-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K//Jbw4v8U2baUVn07XYSHKVzesvG3odJTfAPiva8GKGxx7z/hmxKc6YYazCx+F0 22RwfB5CI4XSSHQknTCTxw== 0000927016-01-001433.txt : 20010322 0000927016-01-001433.hdr.sgml : 20010322 ACCESSION NUMBER: 0000927016-01-001433 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 41 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIERRA PACIFIC RESOURCES CENTRAL INDEX KEY: 0000741508 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 880198358 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-08788 FILM NUMBER: 1573964 BUSINESS ADDRESS: STREET 1: PO BOX 30150 STREET 2: 6100 NEIL RD CITY: RENO STATE: NV ZIP: 89511 BUSINESS PHONE: 7758344011 MAIL ADDRESS: STREET 1: P O BOX 30150 STREET 2: 6100 NEIL ROAD CITY: RENO STATE: NV ZIP: 89511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEVADA POWER CO CENTRAL INDEX KEY: 0000071180 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 880045330 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 002-28348 FILM NUMBER: 1573965 BUSINESS ADDRESS: STREET 1: 6226 W SAHARA AVE CITY: LAS VEGAS STATE: NV ZIP: 89146 BUSINESS PHONE: 7023675000 MAIL ADDRESS: STREET 1: P O BOX 230 CITY: LAS VEGAS STATE: NV ZIP: 89151 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHERN NEVADA POWER CO DATE OF NAME CHANGE: 19701113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIERRA PACIFIC POWER CO CENTRAL INDEX KEY: 0000090144 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 880044418 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-00508 FILM NUMBER: 1573966 BUSINESS ADDRESS: STREET 1: 6100 NEIL RD STREET 2: P O BOX 10100 CITY: RENO STATE: NV ZIP: 89520-0400 BUSINESS PHONE: 7026895408 MAIL ADDRESS: STREET 1: 6100 NEIL ROAD STREET 2: P.O. BOX 10100 CITY: RENO STATE: NV ZIP: 89520 10-K405 1 0001.txt FORM 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000
Registrant, State of Incorporation, Address of Commission File Principal Executive Offices and Telephone I.R.S. employer State of Number Number Identification Number Incorporation 1-8788 SIERRA PACIFIC RESOURCES 88-0198358 Nevada P.O. Box 10100 (6100 Neil Road) Reno, Nevada 89520-0400 (89511) (775) 834-4011 1-4698 NEVADA POWER COMPANY 88-0045330 Nevada 6226 West Sahara Avenue Las Vegas, Nevada 89146 (702) 367-5000 0-508 SIERRA PACIFIC POWER COMPANY 88-0044418 Nevada P.O. Box 10100 (6100 Neil Road) Reno, Nevada 89520-0400 (89511) (775) 834-4011 (Title of each class) (Name of exchange on which registered) Securities registered pursuant to Section 12(b) of the Act: Securities of Sierra Pacific Resources: -------------------------------------- Common Stock, $1.00 par value New York Stock Exchange Common Stock Purchase Rights New York Stock Exchange Securities of Nevada Power Company and subsidiaries: ---------------------------------------------------- 8.2% Cumulative Quarterly Income New York Stock Exchange Preferred Securities, Series A, issued by NVP Capital I 7 3/4% Cumulative Quarterly Trust Issued New York Stock Exchange Preferred Securities, issued by NVP Capital III Securities registered pursuant to Section 12(g) of the Act: Securities of Sierra Pacific Power Company and subsidiaries ----------------------------------------------------------- $2.15 Dividend Trust Originated Preferred Securities, New York Stock Exchange issued by Sierra Pacific Power Capital Trust I Securities of Sierra Pacific Power Company: ------------------------------------------- Class A Preferred Stock, Series 1, $25 stated value
Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ --- Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- State the aggregate market value of the voting stock held by non-affiliates. As of March 13, 2001: $ 1,058,630,677 Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Stock, $1.00 par value, of Sierra Pacific Resources Outstanding at March 13, 2001: 78,475,217 Shares Sierra Pacific Resources is the sole holder of the 1,000 shares of outstanding Common Stock, $1.00 stated value, of Nevada Power Company. Sierra Pacific Resources is the sole holder of the 1,000 shares of outstanding Common Stock, $3.75 par value, of Sierra Pacific Power Company. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's definitive proxy statement to be filed in connection with the annual meeting of shareholders, to be held May 21, 2001, are incorporated by reference into Part III hereof. This combined Annual Report on Form 10-K is separately filed by Sierra Pacific Resources, Nevada Power Company and Sierra Pacific Power Company. Information contained in this document relating to Nevada Power Company is filed by Sierra Pacific Resources and separately by Nevada Power Company on its own behalf. Nevada Power Company makes no representation as to information relating to Sierra Pacific Resources or its subsidiaries, except as it may relate to Nevada Power Company. Information contained in this document relating to Sierra Pacific Power Company is filed by Sierra Pacific Resources and separately by Sierra Pacific Power Company on its own behalf. Sierra Pacific Power Company makes no representation as to information relating to Sierra Pacific Resources or its subsidiaries, except as it may relate to Sierra Pacific Power Company. =============================================================================== SIERRA PACIFIC RESOURCES ANNUAL REPORT FORM 10-K CONTENTS PART I................................................................................................. 5 Item 1. Business..................................................................................... 5 Sierra Pacific Resources............................................................................ 5 Nevada Power Company................................................................................ 8 Sierra Pacific Power Company........................................................................ 16 Item 2. Properties................................................................................... 43 Item 3. Legal Proceedings............................................................................ 43 Item 4. Submission Of Matters To A Vote Of Security Holders.......................................... 43 PART II................................................................................................ 44 Item 5. Market For The Registrant's Common Stock And Related Stockholder Matters..................... 44 Item 6. Selected Financial Data...................................................................... 45 Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operations........ 45 Sierra Pacific Resources............................................................................ 47 Nevada Power Company................................................................................ 50 Sierra Pacific Power Company........................................................................ 55 Item 7A. Quantitative and Qualitative Disclosures About Market Risk................................... 72 Item 8. Financial Statements and Supplementary Data.................................................. 75 Notes to Financial Statements....................................................................... 93 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......... 139 PART III............................................................................................... 140 Item 10. Directors and Executive Officers of the Registrant........................................... 140 Item 11. Executive Compensation....................................................................... 146 Item 12. Security Ownership of Certain Beneficial Owners and Management............................... 152 Item 13. Certain Relationships and Related Transactions............................................... 153 PART IV................................................................................................ 158 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................. 158 SIGNATURES............................................................................................. 160
2 FORWARD LOOKING STATEMENTS The information in this Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to anticipated financial performance, management's plans and objectives for future operations, business prospects, outcome of regulatory proceedings, pending legislation in California and Nevada, market conditions and other matters. Words such as "anticipate," "believe," "estimate," "expect," "intend," "plan" and "objective" and other similar expressions identify those statements that are forward-looking. These statements are based on management's beliefs and assumptions and on information currently available to management. Actual results could differ materially from those contemplated by the forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such statements, factors that could cause the actual results of Sierra Pacific Resources (SPR), Nevada Power Company (NVP), or Sierra Pacific Power Company (SPPC) to differ materially from those contemplated in any forward-looking statement include, among others, the following: (1) the outcome and timing of regulatory proceedings before the Public Utilities Commission of Nevada (PUCN) relating to the Comprehensive Energy Plan (CEP) filed by NVP and SPPC (collectively, the "Utilities") in January 2001, especially whether the significant rate increases granted by the PUCN to the Utilities on February 23, 2001, are successfully challenged in court or are reduced or delayed, and whether the other relief requested by the Utilities in the CEP is granted in a timely fashion; (2) a continuation of the current shortage of supply of electricity in the western United States and the adverse effect that such shortage is having on the price and availability of purchased power throughout the region; (3) whether the rate relief granted in the settlement agreement approved by the PUCN in July 2000, as augmented by its approval of the rate rider in the CEP, will be sufficient to stop the serious under-recovery of fuel and purchased power costs which has led to significant periodic losses by the Utilities, and whether that settlement will be challenged in court and or refunds demanded; (4) a continuation of the extremely high prices for natural gas in the western United States, as those affect both the cost of generated and purchased electricity and the cost of acquiring gas for SPPC's retail gas customers (in either case, to the extent that the Utilities are not permitted to pass these higher costs on to their respective customers); (5) whether recent California legislation barring the sale of power plants by public utilities until 2006 is amended to exempt SPPC and whether that legislation, pending legislation in Nevada, or future legislative or regulatory action in California or Nevada may bar or render impracticable the sale of the Utilities' electric generation plants; (6) if the sale of the Utilities' generation plants is prohibited or materially delayed, how such a development may affect SPR's ability to obtain the necessary regulatory approvals to complete the acquisition of Portland General Electric Co. (PGE) as well as the Utilities' ability to produce at reasonable cost power that would no longer be available under the transition power purchase agreements entered into with the purchasers of the generation plants; 3 (7) regulatory delays or conditions imposed by regulatory bodies in approving the acquisition of PGE; (8) whether the PUCN will issue favorable orders in a timely manner to permit the Utilities to borrow money and issue additional securities to finance the Utilities' operations and to purchase power and fuel necessary to serve their respective customers; (9) the extent to which the financial difficulties of California's electric utilities spread to utilities located in other western states and adversely affect SPR, NVP and SPPC's ability to access the capital markets to finance their capital requirements for construction costs and the repayment of maturing debt which are estimated for 2001 to total approximately $405 million for NVP and approximately $453 million for SPPC; (10) whether and in what form electric industry restructuring may continue in Nevada and what impact any changes may have on the Utilities, including the amount the Utilities would be allowed to recover from customers for certain costs that prove to be uneconomic after restructuring; (11) management's ability to integrate the operations of SPR, NVP and SPPC, and of PGE upon its acquisition, and to implement and realize anticipated cost savings from the merger of SPR and NVP and the acquisition of PGE; (12) regulatory or other delays in the sale of SPPC's water business to Truckee Meadows Water Authority ("TMWA"); (13) unseasonable weather and other natural phenomena, which can have potentially serious impacts on the Utilities' costs and earnings; (14) industrial, commercial and residential growth in the service territories of the Utilities; (15) the loss of any significant customers; (16) changes in the business of major customers, including those engaged in gold mining or gaming, which may result in changes in the demand for services of NVP or SPPC; and (17) the extent to which high energy prices and the financial difficulties of electric utilities and power exchanges in the western United States cause any counterparties to NVP's or SPPC's power purchase contacts to default on their obligations, which defaults could have a material adverse effect on the financial performance of NVP and/or SPPC. Other factors and assumptions not identified above may also have been involved in deriving these forward-looking statements, and the failure of those other assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. SPR, NVP and SPPC assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward- looking statements. 4 PART I ITEM 1. BUSINESS SIERRA PACIFIC RESOURCES ------------------------ Sierra Pacific Resources, hereafter known as SPR, was incorporated under Nevada Law on December 12, 1983. SPR's mailing address is P.O. Box 30150 (6100 Neil Road), Reno, Nevada 89520-3150 (89511). SPR has eight primary, wholly owned subsidiaries: Nevada Power Company (NVP), Sierra Pacific Power Company (SPPC), Tuscarora Gas Pipeline Company (TGPC), Sierra Pacific Communications (SPC), Sierra Energy Company dba e.three (e.three), Sierra Pacific Energy Company (SPE), Lands of Sierra (LOS) and Nevada Electric Investment Company (NEICO). NVP and SPPC are referred to together in this report as the "Utilities". INTRODUCTION ------------ AN EXPLANATION OF THE REPORTING FORMAT The merger between SPR and NVP on July 28, 1999, was treated for accounting purposes as a reverse acquisition and deemed to have occurred on August 1, 1999. As a result, for financial reporting and accounting purposes, NVP was considered the acquiring entity under Accounting Principles Board Opinion No. 16, Business Combinations, even though SPR became the legal parent of NVP. Because of this accounting treatment, historic financial information presented in the financial statements for SPR for 1998 is that of NVP and includes no information for SPR. In addition, the financial information for the year ended December 31, 1999, reflects the acquisition of SPR by NVP on August 1, 1999. Therefore, the results of operations for that year reflect twelve months of information for NVP and five months of information for SPR and its pre-merger subsidiaries. This presentation is carried forward to the notes to the financial statements. The discussion in this report has been divided wherever possible to highlight the activities of the major subsidiaries of SPR. Parenthetical references are included after each major section title to identify the specific entity addressed in the section. References to SPR refer to the consolidated entity, except for the section related to debt financing in which SPR debt is discussed separately from that of its subsidiaries. INDUSTRY AND REGIONAL PROBLEMS AFFECTING THE UTILITIES (NVP AND SPPC) - --------------------------------------------------------------------- Electric Utility Trends In 2000, wholesale electricity prices soared more than 300% over 1999 rates and continue at high levels. Wholesale regional electricity costs are not expected to stabilize for several years until more generation supplies are brought online. Although a number of factors have contributed to this situation, California's electric restructuring model, which deregulated wholesale prices but capped retail rates, together with inadequate supplies to meet demand, have been among the principal causes. As the largest state in the region, California market trends substantially influence the entire western U.S. The Utilities, which operate principally in Nevada, have been significantly impacted by rising wholesale prices. These conditions have depressed earnings to unprecedented low levels, including operating losses for NVP and SPR, and very low returns on investment for SPPC. If these conditions continue and there is 5 not prompt, decisive and comprehensive relief from legislators and regulators in the state, future earnings and the ability to pay dividends could be in jeopardy. During the hot 2000 summer, an inadequate supply of electricity was available to serve the western U.S. Natural gas prices also increased unexpectedly. While all western utilities are struggling with the rapid rise in prices, the problem has been most acute in California. The two largest California utilities have not been allowed to pass wholesale price increases through to consumers and as a result are experiencing severe liquidity constraints and have each stated publicly that they may file for bankruptcy. As the California utilities can no longer pay for energy, the state of California has stepped into this role. Power producers throughout the west were ordered by the U.S. Department of Energy to provide excess power to California, although that order has now expired. The California State Legislature is pursuing various legislation to resolve this issue. One of the bills signed by California's governor places a moratorium until 2006 on divestiture of any utility owned generation plants serving the California market. This moratorium applies to the sale of SPPC's power plants. While the California crisis impacts the entire west, including SPPC and NVP, Nevada differs in certain respects from California. SPPC and NVP are allowed to enter into bilateral contracts with suppliers and have secured virtually all of their normalized resource needs for 2001. Both NVP and SPPC currently own their own generation plants. Although the Utilities have been in the process of divesting their generation assets, they have negotiated transition power purchase agreements with each purchaser lasting until March 2003, which give the Utilities the ability to purchase the output at 1998 fuel prices. In July 2000, SPPC and NVP entered into a Global Settlement to resolve certain deferred energy and restructuring issues. The Global Settlement allowed both utilities to begin to raise their rates to pay for rising fuel costs. See Nevada Matters in Regulation and Rate Proceedings, later, for further discussion on the Global Settlement. However, the Global Settlement allows rates to increase based on trailing 12-month average costs and is subject to rate caps. As a result, the increases in rates are not keeping pace with the rapid rise in wholesale costs, and the companies are substantially under recovering their fuel and operating costs. As a result, the Utilities filed a Comprehensive Energy Plan (CEP) with the PUCN on January 29, 2001, seeking a further increase in rates, as well as permission to restructure certain contracts and secure long-term energy supplies for consumers. On February 23, 2001, the PUCN authorized the CEP rate increase to begin March 1, 2001, subject to subsequent review and evaluation of the filing. See Nevada Matters in Regulation and Rate Proceedings, later, for further discussion on the CEP. Generation Divestiture SPPC serves customers in the California market and is impacted by legislation passed in California. A recently enacted moratorium on the divestiture of generation by California utilities until 2006 applies to SPPC and may halt or delay SPPC's divestiture efforts as well as the sale of NVP's interest in the Mohave Generating Station in Laughlin, Nevada. In Nevada the state Consumer Advocate has filed a motion seeking a moratorium on divestiture. The Governor of Nevada had directed the PUCN to reevaluate whether divestiture continues to be in the public's interest. In addition, a bill has been introduced in the Nevada legislature that would halt divestiture until at least July 1, 2003. A delay in divestiture may have negative financial implications for the Utilities due to rising fuel costs and foregoing the benefits of the post divestiture generation buyback contracts, unless the PUCN permits recovery of these higher costs. See Generation Divestiture, later, for further discussion. In addition, SPPC's request for an exemption from the requirements of California law requiring approval of the 6 CPUC before divestiture of its plants and our request for approval of the sale was denied, subject to refiling. Regulation and Electric Restructuring The electric industry, which has been in transition toward increased competition over the past several years, is currently the subject of reevaluation nationally as a result of the problems in California and the west. In Nevada during 2000, electric restructuring and the opening of a competitive energy market were twice delayed by the Governor of Nevada. The status of restructuring efforts, including the California issues, influenced the Governor of Nevada in his decision to delay the opening of competition and to establish a committee, the Nevada Electric Energy Policy Committee (NEEPC), to advise him on energy issues. The NEEPC issued its report on January 15, 2001. The Governor included many of its recommendations in his energy protection plan and recommendations to the Nevada legislature. In the 2001 legislative session, restructuring is expected to be a prevalent topic. In addition, the Governor has halted the implementation of restructuring indefinitely until the market stabilizes. See Regulation and Rate Proceedings, later, and Regulatory Events in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for further discussion regarding restructuring activities and regulatory changes affecting the Utilities. PORTLAND GENERAL ELECTRIC ACQUISITION ------------------------------------- In November 1999 SPR and Enron Corporation (Enron) announced they had entered into a purchase and sale agreement for Enron's wholly owned electric utility subsidiary, PGE. PGE is an electric utility serving more than 700,000 retail customers in northwest Oregon. Upon completion of the transaction, PGE would become a wholly owned subsidiary of SPR. Under terms of the agreement, Enron has agreed to sell PGE to SPR for $2.02 billion to $2.1 billion in cash, depending upon the level of liabilities assumed at the time of close. In addition, $1.0 billion in PGE debt and preferred stock would remain outstanding and be reflected in SPR's consolidated financial statements. In addition to other regulatory approvals discussed below, the PGE acquisition is subject to the approval of the Securities and Exchange Commission (the "SEC") under the Public Utility Holding Company Act ("PUHCA"), and SPR has applied to the SEC to become a registered public utility holding company under PUHCA. In connection with that application, SPR has made certain representations to the SEC regarding the methods of financing the PGE acquisition and regarding the capital structure of SPR following the acquisition. According to those representations, SPR expects to initially finance the transaction primarily through a bank loan or other form of debt. In its application to the SEC, SPR had proposed to increase its consolidated common equity following the acquisition by paying down debt at the utility level with some of the proceeds from the sale of the electric generation assets of the Utilities, the sale of non-strategic assets, the sale of additional common stock, and increased retained earnings from the combined operations of the three utility subsidiaries. In light of the uncertainty related to the sale of the Utilities' generation assets (see Generation Divestiture, later), SPR is evaluating alternative financing plans and capital structures to be presented to the SEC in connection with the financing application which must be approved as a condition for closing. The proposed transaction is subject to other closing conditions, including, without limitation, the receipt of all necessary governmental approvals, including the Federal Energy Regulatory Commission (FERC), the Federal Trade Commission/Department of Justice (FTC/DOJ), the Oregon Public Utility Commission (OPUC), and the Nuclear Regulatory Commission (NRC). SPR's filings have been made, and all state regulatory approvals have been received and only the SEC approval remains at the federal level. As of May 3, 2000, the FTC/DOJ investigation concluded and the waiting period under Hart- 7 Scott-Rodino expired with no action taken. On July 27, 2000, the NRC approved PGE's transfer application filed in January. On October 30, 2000, the OPUC approved SPR's application to acquire PGE. The OPUC approved a September 1 settlement agreement that calls for a six-year price freeze on non-fuel operations and maintenance for PGE customers and a $95 million credit for Oregon consumers. The "acquisition credit" will be shown on monthly power bills as soon as the transaction is complete and will continue through September 30, 2007. PGE will retain its ability to adjust rates to reflect changes in the prices for wholesale electricity and fuel purchased to operate its power plants. On November 21, 2000, the FERC approved the transaction based on a plan that included the sale of the power plants. The purchase and sale agreement between SPR and Enron provides that the agreement may be terminated by either party without liability (unless a pre-existing breach has occurred) if the closing of the transaction has not occurred on or before May 5, 2001. NEVADA POWER COMPANY -------------------- NVP is a Nevada corporation organized in 1921. NVP became a wholly owned subsidiary of Sierra Pacific Resources (SPR) on July 28, 1999. Its mailing address is 6226 West Sahara Avenue, Las Vegas, Nevada 89146. NVP is a public utility engaged in the distribution, transmission, generation, purchase and sale of electric energy in Clark County in southern Nevada. It provides electricity to approximately 611,000 customers in the communities of Las Vegas, North Las Vegas, Henderson, Searchlight, Laughlin and adjoining areas. Service is also provided to Nellis Air Force Base and the Department of Energy at Mercury and Jackass Flats at the Nevada Test Site. See Generation Divestiture, later. NVP has two primary, wholly owned subsidiaries, NVP Capital I and NVP Capital III, both of which are business trusts. NVP Capital I and NVP Capital III were created to issue trust securities in order to purchase junior subordinated debentures of NVP. Business and Competitive Environment NVP's electric business contributed $1.325 billion (100%) of 2000 operating revenues. The system has an annual load factor of approximately 49.3%, which is lower than the industry norm of 50% to 55%. Summer peak loads are driven by air conditioning demand. NVP's peak load increased an average of 7.1% annually over the past five years, reaching 4,325 MW on August 1, 2000. NVP's total electric megawatt-hour (MWh) sales have increased an average of 7.4% annually over the past five years. Winter peak loads are low relative to the summer peak. Winter load above the base amount is driven by air handling in forced air furnaces. NVP's service territory continues to be one of the fastest growing areas in the nation. A significant part of the growth in NVP's electric sales has resulted from new residential, industrial, and gaming customers. 8 NVP's electric customers by class contributed the following toward 2000 and 1999 MWh sales:
MWh Sales (Billed and Unbilled) 2000 1999 --------------------------------- -------------------------------- Residential 7,015,103 36.1% 6,138,436 37.9% Office 1,896,111 9.7% 875,716 5.4% Gaming/Recreation/Restaurants 3,963,286 20.4% 3,009,526 18.6% Wholesale 2,695,922 13.9% 829,551 5.1% Retail 783,467 4.0% 462,918 2.9% All Other & Unclassified 3,098,259 15.9% 4,873,063 30.1% ----------- ------ ----------- ------ TOTAL 19,452,148 100.0% 16,189,210 100.0% =========== ====== =========== ======
Tourism and gaming remain southern Nevada's premier industries. Nearly 38 million tourists visited Las Vegas in 2000, infusing approximately $30 billion into the local economy during the year. During the past two years, several major resorts opened on the Las Vegas Strip, including Bellagio, Mandalay Bay, Paris Las Vegas, The Venetian and Aladdin/Desert Passage. The number of area hotel/motel rooms grew from 119,986 in 1999 to a total of 124,205 at the end of 2000. Currently, Las Vegas is the home of 18 of the world's 20 largest hotels. No mega-resort properties are scheduled to open during 2001. Hotel room growth is expected to be 2.4% during 2001. Upon completion of a 1.3 million square foot expansion of the Las Vegas Convention Center, the Center will have more than 3.2 million square feet of meeting and exhibit space, making it one of the largest facilities of its kind in the world. When the expansion is complete, Las Vegas will have approximately 7.5 million square feet of convention and meeting space citywide. In 2000, more than 3.8 million convention and trade show delegates traveled to Las Vegas, generating more than $4 billion in non-gaming revenue. During 2000, firm and non-firm sales to wholesale customers comprised 13.7% of total energy sales, an increase of 220.1% over the prior year.
MWh Sales 2000 1999 ----------------------------------- ---------------------------------- Firm Sales 283,480 10.52% 363,133 43.80% Non-Firm Sales 2,412,442 89.48% 466,418 56.20% ------------ -------- ------------ ------- Total 2,695,922 100.00% 829,551 100.00% ============ ======== ============ =======
NVP's increase in MWh sales from last year was a result of market conditions and NVP's hedging program. NVP regularly seeks to optimize its daily and hourly portfolio by buying and selling short excess power in the wholesale markets. NVP purchases fixed cost energy at a delivery point where the energy can either be delivered to its control area or traded, should NVP not require the energy. The energy is also traded if replacement energy can be obtained less expensively than transporting the energy to the control area. NVP neither purchases nor sells energy on a speculative basis. Construction Program NVP's construction program and estimated expenditures are subject to continuing review, and are revised from time to time due to various factors, including the rate of load growth, escalation of 9 construction costs, availability of fuel types, changes in environmental regulations, adequacy of rate relief, and NVP's ability to raise necessary capital. Gross construction expenditures for 2000, including allowance for funds used during construction (AFUDC) and contributions in aid of construction were $204.5 million and for the period 1996 through 2000 were $1,167.5 million. Estimated construction expenditures for 2001 and the period from 2002 to 2005 are as follows (dollars in thousands):
2001 2002-2005 Total 5-Year ---------- ------------- -------------- Total construction expenditures $ 214,002 $ 860,796 $ 1,074,798 AFUDC (11,837) (52,135) (63,972) Net salvage, including cost of removal (1,053) (4,214) (5,267) Net customer advances and contributions in aid of construction (26,112) (104,447) (130,559) ---------- ------------- -------------- Total cash requirements $ 175,000 $ 700,000 $ 875,000 ========== ============= ==============
Total construction expenditures estimated for 2001 and the 2002-2005 period consist of the following (dollars in thousands):
Total 2001 2002-2005 5-Year ---- --------- ------ Electric Facilities: Distribution $ 136,756 $ 630,842 $ 767,598 Generation (1) 14,683 0 14,683 Transmission 30,894 181,133 212,027 Other 31,669 48,821 80,490 --------------------------------------------- $ 214,002 $ 860,796 $1,074,798 =============================================
(1) Assumes divestiture of generation assets in 2001. See Generation Divestiture, later. The River Mountain Project has been approved in previous resource plans and may be financed utilizing internally generated cash and/or the proceeds from various forms of debt and preferred securities. River Mountain is a 230kV (kilovolt) joint transmission project with the Colorado River Commission. Total project costs incurred through December 31, 2000, were $26.3 million. Actual costs for 2000 were $21.5 million. Estimated costs for 2001 are $7.9 million, which may be financed utilizing internally generated cash and/or the proceeds from various forms of debt and preferred securities. Also, see Transmission, later, for additional future construction, subject to resource plan approval, that NVP may build to provide transmission service to new generating plants planned for Southern Nevada. Expenditures for these facilities are not reflected in the tables above. 10 Facilities and Operations Total System Part of the restructuring efforts required a change to NVP's demarcation between transmission and distribution facilities. The values shown in this report reflect this change. As of December 31, 2000, NVP's electric transmission facilities consisted of approximately 1,518 overhead pole line miles and 26 substations. Its distribution facilities consisted of approximately 3,416 overhead pole line miles, 10,394 underground cable miles and 129 substations. NVP maintains a wide variety of resources in its generation system. During 2000, NVP generated 53.8% of its total electric energy requirements in its own plants, purchasing the remaining 46.2% as shown below:
Megawatt- Percent Hours of Total ------------- ------------ Company Generation ------------------ Gas/Oil 4,661,326 23.1% Coal 6,187,370 30.7% ------------- ------------ Total Generated 10,848,696 53.8% ------------- ------------ Purchased Power --------------- Long-Term Firm: Hydro 1,188,189 5.9% Utility Purchases 236,700 1.2% Short Term Firm and Spot Purchases 5,378,942 26.7% Non-Utility Purchases 2,511,120 12.5% ------------- ------------ Total Purchased 9,314,951 46.2% ------------- ------------ Total 20,163,647 100.0% ============= ============
NVP's decision to purchase short-term and spot energy is based on the economics of purchasing "as-available" energy when it is less expensive than its own generation. At the time of the 2000 system peak, NVP had purchased firm capacity under long-term contracts with qualifying facilities (QFs) equal to 11% of total peak hour capacity. Risk Management During the year 2000, NVP engaged the services of a risk management consulting company to review its existing programs and practices, to manage energy commodity (electricity, natural gas, coal and oil) price risk, and to assist in the implementation of a revised program. That project led to the development of a new Board of Directors approved Energy Risk Management Policy Manual and implementation of a new risk management system. The Energy Risk Policy Manual sets forth business objectives, organizational structure, performance metrics, reporting requirements, and establishes the Exposure Management Committee (EMC), which is responsible for providing management advice and recommendations on energy risk management-related issues. The EMC met throughout 2000. Load and Resources Forecast NVP's electric customer growth rate was 5.1%, 5.9%, and 5.9% in 2000, 1999, and 1998, respectively. Annual electricity sales reached 19.5 million megawatt- hours in 2000, which represents an 11 increase of 16.6% over 1999. The peak electric demand rose from 3,993 megawatts in 1999 to 4,325 megawatts in 2000. The projections shown below are forecasts of the load to be provided to all of NVP's current customers, and therefore include demand that may actually be met by other electric suppliers if and when open access to alternative suppliers is implemented in Nevada. See Regulation and Rate Proceedings, later. As part of its order approving the merger of SPR and NVP, the PUCN ordered NVP to divest its generation facilities to enhance competition in a deregulated environment. See Generation Divestiture, later. Until such time as those sales are completed, NVP will continue to provide energy through generation and purchased power to meet peak loads. NVP's actual total system capability and peak loads for 2000, and as estimated for summer peak demand through 2002 (assuming no curtailment of supply or load and normal weather conditions), are indicated below:
Capacity at 2000 Peak Forecast Summer Peak ------------------------------------------------------------------- MW % 2001 2002 ------------------------------------------------------------------- NVP Generation: Existing (1) 1,728 36% 0 0 ------------------------------------------------------------------- Purchases Long/Short-Term Firm (2) 2,344 48% 4,359 (7) 3,209 (7) Non-Utility Generators (4) 538 11% 515 515 Wholesale Sales (6) 44 1% 30 31 ------------------------------------------------------------------- Subtotal 2,926 60% 4,844 3,693 ------------------------------------------------------------------- Additional Required (3) 190 4% 305 1,689 Total System Capacity 4,844 100% 5,149 5,382 =================================================================== 4,325 89% 4,597 4,805 Net System Peak (5) Planning Reserves 519 11% 552 577 ------------------------------------------------------------------- Total 4,844 100% 5,149 5,382 =================================================================== Growth over previous year 6.3% 4.5%
(1) Assumes divestiture is complete by peak season 2001. See Generation Divestiture, later. (2) Long-term purchases include NVP's allotment of Hoover Dam energy. Values are net of losses. (3) Includes potential short-term firm purchases that are not under contract. Values shown represent purchases within existing transmission system limits. (4) Includes Sunpeak units, which will be divested with NVP's generating units. (5) The system peak shown for 2000 is the actual system peak of 4,325 MW, which occurred on August 1, 2000. (6) On peak wholesale to Silver State and Needles. (7) Includes agreements to purchase output of plants to be divested and other contracted firm purchases. NVP plans its system capacity needs in accordance with the Western Systems Coordinating Council (WSCC) reliability criteria, which recommends planning reserves in excess of required operating reserves. "Additional Required" represents the additional, uncommitted capacity needed in order to maintain an adequate reserve margin consistent with the WSCC planning reserve criteria. These additional reserves will be met, if needed, with short-term purchases to the extent available through 2002. 12 Generation The following is a list of NVP's share of generation plants (except Reid Gardner No. 4, see note (4) below) including the megawatt (MW) summer net capacity, the type and fuel used to generate, and the year(s) that the unit(s) was (were) installed.
Number of MW Name Type Fuel Units Capacity Years(s) Installed ---------------------------------------------------------------------------------------------------- Clark Station (1) Steam Gas/Oil 3 175 1955, 1957, 1961 Combustion Turbine Gas/Oil 1 50 1973 Combined Cycles (2) Gas/Oil 6 462 1979, 1979, 1980, 1982, 1993, 1994 --------------------- Total Clark Station 10 687 Reid Gardner (3) (4) Steam Coal 4 605 1965, 1968, 1976, 1983 Navajo (5) Steam Coal 3 255 1974 Mohave (6) Steam Coal 2 196 1971 Sunrise Steam Gas/Oil 1 80 1964 Combustion Turbine Gas/Oil 1 69 1974 --------------------- Total Sunrise 2 149 --------------------- Harry Allen Combustion Turbine Gas/Oil 1 72 1995 --------------------- Grand Total NVP 22 1964 =====================
(1) Clark Station Units Nos. 7 & 8 were on forced outages due to generator damage between May 8 through July 15 (for Unit No. 7) or through August 24 (for Unit No. 8). The damage to the unit and the resulting lost production were covered by insurance; however, the amount of coverage available is currently in dispute. (2) The combined cycles at Clark Station each consist of one steam turbine and two combustion turbines for a total of six generating units. (3) Reid Gardner Unit No. 2 was on a forced outage due to generator damage between July 16 through July 31. The damage to the unit and the resulting additional cost of purchased power, above the deductibles, are covered by insurance. (4) Reid Gardner Unit No. 4 is owned by the California Department of Water Resources ("CDWR") (67.8%) and NVP (32.2%). NVP is the operating agent. Contractually, NVP is entitled to receive 24 MW of base load capacity and 226 MW of peaking capacity. NVP is entitled to use 100% of the unit's peaking capacity for 1,500 hours each year and is entitled to 9.6% of the first 250 MW of capacity and associated energy. (5) This represents NVP's 11.3% undivided interest in the Navajo Generating Station as tenant in common without right of partition with five other non- affiliated utilities. (6) This represents NVP's 14% undivided interest in the Mohave Generating Station as tenant in common without right of partition with three other non-affiliated utilities, less operating restrictions. See Generation Divestiture, later. Purchased Power NVP maintains and utilizes a diverse portfolio of resources with the objective of minimizing its net average system operating costs. These resources consist of contracted and spot market supplies, as well as its own generation. During the last several years, NVP has experienced a dramatic increase in 13 the price of market energy, compared to previous years. Some of this increase is reflective of the overall increase in electricity costs throughout the country, the changing of regulatory environments and the opening of new and/or deregulated markets. See Industry and Regional Problems Affecting the Utilities, earlier. NVP is a member of the Western Systems Power Pool and the Southwest Reserve Sharing Group (SWRSG). NVP's membership in the SWRSG has allowed it to network with other utilities in an effort to more efficiently use its resources in the sharing of responsibilities for reserves. NVP purchases both forward firm energy (typically in blocks) and spot market energy based on economics, operating reserve margins and unit availability. NVP has been able to efficiently manage its growing loads by utilizing its generation resources in conjunction with buying and selling opportunities in the market. NVP purchases Hoover Dam power pursuant to a contract with the State of Nevada, which became effective June 1, 1987, and will continue through September 30, 2017. NVP's allocation of hydro-electric capacity is 235 MWs. NVP has a contract to purchase 222 MWs from Nevada Sunpeak Limited Partnership, an independent power producer. The contract became effective June 8, 1991 and will continue through May 31, 2016. According to the regulations of the Public Utility Regulatory Policies Act, NVP is obligated, under certain conditions, to purchase the generation produced by small power producers and cogeneration facilities at costs determined by the appropriate state utility commission. Generation facilities that meet the specifications of the regulations are known as qualifying facilities (QFs). As of December 31, 2000, NVP had a total of 305 MWs of contractual firm capacity under contract with four QFs. All QF contracts currently delivering power to NVP at long-term rates have been approved by the PUCN and have QF status as approved by the FERC. The QFs are as follows:
Contract Contract Net Capacity Qualifying Facility Start End (MW) ----------------------------------------------------------- Saguaro Power Company 10/17/91 04/30/22 90 Nevada Cogeneration Associates #1 06/18/92 04/30/23 85 Nevada Cogeneration Associates #2 02/01/93 04/30/23 85 Las Vegas Cogeneration Limited Partnership 05/10/94 05/31/24 45 ----- Total 305 =====
Energy purchased by NVP from the QFs constituted 27% of the purchase power requirements and 12.5% of the net system requirements during 2000. All of the QFs are cogenerators providing steam for various products and businesses. Transmission NVP's existing transmission lines are primarily confined within Clark County, Nevada. Four 230 kilovolt (kV) transmission lines connect NVP to the Western Area Power Administration's transmission facilities at Henderson and Mead Substations. Three 230 kV lines connect NVP to the Los Angeles Department of Water and Power's transmission facilities at McCullough Substation. A 345 kV 14 line connects NVP to PacifiCorp at the Utah-Nevada state line. Also, NVP has two, 500/230 kV transformers that connect NVP to the Navajo Transmission System at the Crystal Substation. Finally, NVP also has ownership of two, 500 kV transmission lines that transmit power from the Mohave and Navajo Generating Station, respectively, to the NVP system. The River Mountains Project is a transmission project developed in partnership with the Colorado River Commission of Nevada. NVP's portion of the project consists of two, 230 kV transmission lines built along separate transmission corridors between the Mead Substation and NVP's new Equestrian Substation. In addition, NVP is building a 230 kV transmission line between the Equestrian Substation and the Faulkner Substation. The project has a spring 2001 in-service date and increases import capability by 350 MWs. The estimated project cost is $40.4 million. NVP received approval from the PUCN to construct two transmission projects proposed in NVP's 2000 Resource Plan. The Faulkner Substation to Tolson Substation 230 kV project and the Tolson Substation to Arden Substation 230 kV upgrade project are both internal, NVP reinforcements with 2003 and 2004 in- service dates, respectively. Together, the two projects increase NVP's import capability by 380 MWs. The total estimated project costs are $10 million. Due to the supply shortage in the western U.S., several independent power producers have proposed the construction of new generating plants in southern Nevada, and have requested transmission service from NVP. NVP has committed to construct this transmission infrastructure in furtherance on its on-going business plan. The key project in this regard is the construction of a 500 kV transmission system consistent with its tariff and FERC pricing policies. See FERC Matters in Regulation and Rate Proceedings, later, for a discussion of regional transmission issues. Fuel Availability NVP's 2000 fuel requirements for electric generation were provided by natural gas, coal and oil. The average costs of coal, gas and oil for energy generation per million British thermal units (MMBtu) for the years 1996 - 2000, along with the percentage contribution to total fuel requirements were as follows:
--------------------------------------------------------------------- Average Consumption Cost & Percentage Contribution to Total Fuel Requirements Gas Coal Oil --- ---- --- $/MMBtu Percent $/MMBtu Percent $/MMBtu Percent ------- ------- -------- -------- ------- ------- 2000 4.93 42.6% 1.22 57.2% 7.33 0.1% 1999 2.27 40.6% 1.15 59.3% 4.01 0.1% 1998 2.35 33.0% 1.39 67.0% 3.96 * 1997 2.25 33.0% 1.39 67.0% 3.35 * 1996 1.95 24.0% 1.44 76.0% 3.48 * * Oil was less than .1% of consumption ---------------------------------------------------------------------
For a discussion of the change in fuel costs, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. 15 Coal delivered to the Reid Gardner Station originates from various mines in the Utah coalfields and is delivered to the station via the Union Pacific Railroad. Partial requirements for coal supplies are under contract for various terms up to 2007, with the remainder of 2001's requirements purchased from the spot market under four one-year contracts. NVP's long-term coal supply agreement with RAG Coal Sales of America, Inc. is supplied from its Willow Creek Mine in Carbon County, Utah which experienced an explosion and fire on July 31, 2000, and is currently under an ongoing force majeure. No deliveries under this agreement will be scheduled for 2001 and NVP has replaced these volumes with spot market purchases. The Union Pacific Rail Transportation contract provides for deliveries from the Provo, Utah interchange as well as various mines in the Price, Utah area to the Reid Gardner Station in Moapa, Nevada. This contract was effective January 1, 1996, and has been extended through December 31, 2001. The Utah Railway contract originates the remainder of NVP's Price, Utah area supplies. This contract has been extended through December 31, 2001. All of NVP's rail transportation contracts contain certain tonnage requirements and railroad service criteria. Coal for both the Mohave and Navajo Stations is obtained from surface mining operations conducted by Peabody Coal Company on portions of the Black Mesa in Arizona within the Navajo and Hopi Indian reservations. The supply contracts with Peabody extend to December 31, 2005, for Mohave and to June 1, 2011, for Navajo, each contract having an option to extend for an additional 15 years. NVP purchases natural gas on a firm, fixed and indexed price basis from the Rocky Mountain, San Juan or Permian Supply Basins. Natural gas is transported to the Clark and Sunrise stations via El Paso Natural Gas Company from the San Juan and Permian Basins and by Kern River Gas Transmission Company from the Rocky Mountain Basin. NVP has not entered into any long-term interstate transportation contracts in anticipation of the sale of its generation assets. Local natural gas transportation service to Clark and Sunrise Stations is provided under a 32-year transportation services contract with Southwest Gas Company signed in 1995. This contact provides firm service and contains certain operating and nominating provisions. The Harry Allen Station is directly connected to Kern River Pipeline. Oil provides a secondary fuel for Clark, Sunrise and Harry Allen Stations and is used in the igniters at Reid Gardner. Regulation and Rate Proceedings See Regulation and Rate Proceedings, later, for a discussion of regulatory matters affecting NVP. SIERRA PACIFIC POWER COMPANY ---------------------------- SPPC is a Nevada corporation organized in 1965 as a successor to a Maine corporation organized in 1912. SPPC became a wholly owned subsidiary of Sierra Pacific Resources on May 31, 1984. Its mailing address is Post Office Box 10100 (6100 Neil Road), Reno, Nevada 89520-0024. SPPC is a public utility primarily engaged in the distribution, transmission, generation, purchase and sale of electric energy. It provides electricity to approximately 309,500 customers in a 50,000 square mile service area in western, central and northeastern Nevada, including the cities of Reno, 16 Sparks, Carson City, Elko, and a portion of eastern California, including the Lake Tahoe area. In 2000, electric revenues were 85.0% of SPPC's total revenue. See Generation Divestiture, later. SPPC also provides natural gas service in Nevada to approximately 115,000 customers in an area of about 600 square miles in Reno/Sparks and environs. SPPC also supplies water service in Nevada to about 73,000 customers in the Reno/Sparks metropolitan area. SPPC has entered into an agreement to sell its water business. In 2000, natural gas revenues were 9.6% and water revenues were 5.4% of SPPC's total revenues. On January 15, 2001, SPR's Board of Directors approved a definitive agreement to sell SPPC's water business to the Truckee Meadows Water Authority ("TMWA") for $350 million. Of the total purchase price, $342 million is for the water business assets and $8 million is for associated hydroelectric generation assets. The transactions are expected to close in the second quarter of 2001. See "Sale of Water Business" section that follows. SPPC has four primary, wholly owned subsidiaries: GPSF-B, Pinon Pine Corp. (PPC), Pinon Pine Investment Co. (PPIC), and Sierra Pacific Power Capital Trust I. GPSF-B, PPC and PPIC, collectively, own Pinon Pine Company, L.L.C., which was formed to take advantage of federal income tax credits available under (S) 29 of the Internal Revenue Code associated with the alternative fuel (syngas) produced by the coal gasifier located at the Pinon Pine facility. Sierra Pacific Power Capital Trust I was created to issue trust securities in order to purchase SPPC's junior subordinated debentures. Business and Competitive Environment SPPC's electric business contributed $893.8 million (89.9%) of SPPC's 2000 revenues from continuing operations. Electric system peaks typically occur in the summer, while winter peaks run nearly as high. The system has an annual load factor of approximately 68%, which is higher than the industry norm of 50% to 55%. Winter peak loads are primarily driven by increased demand for space heating, demand for air movement (with forced air gas and oil furnaces), and ski resort demands (hotels, lifts, etc.). Summer peak loads are primarily driven by cooling equipment demand (including air conditioning demand) and irrigation pumping. SPPC's peak load increased an average of 6.5% annually over the past five years, reaching 1,577 MW on July 31, 2000. SPPC's total electric megawatt- hour sales have increased an average of 11.7% annually over the past five years. The mining and wholesale sectors comprise the majority of this growth. SPPC's electric customers by class contributed the following toward 2000 and 1999 MWh sales:
MWh Sales 2000 1999 ------------------------ ------------------------- Residential 2,042,704 16.4% 1,998,174 19.6% Commercial and Industrial: Mining 2,720,018 21.9% 2,716,579 26.6% Offices/Schools/Government 1,108,988 8.9% 1,128,189 11.1% Resorts & Recreation 780,526 6.3% 768,750 7.5% Manufacturing/Warehouse 795,728 6.4% 771,733 7.6% Wholesale 3,590,648 28.9% 1,695,420 16.6% All Other 1,396,049 11.2% 1,124,091 11.0% ----------- ----- ----------- ----- Total 12,434,661 100.0% 10,202,936 100.0% =========== ===== =========== =====
17 According to the Nevada Division of Minerals statistics, Nevada leads the nation in gold production, accounting for approximately 74% of all U.S. production and 10% of world production, ranking it the third largest gold producer in the world behind South Africa and Australia. It is estimated that Nevada gold production for 2000 was approximately 8.5 million ounces. A majority of Nevada's gold mines are customers of SPPC. Currently, known gold reserves at existing mines in Nevada total approximately 80 million ounces, the majority of the nation's known gold reserves. These reserves are sufficient to continue production at current rates for the next decade. During 2000, world gold prices ranged from approximately $264 per ounce to $316 per ounce. Production costs continue to vary greatly at Nevada mines, along with profitability. Industry reports indicate many Nevada gold mines have a production cost of less than $250 per ounce, with some of the larger mines producing within the $150 to $200 per ounce range. In addition, low gold prices may shorten the expected mine lives of certain Nevada properties as lower grade ore becomes uneconomic to mine. SPPC's territory also has a variety of other mineral producing mines. Approximately 23 million ounces of silver were produced in 2000, worth about $114 million, with approximately 100 million ounces of silver resources identified in the State. Silver demand exceeded new supply for most of the 1990s, drawing down inventories built up in the 1980s. Other minerals produced in Nevada include copper, lithium, mercury, barite, diatomite, gypsum, and lime, valued at over $134 million. SPPC has seven long-term power sales agreements with major mining customers for terms of at least five years. The final contract expires in 2005. One of these customers has provided SPPC with two years' notice of termination. Five of these agreements have been reviewed and approved by the PUCN as part of SPPC's new tariff structure designed for major customers. These mining agreements secure over 236 megawatts of present and future mining load, or approximately $78 million in annual revenues, which is 8.7% of 2000 electric operating revenues. The agreements require that customers maintain minimum demand and load factor levels, and include termination charge provisions to recover all of SPPC's customer-specific facilities investment. On February 9, 2001, Newmont Mining Corporation announced that it signed a Letter of Intent with El Paso Merchant Energy Company, a subsidiary of El Paso Corporation, to negotiate a 15-year power purchase agreement for 150 megawatts of a proposed 480-megawatt power plant near Carlin, NV. The power project, to be owned by El Paso, is expected to be a major customer for the proposed 291- mile Ruby Pipeline project sponsored by another El Paso Corporation subsidiary, Colorado Interstate Gas Company. SPPC and Newmont have also executed a Memorandum of Understanding that will facilitate the ability of this proposed new plant to market electricity directly to anchor retail customers within SPPC's service territory based upon subsequent regulatory approval. Currently, Newmont gets 110 of the 175 megawatts of power it uses annually from SPPC. The resorts and recreation group consists of hotels, casinos, and ski resorts. This major customer segment comprises 6.3% of the total electric system retail MWh sales. Although tourism and gaming continue to be key contributors to the local economy, northern Nevada has seen the closure of some of the smaller family owned casinos. Larger gaming properties in downtown Reno are working together to create a destination that appeals to customers with a full menu of entertainment. A large older casino has been completely renovated with an upscale interior that is expected to open during the second quarter of 2001. Outside of the downtown area, gaming properties have completed large expansions. 18 Proposition 5 in California, which liberalized Indian reservation gaming operations, had been predicted to cause a decline in Reno's gaming revenues once implemented. Northern Nevada casinos have not seen this impact, but continue to evaluate and implement competitive strategies to expand their entertainment portfolio. These strategies include packaging entertainment value, customer comfort, and reasonable pricing, with the natural attraction of the Sierra Nevada geographic location. The manufacturing and warehousing customer segment group continues at a high growth rate slightly exceeding the resorts and recreation customer segment for 2000. A major factor for business relocations is the lack of personal income taxes and inventory taxes in Nevada coupled with easy access to air, rail and road transportation essential to manufacturing and warehousing businesses. Northern Nevada has most recently been a destination of choice for the high- technology industry, which will result in a continued increase in sales to the manufacturing and warehousing customer segment. In 2000, SPPC solidified working relationships within the business community recruiting industries in targeted sectors such as plastic manufacturers and hi-technology companies. SPPC's MWh sales to wholesale customers have increased 111.8% over the past year. During 2000, firm and non-firm sales to wholesale customers comprised 28.9% of total energy sales. MWh Sales 2000 1999 -------------------- --------------------- Firm Sales 3,342,435 93.1% 1,571,853 92.7% Non-Firm Sales 248,213 6.9% 123,567 7.3% ---------- ----- ---------- ----- Total 3,590,648 100.0% 1,695,420 100.0% ========== ===== ========== ===== SPPC's increase in MWH sales from last year was a result of market conditions and SPPC's hedging program. SPPC regularly seeks to optimize its daily and hourly portfolio by buying and selling short excess power in the wholesale markets. SPPC purchases fixed cost energy at a delivery point where the energy can either be delivered to its control area or traded, should SPPC not require the energy. The energy is also traded if replacement energy can be obtained less expensively than transporting the energy to the control area. SPPC neither purchases nor sells energy on a speculative basis. 19 Construction Program Gross construction expenditures for 2000, including allowance for funds used during construction and contributions in aid of construction, were $155.3 million and for the period 1996 through 2000 were $831.9 million. Estimated construction expenditures for 2001 and the period 2002-2005 are as follows (dollars in thousands):
Total 2001 2002-2005 5-Year ----------------------------------------- Electric facilities $ 90,963 $ 468,530 $559,493 Water facilities 24,911 0 24,911 Gas facilities 12,266 45,452 57,718 Common facilities 9,562 28,310 37,872 ----------------------------------------- Total construction expenditures $137,702 $ 542,292 $679,994 ========================================= AFUDC (2,340) (11,635) (13,975) Net salvage, including cost of removal (120) (400) (520) Net customer advances and contributions in aid of construction (10,242) (15,320) (25,562) ----------------------------------------- Total cash requirements $125,000 $ 514,937 $639,937 =========================================
Total construction expenditures estimated for 2001 and the 2002-2005 period, for each segment of SPPC's business, consist of the following (dollars in thousands):
Total 2001 2002-2005 5-Year --------------------------------------------- Electric Facilities: Distribution $ 57,376 $ 253,705 $311,081 Generation (1) 8,425 0 8,425 Transmission 11,321 189,707 201,028 Other 13,841 25,118 38,959 ---------------------------------------------- $ 90,963 $ 468,530 $559,493 ---------------------------------------------- Water Facilities (2): Treatment and Supply $ 5,654 $ 0 $ 5,654 Distribution 19,077 0 19,077 Other 180 0 180 ---------------------------------------------- $ 24,911 $ 0 $ 24,911 ---------------------------------------------- Gas Facilities: Distribution $ 11,649 $ 43,252 $ 54,901 Other 617 2,200 2,817 ---------------------------------------------- $ 12,266 $ 45,452 $ 57,718 ---------------------------------------------- Common Facilities $ 9,562 $ 28,310 $ 37,872 ---------------------------------------------- TOTAL $137,702 $ 542,292 $679,994 ==============================================
(1) Assumes divestiture of generation assets in 2001. See Generation Divestiture, later. (2) Assumes sale of water business in 2001. See Sale of Water Business, later. The Alturas Intertie Project, which went into service in December 1998, is a 345 kV transmission line from northern California to Reno. Total project costs incurred through December 31, 2000, were $156.2 million. Actual costs incurred in 2000 were $3.0 million. Estimated costs for 2001 are $1.0 million. The Falcon Transmission Project is a 345kV transmission line within 20 Northern Nevada. Total project costs incurred through December 31, 2000, were $5.2 million. Actual costs incurred in 2000 were $2.8 million. Estimated costs for 2001 are $6.4 million. SPPC's construction program and estimated expenditures are subject to continuing review, and are revised from time to time due to various factors, including the rate of load growth, escalation of construction costs, availability of fuel types, changes in environmental regulations, adequacy of rate relief, and SPPC's ability to raise necessary capital. Facilities and Operations Total System As of December 31, 2000, SPPC's electric transmission and distribution facilities consisted of approximately 13,000 overhead pole line miles, 4,500 underground cable miles and 270 substations. SPPC maintains a wide variety of resources in its generation system. During 2000, SPPC generated 43.9% of its total electric energy requirements in its own plants, purchasing the remaining 56.1% as shown below: Megawatt- Percent Hours of Total ---------- -------- Company Generation ------------------ Gas/Oil 3,754,065 28.6% Coal 1,954,691 14.9% Hydro 46,613 0.4% ---------- -------- Total Generated 5,755,369 43.9% ---------- -------- Purchased Power --------------- Utility Purchases: Long-Term Firm 718,361 5.5% Short-Term Firm 5,759,656 43.9% Spot Market 29,620 0.2% Non-Utility Purchases: Geothermal 704,182 5.4% Other 113,404 0.9% Transmission & Balancing 20,482 0.2% ---------- -------- Total Purchased 7,345,705 56.1% ---------- -------- Total 13,101,074 100.0% ========== ======== SPPC's decision to purchase spot market energy is based on the economics of purchasing "as-available" energy when it is less expensive than its own generation. At the time of the 2000 system peak, SPPC had purchased firm capacity under long-term contracts with other utilities and qualifying facilities equal to 10% of total peak hour capacity. In 2000, most of SPPC's non-utility generation came from QFs, except for 17,797 megawatt hours, which came from two small power producers. Risk Management During the year 2000, SPPC engaged the services of a risk management consulting company to review its existing programs and practices, to manage energy commodity (electricity, natural gas, coal and oil) price risk, and to assist in the implementation of a revised program. That project led to the development of a new Board of Directors approved Energy Risk Management Policy Manual and implementation of a new risk management system. The Energy Risk Policy Manual sets forth business 21 objectives, organizational structure, performance metrics, reporting requirements, and establishes the Exposure Management Committee (EMC), which is responsible for providing management advice and recommendations on energy risk management related issues. The EMC met throughout 2000. Load and Resources Forecast SPPC's electric customer growth rate was 2.5%, 2.8%, and 2.8% in 2000, 1999 and 1998, respectively. Annual electricity retail sales reached 8.8 million megawatt-hours in 2000. Peak electric demand rose from 1,470 megawatts in 1999 to 1,577 megawatts in 2000. The projections shown below are forecasts of the load to be provided to all of SPPC's current customers, and therefore, include demand that may actually be met by other electric suppliers if and when open access to alternative suppliers is implemented in Nevada. See Regulation and Rate Proceedings, later. As part of its order approving the merger of SPR and NVP, the PUCN ordered SPPC to divest its generation facilities to enhance competition in a deregulated environment. See Generation Divestiture, later. Until such time as those sales are completed, SPPC will continue to provide energy through generation and purchase power to meet both summer and winter peak loads. SPPC's actual total system capability and peak loads for 2000, and as estimated for summer peak demand through 2002 (assuming no curtailment of supply or load and normal weather conditions), are indicated below:
Capacity at 2000 Peak Forecast Summer Peak -------------------------------------------------------------- MW % 2001 2002 -------------------------------------------------------------- Company Generation: Existing (1) 1,062 61% 28 30 -------------------------------------------------------------- Purchases: Long/Short-Term Firm (2) 575 33% 1,439 1,164 Interruptible/Wheeling/Losses 5 0% 2 1 Non-Utility Generators 98 6% 99 99 -------------------------------------------------------------- Subtotal 678 39% 1,540 1,264 -------------------------------------------------------------- Additional Required 0 0% 187 545 Total System Capacity 1,740 100% 1,755 1,839 -------------------------------------------------------------- -------------------------------------------------------------- Net System Peak Demand (3) 1,577 90% 1,564 1,620 Planning Reserve 181 10% 191 219 -------------------------------------------------------------- Total Requirement 1,758 100% 1,755 1,839 ============================================================== Growth over previous year (0.2%) 4.8%
(1) Assumes divestiture is complete by peak season 2001. See Generation Divestiture, later. Kings Beach and Portola diesels and hydro plants remain under SPPC's control after power plant divestiture. 22 (2) Value is net of losses and includes committed short-term firm block purchases. Values shown represent purchases within existing transmission system limits. Includes actual economy energy purchases during the 2000 peak and is net of sales. (3) The system peak shown for 2000 is the actual system peak of 1,577 MW, which occurred on July 31, 2000. SPPC plans its system capacity needs in accordance with the WSCC reliability criteria, which recommends planning reserves in excess of required operating reserves. The "Additional Required" represents the additional, uncommitted capacity needed in order to maintain adequate reserve margin consistent with the WSCC planning reserve criteria. These additional reserves will be met, if needed, with short-term purchases through 2002 to the extent available. Generation The following is a list of SPPC's share of generation plants including the megawatt (MW) summer net capacity, the type and fuel used to generate, and the year(s) that the unit(s) was (were) installed.
Number MW Name Type Fuel of Units Capacity Years(s) Installed --------------------------------------------------------------------------------------------------------------- Valmy (1) (2) Steam Coal 2 266 1981, 1985 Tracy Steam Gas/Oil 3 244 1963, 1965, 1975 Pinon (3) Combined Cycle (4) Gas 1 89 1996 Clark Mtn. CT's Combustion Turbine Gas/Oil 2 138 1994 Ft. Churchill Steam Gas/Oil 2 226 1968, 1971 Other (5) Gas Turbine, Hydro Gas/Oil, Propane 33 82 1899-1970 ------ ------ Grand Total SPPC 43 1045 ====== ======
(1) SPPC is the operator and owns an undivided 50 percent interest in the Valmy plant. Idaho Power Company owns the remainder. The capacities shown above for the Valmy plant represent SPPC's share only. SPPC owns 100 percent of all of its remaining electric generation plants. (2) Valmy Unit No. 2 was on forced outage due to boiler problems from August 29 through September 14. The damage to the unit and the resulting additional cost of purchased power, above the deductibles, are covered by insurance; however, the amount of coverage available is currently in dispute. (3) Pinon is part of the Pinon Pine Integrated Coal Gasification Combined Cycle power plant. This project was part of the Department of Energy's Clean Coal Demonstration Program. Although the coal gasification portion of the facility is in the start-up phase, the unit has been operating on natural gas since 1996. (4) The combined cycle at Pinon consists of one combustion turbine and one steam turbine. (5) The 4 hydro generating units are included in the sale of SPPC's water business announced in January 2001. See Sale of Water Business, later. See Generation Divestiture, later. Purchased Power SPPC continues to manage a diverse portfolio of contracted and spot market supplies, as well as its own generation, with the objective of minimizing its net average system operating costs. During 23 2000, SPPC experienced a dramatic increase in the price of market energy, compared to previous years. Some of this increase is reflective of the overall increase in electricity costs throughout the country, the changing of regulatory environments and the opening of new and/or deregulated markets. See Industry and Regional Problems Affecting the Utilities, earlier. SPPC's system peak shown for 2000 is the actual system peak of 1,577 MW, which occurred on July 31, 2000. SPPC is a member of the Northwest Power Pool and Western Systems Power Pool. These pools have provided SPPC further access to spot market power in the Pacific Northwest and the Southwest. In turn, SPPC's generation facilities provide a backup source for other pool members who rely heavily on hydroelectric systems. SPPC has an agreement with PacifiCorp's Utah division for delivery of firm power, which also provides added access to spot market power. SPPC purchases hydroelectric and thermal generation spot market energy, by the hour, based upon economics and system import limits. Also purchased during peak load periods is firm energy as required to supply load and maintain adequate operating reserve margins. As off-system energy costs increase, SPPC supplies a higher percentage of its native load utilizing its fossil fuel generation but is still required to buy peaking energy from the market. Currently, SPPC has contracted for a total of 75 MW of long-term firm purchased power from the utility supplier listed below. SPPC's firm purchase power contract contains minimum purchase obligations. Meeting these minimums has not been a problem for SPPC in the past, and is not expected to be a problem in the future. Contract Operation Termination Minimum Contract Party Capacity Date Date Capacity --------------------------------------------------------------------------- PacifiCorp 75 MW June 1989 Feb 28, 2009 70% According to the Public Utility Regulatory Policies Act, SPPC is obligated, under certain conditions, to purchase the generation produced by small power producers and co-generation facilities at costs determined by the appropriate state utility commission. Generation facilities that meet the specifications of the regulations are known as qualifying facilities. As of December 31, 2000, SPPC had a total of 109 MW of maximum contractual firm capacity under 15 contracts with QFs. SPPC also had contracts with three projects at variable short-term avoided cost rates. All QF contracts currently delivering power to SPPC at long-term rates have been approved by either the PUCN or the California Public Utility Commission (CPUC), and have QF status as approved by the FERC. One long-term QF contract terminates in 2006, one terminates in 2039, and the rest terminate between 2014 and 2022. Energy purchased by SPPC from QFs constituted 10% of the net system requirements during 2000. These contracts continue to provide useful diversity for SPPC in meeting its peak load. All the QFs from which SPPC makes firm purchases are either geothermal (87%), hydroelectric or biomass. The actual QF firm capacity output under contract was 64 MW during the summer of 2000. The actual QF output for all non-utility generator deliveries during the summer 2000 peak was 80 MW. Transmission In planning its transmission capacity, SPPC considers generation and purchased power options, as well as the requirements for providing retail and wholesale transmission services. 24 SPPC's existing transmission lines extend some 300 miles from the crest of the Sierra Nevada in eastern California, northeast to the Nevada-Idaho border at Jackpot, Nevada, about 160 miles from Reno northwest to Alturas, California, and 250 miles from the Reno area south to Tonopah, Nevada. A 230 kilovolt transmission line connects SPPC to facilities near the Utah-Nevada state line, which in turn interconnects SPPC to Utah Power facilities. A 345 kV transmission line connects SPPC to Idaho Power facilities at the Idaho - Nevada state line. A 345 kV line connects SPPC to the Bonneville Power Administration's facilities near Alturas, California. SPPC also has two 120 kV lines and one 60 kV line that interconnect with Pacific Gas & Electric on the west side of SPPC's system at Donner Summit, California. Two 60 kV transmission ties allow wheeling of up to 14 MW of power from the Beowawe Geothermal Project, which is located within SPPC's service area, to Southern California Edison. These two minor interties are available for use during emergency conditions affecting either party. The transmission intertie system provides access to regional energy sources. The Falcon Project is a 185-mile 345kV line connecting SPPC's Falcon Substation to SPPC'S Gonder Substation. The Falcon Project improves system import and export capabilities and enables SPPC to provide transmission service between Idaho, Utah, and the northwest. A Right-of-Way application was submitted to the Bureau of Land Management (BLM) in December 1998, and Electric Resource Plan approval was received from the PUCN in April 1999. In October 1999 SPPC received a letter from the BLM requiring the preparation of an Environmental Impact Statement (EIS). Current activities include completion of environmental field surveys, hiring a consultant to prepare the EIS, and WSCC rating studies. The EIS process should continue until July 2001, which should translate to a project in-service date in June 2003. Annual costs for 2000 were $2.83 million, total costs as of December 31, 2000, were $5.25 million and the estimated net cash total cost is $99.9 million. See FERC Matters in Regulation and Rate Proceedings, later, for a discussion of regional transmission issues. Fuel Availability SPPC's 2000 fuel requirements for electric generation were provided by natural gas, coal, and oil. The average costs of coal, gas and oil for energy generation per million British thermal units (MMBtu) for the years 1996-2000, along with the percentage contribution to total fuel requirements were as follows:
------------------------------------------------------------------------------------------------------------- Average Consumption Cost & Percentage Contribution to Total Fuel Requirements Gas Coal Oil --- ---- --- $/MMBtu Percent $/MMBtu Percent $/MMBtu Percent ------- ------- ------- ------- ------- ------- 2000 4.99 66.6% 1.51 32.2% 7.62 1.2% 1999 2.71 62.3% 1.46 37.3% 3.41 0.4% 1998 2.12 60.7% 1.56 39.0% 3.96 0.3% 1997 2.03 62.0% 1.80 37.0% 3.35 1.0% 1996 2.10 61.0% 1.88 37.0% 3.48 2.0% -------------------------------------------------------------------------------------------------------------
For a discussion of the change in fuel costs, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. 25 SPPC's long-term contract with Black Butte Coal Company for coal shipments to Valmy from the mine near Rock Springs, Wyoming, remains in effect until June 30, 2007, or until all volume requirements under the contract are delivered and/or canceled. Due to previous accelerated purchases and cancellations and continuing cancellations of minimum monthly volume obligations, SPPC projects it will fully satisfy all volume requirements and that termination of the contract will occur sometime in early to mid-2002. SPPC's long-term coal contract with Canyon Fuel Company, LLC (Canyon), which provides coal for Valmy from Canyon's SUFCO mine in Central Utah, expires on June 30, 2003. This contract also contains minimum volume requirements that SPPC expects to meet each year until termination. The current owner of the SUFCO mine is Arch Coal, Inc., which acquired ARCO Coal (the previous owner of the Canyon properties, including SUFCO) on June 1, 1998. During 2000, several short-term agreements for the purchase of spot market coal were in place, with two of these agreements extending into 2001. The source of this coal is the Uinta Basin of Utah. These spot market purchases supplement base volume requirements under SPPC's long-term coal contracts at a cost approximately one-half that of contract coal. As of December 31, 2000, Valmy's coal inventory level was 154,796 tons, or approximately 27 days of consumption at 100% capacity. SPPC normally targets an average annual coal stockpile sufficient to provide a 30 day supply at full load. During 2000, transportation of coal to Valmy was provided by the Union Pacific Railroad (UP) under a 3-year agreement effective June 1, 1998. This agreement was negotiated as a resolution to SPPC's previously filed complaint with the Surface Transportation Board alleging unreasonable rate levels being charged by the UP. During 2000, SPPC operated the Pinon Pine facility exclusively on natural gas. No coal was purchased in 2000 for synthetic gas production in the plant's coal gasification facility. SPPC meets its needs for residual oil for generation through purchases on the spot market. With no other mitigating factors, SPPC's residual oil inventory policy is to maintain 50,000 to 75,000 barrels at each of its Tracy and Ft. Churchill generating plants. Oil prices were significantly lower than natural gas prices in December 2000. Additional oil supply was ordered for consumption and to ensure the ability of the electric division to make gas available to SPPC's natural gas business on peak days. The actual residual oil inventory level at these two sites was 203,000 barrels as of December 31, 2000, which is equal to a 9.2 day supply at full load operation. Natural Gas Business SPPC's natural gas business is a local distribution company (LDC) in the Reno/Sparks area that accounted for $100.8 million in 2000 operating revenues or 10.1% of SPPC's revenues from continuing operations. Growth in SPPC's service territory continues to be strong. Customer meter count growth during 2000 was 4.0%. SPPC's total customer meter count increased 4,529 to 116,416 meters by the end of 2000. Growth in all sectors is expected to continue as new developments in SPPC's distribution service area are planned. 26 SPPC's natural gas LDC business is subject to competition from other suppliers and other forms of energy available to its customers. Large customers with fuel switching capability compare natural gas prices on an interruptible basis to alternative energy source prices. During the last year, SPPC has had as many as eight customers secure their own gas supplies, with SPPC providing transportation service on its distribution system. Recently, however, many customers on the gas transportation tariff, as well as other tariffs utilizing current market pricing have chosen to return to SPPC's firm retail tariffs. Those customers have been required to sign agreements to remain on these firm tariffs for a two-year period. SPPC has contracted for firm winter-only and annual gas supplies with 11 Canadian and domestic suppliers to meet the firm requirements of its LDC and electric operations. The contracts total 160,000 decatherms per day through March 2001 and 115,000 decatherms per day for April through October 2001. SPPC's firm natural gas supply is supplemented with natural gas storage services and supplies from a Northwest Pipeline Co. facility located at Jackson Prairie in southern Washington and a liquefied natural gas (LNG) storage from a facility located near Lovelock, Nevada. The LNG facility is operated by Paiute Pipeline Company and is used for meeting peak demand. The Jackson Prairie and LNG facilities can contribute a total of approximately 48,000 decatherms per day of peaking supplies. In November 1996, SPPC entered an agreement to sell winter seasonal peaking capacity supplies to another company over a seven-year period. The contract provides for the payment to SPPC of a monthly reservation charge, reimbursement of pipeline capacity charges during the winter, and a volumetric commodity charge based on the market price for natural gas. SPPC was able to enter into this agreement due to the ability of its power plants to utilize alternative fuels and its power importation option. The obligation to serve this peaking obligation will be transferred to the purchasers of the generation facilities. Following is a summary of the transportation and approximate storage capacity of SPPC's current gas supply program. Firm transportation capacity on the Northwest/Paiute system exists to serve primarily the LDC. Firm transportation capacity on the PGT/Tuscarora system exists primarily to serve SPPC's electric generating plants. Storage capacity is generally used for the peaking requirements of the LDC. Transportation Capacity Northwest: 68,696 decatherms per day firm 90,000 decatherms per day interruptible Paiute: 103,774 decatherms per day firm from November through March 61,044 decatherms per day firm from April through October 90,000 decatherms per day interruptible NOVA: 47,500 decatherms per day firm ANG: 53,000 decatherms per day firm PGT: 30,000 decatherms per day firm 60,270 decatherms per day firm (winter only) 90,000 decatherms per day interruptible Tuscarora: 106,250 decatherms per day firm 50,000 decatherms per day interruptible 27 Storage Capacity Williams: 281,242 decatherms from Jackson Prairie 12,687 decatherms per day from Jackson Prairie Paiute: 463,034 decatherms from Lovelock LNG 35,078 decatherms per day from Lovelock LNG facility As discussed in Generation Divestiture, later, SPPC is pursuing its obligations to sell its gas-fired generation. As part of these sales, SPPC will be transferring portions of its firm pipeline and the winter peaking supply agreement, described above, to the buyers of the Ft. Churchill and Tracy generation bundles. The final allocation of capacity to the buyers is still being determined but will meet the divestiture stipulation requirement that SPPC maintain the availability and reliability of natural gas to its local gas distribution company. Total LDC decatherm supply requirements in 2000 and 1999 were 13.2 million decatherms and 13.4 million decatherms, respectively. Electric generating fuel requirements for 2000 and 1999 were 38.6 million decatherms and 32.6 million decatherms, respectively. In November 2000, SPPC filed a Purchase Gas Adjustment requesting an increase in gas rates of $26,843,000. In January 2001, the PUCN approved a stipulation to make these rates effective February 1, 2001. An average residential customer's monthly bill increased by $11.52 (or 35%). The PUCN also reserved the right to adjust these rates after an evidentiary hearing. As of December 31, 2000, SPPC owned and operated 1,493 miles of three-inch equivalent natural gas distribution piping, 54 miles of which were added in 2000. In addition, SPPC completed in 2000, the construction of a new high- pressure regulator station equipped to receive gas from a second tap on the Tuscarora gas transmission line. This will give the LDC the ability to receive more supply and exercise more operating flexibility. In 2000, SPPC completed several technology projects for the LDC. These projects included a state of the art Supervisory Control and Data Acquisition System and completion of an electronic mapping system for all gas facilities. Sale of Water Business On January 15, 2001, SPR's Board of Directors approved a definitive agreement to sell SPPC's water business to the TMWA for $350 million. Of the total purchase price, $342 million is for the water business assets and $8 million is for associated hydroelectric generation assets. The transactions are subject to various closing conditions, including the release of the water business assets from the lien of SPPC's first mortgage indenture and the receipt of satisfactory regulatory treatment of the gain to SPPC, and are expected to close in the second quarter of 2001. SPPC expects to exit the water business entirely. The sale includes treatment facilities, distribution infrastructure, surface and ground water rights, and storage rights. The total net plant of the water business, including the hydroelectric assets, is approximately $266 million. The water business has approximately 85 employees and serves more than 73,000 customers in the Reno/Sparks metropolitan area. The employees of the water business will become employees of TMWA. TMWA is a joint power authority created by the cities of Reno and Sparks, and Washoe County. TMWA is governed by a Board of Directors consisting of seven representatives (three from the City of Reno, two from the City of Sparks, one from Washoe County, and one at-large director). TMWA intends to finance the transaction through the issuance of tax-exempt bonds. 28 Termination of SPPC's certificate of public convenience and necessity to serve water will require the approval of the PUCN. This filing for termination is set to be heard by the PUCN on March 14, 2001. Transfer of the hydroelectric facilities will require action by the California Public Utilities Commission (CPUC). The sale agreement contemplates a second closing for the hydroelectric facilities to accommodate the CPUC's review of the transaction. Not included in the sale are SPPC-owned properties at Independence Lake (approximately 2,200 acres) and along the Truckee River corridor (approximately 3,500 acres). These properties may be sold in a separate auction in the future. Water Business The water distribution business contributed $57 million (5.4%) to SPPC's 2000 total revenues. Water production in 2000 totaled 26.7 billion gallons. 4 billion gallons were produced from SPPC's groundwater wells. The remaining 22.7 billion gallons were treated through SPPC's two water treatment facilities, the Chalk Bluff Water Treatment Plant and the Glendale Water Treatment Plant. During 2000, 0.56 billion gallons of treated surface water were recharged into the groundwater wells for storage and removal in future years. SPPC's peak day send- out of water to customers during 2000 was 139.3 million gallons, a 4.1% increase over the previous 133.8 million gallon peak set in 1998. The increase in peak day demand was due to high summer temperatures, increases in customer numbers, and decreasing customer concern with conservation. Overall weather conditions during the year produced a below average snow pack with a normal to warm summer season; annual production was up 6.9 %. SPPC's water supplies are from both surface and groundwater sources, with the addition of drought storage and refill provisions sufficient to withstand prolonged drought conditions. The surface water source is the Truckee River, which originates in Lake Tahoe and flows north and east through the cities of Reno and Sparks to Pyramid Lake, located northeast of Reno. SPPC's groundwater comes from 29 supply wells located around the Reno/Sparks area. Regulation and Rate Proceedings See Regulation and Rate Proceedings, later, for a discussion of regulatory matters affecting SPPC. GENERATION DIVESTITURE (NVP AND SPPC) ------------------------------------- In June 1998, SPR announced a plan to divest its generation assets. This business strategy was described in the SPR/NVP merger applications filed with the PUCN and the FERC in July 1998. The FERC, Department of Justice, and SEC approved the merger. The PUCN conditionally approved the merger in December 1998, and one of the conditions was the filing of the divestiture plan with the PUCN. The plan was filed with the PUCN in April 1999, and included details about the auction process, market power mitigation, sale of the assets in described bundles, description of the proposed generation tariffs, description of the proposed power purchase contracts, and a description of the proposed independent system administrator. In June 1999, the PUCN approved a stipulation in the Merger docket case with several conditions. Some of those conditions were: re-file the divestiture plan with the PUCN; file the generation aggregation tariffs (GAT); file the proposal for the Independent System Administrator (ISA) 29 at the FERC; file the proposal for the buyback of purchase power contracts; and file proposals for mitigation of QF and other purchase power contracts. A revised divestiture plan was filed with the PUCN in October 1999. PUCN approval and an Order for Divestiture Plan Stipulation were received in February 2000. The approved plan includes seven bundles: SPPC's bundles are North Valmy (286 MW), Fort Churchill (226 MW), Tracy/Pinon (545 MW); NVP's bundles are Clark (690 MW), Sunrise/Sunpeak (390 MW), Reid Gardner (590 MW), and Harry Allen (76 MW). Not included in the plan's seven bundles were NVP's 14% (222 MW) interest in the Mohave Generating Station ("Mohave") and 11% (255 MW) interest in the Navajo Generating Station ("Navajo") although NVP committed to sell its share of these plants. In March 2000, the Utilities prepared the required offering materials and solicited bids for the seven bundles described in the approved divestiture plan. At the same time, separate negotiations began for the sale of NVP's interests in Mohave and Navajo. Asset sale agreements, described below, have been signed for NVP's 14% share of Mohave and for six of the seven bundles described in the approved divestiture plan (Valmy, Tracy/Pinon, Clark, Reid Gardner, Sunrise/Sunpeak & Harry Allen). Marketing for the sale of SPPC's Fort Churchill bundle and NVP's 11% interest in the jointly owned Navajo power plant is continuing. On May 10, 2000, AES Corporation (AES) announced that it was the successful bidder for the purchase of a controlling interest in the 1,580 MW Mohave Generating Station in Laughlin, Nevada for approximately $667 million. NVP owns a 14% undivided interest in the facility. Mohave Generating Station is a 2-unit, coal-fired power plant located on 2,500 acres along the Colorado River, approximately 80 miles south of Las Vegas. AES executed Asset Sale Agreements with the sellers, NVP (14%) and Southern California Edison Company (56%), for a 70% undivided interest in the facility. Under the agreement, NVP will have the right to buy energy and ancillary services from AES for agreed upon prices, subject to a collar, through early 2003. The total sale price of NVP's interest is $142 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from NVP to AES for the power purchase agreement. The sale is subject to approval and review by various regulatory agencies. On October 19, 2000, SPR and SPPC announced an agreement to sell SPPC's 50% interest in the Valmy Power Station to NRG Energy, Inc. ("NRG") of Minneapolis, Minnesota. Under the agreement, SPPC will have the right to buy energy and ancillary services from the Valmy Power Station for agreed upon prices, subject to a collar, through early 2003. The total sale price of the asset bundle, which includes the Battle Mountain Diesel Plant and the Winnemucca Gas Plant, is $332 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from SPPC to NRG for the power purchase agreement. The Valmy Power Station sells electricity in northern Nevada and surrounding markets. SPPC's net capacity interest in the Valmy Power Station totals 286 MW. Located forty miles from Winnemucca, Nevada, the Valmy Power Station consists of two similar coal-fired units and is owned jointly by SPPC and Idaho Power Company. SPPC owns 50% of the station and operates the plant. The sale is subject to approval and review by various regulatory agencies. On October 27, 2000, SPR and SPPC announced an agreement to sell SPPC's Tracy/Pinon Power Station to WPS Power Development, Inc., a wholly owned subsidiary of WPS Resources Corporation of Green Bay, Wisconsin. Under the agreement, SPPC will have the right to buy energy and ancillary services from WPS Power Development for agreed upon prices, subject to a collar, from 30 closing of the agreement through February 2003. The total sale price of the asset bundle, which includes the Tracy Plant, Pinon Pine, and the Brunswick, Gabbs and Valley Road diesel generators, is $260 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from SPPC to WPS Power Development for the power purchase agreement. The Tracy/Pinon Power Station sells electricity in northern Nevada and surrounding markets. Tracy is also the site of the Pinon Pine Integrated Coal Gasification Combined Cycle project co-funded by the U.S. Department of Energy as part of the Clean Coal Technology Program. SPPC's average capacity in the Tracy/Pinon Power Station totals 525 megawatts. Located approximately 20 miles from Reno, Nevada, the Tracy/Pinon Power Station consists of three similar gas- and oil-fired units, four gas turbines, and the Pinon Pine facility (a combined cycle unit). The sale is subject to approval and review by various regulatory agencies. On November 20, 2000, SPR and NVP announced an agreement to sell NVP's Clark and Reid Gardner Generating Stations to a holding company formed by NRG and Dynegy Inc. (Dynegy) of Houston, Texas. Under the agreement, NVP will have the right to buy energy and ancillary services for agreed upon prices, subject to a collar, from closing of the agreement through February 2003. The total sale price of the asset bundles is $955 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from NVP to NRG and Dynegy for the power purchase agreement. The Clark Generating Station, located in southeastern Las Vegas, consists of 10 gas- and oil-fired generating units, totaling 740 megawatts. The Reid Gardner Generating Station consists of four baseload coal-fired units and is located 52 miles northeast of Las Vegas. Three of the units, 110 megawatts each, are wholly owned by NVP. NVP and the CDWR jointly own the fourth unit, a 275 megawatts coal-fired unit. NRG and Dynegy will jointly acquire NVP's combined ownership and use interest in the fourth unit as part of the transaction. The CDWR will maintain its 15 megawatts ownership interest in the unit. The sale is subject to approval and review by various regulatory agencies. On December 4, 2000, SPR and NVP announced an agreement to sell NVP's Harry Allen Power Station to Pinnacle West Energy (Pinnacle), a subsidiary of Pinnacle West Corporation of Phoenix, Arizona. Under the agreement, NVP will have the right to buy energy and ancillary services from Pinnacle for agreed upon prices, subject to a collar, from closing of the agreement through February 2003. The total sale price of the asset bundle is $71 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from NVP to Pinnacle for the power purchase agreement. The Harry Allen Power Station, located approximately 30 miles north of the city of North Las Vegas, is a 72 megawatt combustion turbine unit. The sale is subject to approval and review by various regulatory agencies. On December 11, 2000, SPR and NVP announced an agreement to sell NVP's Sunrise Station electric generating plant to Reliant Energy Power Generation, Inc. (Reliant), a subsidiary of Reliant Energy of Houston, Texas. The sale includes two generating units owned by NVP and rights to electricity produced by three additional units on the Sunrise site owned by an independent power producer. Under the agreement, NVP will have the right to buy energy and ancillary services from Reliant for agreed upon prices, subject to a collar, from closing of the agreement through February 2003. The total sale price of the asset bundle is $109 million, subject to taxes and other adjustments at closing. The actual sales proceeds will be net of a payment from NVP to Reliant for the power purchase agreement. The Sunrise Station, located near the eastern edge of Las Vegas, consists of two generating units that can be fueled by natural gas or oil and are capable of producing up to 149 megawatts of electricity. The facility also includes three additional gas turbine generating units rated at 222 megawatts. These three units are owned by an independent power producer, Nevada Sun-Peak Limited Partnership, under contract to NVP. The sale is subject to approval and review by various regulatory agencies. 31 As noted above, each of the sales requires the buyer to execute an Asset Sale Agreement, an energy buyback contract called a Transitional Power Purchase Agreement (TPPA), and an Interconnection Agreement. The TPPA's allow SPPC and NVP to obtain energy from these plants at 1998 productions costs from the time of closing to March 2003. The Utilities have obtained FERC approval of the TPPA's and Generation Aggregation Tariffs (GAT), as well as PUCN approval of the Mohave ownership sale. On January 18, 2001, California enacted a law prohibiting any further divestiture of generation properties by California utilities, including SPPC, until 2006. SPR is actively seeking legislation to exempt SPPC from this moratorium on generation sales. However, unless modified by future legislative action or by a court, California law has halted divestiture of SPPC's Valmy, Tracy and Ft. Churchill plants. As Edison is the operating partner in the Mohave Station, the pending sale of that unit is also implicated. Without divestiture, the TPPAs negotiated with the buyers of these units as part of the sale agreements are terminated. On January 24, 2001, the Nevada Utility Consumer Advocate ("UCA") filed a Petition with the PUCN seeking to halt regulatory review of all pending sales agreements for all Nevada generation until the PUCN can make a determination that generation divestiture is still in the public interest. If adopted by the PUCN, the UCA's proposal would at a minimum delay the effective date for TPPAs for all SPPC and NVP units and require that the Utilities immediately secure a fuel supply to run these generators beyond 2001. On March 8, 2001, the PUCN ordered that there be a hearing to address the UCA proposal. The PUCN also consolidated NVP's application for the sale of the Harry Allen plant with the hearing on the UCA proposal. The PUCN requested that the Utilities suspend all generation sale applications until the hearing and order is issued on the UCA request. No divestiture sale filings will be submitted until the PUCN has ruled on the UCA motion. On February 22, 2001, the Governor of Nevada presented his Nevada Energy Protection Plan. One of the points of the plan is re-examination of utility divestiture. The Governor has written to the PUCN, expressing his concern that divestiture in its current form could adversely impact Nevada. He has asked the PUCN to reconsider the issue. Senate Bill 253 has been introduced in the Nevada legislature which, if passed, would halt divestiture of generation until 2003. Although the closing of these sales is scheduled for the second and third quarters of 2001, whether and when such closings will occur depends upon the resolution of the legislative and regulatory issues discussed above. As of December 31, 2000, NVP and SPPC had spent $8.7 million and $11.4 million, respectively, in order to prepare for the generation asset sales. REGULATION AND RATE PROCEEDINGS ------------------------------- Also see Regulatory Events in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional regulatory and rate matters. Nevada Matters (NVP and SPPC) SPPC and NVP are subject to the jurisdiction of the PUCN and, in the case of SPPC, the CPUC with respect to rates, standards of service, siting of, and necessity for, generation and certain transmission facilities, accounting, issuance of securities and other matters with respect to electric distribution and transmission operations. SPPC submits integrated resource plans regarding its electric, 32 gas, and water business operations to the PUCN for approval. NVP submits an integrated resource plan regarding its electric business operations to the PUCN for approval. Under federal law, the Utilities are subject to certain jurisdictional regulation, primarily by the FERC. The FERC has jurisdiction under the Federal Power Act with respect to rates, service, interconnection, accounting, and other matters in connection with the Utilities' sale of electricity for resale and the transmission of energy for others. The FERC also has jurisdiction over the natural gas pipeline companies from which SPPC and NVP take service. As a result of regulation, many of the fundamental business decisions of the Utilities, as well as the rate of return they are permitted to earn on their utility assets, is subject to the approval of governmental agencies. The Utilities are also subject to regulation by environmental authorities. See Environment, later. Comprehensive Energy Plan (NVP and SPPC) On January 29, 2001, the Utilities jointly filed a Comprehensive Energy Plan (the "CEP") with the PUCN. The CEP includes proposals for the Utilities' energy supply portfolio, for emergency rate relief, and for low income and conservation programs. Under the CEP, SPPC and NVP map out a strategy to meet Nevada's short- and long-term energy needs, focusing on new mechanisms to recover the enormous increases in the cost of wholesale power. The CEP also calls for accelerated approval of new long-term power contracts and encourages new power plant development. It also provides for automatic price reductions as wholesale prices eventually fall. The CEP includes tiered rate increases, based on energy usage, that range from zero for certain low usage customers to as much as 29 percent for the state's largest energy users. The average increase is expected to be approximately 17 percent. Under the CEP, up to $5 million in revenue would be provided to the State of Nevada to be used at the State's discretion to fund conservation and low- income protection programs. The Utilities have proposed that the new mechanism take effect on March 1, 2001, and be adjusted on March 1, 2002, or sooner, if wholesale prices fall and if divesture of the Utilities' Nevada power plants is completed and contracts are in place that guarantee the Utilities can purchase power from those plants for two years at 1998 prices. On February 23, 2001, the PUCN voted 3 to 0 to allow the CEP Rider to become effective March 1, 2001, reserving the right to review the reasonableness and to adjust these rates after an evidentiary hearing which will be scheduled at a pre-hearing conference on March 23, 2001. The Utilities will also continue to make monthly fuel and purchased power filings, which are scheduled to expire on March 1, 2003 (See Fuel and Purchased Power Rider below.) Fuel and Purchased Power Rider (NVP and SPPC) On July 20, 2000, the PUCN approved stipulated agreements (the "Global Settlement") that resolved pending state and federal lawsuits and major restructuring issues. On August 3, 2000, the PUCN approved certain revisions to the stipulated agreements. One stipulation allowed NVP to increase its rates effective August 1, 2000, by approximately $48 million annually to recover increased 33 costs of fuel and purchased power, and to update its costs of fuel and purchased power thereafter with monthly fuel and purchased power filings through March 2003. Increases and/or decreases are capped at incrementally increased or decreased rates over successive six-month periods at .95 mils for the first six months, 1.15 mils for the second six months, 1.35 mils for the third six months, 1.55 mils for the next six months, and 1.75 mils for the remaining period. The Global Settlement also permitted SPPC to commence filing monthly fuel and purchased power adjustment cases on the same basis to commence not later than November 1, 2000. SPPC's fuel and purchased power increases and/or decreases are also capped at incrementally increased or decreased rates over successive six- month periods starting October 1, 2000, at 4.5 mils for the first six-month period followed by .95, 1.15, 1.35, 1.55, and1.75 mils for each successive six- month period. Under the terms of the Settlement, the PUCN will review the prudency of the increases after submission of semi-annual audits with any refunds due, if any, to be included in future adjustments. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for further discussion regarding the Global Settlement. Under the terms of the Settlement, the PUCN will review the prudency of the increases after submission of semi-annual audits with any refunds due, if any, to be included in future adjustments. SPR and NVP Merger (NVP and SPPC) As previously mentioned, the merger between SPR and NVP was finalized on July 28, 1999. As part of a stipulation among the merging companies, the PUCN staff and the UCA regarding the merger, the Utilities were required to re-file the plan to divest their generating assets, and file a final ISA proposal with the PUCN and the FERC. In January 2000, the FERC approved the ISA proposal. As part of the conditions for the merger, the Utilities were each required to file a general rate case and unbundle costs. In May 1999, the Nevada Legislature passed Senate Bill 438 (SB 438), which modified the electric restructuring statutes, and, among other things, revised the scope of this proceeding to only unbundling of costs and establishing distribution rates. In May 2000, the PUCN issued final orders related to the proceeding. Several parties, including NVP and SPP, filed Petitions for Reconsideration of the PUCN's orders. In November 2000, the PUCN issued a final Order on Reconsideration in each case. Both NVP and SPP have filed distribution tariffs with the PUCN incorporating the final distribution rates from these proceedings. The effective date of the distribution tariffs is pending the opening of the retail market to competition. The Utilities were also required to file a general rate case three years after the start of retail competition in the state of Nevada. That requirement was subsequently changed in the Global Settlement to no later than October 1, 2002, with rates to be effective March 1, 2003. For more information on the Global Settlement, see Regulatory Events in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. The filing will give the Utilities the opportunity to recover certain costs of the merger, including goodwill, provided they can demonstrate that merger savings exceed certain merger costs. Merger costs are to be split among the non-competitive, potentially competitive and unregulated services or businesses. An opportunity to recover the non-competitive portion of the merger costs will be addressed in the rate case. The burden is on the Utilities to prove that merger savings exceed merger costs. For more information regarding the Merger, see Note 2 of SPR's consolidated financial statements. Electric Industry Restructuring (NVP and SPPC) During the 1997 session, the Nevada Legislature passed Assembly Bill 366 (AB 366). AB 366 was a comprehensive bill that introduced competition for electric and gas retail services. Since the fall of 1997, the PUCN has been developing regulations to implement AB 366. In the 1999 session, the 34 legislature passed SB 438 that significantly modified many provisions of AB 366. These two pieces of legislation substantially alter the way the Utilities are regulated and how they will serve their customers. However, in 2000, electric restructuring and the opening of a competitive energy market were twice delayed by the Governor of Nevada. The status of restructuring efforts, including the California issues, influenced the Governor of Nevada in his decision to delay the opening of competition and to establish a committee, the NEEPC, to advise him on energy issues. The NEEPC issued its report on January 15, 2001. The Governor included many of the NEEPC's recommendations in his energy protection plan and recommendations to the Nevada legislature. Deregulation has been halted indefinitely. In addition, the Governor will not consider deregulation until the market stabilizes, adequate consumer protections are in force, and supplies are at an acceptable level. In the 2001 legislative session, restructuring is expected to be a prevalent topic. Gas Rate Increase (SPPC) On November 1, 2000, SPPC filed to increase gas rates in two filings: The Purchase Gas Adjustment filing was made requesting an increase in natural gas rates of $26.8 million. An average residential customer's monthly bill will increase by $11.52 (or 35%). The Purchase Liquid Propane (LP) Gas Adjustment filing requests an increase in LP gas rates of $24.5 thousand. An average LP gas customer's monthly bill will increase by $4.77 (or 11%). On January 2, 2001, the PUCN approved a stipulation to make these rates effective February 1, 2001. FERC Matters (NVP and SPPC) - --------------------------- Regional Transmission Organization ("RTO") On May 1, 2000, the Utilities, together with Avista Corporation, Bonneville Power Administration (BPA), Idaho Power Company, The Montana Power Company, PacifiCorp, Portland General Electric, and Puget Sound Energy, Inc. formed RTO West and filed articles of incorporation in the State of Washington. RTO West will be a non-profit independent system operator governed by an independent board of directors with a stakeholder advisory board. RTO West would be the single provider and controller of transmission operations in an eight-state region. In October 2000, RTO West submitted with FERC a compliance filing and supplemental material, which provided details of the formation of RTO West. This filing was made in compliance with FERC Order 2000, which required all investor-owned utilities in the United States who own interstate transmission to file a proposal to participate in an RTO or an explanation of efforts and plans to participate in an RTO. FERC Order 2000 requires RTOs to be operated by independent entities that are not participants in the energy market. In addition, RTOs should eliminate regional transmission rate pancaking (multiple rates on a transmission path), manage congestion, internalize parallel path flows, deal effectively and fairly with transmission owning utilities that are not under the FERC jurisdiction, and provide incentives for transmission owning utilities to efficiently operate and invest in their grids. The RTO West utilities intend to submit another filing to the FERC in spring 2001 which will include documents necessary to complete the RTO West proposal. The creation of RTO West is subject to regulatory approvals from FERC and the states served by the investor-owned utilities. The organization will begin operations after all approvals are obtained. FERC's goal is for all RTO's to be operational by December 15, 2001. The proposed operational date in the RTO West filing is approximately one year later. 35 Independent Transmission Company On October 16, 2000, the Utilities, together with Portland General Electric Company, Avista Corporation, The Montana Power Company, and Puget Sound Energy filed jointly with FERC to form TransConnect, a for-profit Independent Transmission Company. The six utilities forming TransConnect will be able to maintain passive ownership in TransConnect, which will be operated by a corporate manager with no affiliated energy market participant. TransConnect's members will aggregate their bulk transmission assets into one large independent transmission company in order to achieve economies of scale and focus purely on the transmission business. TransConnect would own or lease the transmission facilities of the six utilities in Oregon, Washington, Nevada and Montana and parts of Idaho and California. Those facilities are within the proposed territory for RTO West. TransConnect would become a member of RTO West, which will be the single provider of transmission services and controller of transmission operations in the region. The formation of TransConnect is expected to speed coordination efforts for RTO West by reducing the number of transmission owning companies it deals with to one company instead of six vertically integrated utilities. TransConnect's size should allow it to better attract capital for construction of new transmission facilities and system improvements helping ease transmission congestion - a major problem during peak demand periods in the West. TransConnect's members believe TransConnect's "independent" status should allow it to obtain innovative rates for helping achieve the goals of the RTO, such as efficient use of, and investment in, transmission systems and reliability benefits to consumers. The creation of TransConnect is subject to regulatory approvals from FERC, state regulators, and the board of directors of each company. The TransConnect utilities intend to submit a transmission proposal to the FERC by Spring 2001. The initial operations date will be coordinated with the RTO West process. Alturas Intertie Certain Northern California public power groups have challenged the Company's filing with the FERC of the interconnection and operating agreements related to the Alturas Intertie in December 1998 and January 1999. The California groups alleged that the potential reduction in imports into California constitutes an impairment of reliability and therefore seek to force reductions in use of the Alturas Intertie during peak periods. The Company (supported by Bonneville Power Administration and PacifiCorp) has filed testimony before the FERC that the Alturas Intertie does not adversely affect reliability and that, under the FERC's Order No. 888, customers in Nevada are entitled to compete with customers in California for transmission capacity in the Pacific Northwest on a first-come, first-served basis. The FERC staff has agreed with the Company's position on this matter. The matter was tried to an Administrative Law Judge in April and May, 2000, and a decision is expected to be issued imminently. One of the California groups, the Transmission Agency of Northern California ("TANC"), also initiated proceedings in the United States District Court for the Eastern District of California and the United States Court of Appeals for the Ninth Circuit, in each case alleging that Bonneville's construction of a small portion of the Alturas Intertie violated the Northwest Power Preference Act and requesting an injunction prohibiting operation of the Alturas Intertie. The case before the Eastern District was dismissed for lack of jurisdiction. The case before the Ninth Circuit was dismissed for TANC's failure to prosecute. In December 1999, TANC filed suit in the Superior Court of the State of 36 California, Sacramento County, seeking an injunction against operation of the Alturas Intertie based on numerous allegations under state law, including inverse condemnation, trespass, private nuisance, and conversion. That case was removed to Federal Court and dismissed by the trial court, and is now on appeal in the Ninth Circuit. ENVIRONMENT (SPR, NVP AND SPPC) ------------------------------- As with other utilities, NVP and SPPC are subject to federal, state and local regulations governing air, water quality, hazardous and solid waste, land use and other environmental considerations. Nevada's Utility Environmental Protection Act requires approval of the PUCN prior to construction of major utility, generation and transmission facilities. The United States Environmental Protection Agency (EPA), Nevada Division of Environmental Protection (NDEP), and Clark County Health District (CCHD) administer regulations involving air quality, water pollution, solid, hazardous and toxic waste. SPR's Board of Directors has a comprehensive environmental policy and separate board committee which oversees NVP, SPPC, and SPR's corporate performance and achievements related to the environment. Nevada Power Company The Grand Canyon Trust and Sierra Club filed a lawsuit in the U.S. District Court, District of Nevada, in February 1998 against the owners (including NVP) of the Mohave Generation Station ("Mohave"), alleging violations of the Clean Air Act regarding emissions of sulfur dioxide and particulates. An additional plaintiff, National Parks and Conservation Association, later joined the suit. The plant owners and plaintiffs have had numerous settlement discussions and filed a proposed settlement with the court in October 1999. The consent decree, approved by the court in November 1999, established emission limits for sulfur dioxide and opacity and required installation of air pollution controls for sulfur dioxide, nitrogen oxides and particulate matter. The new emission limits must be met by January 1, 2006, and April 1, 2006, for the first and second units respectively. However, if the owners sell their entire ownership interest with a closing date prior to December 30, 2002, the new emission limits become effective 36 months and 39 months from the date of last closing for the two respective units. The estimated cost of new controls is $300 million. As a 14% owner in the Mohave Station, NVP's cost could be $42 million. Also, the United States Congress authorized the EPA to study the potential impact Mohave may have on visibility in the Grand Canyon area. A final report of the study results was released in March 1999. The study acknowledges that sulfur dioxide emissions from Mohave are transported to the Grand Canyon. EPA has solicited information to determine whether visibility impairment in the Grand Canyon can be reasonably attributed to Mohave. If EPA determines that significant visibility impairment is reasonably attributable to the station, EPA could initiate a review for Best Available Retrofit Technology. Mohave's owners believe that settlement of the suit discussed above is acceptable to the EPA. Provisions that are agreed to in a settlement are expected to be reflected in a State Implementation Plan for Nevada and resolve any concerns of EPA regarding visibility impairment In May 1997, NDEP ordered NVP to submit a plan to eliminate the discharge of Reid Gardner Station wastewater to groundwater. The NDEP order also required a hydrological assessment of groundwater impacts in the area. In June 1999, NDEP determined that wastewater ponds had degraded groundwater quality. In August 1999, NDEP issued a discharge permit to Reid Gardner Station and an order that requires all wastewater ponds to be closed or lined with impermeable liners over the next 10 years. This order also required NVP to submit a Site Characterization Plan to NDEP to ascertain 37 impacts. This plan is under review by NDEP. After approval, an estimate of remediation costs will be determined by NVP. New pond construction and lining costs are estimated at $20 million. Also, at the Reid Gardner Station, the NDEP has determined that there is additional groundwater contamination that resulted from oil spills at the facility. NDEP has required submitting a corrective action. The extent of contamination has been determined and remediation is occurring. This remediation is not expected to materially affect the financial position of SPR or NVP. In May 1999, NDEP issued an order to eliminate the discharge of NVP's Clark Station wastewater to groundwater. The order also required a hydrological assessment of groundwater impacts in the area. This assessment was submitted to NDEP in February 2001 and is under review. NVP will spend $565,000 to line existing ponds. After review by NDEP, NVP will implement remediation. Management does not expect this matter to materially affect the financial position of SPR or NVP. In December 2000, an above ground storage tank failed at NVP's Clark Station necessitating remediation of approximately 30,000 gallons of Bunker Fuel. Remediation costs are not expected to be significant. NVP determined that, while constructing the McCullough-Arden transmission line, access roads were created within a wilderness study area in violation of the Bureau of Land Management (BLM) Right of Way Grant. NVP's preliminary estimate for restoration costs is $200,000, which was reserved as of December 31, 1999. No resulting BLM action is pending. As part of the generation divestiture process Phase I and/or Phase II Environmental Assessments were conducted at all of the Utilities' facilities. These assessments noted additional remediation requirements for all the generation assets. All remediation has been completed except for the Reid Gardner facility. The assessment is under review by NDEP. Management does not expect this item to materially affect the financial position of SPR, NVP or SPPC. Sierra Pacific Power Company In September 1994, Region VII of EPA notified SPPC that it was being named as a potentially responsible party (PRP) regarding the past improper handling of Polychlorinated Biphenyls (PCBs) by PCB Treatment, Inc., located in Kansas City, Kansas, and Kansas City, Missouri (the Sites). The EPA is requesting that SPPC voluntarily pay an undefined, pro rata, share of the ultimate clean-up costs at the Sites. A number of the largest PRP's formed a steering committee, which is chaired by SPPC. The responsibility of the Committee is to direct clean-up activities, determine appropriate cost allocation, and pursue actions against recalcitrant parties, if necessary. The EPA issued an administrative order on consent requiring signatories to perform certain investigative work at the Sites. The steering committee retained a consultant to prepare an analysis regarding the Sites. The Site evaluations have been completed. EPA is developing an allocation formula to allocate the remediation costs. SPPC has recorded a preliminary liability for the Sites of $650,000 of which approximately $135,000 has been spent through December 31, 2000. In October 2000, NDEP issued Notices of Alleged Violation (NOAV's) to SPPC for operating the Winnemucca Gas Turbine and the Tracy Peaking Combustion Turbine No. 1 over their annual operating hours. SPPC has applied for additional operating hours on these units per the NOAV's. In December 2000, SPPC notified NDEP that the annual operating hours for the Battle Mountain, Gabbs, and Brunswick Gas Turbines were exceeded in 2000. SPPC has applied for a Class II 38 Air Operating Permit for these units. Enforcement action is pending per NDEP review of permit applications. In January 2001, Placer County Air Pollution Control District issued a Notice of Violation and a subsequent $160,000 penalty to SPPC for operating the Kings Beach Diesel Generation Facility in excess of its permitted annual operating hours. A settlement conference was held in February 2001 to present additional facts or circumstances to be considered in settling this matter. Settlement negotiations are continuing. Other Subsidiaries of SPR Lands of Sierra, a wholly owned subsidiary of SPR, owns property in North Lake Tahoe, California, which is leased to independent condominium owners. The property has both soil and groundwater petroleum contaminate resulting from an historic underground fuel tank. Additional contaminate from a third party fuel tank on the property has also been identified and is undergoing remediation. Estimated future remediation costs are not expected to be significant. Nevada Electric Investment Company (NEICO), a wholly owned subsidiary of SPR, owns property in Wellington, Utah, which was the site of a coal washing and load out facility. The site now has a reclamation estimate supported by a bond of $4 million with the Utah Division of Oil and Gas Mining. The property was under contract for sale and the contract required the purchaser to provide $1.3 million in escrow towards reclamation. However, the sales contract was terminated and NEICO took title to the escrow funds. In September 2000, NEICO leased the property together with an option to purchase it. It is NEICO's intention to sell the property. OTHER SUBSIDIARIES OF SIERRA PACIFIC RESOURCES ---------------------------------------------- Tuscarora Gas Pipeline Company TGPC was formed as a wholly owned subsidiary in 1993 for the purpose of entering into a partnership (Tuscarora Gas Transmission Company or TGTC) with a subsidiary of TransCanada to develop, construct and operate a natural gas pipeline to serve an expanding gas market in Reno, northern Nevada, and northeastern California. In December 1995, TGTC completed construction and began service on its 229-mile pipeline extending from Malin, Oregon, to Reno, Nevada. TGTC interconnects with PG&E Gas Transmission-Northwest (PG&E GT-NW) at Malin, Oregon. PG&E GT-NW is a major interstate natural gas pipeline extending from the U.S./Canadian border, at a point near Bonners Ferry, Idaho to the Oregon/California border. The PG&E GT-NW system provides TGTC customers access to natural gas reserves in the Western Canadian Sedimentary basin, one of the largest natural gas reserve basins in North America. As of December 31, 2000, SPR had an investment of approximately $17.2 million in this subsidiary. As an interstate pipeline, TGTC provides only transportation service. SPPC was the largest customer of TGTC during 2000, contributing 95% of revenues. Malin, Oregon began taking service from TGTC during October 1996. The Sierra Army Depot at Herlong, California began taking service from TGTC October 1997. In 1998, TGTC began serving two new customers, the United States Gypsum Company located north of Empire, Nevada and HL Power Company located northwest of Wendel, California. 39 In 2000, TGTC began construction on a 16.1-mile lateral creating a new citygate connection into the SPPC distribution system. The lateral was completed and placed in service January 29, 2001, providing SPPC with an additional 10,000 decatherms per day of transportation capacity. Also in 2000, TGTC surveyed shipper interest in the feasibility of a proposed expansion project. Sufficient interest was obtained and further investigation into the possibility of expanding TGTC's facilities to serve increased market demand in Nevada and northeastern California is continuing. For a discussion of TGPC's results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Sierra Pacific Communications SPC, formerly Sierra Pacific Media Group, was created to examine and pursue telecommunications opportunities that leveraged existing skill sets of installing and deploying pipe and wire infrastructure. SPC presently has fiber optic assets deployed in the cities of Reno and Las Vegas. The expanding telecommunications market in these areas should provide continuing future opportunities to expand this fiber base and other profitable opportunities. SPC is making final preparations to begin selling bandwidth services in the Reno/Sparks and Las Vegas metropolitan areas. Sales are scheduled to commence in the second quarter of 2001. SPC will continue to construct fiber networks for businesses and governmental agencies in the Reno/Sparks and Las Vegas areas. Sierra Touch America LLC, a partnership between SPC and Touch America, a subsidiary of Montana Power Company, is constructing and will operate a fiber optic line between Salt Lake City, Utah and Sacramento, CA. The route is being constructed for AT&T, PF Net corporations, and Sierra Touch America. SPC's share of construction cost is approximately $25 million of a total estimated construction cost of $120 million. Right-of-way and permitting efforts are in their final phases. Construction activity between Sacramento and Reno commenced in July 2000 and final acceptance of this portion of the build is expected during the second quarter of 2001. Construction within Salt Lake City is complete and construction is in progress through the Reno, NV metropolitan area. The entire project is scheduled for completion in the third quarter of 2001. For a discussion of SPC's results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. e.three e.three was organized in October 1996 as an unregulated wholly owned subsidiary of SPR. It provides comprehensive energy and other business solutions in commercial and industrial markets. This is accomplished by offering a variety of energy-related products and services to increase customers' productivity and profits and improve the quality of the indoor environment. These products and services include: technology and efficiency improvements to lighting, heating, ventilation and air-conditioning equipment; installation or retrofit of controls and power quality systems; energy performance contracting; end-use services; and ongoing energy monitoring and verification services. In September 1998, e.three and NEICO, then a wholly owned subsidiary of NVP, formed e.three Custom Energy Solutions, LLC, a Nevada limited liability company, for the purpose of selling and implementing energy-related performance contracts and similar energy services in southern Nevada. e.three Custom Energy Solutions, LLC's primary focus for its sales activities is in the commercial and industrial markets. During the latter half of 1999, e.three Custom Energy Solutions, LLC began developing a chilled water cooling plant in the downtown area of Las Vegas. The plant is owned by 40 e.three Custom Energy Solutions, LLC and will supply the indoor air-cooling requirements for a number of businesses in its immediate vicinity. The plant was operational in August of 2000. In October 1998, e.three acquired Independent Energy Consulting, Inc. (IEC), a California based company, in an exchange of SPR stock for all of IEC's stock. IEC provides energy procurement management, third party auditing, performance contract consulting and strategic energy planning in the industrial and commercial markets. For a discussion of e.three's results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Sierra Pacific Energy Company SPE was formed to market a package of technology and energy-related products and services in Nevada. SPE filed an application with the PUCN to be licensed as an Alternative Seller of Electricity in the state of Nevada. SPE has withdrawn its application with the PUCN and dissolved its retail energy marketing efforts. For a discussion of SPE's results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Lands of Sierra LOS was organized in 1964 to develop and manage SPPC's non-utility property in Nevada and California. These properties previously included retail, industrial, office and residential sites, timberland, and other properties. Remaining properties include land in Nevada and California. SPR has decided to focus on its core energy business. In keeping with this strategy, LOS continues to sell its remaining properties. For a discussion of LOS' results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Nevada Electric Investment Company NEICO is a wholly owned subsidiary of SPR. In October of 1997, NEICO and UTT Nevada, Inc., an affiliate of Exelon Thermal Technologies, formed Northwind Las Vegas, LLC, a Nevada limited liability company, for the purpose of evaluating district energy projects in southern Nevada. Also, in October of 1997, NEICO and UTT Nevada, Inc. formed Northwind Aladdin, LLC, a Nevada limited liability company, for the purpose of owning, constructing, operating and maintaining the facility for the production and distribution of chilled water, hot water and emergency power for the Aladdin Hotel and Casino project in Las Vegas, Nevada. The project was completed in the first quarter of 2000 and is operational. In September 1998, NEICO and e.three formed e.three Custom Energy Solutions, LLC, a Nevada limited liability company, for the purpose of selling and implementing energy-related performance contracts and similar energy services in southern Nevada. Refer to e.three for a more complete discussion of these activities. For a discussion of NEICO's results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. 41 GENERAL - EMPLOYEES (ALL) ------------------------- SPR and its subsidiaries had 3,232 employees as of December 31, 2000, of which 1,686 were employed by NVP and 1,451 were employed by SPPC. NVP's current contract with the International Brotherhood of Electrical Workers (IBEW) Local No. 396, which covers 55.2% of NVP's workforce, was renegotiated in 1997 and 1998, and is in effect until February 1, 2002. The contract provides for a 4% general wage increase for bargaining unit employees beginning February 2, 1998, with 3% increases in 1999, 2000, and 2001. SPPC's current contract with the IBEW Local No. 1245, which represents 62% of SPPC's workforce, was renegotiated in March 2000 and is in effect until December 31, 2002. The two-year contract provides for 3% general wage increases for bargaining unit employees beginning January 1, 2001, and January 1, 2002. In addition, the contract provides for participation by bargaining unit employees in the incentive compensation program. GENERAL - FRANCHISES (NVP AND SPPC) ----------------------------------- The Utilities have nonexclusive local franchises or revocable permits to carry on their business in the localities in which their respective operations are conducted in Nevada and California. The franchise and other governmental requirements of some of the cities and counties in which the Utilities operate provide for payments based on gross revenues. During 2000, the Utilities collected $47.2 million in franchise or other fees based on gross revenues. They also paid and recorded as expense $0.7 million of fees based on net profits.
Franchise Type of Service Expiration Date ----------------------------------------------------------------------------------------- NVP: Las Vegas Electric November 2029 Clark County Electric May 2004 Nye County Electric May 2006 City of Henderson * Electric November 1999 SPPC: Reno Electric, Gas and Water January 2006 Sparks Electric May 2006 Sparks Gas May 2007 Sparks Water April 2004 Carson City Electric February 2012 City of Elko Electric April 2017 City of South Lake Tahoe Electric April 2018 Washoe County Gas and Water May 2015 Washoe County Electric September 2015 Eureka County Electric July 2018
*Being renegotiated. The Utilities will apply for renewal of franchises in a timely manner prior to their respective expiration dates. 42 GENERAL - RESEARCH AND DEVELOPMENT (ALL) ---------------------------------------- SPR, through its NVP and SPPC subsidiaries, participates in several utility associations, including the Electric Power Research Institute. SPR has invested in Nth Power Technologies (Nth), a venture capital fund that invests in developing technology companies. Nth has made several investments that may result in SPR strengthening its market position and developing new products and services. ITEM 2. PROPERTIES The general character of SPR's, NVP's, and SPPC's principal facilities is discussed in Item 1 - Business. Substantially all of NVP's utility plant is subject to the lien of the Indenture of Mortgage, dated October 1, 1953, and supplemental indentures thereto between NVP and Bankers Trust Company, as trustee, securing NVP's outstanding first mortgage bonds. Substantially all of SPPC's utility plant is subject to the lien of the Indenture of Mortgage, dated December 1, 1940, and supplemental indentures thereto between SPPC and State Street Bank and Trust, as trustee, securing SPPC's outstanding first mortgage bonds. ITEM 3. LEGAL PROCEEDINGS SPR, through the course of its normal business operations, is currently involved in a number of legal actions, none of which has had or, in the opinion of management, is expected to have a significant impact on its financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 43 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS SIERRA PACIFIC RESOURCES ------------------------ SPR's Common Stock is traded on the New York Stock Exchange (symbol SRP). The dividends paid per share and high and low sale prices of the Common Stock in the consolidated transaction reporting system in "The Dow Jones News Retrieval Service" for 2000 and 1999 are as follows: Dividends Paid Per Share High Low --------- ------- -------- 2000 First Quarter $.250 $18.437 $ 12.125 Second Quarter .250 15.687 12.500 Third Quarter .250 19.437 12.562 Fourth Quarter .250 18.062 14.875 1999 First Quarter .325 39.875 33.375 Second Quarter .340 37.000 34.500 Third Quarter* .250 39.125 21.125 Fourth Quarter .250 23.312 16.875 *The merger of SPR and NVP was consummated on July 28, 1999. After that time, SPR owned all of the outstanding common stock of NVP. Prior to that time, SPR owned no securities of NVP. Number of Security Holders: Title of Class Number of Holders -------------- ----------------- Common Stock: $1.00 Par Value As of December 31, 2000: 28,126 Dividends are considered periodically by the Board of Directors and are subject to factors that ordinarily affect dividend policy, such as earnings, business conditions, regulatory factors, the financial condition of SPR and other matters within the discretion of the Board. On December 12, 2000, the SPR Board of Directors voted for a quarterly common dividend of $.25 per share. This dividend of approximately $19.9 million was paid on February 1, 2001, to holders of record as of January 12, 2001. SPR's primary source of funds for the payment of dividends to its stockholders is dividends paid by SPPC and NVP on their common stock, all of which is owned by SPR. Certain contractual and regulatory restrictions may affect the ability of the Utilities to pay dividends to SPR. See Note 13 to the consolidated financial statements. As described herein, the unprecedented conditions in the wholesale energy markets have negatively affected the earnings of SPR, NVP and SPPC. If these conditions continue, without prompt relief, future earnings and the ability to pay dividends are also in question. 44 NVP and SPPC are wholly owned subsidiaries of SPR and, as such, each of their common stock is not publicly traded and no market exists for it. ITEM 6. SELECTED FINANCIAL DATA SIERRA PACIFIC RESOURCES ------------------------ The table below, for periods prior to July 28, 1999, reflects historical information for NVP.
Year Ended December 31, (dollars in thousands, except per share amounts) ---------------------------------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- Operating Revenues $ 2,334,254 $ 1,284,792 $ 873,682 $ 799,148 $ 805,374 =========== =========== =========== =========== =========== Operating Income $ 127,389 $ 162,861 $ 147,277 $ 137,196 $ 132,230 =========== =========== =========== =========== =========== Net (Loss) Income $ (39,780) $ 51,750 $ 83,499 $ 82,091 $ 74,912 =========== =========== =========== =========== =========== (Losses) Earnings per Average Common Share $ (0.51) $ 0.83 $ 1.64 $ 1.65 $ 1.56 =========== =========== =========== =========== =========== Total Assets $ 5,639,484 $ 5,235,917 $ 2,541,840 $ 2,339,422 $ 2,163,224 =========== =========== =========== =========== =========== Long-Term Debt and Redeemable Preferred Securities $ 2,371,051 $ 1,793,999 $ 1,089,099 $ 1,014,311 $ 841,364 =========== =========== =========== =========== =========== Cash Dividends Paid Per Common Share $ 1.00 $ 1.17 $ 1.45 $ 1.60 $ 1.60 =========== =========== =========== =========== ===========
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As discussed in the results of operations sections that follow, operating results for 2000 were negatively affected by significantly higher fuel and purchased power costs. These costs were reflective of higher and extremely volatile prices for purchased power and fuel that developed in May 2000 in the western United States and have continued since. Sierra Pacific Resources (SPR), Nevada Power Company (NVP), and Sierra Pacific Power Company (SPPC) cannot predict how long these unprecedented market conditions will persist. If such market conditions persist, they could have a material adverse effect on the future earnings of SPR, NVP and SPPC. In an effort to mitigate the effects of higher fuel and purchased power costs, NVP and SPPC (collectively the "Utilities") entered into the Global Settlement during 2000, permitting the Utilities to increase electric rates. The Global Settlement established a Fuel and Purchase Power (F&PP) Rider mechanism for each Utility that has resulted in incremental rate increases that are described in more detail later. However, because the mechanism for adjusting rates lags changes in actual energy costs and is subject to certain caps, increases have been insufficient to cover fuel and purchased power costs that continued to rise during the fourth quarter of 2000. In response to continued increases in fuel and purchased power costs and the imbalance between these costs and retail prices, SPR and the Utilities filed on January 29, 2001, an emergency 45 Comprehensive Energy Plan (CEP) with the Public Utilities Commission of Nevada (PUCN). In the CEP, SPR and the Utilities propose short-term emergency price increases ranging from zero for certain low-usage customers to as much as 29 percent for the state's largest energy users. The average increase is 17 percent. The CEP also addresses other issues including long-term contracts, low income assistance and conservation programs, all intended to help stabilize energy markets in the state. Also in the CEP, the Utilities propose to continue making the F&PP filings, which are scheduled to expire on March 1, 2003. Both the F&PP Rider and the CEP Rider proposed in the plan represent dollar-for- dollar pass through of wholesale costs. On February 23, 2001, the PUCN voted 3 to 0 to allow the CEP Rider to become effective March 1, 2001, reserving the right to review the reasonableness and to adjust these rates after an evidentiary hearing which will be scheduled at a pre-hearing conference on March 23, 2001. With respect to NVP, the F&PP Rider began September 1, 2000. This rider is based on the incremental increase in F&PP costs between two historic 12-month periods, subject to certain caps. The stipulation requires that filings be made by NVP each month, with the last filing to be made December 15, 2002, for rates effective February 1, 2003. As a result of the Global Settlement, in addition to a net annualized rate increase of $48 million that became effective as of August 1, 2000, the following monthly filings have been made to date for NVP:
Increase Increase Annualized Date Effective Incurred Allowed Increase Filing Filed Date Mills/kWh Mills/kWh (in millions) ------ ----- ----- --------- --------- ------------- 1 Aug-1, 2000 Sep-1, 2000 1.1 0.95 $15.1 2 Aug-15, 2000 Oct-1, 2000 2.56 0.95 15.3 3 Sep-15, 2000 Nov-1, 2000 2.97 0.95 15.6 4 Oct-15, 2000 Dec-1, 2000 2.91 0.95 15.8 5 Nov-15, 2000 Jan-1, 2001 1.41 0.95 15.8 6 Dec-15, 2000 Feb-1, 2001 0.42 0.42 8.2 7 Jan-15, 2001 Mar-1, 2001 0.17 1.15 16.6 8 Feb-15, 2001 April-1, 2001 0.36 1.15 16.8
As of March 14, 2001, the PUCN has approved and NVP has implemented the first seven of the above rate increases. In each monthly filing, NVP must include a calculation of its Fixed Charge Coverage Ratio for the 12-month period (May 2000 for the first filing). If the Fixed Charge Coverage Ratio is at or above 2.5, then no increase in the rider is allowed for that filing. In addition, every six months an audit of fuel and purchase power practices will be conducted. Any findings of imprudence by the PUCN are to be reflected in future F&PP rider filings. SPPC also entered into the Global Settlement, permitting it to file monthly fuel and purchased power adjustment cases. Beginning November 1, 2000, an F&PP Rider was established for SPPC. As with NVP, the rider is based on the incremental increase in F&PP costs between two 12-month periods, subject to certain caps. The first such filing for SPPC was based on comparing SPPC's F&PP costs for the 12 months ended July 2000 with SPPC's Base Tariff Energy Rate (BTER). The stipulation requires SPPC to make a filing each month, with the last filing to be made December 15, 2002, for rates effective February 1, 2003. 46 As a result of the stipulation, SPPC has filed with the PUCN for approval of the following electric rate increases:
Increase Increase Annualized Date Effective Incurred Allowed Increase Filing Filed Date Mills/kWh Mills/kWh $Millions ------ ----- ---- --------- --------- --------- 1 Sep-15, 2000 Nov-1, 2000 3.2 3.2 $25.7 2 Oct-15, 2000 Dec-1, 2000 1.5 0.95 7.7 3 Nov-15, 2000 Jan-1, 2001 1.6 0.95 7.7 4 Dec-15, 2000 Feb-1, 2001 0.82 0.82 6.7 5 Jan-15, 2001 Mar-1, 2001 1.29 0.95 7.7 6 Feb-15, 2001 April-1, 2001 4.01 0.95 7.9
As of March 14, 2001, the PUCN has approved and SPPC has implemented the first five of the above rate increases. The Fixed Charge Coverage Ratio and audit provisions are the same for SPPC as for NVP. In addition to the above rate filings, on November 1, 2000, SPPC filed with the PUCN to recover $26.8 million in additional costs to its natural gas distribution segment, to account for the higher cost of natural gas that SPPC pays to its suppliers. The increase went into effect February 1, 2001. Comparative fuel and purchased power cost information is included in each Utility's Results of Operations discussion that follows. Also see "Regulatory Events" that follows. RESULTS OF OPERATIONS SIERRA PACIFIC RESOURCES ------------------------ SPR incurred a net loss of $39.8 million for the year end December 31, 2000, compared to net income of $51.8 million in 1999. NVP and SPPC, SPR's principal subsidiaries, declared common stock dividends to their parent, SPR, of $64.3 million and $85 million, respectively. SPPC also declared $3.9 million in dividends to holders of its preferred stock. Operating results for 2000 were adversely affected by fuel and purchased power costs at the Utilities as previously mentioned and as discussed in the results of operations that follow. The merger between SPR and NVP was accounted for as a reverse purchase under generally accepted accounting principles, with NVP considered the acquiring entity, even though SPR became the legal parent of NVP. For accounting purposes, the merger was deemed to have occurred on August 1, 1999. As a result of this reverse purchase accounting treatment: (i) the historical financial statements of SPR for periods prior to the date of the merger are no longer the financial statements of SPR, and therefore, are no longer presented; (ii) the historical financial statements of SPR for periods prior to the date of the merger are those of NVP; (iii) based on a merger date of August 1, 1999, the Consolidating Statements of Income for the twelve months ended December 31, 1999, include five months (August through December 1999) of operating activity for SPR and its subsidiaries other than NVP and include the operating results of NVP for the entire periods presented; and (iv) the Consolidating Statements of Income for the twelve months ended December 31, 2000, include twelve months of operating activity for SPR and its subsidiaries. 47 SIERRA PACIFIC RESOURCES CONSOLIDATING STATEMENTS OF INCOME (Dollars in Thousands)
Year Ended December 31, 2000 -------------------------------------------------------- 12 months 12 months 12 months NVP SPPC Other Total --------------------------- ------------------------- OPERATING REVENUES: Electric $ 1,325,470 $ 893,782 $ - $ 2,219,252 Gas 100,803 - 100,803 Other - - 14,199 14,199 ----------- --------- ---------- ------------ 1,325,470 994,585 14,199 2,334,254 ----------- --------- ---------- ------------ OPERATING EXPENSES: Operation: Purchased power 671,396 444,979 - 1,116,375 Fuel for power generation 292,787 233,748 - 526,535 Gas purchased for resale - 83,199 - 83,199 Deferral of energy costs-net 16,719 (16,164) - 555 Other 139,723 96,438 24,335 260,496 Maintenance 34,057 18,420 - 52,477 Depreciation and amortization 85,989 69,350 696 156,035 Taxes: Income taxes (12,162) (672) (18,188) (31,022) Other than income 23,501 18,152 562 42,215 ----------- --------- ---------- ------------ 1,252,010 947,450 7,405 2,206,865 ----------- --------- ---------- ------------ OPERATING INCOME 73,460 47,135 6,794 127,389 ----------- --------- ---------- ------------ OTHER INCOME: Allowance for other funds used during construction 2,456 357 - 2,813 Other income (expense) - net 1,718 (2,429) 3,357 2,646 ----------- --------- ---------- ------------ 4,174 (2,072) 3,357 5,459 ----------- --------- ---------- ------------ Total Income Before Interest Charges 77,634 45,063 10,151 132,848 ----------- --------- ---------- ------------ INTEREST CHARGES: Long-term debt 64,513 36,865 33,218 134,596 Other 13,732 11,312 10,843 35,887 Allowance for borrowed funds used during construction and capitalized interest (7,855) (2,779) - (10,634) ----------- --------- ---------- ------------ 70,390 45,398 44,061 159,849 ----------- --------- ---------- ------------ (LOSS) INCOME BEFORE SPPC/NVP OBLIGATED MANDATORILY REDEEMABLE PREFERRED TRUST SECURITIES 7,244 (335) (33,910) (27,001) Preferred dividend requirements of obligated mandatorily redeemable preferred trust securities (15,172) (3,742) - (18,914) ----------- --------- ---------- ------------ (LOSS) INCOME BEFORE PREFERRED STOCK DIVIDENDS (7,928) (4,077) (33,910) (45,915) Preferred stock dividend requirements and redemption premium - (3,499) (3,499) ----------- --------- ---------- ------------ (LOSS) INCOME FROM CONTINUING OPERATIONS (7,928) (7,576) (33,910) (49,414) ----------- --------- ---------- ------------ INCOME FROM DISCONTINUED OPERATIONS - 9,634 - 9,634 ----------- --------- ---------- ------------ NET (LOSS) INCOME $ (7,928) $ 2,058 $ (33,910) $ (39,780) =========== ========= ========== ============
48 SIERRA PACIFIC RESOURCES CONSOLIDATING STATEMENTS OF INCOME (Dollars in Thousands)
Year ended Year Ended December 31, 1999 Dec. 31, 1998 ----------------------------------------------------------------- 12 months 5 months 5 months NVP SPPC Other Total NVP ------------------------- ------------------------------------ OPERATING REVENUES: Electric $977,262 $ 259,440 $ - $ 1,236,702 $ 873,682 Gas - 38,958 - 38,958 - Other - - 9,132 9,132 - ---------- --------- --------- ----------- ----------- 977,262 298,398 9,132 1,284,792 873,682 ---------- --------- --------- ----------- ----------- OPERATING EXPENSES: Operation: Purchased power 293,600 79,856 - 373,456 283,838 Fuel for power generation 154,546 51,584 - 206,130 149,804 Gas purchased for resale - 27,262 - 27,262 - Deferral of energy costs-net 97,238 - - 97,238 (29,680) Other 141,041 40,961 11,389 193,391 134,652 Maintenance 50,805 8,492 - 59,297 49,082 Depreciation and amortization 80,644 29,188 243 110,075 73,562 Taxes: Income taxes 19,943 10,602 (5,247) 25,298 42,949 Other than income 22,462 7,232 90 29,784 22,198 ---------- --------- --------- ----------- ----------- 860,279 255,177 6,475 1,121,931 726,405 ---------- --------- --------- ----------- ----------- OPERATING INCOME 116,983 43,221 2,657 162,861 147,277 ---------- --------- --------- ----------- ----------- OTHER INCOME: Allowance for other funds used during construction 3,713 (1,374) - 2,339 8,944 Other income (expense) - net (1,824) (853) 352 (2,325) (4,602) ---------- --------- --------- ----------- ----------- 1,889 (2,227) 352 14 4,342 ---------- --------- --------- ----------- ----------- Total Income Before Interest Charges 118,872 40,994 3,009 162,875 151,619 ---------- --------- --------- ----------- ----------- INTEREST CHARGES: Long-term debt 64,454 12,741 299 77,494 56,995 Other 8,815 5,885 11,529 26,229 6,018 Allowance for borrowed funds used during construction and capitalized interest (8,356) 356 - (8,000) (6,080) ---------- --------- --------- ----------- ----------- 64,913 18,982 11,828 95,723 56,933 ---------- --------- --------- ----------- ----------- (LOSS) INCOME BEFORE SPPC/NVP OBLIGATED MANDATORILY REDEEMABLE PREFERRED TRUST SECURITIES 53,959 22,012 (8,819) 67,152 94,686 Preferred dividend requirements of obligated mandatorily redeemable preferred trust securities (15,172) (1,570) - (16,742) (11,013) ---------- --------- --------- ----------- ----------- (LOSS) INCOME BEFORE PREFERRED STOCK DIVIDENDS 38,787 20,442 (8,819) 50,410 83,673 Preferred stock dividend requirements and redemption premium (95) (2,105) - (2,200) (174) ---------- --------- --------- ----------- ----------- (LOSS) INCOME FROM CONTINUING OPERATIONS 38,692 18,337 (8,819) 48,210 83,499 ---------- --------- --------- ----------- ----------- INCOME FROM DISCONTINUED OPERATIONS - 3,540 - 3,540 - ---------- --------- --------- ----------- ----------- NET (LOSS) INCOME $ 38,692 $ 21,877 $ (8,819) $ 51,750 $ 83,499 ========== ========= ========= =========== ===========
49 NEVADA POWER COMPANY -------------------- Results of Operations NVP's net loss in 2000 was $7.9 million, down from 1999 net income before dividend requirements on preferred stock of $38.8 million. The causes for significant changes in specific lines comprising the results of operations for NVP for the years ended are provided below (dollars in thousands except for amounts per unit): Electric Operating Revenue
2000 1999 1998 -------------------------------- ------------------------------- ------------- Change from Change from Amount Prior year Amount Prior year Amount -------------- --------------- ------------- -------------- ------------- Electric Operating Revenues: Residential $ 492,365 18.3% $ 416,345 9.5% $ 380,299 Commercial 227,790 13.8% 200,186 13.9% 175,760 Industrial 326,916 12.6% 290,409 16.4% 249,390 -------------- ------------- ------------- -------------- ------------- Retail revenues 1,047,071 15.5% 906,940 12.6% 805,449 Other 278,399 295.9% 70,322 3.1% 68,233 -------------- ------------- ------------- -------------- ------------- Total Revenues $ 1,325,470 35.6% $ 977,262 11.9% $ 873,682 ============== ============= ============= ============== ============= Total retail sales (MWH) 16,363,000 12.0% 14,615,000 8.3% 13,491,000 -------------- ------------- ------------- -------------- ------------- Average retail revenue per MWH $ 63.99 3.1% $ 62.06 3.9% $ 59.70
NVP's retail revenues increased in 2000 due to a combination of customer growth, warmer than normal weather, and rate increases resulting from the Global Settlement (see Regulatory Events, later). The number of residential, commercial, and industrial customers increased over the prior year by 5.6%, 4.6% and 7.4%, respectively. As a result of the Global Settlement, NVP implemented monthly rate increases starting August 1, 2000. Other electric revenues increased in 2000 due to large increases in wholesale power sales at much higher prices. NVP's increase in MWH sales from last year was a result of market conditions and NVP's hedging program. NVP regularly seeks to optimize its daily and hourly portfolio by buying and selling short excess power in the wholesale markets. NVP purchases fixed cost energy at a delivery point where the energy can either be delivered to its control area or traded, should NVP not require the energy. The energy is also traded if replacement energy can be obtained less expensively than transporting the energy to the control area. NVP neither purchases nor sells energy on a speculative basis. NVP's residential and commercial electric revenue increased in 1999 primarily due to 6% customer growth for both categories and an energy price increase of 4% effective March 1999. Industrial electric revenues increased in 1999 primarily due to 7% customer growth and an energy price increase of 4% effective March 1999. Other electric revenues increased in 1999 due to greater wholesale electric revenue that was partially offset by lower emission credit sales and water rights revenue in 1999. 50 Purchased Power
2000 1999 1998 --------------------------------- ------------------------------- ------------ Change from Change from Amount Prior year Amount Prior year Amount ----------- ------------- ------------- ------------- ------------ Total Purchased Power $ 671,396 98.1% $ 338,972 19.4% $ 283,838 Less Imputed Capacity Deferral - - (45,372) - - ----------- ------------ ------------ ------------- ------------ Purchased Power $ 671,396 128.7% $ 293,600 3.4% $ 283,838 =========== ============ ============ Purchased Power MWH 9,659,118 22.9% 7,861,985 14.2% 6,886,920 Average cost per MWH of Purchased Power $ 69.51 61.2% $ 43.12 4.6% $ 41.21
NVP's Purchased power costs were significantly higher in 2000 due to substantial increases in prices and higher volumes. A 61% increase in per unit cost of power was caused primarily by higher Short-Term Firm and "Economy" energy prices. These price increases were the result of much higher fuel costs to energy producers combined with increased demand and limited power supplies. Volumes purchased rose 23% to accommodate increases in system load and wholesale sales. Purchased power costs have been reduced by expected insurance recoveries for generation plant outages in 2000. The recoveries are estimated to total $18 million. Purchased power costs were higher in 1999 as compared to 1998 due to a 14% increase in the volume purchased and an increase in the per unit cost of power. This increase in cost was partially offset by a $45 million adjustment (shown separately above) in 1999 related to the deferral of the portion of one-part firm power contracts deemed by regulators to be related to capacity costs rather than energy costs. Fuel for Power Generation
2000 1999 1998 ------------------------------ ---------------------------------- -------------- Change from Change from Amount Prior year Amount Prior year Amount ------------- ------------- -------------- ---------------- ------------- Fuel for Power Generation $ 292,787 89.4% $ 154,546 3.2% $ 149,804 MWHs generated 10,744,466 17.2% 9,167,963 3.7% 8,843,057 Average fuel cost per MWH of Generated Power $ 27.25 61.7% $ 16.86 -0.5% $ 16.94
NVP's 2000 fuel expense increased over 89% compared to 1999 primarily due to a substantial increase in natural gas prices and, to a lesser degree, as a result of increased generation to accommodate system load. In 1999, NVP's fuel expense increased slightly due to an increase in volumes generated to accommodate customer growth. 51 Deferral of Energy Cost - Net
2000 1999 1998 -------------------------- ------------------------------- ----------- Change from Change from Amount Prior year Amount Prior year Amount ---------- ------------ ----------- -------------- ----------- Deferral of energy costs-net $ 16,719 -82.8% $ 97,238 N/A $ (29,680)
Deferral of energy costs-net decreased in 2000 because NVP discontinued deferred energy cost recognition effective August 1, 2000, pursuant to the July 2000 Global Settlement with the PUCN, and because of decisions, described below, by the PUCN affecting 1999's Deferral of energy costs-net. For more information on the Global Settlement, see Regulatory Events, later. In February and March 2000, the PUCN issued orders that rejected NVP's requested rate relief in its 1999 deferred energy filings. As a result of these decisions, a pre-tax charge of $80 million to Deferral of energy costs-net was made in 1999 to provide a reserve for previously deferred energy and imputed capacity costs. Also, deferral of energy costs-net were higher in 1999 because NVP was granted a price increase to cover current fuel expense, which allowed NVP to currently recognize previously deferred costs. In 1998, NVP deferred $27.0 million of increased energy costs for collection in a later period and recognized $2.7 million of energy cost deferrals that had been deferred prior to 1998. Prior to August 2000, recovery of fuel expenses was administered under Nevada's deferred energy cost accounting procedures. Under a deferred energy procedure, changes in the costs of fuel and purchased power are usually reflected in customer rates through annual rate adjustments and should not affect income. See Note 1 of "Notes to Financial Statements" for more information regarding deferred energy accounting. Allowance For Funds Used During Construction (AFUDC)
2000 1999 1998 ---------------------------------- --------------------------------- ------------ Change from Change from Amount Prior year Amount Prior year Amount ------------- ---------------- -------------- --------------- ------------ Allowance for other funds used during construction $ 2,456 -33.9% $ 3,713 -58.5% $ 8,944 Allowance for borrowed funds used during construction 7,855 -6.0% 8,356 37.4% 6,080 ------------- ---------------- ------------- -------------- ------------ $ 10,311 -14.6% $ 12,069 -19.7% $ 15,024 ------------- ---------------- ------------- -------------- ------------
NVP's AFUDC was lower in 2000 primarily due to an overall rate decrease resulting from an increase in short-term debt at a lower interest rate. AFUDC was lower in 1999 than 1998 because construction of the Crystal Transmission Project was completed in May 1999. 52
2000 1999 1998 ------------------------- ------------------------- ----------- Change from Change from Amount Prior year Amount Prior year Amount ---------- ------------- ---------- ------------- ---------- Other operating expense $139,723 -0.9% $141,041 4.7% $134,652 Maintenance expense 34,057 -33.0% 50,805 3.5% 49,082 Depreciation and amortization 85,989 6.6% 80,644 9.6% 73,562 Income taxes (12,162) -161.0% 19,943 -53.6% 42,949 Interest charges on long-term debt 64,513 0.1% 64,454 13.1% 56,995 Interest charges- other 13,732 55.8% 8,815 46.5% 6,018 Other income (expense)-net 1,718 -194.2% (1,824) -60.4% (4,602)
NVP's other operating expense for 2000 decreased due to reduced labor and benefit costs as a result of merger efficiencies and unfilled vacancies. These savings were offset, in part, by an increase in the provision for uncollectible accounts that included a provision of $7.3 million related to receivables from the California Power Exchange and California's Independent System Operator. NVP's other operating expense increased $6.4 million in 1999 over 1998 primarily due to growth related costs for distribution expenses and administrative and general costs that included group insurance and short-term incentive costs. The level of NVP's maintenance and repair expenses depends primarily upon the scheduling, magnitude and number of generation unit overhauls at NVP's generating stations. In 2000 maintenance expense decreased from the prior year primarily as a result of fewer planned plant maintenance activities at NVP's coal generation facilities. In addition, crews performed more required activities of a capital nature, thereby reducing the amount of maintenance expense. In 1999, maintenance expense increased by $1.7 million over 1998 primarily due to boiler maintenance at the Reid Gardner Generating Station. NVP's 2000 depreciation and amortization expense was higher due to an increase in electric plant-in-service over the prior year. Depreciation expense was higher in 1999 compared to 1998 because of the addition of approximately $280 million in depreciable assets including the completion of the Crystal Transmission Project in May 1999. Due to a net loss, NVP recorded an income tax benefit for 2000. NVP's income taxes were lower in 1999 as compared to 1998 due to lower operating income before taxes. NVP's interest charges on long-term debt for 2000 were comparable to 1999's. Interest charges on NVP's long-term debt were higher in 1999 than 1998 due to interest costs associated with $130.0 million of unsecured notes issued in March 1999. See Note 9 of "Notes to Financial Statements" for additional information regarding long-term debt. NVP's interest charges-other increased in 2000 compared to 1999 due to increased debt through the use of commercial paper in 2000 and due to interest costs associated with the issuance of floating rate notes in October 1999 and June, August, and December 2000. Interest charges-other were higher in 1999 than 1998 because of interest costs associated with higher short-term borrowings in 1999. NVP's other income (expense)-net improved in 2000 as a result of greater increases in life insurance cash surrender values and reductions in contributions and membership dues. Other income (expense)-net improved in 1999 compared to 1998 because corporate and short-term incentive costs were charged to operating expenses during 1999 rather than other expense. 53 Liquidity and Capital Resources NVP's net cash flows increased in 2000 compared to 1999. The net increase in cash resulted from less cash used in investing activities and more cash provided by financing activities. A reduction in the net cash used for utility plant was the main cause for the decrease in cash used for investing activities. The increase in cash flows from financing activities was due to an increase in funding received from SPR (less dividends paid) offset, in part, by less cash provided by the net issuance of long and short-term debt. The overall net increase in cash was also partially offset by a reduction in cash flows from operating activities that was mainly due to a decrease in operating income. NVP's overall net cash flows for 1999 were comparable to 1998. Increases in cash flows from operating activities and less cash used for investing activities were both substantially offset by less cash provided by financing activities. As discussed in "Construction Expenditures and Financing" and "Capital Structure" below, it is anticipated that NVP will have external capital requirements for construction costs and for the repayment of maturing short-term and long-term debt during 2001 totaling approximately $405 million, which NVP will need to fund through a combination of (i) the issuance of long-term and short-term debt and (ii) capital contributions from SPR. The remaining cash requirements for these categories in 2001 are anticipated to be provided by internally-generated funds. Construction Expenditures and Financing The table below provides NVP's consolidated cash construction expenditures and internally generated cash, net for 1998 through 2000 (Dollars in thousands):
2000 1999 1998 Total --------- --------- --------- --------- Cash construction expenditures $ 196,636 $ 220,919 $ 302,041 $ 719,596 ========= ========= ========= ========= Net cash flow from operating activities $ 113,711 $ 178,178 $ 148,281 $ 440,170 Less common & preferred cash dividends 88,308 121,646 73,962 283,916 --------- --------- --------- --------- Internally generated cash 25,403 56,532 74,319 156,254 Add equity contribution from parent 137,000 18,000 0 155,000 --------- --------- --------- --------- Total cash available $ 162,403 $ 74,532 $ 74,319 $ 311,254 ========= ========= ========= ========= Internally generated cash as a percentage of cash construction expenditures 13% 26% 25% 22% Total cash available as a percentage of cash construction expenditures 83% 34% 25% 43%
NVP's estimated cash construction expenditures for 2001 through 2005 are $875 million. NVP estimates that 70% (approximately $123 million) of its 2001 cash expenditures will be provided by internally generated funds, with the remainder (approximately $52 million) being provided by the issuance of long- term debt, short-term debt, and parent contributions. This estimate anticipates that NVP will pay all of its net income in dividends to SPR. NVP anticipates receiving $40 million of capital contribution from SPR in 2001. Capital Structure As of December 31, 2000, NVP had short-term debt outstanding of $100 million comprised entirely of floating rate notes. 54 On July 24, 2000, NVP received a 30-day extension of its $150 million Credit Facility to August 28, 2000, in accordance with the terms of the credit agreement. On August 28, 2000, NVP received a 364-day extension of this facility to August 27, 2001. NVP's actual consolidated capital structure at December 31, 2000, and 1999 was as follows (Dollars in thousands):
2000 1999 --------------------- ------------------- Short-Term Debt (1) $ 352,910 15% $ 271,842 12% Long-Term Debt 927,784 39% 931,004 42% Preferred Securities 188,872 8% 188,872 9% Common Equity (2) 887,737 38% 822,973 37% --------------------- ------------------- TOTAL $2,357,303 100% $2,214,691 100% ===================== ===================
(1) Including current maturities of long-term debt and preferred stock. (2) Does not include equity in Sierra Pacific Resources: 2000 = $471,975; 1999 = $654,156. SIERRA PACIFIC POWER COMPANY ---------------------------- Results of Operations As described in Note 17, Discontinued Operations, SPPC has adopted a plan to sell the water utility business. Accordingly, the water business is reported as a discontinued operation and the operating results have been reclassified to report separately the net results of operations from the water business. SPPC's net loss from continuing operations before dividend requirements on preferred stock in 2000 was $4.1 million, down from net income of $64.6 million in 1999. SPPC's operating results that follow are based upon the Sierra Pacific Power Company Consolidated Statements of Income included in Item 8 of this report. The components of gross margin are (dollars in thousands):
2000 1999 1998 -------- -------- -------- Operating Revenues: Electric $893,782 $609,197 $585,657 Gas 100,803 100,177 99,532 -------- -------- -------- Total Revenues 994,585 709,374 685,189 -------- -------- -------- Energy Costs: Electric 678,727 294,846 271,773 Gas 83,199 68,125 65,430 -------- -------- -------- Total Energy Costs 761,926 362,971 337,203 -------- -------- -------- Gross Margin $232,659 $346,403 $347,986 ======== ======== ======== Gross Margin by Segment: Electric $215,055 $314,351 $313,884 Gas 17,604 32,052 34,102 -------- -------- -------- Total $232,659 $346,403 $347,986 ======== ======== ========
55 The causes for significant changes in specific lines comprising the results of operations for the years ended are provided below (dollars in thousands except for amounts per unit): Electric Operating Revenues
2000 1999 1998 --------------------------- -------------------------- ---------- Change from Change from Amount Prior year Amount Prior year Amount ---------- ------------- ---------- ------------- ---------- Electric Operating Revenues: Residential $ 178,701 4.2% $ 171,533 1.4% $ 169,109 Commercial 196,846 4.5% 188,348 5.4% 178,752 Industrial 196,143 5.6% 185,771 0.5% 184,820 ---------- ------------- ---------- ------------- ---------- Retail revenues 571,690 4.8% 545,652 2.4% 532,681 Other 322,092 406.9% 63,545 20.0% 52,976 ---------- ------------- ---------- ------------- ---------- Total Revenues $ 893,782 46.7% $ 609,197 4.0% $ 585,657 ========== ============= ========== ============= ========== Retail sales in megawatt-hours (MWH) 8,807,332 4.7% 8,412,853 4.5% 8,047,650 ---------- ------------- ---------- ------------- ---------- Average retail revenue per MWH $ 64.91 0.1% $ 64.86 -2.0% $ 66.19
As a result of the Global Settlement (see Regulatory Events, later), beginning in November 2000, the PUCN allowed SPPC to begin recovery of increases in fuel and purchased power costs. For the months of November and December, this recovery added revenues of approximately $2.9 million. The increases in residential and commercial electric revenues in 2000 were also due to warmer weather during the cooling-season than in 1999 as evidenced by a 15% increase in cooling degree days, and, to a lesser extent, by increases in customers. The increase in industrial electric revenues was also due to significant increases in usage per customer, primarily by mining customers, more than offsetting the migration of some customers to the commercial class. Other electric revenues increased in 2000 due to large increases in wholesale power sales at much higher prices. SPPC's increase in MWH sales from last year was a result of market conditions and SPPC's hedging program. SPPC regularly seeks to optimize its daily and hourly portfolio by buying and selling short excess power in the wholesale markets. SPPC purchases fixed cost energy at a delivery point where the energy can either be delivered to its control area or traded, should SPPC not require the energy. The energy is also traded if replacement energy can be obtained less expensively than transporting the energy to the control area. SPPC neither purchases nor sells energy on a speculative basis. In 1999, residential, commercial and industrial electric revenues were higher due to 3% increases in both residential and commercial customers and a 7.8% increase in industrial customers. The increases in residential and industrial revenues were partially offset by lower use per residential customer due to milder weather and lower use per industrial customer because of reduced production by several of SPPC's gold mining customers. The average retail revenue per MWh was lower for 1999 because of increased revenues from customers that are charged lower rates per MWh. Other electric revenues were higher due to a $19.4 million increase in wholesale electric sales. 56 Gas Operating Revenues
2000 1999 1998 --------------------------------- --------------------------------- ----------- Change from Change from Amount Prior year Amount Prior year Amount ----------- ---------------- ------------- --------------- ----------- Gas Operating Revenues: Residential $ 43,541 1.5% $ 42,888 -2.2% $ 43,833 Commercial 21,368 0.5% 21,259 -3.5% 22,022 Industrial 11,307 0.5% 11,252 -9.0% 12,368 Miscellaneous 1,782 36.6% 1,305 281.3% (720) ----------- -------------- ------------- -------------- ----------- Total retail revenue 77,998 1.7% 76,704 -1.0% 77,503 Wholesale revenue 22,805 -2.8% 23,473 6.6% 22,029 ----------- -------------- ------------- -------------- ----------- Total Revenues $ 100,803 0.6% $ 100,177 0.6% $ 99,532 =========== ============== ============= ============== =========== Sales (Decatherms): Retail 13,239,534 -1.1% 13,387,819 -5.3% 14,142,782 Wholesale 5,521,317 -47.0% 10,424,212 -11.2% 11,738,372 ----------- -------------- ------------- -------------- ----------- Total 18,760,851 -21.2% 23,812,031 -8.0% 25,881,154 ----------- -------------- ------------- -------------- ----------- Average revenues per decatherm Retail $ 5.89 2.8% $ 5.73 4.6% $ 5.48 Wholesale $ 4.13 83.6% $ 2.25 19.7% $ 1.88
Residential, commercial and industrial gas revenues in 2000 were comparable to 1999. Increases from customer growth were largely offset by lower usage as a result of milder temperatures during the heating seasons. Overall, wholesale gas sales declined slightly in 2000. A 47% decline in unit (decatherm) sales was the result of less gas available for wholesale sales because of significant increases in the usage of gas supplies for electricity generation. This decline was nearly balanced by an 83% increase in wholesale unit prices. Residential, commercial and industrial gas revenues were lower in 1999 because of lower per customer use resulting from milder weather in 1999. Lower gas revenues in 1999 were partially offset by additional customers in all categories. Wholesale gas revenues were higher due to several large gas sales contracts in the first quarter of 1999. Purchased Power
2000 1999 1998 ------------------------------- ---------------------------- ------------ Change from Change from Amount Prior Year Amount Prior Year Amount ------------- --------------- ------------ ------------- ------------ Purchased Power $ 444,979 147.5% $ 179,781 14.5% $ 156,970 Purchased Power MWH 7,349,000 26.8% 5,797,903 25.4% 4,623,959 Average cost per MWH of Purchased Power $ 60.55 95.3% $ 31.01 -8.7% $ 33.95
Purchased power costs increased dramatically in 2000 due to economy and wholesale energy prices nearly doubling. These price increases were the result of much higher fuel costs to energy producers combined with increased demand and limited power supplies. Volumes purchased were also higher to accommodate increased system load. 57 Purchased power costs were higher in 1999 than 1998 primarily because SPPC fulfilled more of its total energy requirements with less expensive purchased power and reduced its own generation. Purchased power costs were also higher during 1999 due to increased wholesale sales. The higher costs were partially offset by lower average unit prices for purchased power. Fuel For Power Generation
2000 1999 1998 ------------------------------ -------------------------------- -------------- Change from Change from Amount Prior year Amount Prior year Amount ------------ ------------- ------------- ------------- -------------- Fuel for Power Generation $ 233,748 103.1% $ 115,065 0.2% $ 114,803 MWHs generated 5,756,000 15.2% 4,998,140 -9.5% 5,524,262 Average fuel cost per MWH of Generated Power $ 40.61 76.4% $ 23.02 10.8% $ 20.78
Fuel for power generation costs more than doubled in 2000 due mainly to significant increases in natural gas prices, and, to a lesser extent, because volumes purchased were higher to accommodate greater system load. Fuel for generation costs in 1999 were comparable with 1998 because higher gas prices were nearly offset by a 9.5% reduction in the volume of electric generation as SPPC was able to replace electricity from generation with less expensive purchased power. Gas Purchased for Resale
2000 1999 1998 ------------------------------ ------------------------------------- -------------- Change from Change from Amount Prior year Amount Prior year Amount -------------- ------------ -------------- -------------- -------------- Gas Purchased for Resale Retail $ 65,744 37.8% $ 47,696 7.2% $ 44,473 Wholesale 17,455 -14.6% 20,429 -2.5% 20,957 -------------- ----------- -------------- ------------- -------------- Total $ 83,199 22.1% $ 68,125 4.1% $ 65,430 =============- =========== ============== ============= ============== Gas Purchased for Resale (decatherms) Retail 12,964,605 -4.0% 13,501,728 -6.6% 14,462,505 Wholesale 5,492,507 -47.3% 10,424,212 -11.2% 11,738,372 -------------- ----------- -------------- ------------- -------------- Total 18,457,112 -22.9% 23,925,940 -8.7% 26,200,877 ============== =========== ============== ============= ============== Average cost per decatherm Retail $ 5.07 43.6% $ 3.53 14.6% $ 3.08 Wholesale $ 3.18 62.2% $ 1.96 9.5% $ 1.79
The cost of gas purchased for resale increased in 2000 because a decrease in the quantities of gas purchased was more than offset by large increases in unit prices. The decline in retail gas purchases corresponds to decreases in demand by SPPC's retail customers. The decrease in wholesale purchases 58 was the result of increased power plant consumption of gas, thereby decreasing the availability of gas for wholesale activities. The significant gas price increases are consistent with the regional growth in demand for limited supplies of natural gas. The cost of gas purchased for retail sales increased slightly in 1999 because of higher unit prices attributable to increased demand for gas in the Pacific Northwest and additional transportation fees. Deferral of Energy Cost - Net
2000 1999 1998 ----------------------------- ------------------------- ------------ Change from Change from Amount Prior year Amount Prior year Amount --------- ------------- -------- ------------ ------------ Deferral of energy costs-net $(16,164) N/A $ - N/A $ -
In January 2000, SPPC began deferring natural gas costs in excess of that allowed in the tariff for its gas LDC, after the expiration of a rate freeze that was in effect from 1997 through 1999. Recovery of fuel expenses is administered under Nevada's deferred energy cost accounting procedures. Under the deferred energy procedure, changes in the costs of fuel and purchased power are reflected in customer rates through annual rate adjustments and do not affect income. See Note 1 of "Notes to Financial Statements" for more information regarding deferred energy accounting. Allowance For Funds Used During Construction (AFUDC)
2000 1999 1998 --------------------------- ------------------------------ -------- Change from Change from Amount Prior year Amount Prior year Amount -------- ------------ -------- ------------- -------- Allowance for other funds used during construction $ 357 N/A $(1,370) -138.2% $3,589 Allowance for borrowed funds used during construction 2,779 1870.9% 141 -97.7% 6,000 ------ ------- ------- ------- ------ $3,136 N/A $(1,229) -112.8% $9,589 ------ ------- ------- ------- ------
SPPC's total allowance for funds used during construction was higher in 2000 compared to 1999 due to higher construction work-in-progress balances in 2000, an AFUDC rate increase, and an adjustment to AFUDC in 1999 discussed below. AFUDC was lower in 1999 than 1998 because of construction completed in June and December 1998 for the Pinon and Alturas projects, respectively. Also, the 1999 amounts reflect a $2.3 million adjustment to reverse amounts previously charged to AFUDC. 59 2000 1999 1998 ------------------------- -------------------------- -------------- Change from Change from Amount Prior year Amount Prior year Amount -------- ------------ -------- -------------- -------------- Other operating expense $96,438 4.0% $92,745 -2.0% $94,669 Maintenance expense 18,420 -9.3% 20,309 -0.3% 20,374 Depreciation and amortization 69,350 -0.6% 69,762 12.5% 61,990 Income taxes (672) -102.0% 33,870 -14.8% 39,753 Interest charges on long-term debt 36,865 18.3% 31,151 11.3% 27,979 Interest charges- other 11,312 0.2% 11,286 55.0% 7,283 Other income (expense)-net (2,429) 260.9% (673) -1301.8% 56
SPPC's other operating expense for 2000 was higher due to an increase in the provision for uncollectible accounts offset, in part, by reduced labor and benefit costs as a result of merger efficiencies and unfilled vacancies. Other operating expense for 1999 includes a $4.5 million adjustment, which increased expense and reduced revenue related to a rate reserve established in 1998. This was offset by other reductions. Maintenance expense for 2000 decreased from 1999 as a result of fewer outages and lower plant maintenance expenses. Maintenance expense for 1999 was comparable to the prior year. Depreciation and amortization expense decreased in 2000 because an increase due to growth was more than offset by a reduction as a result of the full amortization of computer software. Depreciation and amortization expense increased for 1999 compared to 1998 due to the completion of the Alturas Intertie in December 1998 and the Pinon Pine Post-Gasification facilities in June 1998. Due to a net loss from continuing operations, SPPC recorded an income tax benefit for 2000. Operating income taxes were less in 1999 than 1998 due to lower operating income before taxes. Interest charges on long-term debt were higher in 2000 as a result of increased average long-term debt balances compared to 1999, including the June 2000 issuance of $200 million of variable rate notes. Interest on long-term debt was higher in 1999 than in 1998 due to higher average long-term debt balances than the prior year. SPPC's interest charges-other in 2000 were comparable to 1999. Interest charges-other were higher for 1999 than in 1998 because of a PUCN decision to assess partial interest on amounts payable in a prior year's earnings sharing case and higher average short-term borrowing in 1999. SPPC's other income (expense)-net declined in 2000 mainly due to the reclassification of lease expenses for SPPC's main offices. Other income (expense)-net declined in 1999 compared to 1998 primarily because of a reduction in miscellaneous interest income. 60
2000 1999 1998 --------------------------- --------------------------- --------- Change from Change from Amount Prior year Amount Prior year Amount -------- ------------- --------- ------------ --------- Discontinued Operations: Income from operations of water business $9,634 46.3% $6,583 645.5% $ 883 ====== ==== ====== ===== =====
Income from operations of the water business increased in 2000 due primarily to higher revenues. The increase in revenues resulted from both customer growth and to a lesser extent higher usage per customer. Income from operations of the water business increased in 1999 over 1998 due primarily to higher revenues. The increase in revenues resulted from both customer growth and an April 1998 price increase. Liquidity and Capital Resources SPPC's net cash flows increased in 2000 compared to 1999. The net increase in cash resulted from less cash used in investing activities and more cash provided by financing activities. The decrease in cash used for investing activities was primarily due to SPPC's 1999 acquisition of General Electric Capital Corporation's interest in Pinon Pine Company L.L.C. Cash flows from financing activities increased slightly compared to the prior year due to the retirement of preferred stock in 1999. See Note 8 (Preferred Stock and Preferred Securities) for information concerning the preferred stock retirement. The overall net increase in cash was partially offset by a reduction in cash flows from operating activities that was mainly due to a decrease in operating income. Overall net cash flows decreased during 1999, as compared to 1998, due to lower net cash flows from operating activities and to a lesser extent greater cash used in investing activities. The decrease in cash flows from operating and investing activities was partially offset by cash provided from financing activities. The decrease in cash provided from operating activities was primarily due to cash utilized for customer refunds and merger related cash requirements. The increase in cash used for investing activities was due to SPPC's acquisition of General Electric Capital Corporation's interest in Pinon Pine Company L.L.C., GPSF-B. Net cash provided by financing activities resulted from the issuance of $24 million of California rate reduction bonds in April 1999, and $100 million floating rate notes issued on September 17, 1999. See Note 9 of "Notes to Financial Statement" for more details regarding the California bonds. As discussed in "Construction Expenditures and Financing" and "Capital Structure" below, it is anticipated that SPPC will have capital requirements for construction costs and for the repayment of maturing short-term and long-term debt during 2001 totaling approximately $453 million, which SPPC will need to fund through a combination of (i) the issuance of long-term and short-term debt and (ii) the proceeds from the sale of the water business. 61 Construction Expenditures and Financing
2000 1999 1998 Total --------- --------- --------- --------- Cash construction expenditures $ 132,354 $ 116,131 $ 139,098 $ 387,583 ========= ========= ========= ========= Net cash flow from operating activities $ 112,010 $ 122,329 $ 153,191 $ 387,529 Less common & preferred cash dividends 84,899 81,746 80,459 247,104 --------- --------- --------- --------- Internally generated cash 27,111 40,583 72,732 140,425 Add equity contribution from parent 14,000 22,000 17,250 53,250 --------- --------- --------- --------- Total cash available $ 41,111 $ 62,583 $ 89,982 $ 193,675 ========= ========= ========= ========= Internally generated cash as a percentage of cash construction expenditures 20% 35% 52% 36% Total cash available as a percentage of cash construction expenditures 31% 54% 64% 50%
SPPC's estimated cash construction expenditures for 2001 through 2005 are $640 million. SPPC estimates that all of its 2001 cash expenditures (approximately $125 million) will be provided by the issuance of long-term debt, short-term debt, and proceeds from the sale of the water business. This estimate anticipates that SPPC will pay all of its net income in dividends to SPR. Capital Structure As of December 31, 2000, SPPC had short-term debt outstanding of $108.9 million comprised entirely of commercial paper. On July 24, 2000, SPPC received a 30-day extension of its $150 million Credit Facility to August 28, 2000, in accordance with the terms of the credit agreement. On August 28, 2000, SPPC received a 364-day extension of this facility to August 27, 2001. SPPC's actual capital structure at December 31, 2000, and 1999 was as follows (dollars in thousands):
2000 1999 ---------------- ---------------- Short-Term Debt (1) $ 328,578 20% $ 212,339 13% Long-Term Debt 605,816 37% 625,430 39% Preferred Stock 50,000 3% 50,000 3% Preferred Securities 48,500 3% 48,500 3% Common Equity 604,795 37% 673,738 42% ---------------- ---------------- TOTAL $1,637,689 100% $1,610,007 100% ================ ================
(1) Including current maturities of long-term debt and preferred stock. RESULTS OF OPERATIONS - OTHER SUBSIDIARIES ------------------------------------------ Tuscarora Gas Pipeline Company TGPC, a wholly owned subsidiary of SPR, contributed $2.1 million in net income for the twelve months ended December 31, 2000. The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999, include the operating results of TGPC for the five month period ended December 31, 1999, based on a merger date of August 1, 1999, for accounting purposes. TGPC contributed $711 thousand in net income for the five months ended December 31, 1999. TGPC contributed $1.8 million in net income for the twelve months ended December 31, 1999. 62 Sierra Pacific Communications SPC, a wholly owned subsidiary of SPR, incurred a net loss of $989 thousand for the twelve months ended December 31, 2000. The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999, include the operating results of SPC, for the five month period ended December 31, 1999, based on a merger date of August 1, 1999, for accounting purposes. SPC incurred a net loss of $62 thousand for the five months ended December 31, 1999. SPC incurred a net loss of $75 thousand for the twelve months ended December 31, 1999. e-three e.three, a wholly owned subsidiary of SPR, contributed $338 thousand of net income for the twelve months ended December 31, 2000. The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999, include the operating results of e.three, for the five month period ended December 31, 1999, based on a merger date of August 1, 1999, for accounting purposes. e.three incurred a net loss of $381 thousand for the five months ended December 31, 1999. e.three incurred a net loss of $788 thousand for the twelve months ended December 31, 1999. Sierra Pacific Energy Company SPE, a wholly owned subsidiary of SPR, incurred a net loss of $4.5 million for the twelve months ended December 31, 2000. The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999, include the operating results of SPE for the five month period ended December 31, 1999, based on a merger date of August 1, 1999, for accounting purposes. SPE incurred a net loss of $2.2 million for the five months ended December 31, 1999. SPE incurred a net loss of $3.6 million for the twelve months ended December 31, 1999. Lands of Sierra LOS, a wholly owned subsidiary of SPR, incurred a net loss of $191 thousand for the twelve months ended December 31, 2000. The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999, include the operating results of LOS for the five month period ended December 31, 1999, based on a merger date of August 1, 1999, for accounting purposes. LOS contributed net income of $816 thousand for the five months ended December 31, 1999. LOS contributed net income of $810 thousand for the twelve months ended December 31, 1999. Nevada Electric Investment Company Nevada Electric Investment Company (NEICO), a wholly owned subsidiary of SPR, contributed net income of $384 thousand for the twelve months ended December 31, 2000. NEICO was, prior to 2000, a wholly owned subsidiary of NVP. Accordingly, NEICO's operating results for the twelve months ended December 31, 1999 (a net loss of $594,000), are included in NVP's operating results for that period. Sierra Pacific Resources (Holding Company) The holding company operating results included approximately $44.5 million and $11.5 million of interest costs for 2000 and 1999 that resulted primarily from the merger financing. For additional merger information, see Note 2 of the consolidated financial statements included in this report. 63 Liquidity and Capital Resources (SPR Consolidated) SPR's net cash flows increased in 2000 compared to 1999. The net increase in cash resulted from less cash used in investing activities offset substantially by decreases in cash from operating and financing activities. The decrease in cash flows used in investing activities is due to the merger cash requirements included in the 1999 amounts. Cash flows from operating activities were less in 2000 due primarily to a decrease in operating income and an increase in accounts receivable, offset, in part, by increases in accounts payable and depreciation and amortization. Cash flows from financing activities decreased in 2000 compared to 1999 because most of the cash provided by long- term debt issued in 2000 was utilized to retire short-term borrowings and other long-term debt. See Notes 9 (Long Term Debt) and 12 (Short-Term Borrowings) for detailed financing information. Overall net cash flows increased slightly during 1999, as compared to 1998. Net cash flows were greater in 1999 due to more cash provided from operating and financing activities. The increase in cash provided from operating and financing activities was partially offset by more cash used in investing activities. The increase in cash flows from operating activities was primarily due to the collection of revenues related to previously deferred energy costs. Increased cash from financing activities resulted from the issuance of $456.2 million of commercial paper by SPR to provide funding of the cash portion of the merger consideration. Also, NVP issued long-term debt of $130 million senior unsecured notes, and SPPC and NVP each issued $100 million floating rate notes in September and October 1999, respectively. Cash utilized for investing activities increased primarily as a result of the merger cash requirements. See Note 2 to the consolidated financial statements included in this report for more information about the merger cash requirements. Construction Expenditures and Financing (SPR Consolidated) The table below provides SPR's consolidated cash construction expenditures and internally generated cash, net for 2000 and 1999. The historical information for 1998 is NVP information (Dollars in thousands):
2000 1999 1998 Total ---------- ---------- ---------- ----------- Cash construction expenditures* $ 328,990 $ 729,794 $ 302,041 $ 1,360,825 ========== ========== ========== =========== Net cash flow from operating activities 185,896 211,089 148,281 545,266 Less common & preferred cash dividends 83,057 115,833 73,962 272,852 ---------- ---------- ---------- ----------- International generated cash 102,839 95,256 74,319 272,414 ========== ========== ========== =========== Internally generated cash as a percentage of cash construction expenditures 31% 13% 25% 20%
* 1999 cash construction expenditures include $448.3 million of merger related costs. SPR's estimated cash construction expenditures for 2001 through 2005 are $1.5 billion. SPR estimates that 14% (approximately $47 million) of its 2001 cash expenditures will be provided by internally generated funds, with the remainder being provided by the issuance of long-term debt, short-term debt, and proceeds from the sale of the water business. It is anticipated that the Utilities will pay all of their net income in dividends to SPR. SPR anticipates capital contributions of $40 million to NVP in 2001, which NVP will use, together with proceeds from the issuance of long- term and short-term debt, to fund construction. SPPC will utilize proceeds from the issuance of long-term and short-term debt, and proceeds from the sale of the water business to fund construction. 64 Capital Structure (SPR Consolidated) SPR's actual consolidated capital structure at December 31, 2000, and 1999 was as follows (Dollars in thousands):
2000 1999 ---------------- ---------------- Short-Term Debt (1) $ 685,601 15% $ 957,688 22% Long-Term Debt 2,133,679 48% 1,556,627 36% Preferred Stock 50,000 1% 50,000 1% Preferred Securities 237,372 5% 237,372 6% Common Equity 1,359,712 31% 1,477,129 35% ---------------- ---------------- TOTAL $4,466,364 100% $4,278,816 100% ================ ================
(1) Including current maturities of long-term debt and preferred stock. Included in amounts above for Short-Term and Long-Term Debt is $4 million and $600 million, respectively, of SPR holding company debt. REGULATORY EVENTS (NVP AND SPPC) -------------------------------- Substantially all of the utility operations of both NVP and SPPC are conducted in Nevada. As a result both companies are subject to utility regulation within Nevada and therefore deal with many of the same regulatory issues. Also see Note 20, Subsequent Events, in the Notes to Financial Statements. Nevada Electric Restructuring Competition in the Nevada electricity market was originally scheduled to start on March 1, 2000. However, in February 2000 the Governor of Nevada delayed the date of competition indefinitely. Generally, restructuring regulations and PUCN decisions during 2000 proceeded slowly. Numerous hearings and workshops have been held by the PUCN regarding three important regulations, "provider of last resort", "past costs", and "renewable portfolio requirements" regulations. In accordance with Financial Accounting Standard Board (FASB) Statement No. 71, "Accounting for the Effects of Certain Types of Regulation," SPPC's and NVP's financial statements reflect the effects of rate regulation and decisions by regulatory commissions. For example, expenses may be deferred as regulatory assets on the balance sheet and subsequently be amortized to the income statement when they are recovered from customers in future periods. Similarly, certain items may be deferred as regulatory liabilities, which are also eventually amortized to the income statement. Management periodically assesses whether the requirements for application of SFAS 71 are satisfied. In 1997, the Emerging Issues Task Force of the FASB concluded that once sufficiently detailed deregulation guidance is issued, an entity should discontinue applying SFAS 71 to the separable portion of their business whose pricing is being deregulated. However, an entity may continue to recognize regulatory assets previously associated with that separable portion of their business provided that the transition plan provides for their recovery through the regulatory process. Given the uncertainty related to the current restructuring legislation and PUCN restructuring rules that would ultimately enable retail competition in Nevada, SPPC and NVP continue to apply regulatory accounting to the generation, transmission and distribution portions of their businesses. On March 28, 2000, SPR, NVP and SPPC filed a federal lawsuit challenging Nevada's laws providing for competition in the electric utility industry and the PUCN's implementation of competition. 65 On July 20, 2000, the PUCN approved the Global Settlement that resolved pending state and federal lawsuits and major restructuring issues, including past costs. On August 3, 2000, the PUCN approved 19 revisions to the stipulated agreements. The stipulations provided for open access to occur in a phased manner beginning in November 2000 for large commercial customers and continuing until September 2001 for residential customers. On October 4, 2000, the Governor announced that he had decided to delay the opening of the electricity market in order to allow the state to develop a comprehensive energy policy. The Governor also appointed a bipartisan panel, NEEPC to develop a long-term strategy and report its findings by January 15, 2001, prior to the start of the 2001 legislative session. Management believes it is probable that changes will be made to restructuring legislation and/or PUCN restructuring rules, although it is not possible at this time to predict the nature of those changes or to assess their possible impact on the Utilities. On January 15, 2001, the NEEPC issued its report providing recommendations on electric restructuring issues to the Governor. The report addressed several areas including low income assistance, conservation, renewables, and incentives for encouraging supply. The committee recommended that the market not open until conditions beneficial to Nevada exist. In addition recommendations were provided for market stabilization. The NEEPC report includes a position paper provided by the Southern Nevada Water Authority (SNWA). The SNWA proposes that a non-profit governmental entity be considered as the provider of energy. In February 2001, the Governor of Nevada issued the Nevada Energy Protection Plan. This Plan calls for implementation of conservation measures, measures to facilitate construction of new power plants, new transmission capability, and a focus on alternative energy sources. In addition, the Plan calls for a re-examination of divestiture and places an indefinite halt on the implementation of restructuring. Highlights of the July 20, 2000 Stipulations (The Global Settlement): - -------------------------------------------------------------------- Fuel and Purchased Power Rider The Global Settlement established a Fuel and Purchase Power (F&PP) Rider which allowed NVP to increase its rates effective August 1, 2000, by approximately $48 million annually to recover increased costs of fuel and purchased power, and to update its going-forward costs of fuel and purchased power thereafter with monthly fuel and purchased power filings up to March 2003. Increases and/or decreases are capped at incrementally increased or decreased rates over successive six-month periods at .95 mils for the first six months, 1.15 mils for the second six months, 1.25 mils for the third six months, 1.55 mils for the next six months, and 1.75 mils for the remaining period. The Settlement also permits SPPC to commence filing monthly fuel and purchased power adjustment cases on the same basis to commence not later than November 1, 2000. SPPC fuel and purchased power increases and/or decreases are also capped at incrementally increased or decreased rates over successive six-month periods starting October 1, 2000, at 4.5 mils for the first six-month period followed by .95, 1.15, 1.35, 1.55, and 1.75 mils for each successive six-month period. See the tables at beginning of Management's Discussion and Analysis for actual rate increases implemented to date. 66 Incentives for Utilities to Meet Open Access Dates Provided that open access procedures including billing and settlement are in place by the open access dates, NVP and SPPC will be allowed to retain up to $16 million and $9 million, respectively, from any gain on the divestiture of generation assets. Past Costs Major past cost issues are resolved by the stipulations. The Utilities have waived their rights to the collection of any past costs other than those provided for in the stipulations. The parties have agreed that the stipulations eliminate the need for a past cost regulation. Generation Divestiture The gain on the sale of generation facilities for regulatory purposes will be calculated based upon recorded book values as of the date of sale and includes costs of sale, less applicable taxes and amounts related to the Transitional Purchase Power Agreements ("TPPAs"). Common and general plant allocable to generation will be recoverable from the gain. NVP is to receive the first $15 million dollars in settlement for certain deferred energy costs. Additional gain, if any, from the sale of NVP's generation facilities will be applied to the allowed incentive to NVP for meeting retail open access dates, as described above. Additional gain, if any, up to $9 million, from the sale of SPPC's generation facilities will be applied to the allowed incentives to SPPC for meeting retail open access dates, as described above. Any remaining gains will be set aside in escrow accounts to be utilized to pay down costs associated with above-market purchased power contracts. Long-Term Purchased Power Contracts The Utilities will auction their purchased power contracts on an annual basis in the wholesale markets. If the auction does not yield sufficient proceeds to pay for the purchased power contracts, the Utilities will collect the difference from all customers through a non-bypassable wires charge. This Purchased Power Agreement Adjustment Mechanism (PPAAM) charge will be in place when the market opens. The Utilities filed their first PPAAM with the PUCN on October 2, 2000. To the extent that there are tax or market advantages, the Utilities will pursue a competitive permanent auction of purchased power contracts. Such an auction would be funded by an amount not to exceed the principal and interest in the escrow accounts that were funded by the gain on the sale of generation assets. If the permanent auction does not proceed or if such auction does not exhaust the generation escrow accounts, the PPAAM charge will be reduced by an annuity calculated on any remaining amount in the generation escrow account. Transition Costs The ability of the Utilities to recover costs they expect to spend to open the market, referred to as transition costs, was not resolved by the stipulations. The Utilities expect to petition the PUCN in the near future to request recovery of their transition costs. In other matters related to restructuring, the PUCN has continued rulemaking and discussion related to a number of topics including: 67 Provider Of Last Resort - ----------------------- The PLR will provide electric service to customers who do not select an electricity provider and to customers who are not able to obtain service from an alternative seller after the date competition begins. The PUCN adopted this regulation in December 2000. The final regulation did not include language that restricted the PLR's ability to finance costs. However the final regulation contains a strict standard of conduct to govern the relationship between electric distribution utility (EDU) and PLR functions. Implementation of these provisions could have negative financial ramifications. Transmission Access for Retail Competition - ------------------------------------------ On July 19, 2000, the Utilities filed with the FERC a modified Open Access Tariff that would govern transmission access for retail competition in Nevada until a RTO becomes operational. The modified Open Access Tariff was approved by FERC on October 25, 2000, to become effective when retail competition begins in Nevada. The Utilities also continue to pursue compliance with FERC Order 2000, which calls for utilities to form RTO's. Also see FERC Matters, below. Pricing of Distribution Service and Unbundling of Utility Services - ------------------------------------------------------------------ In May, 2000, the Utilities filed final versions of the approved non-price terms and conditions and rates reflecting the PUCN's filed Opinion and Order in Dockets 99-4001 and 99-4005 (known as the Compliance Filings). These tariffs govern the rates, terms and conditions for Distribution Service for customers who choose and alternate energy supplier. OTHER NEVADA MATTERS Earnings Sharing (SPPC) On May 1, 2000, SPPC filed its third and last compliance filings related to the 1997 rate stipulation. The filings provide a calculation of Sierra's electric and gas earnings in excess of a 12% return on equity (ROE). Any earnings in excess of 12% ROE are shared 50/50 between shareholders and customers. On August 4, 2000, the PUCN approved a stipulation between SPPC, PUCN Staff, and the Nevada Utility Consumer Advocate that rebated $8.63 million and $670,000 to electric and gas customers, respectively, in 2000. In addition SPPC refunded an additional $390,000 to electric customers resulting from the 1999 compliance filing. The August 4, 2000, approved stipulation also resolved all outstanding issues associated with previous shared earning filings. Deferred Energy Filing On July 20, 2000, NVP signed the "Global Settlement" stipulation which eliminated the deferred energy accounting adjustment rates, effective August 1, 2000. In consideration of such termination, NVP may be allowed to recover up to $15 million in the aggregate out of the first-available after-tax proceeds from the sale of NVP's generation assets above book value and costs of sale. Until such recovery is completed NVP may accrue carrying charges at an annual rate of 9.5% on the unrecovered balance. 68 CALIFORNIA MATTERS (SPPC, NVP) Generation Divestiture On March 2, 2000, SPPC filed an application requesting exemption from CPUC approval of the Nevada-based generation divestiture transaction. SPPC cited several reasons for the exemption including that the PUCN and FERC oversight of the generation divestiture will assure reliability and market power mitigation as required by California's electric restructuring legislation. On September 18, 2000, a proposed settlement agreement was filed with the CPUC. However, on January 18, 2001, California enacted a law prohibiting any further divestiture of generation properties by California utilities, including SPPC, until 2006. Unless modified by future legislative action or by a court, divestiture of SPPC's Valmy, Tracy and Ft. Churchill plants is halted. As Edison is the operating partner in the Mohave Station, the pending sale of that unit is also implicated. Without divestiture, the TPPAs negotiated with the buyers of these units as part of the sale agreements are terminated. Distribution Performance-based Rate-making (PBR) On May 4, 2000, the CPUC dismissed without prejudice SPPC's January 3, 2000, distribution PBR proposal. The order accepted the application as meeting the compliance requirement but directed SPPC to re-file it when the cost of capital and cost of service studies are available. On July 3, 2000, SPPC re- submitted the PBR proposal along with the Cost of Service Study. On September 20, 2000, a pre-hearing conference was held which established a procedural schedule and hearings are scheduled to begin April 2, 2001. On May 8, 2000, SPPC filed its 2001 Cost of Capital application. In September 2000, hearings were held. On December 21, 2000, the CPUC approved a 2001 Return on Equity of 10.8% resulting in a Rate of Return of 9.01% for SPPC's California operations. The CPUC also approved an automatic trigger mechanism that will replace SPPC's annual cost of capital filings. Litigation Regarding California Power Market In response to complaints and requests for relief filed by California utilities and their customers, the FERC issued an order on August 23, 2000, initiating hearing proceedings under section 206 of the Federal Power Act to address matters affecting bulk power markets and wholesale energy prices (including price volatility) in California. On November 1, 2000, the FERC proposed specific remedies to address problems that it found in California's wholesale bulk power markets and to ensure just and reasonable wholesale power rates by public utility sellers in California. This ongoing proceeding, together with proceedings currently pending before the CPUC, may result in significant changes to the California power markets. Some parties to these proceedings have requested refunds from sellers of electrical power for past market transactions. The FERC denied this request for sales prior to October 2, 2000. However, the FERC held that sales made after October 2, 2000, are subject to refund, with the level and extent of any refund to be determined in future orders. Although a relatively small portion of SPPC's electricity customers are in the California, SPR, SPPC and NVP are monitoring the developments in California and at the FERC to determine what effect, if any, those developments may have on SPPC's California operations, on bulk sales of power by either utility and on general market prices for wholesale energy in the western United States. 69 FERC MATTERS (SPPC, NVP) Regional Transmission Organization (RTO) On May 1, 2000, NVP, SPPC, and Avista Corporation, BPA, Idaho Power Company, The Montana Power Company, PacifiCorp, Portland General Electric, and Puget Sound Energy, Inc. formed RTO West and filed articles of incorporation in the State of Washington. RTO West will be a non-profit independent system operator governed by an independent board of directors with a stakeholder advisory board. RTO West would be the single provider of transmission services, and controller of transmission operations in an eight-state region. RTO West submitted a compliance filing on October 16, 2000, with FERC. Supplemental material, which provided details of the formation of RTO West, was submitted on October 23. The creation of RTO West is subject to regulatory approvals from FERC and the states served by the investor-owned utilities. The organization will begin operations after all approvals are obtained. FERC's goal is for all RTO's to be operational by December 15, 2001. The proposed operational date in the RTO West filing is approximately one year later. Independent Transmission Company On October 16, 2000, NVP, SPPC, and Portland General Electric Company, Avista Corporation, The Montana Power Company, and Puget Sound Energy filed jointly with FERC to form TransConnect, a for-profit Independent Transmission Company. The creation of TransConnect is subject to regulatory approvals from FERC, state regulators, and the board of directors of each company. TransConnect would own or lease the transmission facilities of the six utilities in Oregon, Washington, Nevada and Montana and parts of Idaho and California. Those facilities are within the proposed territory for RTO West. RTO West would deal with TransConnect, instead of the six utilities. The TransConnect utilities are currently preparing a rate filing to the FERC in the second quarter of 2001. The initial operations date will be coordinated with the RTO West process. Open Access Transmission Rates In May 1999, NVP filed an application with the FERC to increase its Open Access Transmission rates. On March 30, 2000, the FERC approved the settlement filed on February 8, 2000 with rates becoming effective on March 1, 2000. Also on March 30, 2000, NVP filed a Loss Study that NVP agreed to provide in the settlement. On May 23, 2000, the FERC accepted NVP's Loss Study and the docket was completed. In March 1999, SPPC filed an application with the FERC to increase its Open Access Transmission rates. On March 30, 2000, SPPC filed a Loss Study that SPPC agreed to provide in the partial settlement that was approved in January 2000. On April 26, 2000, a settlement was filed by SPPC on issues raised by the City of Fallon and on August 1, 2000, the FERC approved the settlement. On July 18, 2000 a settlement was filed by SPPC on issues raised by the Mines which provides that the issues not be resolved in this case, but at a later date. On September 18, 2000, the FERC approved the settlement. On July 7, 2000, a settlement was filed by SPPC resolving all Loss Study issues in the case and on September 18, 2000, the FERC approved the settlement. 70 Revised Generation Tariffs And Transitional Purchase Power Agreements On March 31, 2000, the Utilities filed for approval of Generation Tariffs that contain the rates, terms and conditions under which the new owners of divested generation facilities could sell energy and ancillary services. The filing also included pro-forma Transitional Purchase Power Agreements (TPPAs) between the Utilities and the new owners of the divested generation facilities. Final signed versions of the TPPAs will be submitted to the FERC as part of the Asset Sale Agreements between the Utilities and the new owners of the divested generation facilities. On May 31, 2000, the FERC accepted for filing the Generation Tariff and the pro forma TPPAs. The FERC required one modification to the TPPAs in that the Utilities were required to notify the new owners one day ahead of their intended use of the generation or release the capacity to the new owners. The FERC also set for hearing the rates in the generation tariff and in the TPPAs. The Utilities have reached a settlement with the FERC Staff, PUCN and the Nevada Bureau of Consumer Protection regarding the rates in the Generation Tariff and TPPAs. The settlement has not yet been submitted to the FERC for approval. Merger Savings On April 8, 1998, SPR and NVP filed a joint application with the PUCN for approval of their proposed merger. On December 31, 1998, the PUCN voted 3-0 to approve the merger, with conditions. The conditions include, among others, requirements to divest generation, file the divestiture plan with the Commission for approval, file an Independent Systems Administrator (ISA) proposal with the FERC, file a generation tariff with the FERC, file a rate case and unbundle costs in 1999, file a subsequent rate case three years after retail competition, and submit application to recover stranded costs. The merger savings should approximate $30 million per year. The Utilities have experienced a reduction in the workforce, primarily in the administrative and general areas, of approximately 300 employees since the merger announcement date of April 30, 1998. The merger savings are tracking with and exceeding the targeted $30 million per year. Final numbers and analysis will be part of the aforementioned subsequent rate case to be filed three years after retail competition. 71 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK SPR has evaluated its risk related to financial instruments whose values are subject to market sensitivity. The only such instruments are fixed and variable rate debt, and preferred securities obligations, which were as follows on December 31, 2000, and 1999. Fair market value was determined using quoted market price for the same or similar issues or on the current rates offered for debt of the same remaining maturities. Long-term debt (dollars in thousands):
Expected Maturity Date December 31, 2000 Fixed Rate --------------------------------------------------------------------------------------------------- Expected Maturities Amounts Weighted Avg Int Rate Fair Market Value ------------------------------------------------------------------------------------------------- NVP SPPC SPR Consolidated Consolidated Consolidated ---------------- ----------------- 2001 $ 100 $ 19,620 $ - $ 19,720 $ 5.57% 2002 15,000 2,626 17,626 7.40% 2003 20,632 20,632 5.63% 2004 130,000 2,621 132,621 6.20% 2005 2,622 300,000 302,622 8.73% Thereafter 588,942 497,311 1,086,253 6.55% ================================================== ================ ================== Total Fixed Rate $ 734,042 $ 545,432 $ 300,000 $ 1,579,474 $ 1,579,221 ------------------------------------------------------------------------- ------------------ Variable Rate Due 2001 $ 250,000 $ 200,000 $ - $ 450,000 7.48% Due 2002 100,000 100,000 7.29% Due 2003 200,000 200,000 7.24% Due 2009 15,000 15,000 4.45% Due 2020 100,000 80,000 180,000 4.36% ================================================== ================ ================== $ 365,000 $ 280,000 $ 300,000 $ 945,000 $ 941,920 ------------------------------------------------------------------------- ------------------ Preferred securities (fixed rate) Due 2036 $ - $ 48,500 $ 48,500 8.60% Due 2037 118,872 118,872 8.20% Due 2038 70,000 70,000 7.75% ================================================== ================ ================== $ 188,872 48,500 $ 237,372 $ 234,792 Total $1,287,914 $ 873,932 $ 600,000 $ 2,761,846 $ 2,755,933 - ---------------------==================================================------------------------------==================
72
Expected Maturity Date December 31, 1999 Fixed Rate -------------------------------------------------------------------------------------------------------------- Expected Maturities Amounts Weighted Ave Int Rate Fair Market Value -------------------------------------------------------------------------------------------------------------- NVP SPPC SPR Consolidated Consolidated -------------------------------------------------------------------------------------------------------------- 2000 $ 89,954 $ 2,755 $ 10 ,000 $ 102,709 7.00% 2001 19,620 112 19,732 5.58% 2002 15,000 2,626 17,626 7.05% 2003 20,631 80 20,711 5.53% 2004 130,000 2,621 132,621 6.20% 2005 - - Thereafter 786,004 499,932 1,285,936 6.68% ========================================================= ====================== ============== Total Fixed Rate $1,020,958 $ 548,185 $ 10,192 $ 1,579,335 $ 1,540,990 --------------------------------------------------------- ---------------------- -------------- Variable Rate Due 2000 $ 100,000 $ 100,000 6.92% Due 2001 - Due 2002 - Due 2003 - Due 2005 - Due 2020 80,000 80,000 3.81% ========================================================= --------------- -------------- $ - $ 180,000 $ - $ 180,000 $ 180,000 --------------------------------------------------------- --------------- -------------- Preferred securities (fixed rate) Due 2036 $ 188,872 $ 48,500 $ 237,372 18.18% $ 208,618 ========================================================= =============== ============== Total $1,209,830 $ 776,685 $ 10,192 $ 1,996,707 $ 1,929,608 =============================================================================== --------------- ==============
* Weighted daily average rate for month ended December 31, 2000, and 1999. COMMODITY PRICE RISK SPR is exposed to commodity price risk primarily related to changes in the market price of electricity as well as changes in fuel costs incurred to generate electricity. As a result of the merger of SPR and NVP, the Board of Directors of the combined company requested that management review and consolidate the Risk Management Programs of the two utilities. SPPC and NVP engaged the services of an energy risk management consulting company to review existing policies and procedures, make any recommendations to the existing Program, and implement the revised Program. That project led SPPC and NVP to adopt revised policies and procedures, and implement new IT systems to track any commodity price exposure. The primary objective of the revised risk management policy is to decrease the Utilities' exposure to commodity prices which are primarily western electric and natural gas prices. SPPC's gas local distribution company is protected by deferred energy accounting procedures (See Note 1 to the Financial Statements). SPR also monitors and manages credit risk with its trading counterparties. Currently, SPR has outstanding transactions with over 30 energy and financial services companies. The aggregate credit risk associated with these transactions is $1.6 billion. The top 10 companies ranked by credit exposure are all rated investment grade corporations with assets exceeding $10 billion with head offices in various 73 locations throughout the United States and Europe. These counterparties make up approximately 85% of the total credit exposure. 74 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page ---- Independent Auditors' Reports............................................. 76-77 Financial Statements: Consolidated Balance Sheets as of December 31, 2000 and 1999......... 78 Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998................................................ 79 Consolidated Statements of Common Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998....................... 80 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998................................... 81 Consolidated Statements of Capitalization as of December 31, 2000 and 1999..................................................... 82-83 Balance Sheets for Nevada Power Company as of December 31, 2000 and 1999..................................................... 84 Statements of Income for Nevada Power Company for the Years Ended December 31, 2000, 1999 and 1998.................................. 85 Statements of Cash Flows for Nevada Power Company for the Years Ended December 31, 2000, 1999 and 1998.............. 86 Statements of Capitalization for Nevada Power Company as of December 31, 2000 and 1999........................... 87 Balance Sheets for Sierra Pacific Power Company as of December 31, 2000 and 1999........................................ 88 Statements of Income for Sierra Pacific Power Company for the Years Ended December 31, 2000, 1999 and 1998............... 89 Consolidated Statements of Common Shareholders' Equity for Sierra Pacific Power Company for the Years Ended December 31, 2000, 1999 and 1998..................................................... 90 Statements of Cash Flows for Sierra Pacific Power Company for the Years Ended December 31, 2000, 1999 and 1998.............. 91 Statements of Capitalization for Sierra Pacific Power Company as of December 31, 2000 and 1999........................... 92 Notes to Financial Statements ........................................... 93
75 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Sierra Pacific Resources Reno, Nevada We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of Sierra Pacific Resources and subsidiaries (the Company) and the separate unconsolidated balance sheets and statements of capitalization of Nevada Power Company (NVP) as of December 31, 2000 and 1999, and the related statements of income, common shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the consolidated financial statement schedules listed in the Index at Item 14. These financial statements and financial statement schedules are the responsibility of the Company's and NVP's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the consolidated financial position of the Company and the financial position of NVP as of December 31, 2000 and 1999, and the respective results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. Deloitte & Touche LLP Reno, Nevada February 23, 2001 (March 9, 2001 as to Note 20) 76 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholder of Sierra Pacific Power Company Reno, Nevada We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of Sierra Pacific Power Company and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, common shareholder's equity, and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. Deloitte & Touche LLP Reno, Nevada February 23, 2001 (March 9, 2001 as to Note 20) 77 SIERRA PACIFIC RESOURCES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
December 31, 2000 1999 ------------------ ------------------ ASSETS Utility Plant at Original Cost: Plant in service $ 5,269,724 $ 5,028,204 Less: accumulated provision for depreciation 1,636,657 1,490,600 ------------------ ------------------ 3,633,067 3,537,604 Construction work-in-progress 348,067 278,530 ------------------ ------------------ 3,981,134 3,816,134 ------------------ ------------------ Investments in subsidiaries and other property, net 135,062 105,880 ------------------ ------------------ Current Assets: Cash and cash equivalents 51,503 4,789 Accounts receivable less provision for uncollectible accounts: 2000-$13,194; 1999-$6,475 336,361 213,452 Materials, supplies and fuel, at average cost 75,132 73,193 Deferred energy costs 16,370 14,884 Other 59,128 7,003 ------------------ ------------------ 538,494 313,321 ------------------ ------------------ Deferred Charges: Goodwill, net of amortization 320,256 327,725 Regulatory tax asset 175,509 192,588 Other regulatory assets 105,588 101,227 Other 116,965 122,677 ------------------ ------------------ 718,318 744,217 ------------------ ------------------ Net assets of discontinued operations (Note 17) 266,476 256,365 ------------------ ------------------ $ 5,639,484 $ 5,235,917 ================== ================== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholders' equity $ 1,359,712 $ 1,477,129 Preferred stock 50,000 50,000 SPPC/ NVP obligated mandatorily redeemable preferred trust securities 237,372 237,372 Long-term debt 2,133,679 1,556,627 ------------------ ------------------ 3,780,763 3,321,128 ------------------ ------------------ Current Liabilities: Short-term borrowings 213,074 754,979 Current maturities of long-term debt 472,527 202,709 Accounts payable 312,039 138,448 Accrued interest 30,184 15,394 Dividends declared 20,890 20,850 Accrued salaries and benefits 28,957 15,410 Deferred taxes on deferred energy costs - 5,683 Other current liabilities 17,795 29,773 ------------------ ------------------ 1,095,466 1,183,246 ------------------ ------------------ Commitments & Contingencies (Note 18) Deferred Credits: Deferred federal income taxes 407,370 405,594 Deferred investment tax credit 59,189 62,604 Regulatory tax liability 50,994 49,440 Customer advances for construction 109,962 109,422 Accrued retirement benefits 80,027 67,314 Other 55,713 37,169 ------------------ ------------------ 763,255 731,543 ------------------ ------------------ $ 5,639,484 $ 5,235,917 ================== ==================
The accompanying notes are an integral part of the financial statements. 78 SIERRA PACIFIC RESOURCES CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Amounts)
Year ended December 31, 2000 1999 1998 ---------------- ---------------- ---------------- OPERATING REVENUES: Electric $ 2,219,252 $ 1,236,702 $ 873,682 Gas 100,803 38,958 - Other 14,199 9,132 - ---------------- ---------------- ---------------- 2,334,254 1,284,792 873,682 ---------------- ---------------- ---------------- OPERATING EXPENSES: Operation: Purchased Power 1,116,375 373,456 283,838 Fuel for power generation 526,535 206,130 149,804 Gas purchased for resale 83,199 27,262 - Deferral of energy costs-net 555 97,238 (29,680) Other 260,496 193,391 134,652 Maintenance 52,477 59,297 49,082 Depreciation and amortization 156,035 110,075 73,562 Taxes: Income taxes (31,022) 25,298 42,949 Other than income 42,215 29,784 22,198 ---------------- ---------------- ---------------- 2,206,865 1,121,931 726,405 ---------------- ---------------- ---------------- OPERATING INCOME 127,389 162,861 147,277 ---------------- ---------------- ---------------- OTHER INCOME: Allowance for other funds used during construction 2,813 2,339 8,944 Other income (expense) - net 2,646 (2,325) (4,602) ---------------- ---------------- ---------------- 5,459 14 4,342 ---------------- ---------------- ---------------- Total Income Before Interest Charges 132,848 162,875 151,619 ---------------- ---------------- ---------------- INTEREST CHARGES: Long-term debt 134,596 77,494 56,995 Other 35,887 26,229 6,018 Allowance for borrowed funds used during construction and capitalized interest (10,634) (8,000) (6,080) ---------------- ---------------- ---------------- 159,849 95,723 56,933 ---------------- ---------------- ---------------- (LOSS) INCOME BEFORE SPPC/NVP OBLIGATED MANDATORILY REDEEMABLE PREFERRED TRUST SECURITIES (27,001) 67,152 94,686 Preferred dividend requirements of SPPC/NVP obligated mandatorily redeemable preferred trust securities (18,914) (16,742) (11,013) ---------------- ---------------- ---------------- (LOSS) INCOME BEFORE PREFERRED STOCK DIVIDENDS (45,915) 50,410 83,673 Preferred stock dividend requirements of subsidiary (3,499) (2,200) (174) ---------------- ---------------- ---------------- (LOSS) INCOME FROM CONTINUING OPERATIONS (49,414) 48,210 83,499 ---------------- ---------------- ---------------- DISCONTINUED OPERATIONS: Income from operations of water business to be disposed of (net of income taxes of $3,426 and $788 in 2000 and 1999, respectively) 9,634 3,540 - ---------------- ---------------- ---------------- NET (LOSS) INCOME $ (39,780) $ 51,750 $ 83,499 ================ ================ ================ (Loss) Income per share - Basic (Loss) Income from continuing operations $ (0.63) $ 0.77 $ 1.64 Income from discontinued operations 0.12 0.06 - ---------------- ---------------- ---------------- Net income (loss) $ (0.51) $ 0.83 $ 1.64 ================ ================ ================ (Loss) Income per share - Diluted (Loss) Income from continuing operations $ (0.63) $ 0.77 $ 1.64 Income from discontinued operations 0.12 0.06 - ---------------- ---------------- ---------------- Net (loss) income $ (0.51) $ 0.83 $ 1.64 ================ ================ ================ Weighted Average Shares of Common Stock Outstanding 78,435,405 62,577,385 50,993,000 ================ ================ ================ Annual Dividends Paid Per Share of Common Stock $ 1.000 $ 1.165 $ 1.450 ================ ================ ================
The accompanying notes are an integral part of the financial statements. 79 SIERRA PACIFIC RESOURCES CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY (Dollars in Thousands)
Year ended December 31, ------------------------------------------------------- 2000 1999 1998 ----------------- ---------------- ---------------- Common Stock: Balance at Beginning of Year $ 78,414 $ $ 54,066 $ 53,604 401(k) Savings Plan - - 65 Stock purchase and dividend reimbursement 61 - 397 Merger conversion - 36,064 - Merger cash consideration - (11,716 - ----------------- ---------------- ---------------- Balance at End of Year 78,475 78,414 54,066 ----------------- ---------------- ---------------- Other Paid-In Capital: Balance at Beginning of Year 1,293,990 683,156 662,987 Premium on sale of common stock - - 20,169 CSIP, DRP, ESPP and other 1,231 1,409 - Merger transactions - 212,148 - Revaluation of pension asset - 66,103 - Goodwill - 331,174 - ----------------- ---------------- ---------------- Balance at End of Year 1,295,221 1,293,990 683,156 ----------------- ---------------- ---------------- Retained Earnings (Deficit): Balance at Beginning of Year 104,725 126,814 117,032 Income (loss) before preferred dividends of continuing operations (45,915) 50,410 83,673 Income from discontinued operations (before preferred dividend allocation of $401 and $196 in 2000 and 1999, respectively ) 10,035 3,736 - Dividends declared: Preferred stock of subsidiaries (3,900) (2,721) (174) Common stock (78,929) (73,514) (73,717) ----------------- ---------------- ---------------- Balance at End of Year (13,984) 104,725 126,814 ----------------- ---------------- ---------------- Total Common Shareholders' Equity at End of Year $ 1,359,712 $ 1,477,129 $ 864,036 ================= ================ ================
The accompanying notes are an integral part of the financial statements 80 SIERRA PACIFIC RESOURCES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Year ended December 31, 2000 1999 1998 --------------- ------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: (Loss) Income before preferred dividends from continuing operations $ (45,915) $ 50,410 $ 83,673 Income before preferred dividends from discontinued operations 10,035 3,736 - Non-cash items included in income: Depreciation and amortization 163,370 113,236 73,562 Deferred taxes and deferred investment tax credit (18,564) (16,543) 23,640 AFUDC and capitalized interest (13,858) (10,501) (15,025) Deferred energy costs 14,884 48,313 (33,819) Early retirement and severance amortization 4,196 1,748 - Other non-cash 30,972 24,122 13,896 Changes in certain assets and liabilities, net of acquisition: Accounts receivable (122,909) (7,393) (9,034) Materials, supplies and fuel (1,864) (3,846) 2,764 Other current assets (52,125) 155 1,359 Accounts payable 173,591 49,655 22,788 Other current liabilities 16,359 (6,342) (7,918) Other - net 27,724 (35,661) (7,605) --------------- ------------- ----------- Net Cash Flows From Operating Activities 185,896 211,089 148,281 --------------- ------------- ----------- CASH FLOWS USED IN INVESTING ACTIVITIES: Acquisition of business, net of cash acquired - (448,311) - Additions to utility plant (359,774) (299,064) (314,933) AFUDC and other charges to utility plant 15,227 (3,645) 3,996 Customer refunds for construction (889) 8,173 - Contributions in aid of construction 16,446 13,053 8,896 --------------- ------------- ----------- Net cash used for utility plant (328,990) (729,794) (302,041) --------------- ------------- ----------- (Investments in) disposal of subsidiaries and other property - net (28,056) 1,366 (2,277) --------------- ------------- ----------- Net Cash Used In Investing Activities (357,046) (728,428) (304,318) --------------- ------------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) Increase in short-term borrowings (547,310) 495,165 105,000 Proceeds from issuance of long-term debt 1,165,000 230,699 - Retirement of long-term debt (318,061) (63,293) (17,436) Change in funds held in trust - - 52,939 Proceeds from NVP obligated mandatorily redeemable preferred trust securities - - 70,000 Retirement of preferred stock - (26,380) (200) Sale of common stock 1,292 - 20,746 Dividends paid (83,057) (115,833) (73,962) --------------- ------------- ----------- Net Cash Provided By Financing Activities 217,864 520,358 157,087 --------------- ------------- ----------- Net Increase in Cash and Cash Equivalents 46,714 3,019 1,050 Beginning balance in Cash and Cash Equivalents 4,789 1,770 720 --------------- ------------- ----------- Ending balance in Cash and Cash Equivalents $ 51,503 $ 4,789 $ 1,770 =============== ============= =========== Supplemental Disclosures of Cash Flow Information: Cash Paid During Period For: Interest $ 167,158 $ 127,063 $ 75,487 Income Taxes $ 12,730 $ 43,719 $ 27,110
The accompanying notes are an integral part of the financial statements 81 SIERRA PACIFIC RESOURCES CONSOLIDATED STATEMENTS OF CAPITALIZATION (Dollars in Thousands)
December 31, 2000 1999 --------------- -------------- Common Shareholders' Equity: Common stock $1.00 par value, authorized 250 million; issued and outstanding 2000: 78,475,217 shares; 1999, 78,428,480 shares $ 78,475 $ 78,414 Additional paid-in capital 1,295,221 1,293,990 Retained earnings (deficit) (13,984) 104,725 --------------- -------------- Total Common Shareholders' Equity 1,359,712 1,477,129 --------------- -------------- Preferred Stock of Subsidiaries: Not subject to mandatory redemption Outstanding at December 31 Class A Series 1; $1.95 dividend 50,000 50,000 --------------- -------------- Preferred Securities of Subsidiaries: NVP obligated Mandatorily Redeemable Preferred Securities of NVP's Subsidiary Trust, NVP Capital I, holding solely $122.6 million principal amount of 8.2% Junior Subordinated Debentures of NVP, due 2037 118,872 118,872 NVP obligated Mandatorily Redeemable Preferred Securities of NVP's Subsidiary Trust, NVP Capital III, holding solely $72.2 million principal amount of 7 3/4% Junior Subordinated Debentures of NVP, due 2038 70,000 70,000 SPPC obligated Mandatorily Redeemable Preferred Securities of SPPC's Subsidiary Trust, SPPC Capital I, holding solely $50 million principal amount of 8.60% Junior Subordinated Debentures of SPPC, due 2036 48,500 48,500 --------------- -------------- Total Preferred Securities 237,372 237,372 --------------- -------------- Long-Term Debt: First Mortgage Bonds: Unamortized bond premium and discount, net (913) (583) Debt Secured by First Mortgage Bonds: 7 5/8% Series L due 2002 15,000 15,000 7.80% Series T due 2009 - 15,000 6.70% Series V due 2022 105,000 105,000 6.60%Series W due 2019 39,500 39,500 7.20% Series X due 2022 78,000 78,000 8.50% Series Z due 2023 35,000 35,000 7.06% Series AA due 2000 - 85,000 2.00% Series Z due 2004 72 93 2.00% Series O due 2011 1,374 1,497 6.35% Series FF due 2012 1,000 1,000 6.55% Series AA due 2013 39,500 39,500 6.30% Series DD due 2014 45,000 45,000 6.65% Series HH due 2017 75,000 75,000 6.65% Series BB due 2017 17,500 17,500 6.55% Series GG due 2020 20,000 20,000 6.30% Series EE due 2022 10,250 10,250 6.95% to 8.61% Series A MTN due 2022 110,000 110,000 7.10% and 7.14% Series B MTNdue 2023 58,000 58,000 6.62% to 6.83% Series C MTN due 2006 50,000 50,000 5.90% Series JJ due 2023 9,800 9,800 5.90% Series KK due 2023 30,000 30,000
The accompanying notes are an integral part of the financial statements. 82 SIERRA PACIFIC RESOURCES CONSOLIDATED STATEMENTS OF CAPITALIZATION (Dollars in Thousands) Continued from previous page
December 31, 2000 1999 ----------------- ---------------- 5.00% Series Y due 2024 3,138 3,207 6.70% Series II due 2032 21,200 21,200 5.47% Series D MTN due 2001 17,000 17,000 5.50% Series D MTN due 2003 5,000 5,000 5.59% Series D MTN due 2003 13,000 13,000 ----------------- ---------------- Subtotal, excluding current portion 798,421 898,964 ----------------- ---------------- Industrial development revenue bonds 7.80% due 2020 - 100,000 5.90% Series 1997A due 2032 52,285 52,285 5.90% Series 1995B due 2030 85,000 85,000 5.60% Series 1995A due 2030 76,750 76,750 5.50% Series 1995C 44,000 44,000 Pollution control revenue bonds 6 3/8% due 2036 20,000 20,000 5.80% Series 1997B due 2032 20,000 20,000 5.30% Series 1995D due 2011 14,000 14,000 5.45% Series 1995D due 2023 6,300 6,300 5.35% Series 1995E due 2022 13,000 13,000 ----------------- ---------------- Total excluding current portion 331,335 431,335 ----------------- ---------------- Variable Rate Notes Floating rate note due 2000 - 100,000 Floating rate note due 2001 200,000 - Floating rate note due 2001 150,000 - Floating rate note due 2001 100,000 - IDRB Series 2000A due 2020 100,000 - PCRB Series 2000B due 2009 15,000 - Water facilities note maturing 2020 80,000 80,000 Floating Rate Note due 2002 100,000 - Floating Rate Note due 2003 200,000 - ----------------- ---------------- 945,000 180,000 8.75% Senior unsecured note Series 2000 due 2005 300,000 - 6.20% Senior unsecured note Series A 130,000 130,000 ----------------- ---------------- 430,000 130,000 ----------------- ---------------- 8.75% Senior unsecured note Series 2000 due 2005 81,815 87,007 Current maturities and sinking fund requirements (472,531) (189,842) Other 19,639 19,163 ----------------- ---------------- Total Long-Term Debt 2,133,679 1,556,627 TOTAL CAPITALIZATION $ 3,780,763 $ 3,321,128 ================= ================
The accompanying notes are an integral part of the financial statements. 83 NEVADA POWER COMPANY BALANCE SHEETS (Dollars in Thousands)
December 31, 2000 1999 ---------------- -------------- ASSETS Utility Plant at Original Cost: Plant in service $ 3,089,705 $ 2,928,973 Less: accumulated provision for depreciation 855,599 772,003 ---------------- -------------- 2,234,106 2,156,970 Construction work-in-progress 228,856 195,671 ---------------- -------------- 2,462,962 2,352,641 ---------------- -------------- Investments in Sierra Pacific Resources (Note 1A) 471,975 654,156 Investments in subsidiaries and other property, net 13,418 15,644 ---------------- -------------- 485,393 669,800 ---------------- -------------- Current Assets: Cash and cash equivalents 43,858 243 Accounts receivable less provision for uncollectible accounts: 2000-$11,605; 1999-$2,826 137,097 110,955 Materials, supplies and fuel, at average cost 45,573 43,108 Deferred energy costs - 14,884 Other 28,933 3,573 ---------------- -------------- 255,461 172,763 ---------------- -------------- Deferred Charges: Regulatory tax asset 113,647 130,833 Other regulatory assets 32,583 28,190 Other 25,912 24,258 ---------------- -------------- 172,142 183,281 ---------------- -------------- $ 3,375,958 $ 3,378,485 ================ ============== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholders' equity including $471,975 and $654,156 of equity in Sierra Pacific Resources in 2000 and 1999 (Note 1A) $ 1,359,712 $ 1,477,129 NVP obligated mandatorily redeemable preferred trust securities 188,872 188,872 Long-term debt 927,784 931,004 ---------------- -------------- 2,476,368 2,597,005 ---------------- -------------- Current Liabilities: Short-term borrowings 100,000 182,000 Current maturities of long-term debt 252,910 89,842 Accounts payable 126,015 75,088 Accrued interest 16,913 10,098 Dividends declared 86 24,126 Accrued salaries and benefits 12,297 7,025 Deferred taxes on deferred energy costs - 5,683 Other current liabilities 16,450 18,536 ---------------- -------------- 524,671 412,398 ---------------- -------------- Commitments & Contingencies (Note 18) Deferred Credits: Deferred federal income taxes 216,753 236,139 Deferred investment tax credit 25,163 26,624 Regulatory tax liability 19,908 14,993 Customer advances for construction 65,588 69,341 Accrued retirement benefits 27,985 18,262 Other 19,522 3,723 ---------------- -------------- 374,919 369,082 ---------------- -------------- $ 3,375,958 $ 3,378,485 ================ ==============
The accompanying notes are an integral part of the financial statements. 84 NEVADA POWER COMPANY STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Amounts)
Year ended December 31, ---------------------------------------------- 2000 1999 1998 -------------- ------------- -------------- OPERATING REVENUES: Electric $ 1,325,470 $ 977,262 $ 873,682 OPERATING EXPENSES: Operation: Purchased power 671,396 293,600 283,838 Fuel for power generation 292,787 154,546 149,804 Deferral of energy costs-net 16,719 97,238 (29,680) Other 139,723 141,041 134,652 Maintenance 34,057 50,805 49,082 Depreciation and amortization 85,989 80,644 73,562 Taxes: Income taxes (12,162) 19,943 42,949 Other than income 23,501 22,462 22,198 -------------- ------------- -------------- 1,252,010 860,279 726,405 -------------- ------------- -------------- OPERATING INCOME 73,460 116,983 147,277 -------------- ------------- -------------- OTHER INCOME: Equity in earnings (losses) of Sierra Pacific Resources (Note 1A) (31,852) 13,058 - Allowance for other funds used during construction 2,456 3,713 8,944 Other income (expense) - net 1,718 (1,824) (4,602) -------------- ------------- -------------- (27,678) 14,947 4,342 -------------- ------------- -------------- Total Income Before Interest Charges 45,782 131,930 151,619 -------------- ------------- -------------- INTEREST CHARGES: Long-term debt 64,513 64,454 56,995 Other 13,732 8,815 6,018 Allowance for borrowed funds used during construction and capitalized interest (7,855) (8,356) (6,080) -------------- ------------- -------------- 70,390 64,913 56,933 -------------- ------------- -------------- (LOSS) INCOME BEFORE NVP OBLIGATED MANDATORILY REDEEMABLE PREFERRED TRUST SECURITIES (24,608) 67,017 94,686 Preferred dividend requirements of NVP obligated mandatorily redeemable preferred trust securities (15,172) (15,172) (11,013) -------------- ------------- -------------- INCOME (LOSS) BEFORE PREFERRED STOCK DIVIDENDS (39,780) 51,845 83,673 Preferred stock dividend requirements - (95) (174) -------------- ------------- -------------- NET (LOSS) INCOME $ (39,780) $ 51,750 $ 83,499 ============== ============= ============== Net (Loss) Income Per Share- Basic $ (0.51) $ 0.83 $ 1.64 ============== ============= ============== - Diluted $ (0.51) $ 0.83 $ 1.64 ============== ============= ============== Weighted Average Shares of Common Stock Outstanding (000's) 78,435 62,577 50,993 ============== ============= ============== Dividends Paid Per Share of Common Stock $ 1.000 $ 1.165 $ 1.450 ============== ============= ==============
The accompanying notes are an integral part of the financial statements. 85 NEVADA POWER COMPANY STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Year ended December 31, ---------------------------------------------- 2000 1999 1998 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: (Loss) Income before preferred dividends $ (39,780) $ 51,845 $ 83,673 Non-cash items included in income: Depreciation and amortization 85,989 80,643 73,562 Deferred taxes and deferred investment tax credit (26,528) (18,913) 23,640 AFUDC and capitalized interest (10,311) (12,069) (15,025) Deferred energy costs 14,884 48,313 (33,819) Other non-cash 20,101 16,908 13,896 Equity in earnings of SPR (Note 2) 31,852 (13,058) - Changes in certain assets and liabilities, net of acquisition: Accounts receivable (26,142) (11,795) (9,034) Materials, supplies and fuel (2,465) (3,502) 2,764 Other current assets (25,360) 1,778 1,359 Accounts payable 50,927 34,964 22,788 Other current liabilities 10,001 17,066 (7,918) Other - net 30,543 (14,002) (7,605) ------------ ------------ ------------ Net Cash Flows From Operating Activities 113,711 178,178 148,281 ------------ ------------ ------------ CASH FLOWS USED IN INVESTING ACTIVITIES: Additions to utility plant (204,505) (223,963) (314,933) AFUDC and other charges to utility plant 11,622 (2,184) 3,996 Customer refunds for construction (3,753) 5,228 - Contributions in aid of construction - - 8,896 ------------ ------------ ------------ Net cash used for utility plant (196,636) (220,919) (302,041) Investments in subsidiaries and other property - net - 1,499 (2,277) ------------ ------------ ------------ Net Cash Used In Investing Activities (196,636) (219,420) (304,318) CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) increase in short-term borrowings (82,000) 77,000 105,000 Proceeds from issuance of long-term debt 365,000 129,900 - Retirement of long-term debt (205,152) (60,283) (17,436) Change in funds held in trust - 9 52,939 Proceeds from NVP-obligated mandatorily redeemable preferred trust securities - - 70,000 Retirement of preferred stock - (3,265) (200) Sale of common stock - - 20,746 Additional investment of Parent 137,000 18,000 Dividends paid (88,308) (121,646) (73,962) ------------ ------------ ------------ Net Cash Provided By Financing Activities 126,540 39,715 157,087 ------------ ------------ ------------ Net Increase/Decrease in Cash and Cash Equivalents 43,615 (1,527) 1,050 Beginning balance in Cash and Cash Equivalents 243 1,770 720 ------------ ------------ ------------ Ending balance in Cash and Cash Equivalents $ 43,858 $ 243 $ 1,770 ============ ============ ============= Supplemental Disclosures of Cash Flow Information: Cash Paid During Period For: Interest $ 71,430 $ 91,196 $ 75,487 Income Taxes $ 6,500 $ 38,219 $ 27,110
The accompanying notes are an integral part of the financial statements. 86 NEVADA POWER COMPANY STATEMENTS OF CAPITALIZATION (Dollars in Thousands)
December 31, 2000 1999 -------------- ------------ Common Shareholders' Equity: Common stock issued $ 1 $ 1 Other paid-in capital 892,185 755,226 Retained earnings (deficit) (4,449) 67,746 Equity in Sierra Pacific Resources (Note 1A) 471,975 654,156 -------------- ------------ Total Common Shareholder's Equity 1,359,712 1,477,129 -------------- ------------ Preferred Securities: NVP obligated Mandatorily Redeemable Preferred Securities of NVP's Subsidiary Trust, NVP Capital I, holding solely $122.6 million principal amount of 8.2% Junior Subordinated Debentures of NVP, due 2037 118,872 118,872 NVP obligated Mandatorily Redeemable Preferred Securities of NVP's Trust, NVP Capital III, holding solely $72.2 million principal amount of 7 3/4% Junior Subordinated Debentures of NVP, due 2038 70,000 70,000 -------------- ------------ Total Preferred Securities 188,872 188,872 -------------- ------------ Long-Term Debt: First Mortgage Bonds: Unamortized bond premium and discount, net (163) 212 Debt Secured by First Mortgage Bonds: 7 5/8% Series L due 2002 15,000 15,000 7.80% Series T due 2009 - 15,000 6.70% Series V due 2022 105,000 105,000 6.60% Series W due 2019 39,500 39,500 7.20% Series X due 2022 78,000 78,000 8.50% Series Z due 2023 35,000 35,000 7.06% Series AA due 2000 - 85,000 -------------- ------------ Subtotal, excluding current portion 272,337 372,712 Industrial development revenue bonds 7.80% due 2020 - 100,000 5.90% Series 1997A due 2032 52,285 52,285 5.90% Series 1995B due 2030 85,000 85,000 5.60% Series 1995A due 2030 76,750 76,750 5.50% Series 1995C due 2030 44,000 44,000 Pollution Control Revenue Bonds 6 3/8% due 2036 20,000 20,000 5.80% Series 1997B due 2032 20,000 20,000 5.30% Series 1995D due 2011 14,000 14,000 5.45% Series 1995D due 2023 6,300 6,300 5.35% Series 1995E due 2022 13,000 13,000 -------------- ------------ Total excluding current portion 331,335 431,335 -------------- ------------ Variable Rate Notes Floating rate note due 2001 150,000 - Floating rate note due 2001 100,000 - IDRB Series 2000A due 2020 100,000 - PCRB Series 2000B due 2009 15,000 - -------------- ------------ 365,000 - -------------- ------------ 6.20% Senior unsecured note Series A 130,000 130,000 Obligation under capital leases 81,815 87,007 Current maturities and sinking fund requirements (252,911) (89,842) Other, excluding current portion 208 (208) -------------- ------------ Total Long-Term Debt 927,784 931,004 -------------- ------------ TOTAL CAPITALIZATION $ 2,476,368 $ 2,597,005 ============== ============
The accompanying notes are an integral part of the financial statements. 87 SIERRA PACIFIC POWER COMPANY CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
December 31, 2000 1999 --------------- --------------- ASSETS Utility Plant at Original Cost: Plant in service $ 2,180,019 $ 2,097,533 Less: accumulated provision for depreciation 781,058 718,597 --------------- --------------- 1,398,961 1,378,936 Construction work-in-progress 119,210 82,859 --------------- --------------- 1,518,171 1,461,795 --------------- --------------- - Investments in subsidiaries and other property, net 60,047 62,704 --------------- --------------- Current Assets: Cash and cash equivalents 5,348 3,011 Accounts receivable less provision for uncollectible accounts: 2000 - $1,589; 1999 - $3,649 133,369 111,175 Materials, supplies and fuel, at average cost 29,209 29,642 Deferred energy costs 16,370 - Other 29,852 3,103 --------------- --------------- 214,148 146,931 --------------- --------------- Deferred Charges: Regulatory tax asset 61,862 61,755 Other regulatory assets 61,236 69,645 Other 12,036 25,512 --------------- --------------- 135,134 156,912 --------------- --------------- - - Net assets of discontinued operations (Note 9) 266,476 256,365 --------------- --------------- $ 2,193,976 $ 2,084,707 =============== =============== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholder's equity $ 604,795 $ 673,738 Preferred stock 50,000 50,000 SPPC obligated mandatorily redeemable preferred trust securities 48,500 48,500 Long-term debt 605,816 625,430 --------------- --------------- 1,309,111 1,397,668 --------------- --------------- Current Liabilities: Short-term borrowings 108,962 109,584 Current maturities of long-term debt 219,616 102,755 Accounts payable 146,724 78,491 Accrued interest 6,992 5,110 Dividends declared 23,975 19,974 Accrued salaries and benefits 15,475 8,385 Other current liabilities 2,932 10,673 --------------- --------------- 524,676 334,972 --------------- --------------- Commitments & Contingencies (Note 18) Deferred Credits: Deferred federal income taxes 180,166 161,891 Deferred investment tax credit 34,025 35,980 Regulatory tax liability 31,087 34,447 Accrued retirement benefits 44,374 49,052 Customer advances for construction 41,776 40,081 Other 28,761 30,616 --------------- --------------- 360,189 352,067 --------------- --------------- $ 2,193,976 $ 2,084,707 =============== ===============
The accompanying notes are an integral part of the financial statements. 88 SIERRA PACIFIC POWER COMPANY CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands)
December 31, 2000 1999 1998 --------------- --------------- --------------- OPERATING REVENUES: Electric $ 893,782 $ 609,197 $ 585,657 Gas 100,803 100,177 99,532 --------------- --------------- --------------- 994,585 709,374 685,189 --------------- --------------- --------------- OPERATING EXPENSES: Operation: Purchased power 444,979 179,781 156,970 Fuel for power generation 233,748 115,065 114,803 Gas purchased for resale 83,199 68,125 65,430 Deferral of energy costs - net (16,164) - - Other 96,438 92,745 94,669 Maintenance 18,420 20,309 20,374 Depreciation and amortization 69,350 69,762 61,990 Taxes: Income taxes (672) 33,870 39,753 Other than income 18,152 17,014 16,937 --------------- --------------- --------------- 947,450 596,671 570,926 --------------- --------------- --------------- OPERATING INCOME 47,135 112,703 114,263 --------------- --------------- --------------- OTHER INCOME: Allowance for other funds used during construction 357 (1,370) 3,589 Other (expense) income - net (2,429) (673) 56 --------------- --------------- --------------- (2,072) (2,043) 3,645 --------------- --------------- --------------- Total Income 45,063 110,660 117,908 --------------- --------------- --------------- INTEREST CHARGES: Long-term debt 36,865 31,151 27,979 Other 11,312 11,286 7,283 Allowance for borrowed funds used during construction and capitalized interest (2,779) (141) (6,000) --------------- --------------- --------------- 45,398 42,296 29,262 --------------- --------------- --------------- INCOME BEFORE SPPC OBLIGATED MANDATORILY REDEEMABLE PREFERRED TRUST SECURITIES (335) 68,364 88,646 Preferred dividend requirements of SPPC obligated mandatorily redeemable preferred trust securities (3,742) (3,749) (4,171) --------------- --------------- --------------- (LOSS) INCOME BEFORE PREFERRED DIVIDENDS (4,077) 64,615 84,475 Preferred dividend requirements and premium paid on redemption (3,499) (4,957) (4,797) --------------- --------------- --------------- NET (LOSS) INCOME FROM CONTINUING OPERATIONS (7,576) 59,658 79,678 --------------- --------------- --------------- DISCONTINUED OPERATIONS: Income from operations of water business to be disposed of (net of income taxes of $3,426, $2,172 and $3,797 in 2000, 1999 and 1998, respectively) 9,634 6,583 883 --------------- --------------- --------------- NET INCOME $ 2,058 $ 66,241 $ 80,561 =============== =============== ===============
The accompanying notes are an integral part of the financial statements. 89 SIERRA PACFIC POWER COMPANY CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY (Dollars in Thousands)
Year ended December 31, 2000 1999 1998 -------------- -------------- ------------- Common Stock Balance at Beginning of Year and End of Year $ 4 $ 4 $ 4 -------------- -------------- ------------- Other Paid-In Capital Balance at Beginning Year 584,684 562,684 545,434 Additional investment by parent company 14,000 22,000 17,250 -------------- -------------- ------------- Balance at End of Year 598,684 584,684 562,684 -------------- -------------- ------------- Retained Earnings Balance at Beginning of Year 89,049 98,679 94,118 (Loss) Income before preferred dividends of continuing operations (4,077) 64,615 84,475 Income from discontinued operations (before preferred dividend allocation of $401 and $528 and $662 in 2000, 1999 and 1998 respectively) 10,035 7,111 1,545 Preferred stock dividends declared & premium on redemption (3,900) (5,355) (5,459) Common stock dividends declared (85,000) (76,000) (76,000) -------------- -------------- ------------- Balance at End of Year 6,107 89,050 98,679 -------------- -------------- ------------- Total Common Shareholder's Equity at End of Year $ 604,795 $ 673,738 $ 661,367 ============== ============== =============
The accompanying notes are an integral part of the financial statements 90 SIERRA PACIFIC POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Year Ended December 31, 2000 1999 1998 -------------- -------------- -------------- Cash Flows From Operating Activities: (Loss) Income before preferred dividends from continuing operations $ (4,077) $ 64,615 $ 84,475 Income before preferred dividends from discontinued operations 10,035 7,111 1,545 Non-Cash items included in income: Depreciation and amortization 76,685 77,373 69,435 Deferred taxes and investment tax credits 7,935 5,595 (3,743) AFUDC and capitalized interest (3,547) 1,033 (10,211) Early retirement and severance amortization 4,196 4,194 4,177 Other non-cash 10,871 8,644 2,400 Changes in certain assets and liabilities: Accounts receivable (22,194) 685 (13,836) Materials, supplies and fuel 508 (4,294) (521) Other current assets (26,749) (411) (120) Accounts payable 68,233 12,459 2,944 Other current liabilities 1,231 (23,257) 6,844 Other-net (11,117) (31,418) 9,802 -------------- -------------- -------------- Net Cash Flows From Operating Activities 112,010 122,329 153,191 -------------- -------------- -------------- Cash Flows From Investing Activities: Additions to utility plant (155,269) (142,306) (183,384) Non-cash charges to utility plant 3,605 (768) 10,587 Customer refunds for construction 2,864 5,120 (3,517) Contributions in aid of construction 16,446 21,823 37,216 -------------- -------------- -------------- Net cash used for utility plant (132,354) (116,131) (139,098) Investment in subsidiaries and other non-utility property - net 2,292 (28,720) (2,788) -------------- -------------- -------------- Net Cash Used in Investing Activities (130,062) (144,851) (141,886) -------------- -------------- -------------- Cash Flows From Financing Activities Increase in short-term borrowings (5,915) 1,972 30,637 Proceeds from issuance of long-term debt 200,000 124,495 35,000 Retirement of long-term debt (102,797) (33,270) (5,456) Retirement of preferred stock - (23,115) - Additional investment by parent company 14,000 22,000 17,250 Dividends paid and premiums on preferred redemption (84,899) (81,746) (80,459) -------------- -------------- -------------- Net Cash Provided by (Used in) Financing Activities 20,389 10,336 (3,028) -------------- -------------- -------------- Net Increase (Decrease) in Cash and Cash Equivalents 2,337 (12,186) 8,277 Beginning Balance in Cash and Cash Equivalents 3,011 15,197 6,920 -------------- -------------- -------------- Ending Balance in Cash and Cash Equivalents $ 5,348 $ 3,011 $ 15,197 ============== ============== ============== Supplemental Disclosures of Cash Flow Information: Cash Paid During Year For: Interest $ 57,331 $ 54,303 $ 48,250 Income taxes 9,644 28,604 45,963
The accompanying notes are an integral part of the financial statements. 91 SIERRA PACIFIC POWER COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION (Dollars in Thousands)
December 31, 2000 1999 ---------------- ---------------- Common Shareholder's Equity: Common stock, $3.75 par value, 1,000 shares authorized, issued and outstanding $ 4 $ 4 Other paid-in capital 598,684 584,684 Retained earnings 6,107 89,050 ---------------- ---------------- Total Common Shareholder's Equity 604,795 673,738 Cumulative Preferred Stock: Not subject to mandatory redemption: $25 stated value Class A Series 1; $1.95 dividend 50,000 50,000 ---------------- ---------------- Company-obligated mandatorily redeemable preferred securites of the Company's subsidiary trust, Sierra Pacific Power Capital I, holding solely $50 million principal amount of 8.60% junior subordinated debentures of the Company, due 2036 48,500 48,500 ---------------- ---------------- Long Term Debt: First Mortgage Bonds: Unamortized bond premium and discount, net (750) (795) Debt Secured by First Mortgage Bonds: 2.00% Series Z due 2004 72 93 2.00% Series O due 2011 1,374 1,497 6.35% Series FF due 2012 1,000 1,000 6.55% Series AA due 2013 39,500 39,500 6.30% Series DD due 2014 45,000 45,000 6.65% Series HH due 2017 75,000 75,000 6.65% Series BB due 2017 17,500 17,500 6.55% Series GG due 2020 20,000 20,000 6.30% Series EE due 2022 10,250 10,250 6.95% to 8.61% Series A MTN due 2022 110,000 110,000 7.10% and 7.14% Series B MTN due 2023 58,000 58,000 6.62% to 6.83% Series C MTN due 2006 50,000 50,000 5.90% Series JJ due 2023 9,800 9,800 5.90% Series KK due 2023 30,000 30,000 5.00% Series Y due 2024 3,138 3,207 6.70% Series II due 2032 21,200 21,200 5.47% Series D MTN due 2001 17,000 17,000 5.50% Series D MTN due 2003 5,000 5,000 5.59% Series D MTN due 2003 13,000 13,000 ---------------- ---------------- Subtotal, excluding current portion 526,084 526,252 Variable Rate Note: Water Facilities Note: maturing 2020 80,000 80,000 Floating rate note due 2000 - 100,000 Floating rate note due 2001 200,000 - ---------------- ---------------- Subtotal 280,000 180,000 Other 19,348 21,932 Current Maturities (219,616) (102,754) ---------------- ---------------- Total Long-Term Debt 605,816 625,430 ---------------- ---------------- TOTAL CAPITALIZATION $ 1,309,111 $ 1,397,668 ================ ================
The accompanying notes are an integral part of the financial statements. 92 NOTES TO FINANCIAL STATEMENTS ----------------------------- NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies for both utility and non-utility operations are as follows: General The consolidated financial statements include the accounts of Sierra Pacific Resources (SPR) and its wholly-owned subsidiaries, Nevada Power Company (NVP), Sierra Pacific Power Company (SPPC), Tuscarora Gas Pipeline Company (TGPC), Lands of Sierra, Inc. (LOS), Sierra Gas Holding Company (SGHC), Sierra Energy Company dba eo three (eo three), Nevada Electric Investment Company (NEICO), Sierra Pacific Energy Company (SPE), Sierra Water Development Company (SWDC) and Sierra Pacific Communications (SPC). All significant intercompany balances and intercompany transactions have been eliminated in consolidation. See Note 2 for additional information regarding the presentation of consolidated financial results pursuant to the 1999 merger of SPR and NVP. NVP is an operating public utility that provides electric service in Clark County in southern Nevada. The assets of NVP represent 51% of the consolidated assets of SPR at December 31, 2000. NVP provides electricity to approximately 611,000 customers in the communities of Las Vegas, North Las Vegas, Henderson, Searchlight, Laughlin and adjoining areas. Service is also provided to Nellis Air Force Base and the Department of Energy at Mercury and Jackass Flats at the Nevada Test Site. The consolidated financial statements of SPR include the accounts of NVP's wholly owned subsidiaries, NVP Capital I and NVP Capital III. SPPC is an operating public utility that provides electric service in northern Nevada and northeastern California. SPPC also provides natural gas and water services in the Reno/Sparks area of Nevada. The assets of SPPC represent 39% of the consolidated assets of SPR at December 31, 2000. SPPC provides electricity to approximately 309,500 customers in a 50,000 square mile service area including western, central and northeastern Nevada, including the cities of Reno, Sparks, Carson City, Elko, and a portion of eastern California, including the Lake Tahoe area. The consolidated financial statements of SPR include the accounts of SPPC's wholly owned subsidiaries, Pinon Pine Corporation, Pinon Pine Investment Company, GPSF-B, SPPC Funding LLC, and Sierra Pacific Power Capital I. The Utilities' accounts for electric operations and SPPC's accounts for gas operations are maintained in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission ("FERC"). SPPC maintains its accounts for water operations in accordance with the Uniform System of Accounts prescribed by the National Association of Regulatory Utility Commissioners. TGPC is a partner in a joint venture that developed, constructed, and operates a natural gas pipeline serving the expanding gas market in the Reno area and certain northeastern California markets. TGPC accounts for its joint venture interest under the equity method. eo three provides comprehensive energy services in commercial and industrial markets on a regional basis. SPE markets a package of telecommunication products and services. SPC was formed in 1999 to provide telecommunications services using fiber optic cable technology in both northern and southern Nevada. SPR is a limited partner in an energy technology venture capital partnership formed to gain access to new technologies that could affect SPR and its subsidiaries. This partnership invests in energy 93 companies offering technologies of strategic advantage to its partners. The initial term of this partnership expires in 2006, with two extensions of up to two years each. SPR's investment in the partnership was $4.4 million as of December 31, 2000, of which $875,000 was made in 2000. The remaining $600,000 balance of SPR's commitment is expected to be drawn as funds are needed by the partnership during 2001. Gains and losses will be allocated 80% to the limited partners based on their contributions, and 20% to the general partner. SPR, as a limited partner, is entitled to 7.89% and accounts for this investment on the cost basis. The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities. These estimates and assumptions also affect the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of certain revenues and expenses during the reporting period. Actual results could differ from these estimates. Certain reclassifications of prior year information have been made for comparative purposes but have not affected previously reported net income or common shareholders' equity. Utility Plant In addition to direct labor and material costs, the Utilities also charge the following to the cost of constructing utility plant: the cost of time spent by administrative employees in planning and directing construction work; property taxes; employee benefits (including such costs as pensions, postretirement and postemployment benefits, vacations and payroll taxes); and an allowance for funds used during construction (AFUDC). The original cost of plant retired or otherwise disposed of and the cost of removal less salvage is generally charged to the accumulated provision for depreciation. The cost of current repairs and minor replacements is charged to operating expenses when incurred. The cost of renewals and betterments is capitalized. Allowance For Funds Used During Construction and Capitalized Interest As part of the cost of constructing utility plant, the Utilities capitalize AFUDC. AFUDC represents the cost of borrowed funds and, where appropriate, the cost of equity funds used for construction purposes in accordance with rules prescribed by the FERC and the Public Utility Commission for Nevada ("PUCN"). AFUDC is capitalized in the same manner as construction labor and material costs, with an offsetting credit to "other income" for the portion representing the cost of equity funds and as a reduction of interest charges for the portion representing borrowed funds. Recognition of this item as a cost of utility plant is in accordance with established regulatory ratemaking practices. Such practices permit the utility to earn a fair return on, and recover in rates charged for utility services, all capital costs. This is accomplished by including such costs in the rate base and in the provision for depreciation. NVP's AFUDC rates used during 2000, 1999, and 1998 were 8.34%, 8.55%, and 9.66%, respectively. SPPC's AFUDC rates used during 2000, 1999, and 1998 were 7.17%, 6.09%, and 7.69%, respectively. As specified by the PUCN, certain projects were assigned a lower AFUDC rate due to specific low-interest-rate financings directly associated with those projects. 94 Depreciation Depreciation is calculated using the straight-line composite method over the estimated remaining service lives of the related properties. NVP's depreciation provision for 2000, 1999, and 1998, as authorized by the PUCN and stated as a percentage of the original cost of depreciable property, was approximately 2.9%. SPPC's depreciation provision for 2000, 1999, and 1998, as authorized by the PUCN and stated as a percentage of the original cost of depreciable property, was approximately 3.21%, 3.14%, and 3.31%, respectively. Cash and Cash Equivalents Cash is comprised of cash on hand and working funds. Cash equivalents consist of high quality investments in money market funds. Current Assets - Other Included in the December 31, 2000, balance of Current Assets - Other presented in the SPR, NVP and SPPC Balance Sheets is $35.2 million, $13.2 million and $22.0 million, respectively, of federal income taxes receivable due to the tax benefit resulting from losses. Regulatory Accounting and Other Regulatory Assets The Utilities' rates are currently subject to the approval of the PUCN and are designed to recover the cost of providing generation, transmission and distribution services. As a result, the Utilities qualify for the application of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation", issued by the Financial Accounting Standards Board (FASB). This statement recognizes that the rate actions of a regulator can provide reasonable assurance of the existence of an asset and requires the capitalization of incurred costs that would otherwise be charged to expense where it is probable that future revenue will be provided to recover these costs. SFAS No. 71 prescribes the method to be used to record the financial transactions of a regulated entity. The criteria for applying SFAS No. 71 include the following: (i) rates are set by an independent third party regulator, (ii) approved rates are intended to recover the specific costs of the regulated products or services, and (iii) rates that are set at levels that will recover costs can be charged to and collected from customers. SFAS No. 101, "Regulated Enterprises-Accounting for the Discontinuation of Application of FASB Statement No. 71", requires that an enterprise whose operations cease to meet the qualifying criteria of SFAS No. 71 discontinue the application of that statement by eliminating the effects of any actions of regulators that had been previously recognized. In 1997, the Emerging Issues Task Force (EITF) released Issue 97-4. In doing so, it reached a consensus that a utility subject to a deregulation plan for its generation business should stop applying SFAS No. 71 to the generating portion of its business no later than the date when a deregulation plan with sufficient detail of the effect of the plan is known. EITF 97-4 also reached a consensus that regulatory assets and liabilities that originated in a portion of the business that is discontinuing its application of SFAS No. 71 should be evaluated on the basis of where (that is, the portion of the business in which) the regulated cash flows to realize and settle them will be derived. The result of the consensus is that there is no elimination of regulatory assets which the deregulatory legislation or rate order specifies collection of, if the regulatory assets are recoverable through a portion of the business which remains subject to SFAS No. 71. 95 In conformity with SFAS No. 71, the accounting for the Utilities conforms to generally accepted accounting principles as applied to regulated public utilities and as prescribed by the agencies and commissions of the jurisdictions in which they operate. In accordance with these principles, certain costs that would otherwise be charged to expense or capitalized as plant costs are deferred as regulatory assets based on expected recovery from customers in future rates. Management's expected recovery of deferred costs is based upon specific ratemaking decisions or precedent for each item. The following other regulatory assets were included in the consolidated balance sheets of SPR as of December 31 (dollars in thousands):
DESCRIPTION 2000 1999 AMORTIZATION PERIODS - ------------------------------------------- --------- --------- -------------------- Early retirement and severance offers $ 12,567 $ 17,001 Various through 2004 Loss on reacquired debt 32,548 31,279 Various through 2030 Plant assets 3,964 7,104 Various through 2031 Merger transition costs 8,275 6,638 To be determined Merger severance/relocation 22,434 19,398 To be determined Merger goodwill 11,533 3,392 To be determined Other costs 14,267 16,415 Various --------- --------- Total $ 105,588 $ 101,227 ========= =========
Currently, the electric utility industry is predominantly regulated on a basis designed to recover the cost of providing electric power to its retail and wholesale customers. If cost-based regulation were to be discontinued in the industry for any reason, including competitive pressure on the cost-based prices of electricity, profits could be reduced, and utilities might be required to reduce their asset balances to reflect a market basis less than cost. Discontinuance of cost-based regulation would also require affected utilities to write off their associated regulatory assets. Management cannot predict the potential impact, if any, of these competitive forces on the Utilities' future financial position and results of operations. Management periodically assesses whether the requirements for application of SFAS 71 are satisfied. Given the uncertainty related to the current restructuring legislation and PUCN restructuring rules that would ultimately enable retail competition in Nevada, the Utilities continue to apply regulatory accounting to the generation, transmission and distribution portions of their businesses. Deferral of Energy Costs Nevada and California statutes permit regulated utilities to, from time-to- time, adopt deferred energy accounting procedures, which record as deferred energy costs the difference between actual energy expense and energy revenues. Under regulations adopted by the PUCN, deferred energy rates are revised at least every 12 months to recapture the accumulated deferred balance over a future period. The intent of these procedures is to ease the effect of fluctuations in the cost of purchased gas, fuel and purchased power. NVP utilized deferred energy accounting procedures in 1998, 1999, and part of 2000. Pursuant to stipulated agreements with the PUCN in July 2000, NVP ceased utilizing deferred energy accounting effective August 1, 2000. During 1999, SPPC did not employ deferred energy accounting procedures, but resumed those procedures for natural gas operations as of January 1, 2000. 96 Federal Income Taxes and Investment Tax Credits SPR and its subsidiaries file a consolidated federal income tax return. Current income taxes are allocated based on SPR's and each subsidiary's respective taxable income or loss and investment tax credits as if each subsidiary filed a separate return. Deferred taxes are provided on temporary differences at the statutory income tax rate in effect as of the most recent balance sheet date. SPR accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred tax liabilities and assets for the future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. For regulatory purposes, the Utilities are authorized to provide for deferred taxes on the difference between straight-line and accelerated tax depreciation on post-1969 utility plant expansion property, deferred energy, and certain other differences between financial reporting and taxable income, including those added by the Tax Reform Act of 1986 (TRA). In 1981, the Utilities began providing for deferred taxes on the benefits of using the Accelerated Cost Recovery System for all post-1980 property. In 1987, the TRA required the Utilities to begin providing deferred taxes on the benefits derived from using the Modified Accelerated Cost Recovery System. Investment tax credits are no longer available to the Utilities. The deferred investment tax credits are being amortized over the estimated service lives of the related properties. Revenues Operating revenues include unbilled utility revenues earned (service has been delivered, but not yet billed by the end of the accounting period). These amounts are also included in accounts receivable. Recent Pronouncements Financial Accounting Standards Board Effective January 1, 2001, SPR, SPPC and NVP adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 requires that an entity recognize all derivatives as assets or liabilities in the consolidated balance sheets and measure those instruments at fair value. On January 1, 2001, SPR recorded a transition adjustment to implement this new standard that resulted in an increase in other comprehensive income of approximately $158 million, before tax. SPPC and NVP recorded a transition adjustment to implement this new standard that resulted in an increase in other comprehensive income of approximately $205 million, before tax, and a decrease in other comprehensive income of approximately $43 million, before tax, respectively. The adjustments were recognized as of January 1, 2001, as the cumulative effect of a change in accounting principle. There was no significant transition adjustment affecting the consolidated statements of income. The ongoing effects of SFAS No. 133 will depend on future market conditions and the positions in derivative instruments and hedging activities at the measurement dates. 97 NOTE 1A. FINANCIAL STATEMENTS OF NEVADA POWER COMPANY As described in Note 2 that follows, NVP was deemed to be the acquirer of SPR for accounting purposes as reflected in the SPR Consolidated Financial Statements. However, after the merger with SPR and as a result of the structure of the transactions, NVP is a separate legal entity, which is a wholly owned subsidiary of SPR. As a legal matter, NVP does not own any equity interest in SPR. The audited NVP Financial Statements accommodate the presentation of financial information of NVP on a stand-alone basis by summarizing all non-NVP financial information into a few items on each of the Financial Statements. These summarized items are repeated below (in 000's): Non-NVP Financial Items on the NVP Financial Statements
NVP Balance Sheet: December 31, 2000 December 31, 1999 - ------------------ ----------------- ----------------- Investment in Sierra Pacific Resources $471,975 $654,156 Equity in Sierra Pacific Resources $471,975 $654,156
The Investment in Sierra Pacific Resources reflects the net assets, after deducting for all liabilities and preferred stock of Sierra Pacific Resources not related to NVP. The Equity in Sierra Pacific Resources reflects the sum of paid-in-capital and retained earnings of SPR, without the benefit of NVP. These line items are required by the rules of purchase accounting and do not represent any asset to which holders of NVP's securities may look for recovery of their investment. These items must be disregarded for determining the ability of NVP to satisfy its obligations or to pay dividends (preferred or common), for calculating NVP's ratios of earnings to fixed charges and preferred stock dividends, and for all of NVP's financial covenants and earnings tests including those under its charter and mortgage.
NVP Income Statement: Twelve Months Ended Twelve Months Ended Twelve Months Ended - --------------------- ------------------- ------------------- ------------------- December 31, 2000 December 31, 1999 December 31, 1998 ----------------- ----------------- ----------------- Equity in Earnings (Losses) of Sierra Pacific Resources $(31,852) $13,058 $ --
The Equity in Earnings (Losses) of Sierra Pacific Resources represents the net income (loss) of SPR after SPPC preferred stock dividends. This line item is required by the rules of purchase accounting and does not represent any item of revenue or income to which holders of NVP's securities may look for recovery of their investment. This item must be disregarded for determining the ability of NVP to satisfy its obligations or its ability to pay dividends (preferred or common), for calculating NVP's ratios of earnings to fixed charges and preferred dividends, and for all of NVP's financial covenants and earnings tests including those under its charter and mortgage.
NVP Statement of Cash Flow: Year Ended Year Ended Year Ended - --------------------------- ---------- ---------- ---------- December 31, 2000 December 31, 1999 December 31, 1998 ----------------- ----------------- ----------------- Equity in Earnings (Losses) of Sierra Pacific Resources $(31,852) $13,058 $ --
As in the Income Statement, the Equity in Earnings (Losses) of Sierra Pacific Resources represents the net income (loss) of SPR, after SPPC preferred stock dividends. This line item is required by the rules of purchase accounting and does not represent any item of cash flow to which holders of NVP's securities may look for recovery of their investment. This item must be disregarded for determining the ability of NVP to satisfy its obligations or its ability to pay 98 dividends (preferred or common), for calculating NVP's ratios of earnings to fixed charges and preferred dividends, and for all of NVP's financial covenants and earnings tests including those under its charter and mortgage.
NVP Statement of Capitalization: December 31, 2000 December 31, 1999 - -------------------------------- ----------------- ----------------- Equity in Sierra Pacific Resources $471,975 $654,156
The Equity in Sierra Pacific Resources reflects the sum of paid-in-capital and retained earnings of SPR on NVP's books. This line item is required by the rules of purchase accounting and does not represent any item of cash flow to which holders of NVP's securities may look for recovery of their investment. This item must be disregarded for determining the ability of NVP to satisfy its obligations or its ability to pay dividends (preferred or common), for calculating NVP's ratios of earnings to fixed charges and preferred dividends, and for all of NVP's financial covenants and earnings tests including those under its charter and mortgage. NOTE 2. SIERRA PACIFIC RESOURCES AND NEVADA POWER MERGER On July 28, 1999, the merger between SPR and NVP was consummated. The merger was accounted for as a reverse purchase under generally accepted accounting principles, with NVP considered the acquiring entity even though SPR is the surviving legal entity. In addition, for accounting purposes the merger was deemed to have occurred on August 1, 1999. As a result of this reverse purchase accounting treatment: (i) the historical financial statements of SPR for periods prior to the date of the merger are no longer the financial statements of SPR, and therefore, are no longer presented; (ii) the historical financial statements of SPR for periods prior to the date of the merger are those of NVP; and (iii) based on a merger date of August 1, 1999, the Consolidated Statements of Income for the twelve months ended December 31, 1999, include five months (August through December 1999) of operating activity for SPR and its subsidiaries other than NVP. The same statements include the operating results of NVP for the entire periods presented Through December 31, 2000, SPR incurred a total of $57.9 million in capitalized costs since merger work began. The capitalized merger amounts consist of $35.5 million of transaction and transition costs and $22.4 million of employee separation costs. Employee severance, relocation, and related costs for SPR were $22.4 million, of which $.9 million remains unpaid as of December 31, 2000. Other costs incurred in connection with employee separations included pension and postretirement benefits net of plan gains of $4.5 million. In accordance with the terms of the merger, each outstanding share of SPR's common stock was converted into the right to receive either $37.55 in cash or 1.44 shares of newly issued SPR common stock. Each outstanding share of NVP common stock was converted to the right to receive either $26.00 in cash or 1.00 share of newly issued SPR common stock. 4,037,000 shares of SPR and 11,716,611 shares of NVP common stock were exchanged for $151.6 million and $304.6 million, respectively. The remaining shares of each company were converted to newly issued shares of SPR common stock. SPR stockholders and NVP stockholders received 38,866,054 and 39,548,506 shares, respectively, of newly issued SPR common stock, resulting in 78,414,560 outstanding shares of SPR on August 1, 1999. The total consideration paid to SPR common stockholders was equal to cash of $151.6 million and 38,866,054 shares of newly issued SPR common stock at a price of $24.18 per share based on the average closing price of NVP common stock between April 22, 1998 and May 6, 1998. The eleven-day 99 average price of NVP common stock used in determining the total stock consideration represents the market price over a reasonable period of time before and after the transaction was announced on April 29, 1998. Goodwill of $331.2 million was recorded in connection with the merger and is being amortized over 40 years. However, the order of the Public Utilities Commission of Nevada (PUCN) approving the merger allowed SPR to defer merger costs (including goodwill) allocable to the regulated Utilities for a three-year period. At the end of the deferral period SPR will propose an amortization period for goodwill and other merger costs. Accordingly, goodwill amortization associated with the regulated Utilities is being reclassified to a regulatory asset during the three-year period. NOTE 3. REGULATORY ACTIONS Nevada Matters - -------------- Earnings Sharing (SPPC) On May 1, 2000, SPPC filed its third and last compliance filings related to the 1997 rate stipulation. The filings provide a calculation of Sierra's electric and gas earnings in excess of a 12% return on equity (ROE). Any earnings in excess of 12% ROE are shared 50/50 between shareholders and customers. On August 4, 2000, the PUCN approved a stipulation between SPPC, Staff, and the UCA that rebated $8.63 million and $670,000 to electric and gas customers, respectively, in 2000. In addition SPPC refunded an additional $390,000 to electric customers resulting from the 1999 compliance filing. The August 4, 2000, approved stipulation also resolved all outstanding issues associated with previous shared earning filings. Stipulations (The Global Settlement) On July 20, 2000, SPR, NVP and SPPC signed the "Global Settlement" stipulation which eliminated NVP's deferred energy accounting adjustment ("DEAA") rates, effective August 1, 2000. In consideration of such termination, NVP will be allowed to recover out of the first-available after-tax proceeds from the sale of NVP's generation assets above book value and costs of sale, up to $15 million in the aggregate. Until such recovery is completed NVP may accrue carrying charges at an annual rate of 9.5% on the unrecovered balance. Also part of the Global Settlement, a Fuel and Purchased Power Rider ("F&PP") allowed NVP to increase its rates effective August 1, 2000, by approximately $48 million annually to recover increased costs of fuel and purchased power, and to update its going-forward costs of fuel and purchased power thereafter with monthly fuel and purchased power filings up to March 2003. Increases and/or decreases are capped at incrementally increased or decreased rates over successive six-month periods at .95 mils for the first six months, 1.15 mils for the second six months, 1.25 mils for the third six months, 1.55 mils for the next six months, and 1.75 mils for the remaining period. The Settlement also permitted SPPC to commence filing monthly fuel and purchased power adjustment cases on the same basis to commence not later than November 1, 2000. SPPC fuel and purchased power increases and/or decreases are also capped at incrementally increased or decreased rates over successive six-month periods starting October 1, 2000 at 4.5 mils for the first six-month period followed by .95, 1.15, 1.35, 1.55, and1.75 mils for each successive six-month period. Under the terms of the Settlement, the PUCN will review the prudency of the increases after submission of semi-annual audits with refunds, if any, to be included in future adjustments. 100 Comprehensive Energy Plan See Note 20, Subsequent Events. California Matters On February 18, 1999, the California Public Utility Commission (CPUC) approved SPPC's proposed Revenue Cycle Services Credits (RCSC) application filed February 2, 1998. The RCSC addresses meter ownership, meter services, meter reading, and billing and applies to customers who select their provider of a revenue cycle service. On April 9, 1999, SPPC made a compliance tariff filing which reflects the approved credits. On April 5, 1999, the CPUC approved SPPC's proposed unbundled rates effective back to June 1, 1998. FERC Matters (SPPC) In March 1999, SPPC filed an application with the FERC to increase its Open Access Transmission rates. In October 1999, SPPC filed an Offer of Partial Settlement which resolved all issues with the exception of pricing to the Mines and to the City of Fallon. On January 31, 2000, the FERC approved the Partial Settlement. On March 30, 2000, SPPC filed a Loss Study that SPPC agreed to provide in the Partial Settlement. On April 26, 2000, a settlement was filed by SPPC on issues raised by the City of Fallon and on August 1, 2000, the FERC approved the settlement. On July 18, 2000, a settlement was filed by SPPC on issues raised by the Mines which provides that the issues not be resolved in this case, but at a later date. On September 18, 2000, the FERC approved the settlement. On July 7, 2000, a settlement was filed by SPPC resolving all Loss Study issues in the case and on September 18, 2000, the FERC approved the settlement. On March 31, 2000, the Utilities filed for approval of Generation Tariffs that contain the rates, terms and conditions under which the new owners of divested generation facilities could sell energy and ancillary services. The filing also included pro-forma Transitional Purchase Power Agreements (TPPAs) between the Utilities and the new owners of the divested generation facilities. Final signed versions of the TPPAs will be submitted to the FERC as part of the Asset Sale Agreements between the Utilities and the new owners of the divested generation. On May 31, 2000, the FERC accepted for filing the Generation Tariff and the TPPAs. The FERC required one modification to the TPPAs in that the Utilities were required to notify the new owners day-ahead of real-time of their intended use of the generation or release the capacity to the new owners. The FERC also set for hearing the rates in the generation tariff and in the TPPAs. The Utilities have reached a settlement with the FERC Staff, PUCN and the Bureau of Consumer Protection regarding the rates in the Generation Tariff and TPPAs. The settlement has not yet been submitted to the FERC for approval. FERC Matters (NVP) On May 29, 1999, SPPC and NVP filed an application with the FERC to increase its Open Access Transmission rates. On November 24, 1999, an unopposed motion to suspend the procedural schedule to allow consummation of a settlement was filed with the FERC. The Settlement was filed February 8, 2000 and the proposed rates became effective on March 1, 2000. 101 On March 31, 1999, NVP filed with the FERC for approval of generation tariffs, which contain the rates, terms and conditions under which the new owners of SPR's generation would operate after divestiture. The FERC approved the tariffs on November 1, 1999. In compliance with the FERC's November 1 order, NVP filed pro forma service agreements for the approved tariffs on November 16, which were subsequently approved on December 16. NOTE 4. EARNINGS PER SHARE SPR follows SFAS No. 128, "Earnings Per Share". The following provides the calculation for Diluted EPS. The difference between Basic EPS and Diluted EPS is due to common stock equivalent shares resulting from stock options, the employee stock purchase plan, performance shares and a non-employee director stock plan. Common stock equivalents were determined using the treasury stock method. 102
December 31, ------------------------------------------------- 2000 1999 1998 ------------ ------------ ------------ Basic EPS Numerator (Loss) Income from continuing operations ($000) $ (49,414) $ 48,210 $ 83,499 Income from discontinued operations ($000) 9,634 3,540 -- ------------ ------------ ------------ (Loss) Net income ($000) $ (39,780) $ 51,750 $ 83,499 ============ ============ ============ Denominator Weighted average number of shares outstanding 78,435,405 62,577,385 50,993,000 Per-Share Amounts: ------------ ------------ ------------ (Loss) Income from continuing operations $ (0.63) $ 0.77 $ 1.64 Income from discontinued operations 0.12 0.06 -- ------------ ------------ ------------ (Loss) Net income $ (0.51) $ 0.83 $ 1.64 ============ ============ ============ Diluted EPS Numerator (Loss) Income from continuing operations ($000) $ (49,414) $ 48,210 $ 83,499 Income from discontinued operations ($000) 9,634 3,540 -- ------------ ------------ ------------ (Loss) Net income ($000) $ (39,780) $ 51,750 $ 83,499 ============ ============ ============ Denominator Weighted average number of shares outstanding before dilution 78,435,405 62,577,385 50,993,000 Stock options 5,645 20,447 -- Executive long term incentive plan- performance shares 35,393 26,118 -- Non-Employee Director stock plan 5,885 5,736 -- Employee stock purchase plan 2,807 1,790 -- ------------ ------------ ------------ 78,485,135 62,631,476 50,993,000 ------------ ------------ ------------ Per-Share Amounts: (Loss) Income from continuing operations $ (0.63) $ 0.77 $ 1.64 Income from discontinued operations 0.12 0.06 -- ------------ ------------ ------------ (Loss) Net income $ (0.51) $ 0.83 $ 1.64 ============ ============ ============
103 NOTE 5. INVESTMENTS IN SUBSIDIARIES AND OTHER PROPERTY Investments in subsidiaries and other property consisted of (dollars in thousands): Sierra Pacific Resources ------------------------ December 31, 2000 1999 -------- -------- Investment in Pinon Pine, LLC $ 58,049 $ 60,043 Investment in TGTC 17,164 16,408 Cash Value-Life Insurance 13,393 11,492 Acquisition Costs 12,451 1,698 Other Investments 34,005 16,239 -------- -------- $135,062 $105,880 ======== ======== Nevada Power Company -------------------- December 31, 2000 1999 -------- -------- Cash Value-Life Insurance $ 13,393 $ 11,492 Other 25 4,152 -------- -------- $ 13,418 $ 15,644 ======== ======== Sierra Pacific Power Company ---------------------------- December 31, 2000 1999 -------- -------- Investment in Pinon Pine, LLC $ 58,049 $ 60,043 Other 1,998 2,661 -------- -------- $ 60,047 $ 62,704 ======== ======== NOTE 6. JOINTLY OWNED FACILITIES At December 31, 2000, SPR (through its utility subsidiaries NVP and SPPC) owned the following undivided interests in jointly owned electric utility facilities:
Construction % Owned Accumulated Net Plant in Work in Generating Facility by Company Plant in Service Depreciation Service Progress Subsidiary - ----------------------------------------------------------------------------------------------------------------------------- Navajo Station 11.3 $201,614 $ 90,881 $110,733 $ 4,386 NVP Mohave Facility 14.0 78,679 34,733 43,946 6,160 NVP Reid Gardner No. 4 32.2 125,945 50,906 75,039 797 NVP Valmy Station 50.0 280,009 118,521 161,488 102 SPPC -------- -------- -------- ------- TOTAL $686,247 $295,041 $391,206 $11,445 ======== ======== ======== =======
The amounts above for Navajo and Mohave include NVP's share of transmission systems and general plant equipment and, in the case of Navajo, NVP's share of the jointly owned railroad which delivers coal to the plant. Each participant provides its own financing for all of these jointly owned 104 facilities. NVP's share of operating expenses for these facilities is included in the corresponding operating expenses in the Consolidated Statements of Income. Valmy SPPC and Idaho Power Company each own an undivided 50% interest in the Valmy generating station, with each company being responsible for financing its share of capital and operating costs. SPPC is the operator of the plant for both parties. SPPC's share of direct operation and maintenance expenses for Valmy is included in the accompanying Consolidated Statements Of Income. Pinon Pine Pinon Pine Corp. and Pinon Pine Investment Co., wholly owned subsidiaries of SPPC, collectively own a 38% interest in Pinon Pine Company, L.L.C. GPSF-B, a Delaware corporation formerly owned by General Electric Capital Corporation (GECC) and now owned by SPPC, owns the remaining 62% as of February 1999. The LLC was formed to take advantage of federal income tax credits associated with the alternative fuel (syngas) produced by the coal gasifier available under ss. 29 of the Internal Revenue Code. The entire project, which includes an LLC-owned gasifier and an SPPC-owned power island and post-gasification facility to partially cool and clean the syngas, is referred to collectively as the Pinon Pine Power Project. Pinon Pine is a project co-funded by the Department of Energy (DOE) under an agreement between SPPC and DOE that runs through December 31, 2000. Through December 31, 2000, the DOE has funded $166.5 million for both construction and operation and maintenance of the project. To date, SPPC has not been successful in obtaining sustained operation of the gasifier but work continues to identify problem areas and redesign solutions which will likely require additional capital expenditures. Due to the problems noted above, SPPC and Foster Wheeler settled on a portion of the cost overrun and have entered into an alternative dispute resolution. NOTE 7. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL As of December 31, 2000, 3,568,358 shares of common stock were reserved for issuance under the Common Stock Investment Plan (CSIP), Employees' Stock Purchase Plan (ESPP), Non-Employee Director Stock Plan and Executive Long-Term Incentive Plan (ELTIP). The ELTIP for key management employees allows for the issuance of SPR's common shares to key employees through December 31, 2003. This Plan permits the following types of grants, separately or in combination: nonqualified and qualified stock options; stock appreciation rights; restricted stock; performance units; performance shares and bonus stock. SPR also provides an ESPP to all of its employees meeting minimum service requirements. Employees can choose twice each year to have up to 15% of their base earnings withheld to purchase company common stock. The purchase price of the stock is 90% of the market value on the offering date or 100% of the market price on the execution date, if less. The Non-employee Director Stock Plan provides that a portion of SPR's outside directors' annual retainer be paid in SPR common stock. SPR records the costs of these plans in accordance with Accounting Principles Board Opinion Number 25. As a part of the August 1, 1999, merger, the NVP ELTIP was terminated and existing SPR plans were adopted by the surviving company. 105 On September 21, 1999, the Board of Directors of SPR (the "SPR Board") declared a dividend distribution of one right (an "SPR Right") for each outstanding share of SPR common stock to shareholders of record at the close of business on October 31, 1999. By issuing the new SPR Rights, the SPR Board extended the benefits and protections afforded to shareholders under the Rights Agreement, dated as of October 31, 1989, which expired on October 31, 1999. Each SPR Right, initially evidenced by and traded with the shares of SPR Common Stock, entitles the registered holder (other than an "Acquiring Person" as defined in the Rights Agreement) to purchase at an exercise price of $75.00, $150.00 worth of common stock at its then-market value, subject to certain conditions and approvals set forth in the Rights Agreement. If, at any time while there is an Acquiring Person, SPR engages in a merger or other business combination transaction or series of related transactions in which the Common Stock is changed or exchanged or 50% or more of its assets or earning power is transferred, each SPR Right (not previously voided by the occurrence of a Flip-in Event, as described in the Rights Agreement) will entitle its holder to purchase, at the SPR Right's then-current Exercise Price, common stock of such Acquiring Person having a calculated value of twice the SPR Right's then-current Exercise Price. The SPR Rights are not exercisable until the Distribution Date and expire on October 31, 2009, unless previously redeemed by SPR. Following an SPR Distribution Date, the SPR Rights will trade separately from the SPR Common Stock and will be evidenced by separate certificates. Until an SPR Right is exercised, the holder thereof will have no rights as a shareholder of SPR, including, without limitation, the right to receive dividends. The purpose of the plan is to help ensure that SPR's shareholders receive fair and equal treatment in the event of any proposed hostile takeover of SPR. The changes in common stock and additional paid-in capital for 2000, 1999, and 1998, are as follows (dollars in thousands):
Shares Issued Amount 2000 1999 1998 2000 1999 1998 ---------- ------------ ---------- --------- -------- --------- Merger exchange - 78,414,560 - $ - $ 66,540 $ - CSIP/DRP 5,389 - 799,762 237 - 19,067 ESPP, and other 55,268 - 65,609 1,055 - 1,564 ---------- ------------ ---------- --------- -------- -------- 60,657 78,414,560 865,371 $ 1,292 $ 66,540 $ 20,631 ========== ============ ========== ========= ======== ========
NOTE 8. PREFERRED STOCK AND PREFERRED SECURITIES All issues of preferred stock are superior to SPR common stock with respect to dividend payments (which are cumulative) and liquidation rights. 106 The following table indicates the dollar amount and number of shares outstanding at December 31 of each year:
Amount Shares Outstanding -------------------------- ------------------------ (Dollars in thousands) 2000 1999 2000 1999 -------------------------- ------------------------ Preferred Stock - --------------- Not subject to mandatory redemption SPPC Class A Series I $ 50,000 $ 50,000 2,000,000 2,000,000 -------------------------- ------------------------ Total Preferred stock 50,000 50,000 2,000,000 2,000,000 ========================== ======================== Preferred Securities - -------------------- Subject to mandatory redemption: Preferred Securities of Nevada Power Co Capital I $ 118,872 $ 118,872 147,058 147,058 Preferred Securities of Nevada Power Co Capital III 70,000 70,000 86,598 86,598 -------------------------- ------------------------- Subtotal 188,872 188,872 233,656 233,656 Preferred securities of Sierra Pacific Power Company Capital I 48,500 48,500 1,940,000 1,940,000 -------------------------- ------------------------ Total Preferred Securities 237,372 237,372 2,173,656 2,173,656 ========================== ========================
NVP NVP's obligations provide a full and unconditional guarantee of the Trust's obligations under the QUIPS. Financial statements of the Trust are consolidated with NVP's. Separate financial statements are not filed because the Trust is wholly owned by NVP and essentially has no independent operations, and NVP's guarantee of the Trust's obligations is full and unconditional. The $118.9 million in net proceeds was used for general corporate utility purposes and the repayment of short-term debt. In October 1998, NVP Capital III (Trust), a wholly-owned subsidiary of Nevada Power Company, issued 2,800,000, 7 3/4% Cumulative Quarterly Trust Issued Preferred Securities at $25 per security. NVP owns the entire common securities, 86,598 shares issued by the Trust for $2.2 million. The Trust Issued Preferred Securities and the common securities represent undivided beneficial ownership interests in the assets of the Trust, a statutory business trust formed under the laws of the state of Delaware. The existence of the Trust is for the sole purpose of issuing the Trust Issued Preferred Securities and the common securities and using the proceeds thereof to purchase from NVP its 7 3/4% Junior Subordinated Deferrable Interest Debentures due September 30, 2038, extendible to September 30, 2047, under certain conditions, in a principal amount of $72.2 million. The sole asset of the Trust is the deferrable interest debentures. Holders of the Trust Issued Preferred Securities are entitled to receive preferential cumulative cash distributions accruing from the date of original issuance and payable quarterly on the last day of March, June, September and December of each year. The Trust Issued Preferred Securities are subject to mandatory redemption, in whole or in part, upon repayment of the deferrable interest debentures at maturity or their earlier redemption in an amount equal to the amount of related deferrable interest debentures maturing or being redeemed. The Trust Issued Preferred Securities are redeemable at $25 per preferred security plus accumulated and unpaid distributions thereon to the 107 date of redemption. NVP's obligations provide a full and unconditional guarantee of the Trust's obligations under the Trust Issued Preferred Securities. Financial statements of the Trust are consolidated with NVP's. Separate financial statements are not filed because the Trust is wholly owned by NVP and essentially has no independent operations, and NVP's guarantee of the Trust's obligations is full and unconditional. The $70 million in net proceeds was used for general corporate utility purposes including the repayment of short-term debt. On July 23, 1999, NVP redeemed the 4.7%, 5.2% and 5.4% Series Redeemable Cumulative Preferred Stock. The total par value and premium was $3.5 million and was paid in accordance with the merger agreement with Sierra Pacific Resources. SPPC SPPC's Restated Articles of Incorporation, as amended on August 19, 1992, authorize an aggregate total of 11,780,500 shares of preferred stock at any given time. On July 29, 1996, Sierra Power Capital I (the Trust), a wholly owned subsidiary of SPPC, issued $48.5 million (1,940,000 shares) of 8.60% Trust Originated Preferred Securities (the Preferred Securities). SPPC owns all the common securities of the Trust; 60,000 shares totaling $1.5 million (Common Securities). The Preferred Securities and the Common Securities (the Trust Securities) represent undivided beneficial ownership interests in the assets of the Trust. The existence of the Trust is for the sole purpose of issuing the Trust Securities and using the proceeds thereof to purchase from SPPC its 8.60% Junior Subordinated Debentures due July 30, 2036, in a principal amount of $50 million. The sole asset of the Trust is SPPC's junior subordinated debentures. SPPC's obligations provide a full and unconditional guarantee of the Trust's obligations under the Preferred Securities. The Preferred Securities of Sierra Pacific Power Capital I are redeemable only in conjunction with the redemption of the related 8.60% junior subordinated debentures. The junior subordinated debentures will mature on July 30, 2036, and may be redeemed, in whole or in part, at any time on or after July 30, 2001, or at any time in certain circumstances upon the occurrence of a tax event. A tax event occurs if an opinion has been received from tax counsel that there is more than an insubstantial risk that: the Trust is, or will be subject to federal income tax with respect to interest accrued or received on the junior subordinated debentures; the Trust is, or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges; interest payable by SPPC to the Trust on the junior subordinated debentures is not, or will not be, deductible, in whole or in part for federal income tax purposes. Upon the redemption of the junior subordinated debentures, payment will simultaneously be applied to redeem preferred securities having an aggregate liquidation amount equal to the aggregate principal amount of the Junior Subordinated Debentures. The preferred securities are redeemable at $25 per preferred security plus accrued dividends. Financial statements of the Trust are consolidated with SPPC's. Separate financial statements are not filed because the Trust is wholly owned by SPPC and essentially has no independent operation, and SPPC's guarantee of the Trust's obligations is full and unconditional. On November 1, 1999, SPPC paid $23.5 million, par value and premium, to redeem Series A, $2.44 Dividend (4.88%), Series B, $2.36 Dividend (4.72%) and Series C, $3.90 Dividend (7.8%). On February 15, 2001, SPPC received consents from the holders of a majority of its preferred stock to increase the amount of unsecured indebtedness that SPPC may issue. Under SPPC's Restated Articles of Incorporation, SPPC cannot, without the consent of a majority of the total number of votes 108 which may be cast by the holders of SPPC's preferred stock, issue unsecured debt securities with maturities of greater than 12 months for any purpose (other than refunding outstanding unsecured debt or retiring outstanding shares of preferred stock) if such unsecured indebtedness would exceed 20% of the aggregate of (1) the total principal amount of all bonds and other securities representing secured indebtedness then outstanding and (2) the total capital and surplus of SPPC then stated on its books. As of September 30, 2000, SPPC could issue approximately $14 million in additional unsecured debt under this limitation. Pursuant to the consent solicitation, SPPC received the consent of the holders of a majority of preferred stock to issue up to $400 million in long-term unsecured indebtedness in excess of the present limitation. Upon receipt of the required number of consents, SPPC paid a participation premium in the amount of $.50 per share consented to each holder of shares of preferred stock whose valid, unrevoked consent was received prior to the specified return date. The aggregate amount of the participation premium paid was $.9 million. The only series of preferred stock of SPPC currently outstanding is its Class A, Series 1 Preferred Stock, of which 2 million shares are outstanding. NOTE 9. LONG TERM DEBT Substantially all utility plant is subject to the lien of NVP and SPPC indentures under which the first mortgage bonds are issued. Nevada Power Company On March 30, 1999, NVP issued $130 million, 6.2%, Series A senior unsecured notes, due 2004. The notes were issued under rule 144A with registration rights. Net proceeds were used to repay NVP's line of credit. On October 1, 1999, NVP redeemed $45,000,000, Series Y, 6.93%, in first mortgage bonds. On April 20, 2000, NVP utilized a $100 million capital contribution from SPR to retire $85 million of NVP's First Mortgage Bonds maturing on May 1, 2000, and the remaining proceeds were used to pay off its commercial paper outstanding under the program established in July 1999. On June 9, 2000, NVP issued $150 million of floating rate notes that will mature on June 12, 2001. Interest on the notes is payable quarterly. The interest rate on the notes for each interest period is a floating rate, subject to adjustment every three months, equal to the London InterBank Offered Rate (LIBOR) for three-month U.S. dollar deposits plus a spread of 0.55%. These notes are not entitled to any sinking fund and are non-callable. The net proceeds of the $150 million issue were used to redeem $100 million of floating rate notes on July 14, 2000, and the remaining proceeds were used to reduce NVP's commercial paper outstanding under the program established in July 1999. On June 22, 2000, Clark County, Nevada issued for NVP's benefit $100 million Industrial Development Refunding Revenue Bonds, Series 2000A, due June 1, 2020. The interest rate is currently being determined by a Dutch Auction based on an auction period of seven days. The Series A bonds were issued to refund $100 million of Clark County's 7.80% Industrial Development Revenue Bonds Series 1990 on June 30, 2000. On July 28, 2000, Clark County, Nevada issued for NVP's benefit $15 million Pollution Control Refunding Revenue Bonds, Series 2000B, due October 1, 2009. The interest rate is currently being determined by a Dutch Auction based on an auction period of seven days. The Series B bonds were issued to refund a like principal amount of Clark County's 7.80% Pollution Control Revenue Bonds Series 1989 on October 2, 2000. 109 The method of determining the interest rate on the Series A and Series B Bonds may be converted from time to time in accordance with the related Indenture so that such bonds would, thereafter, bear interest at a daily, weekly, flexible, term or auction rate. Both Series A and Series B Bonds are insured by AMBAC Assurance Corporation. On July 24, 2000, NVP received a 30-day extension on its $150 million Credit Facility to August 28, 2000, in accordance with the terms of the credit agreement. On August 28, 2000, NVP received a 364-day extension of this facility to August 27, 2001. The credit program was established in July 1999 to provide credit for general corporate purposes including commercial paper backup. On August 18, 2000, NVP issued $100 million of floating rate notes that will mature on August 20, 2001. Interest on the notes is payable quarterly, commencing on November 18, 2000. The interest rate on the notes for each period is a floating rate, subject to adjustment every three months, equal to the London InterBank Offered Rate (LIBOR) for three-month U.S. dollar deposits plus a spread of 0.58%. These notes are not entitled to any sinking fund. The notes are redeemable at the option of NVP, in whole or in part from time to time, without premium, beginning February 18, 2001. The net proceeds of the $100 million issue were used to reduce NVP's commercial paper outstanding under the program established in July 1999. On March 1, 2001, NVP entered into an Amendment and Waiver Agreement related to its Credit Agreement modifying the fixed charge coverage ratio required by the Agreement's financial covenants. Sierra Pacific Power Company On April 9, 1999, SPPC sold the right to receive payments made in respect of Transition Property as defined by the Offering Circular dated March 30, 1999, to SPPC Funding LLC, a Delaware special purpose limited liability company whose sole member is SPPC, in exchange for the proceeds of the SPPC Funding LLC Notes, Series 1999-1 (the Underlying Notes). SPPC Funding LLC then issued and sold the Underlying Notes to the California Infrastructure and Economic Development Bank Special Purpose Trust SPPC-1 (the Trust) in exchange for the proceeds of the sale of the Trust's $24 million 6.4% Rate Reduction Certificates, Series 1999-1 (the Certificates). The Trust, which had been established by the California Infrastructure and Economic Development Bank, issued and sold the Certificates in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended. The Certificates are one of a series of rate reduction certificates that may be issued from time to time by the Trust and sold to investors upon terms determined at the time of sale. On July 12 and July 16, 1999, respectively, $10 million of the 6.86% and $20 million of the 6.83% of the Series C, collateralized medium-term SPPC notes matured. On September 17, 1999, SPPC issued $100 million floating rate notes, due October 13, 2000. Interest on the notes is payable quarterly, commencing on December 15, 1999. The interest rate on the notes for each interest period to maturity is a floating rate, subject to adjustment every three months. The quarterly rate is equal to the London InterBank Offered Rate (LIBOR) for three- month U.S. dollar deposits plus a spread of 0.75%. These notes are not entitled to any sinking fund and are redeemable in whole, without premium at the option of SPPC, beginning March 15, 2000 and on the 15th day of each month thereafter. The proceeds of this financing were used to pay down commercial paper issued under the program established in July 1999. 110 On June 9, 2000, SPPC issued $200 million of floating rate notes that will mature on June 12, 2001. Interest on the notes is payable quarterly. The interest rate on the notes for each interest period is a floating rate, subject to adjustment every three months, equal to the London InterBank Offered Rate (LIBOR) for three month U.S. dollar deposits plus a spread of 0.50%. These notes are not entitled to any sinking fund and are non-callable. The net proceeds of the $200 million issue were used to redeem $100 million of floating rate notes on July 14, 2000, and the remaining proceeds were used to reduce the amount of SPPC's commercial paper outstanding under the program established in July 1999. On July 24, 2000, SPPC received a 30-day extension of its $150 million Credit Facility to August 28, 2000, in accordance with the terms of the credit agreement. On August 28, 2000, SPPC received a 364-day extension of this facility to August 27, 2001. The credit facility was established in July 1999 to provide credit for general corporate purposes including commercial paper backup. On March 1, 2001, SPPC entered into an Amendment and Waiver Agreement related to its Credit Agreement modifying the fixed charge coverage ratio required by the Agreement's financial covenant. Sierra Pacific Resources On April 1, 1999, $10 million of SPR's Series D senior notes matured. On March 31, 2000, $10 million of SPR's Series E senior notes matured. On April 20, 2000, SPR issued an aggregate of $300 million floating rate notes, $200 million of which matures on April 20, 2003 and the remaining $100 million of which matures on April 20, 2002. Interest on the notes is payable quarterly. The interest rate on the notes for each interest period is a floating rate, subject to adjustment every three months, equal to the London InterBank Offered Rate (LIBOR) for three-month U.S. dollar deposits plus a spread of 0.60% for the notes maturing in 2003, and a spread of 0.65% for the notes maturing in 2002.These notes are not entitled to any sinking fund. The notes due 2002 will be redeemable in whole, without premium, at the option of SPR beginning April 20, 2001, and on each interest payment date thereafter. The net proceeds of the $200 million issue were used to retire an equal amount of commercial paper of SPR issued under the line of credit established in July 1999 that was used as temporary funding for the cash portion of the NVP merger consideration. The net proceeds of the $100 million issue were used to make a capital contribution to NVP. On September 26, 2000, SPR entered into a forward swap relating to its $200 million floating rate notes that will mature on April 20, 2003, effectively locking in a LIBOR rate of 6.655%, which will result in an interest rate of 7.255% on the notes until their maturity. This transaction became effective on October 20, 2000. On April 20, 2000, upon issuance of these floating rate notes, SPR reduced its bank credit facility to $300 million from the previous amount of $500 million in accordance with the terms of credit agreement. The credit facility was established in July 1999 to provide credit for general corporate purposes including commercial paper backup. On June 21, 2000, SPR further reduced its credit facility to $150 million. The remaining $150 million credit facility was a 3-year credit facility, which has since been terminated by SPR effective August 11, 2000. On May 9, 2000, SPR issued $300 million of notes under its universal shelf registration. These notes bear interest at an annual rate of 8.75% and will mature on May 15, 2005. Interest on the notes is payable semi-annually. The notes are not subject to any sinking fund and are redeemable in whole or in part at any time upon payment of the principal amount of the notes being redeemed, plus accrued 111 interest and a make-whole premium. The net proceeds from the issuance of these notes were used to retire an equal amount of commercial paper issued by SPR under the program established in July 1999. NVP's, SPPC's and SPR's aggregate annual amount of maturities for long-term debt for the next five years is shown below (in thousands of dollars):
NVP SPPC SPR ----------- ----------- ----------- 2001 $ 252,910 $ 219,616 $ 472,527 2002 15,000 2,626 117,626 2003 - 20,632 220,632 2004 130,000 2,621 132,621 2005 - 2,622 302,622 ----------- ----------- ----------- Subtotal 397,910 248,117 1,246,028 Thereafter 782,784 577,315 1,360,178 ----------- ----------- ----------- Total $ 1,180,694 $ 825,432 $ 2,606,206 =========== =========== ===========
NOTE 10. TAXES Nevada Power Company The following reflects the composition of taxes on income (in thousands of dollars):
2000 1999 1998 --------- -------- -------- Federal: Taxes estimated to be currently payable (refundable) $ (10,141) $ 38,444 $ 17,163 Deferred taxes related to: Excess of tax depreciations over book depreciation 6,625 12,302 24,111 Contributions in aid of construction and customer advances (6,076) (9,678) (13,211) Avoided interest capitalized (4,557) (3,933) 6,463 Repairs & maintenance 1,750 -- -- Research and experimentation 1,750 -- -- Severance programs -- 2,788 -- Other - net, deferral of energy cost 2,723 (17,250) 12,405 Net amortization of investment tax credit (1,460) (1,460) (1,460) --------- -------- -------- Total $ (9,386) $ 21,213 $ 45,471 ========= ======== ======== As Reflected in Statement of Income: Federal income taxes (12,162) 19,943 42,949 State income taxes -- -- -- --------- -------- -------- Operating Income (12,162) 19,943 42,949 Other income - net 2,776 1,270 2,522 --------- -------- -------- Total $ (9,386) $ 21,213 $ 45,471 ========= ======== ========
112 The total income tax provisions differ from amounts computed by applying the federal statutory tax rate to income before income taxes for the following reasons (in thousands of dollars):
2000 1999 1998 ---------- ---------- --------- Income before preferred dividend requirements $ (7,928) $ 38,793 $ 83,673 Total income tax expense (benefit) (9,386) 21,213 45,471 ---------- ---------- --------- (17,314) 60,006 129,144 Statutory tax rate 35% 35% 35% ---------- ---------- --------- Expected income tax expense (benefit) (6,060) 21,001 45,200 Depreciation related to difference in costs basis for tax purposes 1,431 1,431 1,431 Allowance for funds used during construction - equity 300 300 300 ITC amortization (1,460) (1,460) (1,460) Other - net (3,597) (59) -- ---------- ---------- --------- $ (9,386) $ 21,213 $ 45,471 ========== ========== ========= Effective tax rate 54.2% 35.3% 35.2% ========== ========== =========
The net deferred federal income tax liability consists of deferred federal income tax liabilities less related deferred federal income tax assets, as shown (in thousands of dollars):
2000 1999 ---------- ---------- Deferred Federal Income Tax Liabilities: AFUDC $ 6,067 $ 2,204 Bond redemptions 5,683 1,944 Excess of tax depreciation over book depreciation 188,213 174,642 Severance programs 1,982 2,788 Repairs and maintenance 4,050 - Research and experimentation 3,666 - Tax benefits flowed through to customer 114,097 130,834 Other - net (12,537) 3,306 ---------- ----------- Total $ 311,221 $ 315,718 Deferred Federal Income Tax Assets: Avoided interest capitalized 9,584 4,819 Employee benefit plans 906 2,881 Contributions in aid of construction and customer advances 63,953 56,826 Gross-ups received on contributions in aid of construction and customer advances 4,108 - Unamortized investment tax credit 13,550 14,060 Other - net 2,367 993 ---------- ----------- 94,468 79,579 Total $ 216,753 $ 236,139 ========== ===========
NVP's balance sheets contain also a net regulatory tax asset of $100.6 million at year-end 2000 and $116.8 million at year-end 1999. The net regulatory asset consists of future revenue to be received from customers of $114.1 million at year-end 2000 and $130.8 million at year-end 1999, due to flow-through of the tax benefits of temporary differences. Offset against this amount are future revenues to be refunded to customers (a regulatory liability), consisting of $13.5 million at year-end 2000 and $14 million at year-end 1999 due to unamortized investment tax credits. 113 The regulatory tax liability for temporary differences related to liberalized depreciation will continue to be amortized over the life of the plant. The regulatory tax liability for temporary differences caused by the investment tax credit will be amortized ratably in the same fashion as the accumulated deferred investment credit. Sierra Pacific Power Company The following reflects the composition of taxes on income (in thousands of dollars):
2000 1999 1998 ---------- ---------- ---------- Federal: Taxes estimated to be currently payable $ 866 $ 29,101 $ 46,176 Deferred taxes related to: Excess of tax depreciations over book depreciation 1,830 3,574 4,100 Contributions in aid of construction and customer advances (1,963) (2,701) (2,963) Avoided interest capitalized (548) 69 (875) Repairs & maintenance 2,162 1,504 - Research and experimentation 1,980 1,031 - Severance programs 508 3,774 - Other - net (1,262) 402 (2,075) Net amortization of investment tax credit (1,955) (1,981) (1,930) State (California) 446 888 925 ----------- ---------- ---------- Total $ 2,064 $ 35,661 $ 43,358 =========== ========== ========== As Reflected in Statement of Income (includes tax amounts related 0 discontinued operations): Federal income taxes 2,308 35,154 42,625 State income taxes 446 888 925 ----------- ---------- ---------- Operating Income 2,754 36,042 43,550 Other income - net (690) (381) (192) ----------- ---------- ---------- Total $ 2,064 $ 35,661 $ 43,358 ----------- ---------- ----------
114 The total income tax provisions differ from amounts computed by applying the federal statutory tax rate to income before income taxes for the following reasons (in thousands of dollars):
2000 1999 1998 ------------ ------------ ------------ Income before preferred dividend requirements $ 5,958 $ 71,726 $ 86,020 Total income tax expense 2,064 35,661 43,358 ------------ ------------ ------------ 8,022 107,387 129,378 Statutory tax rate 35% 35% 35% ------------ ------------ ------------ Expected income tax expense 2,808 37,585 45,282 Depreciation related to difference in costs basis for tax purposes 1,424 1,408 1,383 Allowance for funds used during construction - equity (167) 386 (1,334) Tax benefit from the disposition of assets (210) (442) 63 ITC amortization (1,955) (1,981) (1,930) California franchise taxes (net of federal benefit) 290 577 601 Other - net (126) (1,872) (707) ------------ ------------ ------------ $ 2,064 $ 35,661 $ 43,358 ============ ============ ============ Effective tax rate 25.7% 33.2% 33.5% ============ ============ ============
The net deferred federal income tax liability consists of deferred federal income tax liabilities less related deferred federal income tax assets, as shown (in thousands of dollars):
2000 1999 ------------ ------------ Deferred Federal Income Tax Liabilities: AFUDC $ 8,834 $ 8,894 Bond redemptions 5,732 6,099 Excess of tax depreciation over book depreciation 169,403 161,903 Severance programs 3,949 6,380 Repairs and maintenance 9,148 7,684 Research and experimentation 5,513 1,031 Tax benefits flowed through to customer 65,471 65,531 Other - net 2,642 (1,541) ------------ ------------ Total $ 270,692 $ 255,981 ============ ============ Deferred Federal Income Tax Assets: Avoided interest capitalized 15,187 14,624 Employee benefit plans 4,282 3,944 Contributions in aid of construction and customer advances 39,024 36,626 Gross-ups received on contributions in aid of construction and customer advances 5,407 5,163 Unamortized investment tax credit 18,322 19,991 Other - net 5,089 5,372 ------------ ------------ 87,311 85,720 Total $ 183,381 $ 170,261 ============ ============
SPPC's balance sheets contain a net regulatory tax asset of $31.3 million at year-end 2000 and $27.7 million at year-end 1999. The net regulatory asset consists of future revenue to be received from customers of $65.5 million at year-end 2000 and $65.5 million at year-end 1999, due to flow-through of the tax benefits of temporary differences. Offset against this amount are future revenues to be refunded to customers (a regulatory liability), consisting of $15.9 million at year-end 2000 and $17.9 million at year-end 1999, due to temporary differences for liberalized depreciation at rates in excess of current tax rates, and $18.3 million at year-end 2000 and $20.0 million at year-end 1999 due to unamortized investment tax credits. 115 The regulatory tax liability for temporary differences related to liberalized depreciation will continue to be amortized using the average rate assumption method required by the Tax Reform Act of 1986. The regulatory tax liability for temporary differences caused by the investment tax credit will be amortized ratably in the same fashion as the accumulated deferred investment credit. Sierra Pacific Resources The following reflects the composition of taxes on income (in thousands of dollars):
2000 1999 1998 ------------------- -------------------- -------------------- Federal: Taxes estimated to be currently payable (refundable) $ (28,042) $ 42,379 $ 17,163 Deferred taxes related to: Excess of tax depreciations over book depreciation 8,455 11,569 24,111 Contributions in aid of construction and customer advances (8,038) (11,508) (13,211) Avoided interest capitalized (5,106) (3,594) 6,463 Repairs & maintenance 3,912 1,469 - Research and experimentation 3,730 - - Severance programs 508 6,072 - Other - net, deferral fo energy cost 2,040 (17,114) 12,405 Net amortization of investment tax credit (3,415) (2,285) (1,460) State (California) 446 370 - ------------------- -------------------- -------------------- Total $ (25,510) $ 27,358 $ 45,471 =================== ==================== ==================== As Reflected in Statement of Income (includes tax amounts related to discontinued operations) Federal income taxes (28,042) 25,716 42,949 State income taxes 446 370 - ------------------- -------------------- -------------------- Operating Income (27,596) 26,086 42,949 Other income - net 2,086 1,272 2,522 ------------------- -------------------- -------------------- Total $ (25,510) $ 27,358 $ 45,471 =================== ==================== ====================
116 The total income tax provisions differ from amounts computed by applying the federal statutory tax rate to income before income taxes for the following reasons (in thousands of dollars):
2000 1999 1998 ----------- --------- --------- Income before preferred dividend requirements $ (35,880) $ 54,146 $ 83,673 Total income tax expense (benefit) (25,510) 27,358 45,471 --------- --------- --------- (61,390) 81,504 129,144 Statutory tax rate 35% 35% 35% --------- --------- --------- Expected income tax expense (benefit) (21,487) 28,526 45,200 Depreciation related to difference in costs basis for tax purposes 2,855 1,879 1,431 Allowance for funds used during construction - equity 133 805 300 Tax benefit from the disposition of assets (210) (184) -- ITC amortization (3,415) (2,441) (1,460) California franchise taxes (net of federal benefit) 290 241 -- Other - net (3,676) (1,468) -- --------- --------- --------- $ (25,510) $ 27,358 $ 45,471 ========= ========= ========= Effective tax rate 41.6% 33.6% 35.2% ========= ========= =========
The net deferred federal income tax liability consists of deferred federal income tax liabilities less related deferred federal income tax assets, as shown (in thousands of dollars):
2000 1999 ------------------ ------------------ Deferred Federal Income Tax Liabilities: AFUDC $ 14,901 $ 11,098 Bond redemptions 11,415 8,043 Excess of tax depreciation over book depreciation 357,616 336,545 Severance programs 13,198 7,684 Repairs and maintenance 9,179 - Research and experimentation 5,931 9,168 Tax benefits flowed through to customer 179,568 196,365 Other - net 647 10,481 ------------------ ------------------ Total $ 592,455 $ 579,384 Deferred Federal Income Tax Assets: Avoided interest capitalized 24,771 19,443 Employee benefit plans 5,188 6,825 Demand side program costs - 1,473 Contributions in aid of construction and customer advances including gross-ups 112,492 98,615 Unamortized investment tax credit 31,872 34,051 Other - net 7,547 5,013 ------------------ ------------------ 181,870 165,420 Total $ 410,585 $ 413,964 ================== ==================
For a discussion of SPR's regulatory tax assets and liabilities, which consist primarily of amounts at each of the Utilities, see the preceding discussions for each utility. 117 NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The December 31, 2000, carrying amount for cash and cash equivalents, current assets, accounts receivable, accounts payable and current liabilities approximates fair value due to the short-term nature of these instruments. The total fair value of NVP's consolidated long-term debt at December 31, 2000, is estimated to be $851.2 million, (excluding current portion) based on quoted market prices for the same or similar issues or on the current rates offered to NVP for debt of the same remaining maturities. The total fair value (excluding current portion) was estimated to be $910.9 million at December 31, 1999. The estimated fair value of NVP's preferred securities is $186.3 million at December 31, 2000. The fair value of NVP's preferred securities was estimated to be $160.1 million at December 31, 1999. The total fair value of SPPC's consolidated long-term debt at December 31, 2000, is estimated to be $587.4 million (excluding current portion) based on quoted market prices for the same or similar issues or on the current rates offered to SPPC for debt of the same remaining maturities. The total fair value (excluding current portion) was estimated to be $607.1 million as of December 31, 1999. The estimated fair value of SPPC's preferred securities is $48.5 million at December 31, 2000. The fair value of SPPC's preferred securities was estimated to be $48.5 million at December 31, 1999. The total fair value of SPR's consolidated long-term debt at December 31, 2000, is estimated to be $2,051.7 million (excluding current portion) based on quoted market prices for the same or similar issues or on the current rates offered to SPR for debt of the same remaining maturities. The total fair value (excluding current portion) was estimated to be $1,518 million as of December 31, 1999. The estimated fair value of SPR's consolidated preferred securities is $234.8 million at December 31, 2000. The fair value of SPR's consolidated preferred securities was estimated to be $208.6 million at December 31, 1999. NOTE 12. SHORT-TERM BORROWINGS On December 27, 2000, SPR put into place a $50 million unsecured revolving credit facility with Wells Fargo Bank. This facility may be used for working capital and general corporate purposes, including commercial paper backup. This facility will expire on June 30, 2001. On January 23, 2001, SPR drew down the bank facility and currently has $50 million outstanding. On August 28, 2000, the Utilities each renewed their $150 million unsecured revolving credit facility. These facilities may be used for working capital and general corporate purposes, including commercial paper backup. These facilities will expire on August 27, 2001. SPR, SPPC and NVP have sustained their A2/P2 rating by Standard and Poor's and Moody's, respectively. On December 18, 2000, NVP issued $100 million of floating rate notes that will mature on December 17, 2001. Interest on the notes is payable quarterly, commencing on March 17, 2001. The interest on the notes will be a floating rate for each interest period, subject to adjustment every three months. The interest is equal to the London Interbank Offered Rate (LIBOR) for three months of U.S. dollar deposits plus a spread of 0.79%. The Notes are not subject to any sinking fund. 118 At December 31, 2000, SPR had $4 million of outstanding short-term debt comprised entirely of commercial paper with a weighted average interest rate of 6.60%. NVP had short-term debt outstanding of $100 million comprised entirely of floating rate notes. SPPC had $108.9 million outstanding at year-end, comprised entirely of commercial paper, with a weighted average interest rate of 6.67%. The other subsidiaries of SPR had no outstanding short-term borrowings as of year-end. NOTE 13. DIVIDEND RESTRICTIONS SPR's primary source of funds for the payment of dividends to its stockholders is dividends paid by the Utilities on their common stock, all of which is owned by SPR. Accordingly, SPR's ability to pay dividends is dependent upon the ability of the Utilities to pay dividends on their common stock. The Restated Articles of Incorporation of the Utilities, the indentures relating to the various series of their First Mortgage Bonds, and the bank credit agreements of the Utilities contain restrictions as to the payment of dividends on their common stock and as to the purchase or retirement of their capital stock. Under the most restrictive of these provisions, approximately $8.5 million in dividends had been paid to SPR through December 31, 2000, by the Utilities in excess of available unrestricted retained earnings. 119 NOTE 14. RETIREMENT PLAN AND POST-RETIREMENT BENEFITS Pension and other postretirement benefit plans: SPR has pension plans covering substantially all employees. Benefits are based on years of service and the employee's highest compensation for a period prior to retirement. SPR also has other postretirement plans which provide medical and life insurance benefits for certain retired employees. The following table provides a reconciliation of benefit obligations, plan assets and the funded status of the plans. This reconciliation is based on a September 30 measurement date and reflects the acquisition of SPPC by NVP during 1999 under purchase accounting:
Other Postretirement Pension Benefits Benefits ------------------------------- ----------------------------- 2000 1999 2000 1999 ------------------------------- ----------------------------- Change in benefit obligations Benefit obligation, beginning of year $ 348,470 $ 149,031 $ 77,987 $ 16,381 Service cost 11,907 8,481 1,775 996 Interest cost 26,469 12,823 5,829 1,982 Participant contributions 0 0 300 255 Plan amendment & special termination 498 5,865 0 1,312 Actuarial loss (gain) (8,922) 4,663 (4,101) (1,694) Merger of SPPC Plans 0 192,140 0 60,386 Curtailment loss (gain) 0 (5,373) 0 386 Benefits paid (30,287) (19,160) (4,000) (2,017) ------------- ------------ ------------ ------------ Benefit obligation, end of year $ 348,135 $ 348,470 $ 77,790 $ 77,987 ============= ============ ============ ============ Change in plan assets Fair value of plan assets, beginning of year $ 326,708 $ 111,160 $ 66,688 $ 11,138 Actual return on plan assets 51,136 15,510 17,377 4,649 Company contributions 1,596 10,432 $ 1,535 $ 2,069 Participant contributions 0 0 $ 300 $ 255 Merger of SPPC Plans 0 208,766 0 $ 50,593 Benefits paid (30,287) (19,160) (4,000) (2,016) ------------- ------------ ------------ ------------ Fair value of plan assets, end of year $ 349,153 $ 326,708 $ 81,900 $ 66,688 ============= ============ ============ ============ Funded Status, end of year $ 1,018 $ (21,762) $ 4,110 $ (11,299) Unrecognized net actuarial (gains) losses (13,526) 19,765 (22,696) (11,418) Unrecognized prior service cost 11,561 12,264 0 0 Unrecognized net transition obligation 0 0 11,248 12,217 Contributions made in 4th quarter 270 769 0 1,096 ------------- ------------ ------------ ------------ Accrued pension and postretirement benefit obligations $ (677) $ 11,036 $ (7,338) $ (9,404) ============= ============ ============ ============
120 Amounts for pension and postretirement benefits recognized in the consolidated balance sheets consist of the following:
Other Postretirement Pension Benefits Benefits ------------------------------ --------------------------- 2000 1999 2000 1999 ------------------------------ --------------------------- Prepaid pension asset $ 13,939 $ 24,536 N/A N/A Accrued benefit liability (14,616) (13,500) $ (7,338) $ (9,404) Intangible asset 725 346 N/A N/A Accumulated other comprehensive income 2,446 1,822 N/A N/A Additional minimum liability (3,171) (2,168) N/A N/A ---------- -------- -------- --------- Net amount recognized (677) 11,036 (7,338) (9,404) ========== ======== ======== =========
The weighted-average actuarial assumptions as of the measurement date were as follows:
Other Postretirement Pension Benefits Benefits ------------------------- ------------------------- 2000 1999 1998 2000 1999 1998 ------------------------- ------------------------- Discount rate 8.00% 7.50% 6.75% 8.00% 7.50% 6.75% Expected return on plan assets 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% Rate of compensation increase 4.50% 4.50% 4.50% N/A N/A N/A
SPR has assumed a health care cost trend rate of 6% for 2000 and all future years. 121 Net periodic pension and other postretirement benefit costs include the following components:
Pension Benefits ------------------------------------------------ 2000 1999 1998 ------------------------------------------------ Service cost $ 11,907 $ 8,481 $ 5,386 Interest cost 26,469 12,823 9,285 Expected return on assets (27,186) (11,712) (7,697) Amortization of: Transition asset 0 0 0 Prior service costs 1,201 841 780 Actuarial (gains) losses 159 976 187 ------------ ---------- ---------- Net periodic benefit cost 12,550 11,409 7,941 Additional charges (credits): Special termination charges 0 5,865 0 Curtailment credits 0 (3,920) 0 ------------ ---------- ---------- Total net benefit cost $ 12,550 $ 13,354 $ 7,941 ============ ========== ========== Other Postretirement Benefits ------------------------------------------------ 2000 1999 1998 ------------------------------------------------ Service cost $ 1,775 $ 996 $ 433 Interest cost 5,829 1,982 1,155 Expected return on assets (5,327) (1,741) (770) Amortization of: Prior service costs 0 0 0 Transition obligation 968 1,344 967 Actuarial (gains) losses (598) (596) (505) ------------ ---------- ---------- Net periodic benefit cost 2,647 1,985 1,280 Additional charges (credits): Special termination charges 0 1,312 0 Curtailment loss 0 1,283 0 ------------ ---------- ---------- Total net benefit cost $ 2,647 $ 4,580 $ 1,280 ============ ========== ==========
In 1999, a regulatory asset was booked to offset the net effect of special termination benefits and curtailment costs incurred in connection with the merger of SPR and NVP. The assumed health care cost trend rate has a significant effect on the amounts reported. A one percentage point change in the assumed health care cost trend rate would have had the following effects on 2000 service and interest costs and the accumulated postretirement benefit obligation at year end: One percentage point change Increase Decrease --------------------------- -------- -------- Effect on service and interest components of net periodic cost $ 985 $ (787) Effect on accumulated postretirement benefit obligation $ 8,184 $(6,707) 122 NOTE 15. STOCK COMPENSATION PLANS At December 31, 2000, Sierra Pacific Resources had several stock-based compensation plans which are described below. SPR applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for nonqualified stock options and the employee stock purchase plan. The total compensation cost that has been charged against income for the performance shares, dividend equivalents and the non-employee director stock plans was ($0.2) million for 2000, and $0.2 million for 1999. SPR has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock Based Compensation. Had compensation cost for SPR's nonqualified stock options and the employee stock purchase plan been determined based on the fair value at the grant dates for awards under those plans consistent with the provisions of SFAS No. 123, SPR's income applicable to common stock would have been decreased to the pro forma amounts indicated below: 2000 1999 ------------------------ Net Income (Loss) As Reported (39,780) 51,750 Pro Forma (40,75) 50,908 Basic Earnings Per Share As Reported (0.51) 0.83 Pro Forma (0.52) 0.81 Diluted Earnings Per Share As Reported (0.51) 0.83 Pro Forma (0.52) 0.81 1. Prior to the August 1, 1999, merger, NVP did not have a nonqualified stock option plan or an employee stock purchase plan; therefore, presentation of the historical data for the above item is limited to two years. SPR's executive long-term incentive plan for key management employees, which was approved by shareholders on May 16, 1994, provides for the issuance of up to 750,000 of SPR's common shares to key employees through December 31, 2003. June 19, 2000, shareholders approved an increase of 1,000,000 shares for the executive long-term incentive plan. The plan permits the following types of grants, separately or in combination: nonqualified and qualified stock options, stock appreciation rights, restricted stock, performance units, performance shares, and bonus stock. During 2000, SPR issued nonqualified stock options, performance shares, and restricted stock under the long-term incentive plan. 123 Non-Qualified Stock Options Nonqualified stock options granted during 2000 were issued at an option price not less than market value at the date of the grant, August 4, 2000. This grant vests to the participant 25% per year over a four year period from the grant date, and may be exercised for a period not to exceed either the 65th birthday of the participant, February 18, 2009, or one year after retirement, whichever occurs first. The options may be exercised using either cash or previously acquired shares, valued at the current market price, or a combination of both. The Fair value of each nonqualified option has been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants issued in 2000 and 1999: ------------------------------------------------------------------------- Option Grant Date Dividend Expected Risk-Free Rate Expected Life Yield Volatility of Return ------------------------------------------------------------------------- August 4, 2000 4.81% 30.49% 6.14% 9.6 years August 1, 1999 4.25% 17.41% 6.31% 10 years January 1, 1999 4.40% 18.60% 5.08% 10 years ------------------------------------------------------------------------- A summary of the status of SPR's nonqualified stock option plan as of December 31, 2000, and 1999, and changes during the year is presented below:
---------------------------------------------------------------------------------------------------- 2000 1999 --------------------------------------------------------- Weighted- Weighted- Average Exercise Average Nonqualified Stock Options Shares Price Shares Exercise Price ---------------------------------------------------------------------------------------------------- Outstanding at beginning of year (1) 841,355 $24.33 289,119 $21.98 Granted (2) 400,000 $16.00 588,200 $25.36 Exercised 14,107 $14.28 1,286 $14.39 Forfeited 407,687 $25.06 34,678 $22.48 Outstanding at end of year 819,561 $20.07 841,355 $24.33 Options exercisable at year-end 209,099 $22.74 128,969 $20.53 Weighted-average grant date fair value of options granted (3): August 4 $ 4.10 January 1 $ 4.05 August 1 $ 5.11 ----------------------------------------------------------------------------------------------------
1. The historical information is presented for only two years because Nevada Power did not have a nonqualified stock option plan prior to the August 1, 1999, merger. After the merger, the SPR plan, approved in 1994 by the SPR Board of Directors, was adopted by the surviving company. 2. The number of nonqualified stock options granted during the year was 400,000 shares. 3. The fair value of each nonqualified option has been estimated on the date of grant using the Black-Scholes option-pricing model, with the following assumptions used for grants on August 4, 2000: dividend yield of 4.81%, expected volatility of 30.49%, risk-free rate of return of 6.14%, and an expected life of 9.5 years. 124 The following table summarizes information about nonqualified stock options outstanding at December 31, 2000:
-------------------------------------------------------------------------------------- Options Outstanding Options Exercisable ------------------------------------------------------- Number Remaining Number Exercise Outstanding Contractual Exercise Exercisable Grant Date Price at 12/31/00 Life Price at 12/31/00 -------------------------------------------------------------------------------------- 1/1/94 $14.24 8,000 3 years $14.24 8,000 1/1/95 $13.02 9,748 4 years $13.02 9,748 1/1/96 $16.23 8,673 5 years $16.23 6,938 1/1/97 $19.97 45,500 6 years $19.97 45,500 1/1/98 $24.93 69,120 7 years $24.93 46,082 1/1/99 $24.22 115,920 8 years $24.22 38,636 8/1/99 $26.00 162,600 8.6 years $26.00 54,195 8/4/00 $16.00 400,000 9 years $16.00 - Weighted Average Remaining 8.3 years Contractual Life --------------------------------------------------------------------------------------
Each participant was granted dividend equivalents for all 1996 and prior nonqualified option grants. Each dividend equivalent entitles the participant to receive a contingent right to be paid an amount equal to dividends declared on shares originally granted from the date of grant through the exercise date. Dividend equivalents will be forfeited if options expire unexercised. Performance Shares On August 4, 2000, January 1, 2000, and January 1, 1999, SPR granted performance shares in the following numbers and initial values, respectively: 10,164 valued at $16.00 per share, 40,600 valued at $26.00 per share, and 28,944 valued at $24.22 per share. The actual number of shares earned by each participant is dependent upon SPR achieving certain financial goals over three- year performance periods. The value of performance shares, if earned, will be equal to the market value of SPR's common shares as of the end of the performance periods. Sierra Pacific Resources, at its sole discretion, may pay earned performance shares in the form of cash or in shares, or a combination thereof. Simultaneous with the grant of the performance shares above, each participant was granted dividend equivalents. Each dividend equivalent entitles the participant to receive a contingent right to be paid an amount equal to dividends declared on shares originally granted throughout the performance period. Additionally, in order for dividend equivalents to be paid on the performance shares, certain financial targets must be met. Dividend equivalents will be forfeited if options expire unexercised. Restricted Stock Shares In 2000, SPR granted 16,000 restricted stock shares at a grant price of $16.00 per share. The grant vests over 4 years with 4,000 shares becoming available in 2002, 4,000 shares in 2003, and 8,000 shares in 2004. There are no performance criteria or dividend equivalents associated with the grant. 125 Employee Stock Purchase Plan Upon the inception of SPR's employee stock purchase plan, SPR was authorized to issue up to 400,162 shares of common stock to all of its employees with minimum service requirements. June 19, 2000, shareholders approved an additional 700,000 shares for distribution under the plan. According to the terms of the plan, employees can choose twice each year to have up to 15% of their base earnings withheld to purchase SPR's common stock. The purchase price of the stock is 90% of the market value on the offering commencement date. Employees can withdraw from the plan at any time prior to the exercise date. Under the plan SPR sold 46,773 and 21,888 shares to employees in 2000 and 1999, respectively. Compensation cost has been estimated for the employees' purchase rights on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for 2000 and 1999, respectively: average dividend yield of 4.72% and 4.31%, average expected volatility of 30.97% and 18.85%, and average risk-free interest rates of 5.86 and 5.08%. The weighted average fair value of those purchase rights in 2000 was $3.03 and $2.85 in 1999. Non-Employee Director Stock Plan SPR's non-employee director stock plan provides that a portion of the outside directors' annual retainer be paid in SPR stock. Under the current plan, the annual retainer for non-employee directors is $30,000, and the minimum amount to be paid in SPR stock is $20,000 per director. During 2000 and 1999, SPR granted the following total shares and related compensation to directors in SPR stock, respectively: 16,915 and 4,741 shares, and $250,000 and $150,000. SPR did not pay out any phantom stock shares in 2000. NOTE 16. POSTEMPLOYMENT BENEFITS During 1999, SPR offered a severance program to non-bargaining-unit employees, which provides for severance pay and medical benefits continuation totaling $13.7 million and $0.8 million respectively. As approved by the PUCN in 1999, this cost is being deferred as a regulatory asset as of December 31, 2000. The order approving the merger by the PUCN, directed the Utilities to defer merger costs (including severance and related benefits) for a three-year period. The deferral of these costs is intended to allow adequate time for the anticipated savings from the merger to develop. At the end of the three-year period, the order instructs SPPC and NVP to propose an amortization period for these costs, and allows SPPC and NVP to recover the costs to the extent that they are offset by merger savings. At December 31, 2000, the remaining liability for unpaid severance was $0.9 million. NOTE 17. DISCONTINUED OPERATIONS (SALE OF WATER BUSINESS) On September 7, 2000, SPR and SPPC adopted a plan to sell SPPC's water utility business. Accordingly, the water business is reported as a discontinued operation as of September 30, 2000, and the consolidated financial statements have been reclassified to report separately the net assets and operating results of the water business. SPR's and SPPC's prior year operating results have been restated to reflect continuing operations. On January 15, 2001, the SPR Board of Directors approved a definitive agreement to sell SPPC's water business to the Truckee Meadows Water Authority (TMWA) for $350 million. The transaction is subject to various closing conditions, including the release of the water business assets from the lien of SPPC's first mortgage indenture and the receipt of satisfactory regulatory treatment of the gain to SPPC, and is expected to close in the second quarter 2001. The transaction must be approved by the PUCN. 126 SPPC reserved the right to terminate the agreement in the event the PUCN imposes any conditions to the sale unacceptable to SPPC. Included in the sale will be water storage and supply, transmission, treatment and distribution facilities. Also, included in the sale will be four hydroelectric generation plants on the Truckee River. Accounts receivable consists of amounts due from developers for distribution facilities. Regulatory assets included for sale consist primarily of costs incurred in connection with the Truckee River negotiated water settlement. Other unallocated assets that may be in part included in the sale are not reflected in the table of net assets that follows. Assets and liabilities of the water utility business consist of the following:
Amounts in thousands December 31, 2000 December 31, 1999 ----------------- ----------------- Plant in service $338,199 $323,195 Less: Accumulated provision for depreciation 88,056 80,502 Construction work-in-progress 11,861 14,702 Accounts receivable 2,520 2,520 Materials 353 428 Regulatory tax asset 3,609 3,776 Other regulatory assets 4,674 4,015 Total Assets $273,160 $268,134 -------- -------- Deferred federal income taxes 3,215 8,370 Regulatory tax liability 3,469 3,399 ----- ----- Net assets of discontinued operations $266,476 $256,365 -------- --------
Water revenues for the years ended December 31, 2000, 1999, and 1998 were $57 million, $54 million, and $49 million, respectively. Net income from operations of the water business during the period September 7 through December 31, 2000, was approximately $700 million. These amounts are not included in the revenues and income (loss) from continuing operations shown in the accompanying income statements. The income from operations of the water business to be disposed of, as shown in the Consolidated Statements of Income of SPR, includes (in thousands) preferred dividends of $401, $195, and $0 for the years ended December 31, 2000, 1999, and 1998, respectively. The income from operations of the water business to be disposed of, as shown in the Consolidated Statements of Income of SPPC, includes (in thousands) preferred dividends of $401, $528, and $662 the years ended December 31, 2000, 1999, and 1998, respectively. NOTE 18. COMMITMENTS AND CONTINGENCIES Construction - ------------ The Utilities' combined estimated cash construction expenditures for the year 2001 and the five-year period 2001-2005 are $300 million and $1.515 billion, respectively. 127 Due to the supply shortage in the western U.S., several independent power producers have proposed the construction of new generating plants in Southern Nevada, and have requested transmission service from Nevada Power. Nevada Power has committed to construct this transmission infrastructure in furtherance on its on-going business plan. The key project in this regard is the construction of a 500 kV transmission system consistent with its tariff and Federal Energy Regulatory Commission pricing policies. Energy Contracts - ---------------- NVP and SPPC each have one long-term contract for the purchase of electric energy and/or capacity. These contracts expire in 2016 and 2009, respectively. Estimated future commitments under non-cancelable agreements with initial terms of one year or more at December 31, 2000, were as follows (dollars in thousands): Accounted for as a Accounted for as Long-Term Long-Term Capital Executory Contract Lease ------------------------------------------ 2001 $ 24,486 $ 10,823 2002 21,248 10,319 2003 21,225 9,790 2004 21,650 9,286 2005 21,817 8,756 2006 to 2016 70,357 74,069 The above long-term capital lease minimum payments have not been reduced by an estimated $75.9 million of executory costs and $20.8 million in interest. According to the regulations of the Public Utility Regulator Policies Act, the Utilities are obligated, under certain conditions, to purchase the generation produced by small power producers and cogeneration facilities at costs determined by the appropriate state utility commission. Generation facilities that meet the specifications of the regulations are known as qualifying facilities (QFs). As of December 31, 2000, NVP had a total of 305 MWs of contractual firm capacity under contract with four QFs. The contracts terminate between 2022 and 2024. As of December 31, 2000, SPPC had a total of 109 MWs of maximum contractual firm capacity under 15 contracts with QFs. SPPC also had contracts with three projects at variable short-term avoided cost rates. One of SPPC's long-term QF contracts terminates in 2006, one terminates in 2039, and the rest terminate between 2014 and 2022. 128 Commodity Contracts - ------------------- The Utilities have several long-term contracts for the purchase and transportation of coal and natural gas. These contracts expire in years ranging from 2001 to 2023. Estimated future commitments under non-cancelable agreements with initial terms of one year or more at December 31, 2000 were as follows (dollars in thousands): Coal and Gas Transportation 2001 $ 51,835 $ 67,689 2002 33,854 52,970 2003 19,548 44,706 2004 11,440 39,140 2005 9,813 39,141 2006 to 2023 19,084 366,467 Leases - ------ In 1984, NVP sold its administrative headquarters facility, less furniture and fixtures, for $27 million and entered into a 30-year capital lease of that facility with five-year renewal options beginning in year 31. The fixed rental obligation for the first 30 years is $5.1 million per year. Future cash rental payments as of December 31, 2000, were as follows (dollars in thousands): 2001 $ 6,156 2002 6,156 2003 6,156 2004 6,946 2005 7,735 2006 to 2014 65,752 The amount of imputed interest necessary to reduce the future cash rental payments to present value is $49.4 million as of December 31, 2000. Total interest expense on the lease obligation was $5.8 million and total amortization of the leased facility was $(352,000) for the year ended December 31, 2000. The total accumulated amortization of the leased facility on December 31, 2000, was $8.9 million. SPPC has an operating lease for its corporate headquarters building. The primary term of the lease is 25 years, ending in 2010. The current annual rental is $5.4 million, which amount remains constant until the end of the primary term. The lease has renewal options for an additional 50 years. SPR's estimated future minimum cash payments, including SPPC's headquarters building, under non-cancelable operating leases with initial terms of one year or more at December 31, 2000, were as follows (dollars in thousands): 2001 $ 14,380 2002 10,621 2003 8,754 2004 8,279 2005 7,822 2006 to 2045 71,489 129 Portland General Electric Acquisition - ------------------------------------- In November 1999 SPR and Enron Corporation (Enron) announced they had entered into a purchase and sale agreement for Enron's wholly owned electric utility subsidiary, PGE. PGE is an electric utility serving more than 700,000 retail customers in northwest Oregon. Upon completion of the transaction, PGE would become a wholly owned subsidiary of SPR. Under terms of the agreement, Enron has agreed to sell PGE to SPR for $2.02 billion to $2.1 billion in cash, depending upon the level of liabilities assumed at the time of close. In addition, $1.0 billion in PGE debt and preferred stock would remain outstanding and be reflected in SPR's consolidated financial statements. In addition to other regulatory approvals discussed below, the PGE acquisition is subject to the approval of the Securities and Exchange Commission (the "SEC") under the Public Utility Holding Company Act ("PUHCA"), and SPR has applied to the SEC to become a registered public utility holding company under PUHCA. In connection with that application, SPR has made certain representations to the SEC regarding the methods of financing the PGE acquisition and regarding the capital structure of SPR following the acquisition. According to those representations, SPR expects to initially finance the transaction primarily through a bank loan or other form of debt. In its application to the SEC, SPR had proposed to increase its consolidated common equity following the acquisition by paying down debt at the utility level with some of the proceeds from the sale of the electric generation assets of the Utilities, the sale of non-strategic assets, the sale of additional common stock, and increased retained earnings from the combined operations of the three utility subsidiaries. In light of the uncertainty related to the sale of the Utilities' generation assets (see Sale of Generation Assets later), SPR is evaluating alternative financing plans and capital structures to be presented to the SEC in connection with the financing application which must be approved as a condition for closing. The proposed transaction is subject to other closing conditions, including, without limitation, the receipt of all necessary governmental approvals, including the Federal Energy Regulatory Commission (FERC), the Federal Trade Commission/Department of Justice (FTC/DOJ), the Oregon Public Utility Commission (OPUC), and the Nuclear Regulatory Commission (NRC). SPR's filings have been made, and all state regulatory approvals have been received and only the SEC approval remains at the federal level. As of May 3, 2000, the FTC/DOJ investigation concluded and the waiting period under Hart-Scott-Rodino expired with no action taken. On July 27, 2000, the NRC approved PGE's transfer application filed in January. On October 30, 2000, the OPUC approved SPR's application to acquire PGE. The OPUC approved a September 1 settlement agreement that calls for a six-year price freeze on non-fuel operations and maintenance for PGE customers and a $95 million credit for Oregon consumers. The "acquisition credit" will be shown on monthly power bills as soon as the transaction is complete and will continue through September 30, 2007. PGE will retain its ability to adjust rates to reflect changes in the prices for wholesale electricity and fuel purchased to operate its power plants. On November 21, 2000, the FERC approved the transaction based on a plan that included the sale of the power plants. The purchase and sale agreement between SPR and Enron provides that the agreement may be terminated by either party without liability (unless a pre-existing breach has occurred) if the closing of the transaction has not occurred on or before May 5, 2001. As of December 31, 2000, SPR had incurred approximately $12.4 million of transaction costs in preparation for the PGE acquisition. Sale of Generation Assets - ------------------------- In June 1998, SPR announced a plan to divest its generation assets. This business strategy was described in the SPR/NVP merger applications filed with the PUCN and the FERC. 130 The approved plan includes seven bundles: SPPC's bundles are North Valmy (286 MW), Fort Churchill (226 MW), Tracy/Pinon (545 MW); NVP's bundles are Clark (690 MW), Sunrise/Sunpeak (390 MW), Reid Gardner (590 MW), and Harry Allen (76 MW). Not included in the plan's seven bundles were NVP's 14% (222 MW) interest in the Mohave Generating Station ("Mohave") and 11% (255 MW) interest in the Navajo Generating Station ("Navajo") although NVP committed to sell its share of these plants. Asset sale agreements, described below, have been signed for NVP's 14% share of Mohave and for six of the seven bundles described in the approved divestiture plan (Valmy, Tracy/Pinon, Clark, Reid Gardner, Sunrise/Sunpeak and Harry Allen). Marketing for the sale of SPPC's Fort Churchill bundle and NVP's 11% interest in the jointly owned Navajo power plant is continuing. On May 10, 2000, AES Corporation (AES) announced that it was the successful bidder for the purchase of a controlling interest in the 1,580 MW Mohave Generating Station in Laughlin, Nevada for approximately $667 million. NVP owns a 14% undivided interest in the facility. Mohave Generating Station is a 2-unit, coal-fired power plant located on 2,500 acres along the Colorado River, approximately 80 miles south of Las Vegas. AES executed Asset Sale Agreements with the sellers, NVP (14%) and Southern California Edison Company (56%), for a 70% undivided interest in the facility. Under the agreement, NVP will have the right to buy energy and ancillary services from AES for agreed upon prices, subject to a collar, through early 2003. The total sale price of NVP's interest is $142 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from NVP to AES for the power purchase agreement. The sale is subject to approval and review by various regulatory agencies. On October 19, 2000, SPR and SPPC announced an agreement to sell SPPC's 50% interest in the Valmy Power Station to NRG Energy, Inc. ("NRG") of Minneapolis, Minnesota. Under the agreement, SPPC will have the right to buy energy and ancillary services from the Valmy Power Station for agreed upon prices, subject to a collar, through early 2003. The total sale price of the asset bundle, which includes the Battle Mountain Diesel Plant and the Winnemucca Gas Plant, is $332 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from SPPC to NRG for the power purchase agreement. The Valmy Power Station sells electricity in northern Nevada and surrounding markets. SPPC's net capacity interest in the Valmy Power Station totals 286 MW. Located forty miles from Winnemucca, Nevada, the Valmy Power Station consists of two similar coal-fired units and is owned jointly by SPPC and Idaho Power Company. SPPC owns 50% of the station and operates the plant. The sale is subject to approval and review by various regulatory agencies. On October 27, 2000, SPR and SPPC announced an agreement to sell SPPC's Tracy/Pinon Power Station to WPS Power Development, Inc., a wholly owned subsidiary of WPS Resources Corporation of Green Bay, Wisconsin. Under the agreement, SPPC will have the right to buy energy and ancillary services from WPS Power Development for agreed upon prices, subject to a collar, from closing of the agreement through February 2003. The total sale price of the asset bundle, which includes the Tracy Plant, Pinon Pine, and the Brunswick, Gabbs and Valley Road diesel generators, is $260 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from SPPC to WPS Power Development for the power purchase agreement. The Tracy/Pinon Power Station sells electricity in northern Nevada and surrounding markets. Tracy is also the site of the Pinon Pine Integrated Coal Gasification Combined Cycle project co-funded by the U.S. Department of Energy as part of the Clean Coal Technology Program. SPPC's average capacity in the Tracy/Pinon Power Station totals 525 megawatts. Located approximately 20 miles from Reno, Nevada, the Tracy/Pinon Power Station consists of three similar gas- and oil-fired units, four gas turbines, and the Pinon Pine 131 facility (a combined cycle unit). The sale is subject to approval and review by various regulatory agencies. On November 20, 2000, SPR and NVP announced an agreement to sell NVP's Clark and Reid Gardner Generating Stations to a holding company formed by NRG and Dynegy Inc. (Dynegy) of Houston, Texas. Under the agreement, NVP will have the right to buy energy and ancillary services for agreed upon prices, subject to a collar, from closing of the agreement through February 2003. The total sale price of the asset bundles is $955 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from NVP to NRG and Dynegy for the power purchase agreement. The Clark Generating Station, located in southeastern Las Vegas, consists of 10 gas- and oil-fired generating units, totaling 740 megawatts. The Reid Gardner Generating Station consists of four baseload coal-fired units and is located 52 miles northeast of Las Vegas. Three of the units, 110 megawatts each, are wholly owned by NVP. NVP and the California Department of Water Resources (CDWR) jointly own the fourth unit, a 275 megawatts coal-fired unit. NRG and Dynegy will jointly acquire NVP's combined ownership and use interest in the fourth unit as part of the transaction. The CDWR will maintain its 15 megawatts ownership interest in the unit. The sale is subject to approval and review by various regulatory agencies. On December 4, 2000, SPR and NVP announced an agreement to sell NVP's Harry Allen Power Station to Pinnacle West Energy (Pinnacle), a subsidiary of Pinnacle West Corporation of Phoenix, Arizona. Under the agreement, NVP will have the right to buy energy and ancillary services from Pinnacle for agreed upon prices, subject to a collar, from closing of the agreement through February 2003. The total sale price of the asset bundle is $71 million, subject to taxes and other adjustments. The actual sales proceeds will be net of a payment from NVP to Pinnacle for the power purchase agreement. The Harry Allen Power Station, located approximately 30 miles north of the city of North Las Vegas, is a 72 megawatt combustion turbine unit. The sale is subject to approval and review by various regulatory agencies. On December 11, 2000, SPR and NVP announced an agreement to sell NVP's Sunrise Station electric generating plant to Reliant Energy Power Generation, Inc. (Reliant), a subsidiary of Reliant Energy of Houston, Texas. The sale includes two generating units owned by NVP and rights to electricity produced by three additional units on the Sunrise site owned by an independent power producer. Under the agreement, NVP will have the right to buy energy and ancillary services from Reliant for agreed upon prices, subject to a collar, from closing of the agreement through February 2003. The total sale price of the asset bundle is $109 million, subject to taxes and other adjustments at closing. The actual sales proceeds will be net of a payment from NVP to Reliant for the power purchase agreement. The Sunrise Station, located near the eastern edge of Las Vegas, consists of two generating units that can be fueled by natural gas or oil and are capable of producing up to 149 megawatts of electricity. The facility also includes three additional gas turbine generating units rated at 222 megawatts. These three units are owned by an independent power producer, Nevada Sun-Peak Limited Partnership, under contract to NVP. The sale is subject to approval and review by various regulatory agencies. On January 18, 2001, California enacted a law prohibiting any further divestiture of generation properties by California utilities, including SPPC, until 2006. SPR is actively seeking legislation to exempt SPPC from this moratorium on generation sales. However, unless modified by future legislative action or by a court, California law has halted divestiture of SPPC's Valmy, Tracy and Ft. Churchill plants. As Edison is the operating partner in the Mohave Station, the pending sale of that unit is also implicated. Without divestiture, the TPPAs negotiated with the buyers of these units as part of the sale agreements are terminated. 132 On January 24, 2001, the Nevada Utility Consumer Advocate ("UCA") filed a Petition with the PUCN seeking to halt regulatory review of all pending sales agreements for all Nevada generation until the PUCN can make a determination that generation divestiture is still in the public interest. If adopted by the PUCN, the UCA's proposal would at a minimum delay the effective date for TPPAs for all SPPC and NVP units and require that the Utilities immediately secure a fuel supply to run these generators through the 2001 Summer peak and perhaps beyond. On February 22, 2001, the Governor of Nevada presented his Nevada Energy Protection Plan. One of the points of the plan is re-examination of utility divestiture. The Governor has written to the PUCN, expressing his concern that divestiture in its current form could adversely impact Nevada. He has asked the PUCN to revisit the issue. Senate Bill 253 has been introduced in the Nevada legislature. If passed, this Bill would halt divestiture of generation until 2003. Although the closing of these sales is scheduled for the second and third quarters of 2001, whether and when such closings will occur depends upon the resolution of the legislative and regulatory issues discussed above. As of December 31, 2000, NVP and SPPC had spent $8.7 million and $11.4 million, respectively, in order to prepare for the generation asset sales. Environmental - ------------- Nevada Power Company The Grand Canyon Trust and Sierra Club filed a lawsuit in the U.S. District Court, District of Nevada, in February 1998, against the owners (including NVP) of the Mohave Generation Station ("Mohave"), alleging violations of the Clean Air Act regarding emissions of sulfur dioxide and particulates. An additional plaintiff, National Parks and Conservation Association later joined the suit. The plant owners and plaintiffs have had numerous settlement discussions and filed a proposed settlement with the court in October 1999. The consent decree, approved by the court in November 1999, established emission limits for sulfur dioxide and opacity and required installation of air pollution controls for sulfur dioxide, nitrogen oxides and particulate matter. The new emission limits must be met by January 1, 2006 and April 1, 2006, for the first and second units respectively. However, if the owners sell their entire ownership interest with a closing date prior to December 30, 2002, the new emission limits become effective 36 months and 39 months from the date of last closing for the two respective units. The estimated cost of new controls is $300 million. As a 14% owner in the Mohave Station, NVP's cost could be $42 million. Also, the United States Congress authorized the EPA to study the potential impact Mohave may have on visibility in the Grand Canyon area. A final report of the study results was released in March 1999. The study acknowledges that sulfur dioxide emissions from Mohave are transported to the Grand Canyon. EPA has solicited information to determine whether visibility impairment in the Grand Canyon can be reasonably attributed to Mohave. If EPA determines that significant visibility impairment is reasonably attributable to the station, EPA could initiate a review for Best Available Retrofit Technology. Mohave's owners believe that settlement of the suit discussed above is acceptable to the EPA. Provisions that are agreed to in a settlement are expected to be reflected in a State Implementation Plan for Nevada and resolve any concerns of EPA regarding visibility impairment In May 1997, NDEP ordered NVP to submit a plan to eliminate the discharge of Reid Gardner Station wastewater to groundwater. The NDEP order also required a hydrological assessment of groundwater impacts in the area. In June 1999, NDEP determined that wastewater ponds had degraded 133 groundwater quality. In August 1999, NDEP issued a discharge permit to Reid Gardner Station and an order that requires all wastewater ponds to be closed or lined with impermeable liners over the next 10 years. This order also required NVP to submit a Site Characterization Plan to NDEP to ascertain impacts. This plan is under review by NDEP. After approval, an estimate of remediation costs will be determined by NVP. New pond construction and lining costs are estimated at $20 million. Also, at the Reid Gardner Station, the NDEP has determined that there is additional groundwater contamination that resulted from oil spills at the facility. NDEP has required submitting a corrective action. The extent of contamination has been determined and remediation is occurring. This remediation is not expected to materially affect the financial position of SPR or NVP. In May 1999, NDEP issued an order to eliminate the discharge of NVP's Clark Station wastewater to groundwater. The order also required a hydrological assessment of groundwater impacts in the area. This assessment was submitted to NDEP in February 2001 and is under review. NVP will spend $565,000 to line existing ponds. After review by NDEP, NVP will implement remediation. Management does not expect this matter to materially affect the financial position of SPR or NVP. In December 2000, an above ground storage tank failed at NVP's Clark Station necessitating remediation of approximately 30,000 gallons of Bunker Fuel. Remediation costs are not expected to be significant. NVP determined that, while constructing the McCullough-Arden transmission line, access roads were created within a wilderness study area in violation of the Bureau of Land Management (BLM) Right of Way Grant. NVP's preliminary estimate for restoration costs is $200,000, which was reserved as of December 31, 1999. No resulting BLM action is pending. As part of the generation divestiture process Phase I and/or Phase II Environmental Assessments were conducted at all of the Utilities' facilities. These assessments noted additional remediation requirements for all the generation assets. All remediation has been completed except for the Reid Gardner facility. The assessment is under review by NDEP. Management does not expect this item to materially affect the financial position of SPR, NVP or SPPC. Sierra Pacific Power Company In September 1994, Region VII of EPA notified SPPC that it was being named as a potentially responsible party (PRP) regarding the past improper handling of Polychlorinated Biphenyls (PCBs) by PCB Treatment, Inc., located in Kansas City, Kansas, and Kansas City, Missouri (the Sites). The EPA is requesting that SPPC voluntarily pay an undefined, pro rata share of the ultimate clean-up costs at the Sites. A number of the largest PRP's formed a steering committee, which is chaired by SPPC. The responsibility of the Committee is to direct clean-up activities, determine appropriate cost allocation, and pursue actions against recalcitrant parties, if necessary. The EPA issued an administrative order on consent requiring signatories to perform certain investigative work at the Sites. The steering committee retained a consultant to prepare an analysis regarding the Sites. The Site evaluations have been completed. EPA is developing an allocation formula to allocate the remediation costs. SPPC has recorded a preliminary liability for the Sites of $650,000 of which approximately $135,000 has been spent through December 31, 2000. Once evaluations are completed, SPPC will be in a better position to estimate and record the ultimate liabilities for the Sites. 134 In October 2000, NDEP issued Notices of Alleged Violation (NOAV's) to SPPC for operating the Winnemucca Gas Turbine and the Tracy Peaking Combustion Turbine No. 1 over their annual operating hours. SPPC has applied for additional operating hours on these units per the NOAV's. In December 2000, SPPC notified NDEP that the annual operating hours for the Battle Mountain, Gabbs, and Brunswick Gas Turbines were exceeded in 2000. SPPC has applied for a Class II Air Operating Permit for these units. Enforcement action is pending per NDEP review of permit applications. In January 2001, Placer County Air Pollution Control District issued a Notice of Violation and a subsequent $160,000 penalty to SPPC for operating the Kings Beach Diesel Generation Facility in excess of its permitted annual operating hours. A settlement conference was held in February 2001 to present additional facts or circumstances to be considered in settling this matter. Other Subsidiaries of SPR Lands of Sierra, a wholly owned subsidiary of SPR, owns property in North Lake Tahoe, California, which is leased to independent condominium owners. The property has both soil and groundwater petroleum contaminate resulting from an historic underground fuel tank. Additional contaminate from a third party fuel tank on the property has also been identified and is undergoing remediation. Estimated future remediation costs are not expected to be significant. Nevada Electric Investment Company (NEICO), a wholly owned subsidiary of SPR, owns property in Wellington, Utah, which was the site of a coal washing and load out facility. The site now has a reclamation estimate supported by a bond of $4 million with the Utah Division of Oil and Gas Mining. The property was under contract for sale and the contract required the purchaser to provide $1.3 million in escrow towards reclamation. However, the sales contract was terminated and NEICO took title to the escrow funds. In September 2000, NEICO leased the property together with an option to purchase it. It is NEICO's intention to sell the property. See Notes 1, 3, 6, 8, 9, 12, 14, 16, and 17 of SPR's consolidated financial statements for additional commitments and contingencies. SPR and its subsidiaries, through the course of their normal business operations, are currently involved in a number of other legal actions, none of which has had or, in the opinion of management, is expected to have a significant impact on its financial position or results of operations. NOTE 19. SEGMENT INFORMATION SPR operates three business segments (as defined by FASB statement No. 131, Disclosure about Segments of an Enterprise and Related Information) providing regulated electric, natural gas and water service. Electric service is provided to Las Vegas and surrounding Clark County, northern Nevada and the Lake Tahoe area of California. Natural gas and water services are provided in the Reno- Sparks area of Nevada. Other segment information includes segments below the quantitative threshold for separate disclosure. On September 7, 2000, SPR and SPPC adopted a plan to sell SPPC's water utility business. Accordingly, the water business is reported as a discontinued operation as of September 30, 2000 and the consolidated financial statements have been reclassified to report separately the net assets and 135 operating results of the water business. Accordingly the water business is not reflected in the segment information below. Information as to the operations of the different business segments is set forth below based on the nature of products and services offered. SPR evaluates performance based on several factors, of which the primary financial measure is business segment operating income. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies (Note 1). Intersegment revenues are not material. In accordance with the requirements of purchase accounting and based on a merger date of August 1, 1999, the segmented financial information for the period ended December 31, 1999, includes five months of operating activity for SPR's subsidiaries other than NVP. Segmented information for 1998 includes only the operations of NVP.
December 31, 2000 Electric Gas All Other Reconciling Consolidated Eliminations Operating Revenues $2,219,252 $100,803 $ 14,199 $ 2,334,254 ========== ======== ======== ============== Operating income $ 107,175 $ 13,422 $ 6,792 $ 127,389 ========== ======== ======== ============== Operating income taxes $ (16,106) $ 3,271 $(18,187) $ (31,022) ========== ======== ======== ============== Depreciation $ 150,364 $ 4,974 $ 697 $ 156,035 ========== ======== ======== ============== Interest expense on long term debt $ 97,060 $ 4,318 $ 33,218 $ 134,596 ========== ======== ======== ============== Assets $4,586,682 $172,522 $541,524 $338,756 $ 5,639,484 ========== ======== ======== ======== ============== Capital expenditures $ 321,934 $ 14,490 $ 23,350 $ 359,774 ========== ======== ======== ============== December 31, 1999 Electric Gas All Other Reconciling Consolidated Eliminations Operating Revenues $1,236,702 $ 38,958 $ 9,132 $ 1,284,792 ========== ======== ======== ============== Operating income $ 157,030 $ 3,175 $ 2,656 $ 162,861 ========== ======== ======== ============== Operating income taxes $ 30,120 $ 425 $ (5,247) $ 25,298 ========== ======== ======== ============== Depreciation $ 107,704 $ 2,128 $ 243 $ 110,075 ========== ======== ======== ============== Interest expense on long term debt $ 75,869 $ 1,326 $ 299 $ 77,494 ========== ======== ======== ============== Assets $4,355,641 $153,347 $426,881 $300,048 $ 5,235,917 ========== ======== ======== ======== ============== Capital expenditures $ 275,761 $ 7,051 $ 16,252 $ 299,064 ========== ======== ======== ============== December 31, 1998 Electric Gas All Other Reconciling Consolidated Eliminations Operating Revenues $ 873,682 $ 873,682 ========== ============== Operating income $ 147,277 $ 147,277 ========== ============== Operating income taxes $ 42,949 $ 42,949 ========== ============== Depreciation $ 73,562 $ 73,562 ========== ============== Interest expense on long term debt $ 56,995 $ 56,995 ========== ============== Assets $2,541,840 $ 2,541,840 ========== ============== Capital expenditures $ 314,933 $ 314,933 ========== ==============
136 The reconciliation of Capital expenditures for 2000 and 1999 represents capital expenditures of the discontinued water business. The reconciliation of segment assets at December 31, 2000, and 1999 to the consolidated total includes the following unallocated amounts: 2000 1999 Other property $ 1,998 $ 2,661 Cash 5,348 3,011 Current assets- other 29,852 3,103 Other regulatory assets 33,315 34,571 Net Assets-Discontinued Operations 262,476 256,365 Deferred charges- other 1,767 337 -------- -------- $338,756 $300,048 ======== ======== NOTE 20. SUBSEQUENT EVENTS Comprehensive Energy Plan (NVP and SPPC) On January 29, 2001, the Utilities jointly filed a Comprehensive Energy Plan (the "CEP") with the PUCN. The CEP includes proposals for emergency rate relief, for the Utilities' energy supply portfolio, and for low income and conservation programs. Under the CEP, the Utilities map out a strategy to meet Nevada's short- and long-term energy needs, focusing on new mechanisms to recover the cost of wholesale power. The CEP also calls for accelerated approval of new long-term power contracts and encourages new power plant development. It also provides for automatic price reductions when wholesale prices fall. The CEP also includes a proposal that up to $5 million in revenue, generated from rate increases, will be provided to the State of Nevada to be used at the State's discretion to fund conservation and low-income protection programs. The CEP provides that the Utilities continue making monthly fuel and purchased power filings, which are scheduled to expire on March 1, 2003. See Note 3 "Regulatory Actions" for information about the monthly fuel and purchased power filings as provided for by the Global Settlement At a special agenda meeting On February 23, 2001, the PUCN issued an order approving the CEP rate increases to be effective March 1, 2001. The PUCN also set this matter for further proceedings to address the other proposals in the CEP and to analyze the need for the rate increases. A pre-hearing conference is scheduled for March 23, 2001. The CEP includes tiered rate increases, based on energy usage, that range from zero for certain low usage customers to as much as 29 percent for the state's largest energy users. The average increase is expected to be approximately 17 percent. The Utilities have proposed that the rate increases be adjusted on March 1, 2002, or sooner, if wholesale prices fall and if divesture of the Utilities' Nevada power plants is completed and contracts are in place that guarantee the Utilities can purchase power from the new owners of those plants for two years at 1998 prices. Business Matters - California (NVP, SPPC) The California Power Exchange, a non-profit public benefit corporation established to operate the California electricity marketplace where electricity was bought and sold, filed for Chapter 11 bankruptcy protection on March 9, 2001. The California Power Exchange was created by the California legislature in conjunction with its efforts to restructure the electricity industry within the state of California. From March 31, 1998, until January 30, 2001, the Exchange was responsible for establishing 137 a competitive spot market for electric power through day and hour ahead auction of generation and demand bids. At December 31, 2000 the California Power Exchange was indebted to NVP in the amount of $14.8 million for energy sales. An uncollectible reserve of $5.3 million is reflected in NVP's results of operations for the year 2000. SPPC had no outstanding transactions with the California Power Exchange at December 31, 2000. NOTE 21. QUARTERLY FINANCIAL DATA (UNAUDITED) The following figures are unaudited and include all adjustments necessary in the opinion of management for a fair presentation of the results of interim periods. In accordance with the requirements of purchase accounting and based on a merger date of August 1, 1999, the quarterly financial information for the first two quarters of 1999 reflects the operations of NVP. The information for the quarter ended September 30, 1999, includes two months of operating activity for SPR's subsidiaries other than NVP as well as the quarterly data for NVP. Dollars are presented in thousands except per share amounts. 138
Quarter Ended March 31, 2000 June 30, 2000 September 30, 2000 December 31, 2000 Operating Revenues $ 392,649 $ 475,408 $ 867,978 $ 598,219 =========== =========== =========== =========== Operating Income $ 57,968 $ 15,950 $ 20,162 $ 36,962 =========== =========== =========== =========== Income (loss) from continuing operations $ 17,250 $ (24,021) $ (23,741) $ (18,903) Income from discontinued operations 928 3,830 4,193 684 ----------- ----------- ----------- ----------- Net income (loss) $ 18,178 $ (20,191) $ (19,548) $ (18,219) =========== =========== =========== =========== Income (loss) per share-Basic: Income (loss) from continuing operations $ 0.22 $ (0.31) $ (0.30) $ (0.24) Income from discontinued operations $ 0.01 $ 0.05 $ 0.05 $ 0.01 ----------- ----------- ----------- ----------- Net income (loss) $ 0.23 $ (0.26) $ (0.25) $ (0.23) =========== =========== =========== =========== Income (loss) per share-Diluted: Income (loss) from continuing operations $ 0.22 $ (0.31) $ (0.30) $ (0.24) Income from discontinued operations $ 0.01 $ 0.05 $ 0.05 $ 0.01 ----------- ----------- ----------- ----------- Net income (loss) $ 0.23 $ (0.26) $ (0.25) $ (0.23) =========== =========== =========== =========== Quarter Ended March 31, 2000 June 30, 2000 September 30, 2000 December 31, 2000 Operating Revenues $ 182,433 $ 237,937 $ 467,046 $ 397,377 =========== =========== =========== =========== Operating Income $ 20,961 $ 30,913 $ 97,911 $ 13,076 =========== =========== =========== =========== Income (loss) from continuing operations $ 4,483 $ 11,754 $ 62,146 $ (30,173) Income from discontinued operations - - 2,554 986 ----------- ----------- ----------- ----------- Net income (loss) $ 4,483 $ 11,754 $ 64,700 $ (29,187) =========== =========== =========== =========== Income (loss) per share-Basic: Income (loss) from continuing operations $ 0.09 $ 0.23 $ 0.89 $ (0.44) Income from discontinued operations $ - $ - $ 0.04 $ 0.02 ----------- ----------- ----------- ----------- Net income (loss) $ 0.09 $ 0.23 $ 0.93 $ (0.42) =========== =========== =========== =========== Income (loss) per share-Diluted: Income (loss) from continuing operations $ 0.09 $ 0.23 $ 0.89 $ (0.44) Income from discontinued operations $ - $ - $ 0.04 $ 0.02 ----------- ----------- ----------- ----------- Net income (loss) $ 0.09 $ 0.23 $ 0.93 $ (0.42) =========== =========== =========== ===========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 139 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Directors The following is a listing of all the current directors of SPR, NVP and SPPC, and their ages as of December 31, 2000. There are no family relationships among them. Directors serve three-year terms with three (or four) terms of office expiring at each Annual Meeting, or until their successors have been elected and qualified. Directors whose terms expire in 2003: Edward P. Bliss, 68 Consultant to Zurich Scudder Investments Co; retired partner, Loomis, Sayles & Company, Inc., an investment counsel firm in Boston, Massachusetts. He is also a Director of Seaboard Petroleum, Midland, Texas. Mr. Bliss has served as a Director of SPR since 1991, of SPPC since 1991, and was elected a Director of NVP in July 1999. Mary Lee Coleman, 63 President of Coleman Enterprises, a developer of shopping centers and industrial parks. She is also a director of First Dental Health. Ms. Coleman has served as a Director of NVP since 1980, and was elected a Director of SPR and SPPC in July 1999. Theodore J. Day, 51 Senior Partner, Hale, Day, Gallagher Company, a real estate brokerage and investment firm. Mr. Day has served as a Director of SPPC since 1986, of SPR since 1987, and was elected a Director of NVP in July 1999. He is also a Director of the W.M. Keck Foundation. Jerry E. Herbst, 62 Chief Executive Officer of Terrible Herbst, Inc., a gas station, car wash, convenience store chain; and Herbst Supply Co., Inc., a wholesale fuel distributor; family-owned businesses for which he has worked since 1959. He is also a partner of the Coast Resorts (hotel and casino industry). Mr. Herbst has served as a Director of NVP since 1990, and was elected a Director of SPR and SPPC in July 1999. 140 Directors whose terms expire in 2002: Krestine M. Corbin, 63 President and Chief Executive Officer of Sierra Machinery, Incorporated since 1984 and a director of that company since 1980. She also serves on the Federal Reserve Board of San Francisco Board of Directors. Ms. Corbin has served as a Director of SPR since 1991, of SPR since 1989, and was elected a Director of NVP in July 1999. Fred D. Gibson, Jr., 73 Retired Chairman, President and Chief Executive Officer, but remains as a director, of American Pacific Corporation, a manufacturer of chemicals and pollution abatement equipment and a real estate developer. Mr. Gibson has been affiliated with American Pacific Corporation and its predecessor, Pacific Engineering & Production Co., since 1956. He is also a director of Cashman Equipment Company. Mr. Gibson has served as a Director of NVP since 1978, and was elected a Director of SPR and SPPC in July 1999. James L. Murphy, 71 Certified Public Accountant and retired partner of and consultant to Grant Thornton L.L.P., an international accounting and management consulting firm. Mr. Murphy is the owner, independent trustee and general partner of several real estate development projects and numerous rental properties. He is also a retired Colonel in the United States Air Force Reserve. Mr. Murphy has served as a Director of SPPC since 1990, of SPR since 1992, and was elected a Director of NVP in July 1999. Dennis E. Wheeler, 58 Chairman, President and Chief Executive Officer of Coeur d'Alene Mines Corporation since 1986. Mr. Wheeler has served as a Director of SPR since 1990, of SPPC since 1992, and was elected a Director of NVP in July 1999. Directors whose terms expire in 2001: James R. Donnelley, 65 Partner, Stet & Query, Ltd., since June 2000. Retired, R.R. Donnelly & Sons Company since June 2000, Vice Chairman of the Board, R.R. Donnelley & Sons Company from July 1990 to June 2000, and a Director of that company since 1976. Mr. Donnelley was R.R. Donnelley and Sons' Group President, Corporate Development from June 1987 to July 1990, and Group President, Financial Printing Services Group from January 1985 to January 1988. He is also a Director of Pacific Magazines & Printing Limited, and Chairman of National Merit Scholarship Corporation. Mr. Donnelley has served as a Director of SPR since 1987, of SPPC since 1992, and was elected a Director of NVP in July 1999. Walter M. Higgins, 56 Chairman, President and Chief Executive Officer of SPR since August 8, 2000. Chairman, President and Chief Executive Officer of AGL Resources, Inc., from February 1998 to August 141 2000. Chairman, President and Chief Executive Officer of SPR from January 4, 1994 to January 14, 1998. President and Chief Operating Officer of Louisville Gas and Electric Company from 1991 to November 1993. He is also a director of Aegis Insurance Services, Inc. NEETF, American Gas Association, and Infrastrux. John F. O'Reilly, 55 Chairman and Chief Executive Officer of the law firm of Keefer, O'Reilly, and Ferrario. Mr. O'Reilly is also Chairman and Chief Executive Officer of the O'Reilly Gaming Group and is Chairman of the Nevada Test Site Development Corporation. Mr. O'Reilly has served as a Director of NVP since 1995, and was elected a Director of SPR and SPPC in July 1999. Messrs. Higgins and Murphy are Directors of Lands of Sierra, Inc.; Messrs. Day and Higgins are Directors of Tuscarora Gas Pipeline Company; Mr. Higgins is a Director of Sierra Pacific Communications, Sierra Water Development Company, Sierra Gas Holdings Company, Pinon Pine Corporation, Pinon Pine Investment Company, and GPSF-B. The Directors of ethree are Michael J. Carano and Richard J. Coyle. All of the above listed companies are subsidiaries of Sierra Pacific Resources, with the exception of Pinon Pine Corporation, Pinon Pine Investment Company, and GPSF-B, which are subsidiaries of Sierra Pacific Power Company. (b) Executive Officers The following are current executive officers of the companies indicated and their ages as of December 31, 2000. There are no family relationships among them. Officers serve a term which extends to and expires at the annual meeting of the Board of Directors or until a successor has been elected and qualified: Walter M. Higgins, 56, Chairman, President and Chief Executive Officer, Sierra Pacific Resources See above description under Item 10(a), "Directors." Steven W. Rigazio, 46, President, Nevada Power Company Mr. Rigazio was elected President of Nevada Power Company in June 2000. Previously, he was Senior Vice President, Energy Delivery for SPPC and NVP in July 1999. Previously he was Vice President, Finance and Planning, Treasurer, and Chief Financial Officer for NVP effective October 1993. Other NVP management positions include Vice President and Treasurer, Chief Financial Officer; Vice President, Planning; Director of System Planning; Manager of Rates and Regulatory Affairs; and Supervisor of Rates and Regulations. Mr. Rigazio has been with NVP since 1984. William E. Peterson, 53, Senior Vice President, General Counsel and Corporate Secretary, Sierra Pacific Resources Mr. Peterson was elected to his present position in January 1994, and holds the same positions with SPPC and NVP. He was previously Senior Vice President, Corporate Counsel for SPPC from July 1993 to January 1994. Prior to joining SPR in 1993, he served as General Counsel and Resident Agent for SPR since 1992, while a partner in the Woodburn and Wedge law firm. He was a partner in the Woodburn and Wedge law firm since 1982. 142 Mark A. Ruelle, 39, Senior Vice President & Chief Financial Officer, Sierra Pacific Resources, Sierra Pacific Power Company and Nevada Power Company Mr. Ruelle was elected to his present position in December 2000, and holds the same positions with SPPC and NVP. Prior to joining SPR, Mr. Ruelle was President of Westar Energy, a subsidiary of Western Resources in 1996, and before that, served as Vice President, Corporate Development for Western Resources in 1995. Mr. Ruelle was with Western Resources since 1987 and served in numerous positions in regulatory affairs, treasury, finance, corporate development, and strategy planning. David G. Barneby, 55, Vice President, Generation, Sierra Pacific Power Company & Nevada Power Company Mr. Barneby was elected Vice President, Generation, in July 1999. Previously he was elected Vice President, Power Delivery for NVP effective October 1993. Mr. Barneby has been with NVP since 1965, and other management positions include Vice President, Generation; Manager, Generation Engineering and Construction; and Superintendent and Project Manager, Reid Gardner Unit 4. Jeffrey L. Ceccarelli, 46, President, Sierra Pacific Power Company Mr. Ceccarelli was elected to his present position in June 2000. He previously held the position of Vice President, Distribution Services, New Business, in July 1999 for SPPC and NVP. He was elected Vice President, Distribution Services for SPPC in February 1998. Prior to this, he served as Executive Director, Distribution Services. From January 1996 through January 1998, Mr. Ceccarelli was Director, Customer Operations. A civil engineer, Mr. Ceccarelli has been with SPPC since 1972. Gloria T. Banks Weddle, 51, Vice President, Corporate Services, Sierra Pacific Power Company and Nevada Power Company Ms. Weddle was elected Vice President, Corporate Services of Sierra Pacific Power Company and Nevada Power Company in July 1999, she had held the same position with NVP since January 1996. Previously she was Vice President, Human Resources and Corporate Services for NVP effective October 1993. Other NVP management positions include Vice President, Human Resources; Director of Human Resources; and Manager of Compensation and Benefits. Ms. Weddle has been with NVP since 1973. Matt H. Davis, 45, Vice President, Distribution Services, Nevada Power Company Mr. Davis was elected Vice President, Distribution Services for NVP. In the spring of 2000, he held a similar position forth both NVP and SPPC since July 1999. Previously he was Director, System Planning, and Division Director, System Planning and Operations for NVP. Mr. Davis has been with NVP since 1978. Steven C. Oldham, 50, Vice President, Corporate Development & Strategic Planning, Sierra Pacific Resources Mr. Oldham was elected to his current position in June 2000. Previously, he was Vice President, Transmission Business Group and Strategic Development; Vice President, Information 143 Resources, Corporate Redesign and Merger Transaction; Vice President, Regulation and Treasurer; and Treasurer and Director of Finance. Mr. Oldham has been with SPPC since 1976. Mary O. Simmons, 45, Controller, Sierra Pacific Resources Ms. Simmons was elected to her current position in June 1997, and holds the same position with SPPC and NVP. Her previous positions include: Director, Water Policy and Planning; Director, Budgets and Financial Services; and Assistant Treasurer, Shareholder Relations for SPR. Ms. Simmons is a certified public accountant and has been with SPR since 1985. Douglas R. Ponn, 53, Vice President, Governmental and Regulatory Affairs, Sierra Pacific Power Company and Nevada Power Company Mr. Ponn was elected Vice President, Governmental and Regulatory Affairs, in July 1999 for both SPPC and NVP. Previously he was Executive Director, Governmental and Regulatory Affairs. Mr. Ponn has been with SPR since 1986. Mary Jane Reed, 54, Vice President, Human Resources, Sierra Pacific Power Company and Nevada Power Company Ms. Reed was elected Vice President, Human Resources of SPPC in January 1997, and was named to the same position with NVP in July 1999. She was previously Vice President, Human Resources, Network Group for Bell Atlantic Corporation. Ms. Reed was with Bell Atlantic from 1968 - 1996 and, in addition to the Vice President's position, served as Director of Human Resources, Assistant to the President for Consumer Affairs, and several other managerial positions. Richard K. Atkinson, 49, Treasurer, Sierra Pacific Resources Mr. Atkinson was elected Treasurer of SPR, SPPC, and NVP in December 2000. Previously he held the positions of Assistant Treasurer, Executive Director, Finance, and other positions in the Finance Department. Mr. Atkinson has been with SPPC since 1980. Michael R. Smart, 44, Acting Vice President, Resource Management, Sierra Pacific Power Company and Nevada Power Company Mr. Smart was appointed to his present position in October 2000. Previously he was Executive Director, Resource Management for SPPC and NVP effective August 1999. Prior to this, from February 1998, he served as Director, Electric Operations for SPPC. From August 1996 to February 1998, he was Director of Energy Sales. A registered electrical engineer in Nevada and California, Mr. Smart has been with SPPC since 1979 and has held numerous management positions in operations, engineering, and planning. Although all outstanding shares of SPPC's common stock are held by SPR and it is SPR's common stock which is traded on the New York Stock Exchange, SPPC has one series of non-voting preferred stock still outstanding and registered under the Securities Exchange Act of 1934 ("the Act"). As a technical matter, SPPC is thus deemed an "issuer" for purposes of the Act whose officers are required to make filings with respect to beneficial ownership, if any, of those non-voting preferred securities. SPPC's officers, all of whom are currently reporting pursuant to Section 16(a) of the Act 144 with respect to SPR's common stock, have now filed reports with respect to SPPC's preferred stock, which reports show no past or current beneficial ownership of such preferred stock. 145 ITEM 11. EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth information about the compensation of each Chief Executive Officer that served in that position during 2000, and each of the four most highly compensated officers for services in all capacities to SPR and its subsidiaries. Also included is an individual who, although not an officer at the end of 2000, warranted inclusion due to compensation levels.
- --------------------------------------------------------------------------------------------------- Annual Compensation ------------------------------------------------------- Other Annual Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) (a) (b) (c) (d)(2) (e)(3) - --------------------------------------------------------------------------------------------------- Walter M. Higgins (1) 2000 $ 215,151 $ - $ 33,690 Chairman of the Board, President, and Chief Executive Officer Michael R. Niggli (1) 2000 $ 350,654 $ - $ - Chairman and Chief 1999 $ 400,000 $ 255,130 $ 1,183 Executive Officer 1998 $ 353,846 $ 216,000 $ 11,161 Steven W. Rigazio 2000 $ 255,003 $ - $ 15,477 President, Nevada Power 1999 $ 262,075 $ 81,700 $ 60,654 Company 1998 $ 219,462 $ 30,750 $ 13,712 Mark A. Ruelle 2000 $ 250,255 $ - $ 15,967 Senior Vice President, Chief 1999 $ 196,654 $ 86,658 $ 7,389 Financial Officer and Treasurer 1998 $ 192,116 $ 72,843 $ 12,342 Malyn K. Malquist 2000 $ 177,306 $ - $ 52,415 President and Chief 1999 $ 352,692 $ 199,875 $ 14,337 Operating Officer 1998 $ 292,960 $ 180,900 $ 16,486 William E. Peterson 2000 $ 216,203 $ - $ 25,943 Senior Vice President, 1999 $ 200,000 $ 83,053 $ 20,727 General Counsel and Corporate Secretary 1998 $ 199,385 $ 71,503 $ 18,918 Gloria T. Banks-Weddle 2000 $ 209,426 $ - $ 16,154 Vice President, Corporate 1999 $ 185,769 $ 57,564 $ 41,358 Services 1998 $ 177,222 $ 54,000 - - --------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- Long-Term Compensation Awards Payout --------------------------------------------------------------------- Securities Underlying Restricted Stock Options/ SARs All Other Name and Principal Position Awards ($) (#) LTIP Payouts ($) Compensation ($) (a) (f)(4) (g)(5) (h)(6) (i)(7) - -------------------------------------------------------------------------------------------------------- Walter M. Higgins (1) $ 256,000 400,000 $ - $ 411,758 Chairman of the Board, President, and Chief Executive Officer Michael R. Niggli (1) $ - - $ 66,781 $3,543,295 Chairman and Chief $ - 123,000 $ 410,306 $ 8,934 Executive Officer $ - - $ 115,399 $ 79,743 Steven W. Rigazio $ - - $ 26,713 $ 201,227 President, Nevada Power $ - 36,260 $ 127,712 $ 6,811 Company $ - - $ 29,304 $ 4,800 Mark A. Ruelle $ - - $ 59,357 $ 19,160 Senior Vice President, Chief $ - 61,292 $ - $ 8,565 Financial Officer and Treasurer $ - 9,000 $ 50,108 $ 8,974 Malyn K. Malquist $ - - $ 110,977 $2,855,202 President and Chief $ - 298,792 $ - $ 22,021 Operating Officer $ - 61,000 $ 85,184 $ 15,805 William E. Peterson $ - - $ 59,357 $ 20,926 Senior Vice President, $ - 80,168 $ - $ 11,974 General Counsel and Corporate Secretary $ - 9,000 $ 85,184 $ 29,939 Gloria T. Banks-Weddle $ - - $ 16,410 $ 15,934 Vice President, Corporate $ - 18,220 $ 101,582 $ 7,371 Services $ - - $ 29,960 $ 4,514 - --------------------------------------------------------------------------------------------------------
146 (1) Mr. Niggli resigned from his position of Chairman, President and Chief Executive Officer of Sierra Pacific Resources on July 22, 2000, and Mr. Higgins was named Chairman, President and Chief Executive Officer. (2) The amounts presented for 2000 and 1999, and those for the SPR executives in 1998, represent incentive pay received pursuant to SPR's "pay for performance" team incentive plan approved by stockholders in May, 1994. The 1998 amounts for the NVP executives represent pay received according to the NVP Short-Term Incentive Plan. All of the amounts are reported in the year they were earned, although payment may have occurred in a subsequent reporting period. The Board of Directors has elected not to grant payment of the 2000 incentive pay to the executives. (3) For all of the executives listed, except Mr. Malquist, these amounts represent Personal Time Off payouts. Of the amount reported for Mr. Malquist, $17,687.17 represents the difference between the price paid by the executive, upon the exercise of non-qualified stock options, and the fair market value on the date of purchase; the remainder, $34,727.49, represents the payment of dividend equivalents. (4) Upon rehire, Mr. Higgins was awarded a restricted stock grant of 16,000 shares, with the payment of dividend equivalents. On the date of grant the value of this award was $256,000 at $16.00 per share; at December 31, 2000, the value of the grant was $257,000 at $16.0625 per share. The grant will vest over a four year period in the following manner: a. September 2002 4,000 shares b. September 2003 4,000 shares c. September 2004 8,000 shares (5) As a result of the August 1, 1999 merger with Nevada Power Company, all SPR nonqualifying stock options outstanding as of that date were converted at a ratio of 1.44:1. For the pre-merger SPR executives, the 1999 option amounts include the number of new shares issued during the year, as well as the total number of shares that were converted for that employee. For 1998 the amounts are the same as those presented in prior years and do not reflect the conversion. Also, the 2000 Non-Qualified Stock Options were granted in August of 1999, therefore they are included in the 1999 amounts. (6) The Long-term incentive payouts for the SPR executives, for the three-year period January 1, 1997 to December 31, 1999, were not approved for payment by the SPR Board of Directors; therefore, zero amounts are shown in 1999 for the pre-merger SPR executives. In 1999, Nevada Power executives received a lump sum payout of all their performance shares as a result of the August 1, 1999, merger. (7) Amounts for All Other Compensation include the following for 2000: 147
- ------------------------------------------------------------------------------------------------------------------------------------ Walter M. Michael R. Steven W. Mark A. Malyn K. William E. Gloria T. Description Higgins Niggli Rigazio Ruelle Malquist Peterson Banks-Weddle - ------------------------------------------------------------------------------------------------------------------------------------ Company contributions to the 401k deferred compensation plan $ 10,200 $ 10,200 $ 10,200 $ 10,200 $ 10,200 $ 10,200 $ 10,200 Company paid portion of Medical/Dental/Vision Benefits $ 2,444 $ 1,844 $ 5,499 $ 5,499 $ 917 $ 5,499 $ 4,149 Company contributions to the nonqualified deferred compensation plan $ 2,785 $ 4,497 $ 3,391 Imputed income on group term life insurance $ 1,233 $ 955 $ 653 $ 328 $ 253 $ 728 $ 715 premiums paid by SPR Insurance premiums paid for executive term life policies $ 1,116 $ 348 $ 558 $ 1,107 $ 870 Moving Expense Reimbursement $ 32,323 Additional Compensation upon Rehire $ 397,881 Non-Qualified Pension Payments $ 249,666 Severance/Stay Agreement payments $ 3,496,856 $ 184,875 $ 2,589,111 Total $ 411,758 $ 3,543,295 $ 201,227 $ 19,160 $ 2,855,202 $ 20,926 $ 15,934 - ------------------------------------------------------------------------------------------------------------------------------------
Options/SAR Grants in Last Fiscal Year The following table shows all grants of options to the named executive officers of SPR in 2000. Pursuant to SEC rules, the table also shows the present value of the grant at the date of grant.
------------------------------------------------------------------------------------------------------------------ Percent of Number of Total Securities Options/SAR's Underlying Granted to Options/SAR's Employees in Exercise of Base Grant Date Name Granted Fiscal Year Price ($/share) Expiration Date Present Value (a)(1) (b) (c)(2) (d) (e)(3) (f)(4) ------------------------------------------------------------------------------------------------------------------ Walter M. Higgins 08/04/2000 Grant date 400,000 100.00% $ 16.00 2/18/09 $ 1,520,635 Michael R. Niggli - - - - - Steven W. Rigazio - - - - - Mark A. Ruelle - - - - - Malyn K. Malquist - - - - - William E. Peterson - - - - - Gloria T. Banks-Weddle - - - - - ------------------------------------------------------------------------------------------------------------------
(1) Under the SPR executive long-term incentive plan, a grant of 400,000 shares of nonqualifying stock options was made on August 4, 2000. One-quarter of this grant vests annually commencing one year after the date of the grant, and is dependent on certain stock performance criteria. (2) The total number of nonqualifying stock options granted to all employees in 2000 was 400,000. All of the executives, except Mr. Higgins because his employment did not begin until 2000, were 148 granted their year 2000 shares on the date of the NVP & SPR merger, August 1, 1999. As a result, these grants were reported in 1999. (3) Mr. Higgins' grant will expire on either his 65th birthday, 02/18/09, or one year from his date of retirement, whichever occurs first. (4) The hypothetical grant-date present values are calculated under the Black-Scholes Model. The Black-Scholes Model is a mathematical formula used to value options traded on stock exchanges. The assumptions used in determining the option grant date present value listed above include the stock's average expected volatility (30.49%), average risk free rate of return (6.14%), average projected dividend yield (4.81%), the stock option term (9.5 years), and an adjustment for risk of forfeiture during the vesting period (4 years at 3%). No adjustment was made for non-transferability. Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values The following table provides information as to the value of the options held by the named executive officers at year end measured in terms of the closing price of Sierra Pacific Resources common stock on December 31, 2000.
--------------------------------------------------------------------------------------------------------------------- Shares Number of Securities Underlying Value of Unexercised in-the- Acquired on Value Unexercised Options/SARs at money Options/SARs at Fiscal Name Exercise Realized Fiscal Year-End Year-End (a) (b) (c) (d) (e) -------------------------------------------------------------- Exercisable Unexercisable Exercisable Unexercisable --------------------------------------------------------------------------------------------------------------------- Walter M. Higgins - - - - $ - $ - Michael R. Niggli - - - - $ - $ - Steven W. Rigazio - - 4,320 31,940 $ - $ - Mark A. Ruelle - - 25,032 36,260 $ - $ - Malyn K. Malquist 14,107 17,687 - - $ - $ - William E. Peterson - - 42,899 37,269 $ 28,412 $ - Gloria T. Banks-Weddle - - 2,640 15,580 $ - $ - ---------------------------------------------------------------------------------------------------------------------
(c) Related to the exercise of the options reported in (b), Mr. Malquist received dividend equivalents totaling $34,727. (e) Pre-tax gain. Value of in-the-money options based on December 31, 2000, closing trading price of $16.0625 less the option exercise price. Long-Term Incentive Plans-Awards in Last Five Years The executive long-term incentive plan (LTIP) provides for the granting of stock options (both nonqualified and qualified), stock appreciation rights (SARs), restricted stock performance units, performance shares and bonus stock to participating employees as an incentive for outstanding performance. Incentive compensation is based on the achievement of pre-established financial goals for SPR. Goals are established for total shareholder return (TSR) compared against the Dow Jones Utility Index and annual growth in earnings per share (EPS). The following table provides information as to the performance shares granted to the named executive officers of Sierra Pacific Resources in 2000. Nonqualifying stock options granted to the named executives as part of the LTIP are shown in the table "Option/SAR Grants in Last Fiscal Year." 149
-------------------------------------------------------------------------------------------- Performance Estimated Future Payouts Under Number of or Other Non-Stock Price-Based Plans --------------------------------------- Shares, Units Period Until or Other Maturation Name Rights or Payout Threshold($) Target ($) Maximum ($) (a) (b) (c) (d)(1) (e)(2) (f)(3) -------------------------------------------------------------------------------------------- Walter M. Higgins 10,164 3 years $ 132,132 $ 264,264 $ 462,462 Michael R. Niggli - - $ - $ - $ - Steven W. Rigazio 2,900 3 years $ 37,700 $ 75,400 $ 131,950 Mark A. Ruelle 2,900 3 years $ 37,700 $ 75,400 $ 131,950 Malyn K. Malquist - - $ - $ - $ - William E. Peterson 2,900 3 years $ 37,700 $ 75,400 $ 131,950 Gloria T. Banks-Weddle 1,300 3 years $ 16,900 $ 33,800 $ 59,150 --------------------------------------------------------------------------------------------
(1) The threshold represents the level of TSR and EPS achieved during the cycle which represents minimum acceptable performance and which, if attained, results in payment of 50% of the target award. Performance below the minimum acceptable level results in no award earned. (2) The target represents the level of TSR and EPS achieved during the cycle which indicates outstanding performance and which, if attained, results in payment of 100% of the target award. (3) The maximum represents the maximum payout possible under the plan and a level of TSR and EPS indicative of exceptional performance which, if attained, results in a payment of 175% of the target award. All levels of awards are made with reference to the price of each performance share at the time of the grant. Pension Plans The following table shows annual benefits payable on retirement at normal retirement age 65 to elected officers under SPR's defined benefit plans based on various levels of remuneration and years of service which may exist at the time of retirement.
---------------------------------------------------------------------------------------- Annual Benefits for Years of Service Indicated --------------------------------------------------------------------- Highest Average Five-Years 15 Years 20 Years 25 Years 30 Years 35 Years Remuneration ---------------------------------------------------------------------------------------- $ 60,000 $ 27,000 $ 31,500 $ 36,000 $ 36,000 $ 36,000 $120,000 $ 54,000 $ 63,000 $ 72,000 $ 72,000 $ 72,000 $180,000 $ 81,000 $ 94,500 $108,000 $108,000 $108,000 $240,000 $108,000 $126,000 $144,000 $144,000 $144,000 $300,000 $135,000 $157,500 $180,000 $180,000 $180,000 $360,000 $162,000 $189,000 $216,000 $216,000 $216,000 $420,000 $189,000 $220,500 $252,000 $252,000 $252,000 $480,000 $216,000 $252,000 $288,000 $288,000 $288,000 $540,000 $243,000 $283,500 $324,000 $324,000 $324,000 $600,000 $270,000 $315,000 $360,000 $360,000 $360,000 $660,000 $297,000 $346,500 $396,000 $396,000 $396,000 $720,000 $324,000 $378,000 $432,000 $432,000 $432,000 ----------------------------------------------------------------------------------------
150 SPR's noncontributory retirement plan provides retirement benefits to eligible employees upon retirement at a specified age. Annual benefits payable are determined by a formula based on years of service and final average earnings consisting of base salary and incentive compensation. Remuneration for the named executives is the amount shown under "Salary" and "Incentive Pay" in the "Summary Compensation Table. Pension costs of the retirement plan to which SPR contributes 100% of the funding are not and cannot be readily allocated to individual employees and are not subject to Social Security or other offsets. During 2000, a change was made to the policy for calculating credited years of service; now, the first year of service is recognized as credited. Reflecting this change, the years of credited service for the named executives are as follows: Mr. Higgins, 7.1; Mr. Niggli, 0; Mr. Malquist, 0; Mr. Rigazio, 16.5; Mr. Ruelle, 3.8; Mr. Peterson, 14.5; and Ms. Banks-Weddle, 26.5. A supplemental executive retirement plan (SERP) and an excess plan are also offered to the named executive officers. The SERP is intended to ensure the payment of a competitive level of retirement income to attract, retain and motivate selected executives. The excess plan is intended to provide benefits to executive officers whose pension benefits under SPR's retirement plan are limited by law to certain maximum amounts. Severance Arrangements Individual severance allowance plans exist for the named executive officers which provide for severance pay, payable in a lump sum or by purchase of an annuity, if within three years after a change in control of SPR, there is a termination of employment by SPR related to such change in control, or a termination of employment by the employee for good reason, in each case as described in the plans. In these circumstances, officers are entitled to a severance allowance not to exceed an amount equal to 36 months of the officer's base salary and any bonus and the continuation for up to 36 months of participation in SPR's group medical and life insurance plans. Change in control is defined in the plans as, among other things, a dissolution or liquidation, a reorganization, merger or consolidation in which SPR is not the surviving corporation, the sale of all or substantially all the assets of SPR (not the sale of a work unit) or the acquisition by any person or entity of 30% or more of the voting power of SPR. In addition, several merger-related and merger-conditioned severance arrangements have been entered into between SPR and several executives, which are described in Item 13 - Certain Relationships and Related Transactions. 151 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Voting Stock The table below sets forth the shares of Sierra Pacific Resources Common Stock beneficially owned by each director, nominee for director, the Chief Executive Officer, and the four other most highly compensated executive officers. No director, nominee for director or executive officer owns, nor do the directors and executive officers as a group own, in excess of one percent of the outstanding Common Stock of SPR. Unless otherwise indicated, all persons named in the table have sole voting and investment power with respect to the shares shown.
Common Shares Beneficially Percent of Total Common Owned as of Shares Outstanding as of Name of Director or Nominee March 15, 2001 March 15, 2001 - ---------------------------------------- --------------------- ----------------------------------- Edward P. Bliss 26,637 Mary L. Coleman 165,895 Krestine M. Corbin 19,636 Theodore J. Day 34,172 No director or nominee James R. Donnelley 34,459 for director owns in excess Fred D. Gibson Jr. 21,580 of one percent. Jerry E. Herbst 13,902 Walter M. Higgins 30,010 James L. Murphy 18,513 John F. O'Reilly 12,733 Dennis E. Wheeler 17,552 --------------------- 395,089 ===================== Common Shares Beneficially Percent of Total Common Owned as of Shares Outstanding as of Executive Officers March 15, 2001 March 15, 2001 - ---------------------------------------- --------------------- ----------------------------------- Walter M. Higgins 30,010 Michael R. Niggli (1) - Steven W. Rigazio 31,660 No executive officer owns Mark A. Ruelle 50,286 In excess of one percent William E. Peterson 69,275 Gloria T. Banks-Weddle 14,825 --------------------- 196,056 ===================== All directors and executive officers as a group (a) (b) (c) 739,782 =====================
(1) Mr. Niggli resigned from his position of Chairman, President and Chief Executive Officer of Sierra Pacific Resources on July 22, 2000, and Mr. Higgins was named Chairman, President and Chief Executive Officer. (a) Includes shares acquired through participation in the Employee Stock Purchase Plan and/or the 401(k) plan. (b) The number of shares beneficially owned includes shares which the Executive Officers currently have the right to acquire pursuant to stock options granted and performance shares earned under the Executive Long-Term Incentive Plan. Share beneficially owned pursuant to stock options and restricted stock granted to Messrs. Higgins, Rigazio, Peterson, Ruelle, Banks-Weddle and directors and executive officers as a group are -0-, 16,407, 60,316, 47,244, 13,891 and 261,881 shares, respectively. Shares beneficially owned as a result of performance shares earned by Messrs. Higgins, Rigazio, Peterson, Ruelle, Banks-Weddle and directors and executive officers as a group are -0-, 1,521, 3,042, 3,042, 934, and 14,506 shares, respectively. Additionally, 16,000 shares are beneficially owned by Mr. Higgins pursuant to restricted stock grants. (c) Included in the shares beneficially owned by the Directors are 97,683 shares of "phantom stock" representing 152 the actuarial value of the Director's vested benefits in the terminated Retirement Plan for Outside Directors. The "phantom stock" is held in an account to be paid at the time of the Director's departure from the Board. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with Management - ---------------------------- Mr. Peterson, formerly a partner with the law firm of Woodburn and Wedge, became Senior Vice President and General Counsel for Sierra Pacific Resources in 1993. Woodburn and Wedge, which has performed legal services for Sierra Pacific Power Company since 1920 and for Sierra Pacific Resources and all of its subsidiaries from their inception, continues to perform legal work for the company. Mr. Peterson's spouse, an equity partner in the firm since 1982, has performed work for the company since 1976 and continues to do so from time to time. Susan Oldham, a former employee of Sierra Pacific Power Company specializing in water resources law, planning and policy, accepted the Company's voluntary severance offering in December 1995. Ms. Oldham is the spouse of Steven C. Oldham, Senior Vice President, Corporate Development and Strategic Planning, for the Company. Ms. Oldham, a licensed attorney in Nevada and California, has continued to perform specialized legal services in the water resources area for the Company on a contract basis. Change in Control Agreements - ---------------------------- The Company has entered into change in control severance agreements with Gloria Banks Weddle, Jeffrey L. Ceccarelli, Matt H. Davis, Steven C. Oldham, William E. Peterson, Douglas R. Ponn, Mark A. Ruelle, Mary O. Simmons, and Mary Jane Reed. These agreements provide that, upon termination of the executive's employment within 24 months following a change in control of the Company (as defined in the agreement either (a) by SPR for reasons other than cause (as defined in the agreements), (b) death or disability, or (c) by the executive for good reason as defined in the agreement, including a diminution of responsibilities, compensation, or benefits (unless, with respect to reduction in salary or benefits, such reduction is applicable to all senior executives of the Company and the acquirer)), the executive will receive certain payments and benefits. These severance payments and benefits include (i) a lump sum payment equal to three times the sum of the executive's base salary and target bonus, (ii) a lump sum payment equal to the present value of the benefits the executive would have received had he continued to participate in the Company's retirement plans for an additional three years (or, in the case of the Company's Supplemental Executive Retirement Plan only, the greater of three years or the period from the date of termination until the executive's early retirement date, as defined in such plan), and (iii) continuation of life, disability, accident and health insurance benefits for a period of 36 months immediately following termination of employment. The agreements also provide that if any compensation paid, or benefit provided, to the executive, whether or pursuant to the change in control agreements, would be subject to the federal excise tax on "excess parachute payments," payments and benefits provided pursuant to the agreement will be cut back to the largest amount that would not be subject to such excise tax, if such cutback results in a higher after-tax payment to the executive. The Board of Directors entered into these agreements in order to attract and retain excellent management and to encourage and reinforce continued attention to the executives' assigned duties without distraction under circumstances arising from the possibility of a change in control of the Company. In entering into these agreements, the Board was advised by Towers Perrin, the national compensation and benefits consulting firm described above, and Skadden, Arps, Slate, Meagher & Flom, an independent outside law firm, to insure that the agreements entered into were in line with existing industry standards, and provided benefits to management consistent with those standards. The 153 Company declined to renew these contracts in 2000, and they will expire on December 31, 2001, unless renewed or replaced before that time. Employment Agreements - --------------------- Walter M. Higgins On August 4, 2000, the Company elected Walter M. Higgins as President, Chief Executive Officer and Chairman of the Board under terms and conditions of an employment offer. The terms and conditions of that agreement essentially replicate Mr. Higgins' compensation and benefits package provided by his previous employer, AGL Resources, and make him whole for benefits and compensation lost, forgone, or otherwise forfeited as a result of his accepting employment with the Company. The Company engaged Towers Perrin to evaluate Mr. Higgins' offer prior to consummating it in order to assure that it was consistent with Company policy to compensate its senior executives, including the Chief Executive Officer, at or near the midpoint of the competitive market for base salary and incentive compensation opportunities for executives of comparably sized companies in general industry. The employment agreement with Mr. Higgins provides for an annual base salary of $590,000, participation in the Company's short-term incentive program, at 65% of base pay, and participation in the Company's long-term incentive program approved by shareholders at 140% of base salary. These programs are described in the Human Resources Committee Report on Executive Compensation provided above. Under the agreement, Mr. Higgins was also paid $387,881, representing 83% of the incentive payment he would have earned as of September 30, 2000, and would have been paid had he remained at AGL Resources, Inc., until November 1, 2000. The agreement also provides that Mr. Higgins would receive one-half of 38% of the year 2000 SPR annual incentive opportunity provided he satisfied expectations of the Board during the remainder of the year, and one-half of 38% of the year 2000 award opportunity based on the same goals and under the same terms and conditions as exist for the officer group as a whole. The Committee determined that Mr. Higgins achieved his performance goals and therefore earned one-half of the 38%, but consistent with its decision not to pay any incentive award to the officer group as a whole, elected not to award Mr. Higgins any annual incentive compensation for FY 2000. Future payments will be based on corporate and personal performance targets established under terms and conditions of the plan. The agreement also provides that Mr. Higgins will be paid long-term incentives in accordance with the terms of the plan approved by shareholders in 1994, which contemplates a performance share grant of 13,200 shares effective January 2001, to be earned over a three-year period under performance measurements relating to financial performance and total shareholder return. Effective January 1, 2001, he also received 104,000 non-qualified stock options, which will vest at one-third per year. As with the officer group as a whole, the strike price will be fixed at the average daily closing price of the stock on the New York Stock Exchange for the 30-day period January 1-31. In addition, Mr. Higgins will be eligible to receive on a pro-rata basis (28 of 36 months) the 2000-2002 performance share grants, which are also earned based on targets relating to financial performance and total shareholder return. Mr. Higgins also received a one-time restricted stock grant of 16,000 shares with dividend equivalents, grossed-up for taxes, which will vest over a four-year period. Mr. Higgins is required to accumulate and maintain, over five years, two times annual compensation in SPR stock, and was also granted 400,000 non-qualified stock options at a strike price based on the closing stock price on the day he accepted employment with the Company, which will vest 25% per year or sooner if certain price threshold levels are met. Mr. Higgins is also eligible to participate in the Company's Supplemental Executive Retirement Plan and was provided 154 credit for all previous years of service with the Company, plus all years served at AGL Resources or Louisville Gas & Electric, with benefits reduced by any qualified benefits received from that prior employment. Mr. Higgins was also provided $2,000,000 of life insurance coverage at Company expense and is otherwise eligible to participate in all employer-sponsored health, pension, benefit, and welfare plans. In the event Mr. Higgins is terminated by the Company for any reason other than cause (as defined in the agreement), he will receive one year's base salary and annual incentive payment, subject to execution of an appropriate release and non-compete covenants. In the event of a termination resulting from a change in control, within 24 months following a change in control of the Company (as defined in the agreement either (a) by SPR for reasons other than cause (as defined in the agreement), (b) death or disability, or (c) by Mr. Higgins for good reason as defined in the agreement, including a diminution of responsibilities, compensation, or benefits (unless, with respect to reduction in salary or benefits, such reduction is applicable to all senior executives of the Company and the acquirer)), he will receive certain payments and benefits. This severance payment and benefit include (i) a lump sum payment equal to three times the sum of his base salary and target bonus, (ii) a lump sum payment equal to the present value of the benefits he would have received had he continued to participate in the Company's retirement plans for an additional three years (or, in the case of the Company's Supplemental Executive Retirement Plan only, the greater of three years or the period from the date of termination until the executive's early retirement date, as defined in such plan), and (iii) continuation of life, disability, accident and health insurance benefits for a period of 36 months immediately following termination of employment. Under the employment agreement, Sierra Pacific will pay any additional amounts sufficient to hold Mr. Higgins harmless for any excise tax that might be imposed as a result of being subject to the federal excise tax on "excess parachute payments" or similar taxes imposed by state or local law in connection with receiving any compensation or benefits that are considered contingent on a change in control. A change in control for purposes of the Employment Agreement occurs (i) if Sierra Pacific merges or consolidates, or sells all or substantially all of its assets, and less than 65% of the voting power of the surviving corporation is owned by those stockholders who were stockholders of Sierra Pacific immediately prior to such merger or sale; (ii) any person acquires 20% or more of Sierra Pacific's voting stock; (iii) Sierra Pacific enters into an agreement or Sierra Pacific or any person announces an intent to take action, the consummation of which would otherwise result in a change in control, or the Board of Directors of Sierra Pacific adopts a resolution to the effect that a change in control has occurred; (iv) within a two-year period, a majority of the directors of Sierra Pacific at the beginning of such period cease to be directors; or (v) the stockholders of Sierra Pacific approve a complete liquidation or dissolution of Sierra Pacific. Mr. Niggli and Mr. Malquist In connection with the 1999 merger of Sierra Pacific Resources and Nevada Power Company, Sierra Pacific Resources entered into Employment Agreements with Messrs. Niggli and Malquist. Messrs. Niggli and Malquist are sometimes hereinafter individually referred to as the "Executive." The Employment Agreements became effective on July 28, 1999, and had a term of three years. Pursuant to the Employment Agreements, Mr. Niggli served as Chairman and Chief Executive Officer of Sierra Pacific Resources, and Mr. Malquist served as President and Chief Operating Officer of Sierra Pacific Resources and Chief Executive Officer of Nevada Power Company and Sierra Pacific Power Company. 155 Each Executive's Employment Agreement provided that he would receive annual base salary commensurate with his position and level of responsibility, as determined by the Sierra Pacific Board (or compensation committee thereof), but not less than the Executive's annual base salary as in effect immediately prior to the Merger. Each Employment Agreement also provided that the Executive would be eligible to participate in any annual incentive and long-term cash incentive plans applicable to executive and management employees that are authorized by the Board. The Executives were also entitled to participate in all employee benefit plans in which senior executives of Sierra Pacific are entitled to participate, in certain fringe benefits, and in the supplemental retirement plans in which they participated immediately prior to the Merger. If during the term of the employee agreement Sierra Pacific terminated the employment of the Executive for reasons other than cause (as defined in the agreement), death or disability, or the Executive terminated his employment for good reason (as defined in the employment agreement), the Executive would receive, in addition to all compensation earned through the date of termination and coverage and benefits under all benefit and incentive plans to which he is entitled pursuant to the terms thereof, a severance payment equal to three times the sum of his annual base salary and target annual bonus. In addition, the Executive would continue to receive health benefits (i.e., medical insurance, etc.) and life benefits on the same terms and conditions as existed prior to his termination for 36 months following his termination (the "Continuation Period"). Sierra Pacific also agreed to pay any additional amounts sufficient to hold the Executive harmless for any excise tax that might be imposed as a result of being subject to the federal excise tax on "excess parachute payments" or similar taxes imposed by state or local law in connection with receiving any compensation or benefits that is considered contingent on a change in control. Mr. Malquist's employment was terminated on April 18, 2000, and Mr. Niggli's employment was terminated on July 21, 2000, in each case under circumstances which entitled the Executive to the termination benefits described above and as set forth in the summary compensation table. As a result of these terminations, Mr. Malquist received a total payment (including a gross-up for excise taxes) of $2,589,111, and Mr. Niggli received a total payment (including a gross-up for excise taxes) of $3,496,856. Steven W. Rigazio On August 31, 2000, the Company entered into an employment agreement with Steven W. Rigazio, President of Nevada Power. Under the terms of the agreement, Mr. Rigazio will be paid $255,000 in annual base salary, subject to adjustment if the Board determines that an adjustment is appropriate. In addition, Mr. Rigazio is entitled to receive annual incentive and long-term compensation in accordance with the terms and conditions of existing plans as apply to the officer group as a whole. If Mr. Rigazio becomes disabled during the course of his employment, he will be entitled to receive 100% of base salary for six months, and any annual incentive pay for which he would otherwise be eligible during the year he first went on disability. At the expiration of any short-term disability, Mr. Rigazio would be eligible for long-term disability under the Company's long-term disability plan and will continue to be covered by the Company's medical, vision and dental plans during all of such time and will continue to earn years of service under the Retirement Plan until age 65 at which time he will be required to retire. During such time, he will also receive life insurance benefits substantially similar to those he was entitled to receive before going on short-term disability or long-term disability. If Mr. Rigazio dies before age 55 (the Retirement Plan's earliest retirement date), his surviving spouse will be eligible to receive the Retirement Plan's pre-retirement death benefit at the time Mr. Rigazio would have become 55. If Mr. Rigazio dies while on short-term disability or long-term disability, his surviving spouse will be eligible for SERP benefits as if Mr. Rigazio were 62 and will be paid an annuity on the date of death, or when Mr. Rigazio would have reached age 55, whichever occurs later. In addition, the 156 Company will continue to provide the Employee's spouse and eligible dependents all medical coverage so long as they are not covered by other plans. In addition to salary, the Company will also pay Mr. Rigazio $1,109,250 in six $184,875 installments beginning on October 1, 2000, and ending July 2002. If Mr. Rigazio is terminated or dies, any remaining balance will be paid to his estate or surviving spouse. David G. Barneby On June 19, 1999, Nevada Power, a wholly owned subsidiary of the Company, entered into a retention agreement effective on the date of the merger with David G. Barneby, Vice President, Generation, which provides him with benefits which he would have been entitled to receive had he voluntarily terminated his original May 13, 1998, employment agreement with the Company. The agreement provides, in addition to base pay and any incentive pay or long-term pay accrued during the period of his employment, an additional $600,890 in cash, payable in substantially equal quarterly installments commencing on October 1, 1999, and ending on July 31, 2002. If employment is terminated during the term or if the employee dies during the term, any remaining and unpaid installments shall be paid to the employee or to his heirs. If the employee is terminated or retires, then the employee shall, in addition, receive the economic equivalent to an enhancement of his retirement allowing for payment in cash of the present value of the average early retirement benefit calculated on the basis of the greater of actual age or age 55, and an additional five years of age or years of service or a combination thereof to maximize retiree medical benefits. The employee is also entitled to 24 months of employee health and life benefits in amounts substantially equivalent to those in effect immediately prior to termination. In the event any payments or benefits or distributions thereof under the contract or any other agreements, policies, or plans of the Company would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code by reason of being considered contingent on a change of control, then the employee is entitled to receive an additional payment equal to such excise tax. 157 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements, Financial Statement Schedules and Exhibits
Page ---- 1. Financial Statements: Independent Auditors' Report.................................................. 76-77 Consolidated Balance Sheets as of December 31, 2000 and 1999.................. 78 Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998...................................................... 79 Consolidated Statements of Common Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998............................. 80 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998......................................... 81 Consolidated Statements of Capitalization as of December 31, 2000 and 1999................................................................. 82-83 Balance Sheets for Nevada Power Company as of December 31, 2000 and 1999............................................... 84 Statements of Income for Nevada Power Company for the Years Ended December 31, 2000, 1999 and 1998..................... 85 Statements of Cash Flows for Nevada Power Company for the Years Ended December 31, 2000, 1999 and 1998............. 86 Statements of Capitalization for Nevada Power Company as of December 31, 2000 and 1999................................. 87 Consolidated Balance Sheets for Sierra Pacific Power Company as of December 31, 2000 and 1999........................................ 88 Consolidated Statements of Income for Sierra Pacific Power Company for the Years Ended December 31, 2000, 1999 and 1998................... 89 Consolidated Statements of Common Shareholders' Equity for Sierra Pacific Power Company for the Years Ended December 31, 2000, 1999 and 1998.......................................................... 90 Consolidated Statements of Cash Flows for Sierra Pacific Power Company for the Years Ended December 31, 2000, 1999 and 1998............ 91 Consolidated Statements of Capitalization for Sierra Pacific Power Company as of December 31, 2000 and 1999......................... 92 Notes to Financial Statements............................................... 93-139 2. Financial Statement Schedules: Schedule II - Consolidated Valuation and Qualifying Accounts........... 161-162
All other schedules have been omitted because they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules have been omitted because the information is not applicable. 158 3. Exhibits: Exhibits are listed in the Exhibit Index on pages 163-181. (b) Reports on Form 8-K None. 159 SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, Sierra Pacific Resources, Nevada Power Company and Sierra Pacific Power Company have each duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. The signatures for each undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. SIERRA PACIFIC RESOURCES NEVADA POWER COMPANY SIERRA PACIFIC POWER COMPANY By /s/ Walter M. Higgins -------------------------------- Walter M. Higgins Chairman, Chief Executive Officer and Director March 20, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Sierra Pacific Resources, Nevada Power Company and Sierra Pacific Power Company and in the capacities indicated on the 20th day of March, 2001. /s/ Mark A. Ruelle /s/ Mary O. Simmons - --------------------------------------- --------------------------------- Mark A. Ruelle Mary O. Simmons Senior Vice President, Controller Chief Financial Officer (Principal Accounting Officer) (Principal Financial Officer) /s/ Edward P. Bliss /s/ Fred D. Gibson, Jr. - --------------------------------------- --------------------------------- Edward P. Bliss Fred D. Gibson, Jr. Director Director /s/ Mary Lee Coleman /s/ Jerry E. Herbst - --------------------------------------- --------------------------------- Mary Lee Coleman Jerry E. Herbst Director Director /s/ Krestine M. Corbin /s/ James L. Murphy - --------------------------------------- --------------------------------- Krestine M. Corbin James L. Murphy Director Director /s/ Theodore J. Day /s/ John F. O'Reilly - --------------------------------------- --------------------------------- Theodore J. Day John F. O'Reilly Director Director /s/ James R. Donnelley /s/ Dennis E. Wheeler - --------------------------------------- --------------------------------- James R. Donnelley Dennis E. Wheeler Director Director 160 Sierra Pacific Resources Schedule II - Consolidated Valuation and Qualifying Accounts For The Years Ended December 31, 2000, 1999 and 1998 (Dollars in Thousands) Provision for Uncollectible Accounts -------------- Balance at January 1, 1998 $ 3,995 Provision charged to income 8,899 Amounts written off, less recoveries (7,004) -------------- Balance at December 31, 1998 5,890 Balance at January 1, 1999 5,890 Provision charged to income 7,882 Amounts written off, less recoveries (7,297) -------------- Balance at December 31, 1999 6,475 Balance at January 1, 2000 6,475 Provision charged to income 14,879 Amounts written off, less recoveries (8,160) -------------- Balance at December 31, 2000 (1) $ 13,194 ============== Nevada Pacific Resources Schedule II - Consolidated Valuation and Qualifying Accounts For The Years Ended December 31, 2000, 1999 and 1998 (Dollars in Thousands) Provision for Uncollectible Accounts -------------- Balance at January 1, 1998 $ 2,291 Provision charged to income 5,213 Amounts written off, less recoveries (5,075) -------------- Balance at December 31, 1998 2,429 Balance at January 1, 1999 2,429 Provision charged to income 5,877 Amounts written off, less recoveries (5,480) -------------- Balance at December 31, 1999 2,826 Balance at January 1, 2000 2,826 Provision charged to income 13,090 Amounts written off, less recoveries (4,311) -------------- Balance at December 31, 2000 (1) $ 11,605 ============== 161 Sierra Pacific Power Company Schedule II - Consolidated Valuation and Qualifying Accounts For The Years Ended December 31, 2000, 1999 and 1998 (Dollars in Thousands)
Provision for Uncollectible Accounts ------------------- Balance at January 1, 1998 $ 1,704 Provision charged to income 3,686 Amounts written off, less recoveries (1,929) ------------------- Balance at December 31, 1998 3,461 Balance at January 1, 1999 3,461 Provision charged to income 2,005 Amounts written off, less recoveries (1,817) ------------------- Balance at December 31, 1999 3,649 Balance at January 1, 2000 3,649 Provision charged to income 1,789 Amounts written off, less recoveries (3,849) ------------------- Balance at December 31, 2000 (1) $ 1,589 ===================
(1) Included in the provision charged to income in 2000 was $7.3 million and $0.3 million, respectively, for NVP and SPPC as reserves against receivables from California's Power Exchange and Independent System Operator. 162 2000 FORM 10-K EXHIBIT INDEX Exhibits Index Certain of the following exhibits with respect to SPR and its subsidiaries, Nevada Power Company, Sierra Pacific Power Company, Lands of Sierra, Inc., Sierra Energy Company, Tuscarora Gas Pipeline Company and Sierra Water Development Company, are filed herewith. Certain other of such exhibits have heretofore been filed with the Commission and are incorporated herein by reference. (2) Sierra Pacific Resources . Stock Purchase Agreement between Enron Corp. and Sierra Pacific Resources dated November 5, 1999, relating to the proposed acquisition of Portland General Electric Company (filed as Exhibit 10.1 to Form 8-K dated November 5, 1999). (3) Sierra Pacific Resources . Restated Articles of Incorporation of Sierra Pacific Resources dated July 28, 1999 (filed as Exhibit 3(A) to Form 10-K for year ended December 31, 1999). . *(A) By-laws of Sierra Pacific Resources as amended through February 25, 2000. Nevada Power Company . Restated Articles of Incorporation of Nevada Power Company, dated July 28, 1999 (filed as Exhibit 3(B) to Form 10-K for year ended December 31, 1999). . Amended and Restated By-Laws of Nevada Power Company dated July 28, 1999 (filed as Exhibit 3(C) to Form 10-K for year ended December 31, 1999). Sierra Pacific Power Company . Restated Articles of Incorporation of Sierra Pacific Power Company dated May 19, 1987 (filed as Exhibit (3)(A) to Form 10-K for the year ended December 31, 1993). . Certificate of Amendments dated August 26, 1992 to Restated Articles of Incorporation of Sierra Pacific Power Company dated May 19, 1987, in connection with Sierra Pacific Power Company's preferred stock (filed as Exhibit 3.1 to Form 8-K dated August 26, 1992). . Certificate of Designation, Preferences and Rights dated August 31, 1992 to Restated Articles of Incorporation of Sierra Pacific Power Company dated May 19, 1987, in connection with Sierra Pacific Power Company's Class A Series 1 Preferred Stock (filed as Exhibit 4.3 to Form 8-K dated August 26, 1992). . By-laws of Sierra Pacific Power Company, as amended through November 13, 1996 (filed as Exhibit (3)(A) to Form 10-K for the year ended December 31, 1996). . Articles of Incorporation of Pinon Pine Corp., dated December 11, 1995 (filed as Exhibit (3)(A) to Form 10-K for the year ended December 31, 1995). 163 . Articles of Incorporation of Pinon Pine Investment Co., dated December 11, 1995 (filed as Exhibit (3)(B) to Form 10-K for the year ended December 31, 1995). . Agreement of Limited Liability Company of Pinon Pine Company, L.L.C., dated December 15, 1995, between Pinon Pine Corp., Pinon Pine Investment Co. and GPSF-B INC 1995 (filed as Exhibit (3)(C) to Form 10-K for the year ended December 31, 1995). . Amended and Restated Limited Liability Company Agreement of SPPC Funding LLC dated as of April 9, 1999, in connection with the issuance of California rate reduction bonds (filed as Exhibit (3)(A) to Form 10-K for the year ended December 31, 1999). (4) Sierra Pacific Resources . Indenture between Sierra Pacific Resources and The Bank of New York, dated as of May 1, 2000 for the issuance of debt securities (filed as Exhibit 4.1 to Form 8-K dated May 22, 2000). . Global 8-3/4% Note due 2005 (filed as Exhibit 4.2 to Form 8-K dated May 22, 2000). . Officers' Certificate establishing the terms of the 8-3/4% Notes due 2005 (filed as Exhibit 4.3 to Form 8-K dated May 22, 2000). . *(A) Fiscal and Paying Agency Agreement dated as of April 17, 2000 between Sierra Pacific Resources and Bankers Trust Company, relating to the Company's money market note program. . *(B) Form of Global Floating Rate Note due April 20, 2002 in connection with the Company's money market note program. . *(C) Form of Global Floating Rate Note due April 20, 2003 in connection with the Company's money market note program. . Rights Agreement between Sierra Pacific Resources and Harris Trust and Savings Bank dated as of September 21, 1999 (filed as Exhibit 99.1 to the Form 8-K dated December 7, 1999). Nevada Power Company . Fiscal and Paying Agency Agreement dated as of October 12, 1999 between Nevada Power Company and Bankers Trust Company, relating to Nevada Power Company's money market note program (filed as Exhibit 4(A) to Form 10-K for year ended December 31, 1999). Substantially identical agreements were used for the June 9, August 18, and December 18, 2000 issuances of money market notes. . Form of Global Floating Rate Note due October 6, 2000 in connection with the Company's money market note program (filed as Exhibit 4(B) to Form 10-K for year ended December 31, 1999). . *(D) Form of Global Floating Rate Note due June 12, 2001 in connection with the Company's money market note program. 164 . *(E) Form of Global Floating Rate Note due August 20, 2001 in connection with the Company's money market note program. . *(F) Form of Global Floating Rate Note due December 17, 2001 in connection with the Company's money market note program. . Junior Subordinated Indenture between Nevada Power and IBJ Schroder Bank & Trust Company, as Debenture Trustee dated March 1, 1997 (filed as Exhibit 4.01 to Form S-3, File No. 333-21091). . Trust Agreement of NVP Capital I dated March 1, 1997 (filed as Exhibit 4.03 to Form S-3, File No. 333-21091). . Form of Amended and Restated Trust Agreement dated March 1, 1997 (filed as Exhibit 4.10 to Form S-3, File No. 333-21091). . Form of Agreement as to Expenses and Liabilities between Nevada Power and NVP Capital I dated March 1, 1997 (filed as Exhibit 4.14 to Form S-3, File No. 333-21091). . Form of Preferred Security Certificate for NVP Capital I and NVP Capital II dated March 1, 1997 (filed as Exhibit 4.11 to Form S-3, File No. 333-21091). . Form of Guarantee Agreement dated March 1, 1997 (filed as Exhibit 4.12 to Form S-3, File No. 333-21091). . Form of Supplemental Indenture between Nevada Power and IBJ Schroder Bank & Trust Company, as Debenture Trustee dated March 1, 1997 (filed as Exhibit 4.13 to Form S-3, File No. 333- 21091). . Supplemental Indenture No. 2 and Assumption Agreement, dated as of June 1, 1999, between Nevada Power Company and IBJ Whitehall Bank & Trust Company, supplementing and assuming the Junior Subordinated Indenture dated as of March 1, 1997 between Nevada Power Company and IBJ Whitehall Bank & Trust Company (filed as Exhibit 4(D) to Form 10-K for year ended December 31, 1999). . Form of Indenture between Nevada Power and IBJ Schroder Bank & Trust Company, as Trustee dated October 1, 1998 (filed as Exhibit 4.1 to Form S-3, File Nos. 333-63613 and 333-63613-01). . Certificate of Trust of NVP Capital III dated October 1, 1998 (filed as Exhibit 4.2 to Form S-3, File Nos. 333-63613 and 333- 63613-01). . Trust Agreement for NVP Capital III dated October 1, 1998 (filed as Exhibit 4.3 to Form S-3, File Nos. 333-63613 and 333- 63613-01). . Form of Amended and Restated Declaration of Trust dated October 1, 1998 (filed as Exhibit 4.4 to Form S-3, File Nos. 333-63613 and 333-63613-01). 165 . Form of Preferred Security Certificate for NVP Capital III dated October 1, 1998 (filed as Exhibit 4.5 to Form S-3, File Nos. 333- 63613 and 333-63613-01). . Form of Preferred Securities Guarantee Agreement dated October 1, 1998 (filed as Exhibit 4.7 to Form S-3, File Nos. 333-63613 and 333-63613-01). . Form of Junior Subordinated Deferrable Interest Debenture dated October 1, 1998 (filed as Exhibit 4.9 to Form S-3, File Nos. 333- 63613 and 333-63613-01). . Supplemental Indenture No. 1 and Assumption Agreement, dated as of June 1, 1999, between Nevada Power Company and IBJ Whitehall Bank & Trust Company, supplementing and assuming the Indenture dated as of October 1, 1998 between Nevada Power Company and IBJ Whitehall Bank & Trust Company (filed as Exhibit 4(E) to Form 10-K for year ended December 31, 1999). . Supplemental Indenture No. 1 between Nevada Power Company and IBJ Whitehall Bank & Trust Company dated as of March 1, 1999 (filed as Exhibit 4.2 to Form S-4, File No. 333-77325). . Supplemental Indenture No. 3 and Assumption Agreement, dated as of July 1, 1999, between Nevada Power Company and IBJ Whitehall Bank & Trust Company, supplementing and assuming the Senior Unsecured Note Indenture dated as of March 1, 1999 between Nevada Power Company and IBJ Whitehall Bank & Trust Company (filed as Exhibit 4(F) to Form 10-K for year ended December 31, 1999). . Form of Senior Unsecured Note Indenture between Nevada Power Company and IBJ Whitehall Bank & Trust Company dated as of April 1, 1999 (filed as Exhibit 4.1 to Form S-4, File No. 333-77325). . Supplemental Indenture No. 2 between Nevada Power Company and IBJ Whitehall Bank & Trust Company dated as of April 1, 1999 (including form of 6.20% Senior Unsecured Note, Series B due April 15, 2004) (filed as Exhibit 4.3 to Form S-4, File No. 333-77325). . Instrument of Further Assurance dated April 1, 1956 to Indenture of Mortgage and Deed of Trust dated October 1, 1953 (filed as Exhibit 4.8 to Form S-1, File No. 2-12666). . Indenture of Mortgage and Deed of Trust Providing for First Mortgage Bonds, dated October 1, 1953 and Twenty-Seven Supplemental Indentures as follows: . First Supplemental Indenture, dated August 1, 1954 (filed as Exhibit 4.2 to Form S-1, File No. 2-11440). . Second Supplemental Indenture, dated September 1, 1956 (filed as Exhibit 4.9 to Form S-1, File No. 2-12566). . Third Supplemental Indenture, dated May 1, 1959 (filed as Exhibit 4.13 to Form S-1, File No. 2-14949). . Fourth Supplemental Indenture, dated October 1, 1960 (filed as Exhibit 4.5 to S-1, File No. 2-16968). 166 . Fifth Supplemental Indenture, dated December 1, 1961 (filed as Exhibit 4.6 to Form S-16, File No. 2-74929). . Sixth Supplemental Indenture, dated October 1, 1963 (filed as Exhibit 4.6A to Form S-1, File No. 2-21689). . Seventh Supplemental Indenture, dated August 1, 1964 (filed as Exhibit 4.6B to Form S-1, File No. 2-22560). . Eighth Supplemental Indenture, dated April 1, 1968 (filed as Exhibit 4.6C to Form S-9, File No. 2-28348. . Ninth Supplemental Indenture, dated October 1, 1969 (filed as Exhibit 4.6D to Form S-1, File No. 2-34588). . Tenth Supplemental Indenture, dated October 1, 1970 (filed as Exhibit 4.6E to Form S-7, File No. 2-38314). . Eleventh Supplemental Indenture, dated November 1, 1972 (filed as Exhibit 2.12 to Form S-7, File No. 2-45728). . Twelfth Supplemental Indenture, dated December 1, 1974 (filed as Exhibit 2.13 to Form S-7, File No. 2-52350). . Thirteenth Supplemental Indenture, dated October 1, 1976 (filed as Exhibit 4.14 to Form S-16, File No. 2-74929). . Fourteenth Supplemental Indenture, dated May 1, 1977 (filed as Exhibit 4.15 to Form S-16, File No. 2-74929). . Fifteenth Supplemental Indenture, dated September 1, 1978 (filed as Exhibit 4.16 to Form S-16, File No. 2-74929). . Sixteenth Supplemental Indenture, December 1, 1981 (filed as Exhibit 4.17 to Form S-16, File No. 2-74929). . Seventeenth Supplemental Indenture, dated August 1, 1982 (filed as Exhibit 4.2 to Form 10-K, File No. 1-4698, Year 1982). . Eighteenth Supplemental Indenture, dated November 1, 1986 (filed as Exhibit 4.6 to Form S-3, File No. 33-9537). . Nineteenth Supplemental Indenture, dated October 1, 1989 (filed as Exhibit 4.2 to Form 10-K, File No. 1-4698, Year 1989). . Twentieth Supplemental Indenture, dated May 1, 1992 (filed as Exhibit 4.21 to Form S-3, File No. 33-53034). . Twenty-First Supplemental Indenture, dated June 1, 1992 (filed as Exhibit 4.22 to Form S-3, File No. 33-53034). 167 . Twenty-Second Supplemental Indenture, dated June 1, 1992 (filed as Exhibit 4.23 to Form S-3, Filed No. 33-53034). . Twenty-Third Supplemental Indenture, dated October 1, 1992 (filed as Exhibit 4.23 to Form S-3, File No. 33-53034). . Twenty-Fourth Supplemental Indenture, dated October 1, 1992 (filed as Exhibit 4.23 to Form S-3, File No. 33-53034). . Twenty-Fifth Supplemental Indenture, dated January 1, 1993 (filed as Exhibit 4.23 to Form S-3, File No. 33-53034). . Twenty-Sixth Supplemental Indenture, dated May 1, 1995 (filed as Exhibit 4.2 to Form 10-K, File No. 1-4698, Year 1995). . Twenty-Seventh Supplemental Indenture dated as of July 1, 1999 (filed as Exhibit 4(C) to Form 10-K for year ended December 31, 1999). Sierra Pacific Power Company . Fiscal and Paying Agency Agreement dated as of September 14, 1999 between Sierra Pacific Power Company and Bankers Trust Company, relating to the Company's money market note program (filed as Exhibit 4(A) to Form 10-K for year ended December 31, 1999). . Form of Global Floating Rate Note due October 13, 2000 in connection with Sierra Pacific Power Company's money market note program (filed as Exhibit 4(B) to Form 10-K for year ended December 31, 1999). . *(G) Form of Global Floating Rate Note due June 12, 2001 in connection with Sierra Pacific Power Company's money market note program. . Mortgage Indentures of Sierra Pacific Power Company defining the rights of the holders of the Company's First Mortgage Bonds: . Original Indenture (filed as Exhibit 7-A to Registration No. 2-7475). . Ninth Supplemental Indenture (filed as Exhibit 2-M to Registration No. 2-59509). . Tenth Supplemental Indenture (filed as Exhibit 4-K to Registration No. 2-23932). . Eleventh Supplemental Indenture (filed as Exhibit 4-L to Registration No. 2-26552). . Twelfth Supplemental Indenture (filed as Exhibit 4-L to Registration No. 2-36982). . Sixteenth Supplemental Indenture (filed as Exhibit 2-Y to Registration No. 2-53404). . Nineteenth Supplemental Indenture (filed as Exhibit (4)(A) to the 1991 Form 10-K). 168 . Twentieth Supplemental Indenture (filed as Exhibit (4)(B) to the 1991 Form 10-K). . Twenty-Seventh Supplemental Indenture (filed as Exhibit (4)(A) to the 1989 Form 10-K). . Twenty-Eighth Supplemental Indenture (filed as Exhibit (4)(A) to the 1992 Form 10-K). . Twenty-Ninth Supplemental Indenture (filed as Exhibit D to Form 8-K dated July 15, 1992). . Thirtieth Supplemental Indenture (filed as Exhibit (4)(B) to the 1992 Form 10-K). . Thirty-First Supplemental Indenture (filed as Exhibit (4)(C) to the 1992 Form 10-K). . Thirty-Second Supplemental Indenture (filed as Exhibit 4.6 to Registration No. 33-69550). . Thirty-Third Supplemental Indenture (filed as Exhibit C to Form 8-K dated October 20, 1993). . Thirty-Fourth Supplemental Indenture (filed as Exhibit C to Form 8-K dated March 11, 1996). . Thirty-Fifth Supplemental Indenture (filed as Exhibit C to Form 8-K dated March 10, 1997). . Indenture dated as of April 9, 1999 between SPPC Funding LLC and Bankers Trust Company of California, N.A. in connection with the issuance of California rate reduction bonds (filed as Exhibit 4(C) to Form 10-K for year ended December 31, 1999). . First Series Supplement dated as of April 9, 1999 to Indenture between SPPC Funding LLC and Bankers Trust Company of California, N.A. in connection with the issuance of California rate reduction bonds (filed as Exhibit 4(D) to Form 10-K for year ended December 31, 1999). . Form of SPPC Funding LLC Notes, Series 1999-1, in connection with the issuance of California rate reduction bonds (filed as Exhibit 4(E) to Form 10-K for year ended December 31, 1999). . Indenture between Sierra Pacific Power Company and IBJ Schroder Bank and Trust Company as Trustee dated July 1, 1996 in connection with the offering of the Preferred Securities of the Trust (filed as Exhibit 4.2 to Form 8-K dated August 2, 1996). . First Supplemental Indenture to the Indenture used in connection with the issuance of Junior Subordinated Debentures dated July 24, 1996 in connection with the offering of the Preferred Securities of the Trust (filed as Exhibit 4.3 to Form 8-K dated August 2, 1996). 169 . Amended and Restated Declaration of Trust of Sierra Pacific Power Capital I (the Trust) dated July 24, 1996 in connection with the offering of the Preferred Securities of the Trust (filed as Exhibit 4.1 to Form 8-K dated August 2, 1996). . Guarantee with respect to Preferred Securities dated July 29, 1996 in connection with the offering of the Preferred Securities of the Trust (filed as Exhibit 4.4 to Form 8-K dated August 2, 1996). . Guarantee with respect to Common Securities dated July 29, 1996 in connection with the offering of the Preferred Securities of the Trust (filed as Exhibit 4.5 to Form 8-K dated August 2, 1996). . Collateral Trust Indenture dated June 1, 1992 between Sierra Pacific Power Company and Bankers Trust Company, as Trustee, relating to Sierra Pacific Power Company's medium-term note program (filed as Exhibit B to Form 8-K dated July 15, 1992). . First Supplemental Indenture dated June 1, 1992 (filed as Exhibit C to Form 8-K dated July 15, 1992). . Second Supplemental Indenture dated October 1, 1993 (filed as Exhibit B to Form 8-K dated October 20, 1993). . Third Supplemental Indenture dated as of February 1, 1996 (filed as Exhibit B to Form 8-K dated March 11, 1996). . Fourth Supplemental Indenture dated as of February 1, 1997 (filed as Exhibit B to Form 8-K dated March 10, 1997). . Form of Medium-Term Global Fixed Rate Note, Series A in connection with Sierra Pacific Power Company's medium-term note program (filed as Exhibit E to Form 8-K dated July 15, 1992 ). . Form of Medium-Term Global Fixed Rate Note, Series B in connection with Sierra Pacific Power Company's medium-term note program (filed as Exhibit D to Form 8-K dated October 25, 1993). . Form of Medium-Term Global Fixed-Rate Note, Series C in connection with Sierra Pacific Power Company's medium-term note program (filed as Exhibit D to Form 8-K dated March 11, 1996). . Form of Medium-Term Global Fixed-Rate Note, Series D in connection with Sierra Pacific Power Company's medium-term note program (filed as Exhibit D to Form 8-K dated March 10, 1997). (10) Sierra Pacific Resources, Nevada Power Company, and Sierra Pacific Power Company . Stipulation and Agreement to Compromise and Settle - Federal (filed as Exhibit (10.A) to Form 10-Q for quarter ended September 30, 2000). 170 . Stipulation and Agreement to Compromise and Settle - State (filed as Exhibit (10.B) to Form 10-Q for quarter ended September 30, 2000). Sierra Pacific Resources . *(A) Credit Agreement dated as of December 26, 2000 among Sierra Pacific Resources and Wells Fargo Bank, N.A. relating to $50,000,000 credit facility. . Change in Control Agreement dated April 20, 2000, by and between Sierra Pacific Resources and with Gloria Banks Weddle in substantially the same form as the Change in Control Agreements filed as Exhibit (10)(A) to Sierra Pacific Power Company's Annual Report on Form 10-K for the year ended December 31, 1997, and incorporated herein by reference thereto (filed as Exhibit 10 to Form 10-Q for the quarter ended June 30, 2000). . Change in Control Agreement dated February 18, 1997 by and among Sierra Pacific Resources and the following officers (individually): Gerald W. Canning, Jeffrey L. Ceccarelli, Randy G. Harris, Malyn K. Malquist, Steven C. Oldham, Victor H. Pena, William E. Peterson, Mark A. Ruelle, Mary O. Simmons, Doug Ponn, and Mary Jane Willier (filed as Exhibit 10(A) to Form 10-K for the year ended December 31, 1997). . *(B) Walter M. Higgins Employment Letter dated August 4, 2000. . Employment Agreement dated as of April 29, 1998 between Sierra Pacific Resources and Michael R. Niggli (Exhibit 7.15.1 to Agreement and Plan of Merger, dated as of April 29, 1998, among Sierra Pacific Resources, Nevada Power Company, LAKE Merger Sub, and DESERT Merger Sub, filed as Exhibit 2.1 to Form 8-K dated April 30, 1998). . Employment Agreement dated as of April 29, 1998 between Sierra Pacific Resources and Malyn K. Malquist (Exhibit 7.15.2 to Agreement and Plan of Merger, dated as of April 29, 1998, among Sierra Pacific Resources, Nevada Power Company, LAKE Merger Sub, and DESERT Merger Sub, filed as Exhibit 2.1 to Form 8-K dated April 30, 1998). . Change in Control Agreements dated February 18, 1997 by and among Sierra Pacific Resources and the following officers (individually): Gerald W. Canning, Jeffrey L. Ceccarelli, Randy G. Harris, Malyn K. Malquist, Steven C. Oldham, William E. Peterson, Mark A. Ruelle, Mary O. Simmons, and Mary Jane Willier (filed as Exhibit (10)(A) to Sierra Pacific Power Company's Form 10-K for the year ended December 31, 1997). . Sierra Pacific Resources Executive Long-Term Incentive Plan (filed as Exhibit 99.1 to Form S-8 dated December 13, 1999). . Sierra Pacific Resources' Non-Employee Director Stock Plan (filed as Exhibit 99.2 to Form S-8 dated December 13, 1999). . Sierra Pacific Resources' Employee Stock Purchase Plan (filed as Exhibit 99.3 to Form S-8 dated December 13, 1999). 171 Nevada Power Company . *(C) Asset Sale Agreement between Nevada Power Company and The AES Corporation dated as of May 10, 2000 for the Mohave Asset Bundle. . *(D) Transitional Power Purchase Agreement by and between Nevada Power Company and AES Mohave, LLC dated as of May 10, 2000. . *(E) Asset Sale Agreement between Nevada Power Company, NRG Energy, Inc. and Dynegy Holdings Inc. for the Clark Asset Bundle dated as of November 16, 2000. . *(F) Transitional Power Purchase Agreement by and between Nevada Power Company and Clark Power LLC dated as of November 16, 2000. . *(G) Asset Sale Agreement between Nevada Power Company, NRG Energy, Inc. and Dynegy Holdings Inc. for the Reid Gardner Asset Bundle dated as of November 16, 2000. . *(H) Transitional Power Purchase Agreement by and between Nevada Power Company and Reid Gardner Power LLC dated as of November 16, 2000. . *(I) Asset Sale Agreement between Nevada Power Company and Pinnacle West Energy Corporation for the Harry Allen Asset Bundle, dated as of December 1, 2000. . *(J) Transitional Power Purchase Agreement by and between Nevada Power Company and Pinnacle West Energy Corporation dated as of December 1, 2000. . *(K) Asset Sale Agreement between Nevada Power Company and Reliant Energy Sunrise, LLC for the Sunrise/Sun-Peak Asset Bundle dated as of December 9, 2000. . *(L) Transitional Power Purchase Agreement by and between Nevada Power Company and Reliant Energy Sunrise, LLC dated as of December 9, 2000. . Credit Agreement dated as of June 24, 1999 among Nevada Power Company, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank, N.A. relating to $150,000,000 credit facility (filed as Exhibit (10)(B) to Form 10-K for year ended December 31, 1999). . *(M) Amended and Restated Credit Agreement dated as of August 28, 2000 among Nevada Power Company, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank, N.A. relating to $150,000,000 credit facility. . *(N) Amendment and Waiver Agreement dated as of March 1, 2001 among Nevada Power Company, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank, N.A. relating to $150,000,000 credit facility. . Letter of Credit and Reimbursement Agreement dated as of October 1, 1995 among Nevada Power Company, The Banks Named Herein, and Societe Generale, Los Angeles Branch (filed as Exhibit 10.80 to Form 10-K, File No. 1-4698, Year 1995). 172 . Letter of Credit and Reimbursement Agreement dated as of October 1, 1995 among Nevada Power Company, The Banks Named Herein, and Barclays Bank PLC, New York Branch (filed as Exhibit 10.81 to Form 10-K, File No. 1-4698, Year 1995). . Letter of Credit and Reimbursement Agreement dated as of April 12, 1994 between Nevada Power Company and Societe Generale, Los Angeles Branch and Amendment No. 1 thereto dated as of May 3, 1994 (filed as Exhibit 10.72 to Form 10-K, File No. 1-4698, Year 1994). . Reimbursement Agreement dated as of November 1, 1988 between the Fuji Bank, Limited and Nevada Power Company (filed as Exhibit 10.43 to Form 10-K, File No. 1-4698, Year 1988). . Reimbursement Agreement dated as of December 1, 1985 between The Fuji Bank, Limited and Nevada Power Company (filed as Exhibit 10.38 to Form 10-K, File No. 1-4698, Year 1986). . Guaranty Agreement dated as of March 1, 1974 between Nevada Power Company and Commerce Union Bank as Trustee (filed as Exhibit 5.39 to Form 8-K, File No. 1-4698, April 1974). . *(O) Financing Agreement No. 1 between Clark County, Nevada and Nevada Power Company dated as of June 1, 2000 (Series 2000A). . *(P) Financing Agreement No. 2 between Clark County, Nevada and Nevada Power Company dated as of June 1, 2000 (Series 2000B). . Financing Agreement between Clark County, Nevada and Nevada Power Company dated November 1, 1997 (filed as Exhibit 10.83 to Form 10-K, File No. 1-4698, Year 1997). . Financing Agreement between Coconino County, Arizona Pollution Control Corporation and Nevada Power Company dated November 1, 1997 (filed as Exhibit 10.84 to Form 10-K, File No. 1-4698, Year 1997). . Financing Agreement between Coconino County, Arizona Pollution Control Corporation and Nevada Power Company dated October 1, 1996 (filed as Exhibit 10.82 to Form 10-K, File 1-4698, Year 1996). . Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995A) (filed as Exhibit 10.75 to Form 10-K, File No. 1-4698, Year 1995). . Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995B) (filed as Exhibit 10.76 to Form 10-K, File No. 1-4698, Year 1995). . Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995C) (filed as Exhibit 10.77 to Form 10-K, File No. 1-4698, Year 1995). 173 . Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995D) (filed as Exhibit 10.78 to Form 10-K, File No. 1-4698, Year 1995). . Financing Agreement between Coconino County, Arizona Pollution Control Corporation and Nevada Power Company dated October 1, 1995 (Series 1995E) (filed as Exhibit 10.79 to Form 10-K, File No. 1-4698, Year 1995). . Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1992 (filed as Exhibit 10.67 to Form 10-K, File No. 1- 4698, Year 1992). . Financing Agreement between Clark County, Nevada and Nevada Power Company dated June 1, 1992 (Series 1992A) (filed as Exhibit 10.65 to Form 10-K, File No. 1-4698 (Year 1992). . Financing Agreement between Clark County, Nevada and Nevada Power Company dated June 1, 1992 (Series 1992B) (filed as Exhibit 10.66 to Form 10-K, File No. 1-4698, Year 1992). . Financing Agreement between Clark County, Nevada and Nevada Power Company dated as of November 1, 1988 (filed as Exhibit 10.42 to Form 10-K, File No. 1-4698, Year 1988). . Financing Agreement between Clark County, Nevada and Nevada Power Company dated as of December 1, 1985 (filed as Exhibit 10.37 to Form 10-K, File No. 1-4698, Year 1985). . Financing Agreement dated as of February 1, 1983 between Clark County, Nevada and Nevada Power Company (filed as Exhibit 10.36 to Form 10-K, File No. 1-4698, Year 1985). . Retention Agreement dated as of July 28, 1999 between Nevada Power Company and David G. Barneby (filed as Exhibit (10)(E) to Form 10-K for year ended December 31, 1999). . Employment Agreement dated as of March 13, 1998 between Nevada Power Company and Gloria Banks Weddle (filed as Exhibit (10)(C) to Form 10-K for year ended December 31, 1999). . Employment Agreement dated as of March 13, 1998 between Nevada Power Company and Steven W. Rigazio (filed as Exhibit (10)(D) to Form 10-K for year ended December 31, 1999). . *(Q) Plant Collective Bargaining Agreement dated February 1, 1998, effective through February 1, 2002 between Nevada Power Company and the International Brotherhood of Electrical Workers Local No. 396. . *(R) Clerical Collective Bargaining Agreement dated February 1, 1998, effective through February 1, 2002 between Nevada Power Company and the International Brotherhood of Electrical Workers Local No. 396. 174 . *(S) Generation Agreement dated as of June 25, 1999 between Nevada Power Company and the International Brotherhood of Electrical Workers Local No. 396. . Settlement Agreement and Promissory Note between Mountain Coal Company and Atlantic Richfield Company and Nevada Power Company dated March 9, 1994 (filed as Exhibit 10.71 to Form 10-K, File No. 1-4698, Year 1993). . Contract for Long-Term Power Purchases from Qualifying Facilities dated May 27, 1992 between Las Vegas Co-generation, Inc. and Nevada Power Company. (filed as Exhibit 10.70 to Form 10-K, File No. 1-4698, Year 1993). . Western Systems Power Pool Agreement ("Agreement") dated January 2, 1991 between thirty-nine other Western Systems Power Pool members as listed on pages 1 and 2 of the Agreement and Nevada Power Company (filed as Exhibit 10.61 to Form 10-K, File No. 1-4698, Year 1990). . Contract A for Long-Term Power Purchases from Qualifying Facilities dated May 2, 1989 between Nevada Cogenerational Associates #1 (assigned from Bonneville Nevada Corporation) and Nevada Power Company (filed as Exhibit 10.47 to Form 10-K, File No. 1-4698, Year 1989) . Contract B for Long-Term Power Purchases from a Qualifying Facility dated May 24, 1990 between Nevada Cogenerational Associates (assigned from Bonneville Nevada Corporation) and Nevada Power Company (filed as Exhibit 10.56 to Form 10-K, File No. 1-4698, Year 1990). . Contract for Long-Term Power Purchases from Qualifying Facilities dated April 10, 1989 between Saguaro Power Company (assigned from Magna Energy Systems and Eastern Sierra Energy Company) and Nevada Power Company (filed as Exhibit 10.48 to Form 10-K, File No. 1-4698, Year 1989). . Agreement for Transmission Service dated March 29, 1989 between Overton Power District No. 5, Lincoln County Power District No. 1 and Nevada Power Company (filed as Exhibit 10.51 to Form 10-K, File No. 1-4698, Year 1989). . Contract for Operation, Maintenance, Replacement, Ownership, and Interconnection of Facilities dated June 30, 1988 between United States Department of Energy Western Area Power Administration and Nevada Power Company (filed as Exhibit 10.52 to Form 10-K, File No. 1-4698, Year 1989). . Transmission Facilities Agreement between Utah Power & Light Company and Nevada Power Company, dated August 17, 1987 (filed as Exhibit 10.41 to Form 10-K, File No. 1-4698, Year 1987). . Contract for Sale of Electrical Energy between the State of Nevada and Nevada Power Company, dated July 8, 1987 (filed as Exhibit 10.39 to Form 10-K, File No. 1-4698, Year 1987). 175 . Sublease Agreement between Powveg Leasing Corp., as Lessor and Nevada Power Company as Lessee, dated January 11, 1984 for lease of administrative headquarters (filed as Exhibit 10.31 to Form 10-K, File No. 1-4698, Year 1983). . Participation Agreement Reid Gardner Unit No. 4 dated July 11, 1979 between Nevada Power Company and California Department of Water Resources (filed as Exhibit 5.34 to Form S-7, File No. 2-65097). . Amended Mohave Project Coal Slurry Pipeline Agreement dated May 26, 1976 between Peabody Coal Company and Black Mesa Pipeline, Inc. (Exhibit B to Exhibit 10.18) (filed as Exhibit 5.36 to Form S-7, File No. 2-56356). . Amended Mohave Project Coal Supply Agreement dated May 26, 1976 between Nevada Power Company and Southern California Edison Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural Improvement and Power District and the Peabody Coal Company (filed as Exhibit 5.35 to Form S-7, File No. 2-56356). . Navajo Project Co-Tenancy Agreement dated March 23, 1976 between Nevada Power Company, Arizona Public Service Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural Improvement and Power District, Tucson Gas & Electric Company and the United States of America (filed as Exhibit 5.31 to Form 8-K, File No. 1-4696, April 1974). . Mohave Operating Agreement dated July 6, 1970 between Nevada Power Company, Salt River Project Agricultural Improvement and Power District, Southern California Edison Company and Department of Water and Power of the City of Los Angeles (filed as Exhibit 13.26F to Form S-1, File No. 2-38314). . Navajo Project Coal Supply Agreement dated June 1, 1970 between Nevada Power Company, the United States of America, Arizona Public Service Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural District, Tucson Gas & Electric Company and the Peabody Coal Company (filed as Exhibit 13.27B to Form S-1, File No. 2-38314). . Eldorado System Conveyance and Co-Tenancy Agreement dated December 20, 1967 between Nevada Power Company and Salt River Project Agricultural Improvement and Power District and Southern California Edison Company (filed as Exhibit 13.30 to Form S-9, File No. 2-28348). . Mohave Project Plant Site Conveyance and Co-Tenancy Agreement dated May 29, 1967 between Nevada Power Company and Salt River Project Agricultural Improvement and Power District and Southern California Edison Company (filed as Exhibit 13.27 to Form S-9, File No. 2-28348). . *(T) Los Angeles-Nevada Power NOB to MCC500 50 MW Firm Transmission Service Agreement dated October 17, 2000 between Nevada Power Company and Department of Water and Power of the City of Los Angeles. 176 . *(U) Reliability Management System Agreement dated June 18, 1999 by and between Western Systems Coordinating Council and Nevada Power Company. Sierra Pacific Power Company . *(V) Asset Sale Agreement between Sierra Pacific Power Company and NRG Energy, Inc. dated as of October 16, 2000 for the North Valmy Asset Bundle. . *(W) Transitional Power Purchase Agreement by and between Sierra Pacific Power Company and Valmy Power LLC dated as of October 16, 2000. . *(X) Asset Sale Agreement between Sierra Pacific Power Company and WPS Northern Nevada, LLC for the Tracy/Pinon Asset Bundle dated as of October 25, 2000. . *(Y) Transitional Power Purchase Agreement by and between Sierra Pacific Power Company and WPS Northern Nevada, LLC dated as of October 25, 2000. . *(Z) Asset Purchase Agreement between Sierra Pacific Power Company and Truckee Meadows Water Authority dated as of January 15, 2001. . Credit Agreement dated as of June 24, 1999 among Sierra Pacific Power Company, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank, N.A. relating to $150,000,000 credit facility (filed as Exhibit (10)(B) to Form 10-K for year ended December 31, 1999). . *(AA) Amended and Restated Credit Agreement dated as of August 28, 2000 among Sierra Pacific Power Company, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank, N.A. relating to $150,000,000 credit facility. . *(BB) Amendment and Waiver Agreement dated as of March 1, 2001 among Sierra Pacific Power Company, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank, N.A. relating to $150,000,000 credit facility. . Letter of Credit, Reimbursement and Security Agreement dated December 12, 1990 between Sierra Pacific Power Company and Union Bank of Switzerland relating to the Washoe County, Nevada Water Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1990 (filed as Exhibit (10)(F) to Form 10-K for the year ended December 31, 1990). . Financing Agreement dated June 1, 1993 between Sierra Pacific Power Company and Washoe County, Nevada relating to the Washoe County, Nevada Water Facilities Refunding Revenue Bonds (Sierra Pacific Power Company Project) Series 1993A (filed as Exhibit (10) (I) to Form 10-K for the year ended December 31, 1993). . Financing Agreement dated June 1, 1993 between Sierra Pacific Power Company and Washoe County, Nevada relating to the Washoe County, Nevada Gas and Water Facilities Refunding Revenue Bonds (Sierra Pacific Power Company Project) Series 1993B (filed as Exhibit (10) (J) to Form 10-K for the year ended December 31, 1993). . First Amendment dated August 12, 1991 to Financing Agreement dated December 1, 1990 between Sierra Pacific Power Company and Washoe County, Nevada relating to the 177 Washoe County, Nevada Water Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1990 (filed as Exhibit (10)(J) to Form 10-K for the year ended December 31, 1991). . Financing Agreement dated September 1, 1990 between Sierra Pacific Power Company and Washoe County, Nevada relating to the Washoe County, Nevada Gas Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1990 (filed as Exhibit (10)(C) to Form 10-K for the year ended December 31, 1990). . Financing Agreement dated September 1, 1990 between Sierra Pacific Power Company and Washoe County, Nevada relating to the Washoe County, Nevada Water Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1990 (filed as Exhibit (10)(E) to Form 10-K for the year ended December 31, 1990). . Financing Agreement dated December 1, 1987 between Sierra Pacific Power Company and Washoe County, Nevada relating to the Washoe County, Nevada Variable Rate Demand Gas Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1987 (filed as Exhibit (10)(H) to Form 10-K for the year ended December 31, 1993). . Financing Agreement dated June 1, 1987 between Sierra Pacific Power Company and Washoe County, Nevada relating to the Washoe County, Nevada Variable Rate Demand Water Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1987 (filed as Exhibit (10)(G) to Form 10-K for the year ended December 31, 1993). . Financing Agreement dated March 1, 1987 between Sierra Pacific Power Company and Humboldt County, Nevada relating to the Humboldt County, Nevada Variable Rate Demand Pollution Control Refunding Revenue Bonds (Sierra Pacific Power Company Project) Series 1987 (filed as Exhibit (10)(E) to Form 10-K for the year ended December 31, 1993). . Financing Agreement dated March 1, 1987 between Sierra Pacific Power Company and Washoe County, Nevada relating to the Washoe County, Nevada Variable Rate Demand Gas and Water Facilities Refunding Revenue Bonds (Sierra Pacific Power Company Project) Series 1987 (filed as Exhibit (10)(F) to Form 10-K for the year ended December 31, 1993). . Agreement dated January 1, 1998 (extended through December 31, 2002) between Sierra Pacific Power Company and the International Brotherhood of Electrical Workers Local No. 1245 (filed as Exhibit 10(B) to Form 10-K for the year ended December 31, 1997). . Transition Property Purchase and Sale Agreement dated as of April 9, 1999 between Sierra Pacific Power Company and SPPC Funding LLC in connection with the issuance of California rate reduction bonds (filed as Exhibit 10(B) to Form 10-K for the year ended December 31, 1999). . Transition Property Servicing Agreement dated as of April 9, 1999 between Sierra Pacific Power Company and SPPC Funding LLC in connection with the issuance of California rate reduction bonds (filed as Exhibit 10(C) to Form 10-K for the year ended December 31, 1999). 178 . Administrative Services Agreement dated as of April 9, 1999 between Sierra Pacific Power Company and SPPC Funding LLC in connection with the issuance of California rate reduction bonds (filed as Exhibit 10(D) to Form 10-K for the year ended December 31, 1999). . Addendum dated October 9, 1993 to Rail Transportation Contract dated June 30, 1986 between Sierra Pacific Power Company and Idaho Power Company as shippers and Union Pacific Railroad Companies as carriers (filed as Exhibit (10)(D) to Form 10-K for the year ended December 31, 1993). . Cooperative Agreement dated July 31, 1992 between Sierra Pacific Power Company and the United States Department of Energy in connection with the Pinon Pine Integrated Coal Gasification Combined Cycle Project (filed as Exhibit (10)(H) to Form 10-K for the year ended December 31, 1992). . Settlement Agreement and Mutual Release dated May 8, 1992 between Sierra Pacific Power Company and Coastal States Energy Company (filed as Exhibit (10)(D) to Form 10-K for the year ended December 31, 1992; confidential portions omitted and filed separately with the Securities and Exchange Commission). . Letter of Amendment dated May 18, 1987 to Lease dated January 30, 1986 between Sierra Pacific Power Company and Silliman Associates Limited Partnership relating to the Company's corporate headquarters building (filed as Exhibit (10) (K) to Form 10-K for the year ended December 31, 1993). . General Transfer Agreement dated February 25, 1988 between Sierra Pacific Power Company and the United States of America Department of Energy acting by and through the Bonneville Power Administration (filed as Exhibit (10)(E) to Form 10-K for the year ended December 31, 1988). . Rail Transportation Contract dated June 30, 1986 between Sierra Pacific Power Company and Idaho Power Company as shippers and Union Pacific and Western Pacific Railroad Companies as carriers (filed as Exhibit (10)(C) to Form 10-K for the year ended December 31, 1993). . Coal Purchase Contract dated June 19, 1986 between Sierra Pacific Power Company, Black Butte Coal Company and Idaho Power Company (filed as Exhibit (10)(C) to the Form 10-K for the year ended December 31, 1992). . Lease dated January 30, 1986 between Sierra Pacific Power Company and Silliman Associates Limited Partnership relating to the Company's corporate headquarters building (filed as Exhibit (10)(I) to Form 10-K for the year ended December 31, 1992). . Interconnection Agreement dated May 29, 1981 between Sierra Pacific Power Company and Idaho Power Company (filed as Exhibit (10)(C) to Form 10-K for the year ended December 31, 1991). . Amendatory Agreement dated February 14, 1992 to Interconnection Agreement dated May 29, 1981 between Sierra Pacific Power Company and Idaho Power Company (filed as Exhibit (10)(D) to Form 10-K for the year ended December 31, 1991). 179 . Coal Sales Agreement dated May 16, 1978 between Sierra Pacific Power Company and Coastal States Energy Company (confidential portions omitted and filed separately with the Securities and Exchange Commission) (filed as Exhibit 5-GG to Registration No. 2-62476). . Amendment No. 1 dated November 8, 1983 to Coal Sales Agreement dated May 16, 1978 between Sierra Pacific Power Company and Coastal States Energy Company (filed as Exhibit (10)(B) to Form 10-K for the year ended December 31, 1991). . Amendment No. 2 dated February 25, 1987 to Coal Sales Agreement dated May 16, 1978 between Sierra Pacific Power Company and Coastal States Energy Company (filed as Exhibit (10)(A) to Form 10-K for the year ended December 31, 1993). . Amendment No. 3 dated May 8, 1992 to Coal Sales Agreement dated May 16, 1978 between Sierra Pacific Power Company and Coastal States Energy Company (filed as Exhibit (10)(B) to Form 10-K for the year ended December 31, 1992; confidential portions omitted and filed separately with the Securities and Exchange Commission). (11) Nevada Power Company and Sierra Pacific Power Company . Nevada Power Company and Sierra Pacific Power Company are wholly owned subsidiaries and, in accordance with Paragraph 6 of SFAS No. 128 (Earnings Per Share), earnings per share data have been omitted. (12) Sierra Pacific Resources . *(A) Statement regarding computation of Ratios of Earnings to Fixed Charges. Nevada Power Company . *(B) Statement regarding computation of Ratios of Earnings to Fixed Charges. Sierra Pacific Power Company . *(C) Statement regarding computation of Ratios of Earnings to Fixed Charges. (21) Sierra Pacific Resources . Nevada Power Company, a Nevada Corporation. Sierra Pacific Power Company, a Nevada Corporation. Lands of Sierra, Inc., a Nevada Corporation. Sierra Energy Corporation, a Nevada Corporation. Tuscarora Gas Pipeline Company, a Nevada Corporation. Sierra Water Development Company, a Nevada Corporation. Sierra Pacific Resources Capital Trust I, a Delaware business trust. Sierra Pacific Resources Capital Trust II, a Delaware business trust. 180 Nevada Power Company . Nevada Electric Investment Company, a Nevada Corporation. NVP Capital I, a Delaware Business Trust. NVP Capital II, a Delaware Business Trust. Sierra Pacific Power Company . Pinon Pine Company, a Nevada Corporation. Pinon Pine Investment Company, a Nevada Corporation. GPSF-B, a Delaware Corporation. SPPC Funding LLC, a Delaware Limited Liability Company. Sierra Pacific Power Capital Trust I, a Delaware Business Trust. (23) Sierra Pacific Resources . *(A) Consent of Independent Accountants in connection with the Sierra Pacific Resources' Registration Statements No. 333-77523 (Common Stock Investment Plan) on Form S-3, No. 333-92651 (Employees' Stock Ownership Plan, Executive Long-Term Incentive Plan, and Non-Employee Director Stock Plan) on Forms S-8, and No. 333-80149 (8-3/4% Notes Due 2005) on Form S-3. (99) Sierra Pacific Resources, Nevada Power Company, Sierra Pacific Power Company . Comprehensive Energy Plan dated January 29, 2001 (filed as Exhibit 99.2 to Form 8-K dated February 1, 2001). 181 EX-3.A 2 0002.txt BY-LAWS OF SIERRA PACIFIC AS AMENDED Exhibit 3(A) BY-LAWS OF SIERRA PACIFIC RESOURCES (Amended: January 15, 1985) (Amended: May 20, 1985) (Amended: June 30, 1988) (Amended: October 2, 1989) (Amended: November 27, 1989) (Amended: January 11, 1990) (Amended: June 22, 1990) (Amended: October 4, 1990) (Amended Effective: May 20, 1991) (Amended: May 18, 1992) (Amended: October 5, 1992) (Amended: December 7, 1993) (Amended: January 5, 1994) (Amended: March 30, 1994) (Amended: May 16, 1994) (Amended: June 24, 1994) (Amended: March 21, 1995) (Amended: November 13, 1996) (Amended: February 25, 2000) ARTICLE I NAME ---- The name of the Corporation (hereinafter referred to as this Corporation) shall be as set forth in the Articles of Incorporation or in any lawful amendments thereto from time to time. ARTICLE II STOCKHOLDERS' MEETINGS ---------------------- All meetings of the stockholders shall be held at the principal office of the Corporation in the State of Nevada unless some other place within or without the State of Nevada is stated in the call. No stockholder action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing without a meeting to the taking of any action is specifically denied. ARTICLE III ANNUAL STOCKHOLDERS' MEETINGS ----------------------------- The Annual Meeting of the Stockholders of the Corporation shall be held at such time and place as directed or selected by a majority of the Board of Directors. ARTICLE IV SPECIAL STOCKHOLDERS' MEETINGS ------------------------------ Special meetings of the stockholders of the Corporation for any purpose or purposes permitted by law may be called at any time by a majority of the Board of Directors or by the Chairman of the Board or the President of the Corporation. Such 1 special meetings may not be called by any other person or persons or in any other manner. ARTICLE V NOTICE OF STOCKHOLDERS' MEETINGS -------------------------------- Notice stating the place, day and hour of all stockholders' meetings and the purpose or purposes for which such meetings are called, shall be given by the President or a Vice President or the Secretary or an Assistant Secretary not less than ten (10) nor more than sixty (60) days prior to the date of the meeting to each stockholder entitled to vote thereat by leaving such notice with him at his residence or usual place of business, or by mailing it, postage prepaid, addressed to such stockholder at his address as it appears upon the books of this Corporation, and to the Chairman of the Board at the Corporation's main office, the person giving such notice shall make affidavit in relation thereto. ARTICLE VI QUORUM AT STOCKHOLDERS' MEETINGS -------------------------------- Except as otherwise provided by law, at any meeting of the stockholders, a majority of the voting power of the shares of capital stock issued and outstanding and entitled to vote represented by such stockholders of record in person or by proxy, shall constitute a quorum, but a less interest may adjourn any meeting sine die or adjourn any meeting from time to time and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the voting power of the stock entitled to vote represented there, it shall 2 decide any question brought before such meeting, unless the question is one upon which by express provision of law, or of the Articles of Incorporation, or of these By-Laws a larger or different vote is required, in which case such express provision shall govern and control the decision of such question. ARTICLE VII PROXY AND VOTING ---------------- Stockholders of record entitled to vote may vote at any meeting either in person or by proxy in writing, which shall be filed with the Secretary of the meeting before being voted. Such proxies shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of six (6) months from the date of its execution unless the stockholder specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven (7) years from the date of its execution. Stockholders entitled to vote shall be entitled to the voting rights as provided in the Articles of Incorporation. ARTICLE VIII BOARD OF DIRECTORS ------------------ The number of Directors of the Corporation shall be not more than fifteen (15) nor less than three (3), and until amendment of this By-Law by either the stockholders or Directors, the number of Directors shall be fourteen (14). The Board of Directors shall have authority to fix the compensation of Directors for regular or special services rendered. The members of the Board of Directors shall be divided 3 into classes in the manner provided in Article VI of the Corporation's Articles of Incorporation and shall be elected and serve for such terms of office as are provided therein, each Director shall serve until his or her successor is duly elected and qualified. Newly created directorships resulting from an increase in number of Directors and vacancies occurring in the Board of Directors for any reason shall be filled in the manner specified in Article VI of the Corporation's Articles of Incorporation. Newly created directorships shall be assigned by the Board of Directors to one of the classes described in said Article VI in the manner provided in such Article. ARTICLE IX POWERS OF DIRECTORS ------------------- The Board of Directors shall have the entire management of the business of this Corporation. In the management and control of the property, business and affairs of this Corporation, the Board of Directors is hereby vested with all the powers possessed by this Corporation itself, so far as this delegation of authority is not inconsistent with the laws of the State of Nevada, with the Articles of Incorporation or with these By-Laws. Except as otherwise provided by law, the Board of Directors shall have power to determine what constitutes net earnings, profits and surplus, respectively, what amount shall be reserved for working capital and for any other purposes, and what amount shall be declared as dividends, and such determination by the Board of Directors shall be final and conclusive. 4 ARTICLE X --------- COMPENSATION OF DIRECTORS AND OTHERS ------------------------------------ Directors may be compensated for their services on an annual basis and/or they may receive a fixed sum plus expenses of attendance, if any, for attendance at each regular or special meeting of the Board, such compensation or fixed sum to be fixed from time to time by resolution of the Board of Directors, provided that nothing herein contained shall be construed to preclude any director from serving this Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may receive like compensation for their services on an annual basis and/or fixed sum for attendance at each committee meeting. Any compensation so fixed and determined by the Board of Directors shall be subject to revision or amendment by the stockholders. ARTICLE XI ---------- EXECUTIVE AND OTHER COMMITTEES ------------------------------ The Board of Directors may, by resolution or vote passed by a majority of the whole Board, designate from their number an Executive Committee of not less than three (3) nor more than a majority of the members of the whole Board as at the time constituted, which Committee shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of this Corporation when the Board is not in session. The Executive Committee may make rules for the notice, holding and conduct of its meetings and keeping of the records thereof. The Executive Committee shall serve until the first Directors' meeting following the next Annual Stockholders' Meeting, and until their successors shall be designated and 5 shall qualify, and, a majority of the members of said Committee shall constitute a quorum for the transaction of business. The Board of Directors shall, by resolution or vote passed by a majority of the whole Board, designate from their members who are not employees of the Corporation, and designate a representative from the Board of Directors of the Corporation's wholly-owned subsidiaries, who is not an employee, to serve on an Audit Committee. The Audit Committee shall not be less than three (3) nor more than a majority of the whole Board at the time constituted, to nominate auditors for the annual audit of the Corporation's books and records, to develop the scope of the audit program, to discuss the results of such audits with the audit firm, and to take any other action they may deem necessary or advisable in carrying out the work of the Audit Committee. The Audit Committee shall serve until their successors shall be designated and shall qualify, and, a majority of the members of the Audit Committee shall constitute a quorum for the transaction of business. The Board of Directors shall, by resolution or vote passed by a majority of the whole Board, designate from their number members to serve on a Compensation and Organization Committee, the Compensation and Organization Committee shall not be less than three (3), nor more than the entire group of directors of the Corporation who are not employees of the Corporation; provided, however, that no more than one (1) member of the Compensation and Organization Committee may be a Board member who is also an employee of the Corporation or its wholly-owned subsidiaries. The Compensation and Organization Committee shall have such duties and responsibilities as the whole Board shall from time to time direct; provided, 6 however, that the Compensation and Organization Committee shall have the duties and responsibilities at least to review and approve the programs, policies and organizational structure of the Corporation, to recommend the personnel required by the Corporation to conduct its affairs, to receive nominations to the Board of Directors (which nominations will be reviewed with the whole Board and presented to the shareholders for election or re-election as positions are available or as terms of office expire), and to consider and recommend to the whole Board the appropriate number and appropriate members to serve on the various committees of the Board. The Compensation and Organization Committee shall serve until their successors shall be designated and shall qualify, and a majority of the members of the Compensation and Organization Committee shall constitute a quorum for the transaction of business. The Board of Directors of this Corporation may also appoint other committees from time to time, membership composition and numbers on such committees, inclusive of representatives of Board of Directors from the wholly- owned subsidiaries, and committee powers conferred upon the same to be determined by resolution or vote of the Board of Directors of this Corporation. ARTICLE XII DIRECTORS' MEETINGS ------------------- Regular meetings of the Board of Directors shall be held at such places within or without the State of Nevada and at such times as the Board by resolution or vote may determine from time to time, and if so determined no notice thereof need be given. Special meetings of the Board of Directors may be held at any time or place within or without the State of Nevada whenever called by the Chairman of the Board, 7 the President, a Vice President, a Secretary, an Assistant Secretary or two or more Directors, notice thereof being given to each Director by the Secretary, an Assistant Secretary or officer calling the meeting, or at any time without formal notice provided all the Directors are present or those not present waive notice thereof. Notice of Special meetings, stating the time and place thereof, shall be given by mailing the same to each Director at his residence or business address at least two days before the meeting, unless, in case of exigency, the President or in his absence the Secretary shall prescribe a shorter notice to be given personally or by telephoning or telegraphing each Director at his residence or business address. Such Special meetings shall be held at such times and places as the notices thereof or waiver shall specify. Meetings of the Board of Directors may be conducted by means of a conference telephone network or a similar communications method by which all persons participating in the meeting can hear each other. The minutes of such meeting shall be submitted to the Board of Directors, for approval, at a subsequent meeting. Unless otherwise restricted by the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all the members of the Board of Directors or of such committee. Such written consent shall be filed with the minutes of meetings of the Board or Committee. 8 ARTICLE XIII QUORUM AT DIRECTORS' MEETING ---------------------------- Except as otherwise provided by law, by the Articles of Incorporation, or by these By-Laws, a majority of the members of the Board of Directors shall constitute a quorum for the transaction of business, but a lesser number may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the members present shall decide any question brought before such meeting. ARTICLE XIV WAIVER OF NOTICE ---------------- Whenever any notice whatever of any meeting of the stockholders, Board of Directors or any committee is required to be given by these By-Laws or the Articles of Incorporation of this Corporation or any of the laws of the State of Nevada, a waiver thereof in writing, signed by the person or persons entitled to said notice whether before or after the time stated therein, shall be deemed equivalent to such notice so required. The presence at any meeting of a person or persons entitled to notice thereof shall be deemed a waiver of such notice as to such person or persons. ARTICLE XV OFFICERS -------- The officers of this Corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer. The Board of Directors at its discretion may elect a Chairman of the Board of Directors. The Chairman of the Board of Directors, if one is to be elected, the President, the Vice Presidents, the Secretary and the 9 Treasurer shall be elected annually by the Board of Directors after its election by the stockholders and shall hold office until their successors are duly elected and qualified, subject, however, to other provisions contained in these By-Laws, and a meeting of the Directors may be held without notice for this purpose immediately after the annual meeting of the stockholders and at the same place. ARTICLE XVI ELIGIBILITY OF OFFICERS ----------------------- Any two or more offices may be held by the same person except the offices of Chairman of the Board of Directors or President and Secretary shall not be held by the same person. The Chairman of the Board of Directors and the President may, but need not, be stockholders and shall be Directors of the Corporation. The Vice Presidents, Secretary, Treasurer and such other officers as may be elected or appointed need not be stockholders or Directors of this Corporation. ARTICLE XVII ADDITIONAL OFFICERS AND AGENTS ------------------------------ The Board of Directors, at its discretion, may appoint one or more Assistant Secretaries and one or more Assistant Treasurers and such other officers or agents as it may deem advisable, and prescribe their duties. All officers and agents appointed pursuant to this Article may hold office during the pleasure of the Board of Directors. 10 ARTICLE XVIII CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT ------------------------------------------------------------ (A) Chairman of the Board: The Chairman of the Board, if there be such --------------------- position, shall, if present, preside at all meetings of the Board of Directors and shall have such powers and perform such other duties as may be assigned to him from time to time by the Board of Directors. (B) Chief Executive Officer: Subject to the control of the Board of ----------------------- Directors, the Chief Executive Officer shall be the principal and chief managerial officer of the corporation and shall have the general supervision, direction and control of the business and officers of the corporation. The Chief Executive Officer shall preside at all meetings of the shareholders. In the absence or inability of the Chairman of the Board of Directors or during the vacancy of the office thereof, the Chief Executive Officer shall preside at all meetings of the Board of Directors and shall have such other powers and perform such other duties as may be assigned to him from time to time by the Board of Directors including, but not limited to, the signing or countersigning of certificates of stocks, bonds, notes, contracts or other instruments of the Corporation. He shall be an ex-officio member of all standing committees with the exception of the Audit Committee. (C) President: In the absence or inability of the Chief Executive Officer --------- or during any vacancy in the office thereof, the President shall perform all of the duties of the Chief Executive Officer and when so acting shall have all the power of and be subject to all the restrictions upon the Chief Executive Officer. Unless another officer is elected by the Board to hold the office of Chief Operating Officer, the President shall 11 also be the Chief Operating Officer with such duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe. ARTICLE XIX VICE PRESIDENTS --------------- Except as especially limited by resolution or vote of the Board of Directors, any Vice President shall perform the duties and have the powers of the President during the absence or disability of the President and shall have power to sign all certificates of stock, deeds and contracts of this Corporation. He shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. ARTICLE XX SECRETARY --------- The Secretary shall keep accurate minutes of all meetings of the Board of Directors, the Executive Committee and the Stockholders, shall perform all the duties commonly incident to this office, and shall perform such other duties and have such other powers as the Board of Directors shall from time to time designate. The Secretary shall have power, together with the Chairman of the Board or the President or a Vice President, to sign certificates of stock of this Corporation. In his absence, an Assistant Secretary or Secretary pro tempore shall perform his duties. 12 ARTICLE XXI TREASURER --------- The Treasurer, subject to the order of the Board of Directors, shall have the care and custody of the money, funds, valuable papers and documents of this Corporation (other than his own bond which shall be in the custody of the President) and shall have and exercise, under the supervision of the Board of Directors, all the powers and duties commonly incident to his office, and shall give bond in such form and with such sureties as may be required by the Board of Directors. He shall deposit all funds of this Corporation in such bank or banks, trust company or trust companies or with such firm or firms doing banking businesses as the Directors shall designate or approve. He may endorse for deposit or collection all checks, notes, etc., payable to this Corporation or to its order, may accept drafts on behalf of this Corporation and, together with the Chairman of the Board or the President or a Vice President, may sign certificates of stock. He shall keep accurate books of account of this Corporation's transactions which shall be the property of this Corporation and, together with all its property of this Corporation, shall be subject at all times to the inspection and control of the Board of Directors. ARTICLE XXII RESIGNATIONS AND REMOVALS ------------------------- Any Director or officer of this Corporation may resign at any time by giving written notice to the Board of Directors or to the President or to the Secretary of this Corporation, and any member of any committee may resign by giving written notice either as aforesaid or to the committee of which he is a member or to the 13 chairman thereof. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. The stockholders at any meeting called for that purpose may remove any director from office in the manner provided in Article VI of the Articles of Incorporation. The Board of Directors by the vote of not less than a majority of those present at a duly called meeting, may remove from office any officer, agent or member or members of any committee elected or appointed by it or by the executive committee. The Compensation and Organization Committee, at any meeting called for that purpose, or the Chief Executive Officer, or, in his absence, the President of the Company, may immediately suspend from his or her office and the performance of his or her duties any officer of the Company pending any meeting of the Board of Directors called for the purpose of removing an officer of the Corporation. ARTICLE XXIII VACANCIES --------- If an officer or agent, one or more, becomes vacant by reason of death, resignation, removal, disqualification or otherwise, the Directors may, by majority vote of the Board of Directors choose a successor or successors who shall hold office for the unexpired term. Vacancies in the Board of Directors shall be filled by the Directors in the manner provided in Article VI of the Articles of Incorporation. 14 ARTICLE XXIV CAPITAL STOCK ------------- The amount of capital stock shall be as fixed in the Articles of Incorporation or in any lawful amendments thereto from time to time. ARTICLE XXV CERTIFICATES OF STOCK --------------------- Every stockholder shall be entitled to a certificate or certificates of the capital stock of this Corporation in such form as may be prescribed by the Board of Directors, duly numbered and sealed with the corporate seal of this Corporation and setting forth the number of shares to which each stockholder is entitled. Such certificates shall be signed by the Chairman of the Board or the President, or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. The Board of Directors may also appoint one or more Transfer Agents and/or Registrars for its capital stock of any class or classes and may require stock certificates to be countersigned and/or registered by one or more of such transfer agents and/or registrars. If certificates of capital stock of this Corporation are signed by a transfer agent and by a registrar, the signatures thereon of the Chairman of the Board or the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of this Corporation and the seal of this Corporation thereon may be facsimiles, engraved or printed. Any provisions of these By-Laws with reference to the signing and sealing of stock certificates shall include, in cases above permitted, such facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used 15 on, any such certificate or certificates shall cease to be such officer or officers of this Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by this Corporation, such certificate or certificates may nevertheless be adopted by the Board of Directors of this Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of this Corporation. ARTICLE XXVI TRANSFER OF STOCK ----------------- Shares of stock may be transferred by delivery of the certificate accompanied either by an assignment in writing on the back of the certificate or by a written power of attorney to sell, assign and transfer the same on the books of this Corporation, signed by the person appearing by the certificate to be the owner of the shares represented thereby, and shall be transferable on the books of this Corporation upon surrender thereof so assigned or endorsed. The person registered on the books of this Corporation as the owner of any shares of stock shall exclusively, be entitled as the owner of such shares, to receive dividends and to vote as such owner in respect thereof. It shall be the duty of every Stockholder to notify this Corporation of his address. 16 ARTICLE XXVII TRANSFER BOOKS -------------- The transfer books of the stock of this Corporation may be closed for such period from time to time, not exceeding sixty (60) days, in anticipation of stockholders' meetings or the payment of dividends or the allotment of rights as the Directors from time to time may determine, provided, however, that in lieu of closing the transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding sixty (60) days, as of which stockholders shall be entitled to vote at any meeting of the stockholders or to receive dividends or rights, and in such case such stockholders and only such stockholders as shall be stockholders of record as of the date so fixed shall be entitled to vote at any such meeting and at any adjournment or adjournments thereof or to receive dividends or rights, as the case may be, notwithstanding any transfer of any stock on the books of this Corporation after such record date fixed as aforesaid. ARTICLE XXVIII LOSS OF CERTIFICATES -------------------- In case of the loss, mutilation or destruction of a certificate of stock a duplicate certificate may be issued upon such terms consistent with the laws of the State of Nevada as the Directors shall prescribe. ARTICLE XXIX SEAL ---- The seal of this Corporation shall consist of a flat-faced circular die with the corporate name of this Corporation, the year of its incorporation and the words 17 "Corporate Seal Nevada" cut or engraved thereon. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE XXX VOTING OF STOCK HELD -------------------- Unless otherwise provided by resolution or vote of the Board of Directors, the Chairman of the Board, the President or any Vice President, may from time to time appoint an attorney or attorneys or agent or agents of this Corporation, in the name on behalf of this Corporation to cast the votes which this Corporation may be entitled to cast as a stockholder or otherwise in any other corporation, any of whose stock or securities may be held by this Corporation, at meetings of the holders of the stock or other securities of such other corporations, or to consent in writing to any action by any such other corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent and may execute or cause to be executed on behalf of this Corporation and under its corporate seal, or otherwise such written proxies, consents, waivers or other instruments as he may deem necessary or proper in the premises; or the Chairman of the Board or the President or any Vice President may himself attend any meeting of the holders of stock or other securities of such other corporation and thereat vote or exercise any or all other powers of this Corporation as the holder of such stock or other securities of such other corporation. The Chairman of the Board or the President or any Vice President may appoint one or more nominees in whose name or names stock or securities acquired by this Corporation may be taken. With the approval of the Chairman of the Board or 18 the President or any Vice President of the Corporation (which approval may be evidenced by his signature as witness on the instruments hereinafter referred to) any such nominee may execute such written proxies, consents, waivers or other instruments as he may be entitled to execute as the record holder of stock or other securities owned by this Corporation. ARTICLE XXXI EXECUTION OF CHECKS, DRAFTS, NOTES, ETC. ---------------------------------------- All checks, drafts, notes or other obligations for the payment of money shall be signed by such officer or officers, agent or agents, as the Board of Directors shall by resolution or vote direct. The Board of Directors may also, in its discretion, require, by resolution or vote, that checks, drafts, notes or other obligations for the payment of money shall be countersigned or registered as a condition to their validity by such officer or officers, agent or agents as shall be directed in such resolution or vote. Checks for the total amount of any payroll and/or branch office current expenses may be drawn in accordance with the foregoing provisions and deposited in a special fund or funds. Checks upon such fund or funds may be drawn by such person or persons as the Treasurer shall designate and need not be countersigned. ARTICLE XXXII SPECIAL PROVISIONS ------------------ Section 1: - --------- The private property of the stockholders, Directors or officers shall not be subject to the payment of any corporate debts to any extent whatsoever. 19 Section 2: - --------- (A) To the fullest extent that the laws of the State of Nevada, as in effect on March 18, 1987, or as thereafter amended, permit elimination or limitation of the liability of directors and officers, no Director, officer, employee, fiduciary or authorized representative of the Company shall be personally liable for monetary damages as such for any action taken, or any failure to take any action, as a Director, officer or other representative capacity. (B) This Article shall not apply to any action filed prior to March 18, 1987, nor to any breach of performance or failure of performance of duty by a Director, officer, employee, fiduciary or authorized representative occurring prior to March, 1987. Any amendment or repeal of this Article which has the effect of increasing Director liability shall operate prospectively only, and shall not affect any action taken, or any failure to act, prior to its adoption. Section 3: - --------- (A) Right to Indemnification. Except as prohibited by law, every Director ------------------------ and officer of the Company shall be entitled as a matter of right to be indemnified by the Company against reasonable expense and any liability paid or incurred by such person in connection with any actual or threatened claim, action, suit or proceeding, civil, criminal, administrative, investigative or other, whether brought by or in the right of the Company or otherwise, in which he or she may be involved, as a party or otherwise, by reason of such person being or having been a Director or officer of the 20 Company or by reason of the fact that such person is or was serving at the request of the Company as a Director, officer, employee, fiduciary or other representative of the Corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other entity (such claim, action, suit or proceeding hereafter being referred to as "action"); provided, however, that no such right of indemnification shall exist with respect to an action brought by a Director or officer against the Company (other than a suit for indemnification as provided in paragraph (B)). Such indemnification shall include the right to have expenses incurred by such person in connection with an action paid in advance by the Company prior to final disposition of such action, subject to such conditions as may be prescribed by law. As used herein, "expense" shall include fees and expenses of counsel selected by such person; and "liability" shall include amounts of judgments, excise taxes, fines and penalties, and amounts paid in settlement. (B) Right of Claimant to Bring Suit. If a claim under paragraph (A) of ------------------------------- this Section is not paid in full by the Company within thirty (30) days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim, and, if successful in whole or in part, the claimant shall also be entitled to be paid the expense of prosecuting such claim. It shall be a defense to any such action that the conduct of the claimant was such that under Nevada law the Company would be prohibited from indemnifying the claimant for the amount claimed, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, independent legal counsel and its stockholders) to have made a 21 determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the conduct of the claimant was not such that indemnification would be prohibited by law, nor an actual determination by the Company (including the Board of Directors, independent legal counsel or its stockholders) that the conduct of the claimant was such that indemnification would be prohibited by law, shall be a defense to the action or create a presumption that the conduct of the claimant was such that indemnification would be prohibited by law. (C) Insurance and Funding. The Company may purchase and maintain insurance --------------------- to protect itself and any person eligible to be indemnified hereunder against any liability or expense asserted or incurred by such person in connection with any action, whether or not the Company would have the power to indemnify such person against such liability or expense by law or under the provisions of this Section 3. The Company may make other financial arrangements which include a trust fund, program of self-insurance, grant a security interest or other lien on any assets of the corporation, establish a letter of credit, guaranty or surety as set forth in 1987 Statutes of Nevada, Chapter 28 to ensure the payment of such sums as may become necessary to effect indemnification as provided herein. (D) Non-Exclusive; Nature and Extent of Rights. The right of ------------------------------------------ indemnification provided for herein (1) shall not be deemed exclusive of any other rights, whether now existing or hereafter created, to which those seeking indemnification hereunder may be entitled under any agreement, by-law or article provision, vote of stockholders or directors or otherwise, (2) shall be deemed to create contractual rights in favor of persons entitled to indemnification hereunder, (3) shall continue as to persons who 22 have ceased to have the status pursuant to which they were entitled or were denominated as entitled to indemnification hereunder and shall inure to the benefit of the heirs and legal representatives of persons entitled to indemnification hereunder and (4) shall be applicable to actions, suits or proceedings commenced after the adoption hereof, whether arising from acts or omissions occurring before or after the adoption hereof. The right of indemnification provided for herein may not be amended, modified or repealed so as to limit in any way the indemnification provided for herein with respect to any acts or omissions occurring prior to the adoption of any such amendment or repeal. Section 4: - --------- In furtherance, and not in limitation, of the powers conferred by statute, the Board of Directors, by a majority vote of those present at any called meeting, is expressly authorized: (A) To hold its meetings, to have one or more offices and to keep the books of the Corporation, except as may be otherwise specifically required by the laws of the State of Nevada, within or without the State of Nevada, at such places as may be from time to time designated by it. (B) To determine from time to time whether, and if allowed under what conditions and regulations, the accounts and books of the Corporation (other than the books required by law to be kept at the principal office of the Corporation in Nevada), or any of them, shall be open to inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted or limited accordingly. 23 (C) To make, alter, amend and rescind the By-Laws of the Corporation, to fix the amount to be reserved as working capital, to fix the times for the declaration and payment of dividends, and to authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation. (D) To designate from its number an executive committee, which, to the extent provided by the By-Laws of the Corporation or by resolution of the Board of Directors, shall have and may exercise in the intervals between meetings of the Board of Directors, the powers thereof which may lawfully be delegated in respect of the management of the business and the affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to such papers as may require it. The Board of Directors may also, in its discretion, designate from its number a finance committee and delegate thereto such of the powers of the Board of Directors as may be lawfully delegated, to be exercised when the Board is not in session. Section 5: - --------- In furtherance, and not in limitation, of the powers conferred by Section 78.378 to Section 78.3793, inclusive, of the General Corporation Law of the State of Nevada, the Corporation, by resolution of the Board of Directors, may call for redemption of control shares under the circumstances and in the manner provided by Section 78.3792 of the General Corporation Law of the State of Nevada as it may be amended from time to time. 24 ARTICLE XXXIII PROPOSALS AT STOCKHOLDERS' MEETINGS ----------------------------------- Section 1: Advance Notification of Proposals at Stockholders' Meetings. ----------------------------------------------------------------------- If a stockholder desires to submit a proposal for consideration at an annual or special stockholders' meeting, or to nominate persons for election as directors at any stockholders' meeting duly called for the election of directors, written notice of such stockholder's intent to make such a proposal or nomination must be given and received by the Secretary of the Corporation at the principal executive offices of the Corporation either by personal delivery or by United States mail not later than (i) with respect to an annual meeting of stockholders, one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting, and (ii) with respect to a special meeting of stockholders, the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders. Each notice shall describe the proposal or nomination in sufficient detail for the proposal or nomination to be summarized on the agenda for the meeting and shall set forth (i) the name and address, as it appears on the books of the Corporation, of the stockholder who intends to make the proposal or nomination; (ii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to present such proposal or nomination; and (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder. In addition, in the case of a stockholder proposal, the notice shall set forth the reasons for conducting such proposed business at the meeting and any material interest of the stockholder in such business. In the case of a nomination of any person for election 25 as a director, the notice shall set forth: (i) the name and address of any person to be nominated; (ii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (iii) such other information regarding such nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (iv) the consent of each nominee to serve as a director of the Corporation if so elected. The presiding officer of the annual or special meeting shall, if the facts warrant, refuse to acknowledge a proposal or nomination not made in compliance with the foregoing procedure, and any such proposal or nomination not properly brought before the meeting shall not be transacted. Section 2: Advisory Stockholder Votes. -------------------------------------- In order for the stockholders to adopt or approve any proposal submitted to them for the purpose of advising the Board of Directors of the stockholders' wishes, a majority of the outstanding stock of the Corporation entitled to vote thereon must be voted for the proposal. ARTICLE XXXIV AMENDMENTS ---------- Except as otherwise specifically provided herein, these By-Laws may be amended, added to, altered or repealed in whole or in part at any annual or special meeting of the stockholders by vote in either case of at least two- thirds of 26 the voting power of the capital stock issued and outstanding and entitled to vote, provided notice of the general nature or character of the proposed amendment, addition, alteration or repeal is given in the notice of said meeting, or by the affirmative vote of a majority of the Board of Directors present at a called regular or special meeting of the Board of Directors, provided notice of the general nature or character of the proposed amendment, addition, alteration or repeal is given in the notice of said meeting. ARTICLE XXXV NEVADA CONTROL SHARE -------------------- Pursuant to NRS (S) 78.378, the Company opts out of the Nevada Control Share statute, and specifically that the provisions of NRS (S)(S) 78.378 to 78.3793 do not apply to the corporation or to an acquisition of a controlling interest by existing or future stockholders. 27 EX-4.A 3 0003.txt FISCAL & PAYING AGENCY AGREEMENT Exhibit 4(A) FISCAL AND PAYING AGENCY AGREEMENT ---------------------------------- THIS AGREEMENT dated as of April 17, 2000 between Sierra Pacific Resources, a corporation organized under the laws of the State of Nevada (the "Company"), and Bankers Trust Company, a New York banking corporation as fiscal and paying agent (the "Agent"). Section 1. Appointment of Agent. The Company proposes to issue from -------------------- time to time its unsecured, unsubordinated Notes (the "Notes"). The Company hereby appoints the Agent to act, on the terms and conditions specified herein, as fiscal and paying agent for the Notes. Section 2. Amount Unlimited; Execution. --------------------------- (a) The Notes shall be issuable in series. The aggregate principal amount of Notes which may be issued hereunder is unlimited. (b) Each Note shall be executed on behalf of the Company by the manual or facsimile signature of an Authorized Representative (as defined in Section 3 hereof) of the Company. Section 3. Authorized Representatives. From time to time the Company -------------------------- will furnish the Agent with a certificate or similar form of evidence of the Company demonstrating the incumbency of officers authorized to execute Notes and Authentication Orders (as defined in Section 4 hereof) on behalf of the Company (an "Authorized Representative"). Until the Agent receives a subsequent incumbency certificate or similar form of evidence of the Company, the Agent shall be entitled to rely on the last such certificate or similar form of evidence delivered to it for purposes of determining the Authorized Representatives. Any Note bearing the manual or facsimile signature of a person who is an Authorized Representative on the date such signature is affixed shall bind the Company after the completion and registration thereof by the Agent, notwithstanding that such person shall have ceased to hold office on the date such Note is authenticated and delivered by the Agent. Section 4. Authentication Orders; Completion, Authentication and ----------------------------------------------------- Delivery of Notes. ----------------- (a) The Notes shall be issued by the Agent only upon receipt from the Company of an order (an "Authentication Order") with respect to a series of Notes, which shall be accompanied by the proposed form of the Notes of such series and, to the extent not set forth in such proposed form of Note, shall include: (i) the designation of the Notes of the series (which may be part of a series of Notes previously issued); (ii) any limit on the aggregate principal amount of the Notes of the series that may be authenticated and delivered hereunder (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes of the series); (iii) any date or dates on which the principal of the Notes of the series is payable; (iv) the method by which the rate or rates at which the Notes shall bear interest shall be determined; the date or dates from which such interest shall be payable (each an "Interest Payment Date") and the record dates for the determination of holders to whom interest is payable; and the basis on which interest is to be calculated; (v) the place or places where the principal of and any interest on the Notes shall be payable; (vi) the price or prices at which, the period or periods within which and the terms and conditions upon which Notes of the series may be redeemed, in whole or in part; (vii) the obligation, if any, of the Company to redeem, purchase or repay Notes of the series pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Notes shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (viii) the denominations in which Notes shall be issuable; (ix) if other than the principal amount thereof, the portion of the principal amount of Notes which shall be payable upon declaration of acceleration of the maturity thereof; (x) any restrictions on sale, resale, pledge or any other transfer of the Notes; and (xi) whether the Notes will be in the form of a global security. (b) Upon receipt of such Authentication Order with respect to the Notes, the Agent shall prepare or cause to be prepared, the necessary Notes in the form attached hereto as Exhibit A and, in accordance with the Authentication --------- Order, shall: (i) complete each Note as to its Registered Holder and principal amount; (ii) record each Note in a Note Register to be maintained by the Agent hereunder; (iii) cause each Note to be manually authenticated by any one of the officers or employees of the Agent duly authorized and designated by it for such purpose; and (iv) deliver each Note. Section 5. Reliance on an Authentication Order. The Agent shall ----------------------------------- incur no liability to the Company in acting hereunder on instructions which the recipient believed in good faith to have been given by an Authorized Representative. Section 6. Company's Representations and Warranties. The ---------------------------------------- Authentication Order given to the Agent in accordance with Section 4 hereof shall constitute a continuing representation and warranty to the Agent by the Company that the issuance and delivery of the Notes which are the subject thereof have been duly and validly authorized by the Company and that the Notes, when completed, authenticated and delivered pursuant hereto, will constitute the legal, valid and binding obligations of the Company. Section 7. Payment of Note Interest; Interest Payment Dates; Record -------------------------------------------------------- Dates. All interest payments in respect of the Notes will be made by the Agent - ----- to the Registered Holders in whose names Notes are registered at the close of business on the record date specified in the Notes of such series (whether or not a New York City Business Day) next preceding each Interest Payment Date (each a "Record Date"). Notwithstanding the foregoing, if so specified in the Notes of such series, if the original issue date or date of transfer of any Note occurs either on an Interest Payment Date or between a Record Date and the next succeeding Interest Payment Date, the first payment of interest on any such Note will be made on the Interest Payment Date following the next succeeding Record Date. Unless otherwise specified in an Authentication Order with respect to a particular series of Notes or in the proposed form of Notes of that series, all interest payments on the Notes will be made at the office of the Agent located at Four Albany Street, New York, New York 10006-1515, or, at the option of the Agent may be made by check of the Agent mailed to the Registered Holders, as such Registered Holders appear on the Record Date in the Note Register referred to in Section 12 hereof, or to such other address in the United States as any Registered Holder shall designate to the Agent in writing not later than the relevant Record Date; provided, however, that in the case of Notes held by a -------- ------- depository or its nominee, 3 payments of principal and interest shall be made by wire transfer of immediately available funds to an account designated by such depository. Section 8. Payment of Note Principal. The Agent will pay the ------------------------- principal amount of each Note at maturity, together with accrued interest due at maturity (unless the maturity date is an Interest Payment Date), if any, only upon presentation and surrender of such Note on or after the maturity date thereof. The Agent will forthwith cancel and destroy each such Note. If the maturity date is an Interest Payment Date, interest will be paid in the usual manner. Section 9. Information Regarding Amounts Due. Promptly following --------------------------------- each Record Date, the Agent will advise the Company of the amount of interest due on the following Interest Payment Date. The Agent will advise the Company by the fifteenth day prior to each payment date of the principal of and accrued interest to be paid on Notes maturing on the next succeeding payment date. Section 10. Availability of Funds. The Company shall assure that --------------------- funds are available to the Agent not later than 11:00 a.m. New York City time on each Interest Payment Date and on each maturity date of any Note, in immediately available funds sufficient to pay all accrued interest on, and/or the principal of any such Note, as the case may be. Section 11. Amendments and Waivers. This Agreement and the ---------------------- provisions of Notes of one or more series issued pursuant hereto may be amended or waived in the manner and with the effect as may be specified in the terms of Notes of such series. Section 12. Registration, Transfer, Exchange, Persons Deemed Owners. ------------------------------------------------------- (a) The term "Note Register" shall mean the definitive record maintained by the Agent in which shall be recorded the names, addresses and taxpayer identifying numbers of Registered Holders of the Notes, the Note numbers and original issue dates thereof and details with respect to the transfers and exchange of Notes. (b) The Agent shall register the transfer of any Note and/or effect the exchange of any Note or Notes for Notes of other authorized denominations only in accordance with the terms and conditions of such Note. Section 13. Application of Funds; Return of Unclaimed Funds. Until ----------------------------------------------- used or applied as herein provided and except as otherwise provided in the terms of the Notes, all funds made available to the Agent hereunder shall be held for the purposes for which they were received but need not be segregated from other funds except to the extent required by law. Section 14. Liability. Neither the Agent nor its officers or --------- employees shall be liable for any act or omission hereunder except in the case of gross negligence or willful 4 misconduct. The duties and obligations of the Agent, its officers and employees shall be determined by the express provisions of this Agreement and they shall not be liable except for the performance of such duties and obligations as are specifically set forth herein and no implied covenants shall be read into this Agreement against them. The Agent may consult with counsel and shall be fully protected in any action taken in good faith in accordance with the advice of counsel. Neither the Agent nor its officers or employees shall be required to ascertain whether any issuance or sale of Notes (or any amendment or termination of this Agreement) has been duly authorized or is in compliance with any other agreement to which the Company is a party (whether or not the Agent is also a party of such other agreement). In acting under this Agreement or in connection with the Notes, the Agent is acting solely as agent of the Company and shall not assume any relationship of agency of trust for or with any Noteholder, except that all funds held by the Agent for payment of principal of or interest on the Notes shall be held in trust by it and applied to payments or the Notes subject to the limitations set forth herein and in the terms of the Note. Section 15. Indemnification. The Company agrees to indemnify and --------------- hold harmless the Agent, its directors, officers, employees and agents from and against any and all liabilities (including liability for penalties), losses, claims, damages, actions, suits, judgments, demands, costs and expenses (including reasonable legal fees and expenses) relating to or arising out of or in connection with its or their performance under this Agreement, except to the extent that they are caused by the gross negligence or willful misconduct of the Agent. The foregoing indemnity includes, but is not limited to, any action taken or omitted in good faith within the scope of this Agreement upon telephone, telecopier or other electronically transmitted instructions, if authorized herein, received from or believed by the Agent in good faith to have been given by, an Authorized Representative. This indemnity shall survive the resignation of removal of the Agent and the satisfaction or termination of this Agreement. Section 16. Compensation of the Agent. The Company agrees to pay the ------------------------- compensation of the Agent at such rates as shall be agreed upon from time to time and to reimburse the Agent for its out-of-pocket expenses (including costs of preparation of the Notes and reasonable legal fees and expenses), disbursements and advances incurred or made in accordance with any provisions of this Agreement. The obligations of the Company to the Agent pursuant to this Section shall survive the resignation or removal of the Agent and the satisfaction or termination of the Agreement. Section 17. Notices. ------- (a) All communications by or on behalf of the Company relating to the issuance, transfer, exchange or payment of Notes or interest thereon shall be directed to the Agent at its address set forth in subsection (b)(ii) hereof (or such other address as the Agent shall specify in writing to the Company). 5 (b) Notices and other communications hereunder shall except to the extent otherwise expressly provided, be in writing and shall be addressed as follows, or to such other addresses as the parties hereto shall specify from time to time: (i) if to the Company: Sierra Pacific Resources 6100 Neil Road Reno, Nevada 89520-0024 Attention: Director of Finance/Assistant Treasurer (ii) if to the Agent in connection with the issuance, transfer, exchange or payment of Notes or interest thereon: Bankers Trust Company Corporate Trust and Agency Services Four Albany Street New York, New York 10006-1515 Section 18. Resignation or Removal of Agent. The Agent may at any ------------------------------- time resign as such agent by giving written notice to the Company of such intention on its part, specifying the date on which its desired resignation shall become effective; provided, however, that such date shall be not less than -------- ------- three months after the giving of such notice by the Agent to the Company. The Agent may be removed at any time by the filing with it of any instrument in writing signed by a duly authorized officer of the Company and specifying such removal and the date upon which it is intended to become effective. Such resignation or removal shall take effect on the date of the appointment by the Company of a successor agent and the acceptance of such appointment by such successor Agent. In the event of resignation by the Agent, if a successor Agent has not been appointed by the Company within three months after the giving of notice by the Agent of its intention to resign, the Agent may, at the expense of the Company, petition any court of competent jurisdiction for appointment of a successor Agent. Section 19. Benefit of Agreement. This Agreement is solely for the -------------------- benefit of the parties hereto, their successors and assigns, and no other person shall acquire or have any right under or by virtue hereof. Section 20. Notes Held by the Agent. The Agent, in its individual or ----------------------- other capacity, may become the owner or pledgee of the Notes with the same rights it would have if it were not acting as fiscal and paying agent hereunder. 6 Section 21. Governing Law. This Agreement is to be delivered and ------------- performed in, and shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York. Section 22. Counterparts. This Agreement may be executed by the ------------ parties hereto in any number of counterparts, and by each of the parties hereto in separate counterparts, each such counterpart, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on their behalf by their officers thereunto duly authorized, all as of the date and year first above written. SIERRA PACIFIC RESOURCES By:_____________________________ BANKERS TRUST COMPANY By:_____________________________ 8 EX-4.B 4 0004.txt FORM OF FLOATING GLOBAL FLOATING RATE NOTE, 2002 Exhibit 4(B) NOTE NO. R-1 CUSIP N0. 826428AB0 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO SIERRA PACIFIC RESOURCES (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A BOOK-ENTRY SECURITY AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) INSIDE THE U.S. TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE U.S. IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. SIERRA PACIFIC RESOURCES FLOATING RATE NOTES DUE APRIL 20, 2002 (THE "NOTES") Sierra Pacific Resources, a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), for value received, hereby promises to pay to Cede & Co., as the nominee of The Depository Trust Company, or registered assigns, the principal amount of $100,000,000 on April 20, 2002 (the "Maturity Date"), and to pay interest as set forth below on the outstanding principal amount hereof from time to time from April 20, 2000 or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly in arrears on January 20, April 20, July 20, and October 20 of each year and on the Maturity Date (each, an "Interest Payment Date"), commencing July 20, 2000, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the fifteenth calendar day preceding each Interest Payment Date (each, a "Regular Record Date"); provided, however, that -------- ------- interest payable on the Maturity Date shall be payable to the person to whom the principal amount of this Note is payable. Any interest payable on any Interest Payment Date other than the Maturity Date and not so punctually paid or duly provided for shall forthwith cease to be payable to the person in whose name this Note is registered at the close of business on such Regular Record Date and shall instead be payable to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Company, notice whereof shall be given to the registered holder of this Note (or one or more predecessor Notes) not less than 10 days prior to such special record date. Principal of this Note shall be payable against surrender hereof at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York. Payment of the principal of and interest on this Note shall be made at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided, however, that, at the option of the Company, -------- ------- payments of interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Note Register (as defined in Section 3 hereof); and provided -------- 2 further, however, that in the case of Notes held by a depository (as defined in - ------- ------- Section 3 hereof) or its nominee, payments of principal and interest shall be made by wire transfer of immediately available funds to an account designated by such depository. If any Interest Payment Date for this Note (other than an Interest Payment Date at the Maturity Date) would otherwise be a day that is not a Business Day (as defined in Section 1 hereof), such Interest Payment Date shall be postponed until the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Payment Date shall be the next preceding Business Day. If the Maturity Date of this Note falls on a day that is not a Business Day, the payment of principal and interest will be made on the next succeeding Business Day, and no interest on such payment shall accrue for the period from and after such Maturity Date, except as otherwise expressly provided for herein. This Note is one of a duly authorized series of securities of the Company, limited in aggregate principal amount of $100,000,000, issued under a Fiscal and Paying Agency Agreement, dated as of April 17, 2000, (the "Fiscal Agency Agreement"), duly executed and delivered by the Company to Bankers Trust Company, as Fiscal and Paying Agent (the "Fiscal Agent"). All terms that are used but not defined in this Note and that are defined in the Fiscal Agency Agreement shall have the meanings set forth therein. This Note may be redeemed at the option of the Company, in whole, beginning on April 20, 2001, and on each Interest Payment Date thereafter, at a redemption price equal to 100% of the unpaid principal amount plus accrued and unpaid interest on this Note to the date of redemption. Any such redemption may be made by the Company upon not less than 15 Business Days prior notice mailed to the holder of this Note at its registered address by first-class mail. On and after the redemption date, interest shall cease to accrue on this Note unless the Company defaults in the payment of any principal then due and payable. 1. Calculation of Interest. The period beginning on, and including, April 20, 2000 and ending on, but excluding, the first Interest Payment Date and each successive period beginning on, and including, an Interest Payment Date and ending on, but excluding, the next succeeding Interest Payment Date is herein called an "Interest Period". "Business Day" shall mean any day on which commercial banks and foreign exchange markets are open for business, including dealings in deposits in U.S. dollars in New York. The rate of interest payable from time to time in respect of this Note (the "Rate of Interest") will be a floating rate determined by reference to LIBOR, determined as described below, plus a margin of 0.65% per annum. All percentages resulting from any calculation on this Note will be rounded to the nearest one hundredth-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on the Notes will be rounded to the nearest cent (with one-half cent being rounded upward). (a) At approximately 11:00 a.m. (London time) on the second day on which commercial banks are open for business (including dealings in U.S. Dollar deposits) in 3 London (or, for purposes of paragraph (c) (ii) below, New York) prior to the commencement of the Interest Period for which such rate will apply (each such day an "Interest Determination Date"), Bankers Trust Company, London Branch, or its successor in this capacity (the "Calculation Agent"), will calculate the rate of interest (the "Rate of Interest") for such Interest Period as, subject to the provisions described below, the rate per annum equal to 0.65% above the rate appearing on the Dow Jones Telerate Page 3750 (or such other page as may replace that page on the Dow Jones Telerate Service) for three-month U.S. dollar deposits in the London inter- bank market on such Interest Determination Date. (b) If on any Interest Determination Date an appropriate rate cannot be determined from the Dow Jones Telerate Service, the Rate of Interest for the next Interest Period shall, subject to the provisions described below, be the rate per annum that the Calculation Agent certifies to be 0.65% per annum above the arithmetic mean of the offered quotations, as communicated to and at the request of the Calculation Agent by not less than two major banks in London selected by the Calculation Agent (the "Reference Banks," which expression shall include any successors nominated by the Calculation Agent), to leading banks in London by the principal London offices of the Reference Banks for three-month U.S. dollar deposits in the London inter- bank market as at 11:00 a.m. (London time) on such Interest Determination Date. (c) If on any Interest Determination Date fewer than two of such offered rates are available, the Rate of Interest for the next Interest Period shall be whichever is the higher of: (i) the Rate of interest in effect for the last preceding Interest Period to which (a) or (b) above shall have applied; and (ii) the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per annum which the Calculation Agent determines to be 0.65% per annum above either (1) the arithmetic mean of the U.S. dollar offered rates which New York City banks selected by the Calculation Agent are or were quoting, on the relevant Interest Determination Date, for three-month deposits to the Reference Banks or those of them (being at least two in number) to which such quotations are or were, in the opinion of the Calculation Agent, being so made, or (2) in the event that the Calculation Agent can determine no such arithmetic mean, the arithmetic mean of the U.S. dollar offered rates which at least two New York City banks selected by the Calculation Agent are or were quoting on such Interest Determination Date to leading European banks for a period of three months; provided, however, that if the banks selected as aforesaid by the Calculation Agent are not quoting as mentioned above, the Rate of Interest shall be the Rate of Interest specified in (i) above. The Calculation Agent shall, as soon as practicable after 11:00 a.m. (London time) on each Interest Determination Date, determine the Rate of Interest and calculate the amount of interest payable in respect of the following Interest Period (the "Interest Amount"). The Interest 4 Amount shall be calculated by applying the Rate of Interest to the principal amount of each Note outstanding at the commencement of the Interest Period, multiplying each such amount by the actual number of days in the Interest Period concerned (which actual number of days shall include the first day but exclude the last day of such Interest Period) divided by 360 and rounding the resultant figure upwards to the nearest cent (half a cent being rounded upwards). The determination of the Rate of Interest and the Interest Amount by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be final and binding on all parties. Notwithstanding anything herein to the contrary, the interest rate on the Notes shall in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. Interest shall cease to accrue on this Note on the Maturity Date unless, upon presentation of this Note, payment of principal is improperly withheld or refused, in which case, interest shall continue to accrue. 2. Calculation Agent. So long as any of this Note remains outstanding, the Company shall maintain under appointment a Calculation Agent, which shall initially be the Fiscal Agent, to calculate the Rate of Interest payable on this Note in respect of each Interest Period. If the Calculation Agent shall fail to establish the Rate of Interest for any Interest Period, or if the Company shall remove the Calculation Agent, the Company shall appoint another commercial or investment bank to act as the Calculation Agent. The Company may change the Calculation Agent without notice. All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions hereof relating to the payment and calculation of interest on this Note by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be binding on the Company, the Calculation Agent and all of the holders and owners of beneficial interests in this Note, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions. 3. Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at an office or agency to be maintained by the Company a register (the register maintained in such office being herein referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Fiscal Agent is hereby appointed "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint co-registrars and may change any Note Registrar or co- registrar without notice. Notes shall be exchangeable pursuant to this Section 3 for Notes registered in the name of, and a transfer of a Note may be registered to, any person other than DTC or its successor depository (DTC or such successor being referred to as a "depository") for such Note or its nominee only if (i) such depository notifies the Company that it is unwilling or unable to continue as depository for such Note or if at any time such depository ceases to be a clearing 5 agency registered under the Securities Exchange Act of 1934, as amended, and a successor depository is not appointed by the Company within 90 days, (ii) there shall have occurred and be continuing an Event of Default (as defined below) with respect to the Notes or (iii) the Company, in its sole discretion, elects to terminate the book-entry system. Upon the occurrence of any one or more of the conditions specified in clauses (i), (ii) or (iii) of the preceding sentence, such Note shall be exchanged for Notes registered in the names of, and the transfer of such Note shall be registered to, such persons (including persons other than the depository with respect to such Notes and its nominee) as such depository shall direct, in each case subject to Section 5 hereof. Subject to the restrictions on transfer and delivery set forth in this Note, Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed) at the office of the Fiscal Agent or at the office of any other transfer agent designated by the Company for such purpose. Such transfer or exchange shall be effected upon the Fiscal Agent's or such other transfer agent's, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Company may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts; provided, however, that there -------- ------- shall at all times be a transfer agent in the Borough of Manhattan, The City of New York. The Notes and any certificates for Notes issued in exchange for Notes or a beneficial interest therein will bear the third legend set forth in this Note. The holder of a certificated Note may transfer such Note, subject to compliance with the provisions of such legend, as provided in the preceding paragraph. Upon the transfer, exchange or replacement of Notes bearing such legend, or upon specific request for removal of such legend on a Note, the Company will deliver only Notes bearing such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Company that neither such legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. 4. Acts by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by the Notes or the Fiscal Agency Agreement to be given or taken by holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided in the Notes or the Fiscal Agency Agreement, such action shall become effective when such instrument or instruments are delivered to the Fiscal Agent and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of the Notes and the Fiscal Agency Agreement and conclusive in favor of the Fiscal Agent and the Company, if made in the manner provided in this Section. 6 (b) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Fiscal Agent deems sufficient. (c) The Company may set any day as the record date for the purpose of determining the holders of outstanding Notes entitled to make any request or demand or give any authorization, direction, notice, consent or waiver or take other action, provided or permitted by the Notes and the Fiscal Agency Agreement to be made, given or taken by holders of the Notes. With regard to any record date set pursuant to the immediately preceding paragraph, the holders of outstanding Notes on such record date (or their duly appointed agents), and only such persons, shall be entitled to take relevant action, whether or not such holders remain holders after such record date. With regard to any action that may be taken hereunder only by holders of a requisite principal amount of outstanding Notes (or their duly appointed agents) and for which a record date is set pursuant to the immediately preceding paragraph, the Company, may at its option, set an expiration date after which no such action purported to be taken by any holder shall be effective unless taken on or prior to such expiration date by holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Company may, on one or more occasions at its option, extend such expiration date to any later date. Nothing in this paragraph shall prevent any holder (or any duly appointed agent thereof) from taking, at any time, any action contrary to or different from, any action previously taken, or purported to have been taken hereunder by such holder, in which event the Company may set a record date in respect thereof pursuant to this paragraph. Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions to this paragraph shall not apply with respect to, any action to be taken by holders pursuant to Section 8 hereof. Upon receipt by the Fiscal Agent of notice of any default, any declaration of acceleration, or any rescission and annulment of any such declaration, or of any direction in accordance with Section 8 hereof, a record date shall automatically and without any other action by any person be set for the purpose of determining the holders of outstanding Notes entitled to join in such notice, declaration, or rescission and annulment, or direction, as the case may be, which record date shall be the close of business on the date the Fiscal Agent receives such notice, declaration, rescission and annulment or direction, as the case may be. The holders of outstanding Notes on such record date (or their duly appointed agent), and only such persons, shall be entitled to join 7 in such notice, declaration, rescission and annulment, or direction, as the case may be, whether or not such holders remain holders after such record date; provided that, unless such notice, declaration, rescission and -------- annulment, or direction, as the case may be, shall have become effective by virtue of holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such notice of default, declaration, or rescission and annulment or direction given or made by the holders, as the case may be, shall automatically and without any action by any person be canceled and of no further effect. Nothing in this paragraph shall prevent a holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a notice of default, a declaration of acceleration, a rescission and annulment of a declaration of acceleration or a direction, contrary to or different from, or, after the expiration of such period, identical to, a previously given notice, declaration, rescission and annulment, or direction, as the case may be, that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. (d) The ownership of the Notes shall be proved by the Note Register. (e) Any request, demand, authorization, direction, notice, consent, waiver, or other Act of the holder of any Note shall bind every future holder of the same Note and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Fiscal Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 5. Denominations. The Notes are issuable only in registered form without coupons in denominations of $100,000 and integral multiples of $1,000 in excess thereof. 6. Persons Deemed Owners. The Company, the Fiscal Agent and any agent of the Company or the Fiscal Agent may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes whatsoever, whether or not this Note shall be overdue, and neither the Company, the Fiscal Agent nor any such agent shall be affected by notice to the contrary. 7. Amendments and Waivers. Without the consent of any holders of the Notes, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into one or more agreements supplemental to the Fiscal Agency Agreement, in form satisfactory to the Fiscal Agent, for any of the following purposes: (a) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Fiscal Agency Agreement; or (b) to add to the covenants of the Company for the benefit of the holders of the Notes; or 8 (e) to add any additional Events of Default; or (d) to secure the Notes; or to evidence and provide for the acceptance of appointment by a successor Fiscal Agent with respect to the Notes; or (e) to amend the restrictions on transfer applicable to the Notes as set forth on this Note; or (g) to cure any ambiguity or to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to correct or supplement any defective provision contained herein or in the Fiscal Agency Agreement, provided that such action pursuant to this clause -------- (g) shall not adversely affect the interests of the holders of the Notes. With the consent of the holders of not less than 66 and 2/3% in principal amount of the outstanding Notes, by act of said holders delivered to the Company and the Fiscal Agent, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into an agreement supplemental to the Fiscal Agency Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Notes, or the Fiscal Agency Agreement as the same pertains to the Notes, or of modifying in any manner the rights of the holders of the Notes: provided, -------- however, that no such amendment or supplemental agreement shall, without the - ------- consent of the holder of each outstanding Note affected thereby, (1) change the stated maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon, or change any place of payment where, or the coin or currency in which, any Note or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, or (2) reduce the percentage in principal amount of the outstanding Notes, the consent of whose holders is required for any such amendment or supplemental agreement or the consent of whose holders is required for any waiver provided for herein or in the Fiscal Agency Agreement, or (3) modify any of the provisions of this Section or Section 9, except to increase any such percentage or to provide that certain other provisions of the Notes cannot be modified or waived without the consent of the holder of each outstanding Note affected thereby. 9 It shall not be necessary for any act of holders under this Section 7 to approve the particular form of any proposed amendment or supplemental agreement, but it shall be sufficient if such act shall approve the substance thereof. Upon the execution of any agreement supplement to the Fiscal Agency Agreement as permitted by this Section 7, the Notes and the Fiscal Agency Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of the Notes and the Fiscal Agency Agreement, as the same pertains to the Notes, for all purposes; and every holder of the Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 8. Defaults and Remedies. The occurrence of any of the following events shall constitute an Event of Default with respect to the Notes: (a) default in the payment of the principal of any of the Notes when the same becomes due and payable; or (b) default in the payment of any installment of interest upon any of the Notes when the same becomes due and payable, and continuance of such default for a period of 30 days; or (c) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Notes for a period of 90 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Fiscal Agent by registered or certified mail or to the Company and the Fiscal Agent by the holders of at least 25% in aggregate principal amount of the Notes, or (d) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Federal Bankruptcy Code or any other similar applicable Federal or State law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in the bankruptcy or insolvency of the Company or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or (e) the Company shall institute proceedings to be adjudicated bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal Bankruptcy Code or any other similar Federal or State law, or shall consent to the filing of any such petition or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due. 10 If an Event of Default occurs and is continuing, the holders of at least 25% in principal amount of the Notes then outstanding may declare all the Notes to be due and payable immediately. Holders of a majority in principal amount of the Notes may waive an Event of Default and rescind any related declaration except as provided in Section 9(a) hereof. The Fiscal Agent may withhold from holders of Notes notice of any continuing Event of Default, except in respect of a default in the payment of principal of or interest on the Notes, if it determines that withholding such notice is in their interest. 9. Waivers. (a) The holders of not less than a majority in principal amount of the outstanding Notes may on behalf of the holders of the Notes waive any past default hereunder with respect to the Notes and its consequences, except a default (1) in the payment of the principal of or interest on any Note, or (2) In respect of a covenant or provision hereof which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Notes; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. (b) The Company may omit in any particular instance to comply with any term, provision or condition set forth in the Notes or the Fiscal Agency Agreement with respect to the Notes if before the time for such compliance the holders of at least 66 and 2/3% in principal amount of the outstanding Notes shall, by act of such holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but (i) without the consent of the holder of each Note affected thereby, no such waiver shall extend to or affect any term, provision or condition which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected, and (ii) no such waiver shall extend to or affect any term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and any duties of the Fiscal Agent in respect of any such term, provision or condition shall remain in full force and effect. 10. Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary (as defined below) to create, issue, assume or guarantee any debt for money borrowed (hereafter in this Section referred to as "Debt") secured by a mortgage, security interest, pledge, lien or other encumbrance upon any shares of stock of any Restricted Subsidiary 11 (whether such shares of stock are now owned or hereafter acquired) without in any such case effectively providing concurrently with the issuance, assumption or guarantee of any such Debt that the Notes (together with, if the Company shall so determine, any other indebtedness of or guarantee by the Company ranking equally with the Notes and then existing or thereafter created) shall be secured equally and ratably with such Debt. As used herein, the term Restricted Securities shall mean any consolidated operating subsidiary of the Company that accounts for 10% or more of the consolidated revenues and/or assets of Company. The Company will not, and will not permit any Restricted Subsidiary to, issue, sell, assign transfer or otherwise dispose of, directly or indirectly, any of the capital stock (which is defined as any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock) (other than nonvoting preferred stock) of any Restricted Subsidiary (except to the Company or to one or more Restricted Subsidiaries or for the purpose of qualifying directors); provided, however, that this covenant shall not apply if: (1) all or any part of such capital stock is sold, assigned, transferred or otherwise disposed of in a transaction for consideration which is at least equal to the fair value of such capital stock, as determined by the Board of Directors (acting in good faith); or (2) the issuance, sale, assignment, transfer or other disposition is required to comply with the order of a court or regulatory authority of competent jurisdiction, other than an order issued at the request of the Company or of one of its Restricted Subsidiaries. 11. Company May Consolidate Etc., Only on Certain Terms. The Company covenants that it will not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any person, firm or corporation, except that the Company may merge or consolidate with, or sell or convey all or substantially all of its assets to, any other corporation, provided that (i) either the Company shall be the continuing corporation, or the - -------- successor corporation (if other than the Company) shall be a corporation organized and existing under the laws of the United States of America or a State thereof and such corporation shall expressly assume the due and punctual payment of the principal of and interest on all the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Note and the Fiscal Agency Agreement to be performed by the Company, by supplemental agreement in form satisfactory to the Fiscal Agent, executed and delivered to the Fiscal Agent by such corporation, and (ii) the Company or such successor corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any such covenant or condition. Upon any consolidation of the Company with, or merger of the Company into, any other person or any sale or conveyance of all or substantially all of the assets of the Company in accordance with this Section 11, the successor person formed by such consolidation or into which the Company is merged or to which such sale or conveyance is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Note and 12 the Fiscal Agency Agreement with the same effect as if such successor person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor person shall be relieved of all obligations and covenants under the Notes and the Fiscal Agency Agreement. 12. Unclaimed Amounts. Any money deposited with the Fiscal Agent in trust for the payment of the principal of or interest on any Note and remaining unclaimed for twelve months after such principal or interest has become due and payable shall be paid to the Company upon its request; and the holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Fiscal Agent with respect to such money shall thereupon cease. 13. Mutilated, Destroyed, Lost and Stolen Notes. If any Note becomes mutilated or defaced or is apparently destroyed, lost or stolen, the Fiscal Agent shall, subject to the provisions of this Section 13, authenticate and deliver a new Note in exchange and substitution for the mutilated or defaced Note or in lieu of or in substitution for the apparently destroyed, lost or stolen Note. Application for the authentication and delivery of a substitute Note pursuant to this Section 13 may be made at the office of the Fiscal Agent. If the applicant for any substitute Note shall furnish to the Company and the Fiscal Agent (i) in the case of any such request in case of loss or theft, such security or indemnity as may be required by the Company and the Fiscal Agent in their sole discretion to indemnify and defend and to save each of them and any agent of either of them harmless, and (ii) in the case of any request for a substitute Note in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Fiscal Agent of the apparent destruction, loss or theft of such Note and of the ownership thereof, then, in the absence of notice to the Company or the Fiscal Agent that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Fiscal Agent shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any substitute Note under this Section 13, the Company may require the payment of a sum sufficient to cover any tax assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith. Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of the Fiscal Agency Agreement equally and proportionately with any and all other Notes. 13 The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 14. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Fiscal Agency Agreement, or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder (and each beneficial owner) of a Note by accepting such Note (or acquisition of a beneficial interest therein) waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes. THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Note shall not be valid or obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Fiscal Agent under the Fiscal Agency Agreement. [The remainder of this page is left blank intentionally.] 14 IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its corporate name, manually or by facsimile, by an Authorized Representative and a facsimile of its corporate seal to be affixed hereunto or imprinted hereon, attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. SIERRA PACIFIC RESOURCES Attest: _________________________ By: ___________________________ Name: Title: Dated: April 20, 2000 FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. BANKERS TRUST COMPANY, as Fiscal Agent By: ___________________________ Authorized Signer 15 EX-4.C 5 0005.txt FORM OF FLOATING GLOBAL FLOATING RATE NOTE, 2003 Exhibit 4(C) NOTE NO. R-1 CUSIP N0. 826428AA2 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO SIERRA PACIFIC RESOURCES (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A BOOK-ENTRY SECURITY AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) INSIDE THE U.S. TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE U.S. IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. SIERRA PACIFIC RESOURCES FLOATING RATE NOTES DUE APRIL 20, 2003 (THE "NOTES") Sierra Pacific Resources, a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), for value received, hereby promises to pay to Cede & Co., as the nominee of The Depository Trust Company, or registered assigns, the principal amount of $200,000,000 on April 20, 2003 (the "Maturity Date"), and to pay interest as set forth below on the outstanding principal amount hereof from time to time from April 20, 2000 or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly in arrears on January 20, April 20, July 20, and October 20 of each year and on the Maturity Date (each, an "Interest Payment Date"), commencing July 20, 2000, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the fifteenth calendar day preceding each Interest Payment Date (each, a "Regular Record Date"); provided, however, that -------- ------- interest payable on the Maturity Date shall be payable to the person to whom the principal amount of this Note is payable. Any interest payable on any Interest Payment Date other than the Maturity Date and not so punctually paid or duly provided for shall forthwith cease to be payable to the person in whose name this Note is registered at the close of business on such Regular Record Date and shall instead be payable to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Company, notice whereof shall be given to the registered holder of this Note (or one or more predecessor Notes) not less than 10 days prior to such special record date. Principal of this Note shall be payable against surrender hereof at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York. Payment of the principal of and interest on this Note shall be made at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided, however, that, at the option of the Company, -------- ------- payments of interest may be made by check mailed to the address of the person entitled thereto 2 as such address shall appear in the Note Register (as defined in Section 3 hereof); and provided further, however, that in the case of Notes held by a -------- ------- ------- depository (as defined in Section 3 hereof) or its nominee, payments of principal and interest shall be made by wire transfer of immediately available funds to an account designated by such depository. If any Interest Payment Date for this Note (other than an Interest Payment Date at the Maturity Date) would otherwise be a day that is not a Business Day (as defined in Section 1 hereof), such Interest Payment Date shall be postponed until the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Payment Date shall be the next preceding Business Day. If the Maturity Date of this Note falls on a day that is not a Business Day, the payment of principal and interest will be made on the next succeeding Business Day, and no interest on such payment shall accrue for the period from and after such Maturity Date, except as otherwise expressly provided for herein. This Note is one of a duly authorized series of securities of the Company, limited in aggregate principal amount of $200,000,000, issued under a Fiscal and Paying Agency Agreement, dated as of April 17, 2000, (the "Fiscal Agency Agreement"), duly executed and delivered by the Company to Bankers Trust Company, as Fiscal and Paying Agent (the "Fiscal Agent"). All terms that are used but not defined in this Note and that are defined in the Fiscal Agency Agreement shall have the meanings set forth therein. 1. Calculation of Interest. The period beginning on, and including, April 20, 2000 and ending on, but excluding, the first Interest Payment Date and each successive period beginning on, and including, an Interest Payment Date and ending on, but excluding, the next succeeding Interest Payment Date is herein called an "Interest Period". "Business Day" shall mean any day on which commercial banks and foreign exchange markets are open for business, including dealings in deposits in U.S. dollars in New York and London. The rate of interest payable from time to time in respect of this Note (the "Rate of Interest") will be a floating rate determined by reference to LIBOR, determined as described below, plus a margin of 0.60% per annum. All percentages resulting from any calculation on this Note will be rounded to the nearest one hundredth-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on the Notes will be rounded to the nearest cent (with one-half cent being rounded upward). (a) At approximately 11:00 a.m. (London time) on the second day on which commercial banks are open for business (including dealings in U.S. Dollar deposits) in London (or, for purposes of paragraph (c) (ii) below, New York) prior to the commencement of the Interest Period for which such rate will apply (each such day an "Interest Determination Date"), Bankers Trust Company, London Branch, or its successor in this capacity (the "Calculation Agent"), will calculate the rate of interest (the "Rate of Interest") for such Interest Period as, subject to the provisions described below, the rate per annum equal to 0.60% above the rate appearing on the Dow Jones Telerate Page 3750 (or such other page as may replace that page on the Dow Jones Telerate Service) for 3 three-month U.S. dollar deposits in the London inter-bank market on such Interest Determination Date. (b) If on any Interest Determination Date an appropriate rate cannot be determined from the Dow Jones Telerate Service, the Rate of Interest for the next Interest Period shall, subject to the provisions described below, be the rate per annum that the Calculation Agent certifies to be 0.60% per annum above the arithmetic mean of the offered quotations, as communicated to and at the request of the Calculation Agent by not less than two major banks in London selected by the Calculation Agent (the "Reference Banks," which expression shall include any successors nominated by the Calculation Agent), to leading banks in London by the principal London offices of the Reference Banks for three-month U.S. dollar deposits in the London inter- bank market as at 11:00 a.m. (London time) on such Interest Determination Date. (c) If on any Interest Determination Date fewer than two of such offered rates are available, the Rate of Interest for the next Interest Period shall be whichever is the higher of: (i) the Rate of interest in effect for the last preceding Interest Period to which (a) or (b) above shall have applied; and (ii) the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per annum which the Calculation Agent determines to be 0.60% per annum above either (1) the arithmetic mean of the U.S. dollar offered rates which New York City banks selected by the Calculation Agent are or were quoting, on the relevant Interest Determination Date, for three-month deposits to the Reference Banks or those of them (being at least two in number) to which such quotations are or were, in the opinion of the Calculation Agent, being so made, or (2) in the event that the Calculation Agent can determine no such arithmetic mean, the arithmetic mean of the U.S. dollar offered rates which at least two New York City banks selected by the Calculation Agent are or were quoting on such Interest Determination Date to leading European banks for a period of three months; provided, however, that if the banks selected as aforesaid by the Calculation Agent are not quoting as mentioned above, the Rate of Interest shall be the Rate of Interest specified in (i) above. The Calculation Agent shall, as soon as practicable after 11:00 a.m. (London time) on each Interest Determination Date, determine the Rate of Interest and calculate the amount of interest payable in respect of the following Interest Period (the "Interest Amount"). The Interest Amount shall be calculated by applying the Rate of Interest to the principal amount of each Note outstanding at the commencement of the Interest Period, multiplying each such amount by the actual number of days in the Interest Period concerned (which actual number of days shall include the first day but exclude the last day of such Interest Period) divided by 360 and rounding the resultant figure upwards to the nearest cent (half a cent being rounded upwards). The determination of the Rate of Interest and the Interest Amount by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be final and binding on all parties. 4 Notwithstanding anything herein to the contrary, the interest rate on the Notes shall in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. Interest shall cease to accrue on this Note on the Maturity Date unless, upon presentation of this Note, payment of principal is improperly withheld or refused, in which case, interest shall continue to accrue. 2. Calculation Agent. So long as any of this Note remains outstanding, the Company shall maintain under appointment a Calculation Agent, which shall initially be the Fiscal Agent, to calculate the Rate of Interest payable on this Note in respect of each Interest Period. If the Calculation Agent shall fail to establish the Rate of Interest for any Interest Period, or if the Company shall remove the Calculation Agent, the Company shall appoint another commercial or investment bank to act as the Calculation Agent. The Company may change the Calculation Agent without notice. All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions hereof relating to the payment and calculation of interest on this Note by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be binding on the Company, the Calculation Agent and all of the holders and owners of beneficial interests in this Note, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions. 3. Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at an office or agency to be maintained by the Company a register (the register maintained in such office being herein referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Fiscal Agent is hereby appointed "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint co-registrars and may change any Note Registrar or co- registrar without notice. Notes shall be exchangeable pursuant to this Section 3 for Notes registered in the name of, and a transfer of a Note may be registered to, any person other than DTC or its successor depository (DTC or such successor being referred to as a "depository") for such Note or its nominee only if (i) such depository notifies the Company that it is unwilling or unable to continue as depository for such Note or if at any time such depository ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and a successor depository is not appointed by the Company within 90 days, (ii) there shall have occurred and be continuing an Event of Default (as defined below) with respect to the Notes or (iii) the Company, in its sole discretion, elects to terminate the book-entry system. Upon the occurrence of any one or more of the conditions specified in clauses (i), (ii) or (iii) of the preceding sentence, such Note shall be exchanged for Notes registered in the names of, and the transfer of such Note shall be 5 registered to, such persons (including persons other than the depository with respect to such Notes and its nominee) as such depository shall direct, in each case subject to Section 5 hereof. Subject to the restrictions on transfer and delivery set forth in this Note, Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed) at the office of the Fiscal Agent or at the office of any other transfer agent designated by the Company for such purpose. Such transfer or exchange shall be effected upon the Fiscal Agent's or such other transfer agent's, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Company may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts; provided, however, that there -------- ------- shall at all times be a transfer agent in the Borough of Manhattan, The City of New York. The Notes and any certificates for Notes issued in exchange for Notes or a beneficial interest therein will bear the third legend set forth in this Note. The holder of a certificated Note may transfer such Note, subject to compliance with the provisions of such legend, as provided in the preceding paragraph. Upon the transfer, exchange or replacement of Notes bearing such legend, or upon specific request for removal of such legend on a Note, the Company will deliver only Notes bearing such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Company that neither such legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. 4. Acts by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by the Notes or the Fiscal Agency Agreement to be given or taken by holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided in the Notes or the Fiscal Agency Agreement, such action shall become effective when such instrument or instruments are delivered to the Fiscal Agent and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of the Notes and the Fiscal Agency Agreement and conclusive in favor of the Fiscal Agent and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his 6 or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Fiscal Agent deems sufficient. (c) The Company may set any day as the record date for the purpose of determining the holders of outstanding Notes entitled to make any request or demand or give any authorization, direction, notice, consent or waiver or take other action, provided or permitted by the Notes and the Fiscal Agency Agreement to be made, given or taken by holders of the Notes. With regard to any record date set pursuant to the immediately preceding paragraph, the holders of outstanding Notes on such record date (or their duly appointed agents), and only such persons, shall be entitled to take relevant action, whether or not such holders remain holders after such record date. With regard to any action that may be taken hereunder only by holders of a requisite principal amount of outstanding Notes (or their duly appointed agents) and for which a record date is set pursuant to the immediately preceding paragraph, the Company, may at its option, set an expiration date after which no such action purported to be taken by any holder shall be effective unless taken on or prior to such expiration date by holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Company may, on one or more occasions at its option, extend such expiration date to any later date. Nothing in this paragraph shall prevent any holder (or any duly appointed agent thereof) from taking, at any time, any action contrary to or different from, any action previously taken, or purported to have been taken hereunder by such holder, in which event the Company may set a record date in respect thereof pursuant to this paragraph. Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions to this paragraph shall not apply with respect to, any action to be taken by holders pursuant to Section 8 hereof. Upon receipt by the Fiscal Agent of notice of any default, any declaration of acceleration, or any rescission and annulment of any such declaration, or of any direction in accordance with Section 8 hereof, a record date shall automatically and without any other action by any person be set for the purpose of determining the holders of outstanding Notes entitled to join in such notice, declaration, or rescission and annulment, or direction, as the case may be, which record date shall be the close of business on the date the Fiscal Agent receives such notice, declaration, rescission and annulment or direction, as the case may be. The holders of outstanding Notes on such record date (or their duly appointed agent), and only such persons, shall be entitled to join in such notice, declaration, rescission and annulment, or direction, as the case may be, whether or not such holders remain holders after such record date; provided that, unless -------- such notice, declaration, rescission and annulment, or direction, as the case may be, shall have become effective by virtue of holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such notice of default, 7 declaration, or rescission and annulment or direction given or made by the holders, as the case may be, shall automatically and without any action by any person be canceled and of no further effect. Nothing in this paragraph shall prevent a holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a notice of default, a declaration of acceleration, a rescission and annulment of a declaration of acceleration or a direction, contrary to or different from, or, after the expiration of such period, identical to, a previously given notice, declaration, rescission and annulment, or direction, as the case may be, that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. (d) The ownership of the Notes shall be proved by the Note Register. (e) Any request, demand, authorization, direction, notice, consent, waiver, or other Act of the holder of any Note shall bind every future holder of the same Note and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Fiscal Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 5. Denominations. The Notes are issuable only in registered form without coupons in denominations of $100,000 and integral multiples of $1,000 in excess thereof. 6. Persons Deemed Owners. The Company, the Fiscal Agent and any agent of the Company or the Fiscal Agent may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes whatsoever, whether or not this Note shall be overdue, and neither the Company, the Fiscal Agent nor any such agent shall be affected by notice to the contrary. 7. Amendments and Waivers. Without the consent of any holders of the Notes, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into one or more agreements supplemental to the Fiscal Agency Agreement, in form satisfactory to the Fiscal Agent, for any of the following purposes: (a) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Fiscal Agency Agreement; or (b) to add to the covenants of the Company for the benefit of the holders of the Notes; or (c) to add any additional Events of Default; or (d) to secure the Notes; or (e) to evidence and provide for the acceptance of appointment by a successor 8 Fiscal Agent with respect to the Notes; or (f) to amend the restrictions on transfer applicable to the Notes as set forth on this Note; or (g) to cure any ambiguity or to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to correct or supplement any defective provision contained herein or in the Fiscal Agency Agreement, provided that such action pursuant to this clause -------- (g) shall not adversely affect the interests of the holders of the Notes. With the consent of the holders of not less than 66-2/3% in principal amount of the outstanding Notes, by act of said holders delivered to the Company and the Fiscal Agent, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into an agreement supplemental to the Fiscal Agency Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Notes, or the Fiscal Agency Agreement as the same pertains to the Notes, or of modifying in any manner the rights of the holders of the Notes: provided, -------- however, that no such amendment or supplemental agreement shall, without the - ------- consent of the holder of each outstanding Note affected thereby, (1) change the stated maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon, or change any place of payment where, or the coin or currency in which, any Note or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, or (2) reduce the percentage in principal amount of the outstanding Notes, the consent of whose holders is required for any such amendment or supplemental agreement or the consent of whose holders is required for any waiver provided for herein or in the Fiscal Agency Agreement, or (3) modify any of the provisions of this Section or Section 9, except to increase any such percentage or to provide that certain other provisions of the Notes cannot be modified or waived without the consent of the holder of each outstanding Note affected thereby. It shall not be necessary for any act of holders under this Section 7 to approve the particular form of any proposed amendment or supplemental agreement, but it shall be sufficient if such act shall approve the substance thereof. Upon the execution of any agreement supplement to the Fiscal Agency Agreement as permitted by this Section 7, the Notes and the Fiscal Agency Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of the Notes and the Fiscal Agency Agreement, as the same pertains to the Notes, for all purposes; and every holder 9 of the Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 8. Defaults and Remedies. The occurrence of any of the following events shall constitute an Event of Default with respect to the Notes: (a) default in the payment of the principal of any of the Notes when the same becomes due and payable; or (b) default in the payment of any installment of interest upon any of the Notes when the same becomes due and payable, and continuance of such default for a period of 30 days; or (c) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Notes for a period of 90 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Fiscal Agent by registered or certified mail or to the Company and the Fiscal Agent by the holders of at least 25% in aggregate principal amount of the Notes, or (d) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Federal Bankruptcy Code or any other similar applicable Federal or State law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in the bankruptcy or insolvency of the Company or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or (e) the Company shall institute proceedings to be adjudicated bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal Bankruptcy Code or any other similar Federal or State law, or shall consent to the filing of any such petition or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due. If an Event of Default occurs and is continuing, the holders of at least 25% in principal amount of the Notes then outstanding may declare all the Notes to be due and payable immediately. Holders of a majority in principal amount of the Notes may waive an Event of Default and rescind any related declaration except as provided in Section 9(a) hereof. The Fiscal Agent may withhold from holders of Notes notice of any continuing Event of Default, except in respect of a default in the payment of principal of or interest on the Notes, if it determines that withholding such notice is in their interest. 10 9. Waivers. (a) The holders of not less than a majority in principal amount of the outstanding Notes may on behalf of the holders of the Notes waive any past default hereunder with respect to the Notes and its consequences, except a default (1) in the payment of the principal of or interest on any Note, or (2) In respect of a covenant or provision hereof which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Notes; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. (2) The Company may omit in any particular instance to comply with any term, provision or condition set forth in the Notes or the Fiscal Agency Agreement with respect to the Notes if before the time for such compliance the holders of at least 66-2/3% in principal amount of the outstanding Notes shall, by act of such holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but (i) without the consent of the holder of each Note affected thereby, no such waiver shall extend to or affect any term, provision or condition which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected, and (ii) no such waiver shall extend to or affect any term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and any duties of the Fiscal Agent in respect of any such term, provision or condition shall remain in full force and effect. 10. Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary (as defined below) to create, issue, assume or guarantee any debt for money borrowed (hereafter in this Section referred to as "Debt") secured by a mortgage, security interest, pledge, lien or other encumbrance upon any shares of stock of any Restricted Subsidiary (whether such shares of stock are now owned or hereafter acquired) without in any such case effectively providing concurrently with the issuance, assumption or guarantee of any such Debt that the Notes (together with, if the Company shall so determine, any other indebtedness of or guarantee by the Company ranking equally with the Notes and then existing or thereafter created) shall be secured equally and ratably with such Debt. As used herein, the term Restricted Securities shall mean any consolidated operating subsidiary of the Company that accounts for 10% or more of the consolidated revenues and/or assets of Company. 11 The Company will not, and will not permit any Restricted Subsidiary to, issue, sell, assign transfer or otherwise dispose of, directly or indirectly, any of the capital stock (which is defined herein as any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock) (other than nonvoting preferred stock) of any Restricted Subsidiary (except to the Company or to one or more Restricted Subsidiaries or for the purpose of qualifying directors); provided, however, that this covenant shall not apply if: (1) all or any part of such Capital Stock is sold, assigned, transferred or otherwise disposed of in a transaction for consideration which is at least equal to the fair value of such capital stock, as determined by the Board of Directors (acting in good faith); or (2) the issuance, sale, assignment, transfer or other disposition is required to comply with the order of a court or regulatory authority of competent jurisdiction, other than an order issued at the request of the Company or of one of its Restricted Subsidiaries. 11. Company May Consolidate Etc., Only on Certain Terms. The Company covenants that it will not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any person, firm or corporation, except that the Company may merge or consolidate with, or sell or convey all or substantially all of its assets to, any other corporation, provided that (i) either the Company shall be the continuing corporation, or the - -------- successor corporation (if other than the Company) shall be a corporation organized and existing under the laws of the United States of America or a State thereof and such corporation shall expressly assume the due and punctual payment of the principal of and interest on all the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Note and the Fiscal Agency Agreement to be performed by the Company, by supplemental agreement in form satisfactory to the Fiscal Agent, executed and delivered to the Fiscal Agent by such corporation, and (ii) the Company or such successor corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any such covenant or condition. Upon any consolidation of the Company with, or merger of the Company into, any other person or any sale or conveyance of all or substantially all of the assets of the Company in accordance with this Section 11, the successor person formed by such consolidation or into which the Company is merged or to which such sale or conveyance is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Note and the Fiscal Agency Agreement with the same effect as if such successor person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor person shall be relieved of all obligations and covenants under the Notes and the Fiscal Agency Agreement. 12. Unclaimed Amounts. Any money deposited with the Fiscal Agent in trust for the payment of the principal of or interest on any Note and remaining unclaimed for twelve months after such principal or interest has become due and payable shall be paid to the Company upon its request; and the holder of such Note shall thereafter, as an unsecured general creditor, 12 look only to the Company for payment thereof, and all liability of the Fiscal Agent with respect to such money shall thereupon cease. 13. Mutilated, Destroyed, Lost and Stolen Notes. If any Note becomes mutilated or defaced or is apparently destroyed, lost or stolen, the Fiscal Agent shall, subject to the provisions of this Section 13, authenticate and deliver a new Note in exchange and substitution for the mutilated or defaced Note or in lieu of or in substitution for the apparently destroyed, lost or stolen Note. Application for the authentication and delivery of a substitute Note pursuant to this Section 13 may be made at the office of the Fiscal Agent. If the applicant for any substitute Note shall furnish to the Company and the Fiscal Agent (i) in the case of any such request in case of loss or theft, such security or indemnity as may be required by the Company and the Fiscal Agent in their sole discretion to indemnify and defend and to save each of them and any agent of either of them harmless, and (ii) in the case of any request for a substitute Note in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Fiscal Agent of the apparent destruction, loss or theft of such Note and of the ownership thereof, then, in the absence of notice to the Company or the Fiscal Agent that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Fiscal Agent shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any substitute Note under this Section 13, the Company may require the payment of a sum sufficient to cover any tax assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith. Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of the Fiscal Agency Agreement equally and proportionately with any and all other Notes. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 14. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Fiscal Agency Agreement, or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder (and each beneficial owner) of a Note by 13 accepting such Note (or acquisition of a beneficial interest therein) waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes. THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Note shall not be valid or obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Fiscal Agent under the Fiscal Agency Agreement. [The remainder of this page is left blank intentionally.] 14 IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its corporate name, manually or by facsimile, by an Authorized Representative and a facsimile of its corporate seal to be affixed hereunto or imprinted hereon, attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. SIERRA PACIFIC RESOURCES Attest: _________________________ By: ___________________________ Name: Title: Dated: April 20, 2000 FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. BANKERS TRUST COMPANY, as Fiscal Agent By: __________________________ Authorized Signer 15 EX-4.D 6 0006.txt FORM OF FLOATING GLOBAL FLOATING RATE NOTE, 2001 Exhibit 4(D) NOTE NO. R-1 CUSIP N0. 641423AU2 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO NEVADA POWER COMPANY (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A BOOK-ENTRY SECURITY AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) INSIDE THE U.S. TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE U.S. IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. NEVADA POWER COMPANY FLOATING RATE NOTES DUE JUNE 12, 2001 (THE "NOTES") Nevada Power Company, a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), for value received, hereby promises to pay to Cede & Co., as the nominee of The Depository Trust Company, or registered assigns, the principal amount of $150,000,000 on June 12, 2001 (the "Maturity Date"), and to pay interest as set forth below on the outstanding principal amount hereof from time to time from June 9, 2000 or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly in arrears on September 9 and December 9 of 2000 and March 9 and June 9 of 2001 and on the Maturity Date (each, an "Interest Payment Date"), commencing September 9, 2000, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the fifteenth calendar day preceding each Interest Payment Date (each, a "Regular Record Date"); provided, however, that -------- ------- interest payable on the Maturity Date shall be payable to the person to whom the principal amount of this Note is payable. Any interest payable on any Interest Payment Date other than the Maturity Date and not so punctually paid or duly provided for shall forthwith cease to be payable to the person in whose name this Note is registered at the close of business on such Regular Record Date and shall instead be payable to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Company, notice whereof shall be given to the registered holder of this Note (or one or more predecessor Notes) not less than 10 days prior to such special record date. Principal of this Note shall be payable against surrender hereof at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York. Payment of the principal of and interest on this Note shall be made at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided, however, that, at the option of the Company, -------- ------- payments of interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Note Register (as defined in Section 3 hereof); and provided -------- 2 further, however, that in the case of Notes held by a depository (as defined in - ------- ------- Section 3 hereof) or its nominee, payments of principal and interest shall be made by wire transfer of immediately available funds to an account designated by such depository. If any Interest Payment Date for this Note (other than an Interest Payment Date at the Maturity Date) would otherwise be a day that is not a Business Day (as defined in Section 1 hereof), such Interest Payment Date shall be postponed until the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Payment Date shall be the next preceding Business Day. If the Maturity Date of this Note falls on a day that is not a Business Day, the payment of principal and interest will be made on the next succeeding Business Day, and no interest on such payment shall accrue for the period from and after such Maturity Date, except as otherwise expressly provided for herein. This Note is one of a duly authorized series of securities of the Company, limited in aggregate principal amount of $150,000,000, issued under a Fiscal and Paying Agency Agreement, dated as of June 2, 2000, (the "Fiscal Agency Agreement"), duly executed and delivered by the Company to Bankers Trust Company, as Fiscal and Paying Agent (the "Fiscal Agent"). All terms that are used but not defined in this Note and that are defined in the Fiscal Agency Agreement shall have the meanings set forth therein. 1. Calculation of Interest. The period beginning on, and including, June 9, 2000 and ending on, but excluding, the first Interest Payment Date and each successive period beginning on, and including, an Interest Payment Date and ending on, but excluding, the next succeeding Interest Payment Date is herein called an "Interest Period". "Business Day" shall mean any day on which commercial banks and foreign exchange markets are open for business, including dealings in deposits in U.S. dollars in New York. The rate of interest payable from time to time in respect of this Note (the "Rate of Interest") will be a floating rate determined by reference to LIBOR, determined as described below, plus a margin of 0.55% per annum. All percentages resulting from any calculation on this Note will be rounded to the nearest one hundredth-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on the Notes will be rounded to the nearest cent (with one-half cent being rounded upward). (a) At approximately 11:00 a.m. (London time) on the second day on which commercial banks are open for business (including dealings in U.S. Dollar deposits) in London (or, for purposes of paragraph (c) (ii) below, New York) prior to the commencement of the Interest Period for which such rate will apply (each such day an "Interest Determination Date"), Bankers Trust Company, or its successor in this capacity (the "Calculation Agent"), will calculate the rate of interest (the "Rate of Interest") for such Interest Period as, subject to the provisions described below, the rate per annum equal to 0.55% above the rate appearing on the Dow Jones Telerate Page 3750 (or such other page as may replace that page on the Dow Jones Telerate Service) for three-month 3 U.S. dollar deposits in the London inter-bank market on such Interest Determination Date. (b) If on any Interest Determination Date an appropriate rate cannot be determined from the Dow Jones Telerate Service, the Rate of Interest for the next Interest Period shall, subject to the provisions described below, be the rate per annum that the Calculation Agent certifies to be 0.55% per annum above the arithmetic mean of the offered quotations, as communicated to and at the request of the Calculation Agent by not less than two major banks in London selected by the Calculation Agent (the "Reference Banks," which expression shall include any successors nominated by the Calculation Agent), to leading banks in London by the principal London offices of the Reference Banks for three-month U.S. dollar deposits in the London inter- bank market as at 11:00 a.m. (London time) on such Interest Determination Date. (c) If on any Interest Determination Date fewer than two of such offered rates are available, the Rate of Interest for the next Interest Period shall be whichever is the higher of: (i) the Rate of interest in effect for the last preceding Interest Period to which (a) or (b) above shall have applied; and (ii) the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per annum which the Calculation Agent determines to be 0.55% per annum above either (1) the arithmetic mean of the U.S. dollar offered rates which New York City banks selected by the Calculation Agent are or were quoting, on the relevant Interest Determination Date, for three-month deposits to the Reference Banks or those of them (being at least two in number) to which such quotations are or were, in the opinion of the Calculation Agent, being so made, or (2) in the event that the Calculation Agent can determine no such arithmetic mean, the arithmetic mean of the U.S. dollar offered rates which at least two New York City banks selected by the Calculation Agent are or were quoting on such Interest Determination Date to leading European banks for a period of three months; provided, however, that if the banks selected as aforesaid by the Calculation Agent are not quoting as mentioned above, the Rate of Interest shall be the Rate of Interest specified in (i) above. The Calculation Agent shall, as soon as practicable after 11:00 a.m. (London time) on each Interest Determination Date, determine the Rate of Interest and calculate the amount of interest payable in respect of the following Interest Period (the "Interest Amount"). The Interest Amount shall be calculated by applying the Rate of Interest to the principal amount of each Note outstanding at the commencement of the Interest Period, multiplying each such amount by the actual number of days in the Interest Period concerned (which actual number of days shall include the first day but exclude the last day of such Interest Period) divided by 360 and rounding the resultant figure upwards to the nearest cent (half a cent being rounded upwards). The determination of the Rate of Interest and the Interest Amount by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be final and binding on all parties. 4 Notwithstanding anything herein to the contrary, the interest rate on the Notes shall in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. Interest shall cease to accrue on this Note on the Maturity Date unless, upon presentation of this Note, payment of principal is improperly withheld or refused, in which case, interest shall continue to accrue. 2. Calculation Agent. So long as any of this Note remains outstanding, the Company shall maintain under appointment a Calculation Agent, which shall initially be the Fiscal Agent, to calculate the Rate of Interest payable on this Note in respect of each Interest Period. If the Calculation Agent shall fail to establish the Rate of Interest for any Interest Period, or if the Company shall remove the Calculation Agent, the Company shall appoint another commercial or investment bank to act as the Calculation Agent. The Company may change the Calculation Agent without notice. All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions hereof relating to the payment and calculation of interest on this Note by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be binding on the Company, the Calculation Agent and all of the holders and owners of beneficial interests in this Note, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions. 3. Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at an office or agency to be maintained by the Company a register (the register maintained in such office being herein referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Fiscal Agent is hereby appointed "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint co-registrars and may change any Note Registrar or co- registrar without notice. Notes shall be exchangeable pursuant to this Section 3 for Notes registered in the name of, and a transfer of a Note may be registered to, any person other than DTC or its successor depository (DTC or such successor being referred to as a "depository") for such Note or its nominee only if (i) such depository notifies the Company that it is unwilling or unable to continue as depository for such Note or if at any time such depository ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and a successor depository is not appointed by the Company within 90 days, (ii) there shall have occurred and be continuing an Event of Default (as defined below) with respect to the Notes or (iii) the Company, in its sole discretion, elects to terminate the book-entry system. Upon the occurrence of any one or more of the conditions specified in clauses (i), (ii) or (iii) of the preceding sentence, such Note shall be exchanged for Notes registered in the names of, and the transfer of such Note shall be 5 registered to, such persons (including persons other than the depository with respect to such Notes and its nominee) as such depository shall direct, in each case subject to Section 5 hereof. Subject to the restrictions on transfer and delivery set forth in this Note, Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed) at the office of the Fiscal Agent or at the office of any other transfer agent designated by the Company for such purpose. Such transfer or exchange shall be effected upon the Fiscal Agent's or such other transfer agent's, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Company may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts; provided, however, that there -------- ------- shall at all times be a transfer agent in the Borough of Manhattan, The City of New York. The Notes and any certificates for Notes issued in exchange for Notes or a beneficial interest therein will bear the third legend set forth in this Note. The holder of a certificated Note may transfer such Note, subject to compliance with the provisions of such legend, as provided in the preceding paragraph. Upon the transfer, exchange or replacement of Notes bearing such legend, or upon specific request for removal of such legend on a Note, the Company will deliver only Notes bearing such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Company that neither such legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. 4. Acts by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by the Notes or the Fiscal Agency Agreement to be given or taken by holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided in the Notes or the Fiscal Agency Agreement, such action shall become effective when such instrument or instruments are delivered to the Fiscal Agent and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of the Notes and the Fiscal Agency Agreement and conclusive in favor of the Fiscal Agent and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his 6 or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Fiscal Agent deems sufficient. (c) The Company may set any day as the record date for the purpose of determining the holders of outstanding Notes entitled to make any request or demand or give any authorization, direction, notice, consent or waiver or take other action, provided or permitted by the Notes and the Fiscal Agency Agreement to be made, given or taken by holders of the Notes. With regard to any record date set pursuant to the immediately preceding paragraph, the holders of outstanding Notes on such record date (or their duly appointed agents), and only such persons, shall be entitled to take relevant action, whether or not such holders remain holders after such record date. With regard to any action that may be taken hereunder only by holders of a requisite principal amount of outstanding Notes (or their duly appointed agents) and for which a record date is set pursuant to the immediately preceding paragraph, the Company, may at its option, set an expiration date after which no such action purported to be taken by any holder shall be effective unless taken on or prior to such expiration date by holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Company may, on one or more occasions at its option, extend such expiration date to any later date. Nothing in this paragraph shall prevent any holder (or any duly appointed agent thereof) from taking, at any time, any action contrary to or different from, any action previously taken, or purported to have been taken hereunder by such holder, in which event the Company may set a record date in respect thereof pursuant to this paragraph. Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions to this paragraph shall not apply with respect to, any action to be taken by holders pursuant to Section 8 hereof. Upon receipt by the Fiscal Agent of notice of any default, any declaration of acceleration, or any rescission and annulment of any such declaration, or of any direction in accordance with Section 8 hereof, a record date shall automatically and without any other action by any person be set for the purpose of determining the holders of outstanding Notes entitled to join in such notice, declaration, or rescission and annulment, or direction, as the case may be, which record date shall be the close of business on the date the Fiscal Agent receives such notice, declaration, rescission and annulment or direction, as the case may be. The holders of outstanding Notes on such record date (or their duly appointed agent), and only such persons, shall be entitled to join in such notice, declaration, rescission and annulment, or direction, as the case may be, whether or not such holders remain holders after such record date; provided that, unless -------- such notice, declaration, rescission and annulment, or direction, as the case may be, shall have become effective by virtue of holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such notice of default, 7 declaration, or rescission and annulment or direction given or made by the holders, as the case may be, shall automatically and without any action by any person be canceled and of no further effect. Nothing in this paragraph shall prevent a holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a notice of default, a declaration of acceleration, a rescission and annulment of a declaration of acceleration or a direction, contrary to or different from, or, after the expiration of such period, identical to, a previously given notice, declaration, rescission and annulment, or direction, as the case may be, that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. (d) The ownership of the Notes shall be proved by the Note Register. (e) Any request, demand, authorization, direction, notice, consent, waiver, or other Act of the holder of any Note shall bind every future holder of the same Note and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Fiscal Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 5. Denominations. The Notes are issuable only in registered form without coupons in denominations of $100,000 and integral multiples of $1,000 in excess thereof. 6. Persons Deemed Owners. The Company, the Fiscal Agent and any agent of the Company or the Fiscal Agent may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes whatsoever, whether or not this Note shall be overdue, and neither the Company, the Fiscal Agent nor any such agent shall be affected by notice to the contrary. 7. Amendments and Waivers. Without the consent of any holders of the Notes, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into one or more agreements supplemental to the Fiscal Agency Agreement, in form satisfactory to the Fiscal Agent, for any of the following purposes: (a) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Fiscal Agency Agreement; or (b) to add to the covenants of the Company for the benefit of the holders of the Notes; or (c) to add any additional Events of Default; or (d) to secure the Notes; or (e) to evidence and provide for the acceptance of appointment by a successor 8 Fiscal Agent with respect to the Notes; or (f) to amend the restrictions on transfer applicable to the Notes as set forth on this Note; or (g) to cure any ambiguity or to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to correct or supplement any defective provision contained herein or in the Fiscal Agency Agreement, provided that such action pursuant to this clause -------- (g) shall not adversely affect the interests of the holders of the Notes. With the consent of the holders of not less than 66 and 2/3% in principal amount of the outstanding Notes, by act of said holders delivered to the Company and the Fiscal Agent, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into an agreement supplemental to the Fiscal Agency Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Notes, or the Fiscal Agency Agreement as the same pertains to the Notes, or of modifying in any manner the rights of the holders of the Notes: provided, -------- however, that no such amendment or supplemental agreement shall, without the - ------- consent of the holder of each outstanding Note affected thereby, (1) change the stated maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon, or change any place of payment where, or the coin or currency in which, any Note or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, or (2) reduce the percentage in principal amount of the outstanding Notes, the consent of whose holders is required for any such amendment or supplemental agreement or the consent of whose holders is required for any waiver provided for herein or in the Fiscal Agency Agreement, or (3) modify any of the provisions of this Section or Section 9, except to increase any such percentage or to provide that certain other provisions of the Notes cannot be modified or waived without the consent of the holder of each outstanding Note affected thereby. It shall not be necessary for any act of holders under this Section 7 to approve the particular form of any proposed amendment or supplemental agreement, but it shall be sufficient if such act shall approve the substance thereof. Upon the execution of any agreement supplement to the Fiscal Agency Agreement as permitted by this Section 7, the Notes and the Fiscal Agency Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of the Notes and the Fiscal Agency Agreement, as the same pertains to the Notes, for all purposes; and every holder 9 of the Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 8. Defaults and Remedies. The occurrence of any of the following events shall constitute an Event of Default with respect to the Notes: (a) default in the payment of the principal of any of the Notes when the same becomes due and payable; or (b) default in the payment of any installment of interest upon any of the Notes when the same becomes due and payable, and continuance of such default for a period of 30 days; or (c) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Notes for a period of 90 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Fiscal Agent by registered or certified mail or to the Company and the Fiscal Agent by the holders of at least 25% in aggregate principal amount of the Notes, or (d) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Federal Bankruptcy Code or any other similar applicable Federal or State law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in the bankruptcy or insolvency of the Company or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or (e) the Company shall institute proceedings to be adjudicated bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal Bankruptcy Code or any other similar Federal or State law, or shall consent to the filing of any such petition or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due. If an Event of Default occurs and is continuing, the holders of at least 25% in principal amount of the Notes then outstanding may declare all the Notes to be due and payable immediately. Holders of a majority in principal amount of the Notes may waive an Event of Default and rescind any related declaration except as provided in Section 9(a) hereof. The Fiscal Agent may withhold from holders of Notes notice of any continuing Event of Default, except in respect of a default in the payment of principal of or interest on the Notes, if it determines that withholding such notice is in their interest. 10 9. Waivers. (a) The holders of not less than a majority in principal amount of the outstanding Notes may on behalf of the holders of the Notes waive any past default hereunder with respect to the Notes and its consequences, except a default (1) in the payment of the principal of or interest on any Note, or (2) In respect of a covenant or provision hereof which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Notes; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. (b) The Company may omit in any particular instance to comply with any term, provision or condition set forth in the Notes or the Fiscal Agency Agreement with respect to the Notes if before the time for such compliance the holders of at least 66 and 2/3% in principal amount of the outstanding Notes shall, by act of such holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but (i) without the consent of the holder of each Note affected thereby, no such waiver shall extend to or affect any term, provision or condition which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected, and (ii) no such waiver shall extend to or affect any term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and any duties of the Fiscal Agent in respect of any such term, provision or condition shall remain in full force and effect. 10. Company May Consolidate Etc., Only on Certain Terms. The Company covenants that it will not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any person, firm or corporation, except that the Company may merge or consolidate with, or sell or convey all or substantially all of its assets to, any other corporation, provided that (i) either the Company shall be the continuing corporation, or the - -------- successor corporation (if other than the Company) shall be a corporation organized and existing under the laws of the United States of America or a State thereof and such corporation shall expressly assume the due and punctual payment of the principal of and interest on all the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Note and the Fiscal Agency Agreement to be performed by the Company, by supplemental agreement in form satisfactory to the Fiscal Agent, executed and delivered to the Fiscal Agent by such corporation, and (ii) the Company or such successor 11 corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any such covenant or condition. Upon any consolidation of the Company with, or merger of the Company into, any other person or any sale or conveyance of all or substantially all of the assets of the Company in accordance with this Section 10, the successor person formed by such consolidation or into which the Company is merged or to which such sale or conveyance is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Note and the Fiscal Agency Agreement with the same effect as if such successor person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor person shall be relieved of all obligations and covenants under the Notes and the Fiscal Agency Agreement. 11. Unclaimed Amounts. Any money deposited with the Fiscal Agent in trust for the payment of the principal of or interest on any Note and remaining unclaimed for twelve months after such principal or interest has become due and payable shall be paid to the Company upon its request; and the holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Fiscal Agent with respect to such money shall thereupon cease. 12. Mutilated, Destroyed, Lost and Stolen Notes. If any Note becomes mutilated or defaced or is apparently destroyed, lost or stolen, the Fiscal Agent shall, subject to the provisions of this Section 12, authenticate and deliver a new Note in exchange and substitution for the mutilated or defaced Note or in lieu of or in substitution for the apparently destroyed, lost or stolen Note. Application for the authentication and delivery of a substitute Note pursuant to this Section 12 may be made at the office of the Fiscal Agent. If the applicant for any substitute Note shall furnish to the Company and the Fiscal Agent (i) in the case of any such request in case of loss or theft, such security or indemnity as may be required by the Company and the Fiscal Agent in their sole discretion to indemnify and defend and to save each of them and any agent of either of them harmless, and (ii) in the case of any request for a substitute Note in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Fiscal Agent of the apparent destruction, loss or theft of such Note and of the ownership thereof, then, in the absence of notice to the Company or the Fiscal Agent that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Fiscal Agent shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any substitute Note under this Section 12, the Company may require the payment of a sum sufficient to cover any tax assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith. 12 Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of the Fiscal Agency Agreement equally and proportionately with any and all other Notes. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 13. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Fiscal Agency Agreement, or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder (and each beneficial owner) of a Note by accepting such Note (or acquisition of a beneficial interest therein) waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes. THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Note shall not be valid or obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Fiscal Agent under the Fiscal Agency Agreement. [The remainder of this page is left blank intentionally.] 13 IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its corporate name, manually or by facsimile, by an Authorized Representative and a facsimile of its corporate seal to be affixed hereunto or imprinted hereon, attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. NEVADA POWER COMPANY Attest: _________________________ By: ___________________________ Name: Title: Dated: June 9, 2000 FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. BANKERS TRUST COMPANY, as Fiscal Agent By: __________________________ Authorized Signer 14 EX-4.E 7 0007.txt FORM OF FLOATING GLOBAL FLOATING RATE NOTE, 2001 Exhibit 4(E) NOTE NO. R-1 CUSIP N0. 641423AV0 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO NEVADA POWER COMPANY (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A BOOK-ENTRY SECURITY AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) INSIDE THE U.S. TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE U.S. IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. NEVADA POWER COMPANY FLOATING RATE NOTES DUE AUGUST 20, 2001 (THE "NOTES") Nevada Power Company, a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), for value received, hereby promises to pay to Cede & Co., as the nominee of The Depository Trust Company, or registered assigns, the principal amount of $100,000,000 on August 20, 2001 (the "Maturity Date"), and to pay interest as set forth below on the outstanding principal amount hereof from time to time from August 18, 2000 or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly in arrears on November 18, 2000 and February 18, May 18 and August 18 of 2001 and on the Maturity Date (each, an "Interest Payment Date"), commencing November 18, 2000, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the fifteenth calendar day preceding each Interest Payment Date (each, a "Regular Record Date"); provided, however, that -------- ------- interest payable on the Maturity Date shall be payable to the person to whom the principal amount of this Note is payable. Any interest payable on any Interest Payment Date other than the Maturity Date and not so punctually paid or duly provided for shall forthwith cease to be payable to the person in whose name this Note is registered at the close of business on such Regular Record Date and shall instead be payable to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Company, notice whereof shall be given to the registered holder of this Note (or one or more predecessor Notes) not less than 10 days prior to such special record date. Principal of this Note shall be payable against surrender hereof at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York. Payment of the principal of and interest on this Note shall be made at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided, however, that, at the option of the Company, -------- ------- payments of interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Note Register (as defined in Section 3 hereof); and provided further, however, that in the case of Notes -------- ------- ------- held by a depository (as defined in Section 3 hereof) 2 or its nominee, payments of principal and interest shall be made by wire transfer of immediately available funds to an account designated by such depository. If any Interest Payment Date for this Note (other than an Interest Payment Date at the Maturity Date) would otherwise be a day that is not a Business Day (as defined in Section 1 hereof), such Interest Payment Date shall be postponed until the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Payment Date shall be the next preceding Business Day. If the Maturity Date of this Note, or any date on which this Note is to be redeemed as provided below, falls on a day that is not a Business Day, the payment of principal and interest will be made on the next succeeding Business Day, and no interest on such payment shall accrue for the period from and after such Maturity Date or redemption date, except as otherwise expressly provided for herein. This Note is one of a duly authorized series of securities of the Company, limited in aggregate principal amount of $100,000,000, issued under a Fiscal and Paying Agency Agreement, dated as of August 15, 2000, (the "Fiscal Agency Agreement"), duly executed and delivered by the Company to Bankers Trust Company, as Fiscal and Paying Agent (the "Fiscal Agent"). All terms that are used but not defined in this Note and that are defined in the Fiscal Agency Agreement shall have the meanings set forth therein. This Note may be redeemed at the option of the Company, in whole or in part from time to time, beginning on February 18, 2001, and on the 18th day of each month thereafter, at a redemption price equal to 100% of the unpaid principal amount plus accrued and unpaid interest on this Note to the date of redemption. Any such redemption may be made by the Company upon not less than 15 calendar days prior notice mailed to the holder of this Note at its registered address by first-class mail. On and after the redemption date, interest shall cease to accrue on this Note unless the Company defaults in the payment of any principal then due and payable. 1. Calculation of Interest. The period beginning on, and including, August 18, 2000 and ending on, but excluding, the first Interest Payment Date and each successive period beginning on, and including, an Interest Payment Date and ending on, but excluding, the next succeeding Interest Payment Date is herein called an "Interest Period". "Business Day" shall mean any day on which commercial banks and foreign exchange markets are open for business, including dealings in deposits in U.S. dollars in New York. The rate of interest payable from time to time in respect of this Note (the "Rate of Interest") will be a floating rate determined by reference to LIBOR, determined as described below, plus a margin of 0.58% per annum. All percentages resulting from any calculation on this Note will be rounded to the nearest one hundredth-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on the Notes will be rounded to the nearest cent (with one-half cent being rounded upward). (a) At approximately 11:00 a.m. (London time) on the second day on which commercial banks are open for business (including dealings in 3 U.S. Dollar deposits) in London (or, for purposes of paragraph (c) (ii) below, New York) prior to the commencement of the Interest Period for which such rate will apply (each such day an "Interest Determination Date"), Bankers Trust Company, or its successor in this capacity (the "Calculation Agent"), will calculate the Rate of Interest for such Interest Period as, subject to the provisions described below, the rate per annum equal to 0.58% above the rate appearing on the Dow Jones Telerate Page 3750 (or such other page as may replace that page on the Dow Jones Telerate Service) for three-month U.S. dollar deposits in the London inter-bank market on such Interest Determination Date. (b) If on any Interest Determination Date an appropriate rate cannot be determined from the Dow Jones Telerate Service, the Rate of Interest for the next Interest Period shall, subject to the provisions described below, be the rate per annum that the Calculation Agent certifies to be 0.58% per annum above the arithmetic mean of the offered quotations, as communicated to and at the request of the Calculation Agent by not less than two major banks in London selected by the Calculation Agent (the "Reference Banks," which expression shall include any successors nominated by the Calculation Agent), to leading banks in London by the principal London offices of the Reference Banks for three-month U.S. dollar deposits in the London inter- bank market as at 11:00 a.m. (London time) on such Interest Determination Date. (c) If on any Interest Determination Date fewer than two of such offered rates are available, the Rate of Interest for the next Interest Period shall be whichever is the higher of: (i) the Rate of interest in effect for the last preceding Interest Period to which (a) or (b) above shall have applied; and (ii) the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per annum which the Calculation Agent determines to be 0.58% per annum above either (1) the arithmetic mean of the U.S. dollar offered rates which New York City banks selected by the Calculation Agent are or were quoting, on the relevant Interest Determination Date, for three-month deposits to the Reference Banks or those of them (being at least two in number) to which such quotations are or were, in the opinion of the Calculation Agent, being so made, or (2) in the event that the Calculation Agent can determine no such arithmetic mean, the arithmetic mean of the U.S. dollar offered rates which at least two New York City banks selected by the Calculation Agent are or were quoting on such Interest Determination Date to leading European banks for a period of three months; provided, however, that if the banks selected as aforesaid by the Calculation Agent are not quoting as mentioned above, the Rate of Interest shall be the Rate of Interest specified in (i) above. The Calculation Agent shall, as soon as practicable after 11:00 a.m. (London time) on each Interest Determination Date, determine the Rate of Interest and calculate the amount of interest payable in respect of the following Interest Period (the "Interest Amount"). The Interest Amount shall be calculated by applying the Rate of Interest to the principal amount of each Note 4 outstanding at the commencement of the Interest Period, multiplying each such amount by the actual number of days in the Interest Period concerned (which actual number of days shall include the first day but exclude the last day of such Interest Period) divided by 360 and rounding the resultant figure upwards to the nearest cent (half a cent being rounded upwards). The determination of the Rate of Interest and the Interest Amount by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be final and binding on all parties. Notwithstanding anything herein to the contrary, the interest rate on the Notes shall in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. Interest shall cease to accrue on this Note on the Maturity Date unless, upon presentation of this Note, payment of principal is improperly withheld or refused, in which case, interest shall continue to accrue. 2. Calculation Agent. So long as any of this Note remains outstanding, the Company shall maintain under appointment a Calculation Agent, which shall initially be the Fiscal Agent, to calculate the Rate of Interest payable on this Note in respect of each Interest Period. If the Calculation Agent shall fail to establish the Rate of Interest for any Interest Period, or if the Company shall remove the Calculation Agent, the Company shall appoint another commercial or investment bank to act as the Calculation Agent. The Company may change the Calculation Agent without notice. All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions hereof relating to the payment and calculation of interest on this Note by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be binding on the Company, the Calculation Agent and all of the holders and owners of beneficial interests in this Note, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions. 3. Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at an office or agency to be maintained by the Company a register (the register maintained in such office being herein referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Fiscal Agent is hereby appointed "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint co-registrars and may change any Note Registrar or co- registrar without notice. Notes shall be exchangeable pursuant to this Section 3 for Notes registered in the name of, and a transfer of a Note may be registered to, any person other than DTC or its successor depository (DTC or such successor being referred to as a "depository") for such Note or its nominee only if (i) such depository notifies the Company that it is unwilling or unable to continue as depository for such Note or if at any time such depository ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and a successor 5 depository is not appointed by the Company within 90 days, (ii) there shall have occurred and be continuing an Event of Default (as defined below) with respect to the Notes or (iii) the Company, in its sole discretion, elects to terminate the book-entry system. Upon the occurrence of any one or more of the conditions specified in clauses (i), (ii) or (iii) of the preceding sentence, such Note shall be exchanged for Notes registered in the names of, and the transfer of such Note shall be registered to, such persons (including persons other than the depository with respect to such Notes and its nominee) as such depository shall direct, in each case subject to Section 5 hereof. Subject to the restrictions on transfer and delivery set forth in this Note, Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed) at the office of the Fiscal Agent or at the office of any other transfer agent designated by the Company for such purpose. Such transfer or exchange shall be effected upon the Fiscal Agent's or such other transfer agent's, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Company may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts; provided, however, that there -------- ------- shall at all times be a transfer agent in the Borough of Manhattan, The City of New York. The Notes and any certificates for Notes issued in exchange for Notes or a beneficial interest therein will bear the third legend set forth in this Note. The holder of a certificated Note may transfer such Note, subject to compliance with the provisions of such legend, as provided in the preceding paragraph. Upon the transfer, exchange or replacement of Notes bearing such legend, or upon specific request for removal of such legend on a Note, the Company will deliver only Notes bearing such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Company that neither such legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. 4. Acts by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by the Notes or the Fiscal Agency Agreement to be given or taken by holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided in the Notes or the Fiscal Agency Agreement, such action shall become effective when such instrument or instruments are delivered to the Fiscal Agent and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of the Notes and the Fiscal Agency Agreement and conclusive in favor of the Fiscal Agent and the Company, if made in the manner provided in this Section. 6 (b) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Fiscal Agent deems sufficient. (c) The Company may set any day as the record date for the purpose of determining the holders of outstanding Notes entitled to make any request or demand or give any authorization, direction, notice, consent or waiver or take other action, provided or permitted by the Notes and the Fiscal Agency Agreement to be made, given or taken by holders of the Notes. With regard to any record date set pursuant to the immediately preceding paragraph, the holders of outstanding Notes on such record date (or their duly appointed agents), and only such persons, shall be entitled to take relevant action, whether or not such holders remain holders after such record date. With regard to any action that may be taken hereunder only by holders of a requisite principal amount of outstanding Notes (or their duly appointed agents) and for which a record date is set pursuant to the immediately preceding paragraph, the Company, may at its option, set an expiration date after which no such action purported to be taken by any holder shall be effective unless taken on or prior to such expiration date by holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Company may, on one or more occasions at its option, extend such expiration date to any later date. Nothing in this paragraph shall prevent any holder (or any duly appointed agent thereof) from taking, at any time, any action contrary to or different from, any action previously taken, or purported to have been taken hereunder by such holder, in which event the Company may set a record date in respect thereof pursuant to this paragraph. Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions to this paragraph shall not apply with respect to, any action to be taken by holders pursuant to Section 8 hereof. Upon receipt by the Fiscal Agent of notice of any default, any declaration of acceleration, or any rescission and annulment of any such declaration, or of any direction in accordance with Section 8 hereof, a record date shall automatically and without any other action by any person be set for the purpose of determining the holders of outstanding Notes entitled to join in such notice, declaration, or rescission and annulment, or direction, as the case may be, which record date shall be the close of business on the date the Fiscal Agent receives such notice, declaration, rescission and annulment or direction, as the case may be. The holders of outstanding Notes on such record date (or their duly appointed agent), and only such persons, shall be entitled to join in such notice, declaration, rescission and annulment, or direction, as the case may be, 7 whether or not such holders remain holders after such record date; provided -------- that, unless such notice, declaration, rescission and annulment, or direction, as the case may be, shall have become effective by virtue of holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such notice of default, declaration, or rescission and annulment or direction given or made by the holders, as the case may be, shall automatically and without any action by any person be canceled and of no further effect. Nothing in this paragraph shall prevent a holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a notice of default, a declaration of acceleration, a rescission and annulment of a declaration of acceleration or a direction, contrary to or different from, or, after the expiration of such period, identical to, a previously given notice, declaration, rescission and annulment, or direction, as the case may be, that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. (d) The ownership of the Notes shall be proved by the Note Register. (e) Any request, demand, authorization, direction, notice, consent, waiver, or other Act of the holder of any Note shall bind every future holder of the same Note and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Fiscal Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 5. Denominations. The Notes are issuable only in registered form without coupons in denominations of $100,000 and integral multiples of $1,000 in excess thereof. 6. Persons Deemed Owners. The Company, the Fiscal Agent and any agent of the Company or the Fiscal Agent may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes whatsoever, whether or not this Note shall be overdue, and neither the Company, the Fiscal Agent nor any such agent shall be affected by notice to the contrary. 7. Amendments and Waivers. Without the consent of any holders of the Notes, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into one or more agreements supplemental to the Fiscal Agency Agreement, in form satisfactory to the Fiscal Agent, for any of the following purposes: (a) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Fiscal Agency Agreement; or (b) to add to the covenants of the Company for the benefit of the holders of the Notes; or 8 (c) to add any additional Events of Default; or (d) to secure the Notes; or (e) to evidence and provide for the acceptance of appointment by a successor Fiscal Agent with respect to the Notes; or (f) to amend the restrictions on transfer applicable to the Notes as set forth on this Note; or (g) to cure any ambiguity or to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to correct or supplement any defective provision contained herein or in the Fiscal Agency Agreement, provided that such action pursuant to this clause -------- (g) shall not adversely affect the interests of the holders of the Notes. With the consent of the holders of not less than 66 and 2/3% in principal amount of the outstanding Notes, by act of said holders delivered to the Company and the Fiscal Agent, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into an agreement supplemental to the Fiscal Agency Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Notes, or the Fiscal Agency Agreement as the same pertains to the Notes, or of modifying in any manner the rights of the holders of the Notes: provided, -------- however, that no such amendment or supplemental agreement shall, without the - ------- consent of the holder of each outstanding Note affected thereby, (1) change the stated maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon, or change any place of payment where, or the coin or currency in which, any Note or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, or (2) reduce the percentage in principal amount of the outstanding Notes, the consent of whose holders is required for any such amendment or supplemental agreement or the consent of whose holders is required for any waiver provided for herein or in the Fiscal Agency Agreement, or (3) modify any of the provisions of this Section or Section 9, except to increase any such percentage or to provide that certain other provisions of the Notes cannot be modified or waived without the consent of the holder of each outstanding Note affected thereby. It shall not be necessary for any act of holders under this Section 7 to approve the particular form of any proposed amendment or supplemental agreement, but it shall be sufficient if such act shall approve the substance thereof. 9 Upon the execution of any agreement supplement to the Fiscal Agency Agreement as permitted by this Section 7, the Notes and the Fiscal Agency Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of the Notes and the Fiscal Agency Agreement, as the same pertains to the Notes, for all purposes; and every holder of the Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 8. Defaults and Remedies. The occurrence of any of the following events shall constitute an Event of Default with respect to the Notes: (a) default in the payment of the principal of any of the Notes when the same becomes due and payable; or (b) default in the payment of any installment of interest upon any of the Notes when the same becomes due and payable, and continuance of such default for a period of 30 days; or (c) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Notes for a period of 90 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Fiscal Agent by registered or certified mail or to the Company and the Fiscal Agent by the holders of at least 25% in aggregate principal amount of the Notes, or (d) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Federal Bankruptcy Code or any other similar applicable Federal or State law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in the bankruptcy or insolvency of the Company or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or (e) the Company shall institute proceedings to be adjudicated bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal Bankruptcy Code or any other similar Federal or State law, or shall consent to the filing of any such petition or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due. If an Event of Default occurs and is continuing, the holders of at least 25% in principal amount of the Notes then outstanding may declare all the Notes to be due and payable 10 immediately. Holders of a majority in principal amount of the Notes may waive an Event of Default and rescind any related declaration except as provided in Section 9(a) hereof. The Fiscal Agent may withhold from holders of Notes notice of any continuing Event of Default, except in respect of a default in the payment of principal of or interest on the Notes, if it determines that withholding such notice is in their interest. 9. Waivers. (a) The holders of not less than a majority in principal amount of the outstanding Notes may on behalf of the holders of the Notes waive any past default hereunder with respect to the Notes and its consequences, except a default (1) in the payment of the principal of or interest on any Note, or (2) in respect of a covenant or provision hereof which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Notes; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. (b) The Company may omit in any particular instance to comply with any term, provision or condition set forth in the Notes or the Fiscal Agency Agreement with respect to the Notes if before the time for such compliance the holders of at least 66 and 2/3% in principal amount of the outstanding Notes shall, by act of such holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but (i) without the consent of the holder of each Note affected thereby, no such waiver shall extend to or affect any term, provision or condition which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected, and (ii) no such waiver shall extend to or affect any term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and any duties of the Fiscal Agent in respect of any such term, provision or condition shall remain in full force and effect. 10. Company May Consolidate Etc., Only on Certain Terms. The Company covenants that it will not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any person, firm or corporation, except that the Company may merge or consolidate with, or sell or convey all or substantially all of its assets to, any other corporation, provided that (i) either the Company shall be the continuing corporation, or the - -------- successor corporation (if other than the Company) shall be a corporation organized and existing under the laws of the United States of America or a State thereof and such corporation shall 11 expressly assume the due and punctual payment of the principal of and interest on all the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Note and the Fiscal Agency Agreement to be performed by the Company, by supplemental agreement in form satisfactory to the Fiscal Agent, executed and delivered to the Fiscal Agent by such corporation, and (ii) the Company or such successor corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any such covenant or condition. Upon any consolidation of the Company with, or merger of the Company into, any other person or any sale or conveyance of all or substantially all of the assets of the Company in accordance with this Section 10, the successor person formed by such consolidation or into which the Company is merged or to which such sale or conveyance is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Note and the Fiscal Agency Agreement with the same effect as if such successor person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor person shall be relieved of all obligations and covenants under the Notes and the Fiscal Agency Agreement. 11. Unclaimed Amounts. Any money deposited with the Fiscal Agent in trust for the payment of the principal of or interest on any Note and remaining unclaimed for twelve months after such principal or interest has become due and payable shall be paid to the Company upon its request; and the holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Fiscal Agent with respect to such money shall thereupon cease. 12. Mutilated, Destroyed, Lost and Stolen Notes. If any Note becomes mutilated or defaced or is apparently destroyed, lost or stolen, the Fiscal Agent shall, subject to the provisions of this Section 12, authenticate and deliver a new Note in exchange and substitution for the mutilated or defaced Note or in lieu of or in substitution for the apparently destroyed, lost or stolen Note. Application for the authentication and delivery of a substitute Note pursuant to this Section 12 may be made at the office of the Fiscal Agent. If the applicant for any substitute Note shall furnish to the Company and the Fiscal Agent (i) in the case of any such request in case of loss or theft, such security or indemnity as may be required by the Company and the Fiscal Agent in their sole discretion to indemnify and defend and to save each of them and any agent of either of them harmless, and (ii) in the case of any request for a substitute Note in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Fiscal Agent of the apparent destruction, loss or theft of such Note and of the ownership thereof, then, in the absence of notice to the Company or the Fiscal Agent that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Fiscal Agent shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. 12 Upon the issuance of any substitute Note under this Section 12, the Company may require the payment of a sum sufficient to cover any tax assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith. Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of the Fiscal Agency Agreement equally and proportionately with any and all other Notes. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 13. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Fiscal Agency Agreement, or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder (and each beneficial owner) of a Note by accepting such Note (or acquisition of a beneficial interest therein) waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes. THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Note shall not be valid or obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Fiscal Agent under the Fiscal Agency Agreement. [The remainder of this page is left blank intentionally.] 13 IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its corporate name, manually or by facsimile, by an Authorized Representative and a facsimile of its corporate seal to be affixed hereunto or imprinted hereon, attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. NEVADA POWER COMPANY Attest: _________________________ By: ___________________________ Name: Title: Dated: August 18, 2000 FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. BANKERS TRUST COMPANY, as Fiscal Agent By: __________________________ Authorized Signer 14 EX-4.F 8 0008.txt FORM OF FLOATING GLOBAL FLOATING RATE NOTE, 2001 Exhibit 4(F) NOTE NO. R-1 CUSIP N0. 641423 AW 8 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO NEVADA POWER COMPANY (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A BOOK-ENTRY SECURITY AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) INSIDE THE U.S. TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE U.S. IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. NEVADA POWER COMPANY FLOATING RATE NOTES DUE DECEMBER 17, 2001 (THE "NOTES") Nevada Power Company, a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), for value received, hereby promises to pay to Cede & Co., as the nominee of The Depository Trust Company, or registered assigns, the principal amount of $100,000,000 on December 17, 2001 (the "Maturity Date"), and to pay interest as set forth below on the outstanding principal amount hereof from time to time from December 18, 2000 or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly in arrears on March 17, June 17 and September 17 of 2001 and on the Maturity Date (each, an "Interest Payment Date"), commencing March 17, 2001, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the fifteenth calendar day preceding each Interest Payment Date (each, a "Regular Record Date"); provided, however, that -------- ------- interest payable on the Maturity Date shall be payable to the person to whom the principal amount of this Note is payable. Any interest payable on any Interest Payment Date other than the Maturity Date and not so punctually paid or duly provided for shall forthwith cease to be payable to the person in whose name this Note is registered at the close of business on such Regular Record Date and shall instead be payable to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Company, notice whereof shall be given to the registered holder of this Note (or one or more predecessor Notes) not less than 10 days prior to such special record date. Principal of this Note shall be payable against surrender hereof at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York. Payment of the principal of and interest on this Note shall be made at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided, however, that, at the option of the Company, -------- ------- payments of interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Note Register (as defined in Section 3 hereof); and provided further, however, that in the case of Notes -------- ------- ------- held by a depository (as defined in Section 3 hereof) 2 or its nominee, payments of principal and interest shall be made by wire transfer of immediately available funds to an account designated by such depository. If any Interest Payment Date for this Note (other than an Interest Payment Date at the Maturity Date) would otherwise be a day that is not a Business Day (as defined in Section 1 hereof), such Interest Payment Date shall be postponed until the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Payment Date shall be the next preceding Business Day. If the Maturity Date of this Note falls on a day that is not a Business Day, the payment of principal and interest will be made on the next succeeding Business Day, and no interest on such payment shall accrue for the period from and after such Maturity Date, except as otherwise expressly provided for herein. This Note, in the aggregate principal amount of $100,000,000, is the initial issuance in a series of notes designated "Floating Rate Notes due December 17, 2001," issued under a Fiscal and Paying Agency Agreement, dated as of December 11, 2000, (the "Fiscal Agency Agreement"), duly executed and delivered by the Company to Bankers Trust Company, as Fiscal and Paying Agent (the "Fiscal Agent"). Such series of securities is not limited as to aggregate principal amount. All terms that are used but not defined in this Note and that are defined in the Fiscal Agency Agreement shall have the meanings set forth therein. 1. Calculation of Interest. The period beginning on, and including, December 18, 2000 and ending on, but excluding, the first Interest Payment Date and each successive period beginning on, and including, an Interest Payment Date and ending on, but excluding, the next succeeding Interest Payment Date is herein called an "Interest Period". "Business Day" shall mean any day on which commercial banks and foreign exchange markets are open for business, including dealings in deposits in U.S. dollars in New York. The rate of interest payable from time to time in respect of this Note (the "Rate of Interest") will be a floating rate determined by reference to LIBOR, determined as described below, plus a margin of 0.79% per annum. All percentages resulting from any calculation on this Note will be rounded to the nearest one hundredth-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on the Notes will be rounded to the nearest cent (with one-half cent being rounded upward). (a) At approximately 11:00 a.m. (London time) on the second day on which commercial banks are open for business (including dealings in U.S. Dollar deposits) in London (or, for purposes of paragraph (c) (ii) below, New York) prior to the commencement of the Interest Period for which such rate will apply (each such day an "Interest Determination Date"), Bankers Trust Company, or its successor in this capacity (the "Calculation Agent"), will calculate the Rate of Interest for such Interest Period as, subject to the provisions described below, the rate per annum equal to 0.79% above the rate appearing on the British Bankers Association Telerate Page 3750 (or such other page as may replace that page on the British Bankers Association Telerate Service) for three- 3 month U.S. dollar deposits in the London inter-bank market on such Interest Determination Date. (b) If on any Interest Determination Date an appropriate rate cannot be determined from the British Bankers Association Telerate Service, the Rate of Interest for the next Interest Period shall, subject to the provisions described below, be the rate per annum that the Calculation Agent certifies to be 0.79% per annum above the arithmetic mean of the offered quotations, as communicated to and at the request of the Calculation Agent by not less than two major banks in London selected by the Calculation Agent (the "Reference Banks," which expression shall include any successors nominated by the Calculation Agent), to leading banks in London by the principal London offices of the Reference Banks for three-month U.S. dollar deposits in the London inter-bank market as at 11:00 a.m. (London time) on such Interest Determination Date. (c) If on any Interest Determination Date fewer than two of such offered rates are available, the Rate of Interest for the next Interest Period shall be whichever is the higher of: (i) the Rate of interest in effect for the last preceding Interest Period to which (a) or (b) above shall have applied; and (ii) the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per annum which the Calculation Agent determines to be 0.79% per annum above either (1) the arithmetic mean of the U.S. dollar offered rates which New York City banks selected by the Calculation Agent are or were quoting, on the relevant Interest Determination Date, for three-month deposits to the Reference Banks or those of them (being at least two in number) to which such quotations are or were, in the opinion of the Calculation Agent, being so made, or (2) in the event that the Calculation Agent can determine no such arithmetic mean, the arithmetic mean of the U.S. dollar offered rates which at least two New York City banks selected by the Calculation Agent are or were quoting on such Interest Determination Date to leading European banks for a period of three months; provided, however, that if the banks selected as aforesaid by the Calculation Agent are not quoting as mentioned above, the Rate of Interest shall be the Rate of Interest specified in (i) above. The Calculation Agent shall, as soon as practicable after 11:00 a.m. (London time) on each Interest Determination Date, determine the Rate of Interest and calculate the amount of interest payable in respect of the following Interest Period (the "Interest Amount"). The Interest Amount shall be calculated by applying the Rate of Interest to the principal amount of each Note outstanding at the commencement of the Interest Period, multiplying each such amount by the actual number of days in the Interest Period concerned (which actual number of days shall include the first day but exclude the last day of such Interest Period) divided by 360 and rounding the resultant figure upwards to the nearest cent (half a cent being rounded upwards). The determination of the Rate of Interest and the Interest Amount by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be final and binding on all parties. 4 Notwithstanding anything herein to the contrary, the interest rate on the Notes shall in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. Interest shall cease to accrue on this Note on the Maturity Date unless, upon presentation of this Note, payment of principal is improperly withheld or refused, in which case, interest shall continue to accrue. 2. Calculation Agent. So long as any of this Note remains outstanding, the Company shall maintain under appointment a Calculation Agent, which shall initially be the Fiscal Agent, to calculate the Rate of Interest payable on this Note in respect of each Interest Period. If the Calculation Agent shall fail to establish the Rate of Interest for any Interest Period, or if the Company shall remove the Calculation Agent, the Company shall appoint another commercial or investment bank to act as the Calculation Agent. The Company may change the Calculation Agent without notice. All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions hereof relating to the payment and calculation of interest on this Note by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be binding on the Company, the Calculation Agent and all of the holders and owners of beneficial interests in this Note, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions. 3. Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at an office or agency to be maintained by the Company a register (the register maintained in such office being herein referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Fiscal Agent is hereby appointed "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint co-registrars and may change any Note Registrar or co- registrar without notice. Notes shall be exchangeable pursuant to this Section 3 for Notes registered in the name of, and a transfer of a Note may be registered to, any person other than DTC or its successor depository (DTC or such successor being referred to as a "depository") for such Note or its nominee only if (i) such depository notifies the Company that it is unwilling or unable to continue as depository for such Note or if at any time such depository ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and a successor depository is not appointed by the Company within 90 days, (ii) there shall have occurred and be continuing an Event of Default (as defined below) with respect to the Notes or (iii) the Company, in its sole discretion, elects to terminate the book-entry system. Upon the occurrence of any one or more of the conditions specified in clauses (i), (ii) or (iii) of the preceding sentence, such Note shall be exchanged for Notes registered in the names of, and the transfer of such Note shall be 5 registered to, such persons (including persons other than the depository with respect to such Notes and its nominee) as such depository shall direct, in each case subject to Section 5 hereof. Subject to the restrictions on transfer and delivery set forth in this Note, Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed) at the office of the Fiscal Agent or at the office of any other transfer agent designated by the Company for such purpose. Such transfer or exchange shall be effected upon the Fiscal Agent's or such other transfer agent's, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Company may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts; provided, however, that there -------- ------- shall at all times be a transfer agent in the Borough of Manhattan, The City of New York. The Notes and any certificates for Notes issued in exchange for Notes or a beneficial interest therein will bear the third legend set forth in this Note. The holder of a certificated Note may transfer such Note, subject to compliance with the provisions of such legend, as provided in the preceding paragraph. Upon the transfer, exchange or replacement of Notes bearing such legend, or upon specific request for removal of such legend on a Note, the Company will deliver only Notes bearing such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Company that neither such legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. 4. Acts by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by the Notes or the Fiscal Agency Agreement to be given or taken by holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided in the Notes or the Fiscal Agency Agreement, such action shall become effective when such instrument or instruments are delivered to the Fiscal Agent and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of the Notes and the Fiscal Agency Agreement and conclusive in favor of the Fiscal Agent and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his 6 or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Fiscal Agent deems sufficient. (c) The Company may set any day as the record date for the purpose of determining the holders of outstanding Notes entitled to make any request or demand or give any authorization, direction, notice, consent or waiver or take other action, provided or permitted by the Notes and the Fiscal Agency Agreement to be made, given or taken by holders of the Notes. With regard to any record date set pursuant to the immediately preceding paragraph, the holders of outstanding Notes on such record date (or their duly appointed agents), and only such persons, shall be entitled to take relevant action, whether or not such holders remain holders after such record date. With regard to any action that may be taken hereunder only by holders of a requisite principal amount of outstanding Notes (or their duly appointed agents) and for which a record date is set pursuant to the immediately preceding paragraph, the Company, may at its option, set an expiration date after which no such action purported to be taken by any holder shall be effective unless taken on or prior to such expiration date by holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Company may, on one or more occasions at its option, extend such expiration date to any later date. Nothing in this paragraph shall prevent any holder (or any duly appointed agent thereof) from taking, at any time, any action contrary to or different from, any action previously taken, or purported to have been taken hereunder by such holder, in which event the Company may set a record date in respect thereof pursuant to this paragraph. Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions to this paragraph shall not apply with respect to, any action to be taken by holders pursuant to Section 8 hereof. Upon receipt by the Fiscal Agent of notice of any default, any declaration of acceleration, or any rescission and annulment of any such declaration, or of any direction in accordance with Section 8 hereof, a record date shall automatically and without any other action by any person be set for the purpose of determining the holders of outstanding Notes entitled to join in such notice, declaration, or rescission and annulment, or direction, as the case may be, which record date shall be the close of business on the date the Fiscal Agent receives such notice, declaration, rescission and annulment or direction, as the case may be. The holders of outstanding Notes on such record date (or their duly appointed agent), and only such persons, shall be entitled to join in such notice, declaration, rescission and annulment, or direction, as the case may be, whether or not such holders remain holders after such record date; provided that, unless -------- such notice, declaration, rescission and annulment, or direction, as the case may be, shall have become effective by virtue of holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such notice of default, 7 declaration, or rescission and annulment or direction given or made by the holders, as the case may be, shall automatically and without any action by any person be canceled and of no further effect. Nothing in this paragraph shall prevent a holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a notice of default, a declaration of acceleration, a rescission and annulment of a declaration of acceleration or a direction, contrary to or different from, or, after the expiration of such period, identical to, a previously given notice, declaration, rescission and annulment, or direction, as the case may be, that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. (d) The ownership of the Notes shall be proved by the Note Register. (e) Any request, demand, authorization, direction, notice, consent, waiver, or other Act of the holder of any Note shall bind every future holder of the same Note and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Fiscal Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 5. Denominations. The Notes are issuable only in registered form without coupons in denominations of $100,000 and integral multiples of $1,000 in excess thereof. 6. Persons Deemed Owners. The Company, the Fiscal Agent and any agent of the Company or the Fiscal Agent may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes whatsoever, whether or not this Note shall be overdue, and neither the Company, the Fiscal Agent nor any such agent shall be affected by notice to the contrary. 7. Amendments and Waivers. Without the consent of any holders of the Notes, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into one or more agreements supplemental to the Fiscal Agency Agreement, in form satisfactory to the Fiscal Agent, for any of the following purposes: (a) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Fiscal Agency Agreement; or (b) to add to the covenants of the Company for the benefit of the holders of the Notes; or (c) to add any additional Events of Default; or (d) to secure the Notes; or 8 (e) to evidence and provide for the acceptance of appointment by a successor Fiscal Agent with respect to the Notes; or (f) to amend the restrictions on transfer applicable to the Notes as set forth on this Note; or (g) to cure any ambiguity or to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to correct or supplement any defective provision contained herein or in the Fiscal Agency Agreement, provided that such action pursuant to this clause -------- (g) shall not adversely affect the interests of the holders of the Notes. With the consent of the holders of not less than 66 and 2/3% in principal amount of the outstanding Notes, by act of said holders delivered to the Company and the Fiscal Agent, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into an agreement supplemental to the Fiscal Agency Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Notes, or the Fiscal Agency Agreement as the same pertains to the Notes, or of modifying in any manner the rights of the holders of the Notes: provided, -------- however, that no such amendment or supplemental agreement shall, without the - ------- consent of the holder of each outstanding Note affected thereby, (1) change the stated maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon, or change any place of payment where, or the coin or currency in which, any Note or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, or (2) reduce the percentage in principal amount of the outstanding Notes, the consent of whose holders is required for any such amendment or supplemental agreement or the consent of whose holders is required for any waiver provided for herein or in the Fiscal Agency Agreement, or (3) modify any of the provisions of this Section or Section 9, except to increase any such percentage or to provide that certain other provisions of the Notes cannot be modified or waived without the consent of the holder of each outstanding Note affected thereby. It shall not be necessary for any act of holders under this Section 7 to approve the particular form of any proposed amendment or supplemental agreement, but it shall be sufficient if such act shall approve the substance thereof. Upon the execution of any agreement supplement to the Fiscal Agency Agreement as permitted by this Section 7, the Notes and the Fiscal Agency Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of the Notes and the 9 Fiscal Agency Agreement, as the same pertains to the Notes, for all purposes; and every holder of the Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 8. Defaults and Remedies. The occurrence of any of the following events shall constitute an Event of Default with respect to the Notes: (a) default in the payment of the principal of any of the Notes when the same becomes due and payable; or (b) default in the payment of any installment of interest upon any of the Notes when the same becomes due and payable, and continuance of such default for a period of 30 days; or (c) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Notes for a period of 90 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Fiscal Agent by registered or certified mail or to the Company and the Fiscal Agent by the holders of at least 25% in aggregate principal amount of the Notes, or (d) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Federal Bankruptcy Code or any other similar applicable Federal or State law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in the bankruptcy or insolvency of the Company or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or (e) the Company shall institute proceedings to be adjudicated bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal Bankruptcy Code or any other similar Federal or State law, or shall consent to the filing of any such petition or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due. If an Event of Default occurs and is continuing, the holders of at least 25% in principal amount of the Notes then outstanding may declare all the Notes to be due and payable immediately. Holders of a majority in principal amount of the Notes may waive an Event of Default and rescind any related declaration except as provided in Section 9(a) hereof. The Fiscal Agent may withhold from holders of Notes notice of any continuing Event of Default, except in 10 respect of a default in the payment of principal of or interest on the Notes, if it determines that withholding such notice is in their interest. 9. Waivers. (a) The holders of not less than a majority in principal amount of the outstanding Notes may on behalf of the holders of the Notes waive any past default hereunder with respect to the Notes and its consequences, except a default (1) in the payment of the principal of or interest on any Note, or (2) in respect of a covenant or provision hereof which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Notes; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. (b) The Company may omit in any particular instance to comply with any term, provision or condition set forth in the Notes or the Fiscal Agency Agreement with respect to the Notes if before the time for such compliance the holders of at least 66 and 2/3% in principal amount of the outstanding Notes shall, by act of such holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but (i) without the consent of the holder of each Note affected thereby, no such waiver shall extend to or affect any term, provision or condition which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected, and (ii) no such waiver shall extend to or affect any term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and any duties of the Fiscal Agent in respect of any such term, provision or condition shall remain in full force and effect. 10. Company May Consolidate Etc., Only on Certain Terms. The Company covenants that it will not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any person, firm or corporation, except that the Company may merge or consolidate with, or sell or convey all or substantially all of its assets to, any other corporation, provided that (i) either the Company shall be the continuing corporation, or the - -------- successor corporation (if other than the Company) shall be a corporation organized and existing under the laws of the United States of America or a State thereof and such corporation shall expressly assume the due and punctual payment of the principal of and interest on all the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Note and the Fiscal Agency Agreement to be performed by the 11 Company, by supplemental agreement in form satisfactory to the Fiscal Agent, executed and delivered to the Fiscal Agent by such corporation, and (ii) the Company or such successor corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any such covenant or condition. Upon any consolidation of the Company with, or merger of the Company into, any other person or any sale or conveyance of all or substantially all of the assets of the Company in accordance with this Section 10, the successor person formed by such consolidation or into which the Company is merged or to which such sale or conveyance is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Note and the Fiscal Agency Agreement with the same effect as if such successor person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor person shall be relieved of all obligations and covenants under the Notes and the Fiscal Agency Agreement. 11. Unclaimed Amounts. Any money deposited with the Fiscal Agent in trust for the payment of the principal of or interest on any Note and remaining unclaimed for twelve months after such principal or interest has become due and payable shall be paid to the Company upon its request; and the holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Fiscal Agent with respect to such money shall thereupon cease. 12. Mutilated, Destroyed, Lost and Stolen Notes. If any Note becomes mutilated or defaced or is apparently destroyed, lost or stolen, the Fiscal Agent shall, subject to the provisions of this Section 12, authenticate and deliver a new Note in exchange and substitution for the mutilated or defaced Note or in lieu of or in substitution for the apparently destroyed, lost or stolen Note. Application for the authentication and delivery of a substitute Note pursuant to this Section 12 may be made at the office of the Fiscal Agent. If the applicant for any substitute Note shall furnish to the Company and the Fiscal Agent (i) in the case of any such request in case of loss or theft, such security or indemnity as may be required by the Company and the Fiscal Agent in their sole discretion to indemnify and defend and to save each of them and any agent of either of them harmless, and (ii) in the case of any request for a substitute Note in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Fiscal Agent of the apparent destruction, loss or theft of such Note and of the ownership thereof, then, in the absence of notice to the Company or the Fiscal Agent that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Fiscal Agent shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any substitute Note under this Section 12, the Company may require the payment of a sum sufficient to cover any tax assessment or other governmental 12 charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith. Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of the Fiscal Agency Agreement equally and proportionately with any and all other Notes. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 13. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Fiscal Agency Agreement, or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder (and each beneficial owner) of a Note by accepting such Note (or acquisition of a beneficial interest therein) waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes. THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Note shall not be valid or obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Fiscal Agent under the Fiscal Agency Agreement. [The remainder of this page is left blank intentionally.] 13 IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its corporate name, manually or by facsimile, by an Authorized Representative and a facsimile of its corporate seal to be affixed hereunto or imprinted hereon, attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. NEVADA POWER COMPANY Attest: _________________________ By: ___________________________ Name: Title: Dated: December 18, 2000 FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. BANKERS TRUST COMPANY, as Fiscal Agent By: __________________________ Authorized Signer 14 EX-4.G 9 0009.txt FORM OF FLOATING GLOBAL FLOATING RATE NOTE, 2001 Exhibit 4(G) NOTE NO. R-1 CUSIP N0. 826418AU9 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO SIERRA PACIFIC POWER COMPANY (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE IS A BOOK-ENTRY SECURITY AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) INSIDE THE U.S. TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE U.S. IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. SIERRA PACIFIC POWER COMPANY FLOATING RATE NOTES DUE JUNE 12, 2001 (THE "NOTES") Sierra Pacific Power Company, a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), for value received, hereby promises to pay to Cede & Co., as the nominee of The Depository Trust Company, or registered assigns, the principal amount of $200,000,000 on June 12, 2001 (the "Maturity Date"), and to pay interest as set forth below on the outstanding principal amount hereof from time to time from June 9, 2000 or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly in arrears on September 9 and December 9 of 2000 and March 9 and June 9 of 2001 and on the Maturity Date (each, an "Interest Payment Date"), commencing September 9, 2000, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided herein, be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the fifteenth calendar day preceding each Interest Payment Date (each, a "Regular Record Date"); provided, however, that interest payable on the Maturity Date shall be -------- ------- payable to the person to whom the principal amount of this Note is payable. Any interest payable on any Interest Payment Date other than the Maturity Date and not so punctually paid or duly provided for shall forthwith cease to be payable to the person in whose name this Note is registered at the close of business on such Regular Record Date and shall instead be payable to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Company, notice whereof shall be given to the registered holder of this Note (or one or more predecessor Notes) not less than 10 days prior to such special record date. Principal of this Note shall be payable against surrender hereof at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York. Payment of the principal of and interest on this Note shall be made at the corporate trust office of the Fiscal Agent or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided, however, that, at the option of the Company, -------- ------- payments of interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Note Register (as defined in Section 3 hereof); and provided -------- 2 further, however, that in the case of Notes held by a depository (as defined in - ------- ------- Section 3 hereof) or its nominee, payments of principal and interest shall be made by wire transfer of immediately available funds to an account designated by such depository. If any Interest Payment Date for this Note (other than an Interest Payment Date at the Maturity Date) would otherwise be a day that is not a Business Day (as defined in Section 1 hereof), such Interest Payment Date shall be postponed until the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Payment Date shall be the next preceding Business Day. If the Maturity Date of this Note falls on a day that is not a Business Day, the payment of principal and interest will be made on the next succeeding Business Day, and no interest on such payment shall accrue for the period from and after such Maturity Date, except as otherwise expressly provided for herein. This Note is one of a duly authorized series of securities of the Company, limited in aggregate principal amount of $200,000,000, issued under a Fiscal and Paying Agency Agreement, dated as of June 2, 2000, (the "Fiscal Agency Agreement"), duly executed and delivered by the Company to Bankers Trust Company, as Fiscal and Paying Agent (the "Fiscal Agent"). All terms that are used but not defined in this Note and that are defined in the Fiscal Agency Agreement shall have the meanings set forth therein. 1. Calculation of Interest. The period beginning on, and including, June 9, 2000 and ending on, but excluding, the first Interest Payment Date and each successive period beginning on, and including, an Interest Payment Date and ending on, but excluding, the next succeeding Interest Payment Date is herein called an "Interest Period". "Business Day" shall mean any day on which commercial banks and foreign exchange markets are open for business, including dealings in deposits in U.S. dollars in New York. The rate of interest payable from time to time in respect of this Note (the "Rate of Interest") will be a floating rate determined by reference to LIBOR, determined as described below, plus a margin of 0.50% per annum. All percentages resulting from any calculation on this Note will be rounded to the nearest one hundredth-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on the Notes will be rounded to the nearest cent (with one-half cent being rounded upward). (a) At approximately 11:00 a.m. (London time) on the second day on which commercial banks are open for business (including dealings in U.S. Dollar deposits) in London (or, for purposes of paragraph (c) (ii) below, New York) prior to the commencement of the Interest Period for which such rate will apply (each such day an "Interest Determination Date"), Bankers Trust Company, or its successor in this capacity (the "Calculation Agent"), will calculate the rate of interest (the "Rate of Interest") for such Interest Period as, subject to the provisions described below, the rate per annum equal to 0.50% above the rate appearing on the Dow Jones Telerate Page 3750 (or such other page as may replace that page on the Dow Jones Telerate Service) for three-month 3 U.S. dollar deposits in the London inter-bank market on such Interest Determination Date. (b) If on any Interest Determination Date an appropriate rate cannot be determined from the Dow Jones Telerate Service, the Rate of Interest for the next Interest Period shall, subject to the provisions described below, be the rate per annum that the Calculation Agent certifies to be 0.50% per annum above the arithmetic mean of the offered quotations, as communicated to and at the request of the Calculation Agent by not less than two major banks in London selected by the Calculation Agent (the "Reference Banks," which expression shall include any successors nominated by the Calculation Agent), to leading banks in London by the principal London offices of the Reference Banks for three-month U.S. dollar deposits in the London inter- bank market as at 11:00 a.m. (London time) on such Interest Determination Date. (c) If on any Interest Determination Date fewer than two of such offered rates are available, the Rate of Interest for the next Interest Period shall be whichever is the higher of: (i) the Rate of interest in effect for the last preceding Interest Period to which (a) or (b) above shall have applied; and (ii) the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per annum which the Calculation Agent determines to be 0.50% per annum above either (1) the arithmetic mean of the U.S. dollar offered rates which New York City banks selected by the Calculation Agent are or were quoting, on the relevant Interest Determination Date, for three-month deposits to the Reference Banks or those of them (being at least two in number) to which such quotations are or were, in the opinion of the Calculation Agent, being so made, or (2) in the event that the Calculation Agent can determine no such arithmetic mean, the arithmetic mean of the U.S. dollar offered rates which at least two New York City banks selected by the Calculation Agent are or were quoting on such Interest Determination Date to leading European banks for a period of three months; provided, however, that if the banks selected as aforesaid by the Calculation Agent are not quoting as mentioned above, the Rate of Interest shall be the Rate of Interest specified in (i) above. The Calculation Agent shall, as soon as practicable after 11:00 a.m. (London time) on each Interest Determination Date, determine the Rate of Interest and calculate the amount of interest payable in respect of the following Interest Period (the "Interest Amount"). The Interest Amount shall be calculated by applying the Rate of Interest to the principal amount of each Note outstanding at the commencement of the Interest Period, multiplying each such amount by the actual number of days in the Interest Period concerned (which actual number of days shall include the first day but exclude the last day of such Interest Period) divided by 360 and rounding the resultant figure upwards to the nearest cent (half a cent being rounded upwards). The determination of the Rate of Interest and the Interest Amount by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be final and binding on all parties. 4 Notwithstanding anything herein to the contrary, the interest rate on the Notes shall in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. Interest shall cease to accrue on this Note on the Maturity Date unless, upon presentation of this Note, payment of principal is improperly withheld or refused, in which case, interest shall continue to accrue. 2. Calculation Agent. So long as any of this Note remains outstanding, the Company shall maintain under appointment a Calculation Agent, which shall initially be the Fiscal Agent, to calculate the Rate of Interest payable on this Note in respect of each Interest Period. If the Calculation Agent shall fail to establish the Rate of Interest for any Interest Period, or if the Company shall remove the Calculation Agent, the Company shall appoint another commercial or investment bank to act as the Calculation Agent. The Company may change the Calculation Agent without notice. All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions hereof relating to the payment and calculation of interest on this Note by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be binding on the Company, the Calculation Agent and all of the holders and owners of beneficial interests in this Note, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions. 3. Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at an office or agency to be maintained by the Company a register (the register maintained in such office being herein referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Fiscal Agent is hereby appointed "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint co-registrars and may change any Note Registrar or co- registrar without notice. Notes shall be exchangeable pursuant to this Section 3 for Notes registered in the name of, and a transfer of a Note may be registered to, any person other than DTC or its successor depository (DTC or such successor being referred to as a "depository") for such Note or its nominee only if (i) such depository notifies the Company that it is unwilling or unable to continue as depository for such Note or if at any time such depository ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and a successor depository is not appointed by the Company within 90 days, (ii) there shall have occurred and be continuing an Event of Default (as defined below) with respect to the Notes or (iii) the Company, in its sole discretion, elects to terminate the book-entry system. Upon the occurrence of any one or more of the conditions specified in clauses (i), (ii) or (iii) of the preceding sentence, such Note shall be 5 exchanged for Notes registered in the names of, and the transfer of such Note shall be registered to, such persons (including persons other than the depository with respect to such Notes and its nominee) as such depository shall direct, in each case subject to Section 5 hereof. Subject to the restrictions on transfer and delivery set forth in this Note, Notes may be presented for exchange or for registration of transfer (duly endorsed or with the form of transfer endorsed thereon duly executed) at the office of the Fiscal Agent or at the office of any other transfer agent designated by the Company for such purpose. Such transfer or exchange shall be effected upon the Fiscal Agent's or such other transfer agent's, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Company may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts; provided, however, that there -------- ------- shall at all times be a transfer agent in the Borough of Manhattan, The City of New York. The Notes and any certificates for Notes issued in exchange for Notes or a beneficial interest therein will bear the third legend set forth in this Note. The holder of a certificated Note may transfer such Note, subject to compliance with the provisions of such legend, as provided in the preceding paragraph. Upon the transfer, exchange or replacement of Notes bearing such legend, or upon specific request for removal of such legend on a Note, the Company will deliver only Notes bearing such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Company that neither such legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. 4. Acts by Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by the Notes or the Fiscal Agency Agreement to be given or taken by holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided in the Notes or the Fiscal Agency Agreement, such action shall become effective when such instrument or instruments are delivered to the Fiscal Agent and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of the Notes and the Fiscal Agency Agreement and conclusive in favor of the Fiscal Agent and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his 6 or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Fiscal Agent deems sufficient. (c) The Company may set any day as the record date for the purpose of determining the holders of outstanding Notes entitled to make any request or demand or give any authorization, direction, notice, consent or waiver or take other action, provided or permitted by the Notes and the Fiscal Agency Agreement to be made, given or taken by holders of the Notes. With regard to any record date set pursuant to the immediately preceding paragraph, the holders of outstanding Notes on such record date (or their duly appointed agents), and only such persons, shall be entitled to take relevant action, whether or not such holders remain holders after such record date. With regard to any action that may be taken hereunder only by holders of a requisite principal amount of outstanding Notes (or their duly appointed agents) and for which a record date is set pursuant to the immediately preceding paragraph, the Company, may at its option, set an expiration date after which no such action purported to be taken by any holder shall be effective unless taken on or prior to such expiration date by holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Company may, on one or more occasions at its option, extend such expiration date to any later date. Nothing in this paragraph shall prevent any holder (or any duly appointed agent thereof) from taking, at any time, any action contrary to or different from, any action previously taken, or purported to have been taken hereunder by such holder, in which event the Company may set a record date in respect thereof pursuant to this paragraph. Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions to this paragraph shall not apply with respect to, any action to be taken by holders pursuant to Section 8 hereof. Upon receipt by the Fiscal Agent of notice of any default, any declaration of acceleration, or any rescission and annulment of any such declaration, or of any direction in accordance with Section 8 hereof, a record date shall automatically and without any other action by any person be set for the purpose of determining the holders of outstanding Notes entitled to join in such notice, declaration, or rescission and annulment, or direction, as the case may be, which record date shall be the close of business on the date the Fiscal Agent receives such notice, declaration, rescission and annulment or direction, as the case may be. The holders of outstanding Notes on such record date (or their duly appointed agent), and only such persons, shall be entitled to join in such notice, declaration, rescission and annulment, or direction, as the case may be, whether or not such holders remain holders after such record date; provided that, unless -------- such notice, declaration, rescission and annulment, or direction, as the case may be, shall have become effective by virtue of holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such notice of default, 7 declaration, or rescission and annulment or direction given or made by the holders, as the case may be, shall automatically and without any action by any person be canceled and of no further effect. Nothing in this paragraph shall prevent a holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a notice of default, a declaration of acceleration, a rescission and annulment of a declaration of acceleration or a direction, contrary to or different from, or, after the expiration of such period, identical to, a previously given notice, declaration, rescission and annulment, or direction, as the case may be, that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. (d) The ownership of the Notes shall be proved by the Note Register. (e) Any request, demand, authorization, direction, notice, consent, waiver, or other Act of the holder of any Note shall bind every future holder of the same Note and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Fiscal Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 5. Denominations. The Notes are issuable only in registered form without coupons in denominations of $100,000 and integral multiples of $1,000 in excess thereof. 6. Persons Deemed Owners. The Company, the Fiscal Agent and any agent of the Company or the Fiscal Agent may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes whatsoever, whether or not this Note shall be overdue, and neither the Company, the Fiscal Agent nor any such agent shall be affected by notice to the contrary. 7. Amendments and Waivers. Without the consent of any holders of the Notes, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into one or more agreements supplemental to the Fiscal Agency Agreement, in form satisfactory to the Fiscal Agent, for any of the following purposes: (a) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Fiscal Agency Agreement; or (b) to add to the covenants of the Company for the benefit of the holders of the Notes; or (c) to add any additional Events of Default; or (d) to secure the Notes; or (e) to evidence and provide for the acceptance of appointment by a successor Fiscal Agent with respect to the Notes; or 8 (f) to amend the restrictions on transfer applicable to the Notes as set forth on this Note; or (g) to cure any ambiguity or to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to correct or supplement any defective provision contained herein or in the Fiscal Agency Agreement, provided that such action pursuant to this clause -------- (g) shall not adversely affect the interests of the holders of the Notes. With the consent of the holders of not less than 66 and 2/3% in principal amount of the outstanding Notes, by act of said holders delivered to the Company and the Fiscal Agent, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into an agreement supplemental to the Fiscal Agency Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Notes, or the Fiscal Agency Agreement as the same pertains to the Notes, or of modifying in any manner the rights of the holders of the Notes: provided, -------- however, that no such amendment or supplemental agreement shall, without the - ------- consent of the holder of each outstanding Note affected thereby, (1) change the stated maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon, or change any place of payment where, or the coin or currency in which, any Note or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, or (2) reduce the percentage in principal amount of the outstanding Notes, the consent of whose holders is required for any such amendment or supplemental agreement or the consent of whose holders is required for any waiver provided for herein or in the Fiscal Agency Agreement, or (3) modify any of the provisions of this Section or Section 9, except to increase any such percentage or to provide that certain other provisions of the Notes cannot be modified or waived without the consent of the holder of each outstanding Note affected thereby. It shall not be necessary for any act of holders under this Section 7 to approve the particular form of any proposed amendment or supplemental agreement, but it shall be sufficient if such act shall approve the substance thereof. Upon the execution of any agreement supplement to the Fiscal Agency Agreement as permitted by this Section 7, the Notes and the Fiscal Agency Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of the Notes and the Fiscal Agency Agreement, as the same pertains to the Notes, for all purposes; and every holder 9 of the Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 8. Defaults and Remedies. The occurrence of any of the following events shall constitute an Event of Default with respect to the Notes: (a) default in the payment of the principal of any of the Notes when the same becomes due and payable; or (b) default in the payment of any installment of interest upon any of the Notes when the same becomes due and payable, and continuance of such default for a period of 30 days; or (c) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Notes for a period of 90 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Fiscal Agent by registered or certified mail or to the Company and the Fiscal Agent by the holders of at least 25% in aggregate principal amount of the Notes, or (d) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Federal Bankruptcy Code or any other similar applicable Federal or State law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in the bankruptcy or insolvency of the Company or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or (e) the Company shall institute proceedings to be adjudicated bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal Bankruptcy Code or any other similar Federal or State law, or shall consent to the filing of any such petition or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due. If an Event of Default occurs and is continuing, the holders of at least 25% in principal amount of the Notes then outstanding may declare all the Notes to be due and payable immediately. Holders of a majority in principal amount of the Notes may waive an Event of Default and rescind any related declaration except as provided in Section 9(a) hereof. The Fiscal Agent may withhold from holders of Notes notice of any continuing Event of Default, except in respect of a default in the payment of principal of or interest on the Notes, if it determines that withholding such notice is in their interest. 10 9. Waivers. (a) The holders of not less than a majority in principal amount of the outstanding Notes may on behalf of the holders of the Notes waive any past default hereunder with respect to the Notes and its consequences, except a default (1) in the payment of the principal of or interest on any Note, or (2) In respect of a covenant or provision hereof which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Notes; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. (b) The Company may omit in any particular instance to comply with any term, provision or condition set forth in the Notes or the Fiscal Agency Agreement with respect to the Notes if before the time for such compliance the holders of at least 66 and 2/3% in principal amount of the outstanding Notes shall, by act of such holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but (i) without the consent of the holder of each Note affected thereby, no such waiver shall extend to or affect any term, provision or condition which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected, and (ii) no such waiver shall extend to or affect any term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and any duties of the Fiscal Agent in respect of any such term, provision or condition shall remain in full force and effect. 10. Company May Consolidate Etc., Only on Certain Terms. The Company covenants that it will not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any person, firm or corporation, except that the Company may merge or consolidate with, or sell or convey all or substantially all of its assets to, any other corporation, provided that (i) either the Company shall be the continuing corporation, or the - -------- successor corporation (if other than the Company) shall be a corporation organized and existing under the laws of the United States of America or a State thereof and such corporation shall expressly assume the due and punctual payment of the principal of and interest on all the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Note and the Fiscal Agency Agreement to be performed by the Company, by supplemental agreement in form satisfactory to the Fiscal Agent, executed and delivered to the Fiscal Agent by such corporation, and (ii) the Company or such successor 11 corporation, as the case may be, shall not, immediately after such merger, consolidation, sale or conveyance, be in default in the performance of any such covenant or condition. Upon any consolidation of the Company with, or merger of the Company into, any other person or any sale or conveyance of all or substantially all of the assets of the Company in accordance with this Section 10, the successor person formed by such consolidation or into which the Company is merged or to which such sale or conveyance is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Note and the Fiscal Agency Agreement with the same effect as if such successor person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor person shall be relieved of all obligations and covenants under the Notes and the Fiscal Agency Agreement. 11. Unclaimed Amounts. Any money deposited with the Fiscal Agent in trust for the payment of the principal of or interest on any Note and remaining unclaimed for twelve months after such principal or interest has become due and payable shall be paid to the Company upon its request; and the holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Fiscal Agent with respect to such money shall thereupon cease. 12. Mutilated, Destroyed, Lost and Stolen Notes. If any Note becomes mutilated or defaced or is apparently destroyed, lost or stolen, the Fiscal Agent shall, subject to the provisions of this Section 12, authenticate and deliver a new Note in exchange and substitution for the mutilated or defaced Note or in lieu of or in substitution for the apparently destroyed, lost or stolen Note. Application for the authentication and delivery of a substitute Note pursuant to this Section 12 may be made at the office of the Fiscal Agent. If the applicant for any substitute Note shall furnish to the Company and the Fiscal Agent (i) in the case of any such request in case of loss or theft, such security or indemnity as may be required by the Company and the Fiscal Agent in their sole discretion to indemnify and defend and to save each of them and any agent of either of them harmless, and (ii) in the case of any request for a substitute Note in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Fiscal Agent of the apparent destruction, loss or theft of such Note and of the ownership thereof, then, in the absence of notice to the Company or the Fiscal Agent that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Fiscal Agent shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any substitute Note under this Section 12, the Company may require the payment of a sum sufficient to cover any tax assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith. 12 Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of the Fiscal Agency Agreement equally and proportionately with any and all other Notes. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 13. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Fiscal Agency Agreement, or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder (and each beneficial owner) of a Note by accepting such Note (or acquisition of a beneficial interest therein) waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes. THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Note shall not be valid or obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Fiscal Agent under the Fiscal Agency Agreement. [The remainder of this page is left blank intentionally.] 13 IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its corporate name, manually or by facsimile, by an Authorized Representative and a facsimile of its corporate seal to be affixed hereunto or imprinted hereon, attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries. SIERRA PACIFIC POWER COMPANY Attest: _________________________ By: ___________________________ Name: Title: Dated: June 9, 2000 FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. BANKERS TRUST COMPANY, as Fiscal Agent By: __________________________ Authorized Signer 14 EX-10.A 10 0010.txt CREDIT AGREEMENT DATED AS OF DECEMBER 26, 2000 Exhibit 10(A) $50,000,000 CREDIT AGREEMENT dated as of December 26, 2000 among SIERRA PACIFIC RESOURCES as Borrower and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Bank, CREDIT AGREEMENT, dated as of December 26, 2000, Between SIERRA PACIFIC RESOURCES, a Nevada corporation, ("Borrower") and WELLS FARGO BANK, NATIONAL ASSSOCIATION ("Bank"). W I T N E S S E T H: ------------------- WHEREAS, the Borrower has requested, and Bank (as defined below) has agreed to make available, the credit facility described below upon the terms and conditions contained herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION SECTION 1.01 DEFINED TERMS. ------------- As used in this Agreement, the following terms have the following meanings: "ABR", when used in reference to any Loan or Borrowing, refers to --- whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquisition" means any transaction, or any series of related ----------- transactions, consummated after the Effective Date, by which the Borrower and/or any of its Subsidiaries directly or indirectly (a) acquires any ongoing business or all or substantially all of the assets of any Person engaged in any ongoing business, whether through purchase of assets, merger or otherwise, (b) acquires control of securities of a Person engaged in an ongoing business representing more than 50% of the ordinary voting power for the election of directors or other governing position if the business affairs of such Person are managed by a board of directors or other governing body or (c) acquires control of more than 50% of the ownership interest in any partnership, joint venture, limited liability company, business trust or other Person engaged in an ongoing business that is not managed by a board of directors or other governing body. "Adjusted LIBO Rate" means, with respect to any Eurodollar Revolving ------------------ Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Affiliate" means, any Person that directly or indirectly Controls, or --------- is under common Control with, or is Controlled by, another Person, provided that, in any event, any Person that owns directly or indirectly securities having 20% or more of the voting power for the election of directors or other governing body of a corporation or 20% or more of the partnership or other 2 ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to Control such corporation or other Person. "Alternate Base Rate" means, for any day, a rate per annum equal to ------------------- the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Applicable Rate" means, for any day, with respect to the facility --------------- fees payable hereunder, with respect to any Eurodollar Revolving Loan or with respect to any usage fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "Facility Fee", "Eurodollar Spread" or "Usage Fee", as the case may be, based on the ratings by S&P and Moody's, respectively, applicable on such day to the Index Debt:
Public Senior Unsecured Debt Ratings Base Rate LIBOR S&P/Moody's Facility Fee Spread Margin ----------- ------------ ------ ------ Ratings greater than A-/A3 .1850% 0.00% .3150% Ratings equal to A-/A3 .2500% 0.00% .4000% Ratings equal to BBB+/Baa1 .3000% 0.00% .4500% Ratings equal to BBB/Baa2 .3500% 0.00% .5000% Ratings equal to BBB-/Baa3 .3750% 0.00% .7250% Ratings less than BBB-/Baa3 .4100% 0.00% .8400%
For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in its lowest rating category, (ii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of two Business Days after it is first announced by the applicable rating agency and (iii) if the rating assigned by Moody's and the rating assigned by S&P shall differ (a) by one level (e.g., Moody's rating of A3 and S&P rating of BBB+), then the higher rating level shall apply (i.e., A3) and (b) by more than one level (e.g., Moody's rating of A3 and S&P rating of BBB-), then the rating level above the lower rating level shall apply (i.e., BBB/Baa2). Each change in the Applicable Rate shall apply during the period commencing two Business Days after the effective date of such change and ending on the 3 date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Bankruptcy Code" means Title 11 of the United States Code entitled --------------- "Bankruptcy," as now or hereafter in effect or any successor thereto. "Board" means the Board of Governors of the Federal Reserve System of ----- the United States of America. "Borrower" means Sierra Pacific Resources, a Nevada corporation. -------- "Borrowing" means advances under the Facility, made, converted or --------- continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. "Borrowing Request" means a request by the Borrower for a Borrowing ----------------- made in accordance with Section 2.03. "Business Day" means any day that is not a Saturday, Sunday or other ------------ day on which commercial banks in Nevada are authorized or required by Law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Lease Obligations" of any Person means all obligations of ------------------------- such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board), and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (including such Statement No. 13). "Change in Control" means (a) the acquisition of ownership, directly ----------------- or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of shares representing more than 20% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; (b) for any period of 12 consecutive calendar months, a majority of the Board of Directors of the Borrower shall no longer be composed of individuals (i) who were members of said Board on the first day of such period, (ii) whose election or nomination to said Board was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of said Board or (iii) whose election or nomination to said Board was approved by individuals 4 referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of said Board; (c) the failure of the Borrower to own, legally and beneficially, 100% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of either NPC or SPPC; or (d) any reduction in Borrower's ownership, either legal or beneficial, of a Significant Subsidiary. "Change in Law" means (a) the adoption of any Law after the date of ------------- this Agreement, (b) any change in any Law or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by Bank (or, for purposes of Section 2.13(b), by any lending office of Bank or by Bank's Parent, if any) with any request, guideline or directive (whether or not having the force of Law) of any Governmental Authority made or issued after the date of this Agreement. "Code" means the Internal Revenue Code of 1986 and the regulations ---- promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Commitment" means, the Commitment of Bank under the Facility. ---------- "Control" of a Person (including, with its correlative meanings, ------- "Controlled by" and "under common Control with") means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of such Person. "Default" means any event, act or condition, which upon notice, lapse ------- of time or both would, unless cured or waived, become an Event of Default. "Default Interest" has the meaning assigned to such term in Section ---------------- 2.11(c). "Dollars" or "$" refers to freely transferable lawful money of the ------- - United States of America. "Effective Date" means the date on which the conditions specified in -------------- Section 4.01 are satisfied (or waived in accordance with Section 9.01). "Environmental Claims" means any and all administrative, regulatory or -------------------- judicial actions, suits, demands, demand letters, directives, claims, liens, notices of non-compliance or violation, investigations or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereafter, "Claims"), including, without ------ limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief in 5 connection with alleged injury or threat of injury to health, safety or the environment due to the presence of Hazardous Materials. "Environmental Law" means any Federal, state, foreign or local ----------------- statute, Law, rule, regulation, ordinance, code, guideline, written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the -- ---- --- ---- Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the Safe Drinking Water Act, 42 -- ---- U.S.C. (S) 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. (S) 2701 et -- ---- -- seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 - ---- U.S.C. (S) 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. -- ---- (S) 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C. (S) 651 -- ---- et seq. ; and any state and local or foreign counter-parts or equivalents, in - -- ---- each case as amended from time to time. "ERISA" means the Employee Retirement Income Security Act of 1974 and ----- the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement, and to any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" means any corporation or trade or business that is a --------------- member of any group of organizations described in Section 414(b) or (c) of the Code of which the Borrower is a member. "Eurodollar", when used in reference to any Loan or Borrowing, refers ---------- to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Section ---------------- 7.01. "Excluded Taxes" means, with respect to the Bank or any other -------------- recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the Laws of which such recipient is organized or in which its principal office is located or, in the case of Bank, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or is attributable to such Foreign Lender's failure or inability to comply with Section 2.15(e), except to the extent that such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.15(a). 6 "Facility" means the $50,000,000.00 revolving line of credit committed pursuant -------- to this Agreement. "Federal Funds Effective Rate" means, for any day, the weighted ---------------------------- average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Bank from three Federal funds brokers of recognized standing selected by it. "Final Fee Payment Date" has the meaning assigned to such term in ---------------------- Section 2.10(a). "Foreign Pension Plan" means any plan, fund (including, without -------------------- limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code. "GAAP" means generally accepted accounting principles in the United ---- States of America applied in a consistent manner. "Governmental Action" means any authorization, approval, order, ------------------- decree, ruling or other action by, or notice to or filing with, any Governmental Authority. "Governmental Authority" means the government of the United States of ---------------------- America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, bureau, instrumentality, regulatory body, court, tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Hazardous Materials" means (a) any petroleum or petroleum products, ------------------- radioactive materials, asbestos in any form that is friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of poly-chlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous waste," "hazardous materials," "extremely hazardous substances," "restricted hazardous waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants," or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, the Release of which is prohibited, limited or regulated by any governmental authority. "Indebtedness" of any Person means, (a) obligations created, issued or ------------ incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, 7 to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; and (f) any guarantee or other arrangement by which such Person guarantees or is otherwise liable for the Indebtedness of others; provided, however, that -------- ------- "Indebtedness" shall not include Secured Nonrecourse Obligations. "Indemnified Parties" means Bank, its Affiliates, and the directors, ------------------- officers, employees, attorneys and agents of each of the foregoing. "Indemnified Taxes" means all Taxes other than Excluded Taxes. ----------------- "Index Debt" means the senior, unsecured, long-term indebtedness for ---------- borrowed money of the Borrower that is not guaranteed by any other Person or subject to any credit enhancement. "Interest Election Request" means a request by the Borrower to convert ------------------------- or continue a Borrowing in accordance with Section 2.05. "Interest Payment Date" means (a) with respect to any ABR Loan, each --------------------- Quarterly Date, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period. "Interest Period" means, with respect to any Eurodollar Borrowing, the --------------- period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Investment" means, when used in connection with any Person, any ---------- investment by or of that Person, whether by means of purchase or other acquisition of stock or other securities of any other Person or by means of a loan, advance creating a debt, capital contribution, guaranty or other debt or equity participation or interest in any other Person, including any partnership --------- and 8 joint venture interests of such Person but excluding any Wholly-Owned --------- Subsidiary of such Person. The amount of any Investment shall be the amount actually invested (minus any return of capital with respect to such Investment ----- which has actually been received in cash or has been converted into cash), without adjustment for subsequent increases or decreases in the value of such Investment. "Law" shall mean any law (including common law), constitution, --- statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "Lenders" means the Persons listed on Schedule I and any other Person ------- that shall have become a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any --------- Interest Period, the average of the offered rates for Dollar deposits for the applicable Interest Period which appear on the Telerate Page 3750, British Bankers Association Interest Settlement Rates, with maturities comparable to the Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00 A.M. (Las Vegas, Nevada time) on the date which is two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any Property, any mortgage, lien, ---- pledge, charge, security interest or encumbrance of any kind in respect of such Property. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any Property that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement (other than an operating lease) relating to such Property. "Loan Documents" means this Agreement, each Borrowing Request, each -------------- Interest Election Request and each Note. "Loans" means advances under the Facility. ----- "Material Adverse Effect" means a material adverse effect on (a) the ----------------------- Property, business, operations, financial condition, prospects, liabilities or capitalization of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower to perform its obligations hereunder, (c) the validity or enforceability of this Agreement, (d) the rights and remedies of the Bank hereunder or (e) the timely payment of the principal of or interest on the Loans or other amounts payable in connection therewith. "Maturity Date" means the earlier of June 30, 2001 or the date of ------------- closing for Borrower's acquisition of Portland General Electric Company. "Moody's" means Moody's Investors Service, Inc.; provided that if such ------- corporation (or its successors and assigns) shall for any reason no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency approved for purposes hereof by Bank and the Borrower. 9 "Multiemployer Plan" means a multiemployer plan defined as such in ------------------ Section 3(37) of ERISA to which contributions have been made by the Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA. "NPC" means Nevada Power Company, a Nevada corporation. --- "NPC Credit Agreement" means that certain Amended and Restated Credit -------------------- Agreement dated as of August 28, 2000 among NPC, as borrower, Mellon Bank, N.A. as administrative agent, First Union National Bank and Wells Fargo Bank, N.A., as syndication agents, and the lender from time to time party thereto. "NPC First Mortgage Bonds" means obligations issued from time to time ------------------------ under, and secured by, the NPC First Mortgage Indenture. "NPC First Mortgage Indenture" means the Indenture of Mortgage, dated ---------------------------- as of October 1, 1953, from NPC to Banker's Trust Company (successor to First Interstate Bank of Nevada, N.A., formerly First National Bank of Nevada, Reno Nevada), as trustee, as modified, amended or supplemented at any time or from time to time by supplemental indentures. "Note" means the promissory note, a form of which is attached hereto ---- as Exhibit "A." "Obligations" means all Indebtedness, obligations and liabilities of ----------- the Borrower to Bank from time to time arising under or in connection with or related to or evidenced by or secured by this Agreement or any other Loan Document, and all extensions, renewals or refinancings thereof, whether such Indebtedness, obligations or liabilities are direct or indirect, otherwise secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising. Without limitation of the foregoing, such Indebtedness, obligations and liabilities shall include the principal amount of all Loans, all interest, fees, indemnities or expenses under or in connection with this Agreement or any other Loan Document, and all extensions, renewals and refinancings thereof, whether or not such Loans were made in compliance with the terms and conditions of this Agreement or in excess of the obligation of the Lenders to lend. Obligations shall remain obligations notwithstanding any assignment or transfer or any subsequent assignment or transfer of any of the Obligations or any interest therein. "Other Taxes" means any and all present or future stamp or documentary ----------- taxes or any other excise or Property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Parent" means any Person that controls a Lender. ------ "Participant" has the meaning assigned to Section 9.12(b). ----------- 10 "PBGC" means the Pension Benefit Guaranty Corporation or any entity ---- succeeding to any or all of its functions under ERISA. "Permitted Liens" has the meaning assigned to such term in Section --------------- 6.02. "Person" means any natural person, corporation, limited liability ------ company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means an employee benefit or other plan established or ---- maintained by the Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan. "Prime Rate" means the rate of interest per annum publicly announced ---------- from time to time by Bank as its prime rate, the Prime Rate to change when and as such prime rate changes. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bank may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "Principal Office" means the principal office of Bank located on the ---------------- date hereof at Las Vegas Regional Commercial Banking Office, 3800 Howard Hughes Parkway, Las Vegas, Nevada. "Property" means any right or interest in or to property of any kind -------- whatsoever, whether real, personal or mixed and whether tangible or intangible. "Quarterly Dates" means the last day of March, June, September and --------------- December in each year, the first of which shall be the first such day after the date hereof; provided that if any such day is not a Business Day, then such Quarterly Date shall be the next succeeding Business Day (unless such succeeding Business Day falls in a subsequent calendar month, in which event such Quarterly Date shall be the next preceding Business Day). "Related Parties" means, with respect to any specified Person, such --------------- Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Release" means the disposing, discharging, injecting, spilling, ------- pumping, leaking, leaching, dumping, emitting, escaping, emptying, pouring or migrating, into or upon any land or water or air, or otherwise entering into the environment. "Reportable Event" means an event described in Section 4043(c) of ---------------- ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043 (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall 11 be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code). "Responsible Officer" means the Treasurer, the Assistant Treasurer, ------------------- the Chief Financial Officer or the Controller of Borrower. "Revolving" means, when referred to a Loan or Borrowing, a Loan or --------- Borrowing which may be repaid and reborrowed. "Secured Nonrecourse Obligations" means and includes (a) secured ------------------------------- obligations of the Borrower taken on a consolidated basis where recourse of the payee of such obligations is expressly limited to an assigned lease or loan receivable and the Property related thereto and (b) liabilities of the Borrower taken on a consolidated basis to manufacturers of leased equipment where such liabilities are payable solely out of revenues derived from the leasing or sale of such equipment. "Securities Issuance" has the meaning assigned to such term in Section ------------------- 2.06(d). "Shareholders' Equity" means, as of any date of determination, the -------------------- amount, which is shown as "shareholders' equity" (which shall include both common and preferred equity) in the consolidated balance sheet of the Borrower at such date. "Significant Subsidiary" has the meaning given to such term in ---------------------- Regulation S-X under the Securities Act of 1934, as amended. "SPPC" means Sierra Pacific Power Company, a Nevada corporation. ---- "SPPC Credit Agreement" means that certain Amended and Restated Credit --------------------- Agreement dated as of August 28, 2000, among SPPC, as borrower, Mellon Bank, N.A., as Administrative Agent, First Union National Bank and Wells Fargo Bank, National Association, as syndication agents, and the lenders from time to time party thereto. "SPPC First Mortgage Bonds" means obligations issued from time to time ------------------------- under, and secured by, the SPPC First Mortgage Indenture. "SPPC First Mortgage Indenture" means the Indenture of Mortgage, dated ----------------------------- as of December 1, 1940, from SPPC to State Street Bank and Trust Company (successor to The New England Trust Company), as trustee, and Gerald R. Wheeler (successor to Leo W. Huegle), as co-Trustee, as modified, amended or supplemented at any time or from time to time by supplemental indentures. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw --- Hill Companies, Inc., and its successor and assigns; provided that if such corporation (or its successors and assigns) shall for any reason no longer perform the functions of a securities rating 12 agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency approved for purposes hereof by the Bank and the Borrower. "Statutory Reserve Rate" means a fraction (expressed as a decimal), ---------------------- the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Bank is subject for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such statutory reserve rates without benefit of or credit for proration, exemptions or offsets that may be available from time to time to Bank under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Subsidiary" shall mean, as to any Person, (i) any corporation more ---------- than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time. "Taxes" means any and all present or future taxes, levies, imposts, ----- duties, deductions, charges or withholdings imposed by any Governmental Authority. "Total Indebtedness" means, as of any date of determination, the sum ------------------ of all Indebtedness of the Borrower and its consolidated Subsidiaries as of such date. "Type", when used in reference to any Loan or Borrowing, refers to ---- whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Unfunded Current Liability" of any Plan means the amount, if any, by -------------------------- which the value of the accumulated plan benefits under the Plan determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions). "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any ----------------------- corporation 100% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the 13 happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has a 100% equity interest at the time. SECTION 1.02. CLASSIFICATION OF LOANS AND BORROWINGS. -------------------------------------- For purposes of this Agreement, Loans or Borrowings may be classified and referred to by Type (e.g., a "Eurodollar Borrowing"). All Borrowing under this Facility shall be Revolving Borrowings. 14 SECTION 1.03 TERMS GENERALLY. --------------- The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement. SECTION 1.04 ACCOUNTING TERMS; GAAP. ---------------------- Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time. ARTICLE II THE CREDITS SECTION 2.01 THE COMMITMENT. -------------- (a) Subject to the terms and conditions set forth herein, Bank agrees to make advances to Borrower from time to time up to and including the Maturity Date, not to, at any time,exceed the aggregate principal amount of Fifty Million Dollars ($50,000,000.00) the proceeds of which shall be used to support issuance of commercial paper and general corporate purposes. SECTION 2.02 LOANS AND BORROWINGS. -------------------- (a) Obligations of Bank. Each Revolving Loan shall be made as part of ------------------- a Borrowing consisting of Loans of the same Type under the Facility made by the Bank. (b) Type of Loans. Subject to Section 2.12, each Borrowing shall be ------------- comprised entirely of ABR Loans or Eurodollar Loans. Bank may, at its option, make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of Bank to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. 15 (c) Minimum Amounts; Limitation on Number of Borrowings. Each --------------------------------------------------- Revolving Borrowing (whether an ABR Borrowing or a Eurodollar Borrowing) shall be in an aggregate amount equal to $5,000,000 or a multiple of $1,000,000 in excess thereof, provided that an ABR Borrowing may be made in an aggregate amount that is equal to the entire unused balance of the total Commitment of the Facility. The Borrower may thereafter, upon irrevocable notice to the Bank in accordance with Section 2.05(b), (i) elect, as of any Business Day, in the case of ABR Loans, to convert any such ABR Loans or any part thereof, in an aggregate amount equal to $5,000,000 or a multiple of $1,000,000 in excess thereof, into Eurodollar Loans, and (ii) elect, as of the last day of the applicable Interest Period, to continue any Eurodollar Loans having Interest Periods expiring on such day or any part thereof in an aggregate amount of $5,000,000 or a multiple of $1,000,000 in excess thereof; provided that, if at any time the aggregate amount of Eurodollar Loans in respect of any Borrowing is reduced by payment, prepayment or conversion of part thereof to be less than $5,000,000, such Eurodollar Loans shall automatically convert into ABR Loans. (d) Maximum Duration of Interest Periods. Notwithstanding any other ------------------------------------ provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Eurodollar Borrowing under the Facility if the Interest Period requested with respect thereto would end after the Maturity. SECTION 2.03 REQUESTS FOR REVOLVING BORROWINGS. --------------------------------- To request a Revolving Borrowing under the Facility, the Borrower shall notify the Bank of such request by telephone (a) in the case of a Eurodollar Revolving Borrowing, not later than 12:00 noon., Las Vegas, Nevada time, three Business Days before the date of the proposed Borrowing, or (b) in the case of an ABR Borrowing, not later than 12:00 noon, Las Vegas, Nevada time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Bank of a written Borrowing Request in the form attached hereto as Exhibit B and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.04. 16 If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Bank shall advise of the details thereof and of the amount of Bank's Loan to be made as part of the requested Borrowing. SECTION 2.04 FUNDING OF BORROWINGS. --------------------- Funding by Lenders. No later than 12:00 noon, Las Vegas, Nevada time, ------------------ on the date specified in each Borrowing Request, Bank will make available the Borrowing requested to be made on such date, in Dollars and in immediately available funds at the account of the Bank most recently designated by it for such purpose by notice to the Bank. The Bank will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with Bank or as designated by the Borrower in the applicable Borrowing Request. SECTION 2.05 INTEREST ELECTIONS. ------------------ (a) Elections by the Borrower for Borrowings. Each Borrowing ---------------------------------------- initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section but subject to Section 2.02. Once Loans have been made pursuant to a Borrowing, the Borrower may elect to convert or continue different portions of such Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) Notice of Elections. To make an election pursuant to this ------------------- Section, the Borrower shall notify the Bank of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Bank of a written Interest Election Request in a form approved by the Bank and signed by the Borrower. (c) Information in Interest Election Requests. Each telephonic and ----------------------------------------- written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be 17 specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing, or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) [Intentionally Omitted] ---------------------- (e) Failure to Elect; Events of Default. If the Borrower fails to ----------------------------------- deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Bank so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.06 TERMINATION, REDUCTION AND EXTENSION OF COMMITMENT. -------------------------------------------------- (a) Scheduled Termination. Unless previously terminated, the Facility --------------------- shall terminate on the Maturity Date. (b) Voluntary Termination or Reduction. The Borrower may at any time ---------------------------------- prior to the Maturity Date termination, or from time to time reduce, the Commitment; provided that (i) each reduction of the Commitment shall be in an amount that is $5,000,000 or greater, and (ii) the Borrower shall not terminate or reduce the Commitment if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.09, the aggregate of all Borrowings then outstanding would exceed the total Commitment. (c) Notice of Voluntary Termination or Reduction . The Borrower shall -------------------------------------------- notify the Bank of any election to terminate or reduce the Commitment under the Facility in accordance with paragraph (b) of this Section at least three Business Days prior to the effective date of such 18 termination or reduction, specifying such election and the effective date thereof. Each notice delivered by the Borrower pursuant to this subsection shall be irrevocable; provided that a notice of termination of the Commitment of a Facility delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Bank on or prior to the specified effective date) if such condition is not satisfied. SECTION 2.07 REPAYMENT OF LOANS; EVIDENCE OF DEBT. ------------------------------------ (a) Repayment. The Borrower hereby unconditionally promises to pay the --------- Loans to the Bank. (b) Manner of Payment. Prior to any repayment or prepayment of any ----------------- Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be paid and shall notify the Bank by telephone (confirmed by telecopy) of such selection not later than 12:00 noon, Las Vegas, Nevada time, three Business Days before the scheduled date of such repayment or prepayment; provided that each repayment or prepayment of Borrowings shall be applied to repay or prepay any outstanding ABR Borrowings before any other Borrowings. If the Borrower fails to make a timely selection of the Borrowing or Borrowings to be repaid or prepaid, such payment shall be applied, first, to pay any outstanding ABR Borrowings and, second, to other Borrowings in the order of the remaining duration of their respective Interest Periods (the Borrowing with the shortest remaining Interest Period to be repaid first). Each payment of a Revolving Borrowing shall be applied ratably to the Loans included in such Borrowing. (c) Maintenance of Loan Accounts by Bank. Bank shall maintain in ------------------------------------ accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to Bank resulting from each Loan made by Bank, including the amounts of principal and interest payable and paid to Bank from time to time hereunder. (d) [Intentionally Omitted] ---------------------- (e) Effect of Entries. The entries made in the accounts maintained ----------------- pursuant to paragraph (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of the Bank to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. SECTION 2.08 [Intentionally Omitted] 19 SECTION 2.09 PREPAYMENT. ---------- (a) Optional Prepayments Right to Prepay Borrowings. The Borrower ----------------------------------------------- shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section. (b) Notices, Etc. The Borrower shall notify the Bank by telephone ------------- (confirmed by telecopy) of any optional prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, Las Vegas, Nevada time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, Las Vegas, Nevada time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitment as contemplated by Section 2.06(c), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06(d). Promptly following receipt of any such notice relating to a Borrowing, the Bank shall advise the Lenders of the contents thereof. SECTION 2.10 FEES. ---- (a) Facility Fee. The Borrower shall pay the Bank a facility fee for ------------ the period from and including the Effective Date to the Maturity Date (the "Final Fee Payment Date") computed at a rate per annum equal to the Applicable Rate on Bank's daily average Commitment, such fee to be paid quarterly in arrears on each Quarterly Date and on the Final Fee Payment Date. The facility fee shall be calculated on the basis of the actual number of days elapsed in a year of 360 days. (b) Payment of Fees. All fees payable hereunder shall be paid on the --------------- dates due, in immediately available funds, to the Bank. SECTION 2.11 INTEREST. -------- (a) ABR Loans. The Loans comprising each ABR Revolving Borrowing --------- shall bear interest at a rate per annum equal to the Alternate Base Rate. (b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing ---------------- shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (c) Default Interest. Notwithstanding the foregoing, if any principal ---------------- of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above or 20 (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (d) Payment of Interest. Accrued interest on each Loan shall be payable ------------------- in arrears on each Interest Payment Date for such Loan and upon termination of the Commitment. (e) Computation. All interest hereunder shall be computed on the basis of ----------- a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Bank, and such determination shall be conclusive, absent manifest error. SECTION 2.12 ALTERNATE RATE OF INTEREST. -------------------------- If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Bank determines (which determination shall be conclusive, absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or (b) the Bank is advised that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to Bank of making or maintaining the Loans included in such Borrowing for such Interest Period. Then the Bank shall give notice thereof to the Borrower and, until the Bank notifies the Borrower that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Revolving Borrowing. SECTION 2.13 INCREASED COSTS. --------------- (a) Increased Costs Generally. If any Change in Law shall: ------------------------- (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, Bank or its Parent (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on Bank or its Parent or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by Bank; 21 and the result of any of the foregoing shall be to increase the cost to Bank or its Parent of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to Bank such additional amount or amounts as will compensate Bank or its Parent, as the case may be, for such additional costs incurred or reduction suffered. (b) Capital Requirements. If Bank determines that any Change in Law -------------------- regarding capital requirements has or would have the effect of reducing the rate of return on Bank's capital or on the capital of its Parent as a consequence of this Agreement or the Loans made by Bank to a level below that which Bank or its Parent could have achieved but for such Change in Law (taking into consideration Bank's policies and the policies of its Parent with respect to capital adequacy), then from time to time the Borrower will pay to Bank such additional amount or amounts as will compensate Bank or its Parent for any such reduction suffered. (c) [Intentionally Omitted] ----------------------- (d) Delay in Requests. Failure or delay on the part of Bank to demand ----------------- compensation pursuant to this Section shall not constitute a waiver of Bank's right to demand such compensation. SECTION 2.14 BREAK FUNDING PAYMENTS. ---------------------- In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of Eurodollar Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.09(b) and is revoked in accordance herewith), then, in any such event, the Borrower shall compensate Bank for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, the loss to Bank attributable to any such event shall be deemed to include an amount determined by Bank to be equal to the excess, if any, of (i) the amount of interest that Bank would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest that Bank would earn on such principal amount for such period if Bank were to invest such principal amount for such period at the interest rate that would be bid by Bank (or an Affiliate of Bank) for dollar deposits from other banks in the eurodollar market at the commencement of such period. A certificate of Bank setting forth any amount or amounts that Bank is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive, absent manifest error. The Borrower shall pay Bank the amount shown as due on any such certificate within 10 days after receipt thereof.SECTION 2.15 TAXES. ----- 22 (a) Payments Free of Taxes. Any and all payments by or on account of any ---------------------- obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Bank receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Law. (b) Payment of Other Taxes by the Borrower. In addition, the Borrower -------------------------------------- shall pay any other Taxes to the relevant Governmental Authority in accordance with applicable Law. (c) Indemnification by the Borrower. The Borrower shall indemnify the ------------------------------- Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Bank, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by the Bank shall be conclusive, absent manifest error. (d) Evidence of Payments. As soon as practicable after any payment of --------------------- Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Bank the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Bank. SECTION 2.16 PAYMENTS GENERALLY. ------------------ Payments by the Borrower. The Borrower shall make each payment ------------------------ required to be made by it hereunder (whether of principal, interest or fees, or under Section 2.13, 2.14 or 2.15, or otherwise) prior to 1:00 PM, Las Vegas, Nevada time, on the date when due, in immediately available funds, without set- off or counterclaim. Any amounts received after such time on any such date shall be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Bank at its Principal Office and to such account at its Principal Office as the Bank shall specify to the Borrower. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars. 23 ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower hereby represents and warrants to the Bank as follows: SECTION 3.01 CORPORATE STATUS. ---------------- The Borrower and each Subsidiary of the Borrower is a corporation, trust or limited liability company duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization. The Borrower and each Subsidiary of the Borrower has the corporate power and authority to own its Property and to transact the business in which it is engaged or presently proposes to engage. The Borrower and each Subsidiary of the Borrower is duly qualified to do business as a foreign corporation, trust or limited liability company and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary or advisable. SECTION 3.02 CORPORATE POWER AND AUTHORIZATION. --------------------------------- The Borrower has the corporate power and authority to execute, deliver, perform, and take all actions contemplated by, each of the Loan Documents to which it is a party, and all such action has been duly and validly authorized by all necessary corporate proceedings on its part. Without limiting the foregoing, the Borrower has the corporate power and authority to borrow pursuant to the Loan Documents to the fullest extent permitted hereby and thereby from time to time, and has taken all necessary corporate action to authorize such borrowings. SECTION 3.03 EXECUTION AND BINDING EFFECT. ---------------------------- This Agreement and each of the other Loan Documents to which the Borrower is a party and which is required to be delivered on or before the Effective Date pursuant to Section 4.01 has been duly and validly executed and delivered by the Borrower. This Agreement and each such other Loan Document constitutes, and when executed and delivered by the Borrower will constitute, the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as the enforceability hereof or thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies. SECTION 3.04 GOVERNMENTAL APPROVALS AND FILINGS. ---------------------------------- No Governmental Action is required for the due execution, delivery and performance by the Borrower of this Agreement or any of the other Loan Documents to which it is a party. 24 SECTION 3.05 ABSENCE OF CONFLICTS. -------------------- Neither the execution and delivery of any of the Loan Documents by the Borrower, nor the consummation of the transactions herein or therein contemplated by the Borrower, nor the performance of or the compliance with the terms and conditions hereof or thereof by the Borrower, does or will: (a) violate or conflict with any Law; or (b) violate, conflict with or result in a breach of any term or condition of, or constitute a default under, or result in (or give rise to any right, -- -- contingent or otherwise, of any Person to cause) any termination, cancellation, prepayment or acceleration of performance of, or result in the creation or -- imposition of (or give rise to any obligation, contingent or otherwise, to create or impose) any Lien upon any of the Property of the Borrower or any Subsidiary of the Borrower pursuant to, or otherwise result in (or give rise to -- any right, contingent or otherwise, of any Person to cause) any change in any right, power, privilege, duty or obligation of the Borrower or any Subsidiary of the Borrower under or in connection with, (i) the articles of incorporation or by-laws (or other constituent documents) of the Borrower or any Subsidiary of the Borrower; (ii) any agreement or instrument creating, evidencing or securing any Indebtedness to which the Borrower or any Subsidiary of the Borrower is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound; or (iii) any other material agreement or instrument to which the Borrower or any Subsidiary of the Borrower is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound. SECTION 3.06 AUDITED FINANCIAL STATEMENTS. ---------------------------- The Borrower has heretofore furnished to the Bank consolidated balance sheets of the Borrower, its consolidated Subsidiaries and NPC as of December 31, 1997, 1998, and 1999 and the related consolidated statements of income, retained earnings and changes in cash flows for the fiscal years then ended, as examined and reported on by independent certified public accountants for the Borrower, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its consolidated Subsidiaries as of the end of each such fiscal year and the results of their operations and their retained earnings and changes in cash flows for the fiscal years then ended, all in conformity with GAAP. 25 SECTION 3.07 INTERIM FINANCIAL STATEMENTS. ---------------------------- The Borrower has heretofore furnished to the Bank an interim consolidated balance sheet of the Borrower, its consolidated Subsidiaries as of the end of the fiscal quarter ending September 30, 2000, together with the related consolidated statements of income, retained earnings and changes in cash flows for the applicable fiscal period ending on such date. Such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its consolidated Subsidiaries as of the end of such fiscal quarter and the results of their operations and their retained earnings and changes in cash flows for the fiscal periods then ended, all in conformity with GAAP, subject to normal and recurring year-end audit adjustments. SECTION 3.08 ABSENCE OF UNDISCLOSED LIABILITIES. ---------------------------------- Neither the Borrower nor any Subsidiary of the Borrower has any liability or obligation of any nature whatever (whether absolute, accrued, contingent or otherwise, whether or not due), forward or long-term commitment or unrealized or anticipated losses from unfavorable commitments, except (a) as disclosed in the financial statements referred to in Sections 3.06 and 3.07, and (b) liabilities, obligations, commitments and losses incurred after September 30, 2000, in the ordinary course of business and consistent with past practices. SECTION 3.09 ABSENCE OF MATERIAL ADVERSE CHANGE. ---------------------------------- Since September 30, 2000, there has been no material adverse change in the business, operations, condition (financial or otherwise), or prospects of the Borrower and its Subsidiaries taken as a whole. SECTION 3.10 ACCURATE AND COMPLETE DISCLOSURE. -------------------------------- All information heretofore, contemporaneously or hereafter provided by or on behalf of the Borrower to the Bank pursuant to or in connection with any Loan Document or any transaction contemplated hereby or thereby is or will be (as the case may be) true and accurate in all material respects on the date as of which such information is dated (or, if not dated, when received by the Bank) and does not or will not (as the case may be) omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. The Borrower has disclosed to the Bank in writing every fact or circumstance which has, or which so far as the Borrower can reasonably foresee is reasonably likely and is reasonably likely to have, a Material Adverse Effect. SECTION 3.11 MARGIN REGULATIONS. ------------------ No part of the proceeds of any Loan hereunder will be used for the purpose of buying or carrying any "margin stock", as such term is used in Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of buying or carrying any "margin stock". Neither the Borrower nor any Subsidiary of the Borrower is engaged in the business of extending credit to others for the purpose of buying or 26 carrying "margin stock". Neither the Borrower nor any Subsidiary of the Borrower owns any "margin stock". Neither the making of any Loan nor any use of proceeds of any such Loan will violate or conflict with the provisions of Regulation T, U or X of the Board, as amended from time to time. SECTION 3.12 LITIGATION. ---------- There is no pending or (to the Borrower's knowledge after due inquiry) threatened action, suit, proceeding or investigation (including any Environmental Claim) by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower which, if adversely decided, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, except for matters described in the financial statements referred to in Section 3.06 or matters previously disclosed to the Bank.. SECTION 3.13 ABSENCE OF EVENTS OF DEFAULT. ---------------------------- No event has occurred and is continuing and no condition exists which constitutes a Default or an Event of Default. SECTION 3.14 ABSENCE OF OTHER CONFLICTS. -------------------------- Neither the Borrower nor any Subsidiary of the Borrower is in violation of or conflict with, or is subject to any contingent liability on account of any violation of or conflict with: (a) any Law (including ERISA, the Code, any applicable occupational health, safety or welfare Law or any applicable Environmental Law); (b) its articles of incorporation or by-laws (or other constituent documents); or (c) any agreement or instrument to which it is party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound; except for matters which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. SECTION 3.15 INSURANCE. --------- The Borrower and each Subsidiary of the Borrower maintains with financially sound and reputable insurers insurance with respect to its properties and business and against at least such liabilities, casualties and contingencies and in at least such types and amounts as is customary in the case of corporations engaged in the same or a similar business or having similar properties similarly situated. 27 SECTION 3.16 TITLE TO PROPERTY; NO LIENS. --------------------------- The Borrower and each Subsidiary of the Borrower has good and marketable title in fee simple to all real Property owned or purported to be owned by it and good title to all other Property of whatever nature owned or purported to be owned by it, including but not limited to all Property reflected in the most recent audited balance sheet referred to in Section 3.06 or submitted pursuant to Section 5.01(b), as the case may be (except as sold or otherwise disposed of in the ordinary course of business after the date of such balance sheet). Except for (i) Liens reflected in the most recent audited balance sheet referred to in Section 3.06 or submitted pursuant to Section 5.01(b), as the case may be, (ii) Liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real Property or irregularities in title thereto which do not materially detract from the value of, or impair the use of, such Property by the Borrower or any Subsidiary of the Borrower in the operation of its business, (iii) Liens for current Taxes not yet due and delinquent and (iv) Liens permitted by Section 6.02 , no Property owned by the Borrower or any Subsidiary of the Borrower is subject to any Lien. SECTION 3.17 TAXES. ----- All tax and information returns required to be filed by or on behalf of the Borrower or any Subsidiary of the Borrower have been properly prepared, executed and filed. All Taxes upon the Borrower or any Subsidiary of the Borrower or upon any of their respective Properties, incomes, sales or franchises which are due and payable have been paid, other than those not yet delinquent and payable without premium or penalty, and except for those being diligently contested in good faith by appropriate proceedings, and in each case adequate reserves and provisions for Taxes have been made on the books of the Borrower and each Subsidiary of the Borrower. The reserves and provisions for Taxes on the books of the Borrower and each Subsidiary of the Borrower are adequate for all open years and for its current fiscal period. Neither the Borrower nor any Subsidiary of the Borrower knows of any proposed additional assessment or basis for any material assessment for additional Taxes (whether or not reserved against). SECTION 3.18 BORROWER NOT AN INVESTMENT COMPANY OR A REGISTERED PUBLIC --------------------------------------------------------- UTILITY HOLDING COMPANY. - ----------------------- The Borrower is not an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act of 1940. The Borrower is not a "holding company" within the meaning of the Public Utility Holding Company Act of 1935 which is subject to registration. SECTION 3.19 ENVIRONMENTAL MATTERS. --------------------- (a) The Borrower and each of its Subsidiaries have complied with and are in compliance with, all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. Except as disclosed to Bank, there are no pending or 28 threatened Environmental Claims against the Borrower or any of its Subsidiaries (including any such claim arising out of the ownership, lease or operation by the Borrower or any of its Subsidiaries of any real Property no longer owned, leased or operated by the Borrower or any of its Subsidiaries) or any real Property owned, leased or operated by the Borrower or any of its Subsidiaries. Except as disclosed to Bank, there are no facts, circumstances, conditions or occurrences with respect to the business or operations of the Borrower or any of its Subsidiaries, or any real Property owned, leased or operated by the Borrower or any of its Subsidiaries (including any real Property formerly owned, leased or operated by the Borrower or any of its Subsidiaries but no longer owned, leased or operated by the Borrower or any of its Subsidiaries) or any Property adjoining or adjacent to any such real Property that could be expected (i) to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any real Property owned, leased or operated by the Borrower or any of its Subsidiaries or (ii) to cause any real Property owned, leased or operated by the Borrower or any of its Subsidiaries to be subject to any restrictions on the ownership, occupancy or transferability of such real Property by the Borrower or any of its Subsidiaries under any applicable Environmental Law. (b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, any real Property owned, leased or operated by the Borrower or any of its Subsidiaries where such generation, use, treatment or storage has violated or could be expected to violate any Environmental Law. Hazardous Materials have not at any time been Released on or from any real Property owned, leased or operated by Borrower or any of its Subsidiaries where such Release has violated or would be expected to violate any applicable Environmental Law. (c) Notwithstanding anything to the contrary in this Section, the representations made in this Section shall not be untrue unless the effect of all violations, claims, restrictions, failures and noncompliances of the types described in this Section would reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Borrower. SECTION 3.20 ERISA. ----- (a) Each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable Laws, including without limitation ERISA and the Code; each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency within the meaning of such sections of the Code or ERISA or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan have been timely made; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 29 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such liability under any of the foregoing sections with respect to any Plan; no condition exists which presents a material risk to the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Borrowing, would not have a Material Adverse Effect; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate has at all times been operated in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no Lien imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Borrower and its Subsidiaries may cease contributions to or terminate any Plan maintained by any of them without incurring any material liability. (b) Each Foreign Pension Plan, if any, has been maintained in substantial compliance with its terms and with the requirements of any and all applicable Laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. All contributions required to be made with respect to a Foreign Pension Plan have been timely made. Neither the Borrower nor any of its Subsidiaries has incurred any obligation in connection with the termination of or withdrawal from any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan, determined as of the end of the Borrower's most recently ended Fiscal Year on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities. SECTION 3.21 PARI PASSU STATUS. ----------------- The claims and rights of the Bank against the Borrower hereunder are not subordinated to, and rank at least pari passu with, the claims and rights of other holders of its unsecured indebtedness except to the extent otherwise provided by Law (including without limitation the Bankruptcy Code and the provisions of 31 U.S.C. (S)3713). ARTICLE IV CONDITIONS SECTION 4.01 EFFECTIVE DATE. -------------- 30 This Agreement and the other Loan Documents shall become effective as against the Bank on the first date on which all of the following conditions shall be satisfied or waived: (a) Agreement; Notes. The Bank shall have received an executed counterpart ---------------- of this Agreement for Bank, duly executed by the Borrower, and the Note. (b) Corporate Proceedings. The Bank shall have received certificates by --------------------- the Secretary or Assistant Secretary of the Borrower dated as of the Effective Date as to (i) true copies of the articles of incorporation and by-laws (or other constituent documents) of the Borrower as in effect on such date (which, in the case of articles of incorporation or other constituent documents filed or required to be filed with the Secretary of State or other Governmental Authority in its jurisdiction of incorporation, shall be certified to be true, correct and complete by such Secretary of State or other Governmental Authority not more than 30 days before the date hereof), (ii) true copies of all corporate action taken by the Borrower relative to this Agreement and the other Loan Documents, and (iii) the incumbency and signatures of the respective officers of the Borrower executing this Agreement and the other Loan Documents to which the Borrower is a party, together with satisfactory evidence of the incumbency of such Secretary or Assistant Secretary. The Bank shall have received, certificates from the Secretary of State of Nevada (or other applicable Governmental Authority) dated not more than 30 days before the Effective Date showing the good standing of the Borrower in Nevada and in each state in which the Borrower does business. (c) Legal Opinion of Counsel to the Borrower. The Bank shall have ---------------------------------------- received, an opinion addressed to the Bank, dated Effective Date, of Choate, Hall & Stewart, and of Woodburn and Wedge as to issues under the laws of the State of Nevada, as to such matters as may be requested by the Bank and in form and substance satisfactory to the Bank. (d) Financial Statements. The Bank shall have received a true and correct -------------------- copy of the (i) audited consolidated financial statements, including balance sheets, income statements and cash flow statements, for the Borrower, NPC, SPPC and their respective consolidated Subsidiaries for the years ended December 31, 1999, 1998, and 1997, and (ii) unaudited interim consolidated financial statements, including a balance sheet, income statement and statement of cash flows, for the Borrower, NPC, SPPC and their respective consolidated Subsidiaries for the three month period ended September 30, 2000. (e) No Material Adverse Effect. Nothing shall have occurred (and the Bank -------------------------- shall have not become aware of any facts or conditions not previously known) which Bank shall determine has, had, or could reasonably be expected to have, a Material Adverse Effect. The Bank shall have received a certificate of a senior financial officer of the Borrower, dated the Effective Date, to the effect that, as of the Effective Date, there has been no Material Adverse Effect since September 30, 2000. 31 (f) No Injunctions. There shall not exist any judgment, order, injunction -------------- or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the transactions contemplated hereby or otherwise referred to herein. (g) Litigation, Proceedings and Investigations. There shall be no actions, ------------------------------------------ arbitrations, suits, investigations or proceedings pending or threatened with respect to this Agreement or which the Bank shall determine could reasonably be expected to have a Material Adverse Effect. (h) No Violation of Existing Agreements. Neither the Borrower nor any ----------------------------------- Subsidiary of the Borrower is in violation of any material agreement or instrument to which it is party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound; (i) [Intentionally Omitted] ----------------------- (j) Ratings. The Bank shall have received a certificate of a senior ------- financial officer of the Borrower, dated the Effective Date, setting forth the then current ratings of the Index Debt. (k) Officers' Certificates. The Bank shall have received, with an executed ---------------------- counterpart, certificates from such officers of the Borrower as to such matters as the Bank may request. (l) Fees, Expenses, etc. All fees and other items required to be paid to ------------------- Bank on or before the Effective Date (including all fees referenced in fee letters and offer letters) shall have been paid or received. (m) Section 4.02 Conditions. ----------------------- (i) Each of the representations and warranties made by the Borrower herein and in each other Loan Document shall be true and correct in all material respects on and as of the Effective Date as if made on and as of such date, both before and after giving effect to the Loans requested to be made on such date. (ii) No Default or Event of Default shall have occurred and be continuing on the Effective Date. (n) Additional Matters. The Bank shall have received, with copies or ------------------ executed counterparts, such other certificates, opinions, documents and instruments as the Bank may have requested. All corporate and other proceedings, and all documents, instruments and other matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be satisfactory in form and substance to the Bank. 32 SECTION 4.02 CONDITIONS TO ALL LOANS. ----------------------- The obligation of Bank to make, convert or continue any Loan on the occasion of any Borrowing is subject to satisfaction of the conditions precedent set forth in Section 4.01 and satisfaction of the following further conditions precedent: (a) Notice. The Borrower shall have executed and delivered to the Bank a ------ Borrowing Request or Interest Election Request for such Borrowing in accordance with Section 2.03 or 2.05, as the case may be. (b) Representations and Warranties. Each of the representations and ------------------------------ warranties made by the Borrower herein and in each other Loan Document shall be true and correct in all material respects on and as of such date as if made on and as of such date, both before and after giving effect to the making, conversion or continuation of Loans requested to be made, converted or continued on such date. (c) No Defaults. No Default or Event of Default shall have occurred and be ----------- continuing on such date or after giving effect to the making, conversion or continuation of Loans requested to be made, converted or continued on such date. (d) No Violations of Law, etc. Neither the making, conversion nor ------------------------- continuation nor use of the Loans shall cause Bank to violate or be in conflict with any Law. (e) No Material Adverse Change. There shall not have occurred, or be -------------------------- threatened, any other event, act or condition which would reasonably be expected to have a Material Adverse Effect. Each request by the Borrower for any Loan or conversion or continuation thereof shall constitute a representation and warranty by the Borrower that the conditions set forth in this Section 4.02 have been satisfied as of the date of such request. Failure of the Bank to receive notice from the Borrower to the contrary before such Loan is made shall constitute a further representation and warranty by the Borrower that the conditions referred to in this Section 4.02 have been satisfied as of the date such Loan is made. ARTICLE V AFFIRMATIVE COVENANTS The Borrower hereby covenants to the Bank: SECTION 5.01 BASIC REPORTING REQUIREMENTS. ---------------------------- (a) Annual Audit Reports. As soon as practicable, and in any event within -------------------- 90 days after the close of each fiscal year of the Borrower, the Borrower shall furnish to the Bank, consolidated statements of income, retained earnings and cash flows of the Borrower and its 33 consolidated Subsidiaries for such fiscal year and a consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the close of such fiscal year, and notes to each, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year. Such financial statements shall be accompanied by an opinion of independent certified public accountants of recognized national standing selected by the Borrower, which opinion shall not be subject to any qualification as to scope of audit or as to any other matter which the Bank determines is adverse. Such opinion in any event shall contain a written statement of such accountants substantially to the effect that (i) such accountants examined such financial statements in accordance with generally accepted auditing standards and accordingly made such tests of accounting records and such other auditing procedures as such accountants considered necessary in the circumstances and (ii) in the opinion of such accountants such financial statements present fairly the financial position of the Borrower and its consolidated Subsidiaries as of the end of such fiscal year and the results of their operations and their retained earnings and cash flows for such fiscal year, in conformity with GAAP. (b) Quarterly Consolidated Reports. As soon as practicable, and in any ------------------------------ event within 45 days after the close of each of the first three fiscal quarters of each fiscal year of the Borrower, the Borrower shall furnish to the Bank, unaudited consolidated statements of income, retained earnings and cash flows of the Borrower and its consolidated Subsidiaries for the period from the beginning of such fiscal year to the end of such fiscal quarter and an unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the close of such fiscal quarter, and notes to each, all in reasonable detail, setting forth in comparative form the corresponding figures for the same periods or as of the same date during the preceding fiscal year (except for the consolidated balance sheet, which shall set forth in comparative form the corresponding balance sheet as of the prior fiscal year end). Such financial statements shall be certified by a Responsible Officer of the Borrower as presenting fairly the financial position of the Borrower and its consolidated Subsidiaries as of the end of such fiscal quarter and the results of their operations and their retained earnings and changes in cash flows for such fiscal year, in conformity with GAAP, subject to normal and recurring year-end audit adjustments. (c) Quarterly Compliance Certificates. The Borrower shall deliver to the --------------------------------- Bank, a Quarterly Compliance Certificate, duly completed and signed by a Responsible Officer of the Borrower concurrently with the delivery of the financial statements referred to in subsections (a) and (b) of this Section 5.01. (d) Certain Other Reports and Information. Promptly upon their becoming ------------------------------------- available to the Borrower, the Borrower shall deliver to the Bank, a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which the Borrower or any Subsidiary of the Borrower shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, and (ii) all reports, proxy statements, financial statements and other information distributed by the Borrower to its stockbrokers, bondholders or the financial community generally. (e) Further Information. The Borrower shall promptly furnish to the Bank, ------------------- such other information and in such form as the Bank or Bank may reasonably request from time to time. 34 (f) Notice of Certain Events. Promptly (and, in the case of clause (i) ------------------------ below, no later than two Business Days) upon becoming aware of any of the following, the Borrower shall give the Bank notice thereof, together with a written statement of a Responsible Officer of the Borrower setting forth the details thereof and any action with respect thereto taken or proposed to be taken by the Borrower: (i) Any Default or Event of Default. (ii) The occurrence or existence of any event or condition (including (A) the violation or alleged violation of any Environmental Law by the Borrower or any Subsidiary of the Borrower or the assertion of any Environmental Claim against the Borrower or any Subsidiary of the Borrower, (B) the commencement of any other action, suit, proceeding or investigation by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower, or (C) the violation, breach or default or alleged violation, breach or default by the Borrower or any Subsidiary of the Borrower or any other Person under any agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole) which event or condition, either individually or in the aggregate, has, or would reasonably be expected to have, a Material Adverse Effect. (iii) Any change in the Index Debt rating. (g) Visitation; Verification. The Borrower shall permit such Persons as ------------------------ the Bank or Bank may designate from time to time to visit and inspect any of the properties of the Borrower and of any Subsidiary, to examine their respective books and records and take copies and extracts therefrom and to discuss their respective affairs with their respective officers, employees and independent accountants at such times and as often as the Bank or Bank may reasonably request; provided, however, that the Borrower reserves the right to restrict -------- access to any of its generating facilities in accordance with reasonably adopted practices relating to safety and security. The Borrower hereby authorizes such officers, employees and independent accountants to discuss with the Bank or Bank the affairs of the Borrower and its Subsidiaries. (h) ERISA. Within 30 days after the Borrower knows that any of the events ----- or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, a statement signed by a Responsible Officer of the Borrower setting forth details respecting such event or condition and the action, if any, that the Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by the Borrower or an ERISA Affiliate with respect to such event or condition): (i) any Reportable Event and any request for a waiver under Section 412(d) of the Code for any Plan; 35 (ii) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by the Borrower or an ERISA Affiliate to terminate any Plan, in each case with respect to which there are insufficient assets to pay benefits as they become due; (iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan; (iv) the complete or partial withdrawal from a Multiemployer Plan by the Borrower or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by the Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; and (v) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if the Borrower or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections. (i) Satisfaction of Certain Reporting Requirements. Notwithstanding any ---------------------------------------------- other provision of this Section 5.01, the Borrower shall be deemed to have satisfied its obligations pursuant to Sections 5.01(a) and (b) if and to the extent that it shall have provided to the Bank, pursuant to Section 5.01(d), copies of its periodic reports (on Form 10-K or 10-Q, as the case may be) as required to be filed with the Securities and Exchange Commission (or any successor thereto) pursuant to the Securities and Exchange Act of 1934, as amended (or any successor statute of similar import), for the annual and quarterly periods described in such Sections. (j) Delivery to Lenders. The Bank shall promptly deliver each of the ------------------- reports, statements, certificates or other documents delivered to the Bank by the Borrower pursuant to this Section 5.01. SECTION 5.02 INSURANCE. --------- The Borrower shall, and shall cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as is customary in the case of corporations engaged in the same or similar businesses or having similar properties similarly situated and as is satisfactory from time to time to the Bank in its reasonable discretion. 36 SECTION 5.03 PAYMENT OF TAXES AND OTHER POTENTIAL CHARGES AND PRIORITY --------------------------------------------------------- CLAIMS. - ------ The Borrower shall, and shall cause each of its Subsidiaries to, pay or discharge (a) on or prior to the date on which penalties or Liens attach thereto, all Taxes imposed upon it or any of its properties; (b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such Property; and (c) on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any such Property or which, if unpaid, might give rise to a claim entitled to priority over general creditors of the Borrower or such Subsidiary in a case under the Bankruptcy Code; provided, that, unless and until foreclosure, distraint, levy, sale or similar - -------- proceedings shall have been commenced, the Borrower or such Subsidiary need not pay or discharge any such Tax, assessment, charge or claim so long as (x) the validity thereof is contested in good faith and by appropriate proceedings diligently conducted, and (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor. SECTION 5.04 PRESERVATION OF CORPORATE STATUS AND FRANCHISES. ----------------------------------------------- The Borrower shall, and shall cause each of its Subsidiaries to, maintain its status as a corporation, trust or limited liability company duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, and to be duly qualified to do business as a foreign corporation, trust or limited liability company and in good standing in all jurisdictions in which the ownership of its properties or the nature of its business or both make such qualification necessary or advisable; provided, however, that nothing in -------- ------- this Section 5.04 shall prevent the withdrawal by the Borrower or any of its Subsidiaries of its qualification as a foreign corporation in any jurisdiction where such withdrawal could not have a Material Adverse Effect . The Borrower shall, and shall cause each of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its material rights, franchises, licenses and patents. SECTION 5.05 GOVERNMENTAL APPROVALS AND FILINGS. ---------------------------------- The Borrower shall keep and maintain in full force and effect all Governmental Actions necessary or advisable in connection with execution and delivery of any Loan Document, consummation of the transactions herein or therein contemplated, performance of or compliance with the terms and conditions hereof or thereof or to ensure the legality, validity, binding effect or enforceability hereof or thereof. 37 SECTION 5.06 MAINTENANCE OF PROPERTIES. ------------------------- The Borrower shall, and shall cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by it and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times. SECTION 5.07 AVOIDANCE OF OTHER CONFLICTS. ---------------------------- The Borrower shall not, and shall not permit any of its Subsidiaries to, violate or conflict with, be in violation of or in conflict with, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with (a) any Law; (b) its articles of incorporation or by-laws; or (c) any agreement or instrument to which it is party or by which any of them or any of their respective Subsidiaries is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound, except for matters which would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect. SECTION 5.08 FINANCIAL ACCOUNTING PRACTICES. ------------------------------ The Borrower shall, and shall cause each of its Subsidiaries to, make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect its transactions and dispositions of its assets and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization, (b) transactions are recorded as necessary (i) to permit preparation of financial statements in conformity with GAAP and (ii) to maintain accountability for assets, (c) access to assets is permitted only in accordance with management's general or specific authorization and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. SECTION 5.09 USE OF PROCEEDS. --------------- The Borrower shall apply the proceeds of all Loans hereunder only for working capital and general corporate purposes of the Borrower, including commercial paper backup. The Borrower shall not use the proceeds of any Loans hereunder directly or indirectly for any unlawful purpose, in any manner inconsistent with Section 3.11, or inconsistent with any other provision of any Loan Document. 38 SECTION 5.10 END OF FISCAL PERIODS. --------------------- The Borrower shall cause (a) each of its, and each of its Subsidiary's, fiscal years to end on December 31 and (b) each of its, and each of its Subsidiary's, fiscal quarters to end on March 31, June 30, September 30 and December 31. ARTICLE VI NEGATIVE COVENANTS The Borrower hereby covenants to the Bank as follows: SECTION 6.01 FINANCIAL CONDITION AND DEBT RATING. At all times during the ----------------------------------- term of this Agreement, the Borrower's public unsecured debt shall be rated by each of Moody's and S&P at not less than the minimum rating considered by each such rating agency as "investment grade"; provided, however, that if such debt rating from either Moody's or S&P shall be reduced to a rating considered by such rating agency to be below "investment grade", such downgrade shall not constitute an Event of Default under this Agreement unless and until such time as the rating has remained below "investment grade" for more than 15 days from the date of such downgrade. SECTION 6.02 LIENS. ----- The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its Property (now owned or hereafter acquired), or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except for the following ("Permitted Liens"): --------------- (a) Liens existing on the date hereof and securing obligations existing on the date hereof, other than Indebtedness to be refinanced; (b) Liens securing obligations of NPC issued under and pursuant to the terms and conditions of the NPC First Mortgage Indenture; (c) Liens securing obligations of SPPC issued under and pursuant to the terms and conditions of the SPPC First Mortgage Indenture; (d) Liens on NPC First Mortgage Bonds issued as collateral for pollution control revenue bonds issued for the benefit of NPC or its Subsidiaries (and related rights and interests) to secure obligations of NPC or such Subsidiaries for the benefit of the holders of such bonds, provided that such bonds are not secured by any other assets or Properties of NPC or its Subsidiaries; (e) Liens on SPPC First Mortgage Bonds issued as collateral for pollution control or gas or water facility revenue bonds issued for the benefit of SPPC or its Subsidiaries (and related 39 rights and interests) to secure obligations of SPPC or such Subsidiaries for the benefit of the holders of such bonds, provided that such bonds are not secured by any other assets or Properties of SPPC or its Subsidiaries; (f) Liens on SPPC First Mortgage Bonds issued as collateral for medium- term notes issued pursuant to the Collateral Trust Indenture, dated as of June 1, 1992, between SPPC and Bankers Trust Company, as Trustee; (g) Liens on "transition property" arising pursuant to Section 843 of the California Public Utility Code for the benefit of holders of rate reduction bonds issued pursuant to a valid financing order of the California Public Utilities Commission; (h) Liens arising from taxes, assessments, charges or claims described in Section 5.03 that are not yet due or that remain payable without penalty or to the extent permitted to remain unpaid under the proviso to such Section 5.03; (i) Deposits or pledges of cash or securities in the ordinary course of business to secure (i) worker's compensation, unemployment insurance or other social security obligations, (ii) performance of bids, tenders, trade contracts (other than for payment of money) or leases, (iii) stay, surety or appeal bonds, or (iv) other obligations of a like nature incurred in the ordinary course of business; (j) Zoning restrictions, easements, minor restrictions on the use of real Property, minor irregularities in title thereto and other minor Liens that do not secure the payment of money or the performance of an obligation and that do not in the aggregate materially detract from the value of an asset to, or materially impair its use in the business of, the Borrower or such Subsidiary; and (k) Liens on Property securing all or part of the purchase price thereof and Liens (whether or not assumed) existing in Property at the time of purchase thereof, provided that: (i) such Lien is created before or substantially simultaneously with the purchase of such Property by the Borrower or such Subsidiary, (ii) such Lien is confined solely to the Property so purchased, improvements thereto and proceeds thereof, (iii) the aggregate amount secured by such Liens on any particular Property at the time purchased by the Borrower or such Subsidiary, as the case may be, shall not exceed the lesser of the purchase price of such Property and the fair market value of such Property at the time of purchase thereof by the Borrower or such Subsidiary, and (iv) the aggregate amount secured by all Liens described in this Section 6.02(k) shall not at any time exceed $150,000,000. "Permitted Liens" shall in no event include any Lien imposed by, or required to be granted pursuant to, ERISA or any Environmental Law. 40 SECTION 6.03 MERGERS. ------- The Borrower shall not, and shall not permit any of its Subsidiaries to, (a) merge with or into or consolidate with any other Person, (b) liquidate, wind-up, dissolve or divide, or (c) agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except: (i) A Person may merge with or into or consolidate with any Subsidiary of the Borrower, provided that (x) the surviving Person shall be a Subsidiary of the Borrower, (y) no Default or Event of Default shall have occurred and be continuing or shall exist at such time or after giving effect to such transaction and (z) the Borrower shall deliver to the Bank (A) a certificate, in a form reasonably satisfactory to the Bank, certifying that no Default or Event of Default exists or will result from such merger and (B) pro forma financial statements in support of such certification; and (ii) A Person may merge with or into or consolidate with the Borrower, provided that (x) the Borrower shall be the surviving Person, (y) no Default or Event of Default shall have occurred and be continuing or shall exist at such time or after giving effect to such transaction and (z) the Borrower shall deliver to the Bank (A) a certificate, in a form reasonably satisfactory to the Bank, certifying that no Default or Event of Default exists or will result from such merger and (B) pro forma financial statements in support of such certification. SECTION 6.04 DISPOSITIONS OF PROPERTIES. -------------------------- The Borrower shall not, and shall not permit any of its Subsidiaries to, sell, convey, assign, lease, sale-leaseback, transfer, abandon or otherwise dispose of, voluntarily or involuntarily (collectively, "Dispose"), any of its Properties, or agree, become or remain liable contingently or otherwise to do any of the foregoing, except that, so long as no Default or Event of Default shall have occurred and be continuing or shall exist at such time or after giving effect to such transaction, the Borrower and its Subsidiaries may Dispose of Property (a) in transactions in the ordinary course of business, (b) that is obsolete, (c) comprising generating assets, provided that the aggregate book value of all generating assets Disposed of pursuant to this Section 6.04(c) from and after the date hereof shall not exceed $1,100,000,000, (d) comprising water assets, provided that the aggregate book value of all water assets disposed of pursuant to this Section 6.04, (d) from and after the date hereof shall not exceed $500,000,000.00, and (e) in transactions other than as provided in Section 6.04 (a), (b), (c), and (d) provided that the aggregate book value of all Property Disposed of pursuant to this Section 6.04 (e) from and after the date hereof shall not exceed $120,000,000. SECTION 6.05 INVESTMENTS AND ACQUISITIONS. ---------------------------- Prior to the making of any Investment or the consummation of any Acquisition by the Borrower or any of its Subsidiaries, the amount or purchase price of which, as the case may be, when aggregated with the amounts and purchase prices of other Investments and Acquisitions made by the Borrower and its Subsidiaries, would exceed $70,000,000 in the aggregate at any time, the Borrower shall deliver to the Bank (i) a certificate, in a form reasonably satisfactory to 41 the Bank, certifying that no Default or Event of Default exists or will result from such Acquisition and (ii) pro forma financial statements in support of such certification. SECTION 6.06 DIVIDENDS AND STOCK REPURCHASES. ------------------------------- The Borrower shall not declare or pay any dividend on its capital stock (except for dividends in the form of capital stock), or redeem or repurchase any of its capital stock, if a Default or Event of Default shall have occurred and be continuing or shall exist at such time or after giving effect to such transaction. SECTION 6.07 TRANSACTIONS WITH AFFILIATES. ---------------------------- The Borrower shall not enter into any transaction of any kind with any Person that Controls the Borrower or is controlled by the Borrower or is under common control with the Borrower other than (a) salary, bonus, employee stock option and other compensation arrangements with directors or officers in the ordinary course of business, (b) transactions that are fully disclosed to the board of directors (or executive committee thereof) of the Borrower and expressly authorized by a resolution of the board of directors (or executive committee) of the Borrower which is approved by a majority of the directors (or executive committee) not having an interest in the transaction, (c) transactions between or among the Borrower and its Wholly-Owned Subsidiaries, and (d) transactions on overall terms at least as favorable to the Borrower as would be the case in an arm's-length transaction between unrelated parties of equal bargaining power. SECTION 6.08 EQUAL AND RATABLE LIEN. ---------------------- If, notwithstanding the prohibition contained in Section 6.02, the Borrower or any of its Subsidiaries shall create, assume or permit to exist any Lien upon any of its Property, other than those permitted by the provisions of Section 6.02, it will make or cause to be made effective provision whereby the Borrowings will be secured equally and ratably with any and all other obligations thereby secured, such security to be pursuant to agreements reasonably satisfactory to the Bank and, in any such case, the Borrowings shall have the benefit, to the fullest extent that, and with such priority as, the Lenders may be entitled under applicable law, of an equitable Lien on such Property. Such violation of Section 6.02 will constitute an Event of Default, whether or not provision is made for an equal and ratable Lien pursuant to this Section. SECTION 6.09 RESTRICTIVE AGREEMENTS. ---------------------- Except as otherwise permitted under Article VI hereunder, and except for agreements referenced in or permitted by or covenants contained within Article VI of the SPPC Credit Agreement and Article VI of the NPC Credit Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other instrument that creates, incurs or permits to exist any Lien upon any of its Property or assets, or (b) prohibits, restricts or imposes any conditions upon the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or 42 to make or repay loans or advances to the Borrower or any other Subsidiary or to guarantee Indebtedness of the Borrower or any other Subsidiary. ARTICLE VII DEFAULTS SECTION 7.01 EVENTS OF DEFAULT. ----------------- An "Event of Default" shall mean the occurrence or existence of one or more ---------------- of the following events or conditions (for any reason, whether voluntary, involuntary or effected or required by Law): (a) The Borrower shall fail to pay when due principal of any Loan. (b) The Borrower shall fail to pay when due interest on any Loan, any fees, indemnity or expenses, or any other amount due hereunder or under any other Loan Document and such failure shall have continued for a period of three business days. (c) Any representation or warranty made or deemed made by the Borrower in or pursuant to or in connection with any Loan Document, or any statement made by the Borrower in any financial statement, certificate, report, exhibit or document furnished by the Borrower to the Bank pursuant to or in connection with any Loan Document, shall prove to have been false or misleading in any material respect as of the time when made or deemed made (including by omission of material information necessary to make such representation, warranty or statement not misleading). (d) The Borrower shall default in the performance or observance of any covenant contained in Article VI or any of the covenants contained in Sections 5.01(f)(i) or 5.09 or 5.10. (e) The Borrower shall default in the performance or observance of any other covenant, agreement or duty under this Agreement or any other Loan Document and (i) in the case of a default under Section 5.01 (other than as referred to in subsection (f)(i) thereof) such default shall have continued for a period of ten Business Days and (ii) in the case of any other default such default shall have continued for a period of 30 days after notice from the Bank to the Borrower. (f) The Borrower or any Subsidiary of the Borrower shall (i) fail to make any payment (x) on account of any Indebtedness under the NPC Credit Agreement or the SPPC Credit Agreement, (y) on account of any Indebtedness aggregating $10,000,000 or more in principal amount or (z) aggregating $10,000,000 or more on any Indebtedness, or any interest or premium thereon, in each case, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and, in each case, such failure shall have continued beyond any applicable grace period specified in any agreement or instrument relating to such Indebtedness, or (ii) fail to perform or observe any other term, covenant or condition on its part 43 to be performed or observed under any agreement or instrument relating to any Indebtedness when required to be performed or observed, and such failure shall have continued beyond any applicable grace period specified in any agreement or instrument relating to such Indebtedness, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness, the unpaid principal amount of which then aggregates $10,000,000. (g) One or more final judgments or orders for the payment of money shall have been entered against the Borrower or any Subsidiary of the Borrower, which judgments or orders exceed $10,000,000 in the aggregate, and such judgments or orders shall have remained undischarged and unstayed for a period of thirty consecutive days. (h) One or more writs or warrants of attachment, garnishment, execution, distraint or similar process exceeding in value the aggregate amount of $10,000,000 shall have been issued against the Borrower or any Subsidiary of the Borrower or any of their respective properties and shall have remained undischarged and unstayed for a period of thirty consecutive days. (i) Any Governmental Action now or hereafter made by or with any Governmental Authority in connection with any Loan Document is not obtained or shall have ceased to be in full force and effect or shall have been modified or amended or shall have been held to be illegal or invalid, and the Bank shall have determined (which determination shall be conclusive provided it is reached in good faith) that the consequence of any of the foregoing events would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (j) Any Loan Document or any material term or provision thereof shall have ceased to be in full force and effect, or the Borrower or any Governmental Authority with jurisdiction over the Borrower shall, or shall purport to, terminate, repudiate, declare voidable or void or otherwise contest, any Loan Document or any material term or provision thereof or any obligation or liability of the Borrower thereunder. (k) An event or condition specified in Section 5.01(h) hereof shall occur or exist with respect to any Plan or Multiemployer Plan or any Lien arises pursuant to ERISA and, as a result of such event or condition or Liens, together with all other such events or conditions or Liens, the Borrower or any ERISA Affiliate shall incur or shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC or suffer an encumbrance to exist in favor of any thereof (or any combination of the foregoing) which would constitute a Material Adverse Effect. (l) The Borrower or any Subsidiary of the Borrower shall have violated any Environmental Law or become subject to any Environmental Claim and, in either case, the Bank shall have determined (which determination shall be conclusive provided it is reached in good faith) that such event would reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect. (m) A proceeding shall have been instituted in respect of the Borrower or any Subsidiary of the Borrower: 44 (i) seeking to have an order for relief entered in respect of such Person, or seeking a declaration or entailing a finding that such Person is insolvent or a similar declaration or finding, or seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to such Person, its assets or its debts under any Law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar Law now or hereafter in effect, or (ii) seeking appointment of a receiver, trustee, liquidator, assignee, sequestrator or other custodian for such Person or for all or any substantial part of its Property, and such proceeding shall result in the entry, making or grant of any such order for relief, declaration, finding, relief or appointment, or such proceeding shall remain undismissed and unstayed for a period of thirty consecutive days. (n) The Borrower or any Subsidiary of the Borrower shall become insolvent; shall fail to pay, become unable to pay, or state that it is or will be unable to pay, its debts as they become due; shall voluntarily suspend transaction of its business; shall make a general assignment for the benefit of creditors; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(m)(i), or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such order for relief, declaration, finding or relief described therein; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(m)(ii), or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such appointment or to the taking of possession by any such custodian of all or any substantial part of its Property; shall dissolve, wind-up, revoke or forfeit its charter (or other constituent documents) or liquidate itself or any substantial part of its Property; or shall take any action in furtherance of any of the foregoing. (o) A Change in Control shall occur. (p) NPC or SPPC shall cease to maintain a first mortgage bond rating of at least Baa3 by Moody's and BBB- by S&P. (q) The Borrower shall fail to maintain ongoing utility segment- identifiable assets (exclusive of cash and marketable securities) and operating income relating to the generation, transmission and/or distribution of electricity, gas or water in a proportion not less than 80% of total assets (exclusive of cash and marketable securities) and operating income. SECTION 7.02 CONSEQUENCES OF AN EVENT OF DEFAULT. ----------------------------------- (a) If an Event of Default specified in subsections (a) through (l), (o), (p) or (q) of Section 7.01 shall occur and, be continuing or shall exist, then, in addition to all other rights and remedies which the Bank may have hereunder or under any other Loan Document, at law, in equity or otherwise, Bank shall be under no further obligation to make Loans hereunder, and the Bank may, , by notice to the Borrower, from time to time do any or all of the following: 45 (i) Declare the Commitment terminated, whereupon the Commitment will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (b) If an Event of Default specified in subsection (m) or (n) of Section 7.01 shall occur or exist, then, in addition to all other rights and remedies which the Bank may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Commitment shall automatically terminate and the Bank shall be under no further obligation to make Loans, and the unpaid principal amount of the Loans, interest accrued thereon and all other obligations shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. ARTICLE VIII MISCELLANEOUS SECTION 8.01 AMENDMENTS AND WAIVERS. ---------------------- Neither this Agreement nor any other Loan Document may be amended, modified or supplemented except in accordance with the provisions of this Section 9.01. The Bank and the Borrower may from time to time amend, modify or supplement the provisions of this Agreement or any other Loan Document for the purpose of amending, adding to or waiving any provision, or changing in any manner the rights and duties of the Borrower, or Bank. Any such amendment, modification or supplement made by the Borrower and the Bank in accordance with the provisions of this Section 9.01 shall be binding upon the Borrower and the Bank. The Bank shall enter into such amendments, modifications or supplements from time to time as directed by the Bank, provided, that no such amendment, modification or -------- supplement may be made which will reduce the principal amount of or extend the time for any payment of principal of any Loan, or reduce the rate of interest or extend the time for payment of any interest borne by any Loan, or extend the time for payment of or reduce the amount of any fees, or reduce or postpone the date for payment of any other obligation, without the written consent of the Bank. SECTION 8.02 NO IMPLIED WAIVER; CUMULATIVE REMEDIES. -------------------------------------- No course of dealing and no delay or failure of the Bank in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or the exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of 46 steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Bank under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Bank would otherwise have hereunder or thereunder, at law, in equity or otherwise. SECTION 8.03 NOTICES. ------- (a) Except to the extent otherwise expressly permitted hereunder or thereunder, all notices, requests, demands, directions and other communications (collectively "notices") under this Agreement or any other Loan Document shall be in writing (including telecopied communication) and shall be sent by first- class mail, or by nationally-recognized overnight courier, or by telecopier (with confirmation in writing mailed first-class or sent by such an overnight courier), or by personal delivery. All notices shall be sent to the applicable party at the address stated on the signature pages hereof or in accordance with the last unrevoked written direction from such party to the other parties hereto in all cases with postage or other charges prepaid. Any such properly given notice shall be effective on the earliest to occur of receipt, telephone confirmation of receipt of telecopy communication, one Business Day after delivery to a nationally-recognized overnight courier, or three Business Days after deposit in the mail. (b) A copy of any notice to the Borrower or any other party to a Loan Document shall simultaneously be sent to Bank. (c) The Bank may rely on any notice (whether or not such notice is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the Borrower, and the Bank shall not have any duty to verify the identity or authority of any Person giving such notice. SECTION 8.04 EXPENSES; TAXES; INDEMNITY. -------------------------- (a) The Borrower agrees to pay or cause to be paid and to save the Bank harmless against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel) incurred by the Bank from time to time arising from or relating to (i) in the case of the Bank, the negotiation, syndication, preparation, execution, delivery, administration and performance of this Agreement and the other Loan Documents, (ii) in the case of the Bank, any amendments, modifications, supplements, waivers or consents to this Agreement or any other Loan Document (whether or not ultimately entered into or granted), and (iii) in the case of the Bank, the enforcement or preservation of rights under this Agreement or any other Loan Document (including but not limited to any such costs or expenses arising from or relating to (A) collection or enforcement of an outstanding Loan or any other amount owing hereunder or thereunder by the Bank, and (B) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the Loan Documents). (b) The Borrower hereby agrees to pay all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or 47 hereafter determined by the Bank to be payable in connection with this Agreement or any other Loan Documents or any other documents, instruments or transactions pursuant to or in connection herewith or therewith (which determination shall be conclusive provided it is reached in good faith), and the Borrower agrees to save the Bank harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such fees, taxes or impositions. (c) The Borrower hereby agrees to reimburse and indemnify each of the Indemnified Parties from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnified Party shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnified Party as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan (and without in any way limiting the generality of the foregoing, including any violation or breach of any Environmental Law or any other Law by the Borrower or any Subsidiary of the Borrower; any Environmental Claim arising out of the management, use, control, ownership or operation of Property by any of such Persons, including all on-site and off-site activities involving Hazardous Materials; or any exercise by the Bank of any of its rights or remedies under this Agreement or any other Loan Document); but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of such Indemnified Party, as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Borrower under this subsection (c), or any other indemnification obligation of the Borrower hereunder or under any other Loan Document, are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. SECTION 8.05 SEVERABILITY. ------------ The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. SECTION 8.06 PRIOR UNDERSTANDINGS. -------------------- This Agreement, the other Loan Documents and any commitment letter regarding the Facility between Bank, and the Borrower, as such agreements shall be amended from time to time, supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein. 48 SECTION 8.07 DURATION; SURVIVAL. ------------------ All representations and warranties of the Borrower contained herein or in any other Loan Document or made in connection herewith or therewith shall survive the making, and shall not be waived by the execution and delivery, of this Agreement or any other Loan Document, any investigation by or knowledge of the Bank, the making of any Loan, or any other event or condition whatever. All covenants and agreements of the Borrower contained herein or in any other Loan Document shall continue in full force and effect from and after the date hereof so long as the Borrower may borrow hereunder and until payment in full of all Obligations. Without limitation, all obligations of the Borrower hereunder or under any other Loan Document to make payments to or indemnify the Bank shall survive the payment in full of all other Obligations, termination of the Borrower's right to borrow hereunder, and all other events and conditions whatever. SECTION 8.08 COUNTERPARTS. ------------ This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. SECTION 8.09 LIMITATION ON PAYMENTS. ---------------------- The parties hereto intend to conform to all applicable Laws in effect from time to time limiting the maximum rate of interest that may be charged or collected. Accordingly, notwithstanding any other provision hereof or of any other Loan Document, the Borrower shall not be required to make any payment to the Bank, and Bank shall refund any payment made by the Borrower, to the extent that such requirement or such failure to refund would violate or conflict with nonwaivable provisions of applicable Laws limiting the maximum amount of interest which may be charged or collected by Bank. SECTION 8.10 SET-OFF. ------- The Borrower hereby agrees that, to the fullest extent permitted by Law, if any Obligation of the Borrower shall be due and payable (by acceleration or otherwise), Bank shall have the right, without notice to the Borrower, to set- off against and to appropriate and apply to such Obligation any indebtedness, liability or obligation of any nature owing to the Borrower by Bank, including but not limited to all deposits (whether time or demand, general or special, provisionally credited or finally credited, whether or not evidenced by a certificate of deposit) now or hereafter maintained by the Borrower with Bank. Such right shall be absolute and unconditional in all circumstances and, without limitation shall exist whether or not Bank or any other Person shall have given notice or made a demand to the Borrower or any other Person, whether such indebtedness, obligation or liability owed to the Borrower is contingent, absolute, matured or unmatured (it being agreed that Bank may deem such indebtedness, obligation or liability to be then due and payable at the time of such setoff), and regardless of the existence or 49 adequacy of any collateral, guaranty or any other security, right or remedy available to Bank or any other Person. The Borrower hereby agrees that, to the fullest extent permitted by Law, any branch, subsidiary or affiliate of Bank shall have the same rights of set-off as the Bank as provided in this Section (regardless of whether such branch, subsidiary or affiliate would otherwise be deemed in privity with or a direct creditor of the Borrower). The rights provided by this Section are in addition to all other rights of set-off and banker's lien and all other rights and remedies which Bank (or any such branch, subsidiary or affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise, and nothing in this Agreement or any other Loan Document shall be deemed a waiver or prohibition of or restriction on the rights of set-off or bankers' lien of any such Person. SECTION 8.11 [INTENTIONALLY OMITTED] ----------------------- SECTION 8.12 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; ASSIGNMENTS. --------------------------------------------------- (a) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the Borrower, the Bank, all future holders of the Note, and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights hereunder or interests herein without the prior written consent of Bank, and any purported assignment without such consent shall be void. (b) [Intentionally Omitted]. ----------------------- (c) Assignments . Bank may, in the ordinary course of its commercial ----------- banking business and in accordance with applicable Law, at any time assign all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or any portion of its Commitment and Loans owing to it and any Note held by it) to any Affiliate of Bank or to one or more additional commercial banks or other Persons (each a "Purchasing Lender"); provided, that - ------------------ -------- (i) any such assignment to a Purchasing Lender which is not an affiliate of Bank shall be made only with the consent (which in each case shall not be unreasonably withheld) of the Borrower (so long as no Default or Event of Default shall have occurred and be continuing) and the Bank; (ii) if Bank makes such an assignment of less than all of its then remaining rights and obligations under this Agreement and the other Loan Documents, the Bank shall retain, after such assignment, a minimum principal amount of $10,000,000 of the Commitment and Loans then outstanding, and such assignment, shall be in a minimum principal amount of $10,000,000 of the Commitment and Loans then outstanding; (d) Financial and Other Information. The Borrower authorizes the Bank to ------------------------------- disclose to any Participant or Purchasing Lender (each, a "transferee") and any ---------- prospective transferee any and all financial and other information in such Person's possession concerning the Borrower and 50 its Subsidiaries and Affiliates which has been or may be delivered to such Person by or on behalf of the Borrower in connection with this Agreement or any other Loan Document or such Person's credit evaluation of the Borrower and its Subsidiaries and Affiliates. (e) Assignments to Federal Reserve Bank. Bank may at any time assign all ----------------------------------- or any portion of its rights under this Agreement, including without limitation any Loans owing to it, and any Note held by it, to a Federal Reserve Bank. No such assignment shall relieve the transferor Lender from its obligations hereunder. SECTION 8.13 GOVERNING LAW; SUBMISSION TO JURISDICTION WAIVER OF JURY -------------------------------------------------------- TRIAL; LIMITATION OF LIABILITY. - ------------------------------ (a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS (EXCEPT TO ------------- THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN DOCUMENTS) SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA, WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES. (b) Certain Waivers. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND --------------- UNCONDITIONALLY: (i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED LITIGATION") MAY ------------------ BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN LAS VEGAS, NEVADA AND SUBMITS TO THE JURISDICTION OF SUCH COURTS (AND, TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER AGREES THAT IT WILL NOT BRING ANY RELATED LITIGATION IN ANY OTHER FORUM, BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK OR BANK TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM IN WHICH THE BORROWER OR ANY OF ITS ASSETS MAY BE LOCATED OR IN WHICH THE BORROWER MAY BE DOING BUSINESS OR THE RIGHT OF THE BORROWER TO ASSERT ANY DEFENSE OR COUNTERCLAIM TO ANY ACTION BROUGHT BY THE BANK OR BANK IN ANY FORUM); (ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER IT; 51 (iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 9.03, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW); AND [Balance of page intentionally left blank] (iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION. (c) Limitation of Liability. TO THE FULLEST EXTENT PERMITTED BY LAW, NO ----------------------- CLAIM MAY BE MADE BY ANY PARTY TO THIS AGREEMENT AGAINST ANY 52 OTHER PARTY TO THIS AGREEMENT OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF ANY OF THEM FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY). EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR ARISES HEREAFTER AND WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. Address SIERRA PACIFIC RESOURCES - ------- Sierra Pacific Resources By: _______________________________ 6100 Neil Road Name: P.O. Box 30150 Title: Reno, Nevada 89520 Attn: Mark Ruelle Telecopier: ________________ Telephone: ________________ Address WELLS FARGO BANK, - ------- NATIONAL ASSOCIATION Wells Fargo Bank By: _______________________________ Las Vegas Regional Commercial Name: Steven Dastrup Banking Office Title: Vice-President 3800 Howard Hughes Parkway Las Vegas, NV 89109 Attn: Steven Dastrup Telecopier: ________________ Telephone: ________________ 53 EX-10.B 11 0011.txt WALTER M. HIGGINS EMPLOYMENT LETTER DATED 8/4/2000 Exhibit 10(B) August 4, 2000 Mr. Walter M. Higgins 4318 Whitewater Creek Road Atlanta, Georgia 30327 Dear Walt: On behalf of the Board of Directors, I am pleased to offer you the position of Chairman, Chief Executive Officer and President of Sierra Pacific Resources. Your primary work location will be Las Vegas, Nevada. We expect that you will assume your duties as soon as possible. Your starting base salary in this position will be $590,000. You will also be eligible for an annual cash incentive under the Company's Short-Term Incentive Program of 65% of your base salary. For the year 2000, we will pay you $397,881, representing 83% of the incentive payment you would have earned as of September 30, 2000, and would have received had you remained at AGL Resources until about November 1, 2000. The Company will also pay you one-half of 38% of the year 2000 Sierra Pacific Resources Short-Term Incentive Program payment, provided you meet certain expectations of the Sierra Pacific Resources Board of Directors during the last part of the year, and one-half of 38% of the year 2000 Sierra Pacific Resources Short-Term Incentive Program payment based on the same goals and under the same terms and conditions as exist for all other officers of Sierra Pacific Resources. Future payments of the short-term incentive is at the discretion of the Board of Directors and will be based on corporate and personal performance. Actual payout may vary from 0% to 150% of target. Long-term incentives for the position are in accordance with the Plan approved by shareholders and administered by the Board of Directors. At this time, long-term incentives consist of Non-Qualified Stock Options (NQSOs) and performance shares. For your position the long term incentive is targeted at 140% of your base salary. Although the 2001 grant of stock options has not yet been finalized, I am projecting that you will receive no less than 104,000 NQSOs effective January 2001. The NQSOs vest one-third per year and are fully vested after the third year. You will also receive a performance share grant of not less than 13,200 shares effective January 1, 2001. The Board will decide the performance measurement for the 2001 grant later this year. You will also be eligible to participate on a pro-rata basis (28 of 36 months or 10,164 shares) in the 2000-2002 performance share grant made earlier this year. The measurements for this grant are based on the achievement of certain strategic goals, which are outlined on the enclosed exhibit. As a special inducement for you to join Sierra Pacific Resources, the Board has also authorized the following incentives. A Restricted Stock Grant of 16,000 shares. These shares will vest over a four-year period as follows: 4,000 shares in September 2002; 5,000 shares in September 2003; and 8,000 shares in September 2004. At the time of Mr. Walter M. Higgins August 4, 2000 Page 2 of 3 payment, the Company will provide you a cash payment grossed-up for taxes in which to pay your income taxes on this stock grant. As Chairman and Chief Executive Officer, you will be expected to maintain two times your annual compensation in Sierra Pacific Resources stock. You will have five years to achieve this level. Also, in addition, you will receive a special stock option grant of 400,000 NQSOs at a strike price to be set based on the closing stock price on the day you verbally commit to this offer. These options will vest 25% over the next four years and if the stock price meets certain levels. You will be eligible to participate in the Company's Supplemental Executive Retirement Plan ("SERP") and eligible for benefits under this Plan, including a maximum benefit of 60% of your Final Average Earnings. You will be provided credit for your previous years of service plus the years you have been with your current employer, but the benefits will be reduced by any other qualified benefits you receive from AGL Resources or Louisville Gas & Electric. If you are involuntarily terminated except for cause, you will be automatically vested in the SERP and SERP benefits will be calculated as though you had reached age 62. The Company will also provide you life insurance coverage of $2,000,000 contingent upon completion of a physical exam performed by a doctor selected by our insurance carrier. This will be in addition to a $1,000,000 policy in the event that you die while traveling on Company business. You will be eligible for all regular employee benefits including a 401K plan that matches employee contributions dollar for dollar up to 6% and Sierra Pacific Resources' Deferred Compensation Plan. You will receive a perquisite allowance of $30,000 to cover such expenses as a car, tax preparation and club memberships. The Company will, subject to Board approval and discretion, bear the expense of memberships in appropriate clubs and facilities at appropriate locations for the purpose of advancing and protecting the business interests of the Company. You will receive paid time off ("PTO") based on your total years of professional work experience. In 2001 your paid time off allowance will be 33 days. In 2000 we will provide you 15 days. In addition to the benefits described above, in the event you are terminated for reasons other than (1) reasons relating to moral turpitude, (2) conviction of any crime amounting to a felony, or (3) on your own volition and without actually being requested to resign by the Board, you will receive within thirty days of termination, one year base salary and target incentive. This payment shall be conditioned on the execution of appropriate releases in favor of the Company for any and all claims connected with or arising out of your employment or termination and will require continued maintenance of confidential and proprietary information, a non-compete for one year and agreement not to disparage the Company. You will also be requested to sign a Change in Control agreement that will provide you severance benefits including three times your base and annual target incentive and grossed up for excise taxes in the event of your termination resulting from a change in control. Mr. Walter M. Higgins August 4, 2000 Page 3 of 3 This offer includes reimbursement for reasonable relocation expenses, including travel, until your family moves, packing and transportation of your household good, and commission on the sale of your home. As is Sierra's policy, all hiring offers are contingent on a drug analysis test. We can arrange for you to have this test at a time and place convenient for you. Also, you will need to provide us proof of U.S. citizenship on your first day of work. This would include a copy of your birth certificate, driver's license, or social security card. The position being offered to you is one of trust and confidence. In accepting the position you are agreeing that, in addition to any other limitation and regardless of circumstances or any future limitation or condition of your employment, that, except as may be required by subpoena or other process of law, you will not divulge, disclose or otherwise communicate directly or indirectly to any person, agency, or entity any knowledge relating to documents, transactions, or any confidential knowledge or proprietary information which you acquire with respect to the business of Sierra Pacific Resources or any of its affiliated companies To indicate acceptance of this offer, please sign below and return one signed original of this letter to Mary Jane Reed, Vice President, Human Resources, as soon as possible. The Board of Directors and I are delighted you have accepted the opportunity to join this Company. We believe, with your contribution, we will accomplish great things for our shareholders, our customers, our employees and our communities. Welcome aboard! Sincerely, James R. Donnelley Acting Chairman of the Board JRD:jan HIGGINSAGRMT Accepted: By__________________________ Walter M. Higgins EX-10.C 12 0012.txt ASSET SALE AGREEMENT, THE AES CORP. Exhibit 10(C) ________________________________________________________________________________ ASSET SALE AGREEMENT ****** NEVADA POWER COMPANY As Seller AND THE AES CORPORATION As Buyer Dated: May 10, 2000 ________________________________________________________________________________ ASSET SALE AGREEMENT Table of Contents PREAMBLE......................................................................................................... 1 ARTICLE 1 DEFINITIONS............................................................................................ 1 1.1 Certain Defined Terms.......................................................................... 1 1.2 Index of Other Defined Terms................................................................... 4 1.3 Certain Interpretive Matters................................................................... 6 ARTICLE 2 BASIC TRANSACTIONS..................................................................................... 6 2.1 Purchased Assets............................................................................... 6 2.2 Excluded Assets................................................................................ 9 2.3 Assumed Liabilities............................................................................ 12 2.4 Excluded Liabilities........................................................................... 14 2.5 Related Agreements............................................................................. 16 2.6 Purchase Price................................................................................. 16 2.7 Buyer Group Transactions With Other Owners..................................................... 19 2.8 No Assignment If Breach........................................................................ 22 2.9 Procedures for Certain Purchase Price Adjustments.............................................. 23 2.10 Intentionally Left Blank....................................................................... 24 2.11 Intentionally Left Blank....................................................................... 24 2.12 Intentionally Left Blank....................................................................... 24 2.13 Assignment of Rights and Obligations to Buyer Subsidiaries..................................... 24 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER............................................................... 27 3.1 Organization and Corporate Power............................................................... 27 3.2 Authority and Enforceability................................................................... 27 3.3 No Breach or Conflict.......................................................................... 27 3.4 Approvals...................................................................................... 28 3.5 Permits........................................................................................ 28 3.6 Compliance with Law............................................................................ 28 3.7 Hazardous Substances........................................................................... 29 3.8 Title to Personal Property..................................................................... 29 3.9 Contracts...................................................................................... 30 3.10 Litigation..................................................................................... 30 3.11 Plant Data..................................................................................... 30 3.12 Brokers........................................................................................ 31 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER................................................................ 32 4.1 Organization and Corporate Power............................................................... 32 4.2 Authority and Enforceability................................................................... 32 4.3 No Breach or Conflict.......................................................................... 32 4.4 Approvals...................................................................................... 33 4.5 Litigation..................................................................................... 33 4.6 Brokers........................................................................................ 33 4.7 Exculpation.................................................................................... 33 4.8 Financing...................................................................................... 34
-i- 4.9 No Knowledge of Seller's Breach......................... 34 4.10 Qualified for Licenses.................................. 34 4.11 Buyer Subsidiaries...................................... 34 ARTICLE 5 COVENANTS OF EACH PARTY......................................... 35 5.1 Efforts to Close........................................ 35 5.2 Post-Closing Cooperation................................ 36 5.3 Expenses................................................ 36 5.4 Announcements; Confidentiality.......................... 37 5.5 Litigation Conduct and Settlement....................... 38 ARTICLE 6 ADDITIONAL COVENANTS OF SELLER.................................. 38 6.1 Access.................................................. 38 6.2 Updating................................................ 39 6.3 Conduct Pending Closing................................. 39 6.4 Environmental Matters................................... 41 ARTICLE 7 ADDITIONAL COVENANTS OF BUYER................................... 43 7.1 Waiver of Bulk Sales Law Compliance..................... 43 7.2 Resale Certificate...................................... 43 7.3 Conduct Pending Closing................................. 43 7.4 Securities Offerings.................................... 43 7.5 Release................................................. 43 7.6 Additional Covenants of the Buyer....................... 44 ARTICLE 8 BUYER'S CONDITIONS TO CLOSING................................... 44 8.1 Performance of Agreement................................ 44 8.2 Accuracy of Representations and Warranties.............. 44 8.3 Officers' Certificate................................... 45 8.4 Approvals............................................... 45 8.5 No Restraint............................................ 46 8.6 Title Insurance......................................... 47 8.7 Related Agreements...................................... 48 8.8 Casualty; Condemnation.................................. 48 8.9 Opinion of Counsel...................................... 49 8.10 Receipt of Other Documents.............................. 49 8.11 Limitation on Adjustments............................... 50 8.12 Independent Engineer's Letter........................... 50 8.13 SCE Closing............................................. 50 ARTICLE 9 SELLER'S CONDITIONS TO CLOSING.................................. 50 9.1 Performance of Agreement................................ 50 9.2 Accuracy of Representations and Warranties.............. 50 9.3 Officers' Certificate................................... 50 9.4 Approvals............................................... 50 9.5 No Restraint............................................ 51 9.6 Related Agreements...................................... 51 9.7 Opinion of Counsel...................................... 51 9.8 Receipt of Other Documents.............................. 51 9.9 Limitation on Adjustments............................... 52 ARTICLE 10 CLOSING........................................................ 52
-ii- 10.1 Closing................................................. 52 10.2 Escrow.................................................. 53 10.3 Power Purchase Agreement and Escrow Arrangements........ 54 10.4 Prorations.............................................. 56 ARTICLE 11 TERMINATION.................................................... 56 11.1 Termination............................................. 56 11.2 Effect of Termination................................... 58 11.3 Modification of Terms................................... 58 11.4 Breakup Fee............................................. 58 ARTICLE 12 SURVIVAL AND REMEDIES; INDEMNIFICATION......................... 59 12.1 Survival................................................ 59 12.2 Exclusive Remedy........................................ 59 12.3 Indemnity by Seller..................................... 59 12.4 Indemnity by Buyer...................................... 60 12.5 Further Qualifications Respecting Indemnification....... 61 12.6 Procedures Respecting Third Party Claims................ 62 12.7 Pro Rata Limitation On Buyer Claims..................... 62 ARTICLE 13 GENERAL PROVISIONS............................................. 63 13.1 Notices................................................. 63 13.2 Attorneys' Fees......................................... 64 13.3 Successors and Assigns.................................. 64 13.4 Counterparts............................................ 64 13.5 Captions and Paragraph Headings......................... 64 13.6 Entirety of Agreement; Amendments....................... 64 13.7 Construction............................................ 65 13.8 Waiver.................................................. 65 13.9 Arbitration............................................. 65 13.10 Governing Law........................................... 68 13.11 Severability............................................ 68 13.12 Consents Not Unreasonably Withheld...................... 68 13.13 Time Is of the Essence.................................. 68
-iii- LIST OF SCHEDULES A Sellers; Undivided Interests 1.1(k) Intentionally Left Blank 2.1(a) Owned Real Property 2.1(b) Real Property Leases 2.1(c) Easements 2.1(d) Equipment 2.1(f) Assigned Contracts 2.1(g) Licenses 2.1(j) Prepayments 2.1(k) Emission Allowances and Emission Reduction Credits 2.1(l) Jointly Owed Intangible Property 2.1(m) Switchyard Assets 2.1(p) Miscellaneous Assets 2.2(a) Excluded Nevada Power and Edison Switchyard Assets 2.2(c) Communications Equipment and Facilities 2.2(u) Other Excluded Assets 2.3(a) Guaranties 2.3(h) Miscellaneous Excluded Liabilities 2.4(c) Assumed Breaches 2.4(m) Excluded Litigation 2.4(n) Other Excluded Liabilities 2.5 Related Agreements 2.6(b) Allocation Schedule 2.6(c)(i) Scheduled Capital Expenditures 2.6(c)(ii)(A) Inventory Control Data Report 2.6(c)(ii)(B) Coal Inventory Report 3.4(a) Seller's Private Party Consents 3.4(b) Seller's Government Consents 3.5 Excluded Permits 3.6 Compliance with Law 3.7 Environmental Matters 3.8 Permitted Encumbrances 3.9 Contracts 3.10 Seller Litigation 3.11 Selected Historical Operating Data 3.12 Seller's Brokers 3.13 Assets Used in the Operation of the Plant 4.4(a) Buyer's Private Party Consents 4.4(b) Buyer's Government Consents 4.5 Buyer's Litigation 4.6 Buyer's Brokers 5.5 Settlement Terms 6.3 Exceptions to Conduct -iv- 6.4(a) Remediation Measures 8.6(b) Disapproved Title Exceptions 8.9 Seller's Legal Opinion 8.12 Independent Engineer's Letter 9.7 Buyer's Legal Opinion 10.3(a)(3) Permitted Investments -v- ASSET PURCHASE AGREEMENT This ASSET SALE AGREEMENT (the "Agreement") is made and entered into as of the 10th day of May 2000 by and among the Seller named on Schedule A hereto ---------- ("Seller"), and The AES Corporation, a Delaware corporation ("Buyer"), with reference to the following facts: A. Seller is a public utility engaged in the business of generating, transmitting and distributing electric energy and in connection therewith owns as a tenant-in-common an undivided interest in the Mohave Generating Station, located in Laughlin, Nevada (the "Plant"). B. Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, upon the terms and subject to the conditions of this Agreement, the percentage shown on Schedule A of one hundred percent (100%) of the undivided ---------- interests owned by all tenants-in-common that own the Plant (the "Undivided Interests"), together with the same percentage of the Undivided Interests in the assets and facilities related to the Plant (the "Transactions"). NOW, THEREFORE, in consideration of the foregoing recitals and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows: ARTICLE 1 DEFINITIONS ----------- 1.1 Certain Defined Terms. For purposes of this Agreement, the following --------------------- terms shall have the following meanings: (a) "Affiliate" of a specified Person shall mean any corporation, partnership, sole proprietorship or other Person which directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with the Person specified. The term "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person. (b) "Auction" means the procedures employed by Southern California Edison Company, a California corporation ("SCE"), through which Undivided Interests in the Plant were offered for sale to competing bidders. (c) "Business Day" means a day that is not a Saturday, a Sunday or a day on which banking institutions in the State of Nevada are not required to be open. (d) "Commercially Reasonable Efforts" means efforts which would be within the contemplation of a reasonable party at the time of executing this Agreement and which do not require the performing party to expend any funds other than expenditures which are customary and reasonable in transactions of the kind and nature contemplated by this Agreement in order for the performing party to satisfy its obligations hereunder. -1- (e) "Co-Tenancy Agreement" means the Mohave Project Plant Site Conveyance and Co-Tenancy Agreement dated May 29, 1967 to which the Owners are parties as of the date hereof, as the same may be amended to the Closing Date. (f) "Emission Allowances" mean all present and future authorizations to emit or Release specified units of pollutants or Hazardous Materials from or in connection with the operation of the Plant, which units are established by a Governmental Body with jurisdiction over the Plant under (i) an air pollution control and emission reduction program designed to mitigate global warming or the transport of air pollutants; (ii) a program designed to mitigate impairment of surface waters, watersheds or groundwater; or (iii) any pollution reduction program with a similar purpose. The term "Allowances" includes emissions allowances, as described above, regardless of whether the Governmental Body establishing such allowances designates them by a name other than "allowances." (g) "Emission Reduction Credits" mean credits, in such units as are established by a Governmental Body with jurisdiction over the Plant, resulting from reductions, if any, in emissions or Releases of pollutants or Hazardous Materials from or in connection with the operation of the Plant (including, without limitation, and to the extent allowable under applicable Law, reductions from shut-downs or control of emissions or Releases beyond that required by applicable Law) that have been identified or certified by the Governmental Body as complying with the Law governing the establishment of such credits. The term "Emission Reduction Credits" includes credits, as described above, regardless of whether the Governmental Body establishing such credits designates them by a name other than "credits" or "emission reduction credits." (h) "Environmental Law" shall mean, all Federal, state, local and foreign civil and criminal laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, as the same may be amended or adopted, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Materials (including, without limitation, Releases to ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport, disposal or handling of Hazardous Materials, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. (S) 1251 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1471 et seq.; the Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601 through 2629; the Oil Pollution Act, 33 U.S.C. (S) 2701 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. (S) 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f through 300j; the Occupational Safety and Health Act, 29 U.S.C. (S) 651 et seq.; the Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. (S) 1201 et seq.; and any similar laws of the States of Nevada, Arizona, California or of any other Governmental Body having jurisdiction -2- over the site at which the Plant is located or otherwise applicable to the Plant or its owners or operators; and regulations implementing the foregoing. (i) "Governmental Body" means any federal, state, local, municipal, foreign or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; any court or governmental tribunal; and any Native American tribe or organization having governmental, regulatory, administrative, taxing or police powers; but does not include the Buyer, any Buyer Subsidiary, or any of their respective successors in interest or any owner or operator of the Assets (if otherwise a Governmental Body). (j) "Hazardous Materials" means any chemicals, materials, substances, or items in any form, whether solid, liquid, gaseous, semisolid, or any combination thereof, whether waste materials, raw materials, chemicals, finished products, by-products, or any other materials or articles, which are listed as hazardous, toxic or dangerous under Environmental Law, including without limitation, petroleum products, asbestos, urea formaldehyde foam insulation, and lead-containing paints or coatings. (k) "Knowledge" of a party shall mean the extent of the actual current knowledge of any Person who serves as of the date of this Agreement or as of the Closing as a duly elected officer of such party. (l) "Laws" shall mean all statutes, rules, regulations, ordinances, orders, and codes of federal, state, local and foreign governmental and regulatory authorities. (m) "Licenses" shall mean registrations, licenses, permits, authorizations and other consents or approvals of Governmental Bodies. (n) "Operating Agent" means SCE, or any of its Affiliates, successors or assigns, in their capacities as operating agent acting on behalf of the Owners under the Operating Agreement. (o) "Operating Agreement" small mean the Mohave Project Operating Agreement effective as of May 1, 1969, among the Owners, as amended to the Closing Date. (p) "Owners" shall mean each of SCE, Nevada Power Company, a Nevada corporation ("NPC"), Salt River Project Agricultural Improvement and Power District, an agricultural improvement district organized and existing under the laws of Arizona, the Department of Water and Power of the City of Los Angeles, a department organized and existing under the Charter of the City of Los Angeles, a California municipal corporation, and, after the Closing, the Buyer and any pertinent Buyer Subsidiary, in their respective capacities as an owner of Undivided Interests in the Assets, as well as the successors and assigns of each of the foregoing with respect to such capacity. -3- (q) "Person" means any individual, corporation (including any non- profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body. (r) "Related Facilities" shall mean all of the coal mines, including, without limitation, the Black Mesa Mine, that provide coal to the Plant, the coal slurry pipeline through which coal is transported to the Plant from such mines, and the real properties, rights and tangible and intangible properties comprising the same or appurtenant thereto. (s) "Release" means any release, spill, emission, leaking, pumping, emptying, dumping, injection, abandonment, deposit, disposal, discharge, dispersal, leaching, or migration of Hazardous Materials (including, without limitation, the abandonment or discarding of Hazardous Materials in barrels, drums, or other containers) into or within the environment, including, without limitation, the migration of Hazardous Materials into, under, on, through, or in the air, soil, subsurface strata, surface water, groundwater, drinking water supply, any sediments associated with any water bodies, or any other environmental medium, regardless of where such migration originates. (t) "Remediation Measures" means action of any kind to address a Release or the presence of Hazardous Substances at, on, in, upon, over, across, under and within the real property included in the Assets or at any off-site location related to the Plant (including the Related Facilities), including any (i) investigation, monitoring, clean-up, containment, remediation, mitigation, removal, disposal or treatment, including without limitation the preparation and implementation of any work plans and the obtaining of authorizations, approvals and permits from Governmental Bodies with respect thereto, and (ii) any response to, or preparation for, any inquiry, order, hearing or other proceeding by or before any Governmental Body with respect to such Release or presence of Hazardous Substances. (u) "Taxes" shall mean (i) all sales, use, property, recordation and transfer taxes imposed by a Governmental Body, and (ii) any interest, penalties and additions to tax attributable to any of the foregoing, but shall not include income and other taxes described in Section 2.4(b). 1.2 Index of Other Defined Terms. In addition to those terms defined above, the following terms shall have the respective meanings given thereto in the Sections indicated below:
Defined Term Section ------------ ------- AAA 13.9(a) ADA 2.3(d) Additional Funds 10.3(a)(iii) Adjustment Sections 2.9 Agreement Preamble Allocation Schedule 2.6(b) Approvals 8.4
-4- Assets 2.1 Assigned Contracts 2.1(f) Assumed Contracts 2.3(a) Assumed Liabilities 2.3 Buyer Preamble Buyer Group 2.6(d) Buyer Subsidiary 2.13 Capital Expenditures 2.6(c)(i) Charter Documents 3.3 Claim Notice 12.6 Closing 10.1 Closing Date 10.1 Coal Inventory Report 2.6(c)(ii) Consent Decree 5.5 Deductible Amount 12.3(b)(i)(B) Deposited Funds 10.3(a)(iii) Depreciation Amount 10.3(c) Easements 2.1(c) Effective Date 10.3(a)(i) Eldorado Transmission Agreements 2.1(m) Equipment 2.1(d) Escrow Agent 10.2 Escrow Capital Amount 10.3(d) Escrow Date 10.3(a) Escrow Funds 10.3(a)(iii) Escrow Period 10.3(b) EWG 5.1(b) Excluded Assets 2.2 Excluded Liabilities 2.4 Extended Price 2.6(d) FERC 3.4(b) HSR Act 3.3 Indemnitee 12.5 Indemnitor 12.5(a) Intercompany Transactions 2.2(m)(i) Inventory Control Data Reports 2.6(c)(ii) Leased Real Property 2.1(b) Losses 12.3(a) Material Adverse Effect 3.3 Mohave Co-Tenancy Agreement Condition 8.4 NPC 1.1(p) Operating Data 3.11 Operator's Report 2.1(j)(ii)(C) Original Closing Date 2.9 Other Owner's Agreement 2.7(a)
-5- Other Transactions Date 2.6(d) Owned Real Property 2.1(a) Panel 2.9 Pending Air Quality Lawsuit 5.5 Permitted Encumbrances 3.8 Plant Recitals Power Purchase Agreement 10.3(a) PPC 2.2(k) PPC Amount 2.6 Prepayments 2.1(j)(ii)(C) PUCN 3.4(b) Purchase Price 2.6(a) PURPA 8.4(b) Real Property Leases Related Agreements 2.5 Rules 13.9(a) SCE 1.1(b) Seller Preamble Seller's Reimbursable Costs 2.7(c)(i) Supplies 2.1(e) Switchyard Assets 2.1(m) Termination Date 11.1(e) Third Party Claims 12.5(a) Title Insurer 8.6 Title Policies 8.6 Transactions Recitals Undivided Interests Recitals
1.3 Certain Interpretive Matters. In this Agreement, unless the context ---------------------------- otherwise requires, the singular shall include the plural, the masculine shall include the feminine and neuter, and vice versa. The terms "includes" or "including" shall mean "including without limitation." References to a Section, Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule of this Agreement, and reference to a given agreement or instrument shall be a reference to that agreement or instrument as modified, amended, supplemented and restated through the date as of which such reference is made. ARTICLE 2 BASIC TRANSACTIONS ------------------ 2.1 Purchased Assets. On the terms and subject to the conditions ---------------- contained in this Agreement, and except as otherwise provided herein, at the Closing Buyer shall, or shall cause the applicable Buyer Subsidiary to, purchase from Seller, and Seller shall sell, convey, assign, transfer and deliver to Buyer, or the applicable Buyer Subsidiary, all of Seller's right, title and interest in and to the percentage of the Undivided Interests shown next to Seller's name in Schedule A hereto and all of Seller's right, title and interest ---------- in and to the same percentage of the -6- Plant and the other assets, properties and facilities used, or held for use, principally in connection with the ownership and operation of the Plant, each as in existence on the Closing Date, including, but not limited to, those assets described below, but excluding all Excluded Assets as defined in Section 2.2 (the "Assets"): (a) The parcels of real property owned in fee (the "Owned Real Property") that are identified in Schedule 2.1(a), together with all --------------- buildings, fixtures and improvements located thereon (including all construction work-in-progress, but excluding the buildings, fixtures and improvements located on the real property which is identified in Schedule -------- 2.1(a) as "Switchyard Property."). ------ (b) The leasehold estates and the related lease or sublease agreements (the "Real Property Leases") respecting land, buildings, fixtures and real property improvements (whether owned or leased) (the "Leased Real Property") identified in Schedule 2.1(b), if any, together --------------- with all construction work-in-progress in respect of same. (c) Easements and privileges (including all water rights) appurtenant to the Owned Real Property or the Leased Real Property as well as the right, by way of license, easement or the like, to locate certain identified Equipment to be sold hereunder on real property not included in the Owned Real Property or the Leased Real Property, all as shown or described more specifically on Schedule 2.1(a), Schedule 2.1(b) or Schedule --------------- --------------- -------- 2.1(c) (the "Easements"). ------ (d) Fixed or mobile machinery and equipment, as well as similar items of tangible personal property, including, without limitation, vehicle refueling tanks, pumps, pipelines, fittings, trucks, tractors, trailers and other vehicles, tools, furniture and revenue metering equipment (including revenue metering equipment, if any, installed in contemplation of the Transactions) (collectively "Equipment") that (i) are not by their nature consumed in the ordinary course of business such that they constitute "Supplies" (as defined below), (ii) are used, owned or leased by the Owners as of the Closing Date, and (iii) in the ordinary course of business are permanently located at the Plant or otherwise on the Owned or Leased Real Property or on an Easement for use primarily in connection with the ownership or operation of the Plant (including Assets temporarily off-site for repair or other purposes). All such items of Equipment (other than furnishings or office equipment) having a net book value of $10,000 or more (pro rated to 100% of the Undivided Interests) as of the close of the most recent fiscal quarter ended at least forty-five (45) days prior to the date of this Agreement are identified on Schedule 2.1(d). --------------- (e) Inventories of spare parts intended to be consumed in the ordinary course of business, maintenance, shop and office supplies, and other similar items of tangible personal property on hand at, or in transit to, the Plant as of the Closing and intended to be consumed in the ordinary course of business, as well as fuel supplies, if any, on hand and stored at, or in transit to, the Plant as of the Closing and intended as feedstock from which to generate electrical power in the ordinary course of operation ("Supplies"). -7- (f) Written contracts and agreements specifically and exclusively relating to the Plant to which Seller as one of the Owners, or the Operating Agent as agent for the Owners, is a party at the Closing (the "Assigned Contracts"), including, without limitation, the agreements identified on Schedule 2.1(f), which contains a list of the agreements (i) --------------- pursuant to which the Owners, or the Operating Agent, as the case may be, paid or received Five Thousand Dollars ($5,000) or more during the calendar year preceding the date of this Agreement or expect to pay or receive Five Thousand Dollars ($5,000) or more during the current calendar year, and (ii) that have a binding remaining term of at least one year which cannot be canceled by the Owners or the Operating Agent without penalty on written notice of ninety (90) days or less. The Assigned Contracts shall also include, without limitation, construction contracts relating to construction work-in-progress at the Plant; equipment leases (whether operating or capital leases) and installment purchase contracts; contracts or arrangements binding on the Plant which restrict the nature of the business activities in which the Plant may engage; leases as lessor or sublessor; and oral contracts if, but only if, the same are identified on Schedule 2.1(f). --------------- (g) The Licenses in favor of the Owners, or the Operating Agent as agent for the Owners, as of Closing that relate to or are necessary for or used in connection with the operation of the Assets as heretofore operated by the Owners and the Operating Agent on their behalf, all of such Licenses being included on Schedule 2.1(g), except for and to the extent that such --------------- Licenses relate to Excluded Assets; provided that such Licenses shall be -------- included within the Assets only to the extent they relate exclusively to the Assets, are held in the names of the Owners or the Operating Agent on behalf of the Owners and are lawfully transferable to Buyer or the Buyer's applicable Buyer Subsidiary. (h) The books, records, plans, drawings, instruction manuals and similar items located at the Plant and which relate exclusively to the Plant and the Assets, subject to the rights of Seller to make copies of and make non-exclusive use of the same and except to the extent such materials are subject to confidentiality or non-disclosure agreements in favor of third parties whose consent to transfer is not obtained. (i) Unexpired warranties as of the Closing which the Owners have (or the Operating Agent on behalf of the Owners has) received from third parties, which relate specifically to any of the Assets and which are transferable to Buyer, including, without limitation, warranties set forth in any equipment purchase agreement, construction agreement, lease agreement, consulting agreement or agreement for architectural or engineering services, it being understood that nothing in this paragraph shall be construed as a representation by Seller that any such unexpired warranty remains enforceable. (j) Advance payments, prepayments, prepaid expenses, deposits and the like (i) that are identified on Schedule 2.1(j), or (ii) (A) made by the --------------- Owners or the Operating Agent on their behalf in the ordinary course of business prior to the Closing specifically with respect to the Assets, (B) which exist as of such Closing, and (C) with respect to which Buyer will receive the benefit after the Closing (collectively, "Prepayments"), which Prepayments are included in the Operating Agent's regularly prepared statement to -8- the Owners (the "Operator's Report"); the Operator's Report prepared as of the close of the most recent fiscal quarter ended at least forty-five (45) days prior to the date of this Agreement is attached hereto as Schedule -------- 2.1(j). ------ (k) The Emission Allowances and Emission Reduction Credits identified on Schedule 2.1(k) as included in the Assets. --------------- (l) Patents and patent rights, trademarks and trademark rights, inventions, copyrights and copyright rights set forth on Schedule 2.1(l) --------------- that are owned by the Owners as tenants-in-common and which relate exclusively to the Plant or the Assets, including without limitation pending applications therefor. (m) The personal property underlying, comprising or constituting a part of the switchyard facilities located at or adjacent to the Plant and which connect the Plant to pertinent electrical transmission facilities (whether such property is regarded as "transmission" or "generation" assets for regulatory or accounting purposes), as well as such Licenses, contracts and warranties which relate to the same to the extent they are transferable to the Buyer, all as set forth on Schedule 2.1(m) (collectively, the --------------- "Switchyard Assets"), unless either prior to or after the date hereof and prior to the Closing, the Owners have entered into, and have consummated the transactions contemplated by, pertinent agreements that (i) separate the ownership of the Switchyard Assets from the ownership of the Plant, and (ii) make the Switchyard Assets subject to agreements among the Owners related to the transmission system commonly referred to as the Eldorado Transmission System (the "Eldorado Transmission Agreements"). (n) The name "Mohave Generating Station," it being understood that Buyer shall not acquire any right to use the name of any Owner or the Operating Agent or any related or similar trade names, trademarks, service marks, corporate names, logos or any part, derivative or combination thereof. (o) The right to receive mail and other communications addressed to Seller or any of its Affiliates insofar as such mail or other communication is so addressed to the Seller in its capacity as an Owner and relates exclusively to the Assets or to the Assumed Liabilities after the Closing. (p) Those miscellaneous and sundry assets identified by category on Schedule 2.1(p), if any, which assets are ancillary to the ownership of the --------------- Assets and the Plant and customarily utilized in connection therewith but not otherwise enumerated above. 2.2 Excluded Assets. The Assets shall not include any of the assets, --------------- properties, rights, Licenses, or contracts which are not described in Section 2.1 above or which are set forth in this Section 2.2, all such other assets, properties, rights, Licenses, and contracts collectively constituting "Excluded Assets," including, without limitation, the following specifically enumerated Excluded Assets: (a) Whether or not the Eldorado Transmission Agreements have been executed and the transactions contemplated thereby consummated, the real and personal -9- property underlying, comprising or constituting all or part of the transmission facilities identified on Schedule 2.2(a) that are not owned by --------------- the Owners as tenants-in-common or that are part of the transmission systems of either Nevada Power Company or SCE. (b) The Switchyard Assets if the Eldorado Transmission Agreements have been executed and the transactions contemplated thereby consummated, subject to the further provisions of any facilities services agreement entered into in connection therewith between the Owners, as owners of the Plant, and participant owners of the Eldorado Transmission System (which may be the same Persons as the Owners). (c) The fixtures, equipment and other personal property located at the Plant comprising or constituting a part of the proprietary or specialized communications systems used by SCE to communicate between and among its facilities and/or to transmit voltage and other control data and information utilized in SCE's transmission systems, including any portion of such assets or system leased or licensed to third parties, together with the right, by way of license, easement or otherwise to retain such property on the real property included in the Assets, all as shown and/or noted or described on Schedule 2.1(a), Schedule 2.1(b), Schedule 2.1(c), Schedule --------------- --------------- --------------- -------- 2.1(d) or Schedule 2.2(c). ------ --------------- (d) Claims, choses in action, rights of recovery, rights of set-off, rights to refunds and similar rights in favor of an Owner of any kind relating to or arising out of the period prior to Closing, including, but not limited to, any refund related to real estate taxes paid prior to the Closing, whether such refund is received as a payment or as a credit against future real estate taxes, except where such claims, choses in action, rights of recovery, rights of set-off, rights to refund and similar rights arise from, as a result of or in connection with the Buyer's assumption, payment, discharge and performance of any Assumed Liability. (e) All privileged or proprietary materials, documents, information, media, methods and processes not owned by the Owners as tenants-in-common and any and all rights to use same, including, without limitation, intangible assets of an intellectual property nature such as trademarks, service marks and trade names (whether or not registered), computer software that is proprietary to Seller, or the use of which under the pertinent license therefor is limited to operation by Seller or its Affiliates or on equipment owned by Seller or its Affiliates, and all promotional or marketing materials (including all marketing computer software). (f) Any and all personnel and employment records of or related to the operation of the Plant or otherwise related to Seller's personnel, whether or not maintained at or by the Plant or the Operating Agent. (g) Rights under any insurance policy, except to the extent such policy insures for occurrences that are included in the Assumed Liabilities (it being understood, however, that Seller will have no obligation to take any action under any such policy to seek any recovery except at the reasonable request, and at the sole expense, of Buyer or to continue any such policies in force except to the extent expressly set forth herein). -10- (h) The right to receive mail and other communications relating to any of the Excluded Assets or Excluded Liabilities; all of which mail and other communications shall be promptly forwarded by Buyer to Seller. (i) Any computer and data processing hardware or firmware, whether or not located at the Plant, that is part of a computer system the central processing unit of which is located at a facility of an Owner or the Operating Agent that is not included in the Assets. (j) Intentionally left blank. (k) All tariffs, agreements and arrangements to which an Owner is a party for the purchase or sale of electric capacity and/or energy or for the purchase of transmission or ancillary services, including, but not limited to, the Transitional Power Purchase Agreement between Seller and Buyer attached hereto as part of Schedule 2.5 (the "PPC"). ------------ (l) Except for the Supplies and items of petty cash that may be on hand at the Plant as of the time of Closing and the Prepayments, all assets constituting working capital, whether cash, cash equivalents, securities, rights to payment, rights to refunds, advance payments, prepayments, prepaid expenses, deposits, and other current assets and similar rights. (m) Any and all of Seller's rights arising under: (i) Any contract respecting an intercompany transaction between Seller, on the one hand, and Seller's Affiliate, on the other hand, whether or not such transaction relates to the provision of goods and services, tax sharing arrangements, payment arrangements, intercompany charges or balances, or the like ("Intercompany Transactions"); (ii) Employment contracts, if any; and (iii) Collective bargaining agreements (it being understood, however, that nothing herein is intended to affect Buyer's obligations, if any, under the National Labor Relations Act). (n) Any and all data and information pertaining to customers of Seller or its Affiliates, whether or not located at the Plant. (o) Rights in, to and under all agreements and arrangements of any nature, the Seller's obligations under which are not assumed by the Buyer or a Buyer Subsidiary under the terms of this Agreement. (p) All trade accounts receivable and all notes, bonds and other evidences of indebtedness of and rights to receive payments arising out of sales occurring in -11- connection with the operations of the Plant prior to the Closing and the security arrangements, if any, related thereto, including any rights with respect to any third party collection procedures or any other actions or proceedings which have been commenced in connection therewith. (q) Emission Allowances and Emission Reduction Credits not enumerated on Schedule 2.1(k). --------------- (r) Rights of Seller arising under this Agreement or any instrument or document executed and delivered pursuant to the terms hereof. (s) Any and all books and records not described in Section 2.1(h). (t) Assets and properties of Seller or its Affiliates that are not used in the ownership or operation of the Assets. (u) Miscellaneous and sundry assets, if any, identified by category on Schedule 2.2(u), which assets may have been utilized in the ownership --------------- and operation of the Plant but which are not intended to be included in the Assets and which are not otherwise enumerated above. At any time or from time to time, up to ninety (90) days following the Closing, any and all of the Excluded Assets may be removed from the Plant by Seller (at no expense to the Buyer, but without charge by Buyer for storage), provided that -------- Seller shall do so in a manner that does not unduly or unnecessarily disrupt normal business activities at the Plant, and provided further that Excluded -------- ------- Assets may be retained at the Plant pursuant to easements, licenses, agreements (including the Operating Agreement) or similar arrangements in favor of Seller and described above or otherwise in the Schedules to this Agreement. 2.3 Assumed Liabilities. Subject to the terms and conditions set forth in ------------------- this Agreement, including the provisions of Section 2.4, Buyer shall, and may also cause a pertinent Buyer Subsidiary or Buyer Subsidiaries to, jointly and severally with Buyer, assume and pay, discharge and perform as and when due, only the following obligations and liabilities of Seller (the "Assumed Liabilities"): (a) All liabilities and obligations which pertain to or are to be paid or performed during the period following the Closing Date (except to the extent that, but for the breach of the Seller, such liabilities and obligations would have been paid or performed on or prior to the Closing Date), and which arise under any written contract, License, agreement, arrangement, understanding or undertaking included in the Assets, including the Real Property Leases and the Assigned Contracts, and any other obligation or liability, including those of any Affiliate of the Seller (including those related to letters of credit and performance bonds), which is in the nature of a guaranty of the foregoing to the extent the same are enumerated in Schedule 2.3(a) (together, the "Assumed Contracts"). --------------- -12- (b) All liabilities and obligations under open purchase orders pertaining to the Assets that were entered into by the Owners, or the Operating Agent on their behalf, in the ordinary course of business with respect to operation of the Plant on or prior to the Closing and which provide for the delivery of goods or services subsequent to the Closing Date, except to the extent such purchase orders are listed as Excluded Assets on Schedule 2.2(u). --------------- (c) All liabilities and obligations associated with the Assets in respect of Taxes for which Buyer is liable pursuant to Section 5.3 or Section 10.3, and any Tax that may be imposed on the ownership, sale, operation or use of the Assets after the Closing. (d) Without limiting the representations and warranties contained in Article 3 or Buyer's rights under Article 12 for a breach thereof, any and all liabilities and obligations respecting any changes or improvements needed to the Assets, if any, for them to be in material compliance with respect to safety, building, fire, land use, access (including, without limitation, the Americans With Disabilities Act ("ADA")) or similar Laws respecting the physical condition of the Assets. (e) Without limiting Seller's representations and warranties contained in Article 3 or Buyer's rights under Article 12 for a breach thereof, any liability, obligation or responsibility under or related to Laws, Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Laws or other Laws, whether prior to, on or after the Closing Date, with respect to the ownership or operation of any of the Assets; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest on or after the Closing Date) caused (or allegedly caused) by the presence or Release of Hazardous Materials at, on, in, under, adjacent to or migrating from the Assets prior to, on or after the Closing Date, including but not limited to Hazardous Materials contained in building materials at or adjacent to the Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or near the Assets; and (iii) Remediation Measures (whether or not such Remediation Measures commenced before the Closing Date or commence on or after the Closing Date) in respect of Hazardous Materials that are present or have been Released prior to, on or after the Closing Date at, on, in, under, adjacent to or migrating from, the Assets or in the soil, surface water, sediments, groundwater, landfill cells, ash deposits or in other environmental media at or adjacent to the Assets. (f) Without limiting the representations and warranties contained in Article 3 or Buyer's rights under Article 12 for a breach thereof, any and all liabilities, claims and expenses not otherwise enumerated above which in any way arise out of or are related to or associated with the ownership, possession, use or operation of the Assets or any business conducted therewith or therefrom before or after the Closing, including, but not limited to, any and all liabilities, claims and expenses associated with the decommissioning, dismantling or demolition of any portion of the Assets. -13- (g) Any and all liabilities of Seller for Remediation Measures under agreements entered into in accordance with Section 5.5. (h) Such miscellaneous and sundry liabilities, identified by category on Schedule 2.3(h), if any, which liabilities are ancillary to the --------------- ownership and operation of the Assets and the Plant but are not otherwise enumerated above. 2.4 Excluded Liabilities. Buyer shall not assume or be obligated to pay, -------------------- perform or otherwise discharge any liabilities or obligations that are not described in Section 2.3 as Assumed Liabilities or any of the following liabilities or obligations (collectively, "Excluded Liabilities"), all of which shall, as among the parties hereto, remain the sole responsibility of, and be discharged and performed as and when due by, Seller: (a) Liabilities or obligations associated with or arising from the Excluded Assets and the ownership, operation and conduct of any business in connection therewith or therefrom, and liabilities associated with or arising from Seller's obligations under this Agreement or any document or instrument executed in connection herewith. (b) Except as set forth in Section 2.3(c), any of the liabilities or obligations of Seller or an Affiliate of Seller (including, without limitation, any liabilities or obligations under any tax sharing agreements) with respect to Taxes, or in respect of franchise taxes or taxes imposed upon or measured in whole or in part by income for any period, or with respect to interest, penalties or additions to any of the foregoing. (c) Liabilities or obligations arising from the breach by the Owners prior to the Closing of any term, covenant, or provision of any of the Assumed Contracts except as set forth in Schedule 2.4(c). --------------- (d) Liabilities or obligations under any Assigned Contract which would be included in the Assets but for the provisions of Section 2.8, unless Buyer is provided with the benefits thereunder as contemplated by such Section. (e) Liabilities to third parties for personal injury or tort, or similar causes of action, arising solely out of the ownership or operation of the Assets prior to the Closing, other than liabilities or obligations assumed by Buyer pursuant to Section 2.3(d) or Section 2.3(e). (f) Subject to Section 2.8, liabilities of Seller incurred in connection with its obtaining any consent, authorization or approval necessary for it to sell, convey, assign, transfer or deliver the Assets to Buyer hereunder. (g) Any liability representing indebtedness for money borrowed or the deferred portion of the purchase price for any tangible Assets (and any refinancing thereof). With respect to any such indebtedness or obligation not so assumed by Buyer that constitutes a lien or encumbrance upon any Asset, Seller agrees that on or prior to the Closing it will either pay or discharge its proportionate part (based on its percentage of -14- the Undivided Interests) of such indebtedness or obligation in full or otherwise cause such lien or encumbrance to be removed from the Asset. (h) Amounts due from Seller arising from Intercompany Transactions. (i) Any liabilities to employees of Seller or its Affiliates or arising under any collective bargaining agreement, or pension, benefit or welfare plan of Seller or its Affiliates (it being understood, however, that nothing herein is intended to affect Buyer's obligations, if any, under the National Labor Relations Act). (j) Intentionally left blank. (k) Except for fines, penalties, costs, liabilities or obligations assumed by Buyer under Section 2.3(d) or 2.3(e), any fines, penalties or costs imposed by a Governmental Body resulting from (i) an investigation, proceeding, request for information or inspection before or by a Governmental Body pending or, to Seller's Knowledge, threatened prior to the Closing but only regarding acts which occurred prior to the Closing, or (ii) illegal acts of Seller occurring prior to the Closing. (l) Any liability, obligation or responsibility under or related to Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with the offsite transport prior to the Closing of Hazardous Materials from the real property included in the Assets, or the treatment, storage or disposal of Hazardous Materials at any site other than the real property included in the Assets, provided that for purposes -------- of this Section, if Hazardous Materials that are Released, disposed of, treated or stored at or on the real estate which is included in the Assets migrate to another location, then such location shall be deemed to be a site included in the real property that is included in the Assets. (m) Any liability, obligation or responsibility in respect of the claims set forth in any of the pending lawsuits or other proceedings set forth in Schedule 2.4(m). --------------- (n) Liabilities which would be Assumed Liabilities but for other express provisions of this Agreement providing for their retention by Seller and such other liabilities and obligations, if any, which would otherwise be Assumed Liabilities but which are identified on Schedule -------- 2.4(n). ------ The parties hereto agree and acknowledge that (x) with respect to Excluded Liabilities for which Seller believes Owners other than, or in addition to, Seller are, or are alleged to be, responsible to third parties, NPC shall, as between Buyer and Seller, be entitled exclusively to control, defend and settle any litigation, administrative or regulatory proceeding, and any investigation or Remediation Measures (including without limitation any environmental mitigation), arising out of or relating to any such Excluded Liabilities, (y) with respect to other Excluded Liabilities (all of which being noted as such on Schedule 2.4(m)), such exclusive right to control, defend and - --------------- -15- settle shall remain with Seller, and (z) Buyer agrees to cooperate fully with SCE or the Seller, as the case may be, in connection therewith. 2.5 Related Agreements. At the Closing, the parties (including any ------------------ pertinent Buyer Subsidiaries) will enter into the additional agreements, if any, attached to and comprising Schedule 2.5 (the "Related Agreements"). ------------ 2.6 Purchase Price. -------------- (a) Consideration. The purchase price for the Assets being sold by ------------- Seller hereunder shall be One Hundred Thirty-Three Million Five Hundred Eleven Thousand One Hundred Eleven Dollars and 11/100 (U.S. $133,511,111.11) (the "Purchase Price"), subject to the further provisions of this Section 2.6. The Purchase Price shall be subject to such adjustments, if any, as may occur pursuant to Sections 2.8, 2.9, 8.6, and 8.8 or other provisions of this Agreement. The amount to be paid by Seller to Buyer for the PPC being entered into by Buyer and Seller hereunder shall be Ten Million Five Hundred Thousand Dollars ($10,500,000) (the "PPC Amount"). At Closing, Buyer shall, or shall cause one or more Buyer Subsidiaries to, pay to Seller the Purchase Price less the PPC Amount, in cash by wire transfer of immediately available funds in U.S. dollars to an account specified in writing by Seller to Buyer not later than the second Business Day prior to the date payment is to be made. (b) Purchase Price Allocation. No later than twenty (20) Business ------------------------- Days prior to the Closing, Seller and the Buyer shall agree upon an allocation of the Purchase Price among the Assets which shall be set forth in a schedule (the "Allocation Schedule") to be attached to this Agreement as Schedule 2.6(b). The Purchase Price shall be allocated in accordance --------------- with the Allocation Schedule, and each party hereto shall be bound by such allocations for all purposes, shall account for and report the purchases and sales contemplated hereby for all purposes (including, without limitation, financial, accounting, and federal and state tax purposes) in accordance with such allocations, and shall not take any position (whether in financial statements, tax returns, or tax audits, or otherwise), which is inconsistent with such allocations without the prior written consent of all other parties, except to the extent, if any, required by applicable Law or generally accepted accounting principles. In the event that Seller and the Buyer do not agree on an allocation of the Purchase Price pursuant to this Section, then the Purchase Price shall be allocated among the Assets in proportion to Seller's net book value therefor. (c) Post-Closing Adjustments for Asset Changes. The Purchase Price ------------------------------------------ shall be subject to the following post-Closing adjustments, except to the extent such amounts have been charged to Buyer under the provisions of the Power Purchase Agreement entered into between the Buyer and Seller pursuant to Section 10.3 hereof: (i) The Purchase Price shall be increased by the amount expended by Seller between the date hereof and the Closing Date for capital additions to or replacements of property, plant and equipment included in the Assets and other expenditures or repairs on property, plant and equipment included in the Assets that would be capitalized by NPC in accordance with its normal capitalization -16- policies (together "Capital Expenditures"), which Capital Expenditures either appear on Schedule 2.6(c)(i) or, subject to the provisions of ------------------ Section 6.3(f), are otherwise deemed reasonably necessary by the Operating Agent or the Owners for the continued operation or maintenance of the Plant and the Assets or for compliance with Law, provided that such Capital Expenditures shall not include Supplies -------- referred to in clause (ii) below. (ii) The Purchase Price shall be further increased by Seller's allocated share of (A) the book value of the Supplies (other than fuel) included in the Operating Agent's regularly prepared reports (the "Inventory Control Data Reports") as of a recent date prior to the Closing that are prepared in accordance with the provisions set forth below (the Inventory Control Data Reports prepared as of a date within one hundred eighty (180) days of the date hereof being attached hereto as Schedule 2.6(c)(ii)(A)); (B) the book value of fuel included ---------------------- in the Operating Agent's report (the "Coal Inventory Report") as of a recent date prior to the Closing (net of the amount to be paid by the Buyer following the Closing for any fuel included in the Coal Inventory Report that has not been paid for prior to the Closing) that is prepared in accordance with the provisions set forth below (the Coal Inventory Report prepared as of a date within one hundred eighty (180) days of the date hereof being attached hereto as Schedule -------- 2.6(c)(ii)(B)); and (C) Prepayments that are included in the ------------- Operator's Report as of a recent date prior to the Closing and Prepayments that are listed on Schedule 2.1(j), which shall be updated --------------- as of the Closing. (iii) In order to implement the foregoing, the Operating Agent shall cause to be prepared and shall provide Buyer, as soon as possible after the Closing Date and in no event later than sixty (60) days thereafter, with a schedule setting forth Capital Expenditures between the date hereof and the Closing Date in reasonable detail so as to permit Buyer to be able to determine the extent to which such Capital Expenditures are or are not listed on Schedule 2.6(c)(i) and ------------------ shall further provide Buyer with a revised Schedule 2.6(c)(ii)(A), ---------------------- 2.6(c)(ii)(B) and Schedule 2.1(j) calculated as of the Closing (or the ------------- --------------- nearest month-end preceding the Closing Date if a mid-month preparation of the Inventory Control Data Reports, the Coal Inventory Report or Operator's Report is impracticable or otherwise burdensome). Such Closing Date Inventory Control Data Reports, Coal Inventory Report or Operator's Report shall be prepared consistently with the method of preparation used by the Operating Agent and on the same basis as Schedule 2.6(c)(ii)(A), Schedule 2.6(c)(ii)(B) or Schedule ---------------------- ---------------------- -------- 2.1(j) attached hereto, and as applicable, it being acknowledged that ------ no physical inventory need be taken, that the measurement of the book value of the Supplies, including fuel, and of Prepayments, in accordance with the Operating Agent's customary accounting practices with respect thereto, is intended merely to provide a reasonable estimate of the fair market value thereof as of the Closing rather than a definitive listing of actual inventory levels or of prepayments as of the Closing, and that, absent manifest error or fraud, such Inventory Control Data Reports, Coal Inventory Report and Operator's Report shall be conclusive as between the parties for -17- purposes of the adjustment to the Purchase Price contemplated by clause (ii) above. (iv) Buyer shall have thirty (30) days to review and make inquiry concerning such schedules delivered by the Operating Agent after the Closing Date. If an adjustment to the amount of the Purchase Price is required by this Section 2.6(c), then the applicable payment or refund shall be made within ten (10) days following the expiration of such thirty (30) day period by wire transfer of immediately available funds, together with interest thereon for the number of days from and including the Closing Date to such settlement date (but excluding such settlement date) at the rate per annum equal to the prime rate of interest during such period as such rate is published in the Western Edition of the Wall Street Journal, computed on the basis of actual days elapsed over a 365-day year. (v) Any dispute concerning the amount of the adjustment required by this Section 2.6(c) shall be resolved pursuant to Section 2.9. (d) Adjustments For Transactions By Other Owners. In the event that, prior to the second anniversary of the Closing Date (the "Other Transactions Date"), the Buyer, or any Affiliate of Buyer or any group of which Buyer or an Affiliate of Buyer is a member, or any successor or assign of the foregoing ("Buyer Group") enters into an agreement or consummates a transaction to acquire, directly or indirectly, any additional portion of the Undivided Interests and related assets from an Owner, or any Affiliate or successor or assign thereof, at an Extended Price therefor that exceeds the Purchase Price that was paid, or that would be payable to Seller under this Agreement had the Closing occurred simultaneously with the consummation of the Buyer Group's transaction for such additional portion of the Undivided Interests, then the Purchase Price shall be increased by the amount of such excess. The term "Extended Price" shall mean the amount derived by the following formula: Extended Price = C/OP X SP Where: C = The aggregate value of all consideration directly or indirectly paid or payable by the purchaser to the seller (including all contingent payments at the maximum potential value thereof) for the assets sold, assigned, transferred or conveyed in such transaction, including cash, notes, securities, property, rights, and other things of value, plus the aggregate value of liabilities assumed by the purchaser in such transaction which are Excluded Liabilities hereunder, minus the aggregate value of liabilities not assumed by the purchaser in such transaction which are Assumed Liabilities hereunder. -18- OP = The percentage of the Undivided Interests acquired in such transaction (without giving effect to Section 2.12(d) of the Asset Sale Agreement between Buyer and SCE related to the Plant). SP = The percentage of the Undivided Interests to be sold by Seller hereunder. Any adjustment of the Purchase Price under the foregoing provisions that occurs simultaneously with or prior to the Closing shall (subject to the occurrence of the Closing) be paid to Seller by wire transfer of funds at the Closing in accordance with the payment provisions hereof. Any adjustment of the Purchase Price under the foregoing provisions that occurs after the Closing shall be paid to Seller by wire transfer of funds upon consummation of the Buyer Group's transaction for such additional portion of the Undivided Interests. The parties understand that for purposes of this Section 2.6(d), the two percent (2%) of the Undivided Interests that may be retained by SCE under Section 2.12(d) of the Asset Sale Agreement between Buyer and SCE shall be deemed to be included in the Undivided Interests to be sold by SCE thereunder. In the event that any member of the Buyer Group gives any consideration to an existing Owner, or any Affiliate or successor or assign thereof, pursuant to Section 2.7(f), such consideration shall not be considered to be part of the aggregate value of consideration, C, as defined above, and shall not be part of the calculation of the Extended Price. (e) Closing Adjustments. The Purchase Price shall be subject to the ------------------- following adjustments at Closing: (i) The Purchase Price shall be increased by Four Million Six Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars and 66/100 ($4,666,666.66) in the event that the lawsuit entitled SCE, et al. v. Peabody Western Coal Co. (including Peabody's counterclaims filed with respect thereto) is dismissed with prejudice prior to the Closing. (ii) The Purchase Price shall be increased by Four Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars and 66/100 ($466,666.66) in the event that, effective as of the Closing, Buyer or an Affiliate of Buyer becomes the Operating Agent under the Operating Agreement and such Operating Agent and SCE or an Affiliate of SCE enter into a mutually acceptable agreement whereby such Operating Agent and SCE or an Affiliate of SCE, agree that SCE or its Affiliate, will provide operations and maintenance services to the Plant on and after the Closing Date for a period of two (2) years in accordance with the requirements of California Assembly Bill 1890. 2.7 Buyer Group Transactions With Other Owners. ------------------------------------------ (a) Until the Other Transactions Date, Buyer agrees that it will not, and it will cause each member of the Buyer Group not to, directly or indirectly enter into any agreement, or otherwise consummate a transaction, with an existing Owner, or any Affiliate or successor or assign thereof, to acquire, directly or indirectly, any additional -19- portion of the Undivided Interests and related assets (an "Other Owner's Agreement"), unless no later than the earlier of the execution of such agreement or consummation of such transaction, the existing Owner and its successors and assigns shall have irrevocably and unconditionally: (i) Waived in writing any and all rights or privileges which such Person may have (whether such rights or privileges arise under Section 12 of the Co-Tenancy Agreement or otherwise) to exercise any right of first or last refusal, consent, approval or similar right, or to enforce any notice or waiting period, in respect of the entry into or consummation of the Transactions contemplated hereby as the same may be amended or modified from time-to-time; and (ii) Agreed in writing (which agreements shall be made expressly for the benefit of Seller, its Affiliates, successors and assigns) that: (A) Notwithstanding any provision to the contrary in the Co-Tenancy Agreement or otherwise, following the date of their assumption hereunder by the Buyer or a Buyer Subsidiary, neither Seller, nor any of its Affiliates, successors or assigns, shall have any liability or obligation for, and such existing Owner and its successors, assigns and Affiliates shall have no right of action or claim against, Seller or any of its Affiliates, successors or assigns, for any Assumed Liabilities; provided, -------- however, nothing contained herein shall affect the obligations of the Owners under the Co-Tenancy Agreement or the Project Agreements (as such term is defined in the Co-Tenancy Agreement) for their proportionate share of any Excluded Liabilities; and (B) Prior to the entry into any Other Owner's Agreement, Seller shall have approved in form and substance such other Owner's Agreement, which approval shall not be unreasonably withheld. (b) With respect to each Other Owner's Agreement entered into in compliance with this Agreement prior to the Other Transactions Date between a member of the Buyer Group and an existing Owner, or any Affiliate or successor or assign thereof, Seller hereby irrevocably and unconditionally: (i) Waives any and all rights or privileges which Seller may have (whether such rights or privileges arise under Section 12 of the Co-Tenancy Agreement or otherwise) to exercise any right of first or last refusal, consent, approval or similar right, or to enforce any notice or waiting period, in respect of the entry into or consummation of the transactions contemplated by such Other Owner's Agreement; and (ii) Agrees (which agreements shall be made expressly for the benefit of such other Owner, its Affiliates, successors and assigns) that notwithstanding any provision to the contrary in the Co-Tenancy Agreement or otherwise, -20- following the date of their assumption under the Other Owner's Agreement by the Buyer or a Buyer Subsidiary (subject to Section 2.12), neither such other Owner, nor any of its Affiliates, successors or assigns, shall have any liability or obligation for, and Seller and its successors, assigns and Affiliates shall have no right of action or claim against, such other Owner or any of its Affiliates, successors or assigns, for any obligations and liabilities which Buyer or a Buyer Subsidiary has agreed to assume under the terms of the Other Owner's Agreement; provided, however, nothing contained herein -------- shall affect the obligations of the Owners under the Co-Tenancy Agreement or the Project Agreements (as such term is defined in the Co-Tenancy Agreement) for their proportionate share of any liabilities in the nature of Excluded Liabilities. (c) In the event that a member of the Buyer Group enters into an Other Owner's Agreement prior to the Other Transactions Date, then at the closing of the purchase and sale of Undivided Interests contemplated therein, Buyer shall cause such member of the Buyer Group or such other Owner to pay a "pro rata share" of Seller's Reimbursable Costs in accordance with the provisions of this Section 2.7(c), unless such payment has been waived in writing by Seller on the basis of such other Owner's prior reimbursement of Seller's Reimbursable Costs outside the provisions of this Agreement. (i) For purposes of this Section 2.7(c), "Seller's Reimbursable Costs" shall be equal to Seller's good faith itemized estimate, delivered to Buyer at the Closing, of Seller's portion of expenses set forth in Sections 5.3(a)-(g), plus any breakup fee paid in accordance with Section 11.4. (ii) For purposes of this Section 2.7(c), "pro rata share" shall mean the percentage of the Undivided Interests owned, as of the date hereof, by the Owner that is the counterparty to the pertinent Other Owner's Agreement, divided by the sum of the percentage of the Undivided Interests owned, as of the date hereof, by: (A) such Owner; (B) Seller; and (C) any other Owner, if (1) it owns Undivided Interests as of the date hereof that are sold to a member of the Buyer Group prior to the closing under the Other Owner's Agreement in question, and (2) such sale was subject to the provisions of this Section 2.7(c) or was otherwise subject to a written waiver in accordance with the introductory paragraph of this Section 2.7(c). (iii) The pro rata share of Seller's Reimbursable Transaction Costs payable hereunder shall be payable to Seller and to the other Owners described in clause (ii)(C) above, if any, in proportion to their relative ownership of Undivided Interests as of the date hereof. (d) In order to protect Seller's legitimate interests arising under this Agreement, the Co-Tenancy Agreement and the Operating Agreement, Buyer agrees that, prior to the Closing, no member of a Buyer Group will, and it will exercise its best efforts so that no representative or other Person purporting to act on behalf of any member of a Buyer Group will, directly or indirectly, solicit, encourage or engage in any substantive -21- discussions with, or negotiate or otherwise deal with, or exchange any information with, any other Owner or any Affiliate thereof or any Person purporting to act on such Owner's behalf concerning any acquisition, transfer or other disposition of the Undivided Interests and related assets of such Owner, unless (i) Buyer provides Seller with at least one (1) Business Day's notice prior to any such discussions, negotiations, dealings or exchange, (ii) Buyer and its representatives remain free to, and do, consult with and inform Seller on a regular and current basis about the substance, progress and material developments in respect of any such discussions, negotiations, dealings or exchange, (iii) Buyer and its representatives provide Seller, on a regular and current basis, with copies of all material correspondence, written proposals and draft and final agreements related to such discussions, negotiations, dealings or exchange, and (iv) Seller is not limited in its freedom to engage in discussions and communications with any such Owner or other Owners or their respective representatives concerning such discussions, negotiations, dealings or exchange, subject to Seller advising Buyer, on a regular and current basis, of the substance of such discussions and communications. (e) The parties hereto agree that any breach of the foregoing provisions of this Section 2.7 by a member of the Buyer Group shall be a material breach of this Agreement. (f) Notwithstanding any other provision of this Section 2.7, if necessary or useful in the reasonable judgment of Buyer, any member of the Buyer Group may give valuable consideration to any third party to obtain such third party's consent to any aspect of this Agreement or the Transactions. In such event, and notwithstanding that the Buyer Group may subsequently, and not in connection with obtaining such consent, enter into an Other Owner's Agreement, any such consideration paid to an other Owner in accordance with the preceding sentence shall not be considered as part of the consideration for such Owner's portion of the Undivided Interests and related assets. 2.8 No Assignment If Breach. Notwithstanding anything contained in this ----------------------- Agreement to the contrary, this Agreement shall not constitute an agreement to assign any Asset, or assume any Assumed Liability, if the attempted assignment or assumption of the same, as a result of the absence of the consent or authorization of a third party or failure of a right of first refusal or notice period to expire, would constitute a breach or default under any agreement, encumbrance or commitment, would violate any Law or would in any way adversely affect the rights, or increase the obligations, of any party to this Agreement with respect thereto. If any such consent or authorization is not obtained, or if an attempted assignment or assumption would be ineffective or would adversely affect the rights or increase the obligations of any party to this Agreement with respect to any such agreement, encumbrance or commitment, so that Buyer or the pertinent Buyer Subsidiary would not, in fact, receive the rights, or assume the obligations with respect thereto as they exist prior to such attempted assignment or assumption, then the parties to this Agreement shall enter into such reasonable cooperative arrangements as may be reasonably acceptable to the parties to this Agreement (including, without limitation, sublease, agency, management, indemnity or payment arrangements and enforcement at the cost and for the benefit of Buyer or the pertinent Buyer Subsidiary of any and all rights against an involved third party) to provide for or impose upon Buyer or the pertinent Buyer Subsidiary the benefits of -22- such Asset or the obligations of such Assumed Liability, as the case may be, and any transfer or assignment to Buyer or the pertinent Buyer Subsidiary of any such Asset, or any assumption by Buyer or a Buyer Subsidiary of any such Assumed Liability, which shall require such consent or authorization of a third party that is not obtained, shall be made subject to such consent or authorization being obtained. If the parties cannot agree on any such arrangement, or any such arrangement would not be reasonably practicable, to provide Buyer or a Buyer Subsidiary with materially all the benefits of such Asset or materially all the obligations of such Assumed Liability, then such Asset or Assumed Liability, as the case may be, shall be excluded from the Transactions and shall be deemed to be an Excluded Asset or an Excluded Liability, as the case may be, and the parties hereto shall negotiate in good faith an equitable adjustment in the Purchase Price, or resolve any disagreement respecting such adjustment in accordance with the procedures of Section 2.9. 2.9 Procedures for Certain Purchase Price Adjustments. If circumstances ------------------------------------------------- exist that result in any disagreement in respect of adjustments to the Purchase Price or that otherwise require the parties to negotiate in good faith equitable adjustments to the Purchase Price pursuant to the provisions of Section 2.6(c) (respecting certain post-Closing adjustments), Section 2.8 (respecting absence of consents), Section 8.6 (respecting the condition of title to interests in real property) or Section 8.8 (respecting casualty losses or condemnation) (Sections 2.6(c), 2.8, 8.6, 8.8, and this Section 2.9 being collectively referred to as the "Adjustment Sections"), then and in any of such events, such negotiations, and the resolution of disagreements, shall be conducted in accordance with the provisions of this Section 2.9. The parties shall negotiate such equitable adjustments in the Purchase Price in good faith prior to the Closing Date (as may be extended by mutual agreement of the parties), provided -------- that any adjustment in the Purchase Price shall be consistent with the Allocation Schedule (if such schedule has been previously agreed upon). If the parties are unable to agree upon an adjustment by the fifth Business Day prior to the Closing Date, then such Closing Date (the "Original Closing Date") (and the Termination Date, if necessary) shall be extended to the fifth Business Day following completion of the procedure described in this Section 2.9 and the determination of the pertinent adjustment or, if longer, the fifth Business Day following any further regulatory approvals which may be necessary (but not more than forty-five (45) Business Days in the aggregate), to provide for the opportunity to resolve such disagreement pursuant to the provisions of this Section 2.9. On the day the Closing would have occurred but for the absence of agreement between the parties, each party shall designate an individual (who may not be a present or former officer, director, partner or employee of either party or any of their respective Affiliates, or of any present investment banking firm, accounting firm, law firm or attorney of or for either party or any of the party's Affiliates) to mediate such disagreement, and advise the other party in writing of the identity of such individual, which advice shall be accompanied by a list of up to ten (10) suggested neutral individuals to serve as a third mediator. The mediators originally designated by each party shall promptly confer about the selection of a third mediator from such lists, and within five (5) Business Days following the Original Closing Date (or Termination Date, as the case may be), the originally designated mediators shall agree upon and (subject to availability) select the third mediator from the lists submitted by the parties or otherwise, provided that if the originally -------- designated mediators cannot agree upon a third mediator by such date, the third mediator shall be a retired judge designated by Judicial and Arbitration Mediation Services, Inc., located in Los Angeles, California. The three mediators so selected are herein referred to as the "Panel". Within seven (7) Business Days following the Original Closing Date or, if later, within three (3) -23- Business Days following the designation of the third mediator, each party shall submit to the Panel in writing, its proposed equitable adjustments in the Purchase Price. Such proposals shall be materially in accordance with the last proposals made by such party to the other party during the course of the aforementioned good faith negotiations between the parties. The parties shall additionally submit such memoranda, arguments, briefs and evidence in support of their respective positions, and in accordance with such procedures, as a majority of the Panel may determine. Within five (5) Business Days following the due date of such submissions, as to each adjustment of the Purchase Price about which there is disagreement, the Panel shall, by majority vote, select the proposed adjustment of the Purchase Price proposed by one of the parties, it being agreed that the Panel shall have no authority to alter any such proposal in any way. Such determination by the Panel shall be final and binding between the parties as to such adjustments of the Purchase Price and shall not be subject to further challenge by the parties pursuant to Section 13.9 hereof or otherwise. Thereafter, the parties shall, subject to the terms and conditions of this Agreement and the receipt of any further regulatory approvals that may become necessary as a result of such adjustments, consummate the Transactions on the basis of such adjustments at a mutually agreeable time and place or places, in accordance with and subject to the provisions of Article 10, which shall be no later than the fifth Business Day following the determination of such adjustments (and receipt of any necessary regulatory approvals therefor) or such later date as the parties may agree upon. Subject to the foregoing, the Panel may determine the issues in dispute following such procedures, consistent with the language of this Agreement, as it deems appropriate to the circumstances and with reference to the amounts in issue, but in any event consistent with the Allocation Schedule to the extent applicable. No particular procedures are intended to be imposed upon the Panel, it being the desire of the parties that any such disagreement shall be resolved as expeditiously and inexpensively as reasonably practicable. No member of the Panel shall have any liability to the parties in connection with service on the Panel, and the parties shall provide such indemnities to the members of the Panel as they shall reasonably request. 2.10 Intentionally Left Blank. ------------------------ 2.11 Intentionally Left Blank. ------------------------ 2.12 Intentionally Left Blank. ------------------------ 2.13 Assignment of Rights and Obligations to Buyer Subsidiaries. For ---------------------------------------------------------- purposes of this Agreement, the term "Buyer Subsidiary" shall refer to any direct or indirect subsidiary of Buyer and any constituent partner or participant in Buyer (if Buyer is a partnership, joint venture, consortium or other association or organization) to whom any of Buyer's rights and obligations hereunder are assigned in compliance with the requirements of this Section. Notwithstanding any contrary provisions contained herein, the parties hereto agree that, prior to and after the Closing, Buyer, in its sole discretion, may assign any or all of its rights and obligations arising under this Agreement, any Related Agreement or the Power Purchase Agreement to one or more Buyer Subsidiaries, provided that, unless Seller shall agree to alternative -------- arrangements in writing, no such assignment shall relieve Buyer of any obligation or liability (i) for the Purchase Price hereunder or (ii) arising on or after the Closing Date (including under contracts existing at the Closing Date), and provided further that, unless Seller shall agree to alternative -------- ------- arrangements in writing, the following shall apply: -24- (a) Buyer will provide Seller with prompt written notice of any such assignment. (b) No such assignment shall be effected if the making of the assignment will result in Seller's or Buyer's inability to obtain any consent or authorization reasonably required to consummate the Transactions or to avoid economic detriment to the Seller arising from the consummation of the Transactions. (c) Each such Buyer Subsidiary that is an assignee of Buyer shall irrevocably appoint Buyer as an authorized representative and agent authorized to act for, to bind and to receive notices and payments on behalf of the Buyer Subsidiaries in all matters arising from or related to this Agreement and the Transactions. (d) Irrespective of any such assignment or the identity of the party or parties executing any Related Agreements: (i) Unless subsection (h) applies, Buyer shall remain jointly and severally liable to Seller and to third parties with respect to any Assumed Liabilities transferred to or undertaken by a Buyer Subsidiary, and shall remain jointly and severally liable to Seller with respect to any other covenant, obligation or liability to Seller hereunder or under a Related Agreement or the Power Purchase Agreement that is transferred to, or undertaken by, a Buyer Subsidiary, including without limitation, the payment of all sums due to Seller hereunder or under a Related Agreement or the Power Purchase Agreement, it being understood that all such covenants, obligations and liabilities shall constitute the direct and primary obligation of Buyer to Seller (and to third parties in the case of the Assumed Liabilities); provided that Buyer's aggregate liability for Assumed -------- Liabilities, other than as set forth in the first proviso to the second sentence of this Section 2.13 with respect to which no limit shall apply, shall be limited to Twenty-Three Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three Dollars ($23,333,333); and (ii) Without limiting the generality of the foregoing, if and to the extent that the application of any principle of Law or of common law would construe the retention by Buyer of the direct and primary obligation to perform any and all obligations, liabilities or covenants assigned to or assumed or undertaken by a Buyer Subsidiary to be a guaranty by the Buyer of the Buyer Subsidiary's performance, then the Buyer hereby irrevocably, absolutely and unconditionally guarantees to Seller the full, prompt and faithful performance by such Buyer Subsidiary of all covenants and obligations to be performed by such Buyer Subsidiary under this Agreement and any Related Agreement assigned to such Buyer Subsidiary. (e) Buyer further hereby agrees that a separate action or actions may be brought and prosecuted against Buyer for any such covenant, obligation or liability assigned to a Buyer Subsidiary, whether action is brought against the pertinent Buyer -25- Subsidiary or whether such Buyer Subsidiary is joined in any such action or actions (Buyer hereby waiving any right to require Seller to proceed against a Buyer Subsidiary). (f) Buyer hereby authorizes Seller, without notice and without affecting Buyer's liability hereunder, from time to time to (i) renew, compromise, extend, accelerate, or otherwise change the terms of any obligation of a Buyer Subsidiary hereunder or under any Related Agreement with the agreement of such Buyer Subsidiary, (ii) take and hold security for the obligations of any such Buyer Subsidiary and exchange, enforce, waive and release any such security, and (iii) apply such security and direct the order or manner of sale thereof as Seller in its discretion may determine. (g) Buyer hereby further waives: (i) Any defense that may arise by reason of the incapacity or lack of authority of any Buyer Subsidiary; (ii) Any defense based upon a statute or rule of law which provides that the obligations of a surety must be neither larger in amount nor in other respects more burdensome than those of the principal; (iii) Any duty on the part of Seller to disclose to Buyer any facts that Seller may now or hereafter know about a Buyer Subsidiary; (iv) Any right to subrogation, reimbursement, exoneration or contribution or any other rights that would result in Buyer being deemed a creditor of a Buyer Subsidiary under the federal Bankruptcy Code or any other law, in each case arising from the existence or performance of obligations of a Buyer Subsidiary hereunder or under any Related Agreement; and (v) Any and all other rights and defenses available to Buyer under the Law of any jurisdiction of a nature similar to those described in Sections 2787 to 2855, inclusive, of the California Civil Code, including, without limitation, (A) any and all defenses Buyer may have by reason of any election of remedies by Seller, and (B) any and all rights, defenses and other benefits under judicial decisions applying such statutes. (h) At Buyer's election, Seller shall enter into a novation agreement in a mutually acceptable form under which one or more of the Buyer Subsidiaries shall be substituted for Buyer hereunder and shall assume and become liable for all obligations and liabilities of Buyer hereunder and under the Related Agreements; provided that Buyer shall provide Seller -------- with a guarantee of the following payments to the extent not otherwise made by a Buyer Subsidiary: (x) the payment of the Purchase Price hereunder, (y) the payments as set forth in the first proviso to the second sentence of this Section 2.13; and (z) payments with respect to the Assumed Contracts, other than as set forth in the first proviso to the second sentence of this Section 2.13, subject to the aggregate limitation set forth in paragraph (d)(i) above. -26- ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- Seller hereby represents and warrants to Buyer, as of the date hereof, as follows, except as set forth in Schedules numbered in relation to the Sections set forth below: 3.1 Organization and Corporate Power. Seller is a corporation duly -------------------------------- incorporated and validly existing under the laws of, and is authorized to exercise its corporate powers, rights and privileges and is in good standing in, the State of Nevada and has full corporate power to carry on its business as presently conducted and to own or lease and operate its properties and assets now owned or leased and operated by it and to perform the transactions on its part contemplated by this Agreement, the Related Agreements and all other agreements contemplated hereby. 3.2 Authority and Enforceability. The execution, delivery and performance ---------------------------- of this Agreement, the Related Agreements and all other agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby have been duly and effectively authorized by the board of directors of Seller; no other corporate act or proceeding on the part of Seller, its board of directors or its shareholders is necessary to authorize this Agreement, any Related Agreement, any such other agreement or the transactions contemplated hereby and thereby. This Agreement has been, and each of the Related Agreements and the other agreements contemplated hereby will, as of the Closing, have been, duly executed and delivered by Seller, and this Agreement constitutes, and each Related Agreement and each such other agreement when executed and delivered will constitute, a valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as it may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors' rights generally and that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding may be brought. 3.3 No Breach or Conflict. Subject to the provisions of Sections 3.4(a) --------------------- and 3.4(b) below regarding private party and governmental consents, and except for compliance with the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any regulatory or licensing Laws applicable to the businesses and assets represented by the Assets, the execution, delivery and performance by Seller of this Agreement and the Related Agreements do not: (a) conflict with or result in a breach of any of the provisions of the Articles of Incorporation or Bylaws or similar charter documents (the "Charter Documents") of Seller; (b) contravene any Law or cause the suspension or revocation of any License presently in effect, which affects or binds Seller or any of its properties, except where such contravention, suspension or revocation will not have a Material Adverse Effect (as defined below) on the Assets and will not affect the validity or enforceability of this Agreement and the Related Agreements or the validity of the Transactions contemplated hereby and thereby; or (c) conflict with or result in a breach of or default (with or without notice or lapse of time or both) under any material agreement or instrument to which Seller is a party or by which it or any of its properties may be affected or bound, the effect of which conflict, breach, or default, either individually or in the aggregate, would be a Material Adverse Effect on the Assets. As used -27- herein, a "Material Adverse Effect": (x) when used with respect to the Assets, means a material adverse effect on the Assets and on the operation thereof, taken as a whole; (y) when used with respect to any portion of the Assets (including, without limitation, the Plant), means a material adverse effect on such portion of the Assets and on the operation thereof, taken as a whole; and (z) when used with respect to an entity, such as Seller or Buyer, means a material adverse effect on the business, condition (financial or otherwise) and results of operations of such entity taken as a whole (including any subsidiaries of such entity) or on the ability of such entity to consummate the Transactions. Notwithstanding the foregoing, the term "Material Adverse Effect" shall not include: (1) any change affecting the international, national, regional or local electric industry as a whole; (2) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power; (3) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used in connection with the Assets; (4) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems or operations thereof; (5) any order of any court or Governmental Body applicable to providers of generation, transmission or distribution of electricity generally that imposes restrictions, regulations or other requirements thereon; or (6) any change or effect resulting from action or inaction by a Governmental Body with respect to an independent system operator or retail access in California, Nevada or Arizona. 3.4 Approvals. --------- (a) Except as set forth in Schedule 3.4(a), the execution, delivery --------------- and performance by Seller of this Agreement and the Related Agreements do not require the authorization, consent or approval of any non-governmental third party of such a nature that the failure to obtain the same would have a Material Adverse Effect on the Assets or the Plant substantially as they have heretofore operated. (b) Except as set forth in Schedule 3.4(b), the execution, delivery --------------- and performance by Seller of this Agreement and the Related Agreements do not require the authorization, consent, approval, certification, license or order of, or any filing with, any court or Governmental Body of such a nature that the failure to obtain the same would have a Material Adverse Effect on the Assets or the Plant, except for compliance with the HSR Act and approvals by the Public Utilities Commission of Nevada ("PUCN") and the Federal Energy Regulatory Commission ("FERC") necessary to consummate the Transactions and to permit Buyer to acquire the Assets and to generate electricity from the Plant for sale. 3.5 Permits. Except as set forth in Schedule 3.5, at the date hereof the ------- ------------ Owners or the Operating Agent possess all Licenses necessary for operation of the Plant in the manner presently operated, other than those the absence of which would not have a Material Adverse Effect on the Assets or the Plant. A true and correct copy of each such License has previously been delivered to or made available for inspection by Buyer. 3.6 Compliance with Law. Except as set forth in Schedule 3.6, and except ------------------- ------------ for the matters that are the subject of Sections 3.5 and 3.7 and the Schedules, if any, related thereto, to the best of Seller's Knowledge, the Plant is in compliance in all material respects with all pertinent Laws and Licenses related to operation thereof as presently operated, other than -28- violations as would not, individually or in the aggregate, have a Material Adverse Effect on the ownership, use or operation of the Assets or on the ability of Seller to execute and deliver the Agreement and the Related Agreements and consummate the Transactions contemplated hereby and thereby. 3.7 Hazardous Substances. To the best of Seller's Knowledge, except as -------------------- disclosed by the "Phase I" and "Phase II" environmental site assessments prepared by outside environmental consultants and made available for inspection by Buyer, by the additional testing by Buyer, if any, or as otherwise disclosed on Schedule 3.7: ------------ (a) There has not been a Release of Hazardous Material on or otherwise affecting the Assets (other than Releases involving de minimis quantities of Hazardous Materials) that: (i) constitutes an unremedied material violation of any Environmental Law if the effect of such violation imposes a current remediation obligation on the part of the Owners; (ii) currently imposes any material release-reporting obligations on the Owners under any Environmental Law that have not been or are not being complied with; or (iii) currently imposes any material clean-up or remediation obligations of the Owners under any Environmental Law; (b) The Owners, during at least the last three years, have complied, and currently are in compliance, in all material respects, with all Environmental Laws that govern the Assets; (c) The Owners have all material Licenses required under the Environmental Laws for operation of the Plant, are in compliance in all material respects with all such Licenses, and during the three-year period preceding the date of the Agreement have not received any notice that: (i) any such existing License will be revoked; or (ii) any pending application for any new such License or renewal of any existing License will be denied; (d) The Operating Agent has not received any currently outstanding written notice of any material proceedings, action, or other claim or liability arising under any Environmental Laws (including, without limitation, notice of potentially responsible party status under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S)(S)9601 et seq. or any state counterpart) from any Person or Governmental Body regarding the Plant; and (e) No portion of the Assets contains or has ever contained any underground storage tank, surface impoundment or similar device used for the management of wastewater, or other waste management unit dedicated to the disposal, treatment, or long-term (greater than 90 days) storage of waste materials. 3.8 Title to Personal Property. Seller has good and defensible title, or -------------------------- valid and effective leasehold rights in the case of leased property, to all tangible personal property included in the Assets to be sold, conveyed, assigned, transferred and delivered to Buyer or a Buyer Subsidiary by Seller, free and clear of all liens, charges, claims, pledges, security interests, equities and encumbrances of any nature whatsoever, except for those created or allowed to be -29- suffered by Buyer or such Buyer Subsidiary and except for the following (individually and collectively, the "Permitted Encumbrances"): (i) the lien of current taxes not delinquent, (ii) liens listed on Schedule 3.8, (iii) the ------------ Assumed Liabilities, (iv) such consents, authorizations, approvals and licenses referred to in Sections 3.4(a) and 3.4(b), and (v) liens, charges, claims, pledges, security interests, equities and encumbrances arising under the Co- Tenancy Agreement, the Operating Agreement and the Project Agreements referred to therein, or which will be discharged or released either prior to, or substantially simultaneously with, the Closing and other liens and possible minor matters that in the aggregate are not substantial in amount and do not materially detract from or interfere with the present or intended use of such property. 3.9 Contracts. Except for such matters which individually and in the --------- aggregate do not have a Material Adverse Effect on the Assets or as otherwise disclosed on Schedule 3.9, to the best of Seller's Knowledge, (a) there is no ------------ liability to any third party by reason of the default by Seller or the Owners, or the Operating Agent acting on their behalf, under any Assumed Contract, (b) the Operating Agent has not received written or other notice that any Person intends to cancel or terminate any Assumed Contract, (c) all of the Assumed Contracts are in full force and effect, and (d) neither the Owners nor the Operating Agent has granted any general power of attorney in respect of the Assets; provided that Seller makes no separate representation or warranty under -------- this Section 3.9 respecting compliance with the provisions of any Assumed Contract related to compliance with Laws generally, Hazardous Substances, title to or condition of property, Licenses, environmental conditions, or Environmental Laws, it being the intent of the parties that warranties respecting such matters shall be made exclusively under the provisions of Sections 3.5, 3.6, 3.7 and 3.8. Seller has previously made available for inspection by Buyer true and complete copies of all written Assumed Contracts except where the failure to so deliver a copy thereof will not have a Material Adverse Effect on the Buyer. 3.10 Litigation. Except for (a) ordinary routine claims and litigation ---------- incidental to the businesses conducted from or through the Assets (including, without limitation, actions for negligence, workers' compensation claims, so- called "slip-and-fall" claims and the like), (b) governmental inspections and reviews customarily made of businesses such as those conducted from or through the Assets, (c) proceedings before regulatory authorities, and (d) matters as set forth on Schedule 3.10, there are no actions, suits, claims or proceedings ------------- pending, or to the best of the Knowledge of Seller, threatened against or affecting the Assets or relating to the operation of the Plant, at law or in equity, or before or by any Governmental Body. Except as disclosed on Schedule -------- 3.10, there is no condemnation proceeding pending or, to the best of the - ---- Knowledge of Seller, threatened against any of the Owned or Leased Real Property. 3.11 Plant Data. Attached hereto as Schedule 3.11, is the following ---------- ------------- selected historical operating or performance data of generating units included in the Assets (the "Operating Data"): (i) the date of the Operating Agent's most recent recorded measurement of the "dependable operating capacity" (as defined in such Schedule) of each such unit for which the Operating Agent has historical records of such measurements and the dependable operating capacity recorded by the Operating Agent at such time in accordance with the procedures and parameters described in such Schedule; (ii) the date of the Operating Agent's most recent "turbine efficiency heat rate test" for each such unit included in the Assets that has a dependable operating capacity of at least 790 megawatts (other than units, if any, indicated in such Schedule, for which the Owners or the Operating Agent do not currently have operating permits) and the outcomes of -30- such tests recorded by the Operating Agent, subject to the procedures, parameters and assumptions that are further described in such Schedule; and (iv) the date of the last major scheduled turbine overhaul recorded for each unit included in the Assets that has a dependable operating capacity of at least 790 megawatts (other than units, if any, indicated in such Schedule, for which the Owners or the Operating Agent do not currently have operating permits) and the steam path audit results indicating the change in turbine efficiency heat rate degradation as a result of the overhaul recorded by the Operating Agent, subject to the procedures, parameters and assumptions that are further described in such Schedule. To the best of the Knowledge of the Seller, the measurements and tests referred to in clauses (i) through (iv) above were all conducted in accordance with practices reasonably likely to result in information that was materially accurate as of the dates on which it was recorded, subject to the accuracy of the measurement devices used and the other assumptions and qualifications contained in such Schedule. Since October 26, 1999, the Plant has been operated only in the usual and ordinary course, except as identified in Schedule 3.11 or ------------- in anticipation of the divestiture of the Assets, and there has not been: (a) Any material casualty, physical damage, destruction or physical loss respecting, or, to the best of the Knowledge of the Seller, material adverse change in the physical condition of, the Plant, subject to ordinary wear and tear and to routine maintenance; (b) Any sale or other disposition other than in the ordinary course of business of any fixed asset included in the Assets that has a net book value in excess of Five Hundred Thousand Dollars ($500,000); (c) Any material mortgage, pledge or imposition of lien on any of such Assets, except for such as will be removed as of the Closing or for Permitted Encumbrances; or (d) Any material amendment (other than general amendments which the insurance carrier makes for a category of policy) or termination or failure to renew any material insurance covering the Assets. 3.12 Brokers. Except as shown on Schedule 3.12, no broker, finder, or ------- ------------- investment banker is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement or the Transactions contemplated hereby based upon any agreements or arrangements or commitments, written or oral, made by or on behalf of Seller. Seller shall be solely responsible for the payment of any such fee or commission to any Person listed on Schedule 3.12 ------------- as an exception to the foregoing. 3.13 Assets Used in the Operation of the Plant. Except as set forth on ----------------------------------------- Schedule 3.13, the Assets include all material assets and properties owned by - ------------- Seller that are necessary (with the Undivided Interest of the other Owners) for the operation of the Plant as currently operated except as follows: (i) Operating Agent's provision of materials and services pursuant to the -31- Operating Agreement, (ii) any contracts and agreements for services and provision of materials that cover property of Operating Agent that are not being assigned to Buyer and any contracts and agreements that by their own terms expire prior to the Closing, (iii) non-transferable Licenses, (iv) the Excluded Assets, and (v) the Related Facilities. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- Buyer hereby represents and warrants to Seller, as of the date hereof, as follows, except as set forth in Schedules numbered in relation to the Sections set forth below: 4.1 Organization and Corporate Power. Buyer is a corporation duly -------------------------------- incorporated and validly existing under the laws of, and is authorized to exercise its corporate powers, rights and privileges and is in good standing in, the State of Delaware and has full corporate power to carry on its business as presently conducted and to own or lease and operate its properties and assets now owned or leased and operated by it and to perform the transactions on its part contemplated by this Agreement and all other agreements contemplated hereby. 4.2 Authority and Enforceability. The execution, delivery and performance ---------------------------- of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and effectively authorized by the board of directors of Buyer; no other corporate act or proceeding on the part of Buyer, its board of directors or shareholders is necessary to authorize this Agreement, any such Related Agreement or the transactions contemplated hereby and thereby. This Agreement has been, and each of the Related Agreements contemplated hereby will, as of the Closing, have been, duly executed and delivered by Buyer, and this Agreement constitutes, and each such Related Agreement when executed and delivered will constitute, a valid and binding obligation of Buyer, enforceable against Buyer, in accordance with its terms, except as it may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors' rights generally and that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding may be brought. 4.3 No Breach or Conflict. Subject to the provisions of Sections 4.4(a) --------------------- and 4.4(b) below regarding private party and governmental consents, and except for compliance with the requirements of the HSR Act and any regulatory or licensing Laws applicable to the businesses and assets represented by the Assets, the execution, delivery and performance by Buyer and the Buyer Subsidiaries of this Agreement and the Related Agreements do not: (a) conflict with or result in a breach of any of the provisions of the Charter Documents of Buyer or any Buyer Subsidiary; (b) contravene any Law or cause the suspension or revocation of any License presently in effect, which affects or binds Buyer or any Buyer Subsidiary or any of their material properties; or (c) conflict with or result in a breach of or default under any material agreement or instrument to which Buyer or any Buyer Subsidiary is a party or by which it or they or any of their properties may be affected or bound. -32- 4.4 Approvals. --------- (a) Except as set forth on Schedule 4.4(a), the execution, delivery --------------- and performance by Buyer and any Buyer Subsidiary of this Agreement and the Related Agreements do not require the authorization, consent or approval of any non-governmental third party. (b) Except as set forth on Schedule 4.4(b), the execution, delivery --------------- and performance by Buyer and any Buyer Subsidiary of this Agreement and the Related Agreements do not require the authorization, consent, approval, certification, license or order of, or any filing with, any court or Governmental Body, except for compliance with the HSR Act and approvals by the PUCN and the FERC necessary to consummate the Transactions and to permit Buyer to acquire the Assets and to generate electricity from the Plant for sale. 4.5 Litigation. Except as set forth on Schedule 4.5, there are no ---------- ------------ actions, suits, claims or proceedings pending, or to the best of Buyer's Knowledge, threatened against Buyer or any Buyer Subsidiary likely to impair the consummation of the Transactions contemplated by this Agreement or otherwise material to the Transactions or to the Buyer or any Buyer Subsidiary, and Buyer is not aware of facts likely to give rise to such litigation. 4.6 Brokers. Except as set forth on Schedule 4.6, no broker, finder, or ------- ------------ investment banker is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement or the Transactions contemplated hereby based upon any agreements or arrangements or commitments, written or oral, made by or on behalf of Buyer. Buyer shall be solely responsible for the payment of any such fee or commission to any Person listed on Schedule 4.6 as an ------------ exception to the foregoing. 4.7 Exculpation. BUYER AGREES THAT EXCEPT FOR THE REPRESENTATIONS AND ----------- WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ASSETS ARE BEING SOLD ON AN "AS IS," "WHERE IS," BASIS AND IN "WITH ALL FAULTS" CONDITION, AND, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY REPRESENTATIONS OR WARRANTIES AS TO LIABILITIES, OPERATIONS OF THE PLANT, THE TITLE, CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ASSETS; ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS OR ANY PART THEREOF, INCLUDING OPERATION AS A POWER PLANT, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT; ANY REPRESENTATION OR WARRANTY CONCERNING COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS OR ENVIRONMENTAL LAWS, THE ABSENCE OF HAZARDOUS MATERIALS, OR THE APPLICABILITY OF GOVERNMENTAL REQUIREMENTS; OR ANY REPRESENTATION AND WARRANTY CONCERNING WHETHER THE ASSETS INCLUDE OR WHETHER ALL OF THE UNDIVIDED INTERESTS TOGETHER INCLUDE SUFFICIENT PROPERTY -33- TO OPERATE THE PLANT. NO INFORMATION OR MATERIAL PROVIDED BY OR COMMUNICATION MADE BY SELLER OR ANY REPRESENTATIVE OF SELLER, INCLUDING ANY INVESTMENT BANKER, WILL CAUSE OR CREATE ANY REPRESENTATION OR WARRANTY DISCLAIMED BY THE FOREGOING. 4.8 Financing. At the Closing, Buyer will have liquid capital or committed --------- sources therefor sufficient to permit it and the pertinent Buyer Subsidiaries, if any, to perform timely its or their obligations hereunder and under the other Transaction Agreements. 4.9 No Knowledge of Seller's Breach. Neither Buyer nor any of its ------------------------------- Affiliates or representatives has Knowledge of any breach of any representation or warranty by Seller or of any other condition or circumstance that would excuse Buyer from its timely performance of its obligations hereunder. Buyer shall notify Seller as promptly as practicable if any such information comes to its attention prior to Closing. 4.10 Qualified for Licenses. To the best of the Buyer's Knowledge, Buyer ---------------------- and any pertinent Buyer Subsidiary are qualified to obtain any Licenses necessary for the operation by Buyer or such Buyer Subsidiary of the Assets as of the Closing in the same manner as the Assets are presently operated by Seller. 4.11 Buyer Subsidiaries. ------------------ (a) As of the Closing, each Buyer Subsidiary will be a corporation or other entity duly organized, validly existing and in good standing under the laws of its state of organization. Each Buyer Subsidiary will at the Closing have all requisite power and authority to carry on its business as then conducted and to own or lease and operate its properties and assets then owned or leased and operated by it and to perform the transactions on its part contemplated by this Agreement and all other agreements contemplated hereby. (b) The board of directors, managers or other governing entity of each Buyer Subsidiary and, if required, its shareholders, partners or members will have, by the date of the Closing, duly and effectively authorized (i) the purchase of the Assets to be purchased by such Buyer Subsidiary, and (ii) the execution, delivery and performance of this Agreement and the Related Agreements and all other agreements contemplated hereby and thereby to which such Buyer Subsidiary is a party. No other act or proceeding on the part of any Buyer Subsidiary, its board of directors, managers, or other governing entity or its shareholders, partners or members will be necessary to authorize this Agreement, any Related Agreement or other agreement contemplated hereby and thereby or the Transactions contemplated hereby and thereby. (c) This Agreement, the Related Agreements and all other agreements contemplated hereby and thereby to which any Buyer Subsidiary is a party will, as of the Closing, have been duly executed and delivered by each such Buyer Subsidiary, and each such agreement, when executed and delivered will constitute, a valid and binding obligation of such Buyer Subsidiary, enforceable against such Buyer Subsidiary in accordance with its terms, except as it may be limited by bankruptcy, insolvency, -34- reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors' rights generally and that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding may be brought. ARTICLE 5 COVENANTS OF EACH PARTY ----------------------- 5.1 Efforts to Close. ---------------- (a) Commercially Reasonable Efforts. Subject to the terms and conditions herein provided including, without limitation, Articles 8 and 9 hereof, each of the parties hereto agrees to use its Commercially Reasonable Efforts to consummate and make effective, as soon as reasonably practicable, the Transactions contemplated hereby, including the satisfaction of all conditions thereto set forth herein. Such actions shall include, without limitation, exerting their Commercially Reasonable Efforts to obtain the consents, authorizations and approvals of all private parties and Governmental Bodies whose consent is reasonably necessary to effectuate the Transactions contemplated hereby, and effecting all other necessary registrations and filings, including, without limitation, giving all notices and providing all information required to be provided in connection with the Mohave Co-Tenancy Agreement Condition, filings under Laws relating to the transfer, reissuance or otherwise obtaining of necessary Licenses, under the HSR Act and all other necessary filings with the PUCN, FERC (including applications to transfer the Switchyard Assets to the extent contemplated herein, requesting Exempt Wholesale Generator status for Buyer or the pertinent Buyer Subsidiary and an application under Section 205 of the Federal Power Act to sell electric generating capacity and energy, including, without limitation, ancillary services, at wholesale at market based rates), and any other Governmental Bodies. Seller shall cooperate with Buyer's efforts to obtain the requisite Licenses and regulatory consents, provided Seller shall not be obligated to incur any -------- liabilities or assume any obligations in connection therewith. Other than Buyer's and Seller's obligations under Section 5.3, neither party shall have any liability to the other if, after using its Commercially Reasonable Efforts, it is unable to obtain any consents, authorizations or approvals necessary for such party to consummate the Transactions. (b) Control Over Proceedings. All analyses, appearances, ------------------------ presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of either party before any regulatory authority in connection with the approval of the Transactions shall be subject to the joint approval or disapproval in advance and the joint control of Buyer and Seller, acting with the advice of their respective counsel, it being the intent that the parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analysis, appearance, presentation, memorandum, brief, argument, opinion and proposal; provided that in the event of a disagreement -------- concerning any such analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal, other than those before the state or local public utilities commission (not including the PUCN) or other local Governmental -35- Body with general regulatory authority over Buyer, the determinations of the Seller shall be controlling, except that the determinations of Buyer shall be controlling with respect to any application of Buyer to FERC for authority to sell electric generating capacity and energy at market-based rates and any filing of Buyer to the extent related to market power in connection with an application to FERC under Section 203 of the Federal Power Act or in connection with a filing at the PUCN; and provided further -------- ------- that nothing will prevent a party from responding to a subpoena or other legal process as required by law or submitting factual information in response to a request therefor, and provided further that the Seller, but -------- ------- not the Buyer without the advance approval of the Seller, may engage in private meetings or in camera proceedings with members and/or representatives of the PUCN if it notifies Buyer of same. Each party will provide the other with copies of all written communications from Governmental Bodies relating to the approval or disapproval of the transactions contemplated by the Agreement and the Related Agreements. In any application to FERC for Exempt Wholesale Generator ("EWG") status, Buyer shall not request approval to charge or receive a fee or profit from any fee paid with respect to the Switchyard Assets if the exclusion of such request is necessary for Buyer or the pertinent Buyer Subsidiary to obtain EWG status. 5.2 Post-Closing Cooperation. After the Closing, upon prior reasonable ------------------------ written request, each party shall cooperate with the other, at the requesting party's expense (but including only out-of-pocket expenses to third parties and not the costs incurred by any party for the wages or other benefits paid to its officers, directors or employees), in furnishing records, information, testimony and other assistance in connection with any inquiries, actions, audits, proceedings or disputes involving either of the parties hereto (other than in connection with disputes between the parties hereto) and based upon contracts, arrangements or acts of Seller, the Owners or the Operating Agent on behalf of the Owners which were in effect or occurred on or prior to Closing and which relate to the Assets, including, without limitation, arranging discussions with (and the calling as witness of) officers, directors, employees, agents, and representatives of Buyer; provided, however, under no circumstances shall such -------- cooperation require the disclosure of the other bids received for any interest in the Plant by Seller to any Person, including to any regulatory agency or to the Buyer. 5.3 Expenses. Whether or not the Transactions contemplated hereby are -------- consummated, except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses. Notwithstanding the foregoing: (a) Costs associated with preliminary title reports and title policies shall be borne by Seller up to the costs that would have been incurred had the title policies been standard coverage policies of title insurance, and the remaining costs, if any, including costs for extended coverage and any endorsements shall be borne by Buyer (except that any survey costs shall be borne by Seller); (b) All costs of the "Phase I" and "Phase II" environmental site assessments provided by Seller to Buyer shall be borne by Seller; -36- (c) All escrow charges, appraisal fees, and charges of any neutral mediator appointed pursuant to Section 2.9 hereof, and related costs, shall be borne one-half by Buyer and one-half by Seller (it being agreed that each party shall bear the costs of its own designated mediator under Section 2.9); (d) Documentary transfer taxes, if any, will be borne by Seller, and recording costs and charges respecting real property will be borne one-half by Buyer and one-half by Seller; (e) All fees and charges of Governmental Bodies shall be borne by the party incurring the fee or charge, except that all fees and charges of Governmental Bodies in connection with the transfer, issuance or authorization of any License shall be borne by Buyer; (f) All liabilities or obligations for Taxes in the nature of sales taxes incurred as a result of the sale of the Assets hereunder to Buyer shall be borne one-half by Seller and one-half by Buyer; and (g) All fees, charges and costs of economists and other experts, if any, jointly retained by Buyer and Seller in connection with submissions made to any Governmental Body and advice in connection therewith respecting approval of the Transactions will be borne one-half by Buyer and one-half by Seller. All such charges and expenses shall be promptly settled between the parties at the Closing or upon termination or expiration of further proceedings under this Agreement, or with respect to such charges and expenses not determined as of such time, as soon thereafter as is reasonably practicable. 5.4 Announcements; Confidentiality. Subject to Section 5.1, prior to the ------------------------------ Closing Date, no press or other public announcement, or public statement or comment in response to any inquiry, relating to the transactions contemplated by this Agreement shall be issued or made by Buyer or Seller without the joint approval of Buyer and Seller; provided that a press release or other public -------- announcement, regulatory filing, statement or comment made without such joint approval shall not be in violation of this Section if it is made in order to comply with applicable Laws or stock exchange policies and in the reasonable judgment of the party making such release or announcement, based upon advice of counsel, prior review and joint approval, despite reasonable efforts to obtain the same, would prevent dissemination of such release or announcement in a timely enough fashion to comply with such Laws or policies, provided that in all -------- instances prompt notice from one party to the other shall be given with respect to any such release, announcement, statement or comment. Each party shall keep all information (i) obtained from the other either before or after the date of this Agreement, or (ii) related to Buyer's proposed purchase of the Assets, Seller's proposed sale of the Assets, the contents of this Agreement or the negotiation of this Agreement confidential, and neither party shall reveal such information to, nor produce copies of any written information for, any Person outside its management group or its professional advisors (including lenders and prospective financing sources) without the prior written consent of the other party, unless such party is compelled to -37- disclose such information by judicial or administrative process or by any other requirements of Law or disclosure is reasonably necessary to obtain a License or a consent. If the Transactions contemplated by this Agreement should fail to close for any reason, each party shall return to the other as soon as practicable all originals and copies of written or recorded information provided to such party by or on behalf of the other party and none of such information shall be used by such party, or its employees, agents or representatives, in the business operations of any Person. Notwithstanding the foregoing, (i) each party's obligations under this Section shall not apply to any information or document which is or becomes the subject of a subpoena or other legal process or otherwise is or becomes available to the public other than as a result of a disclosure by the other party in violation of this Agreement or other obligation of confidentiality under which such information may be held or becomes available to the party on a non-confidential basis from a source other than the other party or its officers, directors, employees, representatives or agents, and (ii) except as may be required by Law, the parties shall seek appropriate protective orders or confidential treatment for the schedules to this Agreement in connection with any filing with or disclosure to any Governmental Body. The parties' obligations under this Section shall survive the termination of this Agreement. Nothing in this Section shall, or is intended to, impair or modify any of the rights or obligations of Buyer or its Affiliates under the confidentiality agreement dated as of November 17, 1999 entered into in connection with the Auction, all of which remain in effect until termination of such agreement in accordance with its terms. 5.5 Litigation Conduct and Settlement. Attached hereto as Schedule 5.5 is --------------------------------- ------------ the consent decree (the "Consent Decree") setting forth the terms of a settlement in principle of the pending litigation entitled Grand Canyon Trust, Inc., et al. v. Southern California Edison Company, et al., U.S.D.C. District of Nevada, Case No. CV-S-98-0035-LDG(RJJ) (the "Pending Air Quality Lawsuit") and concerning other matters related to the Plant. Buyer hereby acknowledges that Seller has executed the Consent Decree and that the Consent Decree has been approved by the court having jurisdiction over such action. Buyer hereby authorizes Seller to execute any other documents or agreements necessary or useful to effectuate the Consent Decree, whether before or after the Closing. Buyer hereby agrees (i) to assume all liabilities of Seller under the Consent Decree, (ii) to execute any documents necessary or useful to assuming such liabilities, and (iii) that all liabilities of Seller under the Consent Decree which require Remediation Measures after the Closing shall be Assumed Liabilities hereunder. ARTICLE 6 ADDITIONAL COVENANTS OF SELLER ------------------------------ Seller hereby additionally covenants, promises and agrees as follows: 6.1 Access. Subject to the restrictions set forth in Section 5.4 ------ respecting confidentiality and provided that Buyer has complied with each and -------- every provision thereof, Seller shall afford Buyer, and the counsel, accountants and other representatives of Buyer, reasonable access, throughout the period from the date hereof to the Closing Date, to the Assets and the managerial personnel associated therewith and all the properties, books, contracts, commitments, and records included in the Assets which Seller has or to which it has access in order to facilitate transition planning. Such access shall be afforded to Buyer after no less than -38- 24 hours' prior written notice, during normal business hours and only in such manner so as not to disturb or interfere with the normal operations of the Assets. Seller's covenants under this Section are made with the understanding that Buyer shall use all such information in compliance with all Laws. The foregoing notwithstanding, Buyer acknowledges and agrees that Buyer's access to such books and records shall not include access to, and Seller shall not have any obligation to deliver to Buyer, (a) any information concerning any alleged dispute or any pending litigation, investigation or proceeding involving Seller or its Affiliates that is protected by or subject to the attorney-client privilege, or the disclosure of which is restricted by an agreement entered into in connection with such dispute, litigation, investigation or proceeding or an order entered by any court, provided that with -------- respect to Assumed Liabilities only, if Buyer has delivered to Seller an opinion of Buyer's regular outside counsel stating that the delivery of such information to Buyer would not result in a waiver of, or otherwise affect, the attorney- client privilege protecting such information, Seller shall deliver such information (redacted with respect to any portion of such information that does not pertain to any Assumed Liability) to Buyer, (b) information which would not be available or to which access would not be provided to all Owners upon request, or (c) information subject to confidentiality or nondisclosure agreements that would be violated by Buyer's access. With respect to information described in clauses (a), (b) or (c) of the preceding sentence, Buyer and Seller shall reasonably cooperate with one another in respect of alternative arrangements, to the extent feasible, to provide Buyer with relevant information without adversely affecting Seller or breaching third party agreements. 6.2 Updating. Seller shall notify Buyer of any changes or additions to -------- any of Seller's Schedules to this Agreement with respect to the Assets or Assumed Liabilities related thereto by the delivery of updates thereof, if any, as of a reasonably current date prior to the Closing not later than three (3) Business Days prior to the Closing. No such updates made pursuant to this Section shall be deemed to cure any inaccuracy of any representation or warranty made in this Agreement as of the date hereof, unless Buyer specifically agrees thereto in writing, nor shall any such notification be considered to constitute or give rise to a waiver by Buyer of any condition set forth in this Agreement. Without limiting the generality of the foregoing, Seller shall notify Buyer reasonably promptly of the occurrence of any material casualty, physical damage, destruction or physical loss respecting, or, to the best of the Knowledge of the Seller, material adverse change in the physical condition of, the Plant, subject to ordinary wear and tear and to routine maintenance. 6.3 Conduct Pending Closing. Prior to consummation of the Transactions ----------------------- contemplated hereby or the termination or expiration of this Agreement pursuant to its terms, unless Buyer shall otherwise consent in writing, which consent shall not be unreasonably withheld or delayed, and except for actions taken by the Operating Agent solely in its capacity as Operating Agent and not upon the express authorization or discretion of the Owners, or taken pursuant to Assumed Contracts, or which are required by law or arise from or are related to the anticipated transfer of the Assets or the general restructuring of the electric utility industry, or as otherwise contemplated by this Agreement or disclosed in Schedule 6.3 or another Schedule to this Agreement, Seller shall, in its - ------------ capacity as an Owner, endeavor to cause the Owners to: (a) Operate and maintain the Assets only in the usual and ordinary course, materially consistent with practices followed prior to the execution of this Agreement; -39- (b) Except as approved by Buyer in its reasonable judgment, not approve, as an Owner, the settlement of any litigation that constitutes an Assumed Liability, other than on terms substantially conforming to the terms set forth in Schedule 6.3(b), or, except as required by their terms, --------------- agree, as an Owner, to amend, terminate, renew, or renegotiate any existing material Assumed Contract or enter into any new Assumed Contract, except in the ordinary course of business and consistent with practices of the recent past, or default (or take or omit to take any action that, with or without the giving of notice or passage of time, would constitute a default) in any of their obligations under any such contracts, it being understood that (i) in connection with any vote of the Owners with respect to any such action proscribed by this Section 6.3(b), Seller agrees to endeavor, where practicable, to consult with Buyer prior to any meeting where matters which may be the subject of a vote are anticipated to be discussed and to vote in accordance with the written instructions, if any, delivered by Buyer to Seller prior to the vote, and, in the event that Seller does not vote in accordance with such instructions, Seller shall provide notice to Buyer of its vote within five (5) Business Days of such vote, and, Buyer may elect, by written notice delivered to Seller within ten (10) Business Days of such vote, to terminate this Agreement and if Buyer so elects, Seller shall pay to Buyer the breakup fee set forth in Section 11.4, and (ii) nothing contained in this Section 6.3(b) shall limit or restrict SCE's ability to carry out its duties and obligations to the other Owners, as Operating Agent; (c) Not: (i) sell, lease, transfer or dispose of, or make any contract for the sale, lease, transfer or disposition of, any assets or properties which would be included in the Assets, other than sales in the ordinary course of business which would not individually, or in the aggregate, have a Material Adverse Effect upon the operations or value of the Plant; (ii) incur, assume, guaranty, or otherwise become liable in respect of any indebtedness for money borrowed which would result in Buyer assuming such liability hereunder after the Closing; (iii) delay the payment and discharge of any liability which, upon Closing, would be an Assumed Liability, because of the Transactions contemplated hereby; or (iv) encumber or voluntarily subject to any lien any Asset (except for Permitted Encumbrances); (d) Maintain in force and effect the material property and liability insurance policies related to the Plant and the Assets; (e) Not take any action which would cause any of Seller's representations and warranties set forth in Article 3 to be materially false as of the Closing; (f) Not make Capital Expenditures, other than those contemplated on Schedule 2.6(c)(i), which would, pursuant to the provisions of Section ------------------ 2.6(c), result in an upward adjustment of the Purchase Price pursuant to Section 2.6(c)(i) in excess of $2,000,000 in the aggregate, except for purchases under agreements in existence as of the date hereof that would constitute Assumed Liabilities as of such date, Capital Expenditures set forth on Schedule 2.6(c)(i), Capital Expenditures otherwise approved in ------------------ writing by Buyer or Capital Expenditures for which Seller does not adjust the Purchase Price pursuant to Section 2.6(c)(i); -40- (g) Negotiate in good faith with the other Owners and, subject to the other Owners' execution and delivery thereof, execute and deliver the Eldorado Transmission Agreements in substantially the form in which such agreements exist on the date hereof. Provided that nothing in this Section shall (i) obligate Seller to make - -------- expenditures other than in the ordinary course of business and consistent with practices of the recent past or to otherwise suffer any economic detriment, (ii) preclude Seller from paying, prepaying or otherwise satisfying any liability which, if outstanding as of the Closing Date, would be an Assumed Liability or an Excluded Liability, (iii) preclude Seller from incurring any liabilities or obligations to any third party in connection with obtaining such party's consent to any transaction contemplated by this Agreement or the Related Agreements provided such liabilities and obligations under this clause (iii) shall be - -------- Excluded Liabilities pursuant to Section 2.4(g) hereof if not approved in advance by Buyer (which approval shall not be unreasonably withheld or delayed), or (iv) preclude Seller from instituting or completing any program designed to promote compliance or comply with Environmental Laws, other Laws or other good business practices respecting the Plants or the Assets. Buyer's election to terminate this Agreement and to receive payment of the breakup fee set forth in Section 11.4 shall be Buyer's sole and exclusive remedy against Seller with respect to any breach by Seller of this Section 6.3(b). 6.4 Environmental Matters. --------------------- (a) Remediation of Existing Soils Contamination. Seller (or those ------------------------------------------- acting on its behalf) shall remain responsible for its share, as an Owner, of the cost and performance of Remediation Measures solely to the extent that such Remediation Measures are required under Environmental Law by any Governmental Body and are part of the Excluded Liabilities. Buyer and Seller shall reasonably cooperate in connection with any such Remediation Measures that involve both Assumed Liabilities and Excluded Liabilities. In addition, Seller may, together with the other Owners, undertake such Remediation Measures prior to the Closing as it and they reasonably determine are required under Environmental Law or which it and they otherwise reasonably believe are appropriate, but shall not be obligated to do so under the terms hereof (except to the extent set forth in Section 6.3). To the extent that any Remediation Measures are undertaken by or on behalf of Seller pursuant to the first sentence of this paragraph, such Remediation Measures will be done in accordance with Schedule 6.4(a). --------------- (b) Seller's Environmental Site Assessments. Seller shall exercise --------------------------------------- its best efforts (without increased out-of-pocket costs to Seller) to cause the consultants which issued the environmental site assessments referenced in Section 3.7 to permit Buyer and any lender providing project financing to Buyer with respect to, and secured by, the Plant to rely on such reports to the full extent (but no further) that Seller may rely on such reports. (c) Additional Buyer's Due Diligence. During the period from the -------------------------------- date hereof to the Closing Date, Seller shall, subject to the conditions of this paragraph (c), permit the Buyer, if it is required as a condition of its financing commitment, to enter upon any and all of the real property included in the Assets for the purposes of inspecting same, making -41- tests, taking samples and soil borings, and/or conducting groundwater studies and such other investigations as are agreed upon between Buyer and Seller. All such activity and testing shall be at the Buyer's sole cost, and Buyer shall deliver to Seller promptly after it is prepared by or on behalf of Buyer, and in any event promptly upon Buyer's receipt, all drafts of any written report prepared by Buyer or its representatives or consultants regarding such activities and all reports of tests taken. Buyer agrees that such testing shall not under any circumstances delay the Closing. Notwithstanding the foregoing, Buyer's right to conduct such activities shall be subject to the following: (i) Buyer shall retain a reputable environmental consulting firm for the purposes of conducting any such investigation, which firm shall be subject to Seller's prior written approval, which will not be unreasonably withheld or delayed; (ii) The activities of the Buyer and its representatives and consultants under this paragraph (c) shall not interfere with normal operation of the Plant; (iii) Buyer shall give Seller a sufficient opportunity to review the scope of the proposed activities at the Plant prior to the first such entry at the Plant; (iv) Buyer shall notify Seller at least two (2) Business Days prior to each entry of the Plant to conduct such activities at the Plant; (v) All activities undertaken in connection with such investigation shall fully comply with applicable Law, including Laws relating to worker safety and to proper disposal of samples taken and any soil or water generated in the process of taking the samples; (vi) Seller shall be permitted to have one or more of its representatives present during all such investigations, and may take split samples, and copy the results of onsite testing and visual inspections, and shall have complete access to all samples taken, test results, and boring records; (vii) In the event the Transactions are not consummated for any reason, Buyer shall, at its own cost, cause the property to be restored to substantially its condition prior to such investigative activities; (viii) Buyer shall take all actions and implement all protections necessary to ensure that actions taken under this paragraph (c), and equipment, materials and substances generated, used or brought onto the site of a Plant, pose no threat to the safety or health of individuals or the environment and cause no damage to the property of Seller or any other Person; (ix) Buyer shall be responsible for, and shall indemnify Seller against, any property damage or personal injury incurred by Seller or any other Person as a result of Buyer's activities under this paragraph (c); and -42- (x) Any written or recorded materials or information generated as part of or in connection with such activities of Buyer shall be deemed to be confidential information of the Seller for purposes of Section 5.4. ARTICLE 7 ADDITIONAL COVENANTS OF BUYER ----------------------------- 7.1 Waiver of Bulk Sales Law Compliance. Subject to the indemnification ----------------------------------- provisions of Section 12.3(a)(iii) hereof, Buyer hereby waives compliance by Seller with the requirements, if any, of Article 6 of the Uniform Commercial Code as in force in any state in which Assets are located and all other similar laws applicable to bulk sales and transfers. 7.2 Resale Certificate. Buyer agrees, and will cause each Buyer ------------------ Subsidiary, to furnish to Seller any resale certificate or certificates or other similar documents reasonably requested by Seller to comply with pertinent sales and use tax laws. 7.3 Conduct Pending Closing. Prior to consummation of the Transactions ----------------------- contemplated hereby or the termination or expiration of this Agreement pursuant to its terms, unless Seller shall otherwise consent in writing, Buyer shall not take any action which would cause any of Buyer's representations and warranties set forth in Article 4 to be materially false as of the Closing. 7.4 Securities Offerings. Buyer hereby agrees to indemnify and hold -------------------- harmless Seller and each of its Affiliates, in accordance with the provisions of Section 12.4(a)(ii), against any and all Losses, as incurred, arising out of the offer or sale by Buyer or any Buyer Subsidiary of securities, except to the extent that such Loss arises from any untrue statement or alleged untrue statement of a material fact contained in any such securities offering materials or prospectus used by Buyer or any Buyer Subsidiary or its or their representatives, or from the omission or alleged omission therefrom of a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, which untrue or alleged untrue statement or omission or alleged omission is made in reliance upon and in conformity with written information furnished to Buyer by Seller under a cover letter from Seller's counsel stating that such information is expressly for use in such offering materials or prospectus. 7.5 Release. Except for the Excluded Liabilities and to the extent of ------- Seller's obligations hereunder or under any Related Agreement, including without limitation its obligations under Article 12 (including without limitation Seller's obligations under Article 12 as a result of the breach of any provision hereof, including those of Article 3), Buyer on behalf of itself and each Buyer Subsidiary, and each successor or assign thereof, hereby waives its right to recover from Seller or from any Affiliate of Seller or any Person acting on behalf of Seller or any such Affiliate, and forever releases and discharges Seller, and any such Affiliate and any such other Person, from any and all damages, claims, losses, liabilities, penalties, fines, liens, judgments, costs, or expenses whatsoever (including, without limitation, attorneys' fees and costs), whether direct or indirect, known or unknown, foreseen or unforeseen, that may arise on account of or in any way be connected with the ownership, possession, use or operation of the -43- Assets prior to or after the Closing, including, but not limited to, the application of Environmental Law thereto. In this regard, Buyer on behalf of itself and each Buyer Subsidiary, and each successor or assign thereof, expressly waives any and all rights and benefits that it now has, or in the future may have conferred upon it by virtue of any statute or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party's settlement with the obligor. Buyer on behalf of itself and each Buyer Subsidiary, and each successor or assign thereof, hereby further acknowledges that it is aware that factual matters now unknown to it may have given or may hereafter give rise to claims, losses and liabilities that are presently unknown, unanticipated and unsuspected, that the release contained herein has been negotiated and agreed upon in light of such awareness, and that it nevertheless hereby intends to be bound to the release set forth above. 7.6 Additional Covenants of the Buyer. Notwithstanding any other --------------------------------- provision hereof, Buyer covenants and agrees that, after the Closing Date, Buyer will (i) provide written notice to the Seller sixty (60) days in advance of making any modifications to the Assets or taking any action which would result in a loss of the exclusion of interest on the pollution control bonds (including any refunding bonds) issued or to be issued on behalf of Seller in connection with the Plant from gross income for federal income tax purposes under Section 103 of the Code, and (ii) take any actions reasonably requested by Seller for the purpose of maintaining such exclusion (including, without limitation, inserting notification requirements in operating manuals and posting notices within the Plant). Buyer further covenants and agrees that, in the event that Buyer transfers any of the Assets, Buyer shall obtain from its transferee a covenant and agreement that is analogous to Buyer's covenant and agreement pursuant to the immediately preceding sentence, as well as a covenant and agreement that is analogous to that of this sentence. This covenant shall survive Closing and shall continue in effect so long as the pollution control bonds or any refunding bonds remain outstanding. ARTICLE 8 BUYER'S CONDITIONS TO CLOSING ----------------------------- The obligations of Buyer to consummate the Transactions shall be subject to fulfillment at or prior to the Closing of the following conditions, unless Buyer waives in writing such fulfillment: 8.1 Performance of Agreement. Seller shall have performed in all material ------------------------ respects its agreements and obligations contained in this Agreement required to be performed on or prior to the Closing. 8.2 Accuracy of Representations and Warranties. The representations and ------------------------------------------ warranties of Seller set forth in Article 3 of this Agreement shall be true in all material respects as of the date of this Agreement (unless the inaccuracy or inaccuracies which would otherwise result in a failure of this condition have been cured as of the Closing) and as of the Closing (as updated by the revising of Schedules contemplated by Section 6.2) as if made as of such time, provided -------- that -44- any such update shall not have disclosed any material adverse change in the physical condition, ownership, or transferability of the Assets. 8.3 Officers' Certificate. Buyer shall have received from Seller an --------------------- officers' certificate, executed on Seller's behalf by its chief executive officer, president, chief financial officer or treasurer (in his or her capacity as such) dated the Closing Date and stating that the conditions in Sections 8.1 and 8.2 above have been met. 8.4 Approvals. --------- (a) The waiting period under the HSR Act shall have expired or been terminated, and, subject to the provisions of Section 2.8, there shall have been obtained all approvals, consents, authorizations and waivers from Governmental Bodies and all approvals, consents, authorizations and waivers from other third parties, including without limitation the expiration without exercise of any right of first refusal or the waiver by such parties having such right of first refusal and the expiration of any applicable notification period or the waiver by such parties entitled to such notification period, all as set forth in Section 12 of the Co-Tenancy Agreement (the "Mohave Co-Tenancy Agreement Condition") (collectively "Approvals"), required for Buyer to acquire the Undivided Interests and the Assets and for the Plant to be operated thereafter materially in accordance with the manner in which it was operated prior to the Closing. In the event that any such Approval requires any modification to this Agreement or the Transactions, imposes any condition to the effectuation of the Transactions, or places any restrictions upon Buyer's ownership of the Assets, then Buyer shall have approved such modifications, conditions and restrictions to the extent that such modifications, conditions and restrictions, if any, are not contemplated by this Agreement and the Related Agreements and that are not in effect on the date hereof, and would, individually or in the aggregate, result in a Material Adverse Effect upon the Buyer, its ownership of the Assets or the operation of the Plant after the Closing, it being agreed that the Buyer shall be deemed to have approved of any such modifications, conditions or restrictions that are not disapproved by Buyer in a written notice to Seller given no later than five (5) Business Days following either the public announcement of the decision of the Governmental Body involved or Buyer's actual Knowledge (or Seller's notice to Buyer) of any such modification, condition or restriction arising from the Approval of a Person that is not a Governmental Body. (b) The Parties acknowledge that FERC's approval of EWG status for Buyer or any Buyer Subsidiary in respect of the Assets is not a condition to the Closing. Notwithstanding the foregoing and without limiting the provisions of Section 5.1, in the event that (x) the Switchyard Assets have not become Excluded Assets under Section 2.2(b) and (y) FERC has denied or withheld approval of Buyer's (or the Buyer Subsidiary's) application requesting EWG status with respect to all the Assets solely because the Switchyard Assets are to be included in the Assets, then Buyer may, by written notice to Seller given prior to the date on which the Closing would have occurred, delay the Closing for a period of up to ninety (90) days. During this period, Buyer may elect, subject to Seller's approval, such approval not to be unreasonably withheld or delayed, one or more alternate structures that comply with the provisions of the Operating -45- Agreement, the Co-Tenancy Agreement and California Assembly Bill 1890 for the purchase of the Assets and/or modifications to the provisions of this Agreement and the Transactions as will provide the Parties with the economic benefits intended to be realized by each of them under this Agreement, taking into account all costs involved in such modifications, so as to allow Buyer or Buyer Subsidiary to obtain EWG status with respect to all the Assets in order to preserve Buyer's or Buyer Subsidiary's non- electric utility company status under the Public Utility Holding Company Act of 1935 and avoid adversely affecting the qualifying facility status of facilities owned by any of Buyer's affiliates under the Public Utility Regulatory Policies Act of 1978 ("PURPA") as a consequence of the ownership test set forth in 18 C.F.R. (S)292.206(b) (1999) of the regulations implementing PURPA, it being recognized that such non-utility status is important to Buyer. Such alternate structures and/or modifications may include, without limitation, (i) treating the Switchyard Assets as Excluded Assets even if the draft Eldorado Transmission Agreements through the date hereof have not been executed and the transactions contemplated thereby consummated, it being understood that the Buyer and the pertinent Buyer Subsidiary would be required to provide such services to Seller as owner of the Switchyard Assets as are contemplated by such drafts of the Eldorado Transmission Agreements; (ii) Buyer and Seller entering into long-term power purchase arrangements on terms providing Buyer and Seller with the same economic benefits (taking into account all costs involved) as a purchase and sale of the Assets without the Switchyard Assets; (iii) Buyer or Buyer Subsidiary licensing or leasing the Switchyard Assets to Seller for Seller to operate, manage and receive the economic benefits therefrom; (iv) placing ownership of the Assets or the Switchyard Assets in a financial intermediary; and (v) other arrangements. The Parties shall use good faith and Commercially Reasonable Efforts to negotiate all terms of such alternate structure and/or modifications that comply with the provisions of the Operating Agreement, the Co-Tenancy Agreement and California Assembly Bill 1890, and Seller shall not unreasonably withhold or delay agreement to any structure and/or modifications proposed by Buyer or Buyer Subsidiary. If the Parties agree upon such alternate structure and/or modifications, then the Closing shall be delayed further for up to an additional 180 days to the extent necessary to obtain any regulatory approvals needed for such modifications, if any; the Parties agree to cooperate and use Commercially Reasonable Efforts to obtain such approvals, it being understood that Buyer or Buyer Subsidiary shall have control over all filings for such regulatory approvals, other than filings with the PUCN. If no such alternate structure and/or modifications are entered into, or if the required regulatory approvals are not obtained, then thirty (30) days after the failure (A) to agree on an alternate structure and/or modifications or (B) to obtain any required regulatory approval, the Closing shall proceed in accordance with the original terms hereof without modification. 8.5 No Restraint. There shall be no: ------------ (a) Injunction, restraining order or order of any nature issued by any court of competent jurisdiction or Governmental Body of competent jurisdiction over the parties which directs that the Transactions contemplated hereby shall not be consummated as herein provided or compels or would compel Buyer to dispose of or discontinue, or -46- materially restrict the operations of, the Plant or any significant portion of the Assets as a result of the consummation of the Transactions contemplated hereby; (b) Suit, action or other proceeding by any Governmental Body of competent jurisdiction over the parties pending or threatened (pursuant to a written notification), wherein such complainant seeks the restraint or prohibition of the consummation of the Transactions or seeks to compel, or such complainant's actions would compel, Buyer to dispose of or discontinue, or materially restrict the operations of, the Plant or any significant portion of the Assets as a result of the consummation of the Transactions contemplated hereby; or (c) Action taken, or law enacted, promulgated or deemed applicable to the Transactions, by any Governmental Body of competent jurisdiction over the parties which would render the purchase and sale of the Assets illegal or which would threaten the imposition of any penalty or material economic detriment upon Buyer if such purchase and sale were consummated; Provided that the parties will use their reasonable efforts to litigate against, - -------- and to obtain the lifting of, any such injunction, restraining or other order, restraint, prohibition, action, suit, law or penalty. 8.6 Title Insurance. Title to Assets comprised of interests in real --------------- property shall have been evidenced by the willingness of First American Title Insurance Company (or an Affiliate thereof) (the "Title Insurer") to issue at regular rates ALTA owner's, or lessee's, as the case may be, extended coverage policies of title insurance (1990 Form B) (the "Title Policies"), with the general survey and creditors' rights exceptions removed, in amounts equal to the respective portions of the Purchase Price allocated to such interests, showing title to such interests in such real property vested in Buyer or the pertinent Buyer Subsidiary subject to transfer of such interest to Buyer or the pertinent Buyer Subsidiary. Such Title Policies shall show title vested in Buyer or the pertinent Buyer Subsidiary subject to: (a) A lien or liens to secure payment of real estate taxes not delinquent; (b) Exceptions, other than those listed on Schedule 8.6(b), disclosed --------------- by the current standard ALTA Preliminary Title Reports, delivered to and approved (except as shown on Schedule 8.6(b)) by Buyer prior to the date --------------- hereof (as indicated by Buyer's signature of approval appended thereto); (c) Matters created by, or with the consent of, Buyer; and (d) Other possible minor matters that in the aggregate are not substantial in amount and do not materially detract from or interfere with the present or intended use of such real property, including such minor matters as may be disclosed by surveys taken after the date hereof. The willingness of the Title Insurer to issue the Title Policies shall be evidenced either by the issuance thereof at the Closing or by the Title Insurer's delivery at the Closing of written -47- commitments or binders, dated as of the Closing (but insuring title as of the date title conveyance documents are recorded), to issue such Title Policies within a reasonable time after the Closing Date, subject to actual transfer of the real property in question. If the Title Insurer is unwilling to issue any such Title Policy, it shall be required to provide Buyer and Seller, in writing, notice setting forth the reason(s) for such unwillingness as soon as practicable. Seller shall have the right to seek to cure any defect which is the reason for such unwillingness, and to extend the Closing and the Termination Date, if necessary, for a period of up to ten (10) Business Days to provide to Seller the opportunity to cure. In the event that, despite Seller's efforts to cure, the Title Insurer remains unwilling to issue any such Title Policy on the Closing Date (as may be extended as provided herein), then, at the election of Buyer, and without affecting the other conditions of the parties to consummation of the Transactions, such real property interests not covered by such a Title Policy shall not be included in the Assets and shall be deemed to be Excluded Assets, and liabilities associated therewith that would otherwise be Assumed Liabilities shall be deemed to be Excluded Liabilities; and Buyer and Seller shall negotiate in good faith prior to the Closing Date an adjustment in the Purchase Price based on the Allocation Schedule. If the parties cannot agree upon such adjustment, then the disagreement shall be resolved in accordance with Section 2.9. Notwithstanding the foregoing, Buyer or the pertinent Buyer Subsidiary may accept such title to any such property interests as the Seller may be able to convey, and such title insurance with respect to the same as the Title Insurer is willing to issue, in which case such interests shall be conveyed as part of the Assets without reduction of the Purchase Price or any credit or allowance against the same and without any other liability on the part of Seller. 8.7 Related Agreements. Seller shall have executed and delivered, as of ------------------ the Closing, the PPC and each of the other Related Agreements, if any, to be executed by Seller, and all required approvals and conditions relating to the PPC shall have been obtained or satisfied. 8.8 Casualty; Condemnation. ---------------------- (a) Casualty. If any part of the Assets is damaged or destroyed -------- (whether by fire, theft, vandalism or other casualty) in whole or in part prior to the Closing, and the fair market value of such damage or destruction or the cost of repair of the Assets that were damaged, lost or destroyed is less than ten percent (10%) of the aggregate Purchase Price, Seller shall, at its option, either (i) reduce the Purchase Price by the lesser of the fair market value of the Assets damaged or destroyed (such value to be determined as of the date immediately prior to such damage or destruction), or the estimated cost to repair or restore the same (any disagreement with respect thereto being resolved in accordance with Section 2.9), (ii) upon the Closing, transfer the proceeds or the rights to the proceeds of applicable insurance to Buyer, provided that the proceeds are -------- obtainable without delay and are sufficient to fully restore the damaged Assets, or (iii) bear the costs of repairing or restoring such damaged or destroyed Assets to substantially the same condition such assets were in before the casualty and, at Seller's election, delay the Closing and the Termination Date for a reasonable time necessary to accomplish the same. If any part of the Assets is damaged or destroyed (whether by fire, theft, vandalism or other cause or casualty) in whole or in part prior to the Closing and the lesser of the fair market value of such Assets or the cost of repair is equal to or greater than ten percent (10%) of the aggregate Purchase Price, then Buyer may elect to: (x) require Seller upon the Closing to -48- transfer the proceeds (or the right to the proceeds) of applicable insurance to Buyer, (y) terminate this Agreement with respect to the damaged or destroyed Assets only, with a reduction in the Purchase Price determined in accordance with Section 2.9, or (z) if the damage or destruction would practically preclude or materially increase the cost of the operation of the balance of the Plant following the Closing, terminate this Agreement. (b) Condemnation. From the date hereof until the Closing, in the ------------ event that any material portion of the Plant becomes subject to or is threatened with any condemnation or eminent domain proceedings, then Buyer, at its option, may, (i) elect to proceed with the Closing as to all the Assets and receive, either from Seller, if it has already received from the condemnor, or the condemnor, the just compensation awarded for the condemnation, (ii) if such condemnation, if successful, would not practically preclude or materially increase the cost of the operation of the balance of the Plant for the purposes and to the extent for which the Plant as a whole was intended, elect to terminate this Agreement with respect only to that part which is condemned or threatened to be condemned with a reduction in the Purchase Price determined as provided in Section 8.8(a) above, or (iii) if such condemnation, if successful, would practically preclude or materially increase the cost of the operation of the balance of the Plant for the purposes for which it is intended, elect to terminate this Agreement. 8.9 Opinion of Counsel. Buyer shall have received, on and as of the ------------------ Closing Date, the opinion of either inside or outside counsel to Seller substantially as to the matters contained in Schedule 8.9, subject to the ------------ conditions and limitations therein and to other customary conditions and limitations. 8.10 Receipt of Other Documents. Buyer shall have received the following: -------------------------- (a) Certified copies of the resolutions of Seller's board of directors respecting this Agreement, the Related Agreements and the Transactions; (b) Certified copies of Seller's Charter Documents, together with a certificate of the corporate secretary of Seller that none of such documents have been amended; (c) One or more certificates as to the incumbency of each officer of Seller who has signed the Agreement, any Related Agreement or any certificate, document or instrument delivered pursuant to the Agreement or any Related Agreement; (d) A good standing certificate for Seller from the Secretary of State of the state of its incorporation, dated as of a date not earlier than fifteen (15) Business Days prior to the Closing Date; (e) Copies of all current Licenses relevant to operation of the Plant and all third party and governmental consents, permits and authorizations that Seller has received in connection with the Agreement, the Related Agreements and the Transactions to occur at the Closing; and -49- (f) Certificates of non-foreign status in the form required by Section 1445 of the Internal Revenue Code duly executed by Seller. 8.11 Limitation on Adjustments. There shall not have been adjustments to ------------------------- the Purchase Price arising under the Adjustment Sections (except for adjustments under Section 2.6(c) or adjustments under Section 2.9 related to adjustments required by such Section) exceeding in the aggregate thirty percent (30%) of the aggregate Purchase Price. 8.12 Independent Engineer's Letter. Buyer shall have received from an ----------------------------- independent engineering firm a letter dated as of the Closing Date, in the form attached hereto as Schedule 8.12, certifying certain matters related to the SCE ------------- Technical Assessment of the Mohave Plant dated October 26, 1999. 8.13 SCE Closing. Buyer and SCE shall have consummated the transactions ----------- contemplated in the Asset Sale Agreement by and between Buyer and SCE dated May 10, 2000. ARTICLE 9 SELLER'S CONDITIONS TO CLOSING ------------------------------ The obligations of Seller to consummate the Transactions shall be subject to the fulfillment at or prior to the Closing of the following conditions, unless Seller waives in writing such fulfillment: 9.1 Performance of Agreement. Buyer shall have performed in all material ------------------------ respects its agreements and obligations contained in this Agreement required to be performed on or prior to the Closing. 9.2 Accuracy of Representations and Warranties. The representations and ------------------------------------------ warranties of Buyer set forth in Article 4 of this Agreement shall be true in all material respects as of the date of this Agreement (unless the inaccuracy or inaccuracies which would otherwise result in a failure of this condition have been cured by the Closing) and as of the Closing as if made as of such time. 9.3 Officers' Certificate. Seller shall have received from Buyer an --------------------- officers' certificate, executed on Buyer's behalf by its chief executive officer, president, chief financial officer or treasurer (in his or her capacity as such) dated the Closing Date and stating that the conditions in Sections 9.1 and 9.2 above have been met. 9.4 Approvals. The waiting period under the HSR Act shall have expired or --------- been terminated, and, subject to the provisions of Section 2.8, all Approvals required for Seller to consummate the Transactions shall have been obtained. Without limiting the generality of the foregoing, the Seller shall have approved the ratemaking treatment of the Transactions and the effects of the Transactions ordered by the PUCN as well as the calculation and recovery of transition costs arising therefrom and related thereto. There shall additionally have been no material change in the regulations, policies, principles or terms of the restructuring of the -50- California electrical utilities industry set forth in Nevada Senate Bill 438 and Nevada Assembly Bill 366. The Seller shall have additionally approved any material modifications to this Agreement and to the Transactions made or ordered by any Governmental Body, if any, including the PUCN, any material conditions to the effectuation of the Transactions required by any Governmental Body, if any, including the PUCN, and material restrictions, if any, upon Seller and its operations after the Closing required by any Governmental Body, if any, including the PUCN, it being agreed that the Seller shall be deemed to have approved of any such modifications, conditions or restrictions, whether required by any Governmental Body or any other Person as a condition of its Approval, that are not disapproved by Seller in a written notice to Buyer given no later than five (5) Business Days following the earlier of either the public announcement of the decision of the Governmental Body involved or Seller's actual Knowledge (or Buyer's notice to Seller) of any such modification, condition or restriction arising from the Approval of a Person that is not a Governmental Body. 9.5 No Restraint. There shall be no: ------------ (a) Injunction, restraining order or order of any nature issued by any court of competent jurisdiction or Governmental Body of competent jurisdiction over the parties which directs that the Transactions contemplated hereby shall not be consummated as herein provided; (b) Suit, action or other proceeding by any Governmental Body of competent jurisdiction over the parties pending or threatened (pursuant to a written notification), wherein such complainant seeks the restraint or prohibition of the consummation of the Transactions or otherwise constrains consummation of the Transactions on the terms contemplated herein; or (c) Action taken, or law enacted, promulgated or deemed applicable to the Transactions, by any Governmental Body of competent jurisdiction over the parties which would render the purchase and sale of the Assets illegal or which would threaten the imposition of any penalty or material economic detriment upon Seller if such Transactions were consummated; Provided that the parties will use their reasonable efforts to litigate against, - -------- and to obtain the lifting of, any such injunction, restraining or other order, restraint, prohibition, action, suit, law or penalty. 9.6 Related Agreements. Buyer and each pertinent Buyer Subsidiary shall ------------------ have executed and delivered, as of the Closing, each of the Related Agreements, if any, to be executed by Buyer or a Buyer Subsidiary. 9.7 Opinion of Counsel. Seller shall have received, on and as of the ------------------ Closing Date, the opinion of either inside or outside counsel to Buyer substantially as to the matters contained in Schedule 9.7, subject to the ------------ conditions and limitations therein and to other customary conditions and limitations. 9.8 Receipt of Other Documents. Seller shall have received the following: -------------------------- -51- (a) Certified copies of the resolutions of Buyer's and each pertinent Buyer Subsidiary's board of directors respecting this Agreement, the Related Agreements and the Transactions, together with certified copies of any shareholder resolutions which are necessary to approve the execution and delivery of this Agreement and the Related Agreements and/or the performance of the obligations of Buyer and each pertinent Buyer Subsidiary hereunder and thereunder; (b) Certified copies of Buyer's and each pertinent Buyer Subsidiary's Charter Documents, together with a certificate of the corporate secretary of Buyer and each pertinent Buyer Subsidiary that none of such documents have been amended; (c) One or more certificates as to the incumbency of each officer of Buyer and each pertinent Buyer Subsidiary who has signed the Agreement, any Related Agreement or any certificate, document or instrument delivered pursuant to the Agreement or any Related Agreement; (d) A good standing certificate for Buyer and each pertinent Buyer Subsidiary from the Secretary of State of their respective states of incorporation, dated as of a date not earlier than fifteen (15) Business Days prior to the Closing Date; and (e) Copies of all current Licenses of Buyer and each pertinent Buyer Subsidiary relevant to operation of the Plant and all third party and governmental consents, permits and authorizations that Buyer and each pertinent Buyer Subsidiary has received in connection with the Agreement, the Related Agreements and the Transactions to occur at the Closing. 9.9 Limitation on Adjustments. There shall not have been adjustments to ------------------------- the Purchase Price arising under the Adjustment Sections (except for adjustments under Section 2.6(c) or adjustments under Section 2.9 related to adjustments required by such Section) exceeding in the aggregate thirty percent (30%) of the aggregate Purchase Price. ARTICLE 10 CLOSING ------- 10.1 Closing. Subject to the terms and conditions hereof, proceedings for ------- the consummation of the Transactions (the "Closing") shall occur at the offices of the Seller or a mutually agreeable place or places within five (5) Business Days after all of the conditions set forth in Article 8 and Article 9 hereof have been satisfied or waived or at such other time as the parties may agree, but in no event earlier than November 1, 2000, unless agreed to by Seller or later than the Termination Date set forth in Section 11.1(e). The date on which such proceedings actually occur is referred to herein as the "Closing Date." The Closing shall be effective for all purposes immediately after 12 O'Clock Midnight, Pacific time, on the day following the Closing Date. At the Closing and subject to the terms and conditions hereof, the following will occur: (a) Deliveries by Seller. Seller shall deliver to Buyer such -------------------- instruments of transfer and conveyance properly executed and acknowledged by Seller in customary -52- form mutually agreed to by the Seller and Buyer necessary to transfer to and vest in Buyer and/or the pertinent Buyer Subsidiaries all of Seller's right, title and interest in and to the Assets or which may be required by the Title Insurer, including, without limitation: (i) Bills of sale and assignment in respect of the Assets; (ii) Grant deeds properly executed and acknowledged by Seller with respect to each of the Owned Real Properties included in the Assets (subject to easements or interests reserved in accordance with the terms hereof); (iii) Assignment and assumption agreements properly executed and acknowledged by Seller with respect to each Real Property Lease included in the Assets; (iv) Instruments of transfer, sufficient to transfer personal property interests that are included in the Assets but not otherwise transferred by the bills of sale and assignment referred to in clause (i) above, properly executed and acknowledged in the form customarily used in commercial transactions in Nevada; and (v) Possession of the Assets. (b) Deliveries by Buyer. Buyer shall, or shall cause the Buyer ------------------- Subsidiaries to, deliver to Seller immediately available funds, by way of wire transfer to an account or accounts designated by Seller, in an amount equal to the Purchase Price less the PPC Amount and such instruments of assumption properly executed and acknowledged by Buyer and the pertinent Buyer Subsidiaries in customary form mutually agreed to by the Buyer and Seller necessary for Buyer to assume the Assumed Liabilities, including, without limitation: (i) Assignment and assumption agreements properly executed and acknowledged by Buyer and the pertinent Buyer Subsidiaries with respect to each Real Property Lease included in the Assets; and (ii) An assumption agreement or assumption agreements in favor of Seller. 10.2 Escrow. If either of the parties desires to consummate the Closing ------ through an escrow, an escrow shall be opened with, and the escrow agent shall be, Chase Manhattan Bank and Trust Company, National Association or an Affiliate thereof (the "Escrow Agent"), by depositing a fully executed copy of this Agreement with the Escrow Agent to serve as escrow instructions. This Agreement shall be considered the primary escrow instructions between the parties, but the parties shall execute such additional standard escrow instructions as Escrow Agent shall require in order to clarify the duties and responsibilities of Escrow Agent. In the event of any conflict between this Agreement and such additional standard escrow instructions, this Agreement shall prevail. If the Closing is to be consummated through the Escrow Agent, the -53- parties shall deliver the funds, instruments of sale, assignment, conveyance and assumption called for by Section 10.1 to the Escrow Agent, and on the Closing Date, the Escrow Agent shall close the escrow by: (a) Causing the deeds for the Owned Real Properties, the assignments of the Real Property Leases, and any other documents which the parties may mutually designate to be recorded in the official records of the appropriate counties in which the pertinent Assets are located; (b) Delivering to Seller by wire transfer of immediately available funds, to an account or accounts designated by Seller, the amounts called for by Section 10.1; and (c) Delivering to Buyer or Seller, as the case may be, the other instruments referred to in Section 10.1. 10.3 Power Purchase Agreement and Escrow Arrangements. ------------------------------------------------ (a) Creation of Escrow. Upon (i) the satisfaction or waiver of each ------------------ of the conditions set forth in Article 8 and Article 9 hereof, other than the Mohave Co-Tenancy Agreement Condition, and (ii) the later of FERC's acceptance of filing of the Power Purchase Agreement attached as Exhibit A --------- hereto (the "Power Purchase Agreement") and the date when an order no longer subject to judicial review has been issued by FERC determining this Agreement to be just and reasonable without changes or new conditions that are unacceptable to either Party, Buyer may, if such Mohave Co-Tenancy Condition is not satisfied prior to the first anniversary of the signing of this Agreement, upon no less than five (5) business days' notice, cause an escrow to be opened with the Escrow Agent by depositing a fully executed copy of this Agreement with the Escrow Agent to serve as escrow instructions. The date of the opening of such escrow shall be the "Escrow Date". The parties hereto agree to proceed as follows: (i) Within five (5) business days after the Escrow Date (the "Effective Date"), each of the parties will deliver the funds, and instruments of sale, assignment, conveyance and assumption called for by Section 10.1 of this Agreement to the Escrow Agent. The delivery of the documents required under Sections 8.3, 8.9, 8.12, 9.3, and 9.7, dated as of the Effective Date, shall be deemed to satisfy the condition contained in such sections as to the delivery of such documents as of the Closing Date. (ii) On or before the Effective Date, each of the parties will execute the Power Purchase Agreement and the PPC attached to Schedule -------- 2.5 hereto. The Power Purchase Agreement and the PPC attached to --- Schedule 2.5 hereto will each become effective on the Effective Date. ------------ (iii) The funds deposited in escrow by Buyer on the Effective Date and on any date thereafter (collectively, the "Deposited Funds"), together with any and all income thereon and proceeds therefrom ("Additional Funds"), from time to time held by the Escrow Agent pursuant to the terms hereof, are referred to herein -54- as the "Escrow Funds." The Escrow Agent shall invest, reinvest and/or deposit all Escrow Funds in investments as set forth on Schedule -------- 10.3(a)(iii) or as contained in a joint direction of the parties ------------ hereto. (b) The Escrow Period. From the Effective Date until the Closing or ----------------- the termination of this Agreement (the "Escrow Period"), the parties hereto hereby agree as follows: (i) The Post-Closing Adjustments described in Section 2.6(c) hereof shall be made as if the Effective Date were the Closing Date for purposes of Section 2.6(c) hereof. The amount to be paid pursuant to Section 2.6(c)(iv) hereof shall be paid to the Escrow Agent and deemed as part of the Deposited Funds. (ii) Seller's Undivided Interest shall be held by Seller in accordance with the terms and provisions of the Co-Tenancy Agreement and the Project Agreements referred to therein, and any and all voting rights that Seller exercises under the auspices of the Co-Tenancy Agreement shall be exercised by Seller after consultation with Buyer. (c) Closing Out of Escrow. Within five days of the satisfaction of --------------------- the Mohave Co-Tenancy Agreement Condition, the parties shall deliver a joint instruction to the Escrow Agent that the condition has been satisfied or waived. As part of such instruction, Seller and Buyer shall provide to the Escrow Agent an accounting of depreciation expense paid by Buyer to Seller with respect to capital expenditures made pursuant to the terms of Section 7 of the Power Purchase Agreement and an amount equal to a rate of return on such depreciation expense calculated from the date of the payments of such depreciation expense at the average rate of return received on the Deposited Funds from the Effective Date to the termination of Escrow (together, the "Depreciation Amount"). All conditions set forth in Article 8 and Article 9, other than the conditions set forth in Section 8.5, Section 8.6, Section 8.8(b) and Section 9.5, hereof shall be deemed satisfied or waived, provided, that the conditions set forth in Sections -------- 8.5, 8.6, 8.8(b) and 9.5 shall be subject to fulfillment at or prior to the Closing, unless waived in writing, and the Closing shall proceed upon such satisfaction or waiver, unless the Agreement is terminated, pursuant to its terms, prior to the date of such satisfaction or waiver. The following instruments, documents and funds will be delivered out of the escrow created hereby to the persons and entities indicated: (i) To Buyer, the instruments and documents referred to in Section 10.1(a). (ii) To Seller, the instruments and documents referred to in Section 10.2 (b). (iii) To Buyer by wire transfer of immediately available funds, to an account or accounts designated by Buyer, the Depreciation Amount. -55- (iv) To Seller by wire transfer of immediately available funds, to an account or accounts designated by Seller, the balance of the Escrow Funds after payment of the Depreciation Amount. (v) To Buyer or Seller, as the case may be, the other instruments referred to in Section 10.1. (d) If the Agreement is terminated prior to the distribution of the funds and instruments out of the escrow, then the parties shall deliver a joint instruction to the Escrow Agent that the Agreement has been terminated. As part of such instruction, Seller and Buyer shall provide to the Escrow Agent an accounting of the amounts paid by Buyer for capital expenditures pursuant to Section 7 of the Power Purchase Agreement (the "Escrow Capital Amount"). Upon delivery of such instructions and the deposit by Seller of the Escrow Capital Amount into the escrow, the escrow shall terminate and the following instruments, documents and funds will be delivered out of the escrow to the persons and entities indicated: (i) To Buyer, the instruments and documents deposited into the Escrow by Buyer. (ii) To Seller, the instruments and documents deposited into the Escrow by Seller. (iii) To Buyer, by wire transfer of immediately available funds, to an account or accounts designated by Buyer, the Deposited Funds and the Escrow Capital Amount. (iv) To Seller, by wire transfer of immediately available funds, to an account or accounts designated by Seller, the Additional Funds. 10.4 Prorations. Items of expense and income (if any) affecting the Assets ---------- and the Assumed Liabilities that are customarily pro-rated, including, without limitation, real and personal property taxes, utility charges, charges arising under leases, insurance premiums, and the like, shall be pro-rated between Seller and Buyer and the pertinent Buyer Subsidiaries as of the Closing Date or the Escrow Date, as the case may be. Proration of property taxes shall be in accordance with Schedule 10.4. ------------- ARTICLE 11 TERMINATION ----------- 11.1 Termination. Any Transactions contemplated hereby that have not been ----------- consummated may be terminated: (a) At any time, by mutual written consent of Seller and Buyer; or -56- (b) By either Buyer or Seller, as the case may be, upon thirty (30) days' written notice given any time after, if (i) consummation of the Transactions requires the Approval of a Governmental Body that has general regulatory jurisdiction over Buyer or Seller (including FERC), the issuance of an order by such Governmental Body disapproving this Agreement and the consummation of the Transactions or otherwise approving of this Agreement or the Transactions in a manner that fails to meet the conditions of the terminating party set forth in Sections 8.4 or 9.4, as the case may be, and (ii) two hundred ten (210) days have elapsed from the filing, if any, after the date hereof of the application for such Governmental Body's approval of this Agreement and the Transactions contemplated hereby if, prior to the date such notice is given, such Governmental Body (not including FERC) has not issued an order approving this Agreement and the Transactions on terms that meet the conditions of the terminating party set forth in Sections 8.4 or 9.4, as the case may be, it being understood that such two hundred ten (210) day period shall not include any period after such order during which applications for rehearing or modification or judicial appeals or remedies are pending; or (c) By one party upon written notice to the other if there has been a material default or breach under this Agreement by the other party which is not cured by the earlier of the Closing Date or the date thirty (30) days after receipt by the other party of written notice from the terminating party specifying with particularity such breach or default; or (d) By Buyer upon written notice to Seller, if Buyer elects to terminate this Agreement pursuant to Section 6.3(b), Section 8.8(a)(z) or Section 8.8(b)(iii); or (e) By either Buyer or Seller upon written notice to the other party, if (i) the Closing shall not have occurred by the Termination Date; (ii) one or more of the other Owners have properly exercised their right of first refusal as to all of the Assets and confirmed its or their commitment to purchase all of the Assets in accordance with Section 12 of the Co- Tenancy Agreement; or (iii) (A) in the case of termination by Seller, the conditions set forth in Article 9 for the Closing cannot reasonably be met by the Termination Date and (B) in the case of termination by Buyer, the conditions set forth in Article 8 for the Closing cannot reasonably be met by the Termination Date, unless in either of the cases described in clauses (A) or (B), the failure of the condition is the result of the material breach of this Agreement by the party seeking to terminate. The Termination Date for the Closing shall be the earlier of (x) the last Business Day of the month which is thirty-seven months after the month in which Seller provides the other Owners with the notice required by Section 12.3 of the Co-Tenancy Agreement or (y) if all Owners waive in writing the further running or application of, or confirm in writing the satisfaction or inapplicability of, the notice period set forth therein, then ninety (90) days following the effective date of the last such written waiver or confirmation of the Owners, but not earlier than 11:59 P.M., Pacific Time, November 1, 2000. Such date, or such later date as may be specifically provided for in this Agreement (including any date arising under the operation of Sections 2.9, 8.6, and 8.8(a) hereof) or agreed upon by the parties, is herein referred to as the "Termination Date." Except as set forth in Section -57- 11.2, each party's right of termination hereunder is in addition to any other rights it may have hereunder or otherwise. 11.2 Effect of Termination. If there has been a termination pursuant to --------------------- Section 11.1, then this Agreement shall be deemed terminated, and all further obligations of the parties hereunder shall terminate, except that the obligations set forth in Sections 5.3, 5.4 and 7.4 and Article 12 and Article 13 shall survive; provided that in the event that Seller pays to Buyer the breakup -------- fee provided for in Section 11.4, Article 12 shall only survive with respect to breaches of Sections 5.3, 5.4 and 7.4 and any and all Third-Party Claims. In the event of such termination of this Agreement, there shall be no liability for damages on the part of a party to another under and by reason of this Agreement or the transactions contemplated hereby except as set forth in Article 12 and except for intentionally fraudulent acts by a party, the remedies for which shall not be limited by the provisions of this Agreement. The foregoing provisions shall not, however, limit or restrict the availability of specific performance or other injunctive or equitable relief to the extent that specific performance or such other relief would otherwise be available to a party hereunder. 11.3 Modification of Terms. Subject to Section 11.1(e), in the event a --------------------- Governmental Body referred to in Section 11.1(b)(i) having general regulatory jurisdiction over Seller entertains, as an alternative to approval of this Agreement and the Transactions with the Buyer contemplated hereby, any proposal of one or more third parties to acquire the Assets from the Seller on terms and conditions that include a higher purchase price than the Purchase Price set forth herein, and such terms and conditions are acceptable to Seller, then and in that event, subject to such restrictions and requirements as such Governmental Body may impose upon Seller, the Seller shall exercise its best efforts to afford to the Buyer the right to enter into appropriate amendments and modifications of this Agreement to match such proposed alternative terms and conditions. Such right shall be exercisable by Buyer within three (3) Business Days after its receipt of written notice from the Seller that, in the Seller's good faith belief, the proposal of such third party or parties makes it unlikely that such Governmental Body will approve this Agreement and the Transactions contemplated hereby in a timely fashion and that the alternative terms and conditions are acceptable to Seller. 11.4 Breakup Fee. In the event the Transactions are terminated by either ----------- Buyer or Seller in accordance with the provisions of Section 11.1(e)(ii) as a result of the proper exercise of the rights of first refusal as to all of the Assets and the confirmation by one or more of the other Owners of its or their commitment to purchase all of the Assets in accordance with Section 12 of the Co-Tenancy Agreement, or by Buyer in accordance with the provisions of Section 6.3(b), then within thirty (30) days following such termination, Seller shall pay to Buyer a cash amount equal to two (2) percent of the Purchase Price. Upon Seller's payment to Buyer, this Agreement shall be terminated in accordance with Section 11.2. -58- ARTICLE 12 SURVIVAL AND REMEDIES; INDEMNIFICATION -------------------------------------- 12.1 Survival. Except as may be otherwise expressly set forth in this -------- Agreement, the representations, warranties, covenants and agreements of Buyer and Seller set forth in this Agreement, or in any writing required to be delivered in connection with this Agreement, shall survive the Closing Date. 12.2 Exclusive Remedy. Absent intentional fraud or unless otherwise ---------------- specifically provided herein, the sole exclusive remedy for damages of a party hereto for any breach of the representations, warranties, covenants and agreements of the other party contained in this Agreement shall be the remedies contained in this Article 12. 12.3 Indemnity by Seller. ------------------- (a) Seller shall indemnify Buyer, each Buyer Subsidiary and their respective Affiliates and hold them harmless from and against any and all claims, demands, suits, loss, liability, damage and expense, including reasonable attorneys' fees and costs of investigation, litigation, settlement and judgment, as well as the Indemnitee's obligations to itself indemnify its directors, officers, attorneys, employees, subcontractors, agents and assigns (collectively "Losses"), which they may sustain or suffer or to which they may become subject as a result of: (i) The inaccuracy of any representation or the breach of any warranty made by Seller in this Agreement; (ii) The nonperformance or breach of any covenant or agreement made or undertaken by Seller in this Agreement; and (iii) If the Closing occurs, the failure of Seller to pay, discharge or perform as and when due, any of the Excluded Liabilities and the failure of Seller to comply with any Bulk Sales Laws referred to in Section 7.1. (b) The indemnification obligations of Seller provided above shall, in addition to the qualifications and conditions set forth in Sections 12.5 and 12.6, be subject to the following qualifications: (i) With respect to claims of indemnity for breaches of representations and warranties under clause (a)(i) above: (A) Written notice to Seller of such claim specifying the basis thereof must be made, or an action at law or in equity with respect to such claim must be served, before the expiration of twelve (12) months after the earlier to occur of the Closing Date or the date on which this Agreement is terminated, as the case may be, except that such time limitation shall not -59- apply to breaches of the warranties contained in Sections 3.1, 3.2, 3.3 and 3.4; (B) If the Closing occurs, Buyer, the Buyer Subsidiaries and their respective Affiliates shall be entitled only to recover the amount by which the aggregate Losses sustained or suffered by them as a result of circumstances described in such clause (a)(i) exceed one percent (1%) of the Purchase Price (the "Deductible Amount"), provided, however, that individual claims of Fifteen -------- Thousand Dollars ($15,000) or less shall not be aggregated for purposes of calculating either the Deductible Amount or the excess of Losses over the Deductible Amount; and (C) If the Closing occurs, in no event shall Seller be liable to Buyer, the Buyer Subsidiaries and their respective Affiliates under clause (a)(i) for Losses in the nature of consequential damages, punitive damages, lost profits, damage to reputation or the like, but such damages shall be limited to out- of-pocket Losses and diminution in value, and to an aggregate limit of one hundred percent (100%) of the Purchase Price. (ii) If the Closing occurs, Buyer, the Buyer Subsidiaries and their respective Affiliates shall not be entitled to indemnity under clauses (a)(ii)-(iii) above except for out-of-pocket Losses actually suffered or sustained by them, and such indemnity shall not include Losses in the nature of consequential damages, punitive damages, lost profits, diminution in value, damage to reputation or the like; except that the provisions of this clause (b)(ii) shall not apply to a breach of Section 5.4. 12.4 Indemnity by Buyer. ------------------ (a) Buyer shall indemnify Seller and its Affiliates and hold them harmless from and against any and all Losses which they may sustain or suffer or to which they may become subject as a result of: (i) The inaccuracy of any representation or the breach of any warranty made by Buyer in this Agreement; (ii) The nonperformance or breach of any covenant or agreement made or undertaken by Buyer in this Agreement; (iii) If the Closing occurs, the failure of Buyer to pay, discharge or perform as and when due, any of the Assumed Liabilities; and (iv) If the Closing occurs, the ongoing operations of Buyer, the Buyer Subsidiaries and the Assets after the Closing Date, including, without limitation, the continuation or performance by the Owners (including the Buyer and Buyer Subsidiaries, if any) after the Closing Date of any agreement or practice of the Owners existing as of or prior to the Closing Date. -60- (b) The indemnification obligations of Buyer provided above shall, in addition to the qualifications and conditions set forth in Sections 12.5 and 12.6, be subject to the following qualifications: (i) Seller and its Affiliates shall not be entitled to indemnity for breaches of representations and warranties under clause (a)(i) unless written notice to Buyer of such claim specifying the basis thereof is made, or an action at law or in equity with respect to such claim is served, before the expiration of twelve (12) months after the earlier to occur of the Closing Date or the date on which this Agreement is terminated, as the case may be, except that such time limitation shall not apply to breaches of the representations and warranties contained in Sections 4.1, 4.2, 4.3, 4.4, and 4.11; (ii) If the Closing occurs, Seller and its Affiliates shall be entitled only to recover the amount by which the aggregate Losses sustained as a result of circumstances described in clause (a)(i) above exceed the Deductible Amount, provided, however, that individual -------- claims of Fifteen Thousand Dollars ($15,000) or less shall not be aggregated for purposes of calculating either the Deductible Amount of the excess of Losses over the Deductible Amounts; and (iii) If the Closing occurs, Seller and its Affiliates shall not be entitled to indemnity under clauses (a)(ii)-(iii) above except for out-of-pocket Losses actually suffered or sustained by them and such indemnity shall not include Losses in the nature of consequential damages, punitive damages, lost profits, diminution in value, damage to reputation or the like, except that the provisions of this clause (b)(ii) shall not apply to a breach of Section 5.4. 12.5 Further Qualifications Respecting Indemnification. The right of a ------------------------------------------------- party (an "Indemnitee") to indemnity hereunder shall be subject to the following additional qualifications: (a) The Indemnitee shall promptly upon its discovery of facts or circumstances giving rise to a claim for indemnification, including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial, governmental or otherwise, by any third party (such third party actions being collectively referred to herein as "Third Party Claims"), give notice thereof to the indemnifying party (the "Indemnitor"), such notice in any event to be given within sixty (60) days from the date the Indemnitee obtains actual knowledge of the basis or alleged basis for the right of indemnity or such shorter period as may be necessary to avoid material prejudice to the Indemnitor; and (b) In computing Losses, such amounts shall be computed net of any related recoveries to which the Indemnitee is entitled under insurance policies, or other related payments received or receivable from third parties, and net of any tax benefits actually received by the Indemnitee or for which it is eligible, taking into account the income tax treatment of the receipt of indemnification. -61- (c) The Indemnitee shall use Commercially Reasonable Efforts to mitigate all Losses for which indemnification may be available hereunder, including availing itself of any defenses, limitations, rights of contribution, claims against third Persons and other rights at law or equity. The Indemnitee's Commercially Reasonable Efforts shall include the reasonable expenditure of money to mitigate or otherwise reduce or eliminate any loss or expenses for which indemnification would otherwise be due, such expenditures being included in indemnified Losses hereunder. 12.6 Procedures Respecting Third Party Claims. In providing notice to the ---------------------------------------- Indemnitor of any Third Party Claim (the "Claim Notice"), the Indemnitee shall provide the Indemnitor with a copy of such Third Party Claim or other documents received and shall otherwise make available to the Indemnitor all relevant information material to the defense of such claim and within the Indemnitee's possession. Subject to the rights of other Owners under the Co-Tenancy Agreement, of the Operating Agent under the Operating Agreement, and of third parties under any Assumed Contract, as among the parties hereto the Indemnitor shall have the right, by notice given to the Indemnitee within fifteen (15) days after the date of the Claim Notice, to assume and control the defense of the Third Party Claim that is the subject of such Claim Notice, including the employment of counsel selected by the Indemnitor after consultation with the Indemnitee, and the Indemnitor shall pay all expenses of, and the Indemnitee shall cooperate fully with the Indemnitor in connection with, the conduct of such defense. The Indemnitee shall have the right to employ separate counsel in any such proceeding and to participate in (but not control) the defense of such Third Party Claim, but the fees and expenses of such counsel shall be borne by the Indemnitee unless the Indemnitor shall agree otherwise; provided, however, -------- if the named parties to any such proceeding (including any impleaded parties) include both the Indemnitee and the Indemnitor, the Indemnitor requires that the same counsel represent both the Indemnitee and the Indemnitor, and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them, then the Indemnitee shall have the right to retain its own counsel at the cost and expense of the Indemnitor. If the Indemnitor shall have failed to assume the defense of any Third Party Claim in accordance with the provisions of this Section, then, as among the parties hereto, the Indemnitee shall have the absolute right to control the defense of such Third Party Claim, and, if and when it is finally determined that the Indemnitee is entitled to indemnification from the Indemnitor hereunder, the fees and expenses of Indemnitee's counsel shall be borne by the Indemnitor, provided that the Indemnitor shall be entitled, at its -------- expense, to participate in (but not control) such defense. The Indemnitor shall have the right to settle or compromise any such Third Party Claim for which it is providing indemnity so long as such settlement does not impose any obligations on the Indemnitee (except with respect to providing releases of the third party). The Indemnitor shall not be liable for any settlement effected by the Indemnitee without the Indemnitor's consent except where the Indemnitee has assumed the defense because Indemnitor has failed or refused to do so. As among the parties hereto, the Indemnitor may assume and control, or bear the costs, of any such defense subject to its reservation of a right to contest the Indemnitee's right to indemnification hereunder, provided that it gives the -------- Indemnitee notice of such reservation within fifteen (15) days of the date of the Claim Notice. 12.7 Pro Rata Limitation On Buyer Claims. Notwithstanding any other ----------------------------------- provision of this Agreement: -62- (a) Following the execution by Buyer or any Affiliate of Buyer of an Other Owner's Agreement, Seller's liability to Buyer hereunder for any Loss shall be limited to the amount for which Seller would have been liable under the terms hereof if (i) all Undivided Interests that are the subject of this Agreement and such Other Owner's Agreements were included under this Agreement, (ii) the Purchase Price actually paid hereunder were adjusted proportionately, and (iii) Seller were liable to Buyer only for that percentage of the Loss as would be proportionate to its percentage of the Undivided Interests in relation to all other Undivided Interests that would, under such circumstances, be subject to this Agreement; and (b) In any and all events, nothing in this Agreement shall have the effect of increasing Seller's liability to a third party (including Governmental Bodies), or to Buyer on account of Third Party Claims (including those by Governmental Bodies), beyond the proportion of the Losses Seller would have incurred in connection with such liabilities or claims had the Transactions not occurred and Seller had remained an Owner of the Undivided Interests subject to the Co-Tenancy Agreement. ARTICLE 13 GENERAL PROVISIONS ------------------ 13.1 Notices. All notices, requests, demands, waivers, consents and other ------- communications hereunder shall be in writing, shall be delivered either in person, by telegraphic, facsimile or other electronic means, by overnight air courier or by mail, and shall be deemed to have been duly given and to have become effective (a) upon receipt if delivered in person or by telegraphic, facsimile or other electronic means, (b) one (1) Business Day after having been delivered to an air courier for overnight delivery or (c) three (3) Business Days after having been deposited in the U.S. mails as certified or registered mail, return receipt requested, all fees prepaid, directed to the parties or their permitted assignees at the following addresses (or at such other address as shall be given in writing by a party hereto): If to Seller, addressed to: Nevada Power Company 6100 Neil Road Reno, Nevada 89511 Attn: William E. Peterson Facsimile: (775) 834-5959 with a copy to counsel for Seller: Skadden Arps Slate Meagher & Flom Four Times Square New York, NY 10036-6522 Attn: Sheldon Adler Facsimile: (212) 735-2000 -63- If to Buyer or any Buyer Subsidiary, addressed to: AES Pacific, Inc. 21469 Waterford Place West Linn, OR 97068 Attn: Tom Kunde Facsimile: (503) 723-5530 with a copy to counsel for Buyer: O'Melveny & Myers LLP 275 Battery Street San Francisco, CA 94111-3305 Attn: Joseph Malkin, Esq. Facsimile: (415) 984-8701 13.2 Attorneys' Fees. Subject to the provisions of Section 13.9, in any --------------- litigation or other proceeding relating to this Agreement (but excluding any proceedings under Section 2.9), the prevailing party shall be entitled to recover its costs and reasonable attorneys' fees. 13.3 Successors and Assigns. Except as provided in Section 2.13, the ---------------------- rights under this Agreement shall not be assignable or transferable nor the duties delegable by either party without the prior written consent of the other; and nothing contained in this Agreement, express or implied, is intended to confer upon any Person, other than the parties hereto, their permitted successors-in-interest and permitted assignees and any Person benefitting from the indemnities provided herein, any rights or remedies under or by reason of this Agreement unless so stated to the contrary. Notwithstanding the foregoing, Buyer may assign for security purposes and grant to its lenders (or security trustee or agent) a security interest in its rights under this Agreement or assign (after Closing) its rights hereunder to any Person or Persons acquiring the Plant; provided that neither the grant of any such interest, nor the foreclosure of any such interest, shall in any way release, reduce or diminish the obligations of Buyer to Seller hereunder, or obtain for such security trustee or agent or any other Person any of the rights of Buyer hereunder or any of the rights of an Owner under any of the Project Agreements (as defined in the Co-Tenancy Agreement), or operate directly or indirectly as an assignment under any of the Project Agreements. 13.4 Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13.5 Captions and Paragraph Headings. Captions and paragraph headings used ------------------------------- herein are for convenience only and are not a part of this Agreement and shall not be used in construing it. 13.6 Entirety of Agreement; Amendments. This Agreement (including the --------------------------------- Schedules and Exhibits hereto), the Related Agreements and the other documents and instruments specifically provided for in this Agreement and the Related Agreements contain the entire -64- understanding between the parties concerning the subject matter of this Agreement and such other documents and instruments and, except as expressly provided for herein, supersede all prior understandings and agreements, whether oral or written, between them with respect to the subject matter hereof and thereof. There are no representations, warranties, agreements, arrangements or understandings, oral or written, between the parties hereto relating to the subject matter of this Agreement and such other documents and instruments which are not fully expressed herein or therein. This Agreement may be amended or modified only by an agreement in writing signed by each of the parties hereto. All Exhibits and Schedules attached to or delivered in connection with this Agreement are integral parts of this Agreement as if fully set forth herein. 13.7 Construction. This Agreement and any documents or instruments ------------ delivered pursuant hereto shall be construed without regard to the identity of the Person who drafted the various provisions of the same. Each and every provision of this Agreement and such other documents and instruments shall be construed as though the parties participated equally in the drafting of the same. Consequently, the parties acknowledge and agree that any rule of construction that a document is to be construed against the drafting party shall not be applicable either to this Agreement or such other documents and instruments. 13.8 Waiver. The failure of a party to insist, in any one or more ------ instances, on performance of any of the terms, covenants and conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or of the future performance of any such term, covenant or condition, but the obligations of the parties with respect thereto shall continue in full force and effect. No waiver of any provision or condition of this Agreement by a party shall be valid unless in writing signed by such party or operational by the terms of this Agreement. A waiver by one party of the performance of any covenant, condition, representation or warranty of the other party shall not invalidate this Agreement, nor shall such waiver be construed as a waiver of any other covenant, condition, representation or warranty. A waiver by any party of the time for performing any act shall not constitute a waiver of the time for performing any other act or the time for performing an identical act required to be performed at a later time. 13.9 Arbitration. ----------- (a) Agreement to Arbitrate. Any controversy or claim arising out of ---------------------- instances, on or relating to this Agreement, or the breach or alleged breach hereof, shall, upon demand of either Seller or Buyer, be submitted to arbitration in the manner hereinafter provided. Seller and Buyer will make every reasonable effort to resolve any such controversy or claim without resort to arbitration. But in the event the parties are unable to effect a satisfactory resolution between themselves, such controversy shall be submitted to arbitration in accordance with the terms and provisions of this Section 13.9 and in accordance with the then current Commercial Arbitration Rules (hereinafter the "Rules") of the American Arbitration Association (or any successor organization) (hereinafter the "AAA"). Any such arbitration shall take place in Los Angeles, California and shall be administered by the AAA. In the event of any conflict between the terms and provisions of this Section 13.9 and the Rules, the terms and provisions of this Section 13.9 shall prevail. -65- (b) Submission to Arbitration. A party desiring to submit to ------------------------- arbitration any such controversy shall send a written arbitration demand to the AAA and to the opposing party. The demand shall set forth a clear and complete statement of the nature of the claim, its basis, and the remedy sought, including the amount of damages, if any. The opposing party may, within thirty days of receiving the arbitration demand, assert a counterclaim and/or set-off. The counterclaim or set-off, which shall be sent to the AAA and the opposing party, shall include a clear and complete statement of the nature of the counterclaim or set-off, its basis, and the remedy sought, including the amount of damages, if any. (c) Selection of Arbitration Panel. The dispute shall be decided by a ------------------------------ panel of three neutral arbitrators selected as follows. The AAA shall submit to the parties, within ten days after receipt of an arbitration demand, a list of eleven potential arbitrators consisting of retired federal or state court judges; provided that none of the potential -------- arbitrators shall have (or have ever had) any material affiliation of any kind with either party or any of their respective Affiliates. Each party shall, within five days, strike four, three, two, one or none of the arbitrators, rank the remaining arbitrators in order of preference (with "l" designating the most preferred, "2" the next most preferred and so forth) and so advise the AAA in writing. The AAA shall appoint the arbitrators with the best combined preference ranking on both lists and designate the most preferred arbitrator as presiding officer (in each case, selecting by lot, if necessary, in the event of a tie). (d) Prehearing Discovery. There shall be no prehearing discovery -------------------- except as follows. Subject to the authority of the presiding officer of the arbitration panel to modify the provisions of this paragraph before the arbitration hearing upon a showing of exceptional circumstances, each party (i) shall propound to the other no more than twenty (20) requests for production of documents, including subpart, and (ii) shall take no more than two (2) discovery depositions. Such discovery shall be conducted in accordance with the provisions and procedures of the Federal Rules of Civil Procedure. No interrogatories or requests for admission shall be permitted. Disputes concerning discovery obligations or protection of discovery materials shall be determined by the presiding officer of the arbitration panel. The foregoing limitations shall not be deemed to limit a party's right to subpoena witnesses or the production of documents at the arbitration hearing, nor to limit a party's right to depose witnesses that are not subject to subpoena to testify in person at the arbitration hearing; provided, however, that the presiding officer of the arbitration -------- panel may, upon motion, place reasonable limits upon the number and length of such testimonial depositions. (e) Arbitration Hearing. The presiding officer of the arbitration ------------------- panel shall designate the place and time of the hearing. The hearing shall be scheduled to begin within ninety (90) days after the filing of the arbitration demand (unless extended by the arbitration panel on a showing of exceptional circumstances) and shall be conducted as expeditiously as possible. In all events, the issues being arbitrated, which shall be limited to those issues identified in the initial claim and counter-claim submitted to the arbitration panel pursuant to Subsection (d) above, shall be submitted for decision within -66- thirty (30) days after the beginning of the arbitration hearing. At least thirty (30) days prior to the beginning of the arbitration hearing, each party shall provide the other party and the arbitration panel with written notice of the identity of each witness (other than rebuttal witnesses) it intends to call to testify at the hearing, together with a detailed written outline of the substance of the anticipated testimony of each such witness. The arbitration panel shall not permit any witness to testify that was not so identified prior to the hearing and shall limit the testimony of each such witness to the matters disclosed in such outline. Subject to the foregoing, the parties shall have the right to attend the hearing, to be represented by counsel, to present documentary evidence and witnesses, to cross-examine opposing witnesses and to subpoena witnesses. The Federal Rules of Evidence shall apply and the panel shall determine the competency, relevance, and materiality of evidence as appropriate. The panel shall recognize privileges available under applicable law. A stenographic record shall be made of the arbitration proceedings. (f) Award. The panel's award shall be made by majority vote of the ----- panel. An award in writing signed by at least two of the panel's arbitrators shall set forth the panel's findings of fact and conclusions of law. The award shall be filed with the AAA and mailed to the parties no later than thirty (30) days after the last day of testimony at the arbitration hearing. The panel shall have authority to issue any lawful relief that is just and equitable, except punitive damages. The award shall state that it dissolves and supersedes any provisional remedies entered pursuant to Subsection (g) below. (g) Provisional Remedies. Pending the selection of the arbitration -------------------- panel, upon request of a party, the AAA may appoint a retired judge to serve as a provisional arbitrator to rule on any motion for preliminary relief. Any preliminary relief ordered by the provisional arbitrator may be immediately entered in any federal or state court having jurisdiction thereof even though the decision on the underlying dispute may still be pending. Once constituted, the arbitration panel may, upon request of a party, issue a superseding order to modify or reverse such preliminary relief or may itself order preliminary relief pending a full hearing on the merits of the underlying dispute. Any such initial or superseding order of preliminary relief may be immediately entered in any federal or state court having jurisdiction thereof even though the decision on the underlying dispute may still be pending. Such relief may be granted by the appointed arbitrator or the arbitration panel only after notice to and opportunity to be heard by the opposing party. Such awards of preliminary relief shall be in writing and, if ordered by a panel of three arbitrators, must be signed by at least two of the panel members. (h) Entry of Award by Court. The arbitration panel's arbitration ----------------------- award shall be final. The parties agree and consent that judgment upon the arbitration award may be entered in any federal or state court having jurisdiction thereof. (i) Costs and Attorney's Fees. The prevailing party shall be entitled ------------------------- to recover its costs and reasonable attorneys' fees, and the party losing the arbitration shall pay all expenses and fees of the AAA, all costs of the stenographic record, all expenses of witnesses or proofs that may have been produced at the direction of the arbitrators, and -67- the fees, costs, and expenses of the arbitrators. The arbitration panel shall designate the prevailing party for these purposes. 13.10 Governing Law. This Agreement shall be governed in all respects, ------------- including validity, interpretation and effect, by the laws of the State of Nevada applicable to contracts made and to be performed wholly within the State of Nevada by residents of the State of Nevada, provided that federal law, -------- including the Federal Arbitration Act, shall govern all issues concerning the validity, enforceability and interpretation of the arbitration provision set forth in Section 13.9 hereof. Any action or proceeding arising under this Agreement shall be adjudicated in Los Angeles, California. 13.11 Severability. Whenever possible, each provision of this ------------ Agreement shall be interpreted in such manner as to be valid, binding and enforceable under applicable law, but if any provision of this Agreement is held to be invalid, void (or voidable) or unenforceable under applicable law, such provision shall be ineffective only to the extent held to be invalid, void (or voidable) or unenforceable, without affecting the remainder of such provision or the remaining provisions of this Agreement. 13.12 Consents Not Unreasonably Withheld. Wherever the consent or ---------------------------------- approval of any party is required under this Agreement, such consent or approval shall not be unreasonably withheld, unless such consent or approval is to be given by such party at the sole or absolute discretion of such party or is otherwise similarly qualified. 13.13 Time Is of the Essence. Time is hereby expressly made of the ---------------------- essence with respect to each and every term and provision of this Agreement. The parties acknowledge that each will be relying upon the timely performance by the other of its obligations hereunder as a material inducement to each party's execution of this Agreement. -68- IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first above written. Buyer: THE AES CORPORATION By: ____________________________________ Name: Title: Seller: NEVADA POWER COMPANY By: ____________________________________ Name: Title: -69- EX-10.D 13 0013.txt TRANSITIONAL POWER PURCHASE AGREEMENT, AES MOHAVE Exhibit 10(D) TRANSITIONAL POWER PURCHASE AGREEMENT BY AND BETWEEN NEVADA POWER COMPANY AND AES MOHAVE, LLC DATED: May 10, 2000 ASSET BUNDLE: MOHAVE TABLE OF CONTENTS
Section Page - ------- ---- 1. DEFINITIONS....................................................... 1 2. TERM.............................................................. 5 3. SECURITY.......................................................... 5 4. SUPPLY SERVICE.................................................... 7 5. NOTIFICATION AND LOAD FORECASTING................................. 10 6. PRICING OF ENERGY................................................. 12 7. INVOICING AND PAYMENTS............................................ 13 8. REGULATORY APPROVALS.............................................. 15 9. COMPLIANCE........................................................ 15 10. INDEMNIFICATION................................................... 11 11. LIMITATION OF LIABILITY........................................... 17 12. INSURANCE......................................................... 18 13. FORCE MAJEURE..................................................... 19 14. DISPUTES.......................................................... 20 15. NATURE OF OBLIGATIONS............................................. 22 16. SUCCESSORS AND ASSIGNS............................................ 23 17. REPRESENTATIONS................................................... 24 18. DEFAULT AND REMEDIES.............................................. 24 19. FACILITY ADDITIONS AND MODIFICATIONS.............................. 25 20. COORDINATION...................................................... 26 21. EMERGENCY CONDITION RESPONSE...................................... 26 22. OUTAGE SCHEDULING................................................. 26 23. REPORTS........................................................... 27 24. COMMUNICATIONS.................................................... 27 25. NOTICES........................................................... 28 26. MERGER............................................................ 28 27. HEADINGS.......................................................... 29 28. COUNTERPARTS AND INTERPRETATION................................... 29 29. SEVERABILITY...................................................... 29 30. WAIVERS........................................................... 29 31. AMENDMENTS........................................................ 30 32. TIME IS OF THE ESSENCE............................................ 30 33. APPROVALS......................................................... 30 34. PLR SERVICE....................................................... 31
Exhibits Page - -------- ---- EXHIBIT A ASSET BUNDLE CAPACITIES.................................. A-1 EXHIBIT B PRICE FLOOR OF ENERGY AND PRICE CEILING OF ENERGY,....... B-1 EXHIBIT C EXAMPLE OF SUPPLIER'S MONTHLY INVOICE.................... C-1 EXHIBIT D EXAMPLE OF BUYER'S INVOICE OF REPLACEMENT COSTS.......... D-1 EXHIBIT E EXAMPLE OF YEAR-END TRUE-UP INVOICE...................... E-1 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS................ F-1 EXHIBIT G FORM OF AVAILABILITY NOTICE.............................. G-1 EXHIBIT H BUYER'S WHOLESALE SALES CONTRACTS AT THE EFFECTIVE DATE.. H-1 i EXHIBIT I FORM OF GUARANTEE........................................ I-1 ii TRANSITIONAL POWER PURCHASE AGREEMENT This Agreement is made and entered into as of May 10, 2000 by and between Nevada Power Company, a Nevada corporation ("Buyer"), and AES Mohave, LLC, a Delaware limited liability company (the "Supplier"). Buyer and Supplier are referred to individually as a "Party" and collectively as the "Parties." WITNESSETH: WHEREAS, Buyer is selling its undivided interest in the Mohave generating station and other assets associated therewith to Supplier or an affiliate thereof (the "Asset Sale"); WHEREAS, notwithstanding the Asset Sale, Buyer expects that it will be designated by the Public Utility Commission of Nevada ("PUCN") as the Provider of Last Resort ("PLR") for its Nevada retail electric customers who are unable to obtain electric service from an alternative seller or who fail to select an alternative seller. The load required to serve such customers, plus the customers under those wholesale sales agreements existing at the Effective Date and specifically identified in Exhibit H, is referred to herein as Buyer's Transitional Resource Requirement; and WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest in the Mohave generating station as a source of supply for its Transitional Resource Requirement; and WHEREAS, Supplier has or is willing to secure the necessary resources to provide a portion of Buyer's Transitional Resource Requirement; and WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell Energy under contract to Buyer; and NOW, THEREFORE, in consideration of the mutual covenants, representations and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows: 1. DEFINITIONS 1.1 Format. ------ 1.1.1 References to Articles and Sections herein are cross-references to Articles and Sections, respectively, in this Agreement, unless otherwise stated. 1.1.2 Any parts of this Agreement which are incorporated by reference shall have the same meaning as if set forth in full text herein. 1.2 Definitions. As used in this Agreement, the following terms shall ----------- have the meanings set forth below: 1.2.1 "Agreement" means this Agreement together with the Exhibits --------- attached hereto, as such may be amended from time to time. 1 1.2.2 "Asset Bundle" means a fourteen percent undivided interest in the ------------ Mohave generating station and other assets associated therewith pursuant to the terms of the Asset Sale Agreement. 1.2.3 "Asset Bundle Capacity" means, with respect to each unit listed in --------------------- Exhibit A, fourteen percent of the net generating capacity (in megawatts ("MW")) of such unit (such net generating capacity currently being 790 MW per unit), as modified from time to time in accordance with Section 5.1 or Section 22, and not to exceed at any time the net capacity for each unit listed in Exhibit A. Asset Bundle Capacity shall also mean, as the context requires, the Energy (in megawatt- hours ("MWh")) which the units would be capable of generating if they operated at the capacity level described in the first sentence of this Section 1.2.3. 1.2.4 "Asset Sale Agreement" means the Agreement between Buyer and Supplier -------------------- or Supplier's affiliate dated as of May 10, 2000, to purchase Buyer's undivided interest in the Mohave generating station. 1.2.5 "Asset Sale" has the meaning set forth in the Recitals. ---------- 1.2.6 "Asset Sale Closing" means the transfer of Buyer's ownership of its ------------------ undivided interest in the Mohave generating station and other assets associated therewith through the consummation of the Asset Sale pursuant to the terms of the Asset Sale Agreement. 1.2.7 "Availability Notice" means a notice delivered from time to time by ------------------- Supplier to Buyer pursuant to Section 5.1 notifying Buyer of changes in the availability of the Asset Bundle. 1.2.8 "Business Day" means any day other than Saturday, Sunday, and any day ------------ that is an observed holiday by Buyer. 1.2.9 "Contract Year" means, with respect to the first Contract Year, the ------------- period beginning on the Effective Date and, with respect to each subsequent Contract Year, the period beginning at the end of the preceding Contract Year, and in each case ending on the earlier of the date which is 12 months thereafter or the termination date of this Agreement. 1.2.10 "Control Area" has the meaning set forth in the OATT. ------------ 1.2.11 "Control Area Operator" means an entity or organization, and its --------------------- representatives, which is responsible for operating and maintaining the reliability of the electric power system(s) within the Control Area. 1.2.12 "Credit Amount" means $50,000,000. ------------- 1.2.13 "Delivered Amount" means, with respect to any Dispatch Hour, the ---------------- Energy delivered by Supplier to Buyer at the designated Point(s) of 2 Delivery during such Dispatch Hour, whether or not such Energy was generated by the Asset Bundle, plus any additional amounts pursuant to Section 4.1.2. 1.2.14 "Dispatch Hour" means the prescribed hour when Energy is to be ------------- delivered by Supplier to Buyer at the designated Point(s) of Delivery. 1.2.15 "Effective Date" means the earlier to occur of (a) the date of the -------------- Asset Sale Closing or (b) the Effective Date pursuant to Section 10.3(a)(i) of the Asset Sale Agreement. 1.2.16 "EDU" means electric distribution utility, the organization with the --- responsibility for the distribution of energy over Buyer's distribution system to retail end-users. 1.2.17 "Energy" means electricity (measured in MWh) to be provided by ------ Supplier to Buyer pursuant to this Agreement 1.2.18 "Event of Default" has the meaning set forth in Section 18 hereof. ---------------- 1.2.19 "FERC" means the Federal Energy Regulatory Commission and any ---- successor agency thereto. 1.2.20 "Force Majeure" has the meaning set forth in Section 13 hereof. ------------- 1.2.21 "GAAP" means United States generally accepted accounting principles. ---- 1.2.22 "Good Utility Practice" means any of the applicable practices, methods --------------------- and acts required by any Governmental Authority having jurisdiction or applicable regional or national reliability council, including NERC, or WSCC, or any successor entity, whether or not the Party whose conduct is at issue is a member thereof, and otherwise engaged in or approved by a significant portion of the United States electric utility industry during the relevant time period, which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with law, regulation, good business practices, reliability, safety, environmental protection, economy and expediency. Good Utility Practice is not intended to be limited to the optimum practice, method, or act to the exclusion of all others, but rather to practices, methods, or acts generally accepted in the United States electric utility industry. 1.2.23 "Governmental Authority" means any foreign, federal, state, local or ---------------------- other governmental, regulatory or administrative agency, court, commission, department, board, or other governmental subdivision, legislature, rulemaking board, tribunal, arbitrating body, or other governmental authority having jurisdiction over matters contained in this Agreement. 3 1.2.24 "Guarantor" has the meaning set forth in Section 3.1.2 hereof. --------- 1.2.25 "ISA" means the Mountain West Independent System Administrator, the --- regional transmission organization authorized with the responsibility for the scheduling and administration of energy and ancillary services over, through and within the Transmission System in coordination with other interconnected entities to provide transmission services. The ISA is also referred to as transmission administrator or transmission operator. 1.2.26 "Law" means any law, treaty, code, rule, regulation, order, --- determination, permit, certificate, authorization, or approval of an arbitrator, court or other Governmental Authority which is binding on a Party or any of its property. 1.2.27 "Minimum Investment Grade Rating" of a Person means that such Person ------------------------------- has a minimum credit rating on its senior unsecured debt securities of at least two of the following ratings: (i) BBB- as determined by Standard & Poor's Corporation, (ii) Baa3 as determined by Moody's Investors Service, Inc., or (iii) a comparable rating by another nationally recognized rating service reasonably acceptable to Buyer. 1.2.28 "Minimum Tangible Net Worth" means the total book value of -------------------------- shareholder's equity less the balance of goodwill, as reported on the latest quarterly balance sheet prepared in accordance with generally accepted accounting principles (GAAP). 1.2.29 "NERC" means the North American Electric Reliability Council and any ---- successor entity thereto. 1.2.30 "OATT" means Buyer's then-effective Open Access Transmission Tariff, ---- or its successor, which has been accepted for filing by the FERC. 1.2.31 "Party" has the meaning set forth in the first paragraph of this ----- Agreement. 1.2.32 "Permitted Deratings" means those reductions to the Asset Bundle ------------------- Capacity of which Supplier may notify Buyer from time to time in an Availability Notice pursuant to Section 5.1. 1.2.33 "Person" means any individual, partnership, limited liability company, ------ joint venture, corporation, trust, unincorporated organization or governmental entity or any department or agency thereof. 1.2.34 "Point of Delivery" means the 500kV bus in the Mohave 500kV ----------------- switchyard, as well as any alternative locations agreed upon pursuant to Section 4.1.4. 1.2.35 "Price Ceiling of Energy" means the ceiling price of Energy as shown ----------------------- in Exhibit B. 4 1.2.36 "Price Floor of Energy" means the floor price of Energy as --------------------- stated in Exhibit B. 1.2.37 "Replacement Costs" means with respect to a period of time, ----------------- the difference between (a) the actual costs, including without limitation related penalties and transmission costs, reasonably incurred by Buyer to replace any shortfall between (1) the Asset Bundle Capacity and (2) the Delivered Amounts during such period and (b) the payments the Supplier would have been entitled to in respect of such shortfall in delivery, taking into account the annual true-up mechanism set forth in Section 7.5 and any other payment adjustments provided for hereunder; provided, however, that to the extent Buyer does not buy Energy to make up any shortfall prior to real time, and relies on imbalance energy to make up such a shortfall, Replacement Costs shall not be paid to the extent Buyer's need to replace the shortfall was mitigated by reductions in the TRR for such Dispatch Hour. 1.2.38 "Transitional Resource Requirement" or "TRR" means the --------------------------------- Energy and loss compensation necessary for Buyer to meet its obligations as a Provider of Last Resort (PLR) for Nevada and under those wholesale sales agreements existing at the Effective Date and specifically identified in Exhibit H. 1.2.39 "Transmission System" means the facilities owned, ------------------- controlled, or operated by Buyer that are used to provide transmission service under the OATT. 1.2.40 "WSCC" means the Western Systems Coordinating Council and ---- any successor entity thereto. 2. TERM 2.1 Term. Unless terminated earlier pursuant to the terms of this ---- Agreement, the term of this Agreement shall commence on the Effective Date and continue until the earlier of the effective date of an order by a Governmental Authority terminating Buyer's PLR responsibility, or March 1, 2003. Supplier shall provide service under this Agreement commencing on the first hour on the day after the Effective Date. 2.2 Termination. ----------- 2.2.1 Except pursuant to Section 2.2.2 or an uncured Event of Default by Buyer, this Agreement may not be terminated without the explicit prior written approval of Buyer. 5 2.2.2 If, prior to the Asset Sale Closing, the FERC or any other Governmental Authority places conditions on or requires revisions of this Agreement which have a material adverse effect on Supplier or Buyer, the Parties agree to negotiate in good faith amendments to the Agreement to preserve the bargain between the Parties. If the Parties fail to negotiate mutually acceptable amendments to this Agreement within sixty days of such action by the FERC or other Governmental Authority, either Party may terminate the Agreement after first notifying the other Party in writing; provided that neither Party may exercise a right of termination pursuant to this Section 2.2.2 after the Asset Sale Closing. 2.2.3 This Agreement may be terminated with the mutual agreement of the Parties. 2.3 Effect of Termination. ---------------------- 2.3.1 Any default or termination of this Agreement shall not release either Party from any applicable provisions of this Agreement with respect to: 2.3.1.1 Indemnity obligations contained in Section 10, to the extent of the statute of limitations period applicable to any third party claim. 2.3.1.2 Limitation of Liability provisions contained in Section 11. 2.3.1.3 Payment of any unpaid amounts in respect of obligations arising prior to or resulting from termination. 2.3.1.4 For a period of one year after the termination date, the right to raise a payment dispute and the resolution thereof pursuant to Section 14. 2.3.1.5 The resolution of any dispute submitted pursuant to Section 14 prior to, or resulting from, termination. 3. SECURITY 3.1 Supplier Certification; Guarantee. As a condition of Buyer's --------------------------------- execution of this Agreement, Supplier shall at Supplier's option comply with at least one of the following provisions: 3.1.1 Supplier Certification. Supplier shall (a) provide a ---------------------- certificate from a duly authorized corporate officer of Supplier certifying that, as of the Effective Date, Supplier has a credit rating equal to or higher than the Minimum Investment Grade Rating; or (b) post a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with a credit rating of A2 or better from Moody's Investors Service, Inc. and A or better from Standard & Poor's Corporation and a Minimum Tangible Net Worth ("MTNW") of $1 billion. 6 3.1.2 Guarantee. In the alternative, the Supplier may provide a --------- corporate guarantee, in form and substance as set forth in Exhibit I, made by an entity (the "Guarantor") that: (a) has a credit rating equal to or higher than the Minimum Investment Grade Rating, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a credit rating equal to or higher than the Minimum Investment Grade Rating; or (b) has a MTNW of no less than $500 million, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a MTNW of no less than $500 million; or (c) posts a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with a credit rating of A2/A or better and a minimum tangible net worth of $1 billion. The aggregate liability of the Guarantor under the corporate guarantee shall not exceed the Credit Amount. 3.2 Compliance. ---------- 3.2.1 Reporting. If at any time during the term of this Agreement, Standard & Poor's Corporation, Moody's Investors Service, Inc. or another nationally recognized firm downgrades the credit rating of Supplier or the Guarantor, as applicable, then Supplier shall provide Buyer with written notice of such change of circumstance within two (2) Business Days of any such change. In the event such a downgrade also constitutes an Event of Default pursuant to Section 18, the requirements of this Section are in addition to, and not in lieu of, the requirements of Section 18. 4. SUPPLY SERVICE 4.1 Obligations of the Parties. -------------------------- 4.1.1 Asset Bundle Capacity. Subject to the terms of Section --------------------- 4.1.3, Supplier shall be required to provide in any Dispatch Hour the Asset Bundle Capacity. 4.1.1.1 Supplier shall be entitled to generate or otherwise procure the Asset Bundle Capacity from any source, including either or both of the units of the Asset Bundle or from sources other than the Asset Bundle. 7 4.1.1.2 Supplier shall deliver the Asset Bundle Capacity to Buyer during the Dispatch Hour on a continuous basis at the Point(s) of Delivery and shall schedule the Delivered Amount in accordance with the applicable transmission scheduling procedures. 4.1.2 Buyer's Obligation to Take. If Buyer is unable or unwilling -------------------------- to take the Asset Bundle Capacity in any Dispatch Hour, the difference (in MWh) between the Asset Bundle Capacity and Buyer's actual take in such Dispatch Hour shall be treated as if it were a part of the Delivered Amount for such Dispatch Hour. Buyer shall give notice to Supplier as soon as reasonably practicable if it is unable or unwilling to take delivery of the full Asset Bundle Capacity in any Dispatch Hour. 4.1.3 Supplier Rights to Output. Supplier may sell to others any ------------------------- portion of the Asset Bundle Capacity which Buyer is unwilling or unable to take. 4.1.4 Point(s) of Delivery. Supplier shall deliver, and Buyer -------------------- shall take delivery of, the Delivered Amount at the Point(s) of Delivery. Subject to Section 4.1.5.2, Supplier shall be responsible for all costs associated with delivery of the Delivered Amount to the Point(s) of Delivery. 4.1.5 Alternative Points of Delivery. For any Dispatch Hour, ------------------------------ either Party may designate one or more alternative Points of Delivery, subject to the other Party's approval, such approval not to be unreasonably withheld or delayed. 4.1.5.1 If Supplier has designated an alternative Point of Delivery, Supplier shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.5.2 If Buyer has designated an alternative Point of Delivery, Buyer shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.6 Fuel. Buyer shall have no responsibility for any fuel ---- procurement or fuel transportation associated with the Asset Bundle during the term of this Agreement. 4.1.7 Resale. Buyer shall not resell the Delivered Amount except ------ as necessary to satisfy Buyer's TRR or to maintain reliability. 4.1.8 Right to Review. Buyer and Supplier each shall have the --------------- right to review during normal business hours the relevant books and records of the other Party to confirm the accuracy of such as it pertains to transactions under this Agreement. The review shall be consistent with standard business practices and shall follow reasonable notice to the other Party. Reasonable notice for a review of the previous month's records shall be at least a twenty-four (24) hour period from one Business Day to a subsequent Business Day. Notice to request a review of other than the 8 previous month's records, shall be provided with a minimum of seven (7) calendar days written notice by the requesting Party, which notice shall specify the period to be covered by the review. The Party providing records can make reasonable requests that the receiving Party keep the records confidential, and the receiving Party shall take reasonable steps to accommodate such requests. 4.1.9 Transmission Outages. Supplier shall not be obligated to -------------------- deliver the Asset Bundle Capacity, and no liquidated damages shall become due, if the Transmission System outages render the Transmission System incapable of receiving the Asset Bundle Capacity at the specified Point(s) of Delivery, provided that in such event Supplier must deliver Energy up to the capability of the Transmission System to receive such Energy. 4.2 Liquidated Damages. ------------------ 4.2.1 The liquidated damages payment provisions are an integral part of this Agreement and form a portion of the consideration for the execution and for any breach of this Agreement. 4.2.2 If the Delivered Amount is less than the Asset Bundle Capacity in any Dispatch Hour during a month, and Replacement Costs computed in respect of such month are greater than zero, then Supplier shall reimburse Buyer for such Replacement Costs. An example of the methodology used to calculate Replacement Costs is provided in Exhibit D. Supplier's obligation to make payments under this section is conditioned on Buyer's fulfillment of its obligation to take reasonable steps to mitigate its Replacement Costs consistent with Good Utility Practice. 4.2.3 The Parties recognize and agree that the payment of such amounts by Supplier is an appropriate remedy in the event of such a failure and that any such payment does not constitute a forfeiture or penalty of any kind, but rather constitutes actual costs to Buyer under the terms of this Agreement. 4.3 Supplier Operating Representative. Supplier shall provide and --------------------------------- maintain a twenty-four (24) hour seven (7) day per week communication link with Buyer's control center and with Buyer's schedulers. Supplier's operating representatives shall be available to address and make decisions on all operational matters under this Agreement on a twenty-four (24) hour seven (7) day per week basis. 5. NOTIFICATION AND LOAD FORECASTING 5.1 Availability Notification. ------------------------- 5.1.1 No later than 5:00 a.m. (Pacific Time) of each day, Supplier shall deliver to Buyer an Availability Notice in the form set forth in Exhibit G. 9 5.1.1.1 Availability Notices shall provide, for the 96-hour period starting at 6:00 a.m. (Pacific Time) that day, Supplier's hourly projection of the unavailability or derating ("Derating") of the Asset Bundle compared to the Asset Bundle Capacity figures stated for each unit in Exhibit A. 5.1.2 Each Availability Notice also shall contain, as applicable: (a) the units which are subject to the Derating; (b) the magnitude of the Derating; (c) the hours during which the Derating is expected to apply; (d) the cause of the Derating; (e) the extent, if any, to which the Derating is attributable to a Permitted Derating; and (f) the projected Asset Bundle Capacity for each unit during the period covered by the Availability Notice, pursuant to Section 5.1.5 below. 5.1.3 Supplier may at any time verbally (with subsequent written confirmation) notify Buyer of any changes to an Availability Notice. Such changes shall be effective for the hours designated in such verbal notice, beginning upon issuance of the notice. 5.1.4 If and to the extent a Derating is the result of one or more of the following causes, it shall be a Permitted Derating: (a) approved planned outages pursuant to Section 22; (b) Transmission System outages as described in Section 4.1.9; (c) response to an emergency condition as described in Section 21.1; (d) subject to the limitations expressed in Section 13.5, a Force Majeure event; (e) compliance with constraints on flue gas emissions applicable to the Asset Bundle, provided, however, that to the extent such constraints can be avoided or mitigated through purchasing emission allowances on commercially reasonable terms or other commercially reasonable economic measures short of installing new equipment or retrofitting existing equipment, these constraints shall not be Permitted Deratings; and (f) equipment limitations due to ambient conditions which differ from ISO conditions. 5.1.5 In respect of any hour, the Asset Bundle Capacity of each unit shall be the Asset Bundle Capacity figure stated in Exhibit A minus any Permitted Derating applicable during such hour. 10 5.1.6 For the avoidance of doubt, the Asset Bundle Capacity shall not be affected by Deratings which are not Permitted Deratings. 5.1.7 In determining whether to declare a Permitted Derating that does not involve a planned outage, Supplier shall take account of operational considerations regarding the items listed in Section 5.1.4 and shall not vary its considerations to reflect different market conditions. 6. PRICING OF ENERGY 6.1 Overview. The price of Energy paid by Buyer to Supplier shall be -------- based upon a designated hourly market price, subject to monthly floor and ceiling provisions. The Price Floor of Energy will ensure that Supplier will receive an average price for Energy for each month which is not less than the price stated in Exhibit B. The Price Ceiling of Energy provision provides that the average price of Energy paid to Supplier each month and for each year shall not exceed the price stated in Exhibit B. 6.2 Price of Energy. --------------- 6.2.1 Market Price of Energy. In respect of any Dispatch Hour, the ---------------------- designated market price of Energy shall be the unconstrained hourly market-clearing price in the day-ahead market from the California Power Exchange (CALPX) as published at the following Web Site http://www.calpx.com/prices/index_prices_dayahead_trading. --------------------------------------------------------- html, or its successor web site name. Should such hourly ---- market in the day-ahead market not exist for the entire term, the Parties shall agree upon a similar market price index. 6.2.2. Price Floor of Energy. The Price Floor of Energy is stated --------------------- in Exhibit B and shall not change during the term of this Agreement. 6.2.3 Price Ceiling of Energy. The Price Ceiling of Energy is ----------------------- stated in Exhibit B and shall not change during the term of this Agreement. 6.3 Price Revisions. The Parties waive any and all rights to seek to --------------- revise the provisions of this Agreement, including the prices stated, pursuant to Sections 205 and/or 206 of the Federal Power Act. 7. INVOICING AND PAYMENTS 7.1 Invoicing and Payment. On or before the 10th day of each month, --------------------- Supplier shall send to Buyer an invoice setting forth the Asset Bundle Capacity, Delivered Amount and market price pursuant to Section 6.2.1 for each Dispatch Hour in the previous month, and the total due from Buyer. The invoice shall be calculated based upon data available to Supplier and shall be in accordance with this Section 7 and Exhibit C. Buyer shall promptly notify Supplier if Buyer in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. 11 7.2 Monthly Invoice Calculation. On each monthly invoice, Supplier shall --------------------------- calculate the following amounts: 7.2.1 The Delivered Amount in respect of each Dispatch Hour multiplied by the corresponding market price of Energy pursuant to Section 6.2.1, summed over the billing period; 7.2.2 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Ceiling of Energy; 7.2.3 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Floor of Energy; and 7.2.4 For each Dispatch Hour of the billing period, the shortfall, if any, between the Asset Bundle Capacity and the Delivered Amount. 7.3 Supplier's Invoice. Supplier will invoice the lesser of the amounts ------------------ calculated in Sections 7.2.1 and 7.2.2 provided that if the amount calculated in Section 7.2.1 is less than the amount calculated in Section 7.2.3, Supplier shall invoice Buyer the amount calculated in Section 7.2.3. Examples of this monthly invoice calculation (and annual true-up process) are contained in Exhibit C. 7.4 Buyer's Invoice. In the event any shortfall occurs pursuant to Section --------------- 7.2.4, Buyer shall within 10 days of receipt of Supplier's invoice deliver to Supplier a Buyer's invoice detailing any Replacement Costs due. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. 7.5 Annual True-Up Mechanism. ------------------------ 7.5.1 The annual true-up mechanism will provide adjustments among the Parties with respect to each Contract Year in the following scenarios: (a) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is less than or equal to (ii) the market price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Buyer shall pay to Supplier the greater of (A) zero; and (B) the difference in the dollar amount between (x) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year and (y) the amounts invoiced by Supplier for Energy pursuant to Section 7.3 summed over the Contract Year; or (b) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is 12 greater than (ii) the market price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Buyer shall pay to Supplier the greater of (A) zero; and (B) the difference in the dollar amount between (x) the market price of Energy for each hour multiplied by the hourly Delivered Amount of Energy summed over the Contract Year and (y) the amounts invoiced by Supplier for Energy pursuant to Section 7.3 summed over the Contract Year. 7.5.2 Supplier shall also perform the calculations set forth in Section 7.5.1 using the hourly Asset Bundle Capacity in place of the hourly Delivered Amount of Energy. Supplier shall include in the true-up invoice an amount equal to the lesser of (a) the difference between the amount calculated pursuant to the first sentence of this Section 7.5.2. and the amount calculated pursuant to Section 7.5.1.and (b) the sum of all Replacement Costs incurred during the Contract Year. 7.5.3 True-up adjustments will be calculated by Supplier within twenty days after each Contract Year. Examples of the true- up calculations and invoice form are set forth in Exhibit E. Interest shall be calculated pursuant to 18 CFR Section 35.19a and shall be included in the true-up invoice. Invoices for true-up adjustments shall be submitted by Supplier within thirty (30) days after the end of the Contract Year. Payments for such invoices shall be due from Buyer twenty (20) days from receipt of the true-up invoice. invoice. 7.6 Invoice Disagreements. Should there be a good faith dispute over any --------------------- invoice, the Parties shall promptly seek resolution pursuant to Section 14. Pending resolution of the invoice dispute, payment shall be made or offsets or credits taken, as applicable, based upon the undisputed portion of the invoice. 7.7 Adjustments. Upon resolution of the dispute, the prevailing Party ----------- shall be entitled to receive the disputed amount, as finally determined to be payable along with interest (calculated pursuant to 18 CFR Section 35.19a) through the date of payment. No invoice (or payment covered thereby) shall be subject to adjustment unless notice or request for adjustment is given within one (1) year of the date payment thereunder was due. 7.8 Method of Payment. Subject to Sections 7.6 and 7.7, Buyer shall remit ------------------ all amounts due by wire or electronic fund transfer, pursuant to Supplier's invoice instructions, no later than twenty days after receipt of the invoice. 7.9 Overdue Payments. Overdue payments shall bear interest from and ---------------- including, the due date to the date of payment on the unpaid portion calculated pursuant to 18 CFR Section 35.19a. 7.10 Buyer Right to Offset. Buyer shall have the right to offset any ---------------------- amounts Supplier owes to Buyer, including Replacement Costs (except for such amounts disputed in good faith by Supplier), against the amounts owed by Buyer to Supplier. 13 7.11 Taxes. Each Party shall pay ad valorem and other taxes attributed to ----- its facilities and services provided. Supplier shall not include any taxes of any kind in its invoices to Buyer. The prices of Energy shall not change during the term of this Agreement as a result of any changes in local, state or federal taxes, fees or levies. 7.12 Late Invoices. If either Party submits an invoice outside of the time ------------- deadlines set forth herein, that Party shall not forfeit its rights to collect the amounts due thereunder, provided that such invoice is no more than six (6) months late, and provided that changes to invoices remain subject to the deadline in Section 7.7 8. REGULATORY APPROVALS 8.1 This Agreement will be filed with the FERC and any other appropriate regulatory agencies by the appropriate Party as may be required. 9. COMPLIANCE 9.1 Each Party shall comply with all relevant Laws and shall, at its sole expense, maintain in full force and effect all relevant permits, authorizations, licenses, and other authorizations material to the maintenance of facilities and the performance of obligations under this Agreement. 9.2 Each Party and its representatives shall comply with all relevant requirements of any authorized Control Area Operator, ISA and/or EDU to ensure the safety of its employees and the public, and to ensure electric system reliability and integrity, material to the performance of this Agreement. 9.3 Buyer and Supplier shall perform or cause to be performed, their obligations under this Agreement in all material respects in accordance with Good Utility Practices. 10. INDEMNIFICATION 10.1 Supplier shall indemnify Buyer for failure to maintain insurance requirements pursuant to Section 12. 10.2 To the fullest extent permitted by law, a Party to this Agreement ("the Indemnifying Party") shall indemnify, defend and hold harmless the other Party, its parent, affiliates, and successors and agents (each an "Indemnified Party") from and against any and all claims, demands, suits, obligations, payments, liabilities, costs, judgments, damages, losses or expenses asserted by third parties against an Indemnified Party and arising out of, relating to, or resulting from the Indemnifying Party's breach of, or the negligent performance of its obligations under this Agreement. 10.2.1 Such indemnity shall also extend to actual courts costs, attorneys' fees, expenses and other liabilities incurred in the defense of any claim, action or proceeding, including negotiation, settlement, defense and appeals, to 14 which this indemnification obligation applies. In furtherance of the foregoing indemnification and not by way of limitation thereof, the Indemnifying Party hereby waives any defense it otherwise might have against the Indemnified Party under applicable workers' compensation laws. 10.2.2 In claims against any Indemnified Party by an agent of the Indemnifying Party, or anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under Section 10.2.1 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Indemnifying Party or a subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts. 10.2.3 Such indemnity shall also extend to all costs and expenses incurred by the Indemnified Party in any action or proceeding to enforce the provisions of this Agreement, but only if and to the extent the Indemnified Party prevails in such action or proceeding. 10.2.4. Such indemnity obligations shall not be construed to negate, abridge or reduce other rights or obligations or indemnity which would otherwise exist at law or equity. The obligations contained herein shall survive any termination, cancellation, or suspension of this Agreement to the extent of the statute of limitations period applicable to any third party claim. 10.3 Indemnification Procedures: -------------------------- 10.3.1 Any Party seeking indemnification under this Agreement shall give the other Party notice of such claim promptly but in any event on or before thirty (30) days after the Party's actual knowledge of such claim or action. Such notice shall describe the claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the claim that has been, or may be sustained by, said Party. To the extent that the other Party will have been actually and materially prejudiced as a result of the failure to provide such notice, such notice will be a condition precedent to any liability of the other Party under the provisions for indemnification contained in this Agreement. 10.3.2 In any action or proceeding brought against an Indemnified Party by reason of any claim indemnifiable hereunder, the Indemnifying Party may, at its sole option, elect to assume the defense at the Indemnifying Party's expense, and shall have the right to control the defense thereof and to determine the settlement or compromise of any such action or proceeding. Notwithstanding the foregoing, an Indemnified Party shall in all cases be entitled to control its defense in any action if it: (i) may result in injunctions or other equitable remedies in respect of the Indemnified Party which would affect its business or operations in any materially adverse manner; 15 (ii) may result in material liabilities which may not be fully indemnified hereunder; or (iii) may have a significant adverse impact on the business or the financial condition of the Indemnified Party (including a material adverse effect on the tax liabilities, earnings or ongoing business relationships of the Indemnified Party) even if the Indemnified Party pays all indemnification amounts in full. 10.3.3 Subject to Section 10.3.2, neither Party may settle or compromise any claim for which indemnification is sought under this Agreement without the prior consent of the other Party; provided, however, said consent shall not be unreasonably withheld or delayed. 11. LIMITATION OF LIABILITY 11.1 To the fullest extent permitted by law and notwithstanding other provisions of this Agreement, in no event shall a Party, or any of their respective successors or assigns be liable to the other Party, whether in contract, warranty, tort, negligence, strict liability, or otherwise, for special, indirect, incidental, multiple, consequential (excluding replacement power costs and other costs pursuant to Section 4.2, but including lost profits and revenues, and lost business opportunities), or punitive damages, related to or resulting from performance or nonperformance of this Agreement or any activity associated with or arising out of this Agreement. However, this Limitation of Liability shall not apply with respect to claims pursuant to Section 10, or for personal injury, death or property damage asserted by third parties as to which a Party is liable pursuant to the indemnification provisions hereof or otherwise hereunder. 11.2 The provisions of this Section 11 shall survive any termination, cancellation, or suspension of this Agreement. 12. INSURANCE 12.1 Supplier shall maintain at its cost and expense, fire, liability, business interruption, worker's compensation and other forms of insurance relating to the damage, destruction and loss of Supplier's Asset Bundle and facilities. Buyer agrees that it is acceptable for Supplier to self-insure in whole or in part against such risks. 12.2 If the Asset Bundle is damaged or destroyed in whole or in part by a casualty, whether insured or not, this Agreement shall continue in full force and effect and Supplier shall take all commercially reasonable steps to repair and restore the Asset Bundle and facilities. 12.3 Every third-party contract of insurance shall be with an insurer qualified to do business in the State of Nevada and with the equivalent of a "Best Rating" of "A" or better and shall include provisions or endorsements 16 (i) stating that such insurance is primary insurance with respect to the interest of Buyer and that any insurance maintained by Buyer is excess and not contributory insurance required hereunder; (ii) providing that no reduction, cancellation or expiration of the policy shall be effective until ninety (90) days from the date written notice thereof is actually received by Buyer. Upon Supplier's receipt of any notice of reduction, cancellation or expiration, Supplier shall immediately provide written notice thereof to Buyer; and (iii) naming Buyer as an additional insured on the general liability insurance policies as its interests may appear with respect to this Agreement. 12.4 On or before the Effective Date, Supplier shall provide to Buyer, and shall continue to provide to Buyer at least fifteen (15) days prior to the end of each Contract Year, upon any change in coverage, or at the request of Buyer not to exceed once each year, properly executed and current certificates of insurance with respect to all insurance policies required to be maintained by Suppler under this Agreement. Certificates of insurance shall provide the following information: (i) the name of insurance company, policy number and expiration date; (ii) The coverage required and the limits on each, including the amount of deductibles or self-insured retentions; (iii) A statement indicating that Buyer shall receive at least thirty (30) days prior written notice of cancellation or expiration of a policy, or reduction of liability limits with respect to a policy; and (iv) A statement indicating that Buyer has been named as an additional insured. At Buyer's request, not to exceed once each Contract Year, in addition to the foregoing certifications, Supplier shall deliver to Buyer a copy of each insurance policy, certified as a true copy by an authorized representative of the issuing insurance company. 12.5 Buyer shall have the right to inspect the original policies of insurance applicable to this Agreement at Supplier's place of business during regular business hours. 13. FORCE MAJEURE 13.1 Each Party shall have the obligation to operate in accordance with Good Utility Practice at all times. 13.2 An event of "Force Majeure" shall be defined as any interruption or failure of service or deficiency in the quality or quantity of service or any other failure to perform any of its obligations hereunder to the extent such failure occurs without fault or negligence on the part of that Party and is caused by factors beyond that Party's reasonable control, which by the exercise of reasonable diligence that Party is unable to prevent, avoid, mitigate or overcome, including without limitation: 17 (i) acts of God or the public enemy, such as storms, flood, lightning, and earthquakes, (ii) failure, threat of failure, or unscheduled withdrawal of facilities from operation for maintenance or repair (excluding such caused by normal wear and tear or manufacturing defects), and including unscheduled transmission and distribution outages, (iii) sabotage of facilities and equipment, (iv) civil disturbance, (v) labor dispute, (vi) action or inaction of a court or public authority, or (vii) any other cause of similar nature beyond the reasonable control of that Party. 13.3 Economic hardship of either Party shall not constitute Force Majeure under this Agreement. Nor shall anything contained in this Section or elsewhere in this Agreement excuse a Party from strict compliance with the obligation of the Parties to comply with the terms of this Agreement relating to timely payments. 13.4 In the event of a Force Majeure, neither Party shall be considered in default under this Agreement or responsible to the other Party in tort, strict liability, contract or other legal theory for damages of any description, and affected performance obligations shall be extended by a period equal to the term of the resultant delay, but in no event shall exceed the term of the Agreement, provided that the Party relying on a claim of Force Majeure: (i) provides prompt written notice of such Force Majeure event to the other Party, giving an estimate of its expected duration and the probable impact on the performance of its obligations hereunder; (ii) exercises all reasonable efforts to continue to perform its obligations under this Agreement; (iii) expeditiously takes action to correct or cure the event or condition excusing performance so that the suspension of performance is no greater in scope and no longer in duration than is dictated by the problem; provided, however, that settlement of strikes or other labor disputes will be completely within the sole discretion of the Party affected by such strike or labor dispute; (iv) exercises all reasonable efforts to mitigate or limit damages to the other Party; and (v) provides prompt notice to the other Party of the cessation of the event or condition giving rise to its excuse from performance. 13.5 Notwithstanding the above provisions, a Force Majeure event shall excuse Supplier from its obligation to deliver the Asset Bundle Capacity pursuant to Section 4 of this Agreement only for the first seven (7) days of the Force Majeure event. After such seven day period, Supplier must either deliver the Asset Bundle 18 Capacity at the Point(s) of Delivery or pay liquidated damages pursuant to Section 4.2 of this Agreement. 14. DISPUTES 14.1 Any action, claim or dispute which either Party may have against the other arising out of or relating to this Agreement or the transactions contemplated hereunder, or the breach, termination or validity thereof (any such claim or dispute, a "Dispute") shall be submitted in writing to the other Party. The submission of any Dispute shall include a concise statement of the question or issue in dispute, together with a statement listing the relevant facts and documentation that support the claim. 14.2 The Parties agree to cooperate in good faith to expedite the resolution of any Disputes. Pending resolution of Disputes, the Parties shall proceed diligently with the performance of their obligations under this Agreement. 14.3 The Parties shall first attempt in good faith to resolve any Dispute. In the event that representatives of the Parties are unable to satisfactorily resolve the Dispute within 30 (thirty) days from the receipt of notice of the Dispute, either Party may by written notice to the other refer the Dispute to their respective senior management or may demand in writing the submission of the Dispute to binding arbitration. In the event a Party refers a Dispute to its senior management, that Party does not waive its right subsequently to demand the submission of the Dispute to binding arbitration. Once a Party demands in writing that a Dispute be submitted to binding arbitration, the Parties expressly select arbitration as the means to resolve Disputes and thereby irrevocably waives their right to a jury trial with respect to any Dispute, subject to the following: 14.3.1 The request for provisional remedies requesting preservation of the Parties' respective rights and obligations under the Agreement may be resolved by a court of law located in County of the principal office of Buyer. 14.4 Subject to the restrictions of Section 6.3, nothing in this Agreement shall preclude, or be construed to preclude, any Party from filing a petition or complaint with the FERC or PUCN with respect to any arbitrable claim over which said agency has jurisdiction. In such case, the other Party may request FERC or the PUCN, as applicable, to reject or to waive jurisdiction. If jurisdiction is rejected or waived with respect to all or a portion of the claim, the portion of the claim not so accepted by FERC or the PUCN, as applicable, shall be resolved through arbitration, as provided in this Agreement. To the extent that FERC or the PUCN, as applicable, asserts or accepts jurisdiction over the claim, the decision, finding of fact or order of FERC or the PUCN, as applicable, shall be final and binding, subject to judicial review under the Federal Power Act or Nevada Revised Statutes and subject to the provisions of Section 2.2.2, and any arbitration proceedings that may have commenced with respect to the claim prior to the assertion or acceptance of jurisdiction by FERC or the PUCN, as applicable, shall be terminated. 19 14.5 Unless otherwise agreed by the Parties, any arbitration initiated under this Agreement shall be conducted in accordance with the following: 14.5.1 Arbitrations shall be held within the County of the principal place of business of Buyer. 14.5.2 Arbitrations shall be conducted in accordance with the "Commercial Arbitration Rules" of the American Arbitration Association ("AAA") then in effect. 14.5.3 Arbitrations shall be conducted by one neutral arbitrator who shall be selected pursuant to the AAA rules and the following: 14.5.3.1 The Parties agree that the list of potential arbitrators provided by the AAA shall, if available, contain 20 candidates, and that at least 50% of the candidates be members of the AAA National Energy Panel. 14.5.3.2 The Parties also agree that each will be allowed to strike the names of five candidates, before ranking the remaining candidates and returning the list to the AAA in accordance with the Commercial Arbitration Rules. If the Parties are unable to agree on an arbitrator, such arbitrator shall be appointed by the American Arbitration Association. 14.5.3.3 The arbitrator shall not have any current or past substantial business or financial relationships with any party to the arbitration (or their affiliates) and shall not be a vendor, supplier, customer, employee, consultant, or competitor to any of the Parties including their affiliates. 14.5.3.4 The arbitrator shall be authorized only to interpret and apply the provisions of this Agreement or any related agreements entered into under this Agreement and shall have no power to modify or change any of the above in any manner. The arbitrator shall have no authority to award punitive or multiple damages or any damages inconsistent with this Agreement. The arbitrator shall within 30 days of the conclusion of the hearing, unless such time is extended by agreement of all Parties, notify the Parties in writing of his or her decision, stating his or her reasons for such decision and separately listing his or her findings of fact and conclusions of law. The decision of the arbitrator rendered in such a proceeding shall be final and binding on the Parties. Judgment on the award may be entered upon it in any court having jurisdiction. 14.6 The Parties shall proceed with the arbitration expeditiously and the arbitration shall, if possible be concluded, in order that the decision may be rendered within six (6) months after the filing of the demand for arbitration. 20 14.7 Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration agreement shall be governed by the Federal Arbitration Act of the United States, 9 U.S.C. (S)(S) 1 et seq. 14.8 The award of the arbitrator shall be final and binding on both Parties and may be enforced in any court having jurisdiction over the Party against which enforcement is sought. 14.9 Expect as otherwise stated herein, each Party shall bear its own expenses, including but not limited to legal fees, except that all expenses associated with the arbitration shall be apportioned in the award of the arbitrator based upon the respective merit of the claims of the Parties. 14.10 This Agreement shall be interpreted pursuant to the laws of the State of Nevada, as if executed and performed wholly within that state, and the Federal Power Act. 15. NATURE OF OBLIGATIONS 15.1 Except where specifically stated in this Agreement to be otherwise, the duties, obligations, and liabilities of the Parties shall be several; not joint or collective. The provisions of this Agreement shall not be construed to create an association, trust, partnership, or joint venture; to impose a trust or partnership duty, obligation, or liability or agency relationship on or with regard to either Party. 15.2 Nothing in this Agreement nor any action taken hereunder shall be construed to create any duty, liability, or standard of care to any person not a Party to this Agreement. Each Party shall be individually and severally liable for its own obligations under this Agreement. 15.3 By this Agreement, neither Party dedicates any part of its facilities or the service provided under this Agreement to the public. 16. SUCCESSORS AND ASSIGNS 16.1 This Agreement may be assigned, without express written consent of the other Party, as follows: 16.1.1 Buyer may assign this Agreement or assign or delegate its rights and obligations under this Agreement, in whole or in part, if such assignment is made to an affiliate, parent, subsidiary, successor or any party, provided that such assignee operates all or a portion of the PLR or if such assignment is required by Law or applicable regulations. 16.1.2 Subject to the requirement that Supplier's assignee fulfills the requirements of this Agreement, including without limitation obligations under Section 3, Supplier may assign this Agreement to an affiliate that directly or indirectly owns at least a fifty percent interest in the Asset Bundle. 16.2 Supplier may, without the consent of Buyer, assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee, lending institution, or any 21 Person for the purposes of financing or refinancing the Asset Bundle, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, conveyances of dispositions in lieu thereof; provided, however, that no such assignment or disposition shall relieve or in any way discharge Supplier or such permitted assignee from the performance of its duties and obligations under this Agreement. Buyer agrees to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, conveyance, pledge or disposition of rights hereunder for purposes of the financing or refinancing of the Asset Bundle, so long as Buyer's rights under this Agreement are not thereby materially altered, amended, diminished or otherwise impaired. 16.3 Either Party may, without the consent of the other Party, assign this Agreement to a successor to all or substantially all of the assets of such Party by way of merger, consolidation, sale or otherwise, provided such successor assumes and becomes liable for all of such Party's duties and obligations hereunder. 16.4 Except as stated above, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by either Party, including by operation of law, without the prior written consent of the other Party, said consent not to be unreasonably withheld. Any assignment of this Agreement in violation of the foregoing shall be, at the option of the non- assigning Party, void. 16.5 Except as set forth above, no assignment or transfer of rights or obligations under this Agreement by a Party shall relieve said Party from full liability and financial responsibility for the performance thereof after any such transfer or assignment unless and until the transferee or assignee shall agree in writing to assume the obligations and duties of said Party under this Agreement and the other Party has consented in writing to such assumption; said consent not to be unreasonably withheld. 16.6 This Agreement and all of the provisions hereof are binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns. 17. REPRESENTATIONS 17.1 Representations of the Parties. The Parties represent and warrant ------------------------------ each to the other as follows: 17.1.1 Incorporation. Buyer is a corporation duly ------------- incorporated, validly existing and in good standing under the laws of the State of Nevada. Supplier is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Both Buyer and Supplier have all requisite corporate power and authority to own, lease and operate their material assets and properties and to carry on their business as now being conducted. 17.1.2 Authority. The Party has full corporate power and --------- authority to execute and deliver this Agreement and, subject to the procurement of applicable regulatory approvals, to carry out the actions required of it by this 22 Agreement. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action required on the part of the Party. The Agreement has been duly and validly executed and delivered by the Party and, assuming that it is duly and validly executed and delivered by the other Party, constitutes a legal, valid and binding agreement of the Party. 17.1.3 Compliance With Law. The Party represents and warrants ------------------- that it is not in violation of any applicable Law, or applicable regulation, which violation could reasonably be expected to materially adversely affect the other Party's performance of its obligations under this Agreement. The Party represents and warrants that it will comply with all Laws, and regulations applicable to its compliance with this Agreement, non-compliance with which would reasonably be expected to materially adversely affect either Party's performance of its obligations under this Agreement. 17.1.4 Representations of Both Parties. The representations in ------------------------------- this Section shall continue in full force and effect for the term of this Agreement. 18. DEFAULT AND REMEDIES 18.1 An Event of Default hereunder shall be deemed to have occurred upon a Party's (Defaulting Party) failure to comply with any material obligation imposed upon it by this Agreement. Examples of an Event of Default include, but are not limited to the following: (i) Failure to make any payments due under this Agreement; (ii) Failure to deliver the Asset Bundle Capacity for a period of thirty days; (iii) Failure to follow the directions of a Control Area Operator, ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto where following such directions is required hereunder; (iv) Supplier being in compliance with neither Section 3.1.1 nor Section 3.1.2; and (v) Failure of the Guarantor to be in compliance with the terms of the Guarantee delivered under Section 3.1.2. 18.2 An Event of Default shall be excused: 18.2.1 In the event such Event of Default was caused by Force Majeure provided that the Party claiming a Force Majeure complies with the requirements of Section 13; and 18.2.2 In the event such Event of Default was caused by transmission and distribution outages or disruptions. 23 18.3 Unless excused, in an Event of Default the Non-Defaulting Party shall be entitled to provide written notice (or verbal notice in case of emergency followed by written notice) of the Event of Default to the Defaulting Party and to specify a cure period, which cure period shall be a minimum of thirty (30) days. 18.4 If an Event of Default is not cured by the Defaulting Party during the cure period specified by the Non-Defaulting Party, the Non-Defaulting Party shall be entitled to those remedies which are not inconsistent with the terms of this Agreement, including termination and the payment of liquidated damages. A Defaulting Party shall not be liable to the Non-Defaulting Party for any punitive, consequential or incidental damages. 18.5 Notwithstanding this Section 18, liquidated damages shall be paid to Buyer pursuant to Sections 4.2 and 13. 19. FACILITY ADDITIONS AND MODIFICATIONS 19.1 Supplier shall be entitled to make additions and modifications to the Asset Bundle subject to the following: 19.1.1 To the extent additions and modifications interfere with the operation of the Asset Bundle in providing Energy to Buyer beyond the limits for planned outages set forth in Section 22, liquidated damages shall be paid to Buyer pursuant to Section 4.2. 19.1.2 Supplier shall use reasonable efforts to minimize any adverse impact on Buyer during the course of making such additions and modifications. 19.1.3 Such additions and modifications shall be conducted in accordance with Good Utility Practice, and all applicable Laws, regulations and Reliability Criteria. 19.2 Supplier shall seek Buyer's prior written approval for all Supplier's additions or modifications to the Asset Bundle which might reasonably be expected to have a material adverse effect upon Buyer with respect to operations or performance under this Agreement. 20. COORDINATION 20.1 Upon knowledge thereof, each Party shall promptly give notice to the other Party of any labor dispute which is delaying or threatens to delay the timely performance of this Agreement, which shall include a description of the general nature of the dispute. 21. EMERGENCY CONDITION RESPONSE 21.1 Buyer and Supplier shall comply with any applicable requirement of any Governmental Authority, NERC, WSCC, ISA, RTO, Control Area Operator, transmission operator, EDU or any successor of any of them, regarding the reduced or increased generation of the Asset Bundle in the event of an emergency 24 condition. Supplier shall not be obligated to deliver the Asset Bundle Capacity, and no liquidated damages shall become due, if generation is reduced in the event of an emergency condition. 21.2 Each Party shall provide prompt verbal notice to the other Party of any emergency condition. 21.3 Either Party may take reasonable and necessary action to prevent, avoid or mitigate injury, danger, damage or loss to its own equipment and facilities, or to expedite restoration of service; provided, however, that the Party taking such action shall give the other Party prior notice if at all possible before taking any action. 22. OUTAGE SCHEDULING 22.1 Buyer acknowledges that Supplier may not be the operator of the Asset Bundle and may not have direct control over the operation of the Asset Bundle. 22.2 Supplier shall request that the Operator coordinate with Buyer any inspections, non-forced outages and maintenance of Supplier's Asset Bundle so as to minimize the impact on Buyer under this Agreement. 22.3 Planned Outages. --------------- 22.3.1 Within sixty (60) days following the Effective Date, Supplier shall provide Buyer with a proposed schedule of planned outages for the period beginning on the date of such proposal through March 1, 2003 ("Contract Period"). The proposed planned outage schedule will designate days for each unit in which the Asset Bundle Capacity will be reduced to zero for such unit. Supplier shall be entitled to designate up to 100 unit- days during the Contract Period. Unit-days may be applied to either unit without limitation. Only whole days, being the 24-hour period commencing at 06:00:00, may be designated for planned outages. 22.3.2 If all unit-days in Supplier's proposed planned outage schedule fall within the months of February, March and November, then it shall not require Buyer's approval and shall become the final planned outage schedule. To the extent Supplier's proposed planned outage schedule designates unit-days which fall outside such months, the inclusion of such unit-days in the final planned outage schedule shall be subject to Buyer's approval. 22.3.3 Supplier shall be entitled to amend the final planned outage schedule with either (a) six months prior written notice to Buyer or (b) Buyer's approval, provided however, that to the extent such amendments contemplate planned outage unit-days outside of the months February, March and November, Buyer's approval shall be required in respect of such unit-days. 23.3.4 In considering whether to grant approval under this Section 22.3, Buyer shall take account of the restrictions and constraints imposed on Supplier under the Co-Tenancy Agreement and the Operating Agreement (both as 25 defined in the Asset Sale Agreement), and Buyer shall not unreasonably withhold or delay its approval. 23. REPORTS 23.1 Supplier shall promptly provide Buyer with copies of any orders, decrees, letters or other written communications to or from any Governmental Authority asserting or indicating that Supplier and/or its Asset Bundle is in violation of Laws which relate to Supplier, or operations or maintenance of the Asset Bundle and which may have a material adverse effect on Buyer. Supplier shall use reasonable efforts to keep Buyer apprised of the status of any such matters. 24. COMMUNICATIONS 24.1 Supplier's Operating Representatives shall be available 24 hours per day for communications with the Control Area Operator and/or the ISA and Buyer to facilitate the operations contained in this Agreement. 24.2 Supplier shall, at its expense, maintain and, if reasonably necessary, install real-time communications equipment at the Asset Bundle to maintain communications between personnel on site at the Asset Bundle, Buyer and the Control Area Operator at all times. Supplier shall provide at its expense: (i) Ringdown voice telephone lines, and (ii) Equipment to transmit to and receive telecopies from Buyer and the Control Area Operator. 24.3 Supplier shall immediately report to Buyer any "Abnormal Condition" that has or may occur, and provide all pertinent information, including but not limited to the following: 24.3.1 A description of the "Abnormal Condition" and the actions to be taken to alleviate the "Abnormal Condition". 24.3.2 The expected duration including the beginning and ending time of the "Abnormal Condition". 25.3.3 The amount of any adjustment to the current (real time) level of Energy. 24.4 Cause of the condition. ---------------------- 24.4.1 An "Abnormal Condition" shall include without limitation any conditions that, to Supplier's knowledge, have or are reasonably likely to: (i) Adversely affect Supplier's ability to provide Energy to Buyer. (ii) Cause an unplanned reduction in the rate of delivery of Energy to Buyer. 26 (iii) Cause an unplanned isolation of the Asset Bundle from the transmission system. 24.5 Supplier shall immediately notify Buyer after such "Abnormal Condition" has been alleviated. 25. NOTICES 25.1 All notices hereunder shall, unless specified otherwise, be in writing and shall be addressed, except as otherwise stated herein, to the Parties' as set forth in Exhibit F. 25.2 All written notices or submittals required by this Agreement shall be sent either by hand-delivery, regular first class U.S. mail, registered or certified U.S. mail postage paid return receipt requested, overnight courier delivery, electronic mail or facsimile transmission and will be effective and deemed to have been received on the date of receipt personally, on the date and time as documented by method of delivery if during normal business hours or on the next succeeding Business Day, or on the third Business Day following deposit with the U.S. mail if sent regular first class U.S. mail. 25.3 Notices of an Event of Default pursuant to Section 18 and or Force Majeure pursuant to Section 13 may not be sent by regular first class U.S. mail. 25.4 Any payments required to be made under this Agreement shall be made to the Party as set forth in Exhibit F. 25.5 Each Party shall have the right to change, at any time upon written notice to the other Party, the name, address and telephone numbers of its representatives under this Agreement for purposes of notices and payments. 26. MERGER 26.1 The Agreement contains the entire agreement and understanding between the Parties with respect to all of the subject matter contained herein, thereby merging and superseding all prior agreements and representations by the Parties with respect to such subject matter. 26.2 In the event of any conflict between this Agreement and the Asset Sale Agreement, the terms of the Asset Sale Agreement shall govern. 27. HEADINGS 27.1 The headings or section titles contained in this Agreement are inserted solely for convenience and do not constitute a part of this Agreement between the Parties, nor should they be used to aid in any manner in the construction of this Agreement. 28. COUNTERPARTS AND INTERPRETATION 27 28.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 28.2 In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of authorship of any of the provisions of this Agreement. 28.3 Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. 28.4 The word "including" in this Agreement shall mean "including without limitation". 29. SEVERABILITY 29.1 If any term, provision or condition of this Agreement is held to be invalid, void or unenforceable by a court or Governmental Authority of competent jurisdiction and such holding is subject to no further appeal or judicial review, then such invalid, void, or unenforceable term, provision or condition shall be deemed severed from this Agreement and all remaining terms, provisions and conditions of this Agreement shall continue in full force and effect, unless, however, the effect of the severance would vitiate the intent of the Parties hereto, as determined by either Party in its reasonable discretion. 29.2 The Parties shall endeavor in good faith to replace such invalid, void, or unenforceable provisions with a valid and enforceable provision which achieves the purposes intended by the Parties to the greatest extent permitted by law. 30. WAIVERS 30.1 No failure or delay on the part of a Party in exercising any of its rights under this Agreement or in insisting upon strict performance of provisions of this Agreement, no partial exercise by either Party of any of its rights under this Agreement, and no course of dealing between the Parties shall constitute a waiver of the rights of either Party under this Agreement. Any waiver shall be effective only by a written instrument signed by the Party granting such waiver, and such shall not operate as a waiver of, or estoppel with respect to, any subsequent failure to comply therewith. 31. AMENDMENTS 31.1 The Parties shall negotiate in good faith to determine necessary amendments, if any, to this Agreement, provided that in negotiating such amendments the Parties shall attempt, in good faith, to reasonably preserve the bargain initially struck in this Agreement if any Governmental Authority, FERC, any state or the PUCN, implements a change in any Law or applicable regulation that materially affects or 28 is reasonably expected to materially affect Buyer's PLR service under this Agreement. 31.2 The Parties shall meet to discuss the impact of any changes in Buyer's OATT, or any rule or practice of NERC, WSCC, or any other Governmental Authority on the terms of this Agreement upon request by either Party during the term of this Agreement. 31.3 In the event that it is deemed necessary to amend this Agreement, the Parties will attempt to agree upon such amendment and will submit such mutually agreed upon amendment(s) to the FERC for filing and acceptance. 31.4 Amendments to this Agreement shall be in writing and shall be executed by an authorized representative of each Party. 32. TIME IS OF THE ESSENCE 32.1 Time is of the essence of this Agreement and in the performance of all of the covenants and conditions hereof. 33 APPROVALS 33.1 Each Party's performance under this Agreement is subject to the condition that all requisite governmental and regulatory approvals for such performance are obtained in form and substance satisfactory to the other Party in its reasonable discretion. Each Party shall use best efforts to obtain all required approvals and shall exercise due diligence and shall act in good faith to cooperate and assist each other in acquiring any regulatory approval necessary to effectuate this Agreement. Further, the Parties agree to reasonably support the other Party in any associated regulatory proceedings, including by being a witness on behalf of the other Party. 33.2 This Agreement is made subject to present or future state or federal laws, regulations, or orders properly issued by state or federal bodies having jurisdiction. 33.3 The Parties hereto agree to execute and deliver promptly, at the expense of the Party requesting such action, any and all other and further instruments, documents and information which may reasonably be necessary or appropriate to give full force and effect to the terms and intent of this Agreement. 34. PLR SERVICE 34.1 The Agreement is premised on Buyer providing PLR service. Notwithstanding anything to the contrary contained herein, if Nevada retail electricity restructuring (including retail customer choice of electricity suppliers) is delayed beyond the Effective Date of this Agreement, the Parties shall continue to perform this Agreement in all respects pursuant to the terms and conditions hereof as if Buyer was the PLR and Buyer's retail and wholesale load shall be considered as the TRR. In no event shall the term of the Agreement be extended beyond March 1, 2003. 29 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representative on the date set forth below. NEVADA POWER COMPANY AES MOHAVE, LLC By:_________________________ By:_________________________ Title:______________________ Title:______________________ Date:_______________________ Date:_______________________ 30 EXHIBITS EXHIBIT NO. DESCRIPTION PAGE NO. - ----------- ----------- -------- EXHIBIT A ASSET BUNDLE CAPACITIES A-1 EXHIBIT B PRICE FLOOR OF ENERGY AND PRICE CEILING B-1 OF ENERGY EXHIBIT C EXAMPLE OF SUPPLIER'S MONTHLY INVOICE C-1 EXHIBIT D EXAMPLE OF BUYER'S INVOICE OF REPLACEMENT COSTS D-1 EXHIBIT E EXAMPLES OF YEAR END TRUE-UP INVOICE E-1 EXHIBIT F NOTICES, BILLING AND PAYMENT F-1 INSTRUCTIONS EXHIBIT G FORM OF AVAILABILITY NOTICE G-1 EXHIBIT H BUYER'S WHOLESALE SALES CONTRACTS AT THE EFFECTIVE DATE H-1 EXHIBIT I FORM OF GUARANTEE I-1 EXHIBIT A ASSET BUNDLE CAPACITIES ASSET BUNDLE: MOHAVE UNITS Capacity/1/ (MW-net) -------------------- Plant & Unit Winter Summer Fuel - ------------ ------ ------ ---- Mohave/1/ 1 111.0 111.0 Coal Mohave/1/ 2 111.0 111.0 Coal ----- ----- Total Capacity 222.0 222.0 /1/ The values listed in this Exhibit are the maximum values for Asset Bundle Capacities. Asset Bundle Capacities may be adjusted from time to time in accordance with the Agreement. A-1 EXHIBIT B MOHAVE BUNDLE PRICE FLOOR OF ENERGY AND PRICE CEILING OF ENERGY Energy Prices - ------------- Price Floor of Energy: $ 22.65 per MWh Price Ceiling of Energy: $ 33.49 per MWh B-1 EXHIBIT C EXAMPLE OF SUPPLIER'S MONTHLY INVOICE [See attached Excel spreadsheet] D-1C-1 EXHIBIT D EXAMPLE OF BUYER'S INVOICE OF REPLACEMENT COSTS [See attached Excel spreadsheet] D-1 EXHIBIT E EXAMPLE OF YEAR END TRUE-UP INVOICE [See attached Excel spreadsheet] E-1 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS Supplier: - -------- a) Agreement Notices: Address: _______________________________ ------------------ _______________________________ _______________________________ Phone: _______________________________ Fax: _______________________________ b) Payment Check: Address: _______________________________ -------------- _______________________________ _______________________________ c) Payment Wire Transfer: Bank: _______________________________ ---------------------- ABA #: _______________________________ For: Supplier's Name ___________________ Account No: For: ___________________________________ d) Operating Notifications: ----------------------- i) (Management, if required) ii) Pre-Schedule: (Phone and Fax Nos.) Telephone Number: ____________________________________________________ Fax Number: __________________________________________________________ iii) Real Time (Phone and Fax Nos.) Telephone Number: ____________________________________________________ Fax Number: __________________________________________________________ F-1 iv) Monthly Checkout Person: (Phone and Fax Nos.) Telephone Number: ____________________________________________________ Fax Number: __________________________________________________________ Buyer: - ------ a) Agreement Notices: ------------------ Address ________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ Phone __________________________________ Fax ____________________________________ b) Invoices: --------- US Post Office: (Via Certified Mail) Overnight Delivery --------------- ------------------ Address ________________________________ Address ____________________ ________________________________________ ____________________________ ________________________________________ ____________________________ ________________________________________ ____________________________ ________________________________________ ____________________________ c) Schedules: ---------- i) Pre-Schedule: Primary Name _____________ Phone ______________ Alternate Name ___________ Phone ______________ ii) Real Time Phone: Fax: ____________________________________________ iii) Monthly Checkout: Phone: Fax: ____________________________________________ F-2 EXHIBIT G FORM OF AVAILABILITY NOTICE [See attached Excel Spreadsheet] ) F-1 EXHIBIT H BUYER'S WHOLESALE SALES CONTRACTS AT THE EFFECTIVE DATE
- ---------------------------------------------------------------------------------------------------------------------------------- Historical Amounts (kWh) No. Party Contract Expiration Estimated Amounts 1998 1999 ================================================================================================================================= 1. Lincoln County Supplemental Power 11/1/2019 LCPD has not taken None None Power District Requirements Contract power for the last several years - ---------------------------------------------------------------------------------------------------------------------------------- 2. Boulder City Supplemental Power 11/1/2019 5 to 10 MW (summer 8,076,942 2,082,456 Requirements Contracts only) - ---------------------------------------------------------------------------------------------------------------------------------- 3. Overton Power Coordination Tariff Replaces Supplemental 26 MW summer 49,198,105 71,700,473 District Power Requirements 20 MW winter Contract on 6/1/2000. 15 MW spring/fall Tariff can be cancelled upon 30 days notice. - ---------------------------------------------------------------------------------------------------------------------------------- 4. Needles, CA Requirements Contract 1/2/2017 16 MW summer 26,412,967 33,276,159 4 MW spring/fall - --------------------------------------------------------------------------------------------------------------------------------- 5. CRC (BMI) Coordination Tariff 30 days notice to cancel 9 MW 65,586,419* - ---------------------------------------------------------------------------------------------------------------------------------
* Ten months 1999-2000. F-2 EXHIBIT I FORM OF GUARANTEE [TO COME] EX-10.E 14 0014.txt ASSET SALE AGREEMENT, NRG ENERGY & DYNEGY HOLDING Exhibit 10(E) ________________________________________________________________________________ ASSET SALE AGREEMENT BETWEEN NEVADA POWER COMPANY, NRG ENERGY, INC. AND DYNEGY HOLDINGS INC. FOR THE CLARK ASSET BUNDLE ________________________________________________________________________________ TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS............................. 1 1.1 Definitions.......................................................... 1 ARTICLE II PURCHASE AND SALE............................ 13 2.1 The Sale............................................................. 13 2.2 Excluded Assets...................................................... 14 2.3 Assumed Liabilities.................................................. 14 2.4 Excluded Liabilities................................................. 17 2.5 License of Non-Transferred Intangible Assets......................... 20 ARTICLE III PURCHASE PRICE............................. 20 3.1 Purchase Price....................................................... 20 3.2 Purchase Price Adjustment............................................ 21 3.3 Allocation of Purchase Price......................................... 22 3.4 Proration............................................................ 23 ARTICLE IV THE CLOSING............................... 24 4.1 Time and Place of Closing............................................ 24 4.2 Payment of Purchase Price............................................ 24 4.3 Deliveries by Seller................................................. 24 4.4 Deliveries by Buyer.................................................. 25 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER................ 27 5.1 Organization; Qualification.......................................... 27 5.2 Authority Relative to this Agreement................................. 27 5.3 Consents and Approvals; No Violation................................. 27 5.4 Reports.............................................................. 28 5.5 Financial Statements................................................. 29 5.6 Undisclosed Liabilities.............................................. 29
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Page ---- 5.7 Absence of Certain Changes or Events............................. 29 5.8 Title to Real Property........................................... 29 5.9 Leasehold Interests.............................................. 30 5.10 Improvements..................................................... 30 5.11 Insurance........................................................ 30 5.12 Environmental Matters............................................ 30 5.13 Labor Matters.................................................... 31 5.14 ERISA; Benefit Plans............................................. 32 5.15 Real Property Encumbrances....................................... 32 5.16 Condemnation..................................................... 33 5.17 Certain Contracts and Arrangements............................... 33 5.18 Legal Proceedings, etc........................................... 33 5.19 Permits.......................................................... 34 5.20 Regulation as a Utility.......................................... 34 5.21 Taxes............................................................ 34 5.22 Title to Personal Property....................................... 34 5.23 Water............................................................ 35 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER.......... 35 6.1 Organization..................................................... 35 6.2 Authority Relative to this Agreement............................. 36 6.3 Consents and Approvals; No Violation............................. 36 6.4 Regulation as a Utility.......................................... 37 6.5 Availability of Funds............................................ 37 ARTICLE VII COVENANTS OF THE PARTIES.................. 37 7.1 Conduct of Business of the Seller................................ 37 7.2 Access to Information............................................ 40 7.3 Expenses......................................................... 41 7.4 Further Assurances............................................... 41 7.5 Public Statements................................................ 42 7.6 Consents and Approvals........................................... 42 7.7 Fees and Commissions............................................. 44 7.8 Use of Pollution Control Facilities.............................. 44 7.9 Tax and Withholding Matters...................................... 44 7.10 Supplements to Schedules......................................... 46 7.11 Employees........................................................ 46 7.12 Risk of Loss..................................................... 48 7.13 Additional Covenants of the Buyer................................ 49
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Page ---- 7.14 Surveys and Certain Title Matters......................................................... 49 7.15 Documentation............................................................................. 50 7.16 Separation Issues......................................................................... 50 7.17 Additional Covenants of the Parties....................................................... 51 ARTICLE VIII CLOSING CONDITIONS.............................................. 52 8.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby....................................................................... 52 8.2 Conditions to Obligations of Buyer........................................................ 53 8.3 Conditions to Obligations of Seller....................................................... 55 ARTICLE IX INDEMNIFICATION............................................... 57 9.1 Indemnification........................................................................... 57 9.2 Defense of Claims......................................................................... 59 ARTICLE X TERMINATION AND ABANDONMENT......................................... 61 10.1 Termination............................................................................... 61 10.2 Procedure and Effect of Termination....................................................... 62 ARTICLE XI MISCELLANEOUS PROVISIONS........................................... 62 11.1 Amendment and Modification................................................................ 62 11.2 Waiver of Compliance; Consents............................................................ 62 11.3 No Survival of Representations and Warranties............................................. 62 11.4 Notices................................................................................... 63 11.5 Assignment................................................................................ 64 11.6 Arbitration............................................................................... 66 11.7 Governing Law............................................................................. 67 11.8 Counterparts.............................................................................. 67 11.9 Interpretation............................................................................ 67 11.10 Entire Agreement.......................................................................... 67 11.11 Bulk Sales or Transfer Laws............................................................... 67
iii ASSET SALE AGREEMENT ASSET SALE AGREEMENT, dated as of November 16, 2000 (the "Agreement"), between Nevada Power Company, a Nevada corporation (the "Seller"), NRG Energy, Inc., a Delaware corporation ("NRG"), and Dynegy Holdings Inc. ("Dynegy") a Delaware corporation (collectively, the "Buyer"). WHEREAS, the Seller owns and operates the "Purchased Assets" (as defined herein); and WHEREAS, the Buyer desires to purchase and assume from the Seller, and the Seller desires to sell to the Buyer, the Purchased Assets and certain associated liabilities upon the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS ----------- 1.1 Definitions. As used in this Agreement, the following terms ----------- have the meanings specified or referred to in this Section 1.1: (1) "Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (2) "Adjustment Statement" shall have the meaning set forth in Section 3.2(a) hereof. (3) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (4) "Agreement" means the Asset Sale Agreement, dated as of November 16, 2000, together with the Schedules and Exhibits thereto. (5) "Ancillary Agreements" means the Interconnection Agreement, the Transitional Power Purchase Agreement, the Operating Easement Agreements, the Waste Water Treatment Agreement and the Water Supply Agreement. (6) "Assignment of Leases" means the Assignment of Leases in the form of Exhibit A hereto. (7) "Assumed Liabilities" shall have the meaning set forth in Section 2.3 hereof. (8) "Benefit Plans" shall have the meaning set forth in Section 2.4(i) hereof. (9) "Benefit Plans of Buyer" shall have the meaning set forth in Section 7.11(d) hereof. (10) "Bill of Sale" means the Bill of Sale to be delivered at the Closing with respect to the Purchased Assets which constitute personal property and which are to be transferred at the Closing, substantially in the form of Exhibit B hereto. (11) "Bonds" means the Pollution Control bonds, which were used to finance the Pollution Control Facilities, as more fully described in Schedule 5.15. (12) "Business Day" means any day other than Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (13) "Buyer" shall have the meaning set forth in the preface hereto. (14) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (15) "Buyer Required Regulatory Approvals" shall have the meaning set forth in Section 6.3(b) hereof. (16) "Buyer's Easements" shall have the meaning set forth in Section 4.3(f) hereof. (17) "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. (S)9601, et seq., as amended. ------- (18) "Clark Bundle" means the Clark Generating Station located in Clark County, Nevada. 2 (19) "Closing" shall have the meaning set forth in Section 4.1 hereof. (20) "Closing Date" shall have the meaning set forth in Section 4.1 hereof. (21) "COBRA" means the Consolidated Omnibus Reconciliation Act of 1985, as amended. (22) "Code" means the Internal Revenue Code of 1986, as amended. (23) "Collective Bargaining Agreements" shall have the meaning set forth in Section 7.11(a) hereof. (24) "Confidentiality Agreement" means the Confidentiality and Auction Protocols Agreement, dated March 14, 2000, between the Seller and NRG Energy, Inc., and the Confidentiality and Auction Protocols Agreement dated April 7, 2000, between the Seller and Dynegy Power Corp. (a wholly owned subsidiary of Dynegy Holdings Inc.). (25) "CPUC" means the California Public Utility Commission or any successor thereto. (26) "CSFB" shall have the meaning set forth in Section 7.7 hereof. (27) "Direct Claim" shall have the meaning set forth in Section 9.2(c) hereof. (28) "Dispute" shall have the meaning set forth in Section 11.6 hereof. (29) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, conservation easements, deed restrictions, encumbrances and charges of any kind. (30) "Environmental Audit Agreement" means the proposed Environmental Audit Agreement which Seller has been seeking to execute with the Nevada Division of Environmental Protection ("NDEP") relating to the Clark Bundle. 3 (31) "Environmental Laws" means all federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances, laws relating to record keeping, notification, disclosure and reporting requirements respecting Hazardous Substances, and laws relating to the management and use of natural resources. (32) "Environmental Permits" shall have the meaning set forth in Section 5.12(a) hereof. (33) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (34) "ERISA Affiliate" shall have the meaning set forth in Section 2.4(i) hereof. (35) "ERISA Affiliate Plans" shall have the meaning set forth in Section 2.4(i) hereof. (36) "Estimated Adjustment Amount" means (i) the Estimated Maintenance and Capital Expenditures Amount plus (ii) the Estimated Inventory Adjustment Amount plus (iii) the Estimated Materials and Supplies Adjustment Amount. (37) "Estimated Closing Payment" shall have the meaning set forth in Section 4.2 hereof. (38) "Estimated Inventory Adjustment Amount" means the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer, which approval shall not be unreasonably withheld, of the fuel inventory priced as the Seller's weighted average fuel costs used at or in connection with the Purchased Assets as of the date that is ten (10) days before the Closing Date, which valuation shall be provided to the Buyer by the Seller no later than five (5) days before the Closing Date. (39) "Estimated Maintenance and Capital Expenditures Amount" means the Seller's estimate of the Maintenance and Capital Expenditures Amount, which estimate shall be the Seller's good faith reasonable estimate of the Mainte- 4 nance and Capital Expenditures Amount actually incurred, as set forth in Schedule 1.1(39) attached hereto as of the date set forth in such Schedule 1.1(39). (40) "Estimated Materials and Supplies Adjustment Amount" means the Seller's good faith reasonable estimate of the book value of materials and supplies used at or in connection with the Purchased Assets on the Materials and Supplies Valuation Date. (41) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (42) "Excluded Assets" shall have the meaning set forth in Section 2.2 hereof. (43) "Excluded Liabilities" shall have the meaning set forth in Section 2.4 hereof. (44) "Federal Power Act" means the Federal Power Act of 1935, as amended. (45) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. (46) "Final Order" shall have the meaning set forth in Section 8.1(c) hereof. (47) "Governmental Authority" means any executive, legislative, judicial, regulatory or administrative agency, body, commission, department, board, court, tribunal, arbitrating body or authority of the United States or any foreign country, or any state, local or other governmental subdivision thereof. (48) "Hazardous Substances" means (i) any petrochemical or petroleum products, oil or coal ash, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (ii) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (iii) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law. 5 (49) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (50) "Hourly Employees" shall have the meaning set forth in Section 7.11(a) hereof. (51) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (52) "Income Tax" means any federal, state, local or foreign Tax (i) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains Taxes and minimum Taxes) or (ii) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such Tax may be based, measured by or calculated with respect to, is described in clause (i), in each case together with any interest, penalties, or additions to such Tax. (53) "Indemnifiable Losses" shall have the meaning set forth in Section 9.1(a) hereof. (54) "Indemnifying Party" shall have the meaning set forth in Section 9.1(c) hereof. (55) "Indemnitee" shall have the meaning set forth in Section 9.1(c) hereof. (56) "Indenture" means Indenture of Mortgage and Deed of Trust dated as of October 1, 1953, as amended from time to time, between the Seller and Bankers Trust Company, as successor trustee. (57) "Independent Accounting Firm" means Deloitte & Touche LLP or such other independent accounting firm of national reputation mutually appointed by the Seller and the Buyer. (58) "Independent Appraiser" shall have the meaning set forth in Section 3.3 hereof. (59) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit C attached hereto. (60) "Interconnection Agreement" means the Interconnection Agreement, dated as of November 16, 2000, between the Seller and the Buyer. 6 (61) "Inventory Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (62) "Knowledge" means the actual knowledge of the directors and executive officers of the specified Person, which directors and executive officers are charged with the responsibility for the particular function as of the date of the Agreement, or with respect to any certificate delivered pursuant to the Agreement, the date of delivery of such certificate. In the case of Seller, "executive officer" includes (i) any person listed on Schedule 1.1(62), and (ii) any person who replaces a person listed on Schedule 1.1(62) between the date of this Agreement and the Closing Date in a listed position or the successor to that position. (63) "Leased Assets" shall have the meaning set forth in Section 7.4 hereof. (64) "Leases" shall have the meaning set forth in Section 5.9 hereof. (65) "Local 396 LOA" shall have the meaning set forth in Section 7.11(a) hereof. (66) "Maintenance and Capital Expenditures Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (67) "Maintenance and Capital Expenditures Amount" means the aggregate amount of all funds actually expended on, or for which liabilities were accrued in accordance with generally accepted accounting principles applied on a consistent basis with respect to any maintenance expenditures and capital expenditures beginning on the date of this Agreement and ending on the Closing Date, excluding (i) any unscheduled maintenance expenditures or capital expenditures which are made by the Seller with the Buyer's consent, which shall not be unreasonably withheld (ii) any maintenance expenditures or capital expenditures made by Seller in breach of Section 7.1, but including (i) any Scheduled Maintenance Expenditures or Scheduled Capital Expenditures, made with respect to the Purchased Assets by the Seller, and (ii) any maintenance expenditures and capital expenditures which were made by the Seller at the Buyer's request, beginning on the date of this Agreement and ending on the Closing Date. (68) "Management Employee" shall have the meaning set forth in Section 7.11(b) hereof. 7 (69) "Management Transition Plan" means the Management Transition Plan, Generation Bundled Employees, as detailed in the Generation Divestiture Severance Packet of the Seller dated July, 2000. (70) "Material Adverse Effect" means any change or changes in or effect on the Purchased Assets that is materially adverse to the business, results of operations, financial condition or physical condition of the Purchased Assets, individually or in the aggregate, except for (i) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power, (ii) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used at the Purchased Assets, (iii) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems, (iv) any change in applicable laws, judgments, orders or decrees, (v) any conditions imposed by a Governmental Authority in connection with the consents or approvals required for the transactions contemplated hereby, and (vi) any materially adverse change in or effect on the Purchased Assets which is cured (including by the payment of money) by the Seller before the Termination Date. (71) "Materials and Supplies Adjustment Amount" shall have the meaning set forth in Section 3.2 hereof. (72) "Materials and Supplies Valuation Date" means the date that is ten (10) days prior to the Closing Date. (73) "Necessary Capital Expenditures" shall have the meaning set forth in Section 7.1(c) hereof. (74) "Necessary Maintenance Expenditures" shall have the meaning set forth in Section 7.1(e) hereof. (75) "Off-Site Location" means any real property other than the Real Property. (76) "Operating Easement Agreements" means the operating easements providing the right to continue operating and maintaining certain generation and transmission facilities at the Purchased Assets, each in substantially the form of Exhibit D or Exhibit E attached hereto. (77) "Operating Easements" means the Seller's Easements and/or Buyer's Easements granted pursuant to the Operating Easement Agreements. 8 (78) "OPUC" means the Oregon Public Utility Commission or any successor thereto. (79) "Permits" shall have the meaning set forth in Section 5.19 hereof. (80) "Permitted Encumbrances" means (i) those exceptions to title to the Purchased Assets listed on Schedule 5.8; (ii) subject to (S)(S) 7.14 and 8.2(g) any state of facts that a current survey of the Real Property would disclose; (iii) with respect to any date before the Closing Date, Encumbrances under the Indenture or under the pollution control bond indentures of trust listed in Schedule 5.15; (iv) mortgages, liens, pledges, charges, Encumbrances and restrictions incurred in connection with the Seller's purchase of properties and assets after the date of the Seller Balance Sheet, but only if and to the extent that such mortgage, lien, pledge, charge, Encumbrance or restriction is against such properties or assets and secures all or a portion of the purchase price therefor; (v) the Buyer's Easements and the Seller's Easements (in accordance with the Operating Easement Agreements applicable to such easements and the Interconnection Agreement); (vi) statutory liens for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings and with respect to which Seller pays the Taxes, assessments or other government charges under protest; (vii) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings in which Seller has posted an appropriate bond to secure payment or placed sufficient Funds in escrow pending the outcome of such dispute; (viii) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities; and (ix) such other liens, imperfections in or failure of title, charges, easements, restrictions and Encumbrances which do not materially detract, individually or in the aggregate, from the value of or materially interfere with the present use of the Purchased Assets and do not, in the aggregate, have a Material Adverse Effect. (81) "Person" means any individual, partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof. (82) "Plan" shall have the meaning set forth in Section 7.11(d). (83) "Pollution Control Facilities" means pollution control facilities relating to the Clark Bundle as more fully described in Schedule 5.15. 9 (84) "PUCN" means the Public Utilities Commission of Nevada or any successor thereto. (85) "Purchase Price" shall have the meaning set forth in Section 3.1 hereof. (86) "Purchased Assets" means, subject to the Permitted Encumbrances, all of the right, title and interest in, to and under the real and personal property, tangible or intangible, of the Seller constituting the Clark Bundle or used principally for generation purposes in connection with such sites including, without limitation, all of the Seller's right, title and interest in the following assets: (i) the Real Property described on Schedule 1.1(86)(i) as associated with the Clark Bundle (the "Clark Bundle Real Property"); (ii) all inventories of fuels, supplies, materials and critical spares located on or in transit to the Clark Bundle Real Property on the Closing Date; (iii) the machinery, equipment, vehicles, furniture and other personal property located on or in transit to the Clark Bundle Real Property on the Closing Date, including, without limitation, the items of personal property included in Schedule 1.1(86)(iii) as being associated with the Clark Bundle, and all warranties against manufacturers or vendors relating thereto, to the extent that such warranties are transferable without consent or with consent obtained through Seller's commercially reasonable efforts pursuant to Section 7.6(b); (iv) the contracts, agreements and personal property leases listed on Schedule 1.1(86)(iv) as being associated with the Clark Bundle and which are assignable without consent or with consent obtained through Seller's commercially reasonable efforts pursuant to Section 7.6(b); (v) the Permits listed on Schedule 1.1(86)(v) as being associated with the Clark Bundle, to the extent transferable without consent or with consent obtained through Seller's commercially reasonable efforts pursuant to Section 7.6(b); (vi) all books, operating records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications, procedures and similar items of the Seller relating specifically to the aforementioned assets other than books of account and associated with the Clark Bundle; (vii) the SO2 Allowances identified on Schedule 1.1(86)(vii) and associated with the Clark Bundle; and (viii) any assets purchased or to be purchased by the Seller pursuant to Section 7.4 and associated with the Clark Bundle; (ix) all telephones, computer hardware, firmware, software, and associated licenses located at and used in the operation of the Clark Bundle, including but not limited to the computer assets listed on Schedule 1.1(86)(iii) but excluding non-material licenses that cannot be transferred and other intangible assets to be licensed by the Buyer pursuant to Section 2.5 of this Agreement; and (x) all water rights specifically associated with the Clark Bundle, including but not limited to the water rights listed on Schedule 5.19(a). (87) "Qualifying Offer of Employment" shall have the meaning set forth in Section 7.11(b) hereof. 10 (88) "Real Property" means each parcel of real property owned by the Seller (or to which the Seller holds an interest therein), including, but not limited to, buildings, structures and improvements located thereon, fixtures contained therein and appurtenances thereto and easements and other rights relating thereto and as more fully described on Schedule 5.8. (89) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment. (90) "Remediation" means an action of any kind to address a Release of Hazardous Substance or the presence of Hazardous Substances at the Purchased Assets or an Off-Site Location, including any or all of the following activities to the extent they relate to or arise from the presence of a Hazardous Substance at the Purchased Assets or an Off-Site Location: (i) monitoring, investigation, assessment, treatment, cleanup, containment, removal, mitigation, response or restoration work; (ii) obtaining any permits, consents, approvals or authorizations of any Governmental Authority necessary to conduct any such activity; (iii) preparing and implementing any plans or studies for any such activity; (iv) obtaining a written notice from a Governmental Authority with jurisdiction over the Purchased Assets or an Off-Site Location under Environmental Laws that no material additional work is required by such Governmental Authority; (v) the use, implementation, application, installation, operation or maintenance of removal actions on the Purchased Assets or an Off- Site Location, remedial technologies applied to the surface or subsurface soils, excavation and treatment or disposal of soils at an Off-Site Location, systems for long-term treatment of surface water or ground water, engineering controls or institutional controls; and (vi) any other activities reasonably determined by a party to be necessary or appropriate or required under Environmental Laws to address the presence or Release of Hazardous Substances at the Purchased Assets or an Off-Site Location. (91) "Rules" shall have the meaning set forth in Section 11.6 hereof. (92) "Scheduled Capital Expenditures" means those capital expenditures included on Schedule 1.1(92). (93) "Scheduled Maintenance Expenditures" means those maintenance expenditures included on Schedule 1.1(93). (94) "SEC" means the Securities and Exchange Commission or any successor thereto. 11 (95) "Securities Act" means the Securities Act of 1933, as amended. (96) "Seller" shall have the meaning set forth in the preface hereto. (97) "Seller Agreements" means those agreements listed on Schedule 5.17(a), the Collective Bargaining Agreements and the Management Transition Plan. (98) "Seller Balance Sheet" shall have the meaning set forth in Section 5.5 hereof. (99) "Seller Required Regulatory Approvals" shall have the meaning set forth in Section 5.3(b) hereof. (100) "Seller's Easements" shall have the meaning set forth in Section 4.4(d) hereof. (101) "Separation Schedule" means the schedule to be delivered to the Buyer by the Seller by the earlier of March 14, 2001 or thirty (30) days prior to the Closing Date, which shall delineate the Purchased Assets from the Seller's other assets and which shall be consistent with the separation schedule summary and one line drawing attached hereto as Exhibit F. (102) "SO2 Allowance" means an authorization by the Administrator of the USEPA under the Clean Air Act, 42 U.S.C. (S)7401, et seq., to emit one ton ------- of sulfur dioxide during or after a specified calendar year. (103) "Subsidiary," when used in reference to any other person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other person. (104) "Tax" means any tax, charge, fee, levy, penalty or other assessment (other than any Income Tax) imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any excise, property, sales, transfer, franchise, payroll, withholding, social security or other tax, including any interest, penalties or additions attributable thereto. (105) "Tax Return" means any return, report, information return, declaration, claim for refund or other document (including any related or supporting 12 information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. (106) "Termination Date" shall have the meaning set forth in Section 10.1(b) hereof. (107) "Third Party Claim" shall have the meaning set forth in Section 9.2(a) hereof. (108) "Transitional Power Purchase Agreement" means Transitional Power Purchase Agreement, dated as of November 16, 2000, between the Buyer and the Seller. (109) "TPPA Amount" shall have the meaning set forth in Section 3.1. hereof. (110) "USEPA" means the United States Environmental Protection Agency, or any successor agency thereto. (111) "WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988, as amended. (112) "Waste Water Treatment Agreement" means a Waste Water Treatment Agreement, to be negotiated and executed between Seller, Buyer and the buyer of the Sunrise Bundle located in Clark County, Nevada, pursuant to Section 7.17(d). (113) "Water Supply Agreement" means a Water Supply Agreement, to be negotiated and executed between Buyer and the buyer of the Harry Allen Bundle located in Clark County, Nevada, pursuant to Section 7.17(d). ARTICLE II ---------- PURCHASE AND SALE ----------------- 2.1 The Sale. Upon the terms and subject to the satisfaction of the -------- conditions contained in this Agreement, at the Closing, the Seller shall sell, assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, free and clear of all Encumbrances (except for Permitted Encumbrances and the Operating Easement(s) granted in accordance with the Operating Easement Agreements and the Interconnection Agreement), the Purchased Assets. 13 2.2 Excluded Assets. Notwithstanding any provision herein to the --------------- contrary, the Purchased Assets shall not include the following (collectively, the "Excluded Assets"): (a) all cash, cash equivalents, bank deposits, accounts receivable, and any income, sales, payroll or other tax receivables; (b) the names "Sierra Pacific Resources," "Sierra Pacific Power Company," "Sierra Pacific," "Nevada Power Company" and "Nevada Power" or any related or similar trade names, trademarks, service marks or logos; (c) transmission, substation and communication facilities and related support equipment described in Schedule 2.2(c); (d) any refund, credit penalty payment, adjustment or reconciliation (i) related to Real Property, personal property or other Taxes paid prior to the Closing Date in respect of the Purchased Assets, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable, or (ii) arising under the Seller Agreements and relating to a period before the Closing Date; (e) except to the extent specifically required by law and except such personnel records set forth on Schedule 2.2(e), the personnel records relating to any employees of the Seller; (f) the rights and assets described in the Separation Schedule as not part of the Purchased Assets; and (g) the SO2 Allowances identified on Schedule 2.2(g); (h) any agreement between Seller and an Affiliate of Seller, except as disclosed on Schedule 2.2(h); and (i) any agreement for the purchase or sale of energy, capacity or ancillary services from the Clark Bundle, other than the Transitional Power Purchase Agreement, Interconnection Agreement or as disclosed on Schedule 2.2(i). 2.3 Assumed Liabilities. On the Closing Date, the Buyer shall ------------------- deliver to the Seller the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the liabilities and obligations of the Seller, direct or indirect, known or unknown, absolute or contingent, which relate to the Purchased Assets, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective 14 conditions thereof, including, without limitation, the following liabilities and obligations: (a) all liabilities and obligations of the Seller to be paid or performed after the Closing Date arising under (i) the Seller Agreements, the Environmental Permits, the Permits, the Leases, contracts and any other agreements assigned to the Buyer pursuant to this Agreement in accordance with the terms thereof, and (ii) the leases, contracts and other agreements entered into by the Seller with respect to the Purchased Assets after the date hereof consistent with the terms of this Agreement (including in the case of (i) and (ii), without limitation, agreements with respect to liabilities for real or personal property taxes or other Taxes on any of the Purchased Assets); except, in each case, to the extent such liabilities and obligations, but for a breach or default by the Seller, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default; (b) all liabilities and obligations associated with the Purchased Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.9 hereof; (c) any liabilities and obligations for which the Buyer has indemnified the Seller pursuant to Section 9.1 hereof; (d) all liabilities to employees for which the Buyer is liable pursuant to Section 7.11 hereof, including the Collective Bargaining Agreements and the Management Transition Plan; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets, including, without limitation, any fines or penalties that arise in connection with the ownership or operation of the Purchased Assets prior to the Closing Date or the costs associated with correcting any such violations; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets prior to the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at the 15 Purchased Assets; and (iii) the investigation and/or Remediation (whether or not such investigation or Remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to the Closing Date at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at the Purchased Assets; provided, as to all of the above, that nothing set forth in this Section 2.3(e) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (f) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or operation of the Purchased Assets; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets on or after the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at the Purchased Assets; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets; (v) the investigation and/or Remediation of Hazardous Substances that are present or have been released on or after the Closing Date at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at the Purchased Assets; and (vi) the investigation and/or Remediation of Hazardous Substances that are disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets, at any Off-Site Location; provided, that nothing set forth in this Section 2.3(f) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (g) all liabilities and obligations of the Seller with respect to the Purchased Assets under the agreements or consent orders set forth on Schedule 5.12; 16 (h) subject to Sections 7.1(c) and (e), all liabilities incurred by the Seller with respect to the Maintenance and Capital Expenditures Amount made with respect to the Purchased Assets by the Seller except for any liabilities that Buyer has already paid to Seller at Closing as an accrued liability included in the Estimated Adjustment Amount; (i) all liabilities or obligations relating to leases for the Purchased Assets; and (j) all other liabilities or obligations exclusively relating to the Purchased Assets no matter when the events or occurrences giving rise to such liabilities or obligations took place. All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are collectively referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between the Seller and the Buyer. Nothing in this Section 2.3 shall be construed to require Buyer to assume any liability excluded by Section 2.4. 2.4 Excluded Liabilities. The Buyer shall not assume or be -------------------- obligated to pay, perform or otherwise discharge the following liabilities (collectively, the "Excluded Liabilities"): (a) any liabilities or obligations of the Seller in respect of any Excluded Assets or other assets of the Seller which are not Purchased Assets; (b) any liabilities or obligations in respect of Taxes attributable to the Purchased Assets for taxable periods ending on or prior to the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.9(a) hereof; (c) any liabilities, obligations or responsibilities relating to the disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, by the Seller, of Hazardous Substances that were generated at the Purchased Assets, at any Off-Site Location, where the disposal, storage, transportation, discharge, Release, recycling or the arrangement for such activities at such Off-Site Location occurred prior to the Closing Date, provided that for purposes of this Section 2.4(c), "Off-Site Location" does not include any location to which Hazardous Substances disposed of, discharged from, emitted from or Released at the Purchased Assets have migrated from the Purchased Assets including, but not limited to, surface waters that have received waste water discharges from the Purchased Assets; 17 (d) any liabilities, obligations or responsibilities relating to (i) the transmission facilities delineated in the Interconnection Agreement or Operating Easement Agreements or (ii) any Seller's operations on, or usage of, the operating easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (A) any violation or alleged violation of Environmental Laws and (B) loss of life, injury to persons or property or damage to natural resources, except to the extent caused by the Buyer; (e) any liabilities or obligations required to be accrued by the Seller in accordance with generally accepted accounting principles and the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities related to the Purchased Assets other than any liability assumed by the Buyer under Sections 2.3(a), (e) or (f) hereof; (f) any liabilities or obligations relating to any personal injury to an employee or a third party (including, without limitation, workers' compensation claims), discrimination, wrongful discharge, unfair labor practice, property damage, breach of contract or tort filed with or pending before any court or administrative agency on the Closing Date, or any claim arising out of an actual event or events of which Seller has Knowledge as of the Closing Date if it is reasonably foreseeable that such event or events will give rise to a claim that may be filed with any court or administrative agency, with respect to liabilities affecting the Purchased Assets, other than any liabilities or obligations assumed by the Buyer under Section 2.3(e) hereof; (g) any payment obligations of the Seller for goods delivered or services rendered prior to the Closing; (h) any liabilities or obligations imposed upon, assumed or retained by the Seller pursuant to the Interconnection Agreement, Operating Easement Agreements or any other Ancillary Agreement; (i) any liabilities, obligations or responsibilities relating to any "employee pension benefit plan" (as defined in Section 3(2) of ERISA) maintained by the Seller and any trade or business (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with the Seller under Sections 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") or to which the Seller and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by the Seller or any ERISA Affiliate (hereinafter referred to as "Benefit Plans"), including any liability (i) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; 18 (ii) with respect to non-compliance with the notice and benefit continuation requirements of COBRA; (iii) with respect to any non-compliance with ERISA or any other applicable laws; or (iv) with respect to any suit, proceeding or claim which is brought against any Benefit Plan, ERISA Affiliate Plan, any fiduciary or former fiduciary of any such Benefit Plan or ERISA Affiliate Plan; (j) liabilities or obligations under Section 2.3(e) that are the subject of a claim filed with or pending before any court or administrative agency on or before November 16, 2000, to the extent that any such claim is not disclosed on Schedule 5.18; (k) liabilities arising under any material intercompany agreement between Seller and an Affiliate of Seller that is not disclosed on a Schedule to this Agreement; (l) liabilities arising under any agreement for the purchase or sale of energy, capacity or ancillary services from the Purchased Assets, other than the Transitional Power Purchase Agreement, the Interconnection Agreement or as disclosed on a Schedule to this Agreement; (m) any accrued liability included in the Estimated Adjustment Amount for which Seller is paid at Closing; (n) any liabilities paid or incurred in connection with obtaining consents to assignment of Seller Agreements; (o) any liabilities for borrowed money or guarantees of third party obligations, except purchase money security interests; (p) liabilities with respect to the pollution control Bonds listed on Schedule 5.15, except for the obligations arising out of the covenants of Buyer set forth in Section 7.8; (q) liabilities with respect to any accrued payment obligations incurred by Seller prior to the Closing Date; (r) any liability for which Seller is entitled to payment under any applicable insurance policy before the application of Section 2.3, to the extent of such payment; and (s) any allocation of charges to Seller or the owner of the Purchased Assets by Southwest Gas Corporation of El Paso Natural Gas Company's 19 Risk Sharing Revenue Stability Charges based on gas transportation or purchases with respect to the Purchased Assets that occurred before the Closing Date. 2.5 License of Non-Transferred Intangible Assets. It is understood -------------------------------------------- by the parties that trade names of Seller are Excluded Assets, however, such names appear on certain of the Purchased Assets, such as certain fixtures and equipment, and on supplies, materials and similar consumable items that will be on hand at the Purchased Assets at Closing. Notwithstanding that such trade names are Excluded Assets, Buyer shall be entitled to use such consumable items for a period of three (3) months following the Closing and shall have up to six (6) months following the Closing to remove such names from fixed Purchased Assets, provided that Buyer shall not send correspondence or other materials to third parties on any stationery that contains a trade name or trademark of Seller or any Affiliate of Seller. Seller hereby grants to Buyer a license to use, solely in connection with the operation of the Clark Bundle on and after Closing, such proprietary computer software of Seller located at the Clark Bundle as is presently used at the Clark Bundle exclusively in connection with the operation of the Clark Bundle and that would otherwise be an Excluded Asset, except for such computer software that is designed to be part of a networked computer system providing data processing capabilities or services beyond the Clark Bundle and any licenses which are not transferable and provided that in no event shall Buyer or any successor have access under such license to Seller's own computer networks. The rights and obligations relating to the licenses contained in this Section 2.5 will be made the subject of a separate software and trademark licensing agreement between the parties which shall address the terms and conditions affecting the irrevocable, fully paid up, royalty-free, transferable, non-exclusive rights and licenses granted therein, in which case the parties shall negotiate such terms and conditions in good faith and deliver such agreement at Closing. ARTICLE III ----------- PURCHASE PRICE -------------- 3.1 Purchase Price. The purchase price for the Purchased Assets -------------- shall be an amount equal to the sum of (i) Three Hundred Forty Two Million Two Hundred Thousand Dollars ($342,200,000), (ii) the Estimated Adjustment Amount, (iii) the Adjustment Amount, and (iv) any amounts paid by the Seller with respect to Leased Assets pursuant to Section 7.4 hereof (the "Purchase Price"). Notwithstanding any other provision of this Agreement, the Purchase Price includes all applicable sales and similar taxes. As a result of the execution of the Transitional Power Purchase Agreement, the amount to be paid by Buyer to Seller at Closing shall be reduced by One Hundred Fifty Eight Million Dollars ($158,000,000) (the "TPPA Amount"), and such reduction is reflected in Section 4.2(iv). 20 3.2 Purchase Price Adjustment. (a) Within sixty (60) days after ------------------------- the Closing, the Seller shall prepare and deliver to the Buyer a statement (the "Adjustment Statement") which reflects (i) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of all fuel inventory used at or in connection with the Purchased Assets and (B) the Estimated Inventory Adjustment Amount (such difference is referred to as the "Inventory Adjustment Amount"), (ii) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of the materials and supplies used at or in connection with the Purchased Assets and (B) the Estimated Materials and Supplies Adjustment Amount (such difference is referred to as the "Materials and Supplies Adjustment Amount") and (iii) the difference between (A) the Maintenance and Capital Expenditures Amount and (B) the Estimated Maintenance and Capital Expenditures Amount (such difference is referred to as the "Maintenance and Capital Expenditures Adjustment Amount"). The Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount and the Maintenance and Capital Expenditures Adjustment Amount are referred to collectively as the "Adjustment Amount." The Adjustment Statement shall be prepared using the same generally accepted accounting principles, policies and methods as the Seller has historically used in connection with the calculation of the items reflected on the Adjustment Statement. The Buyer agrees to cooperate with the Seller in connection with the preparation of the Adjustment Statement and related information, and shall provide to the Seller such books, records and information as may be reasonably requested from time to time. (b) The Buyer may dispute the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount; provided, however, that the Buyer shall notify the Seller -------- ------- in writing of the disputed amount, and the basis of such dispute, within ten (10) Business Days of the Buyer's receipt of the Adjustment Statement. In the event of a dispute with respect to the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount, the Buyer and the Seller shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the Buyer and the Seller are unable to reach a resolution of such differences within thirty (30) days of receipt of the Buyer's written notice of dispute to the Seller, the Buyer and the Seller shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the parties, within thirty (30) days after such submission, upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. The fees and disbursements of the Independent Accounting Firm shall be allocated between the Buyer and the Seller so that the Buyer's share of such fees and disbursements shall be 21 in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully disputed by the Buyer (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm. (c) Within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Buyer shall pay all undisputed portions of the Adjustment Amount. If there is a dispute with respect to any amount on the Adjustment Statement, within five (5) Business Days after the final determination of such disputed amounts on the Adjustment Statement, the Buyer shall pay to the Seller an amount equal to the disputed portion of the Adjustment Amount as finally determined to be payable with respect to the Adjustment Statement; provided, however, that if such amount shall be less than -------- ------- zero, then the Seller shall pay to the Buyer the amount by which such amount is less than zero within five (5) Business Days of such final determination. All payments made pursuant to this Section 3.2(c) shall be paid together, with interest thereon for the period commencing on the Closing Date through the date of payment, calculated at the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in cash by federal or other wire transfer of immediately available funds. (d) Buyer acknowledges that if the Closing occurs after the closing of the transactions contemplated by the Reid Gardner Asset Sales Agreement, Buyer shall make the payment contemplated by Section 3.2(d) of the Reid Gardner Asset Sales Agreement pursuant to the Reid Gardner Asset Sales Agreement in accordance with the terms of the Reid Gardner Asset Sales Agreement. 3.3 Allocation of Purchase Price. The Buyer and the Seller shall use ---------------------------- their good faith best efforts to agree upon an allocation among the Purchased Assets of the sum of the Purchase Price consistent with Section 1060 of the Code and the Treasury Regulations thereunder within one-hundred twenty (120) days of the date of this Agreement but in no event less than thirty (30) days prior to the Closing. The Buyer and the Seller may jointly agree to obtain the services of an independent appraiser (the "Independent Appraiser") to assist the parties in determining fair value of the Purchased Assets for purposes of such allocation. If such an appraisal is made, both the Buyer and the Seller agree to accept the Independent Appraiser's determination of the fair value of the Purchased Assets. The parties shall jointly select the Independent Appraiser. The cost of the appraisal shall be borne equally by the Buyer and the Seller. Each of the Buyer and the Seller agrees to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns, in accordance with such agreed allocation. Each of the Buyer and the Seller shall report the transactions contemplated by this Agreement for federal Income Tax and all other tax purposes in a manner consistent with the allocation determined pursuant 22 to this Section 3.3. Each of the Buyer and the Seller agrees to provide the other promptly with any other information required to complete Form 8594. Each of the Buyer and the Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. 3.4 Proration. (a) The Buyer and the Seller agree that all of the --------- items normally prorated, including those listed below, relating to the business and operation of the Purchased Assets shall be prorated as of the Closing Date, with the Seller liable to the extent such items relate to any time period through the Closing Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date: (i) personal property, real estate, occupancy and any other Taxes, assessments and other charges, if any, on or with respect to the business and operation of the Purchased Assets. In addition, in the event that the Seller is subject to Taxes, assessments and other charges on property of which the Purchased Assets comprises only a portion, the portion of such Taxes, assessments and other charges allocated to the Purchased Assets and subject to proration by this Section 3.4 shall be determined by reference to the relative value of the Purchased Assets, as determined by the Purchase Price paid by the Buyer, compared with the value of the Seller's property subject to such Taxes, assessments and other charges, as assessed by the relevant taxing authority; (ii) rent, Taxes and other items payable by or to the Seller under any of the Seller Agreements to be assigned to and assumed by the Buyer hereunder; (iii) any permit, license or registration fees with respect to any Environmental Permit or other Permit; and (iv) sewer rents and charges for water, telephone, electricity and other utilities. (b) In connection with such proration, in the event that actual figures are not available at the Closing Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either the Seller or the Buyer made within sixty (60) days of the date that the actual amounts become available. The Seller and the Buyer agree to furnish each other with such documents and other records as may be reasonably 23 requested in order to confirm all adjustment and proration calculations made pursuant to this Section 3.4. ARTICLE IV ---------- THE CLOSING ----------- 4.1 Time and Place of Closing. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York, at 10:00 a.m., local time, on the first Business Day following the date on which all of the conditions to each party's obligations hereunder have been satisfied or waived, or such other place or time as the parties may mutually agree, provided that such date shall not occur prior to June 1, 2001, unless the parties mutually agree to an earlier date. The date and time at which the Closing actually occurs is hereinafter referred to as the "Closing Date." 4.2 Payment of Purchase Price. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Assets, the Buyer shall pay or cause to be paid to the Seller the Purchase Price. The portion of the Purchase Price to be paid at Closing shall be as follows: (i) an amount equal to the sum of $342,200,000, plus (ii) any amounts with respect to Leased Assets to be paid pursuant to Section 7.4 hereof, plus (iii) the Estimated Adjustment Amount for the Closing, and less (iv) the TPPA Amount (the "Estimated Closing Payment"), by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer. If, at the time of Closing, there is a payment required to be made pursuant to Section 3.2(d) of the Reid Gardner Asset Sales Agreement, such payment shall be made at Closing. 4.3 Deliveries by Seller. At the Closing, the Seller shall deliver -------------------- to the Buyer the following: (a) The Bill of Sale, duly executed by the Seller for the personal property included in the Purchased Assets; (b) The executed consents to transfer the Seller Agreements, the Environmental Permits and the Permits, to the extent required hereunder or under applicable law; (c) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Seller; 24 (d) The certificate and opinion of counsel as contemplated by Section 8.2 hereof; (e) One or more deeds of conveyance transferring the Seller's interest in the Real Property to the Buyer, without covenant or warranty of title other than as provided in the Form of Grant, Bargain, Sale Deed attached as Exhibit G hereto, duly executed and acknowledged by the Seller and in recordable form subject to Permitted Encumbrances and retaining to the extent necessary any existing easements in favor of the Seller with respect to Real Property conveyed to the Buyer, each substantially in the form of Exhibit G attached hereto; (f) One or more easements to the extent necessary to evidence the right of the Buyer to use the Real Property of the Seller (the "Buyer's Easements") associated with the Purchased Assets, duly executed and acknowledged by the Seller and in recordable form, each substantially in the form of Exhibit E attached hereto; (g) The Assignment of Leases, in the form of Exhibit A attached hereto, assigning to the Buyer all of the Seller's right, title and interest as lessor (or lessee, as the case may be) under the Leases; (h) Copies of the resolutions adopted by the board of directors of the Seller, certified by the secretary of the Seller, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Seller of this Agreement, the Ancillary Agreements, the Bill of Sale and other closing documents described in this Agreement to which the Seller is a party, and the performance by the Seller of its obligations hereunder and thereunder; (i) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Assets in accordance with this Agreement and the Ancillary Agreements, and where necessary or desirable, in recordable form; and (j) Such other agreements, documents, instruments and writings as are required to be delivered by the Seller at or prior to the Closing Date pursuant to this Agreement, the Ancillary Agreements or otherwise required in connection herewith or therewith. 4.4 Deliveries by Buyer. At the Closing, the Buyer shall deliver to ------------------- the Seller the following: 25 (a) The Estimated Closing Payment by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer; (b) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Buyer; (c) The certificate and opinion of counsel as contemplated by Section 8.3 hereof; (d) One or more easements to the extent necessary to evidence the right of Seller to use the Real Property of Buyer (the "Seller's Easements"), to the extent necessary for the Seller to continue and maintain its transmission and distribution business, in favor of the Seller with respect to Real Property conveyed to the Buyer, duly executed and acknowledged by the Buyer, each substantially in the form of Exhibit D attached hereto, and the Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.9 hereof; (e) The Instrument of Assumption, duly executed by the Buyer providing for the assumption of all of the Seller's right, title and interest as lessor (or lessee as the case may be) under the Leases; (f) All such other instruments of assumption as shall, in the reasonable opinion of the Seller and its counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (g) Copies of the resolutions adopted by the board of directors of the Buyer, certified by the secretary of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement, the Ancillary Agreements and other closing documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its obligations hereunder and thereunder; and (h) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement, the Ancillary Agreements or otherwise required in connection herewith or therewith. 26 ARTICLE V --------- REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- The Seller represents and warrants to the Buyer as follows: 5.1 Organization; Qualification. The Seller is a corporation duly --------------------------- organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. The Seller is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and Bylaws as currently in effect. 5.2 Authority Relative to this Agreement. The Seller has full ------------------------------------ corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of the Seller and no other corporate proceedings on the part of the Seller are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by the Seller, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Buyer, subject to the receipt of the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitute valid and binding agreements of the Seller, enforceable against the Seller in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 5.3(a), and other than obtaining the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by the Seller nor the sale by the Seller of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws of the Seller, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any 27 Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to the Seller as a result of the specific regulatory status of the Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which the Seller is a party or by which the Seller, or any of the Purchased Assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Seller, or any of its assets, which violation would have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) approvals or other actions by the PUCN, the CPUC, and/or the OPUC, (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by the Seller and the Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through (iv) above are collectively referred to as the "Seller Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory authority is necessary for the consummation by the Seller of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect and other than the Permits and Environmental Permits. 5.4 Reports. Since January 1, 1996, the Seller, pursuant to the ------- Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act, has filed or caused to be filed with the SEC, the applicable state or local utility commissions or regulatory bodies, or the FERC, as the case may be, all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by them with respect to the business and operations of the Seller as it relates to the Purchased Assets under each of the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act and the respective rules and regulations thereunder, all of which complied in all material 28 respects with all applicable requirements of the appropriate act and the rules and regulations thereunder in effect on the date each such report was filed. 5.5 Financial Statements. The Seller has previously furnished to the -------------------- Buyer (i) balance sheets of the Seller as of June 30, 2000, and (ii) the related statements of income and retained earnings and changes in financial position of the Seller for the fiscal year then ended. The balance sheet of the Seller as of June 30, 2000 is referred to herein as the "Seller Balance Sheet." Each of the balance sheets included in the financial statements referred to in this Section 5.5 (including the related notes thereto) presents fairly the financial position of the Seller as of their respective dates, and the other related statements included therein (including the related notes thereto) present fairly the results of operations and changes in financial position for the periods then ended, all in conformity with generally accepted accounting principles applied on a consistent basis, except as otherwise noted therein. 5.6 Undisclosed Liabilities. Except as set forth in Schedule 5.6, ----------------------- the Seller has no liability or obligation relating to the business or operations of the Purchased Assets, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or reserved against in the Seller Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were incurred in the ordinary course of business, whether before or after the date of the Seller Balance Sheet, or those which in the aggregate are not material to the Purchased Assets. 5.7 Absence of Certain Changes or Events. Except as set forth in ------------------------------------ Schedule 5.7, or in the reports, schedules, registration statements and definitive proxy statements filed by the Seller with the SEC, and except as otherwise contemplated by this Agreement, since the date of the Seller Balance Sheet there has not been: (i) any Material Adverse Effect; (ii) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (iii) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing, capital expenditure or capital financing) by the Seller, which is material to the business or operations of the Purchased Assets, except for non-material agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (iv) any change by the Seller, with respect to the Purchased Assets, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.8 Title to Real Property. Set forth in Schedule 5.8 is a true and ---------------------- complete list of the Real Property of the Seller which is part of the Purchased Assets. 29 The Seller has good and marketable title to all of the Real Property (including easements for access and utilities), subject only to Permitted Encumbrances. 5.9 Leasehold Interests. Schedule 5.9 lists, as of the date of this ------------------- Agreement, all Real Property leases (the "Leases") relating to the Purchased Assets under which the Seller is a lessee, lessor or under which Seller otherwise has any interest and which are to be assigned to, and assumed by, the Buyer on the Closing Date. Except as set forth in Schedule 5.9, to the Seller's Knowledge, all such Leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing material defaults by the Seller thereunder; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default thereunder. Subject only to Permitted Encumbrances, Seller has valid and effective leasehold rights in each Lease in which Seller is the lessee. 5.10 Improvements. Except as set forth in Schedule 5.10, the Seller ------------ has not received any written notices from any Governmental Authority stating or alleging that any improvements with respect to the Purchased Assets have not been constructed in compliance with applicable law. Except as set forth in Schedule 5.10, no written notice has been received by the Seller from any Governmental Authority requiring or advising as to the need for any repair, alteration, restoration or improvement in connection with the Purchased Assets. 5.11 Insurance. Except as set forth in Schedule 5.11, all material --------- policies of fire, liability, workers' compensation and other forms of insurance purchased or held by and insuring the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.11, as of the date of this Agreement, the Seller has not been refused any insurance with respect to the Purchased Assets nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last twelve (12) months. 5.12 Environmental Matters. (a) Except as set forth in Schedule 5.12, --------------------- in any public filing by the Seller pursuant to the Securities Act or the Exchange Act, or in any environmental site assessment prepared by or for the Seller and made available to the Buyer, the Seller holds, and is in substantial compliance with, all material permits, licenses and governmental authorizations (the "Environmental Permits") required for the Seller to operate the Purchased Assets under applicable Environmental Laws, and to the Knowledge of the Seller, the Seller is otherwise in compliance with applicable Environmental Laws with respect to the Purchased 30 Assets except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, which, in the aggregate, are not reasonably likely to have a Material Adverse Effect. The Seller's Environmental Permits are set forth on Schedule 5.12. (b) To Seller's knowledge and except as set forth in Schedule 5.12, Seller has not received any request for information, or been notified in writing or orally that it is a potentially responsible party, under CERCLA or any similar state law with respect to any of the Purchased Assets, except for such liability under such laws as would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. (c) Except as set forth in Schedule 5.12, with respect to the Purchased Assets, the Seller has not entered into or agreed to any consent decree or order, and is not subject to any judgment, decree, or judicial order relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Substances under any Environmental Law, except such consent decrees or orders, judgments, decrees or judicial orders that would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect and has no Knowledge of any pending investigation under any Environmental Law related to the Purchased Assets, other than as contemplated by the Environmental Audit Agreement, if applicable, between Nevada Power Company and the Nevada Division of Environmental Protection related to the Clark Bundle except for such investigations that would not, individually or in the aggregate, be reasonably willing to have a Material Adverse Effect and further, Seller shall disclose to Buyer in writing any Remediation or investigation relating to the Purchased Assets that is commenced after the date of this Agreement and prior to the Closing Date. (d) To Seller's Knowledge, Seller has disclosed and made available to Buyer true, complete and correct copies of any material report, study, investigation, audit, analysis, test or monitoring in the possession of or initiated or prepared by Seller within the 5 years preceding the date of this Agreement pertaining to any environmental matter relating to the Purchased Assets, including without limitation, compliance with Environmental Laws or employee safety. (e) The representations and warranties made in this Section 5.12 are the Seller's exclusive representations and warranties relating to environmental matters. 5.13 Labor Matters. The Seller has previously delivered to the Buyer ------------- copies of all labor union and Collective Bargaining Agreements relating to the Purchased Assets to which the Seller is a party or is subject. With respect to its employees at the Purchased Assets, except to the extent set forth in Schedule 5.13 31 and except for such matters as shall not have a Material Adverse Effect, to the Seller's Knowledge: (i) the Seller is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours; (ii) the Seller has not received written notice of any unfair labor practice charge or complaint against the Seller pending before the National Labor Relations Board; (iii) there is no labor strike, slowdown or stoppage actually pending or threatened against or affecting the Seller; (iv) the Seller has not received notice that any representation petition respecting the employees of the Seller has been filed with the National Labor Relations Board; (v) no arbitration proceeding arising out of or under collective bargaining agreements is pending against the Seller; and (vi) the Seller has not experienced any primary work stoppage since at least December 31, 1995. 5.14 ERISA; Benefit Plans. (a) Except as set forth in Schedule -------------------- 5.14(a)(i), with respect to its employees at the Purchased Assets, the Seller has fulfilled its obligations under the minimum funding requirements of Section 302 of ERISA, and Section 412 of the Code, with respect to each "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and the Code. The Seller has not incurred any liability under Section 4062(b) of ERISA to the Pension Benefit Guaranty Corporation in connection with any employee pension benefit plan relating to employees at the Purchased Assets which is subject to Title IV of ERISA. Except as set forth in Schedule 5.14(a)(ii), the Internal Revenue Service has issued a letter for each employee pension benefit plan determining that such plan is exempt from United States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and there has been no occurrence since the date of any such determination letter which has adversely affected such qualification, and no withdrawal liability has been incurred by or asserted against the Seller with respect to any employee pension benefit plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). (b) Schedule 5.14(b) lists, as of the date of this Agreement, all deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all material bonus and other employee benefit or fringe benefit plans maintained or with respect to which contributions are made by the Seller in respect of employees who are the employees of the Seller who work at the Purchased Assets. Accurate and complete copies of all such plans, other than multiemployer plans, have been made available to the Buyer. 5.15 Real Property Encumbrances. Schedule 5.15 describes the -------------------------- indentures of trust concerning the Pollution Control Facilities at the Clark Bundle (the "Bond Indentures") and the Indenture. At or before Closing, Seller shall cause the Purchased Assets to be released from the liens of the Indenture and the Bond 32 Indentures. Copies of any surveys in the Seller's possession or any policies of title insurance currently in force and in the possession of the Seller with respect to the Real Property will be delivered by the Seller to the Buyer pursuant to Section 7.14. 5.16 Condemnation. Neither the whole nor any part of the Real ------------ Property or any other real property or rights leased, used or occupied by the Seller in connection with the ownership or operation of the Purchased Assets is subject to any pending suit for condemnation or other taking by any public authority, and, to the Knowledge of the Seller, no such condemnation or other taking is threatened or contemplated. 5.17 Certain Contracts and Arrangements. (a) Except for (i) the ---------------------------------- Seller Agreements listed in Schedule 5.17(a) or any other Schedule hereto, (ii) contracts, agreements, personal property leases, commitments, understandings or instruments which shall expire prior to the Closing Date, (iii) non-material agreements with suppliers, distributors and sales representatives entered into in the ordinary course of business, and (iv) contracts, agreements, personal property leases, commitments, understandings or instruments with a value less than $250,000 or with annual payments less than $50,000 the Seller is not a party to any written contract, agreement, personal property lease, commitment, understanding or instrument which is material to the business or operations of the Purchased Assets. (b) Except as disclosed in Schedule 5.17(b), each material Seller Agreement constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to the Buyer pursuant to this Agreement and shall continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder. (c) Except as set forth in Schedule 5.17(c), there is not, under any of the Seller Agreements, any default or event which, with notice or lapse of time or both, would constitute a default on the part of the Seller, except, with respect to the Seller Agreements only, such events of default and other events as to which requisite waivers or consents have been obtained or which would not, in the aggregate, have a Material Adverse Effect. Except as set forth in Schedule 5.17(c), Seller has not received written or other notice of a default concerning a Seller Agreement, nor has Seller received any written or other notice that a party intends to cancel or terminate a Seller Agreement. 5.18 Legal Proceedings, etc. Except as set forth in Schedule 5.18 or ----------------------- in any filing made by the Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, proceedings, or investigations pending, and to Seller's Knowledge no claims, actions, proceedings or investigations threatened, against the Seller relating to the Purchased Assets before or by any court, Governmental 33 Authority or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect. Except as set forth in Schedule 5.18, the Seller is not subject to any outstanding judgment, rule, order, writ, injunction or decree of any court, Governmental Authority or regulatory authority relating to the Purchased Assets which has a Material Adverse Effect. 5.19 Permits. The Seller has all material permits, licenses, -------- franchises and other governmental authorizations, consents and approvals (other than with respect to the Environmental Permits addressed in Section 5.12) (collectively, "Permits"), as set forth in Schedule 5.19(a), necessary to operate the Purchased Assets as presently operated, except where the failure to have such Permits does not have a Material Adverse Effect. Except as set forth in Schedule 5.19(b), with respect to the Purchased Assets, the Seller has not received any written notification, and does not otherwise have Knowledge, that it is in violation of any of such Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for notifications of violations which would not, in the aggregate, have a Material Adverse Effect. The Seller is in compliance with all Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for violations which, in the aggregate, do not have a Material Adverse Effect. 5.20 Regulation as a Utility. The Seller and certain of its ----------------------- affiliates are regulated as public utilities in the States of Nevada and California. Except as set forth on Schedule 5.20, the Seller is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 5.21 Taxes. The Seller has, in respect of the Purchased Assets, (i) ----- filed all Tax Returns required to be filed other than those Tax Returns the failure of which to file would not have a Material Adverse Effect, and (ii) paid in full or all material Taxes shown to be due on such Tax Returns. Except as set forth in Schedule 5.21, the Seller has not received any notice of deficiency or assessment from any taxing authority with respect to liabilities for Taxes of the Seller in respect of the Purchased Assets, which have not been fully paid or finally settled, and any such deficiency shown in such Schedule 5.21 is being contested in good faith through appropriate proceedings. Except as set forth in Schedule 5.21, there are no outstanding agreements or waivers extending the applicable statutory periods of limitation for Taxes associated with the Purchased Assets for any period. 5.22 Title to Personal Property. Schedule 1.l(86)(iii) sets forth a -------------------------- true and complete list of the material machinery, equipment, vehicles, furniture and other 34 tangible personal property located on the Real Property and used in the operation of the Clark Bundle as of the date of this Agreement ("Personal Property"). The Seller has good and marketable title to the Personal Property (or valid and effective leasehold rights in the case of leased Personal Property). 5.23 Water. (a) Seller holds rights, by contract, permit, easement, ----- resolution, ordinance and otherwise, sufficient to enable Seller to legally take, transport and deliver water to the Clark Bundle at rates and in quantities sufficient to operate the Clark Bundle in the manner in which it has historically been operated. Without limiting the generality of the foregoing, Seller represents and warrants that (i) its right to receive water at Clark Station from the Clark County Sanitation District ("CCSD") derives exclusively from permit #21728-S-1 (cert # 6885) and CCSD Resolution No. 88-002 and 99-004 and (ii) with the exception of pipeline operations and maintenance agreements listed on Schedule 5.17(a) there are no other contracts or agreements affecting Seller's right to receive water for Clark Station from CCSD. (b) To Seller's Knowledge there are no facts or circumstances that would prevent Buyer from performing its obligations under the terms and conditions of the proposed form of Waste Water Supply Agreement and the proposed form of Water Supply Agreement. (c) There has been sufficient pond capacity and brine concentration treatment plant capacity to support the unit capacity factors set forth in Schedule 5.23(c), and as of the Closing Date there will have been no material reduction in the pond or brine concentrator treatment plant capacity from historical levels. ARTICLE VI ---------- REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- The Buyer represents and warrants to the Seller as follows: 6.1 Organization. Each of NRG and Dynegy is a corporation duly ------------ organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as is now being conducted. Each of NRG and Dynegy is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. Each of NRG and Dynegy has heretofore delivered to the Seller complete and correct copies of its Certificate of 35 Incorporation and Bylaws (or other similar governing documents), as currently in effect. 6.2 Authority Relative to this Agreement. Each of NRG and Dynegy has ------------------------------------ full corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of NRG and Dynegy and no other corporate proceedings on the part of NRG or Dynegy are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by NRG and Dynegy, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Seller, subject to the receipt of the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, constitute valid and binding agreements of NRG and Dynegy, enforceable against NRG and Dynegy in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 6.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by NRG or Dynegy nor the purchase by NRG or Dynegy of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws (or other similar governing documents) of NRG or Dynegy, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to NRG or Dynegy as a result of the specific regulatory status of the Seller (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Seller (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which NRG or Dynegy or any of their respective subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. 36 (b) Except as set forth in Schedule 6.3(b) and except for (i) filings and approvals required by Section 203 of the Federal Power Act, (ii) a specific determination by the appropriate state commission(s) that allowing the Purchased Assets to be an eligible facility (1) will benefit consumers, (2) is in the public interest, and (3) does not violate State law, as contemplated by Section 32(c) of the Holding Company Act, 15 USC section 79z-5a(c), (iii) an Exempt Wholesale Generator determination made by FERC under Section 32 of the Holding Company Act, 15 USC Section 79z-5a, and (iv) the filings by NRG and Dynegy and the Seller required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in Schedule 6.3(b) and clauses (i), (ii) and (iii) are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect. 6.4 Regulation as a Utility. NRG Energy, Inc., is a subsidiary of a ----------------------- public utility holding company registered under the Holding Company Act. Dynegy Holdings Inc. is neither a public utility company nor a public utility holding company under the Holding Company Act. Except as set forth in Schedule 6.4, the Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.5 Availability of Funds. The Buyer has sufficient funds available --------------------- to it or has received binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. ARTICLE VII ----------- COVENANTS OF THE PARTIES ------------------------ 7.1 Conduct of Business of the Seller. Except as described in --------------------------------- Schedule 7.1, during the period from the date of this Agreement to the Closing Date, the Seller shall operate and maintain the Purchased Assets according to its ordinary and usual course of business consistent with good industry practice and with Schedules 1.1(94) (Scheduled Capital Expenditures) and 1.1(95) (Scheduled Maintenance Expenditures). Without limiting the generality of the foregoing, and, except as contemplated in this Agreement or as described in Schedule 7.1, prior to the Closing 37 Date, without the prior written consent of the Buyer (unless such consent would be prohibited by law), the Seller shall not with respect to the Purchased Assets: (a) (i) create, incur or assume any material amount of indebtedness for money borrowed, other than in the ordinary course of business, including obligations in respect of capital leases but excluding purchase money mortgages granted in connection with the acquisition of property in the ordinary course of business; or (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person except in the ordinary course of business; (b) make any material change in the operations of the Purchased Assets including, without limitation, the levels of fuel inventory and materials and supplies customarily maintained by the Seller; (c) except as set forth in Schedule 1.1(92), make any capital expenditures with respect to the Purchased Assets, except that the Seller shall make any capital expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such capital expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Capital Expenditures"); provided, however, that if the Buyer requests that the Seller -------- ------- make enhancements with a cost in excess of the cost of any Necessary Capital Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancement to the extent that the cost of such enhancement exceeds the cost of the Necessary Capital Expenditures as part of the Adjustment Amount; (d) sell, lease (as lessor), transfer or otherwise dispose of, any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with good industry practice and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Assets other than Permitted Encumbrances; (e) except as set forth in Schedule 1.1(93), make any maintenance expenditures, except that the Seller shall make any maintenance expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such maintenance expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Maintenance Expenditures"); provided, -------- however, that if the Buyer requests that the Seller make enhancements/upgrades - ------- with a cost in excess of the cost of any Necessary Maintenance Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to the extent the 38 cost of such enhancements/upgrades exceeds the cost of the Necessary Maintenance Expenditure as part of the Adjustment Amount; (f) amend any of the Seller Agreements; (g) enter into or amend any real or personal property Tax agreement, treaty or settlement; (h) execute, enter into or amend any agreement, order, decree or judgment relating to any Permit other than non-material renewals of Permits in the ordinary and usual course of business consistent with past practice; (i) enter into any commitment for the purchase or sale of fuel (whether commodity or transportation) that Seller intends to assign to Buyer having a term of greater than ninety (90) days that extends beyond December 31, 2001 if the aggregate payment under such commitment is expected to exceed $500,000 or if the aggregate payments under such commitment and all other then outstanding commitments not previously consented to by the Buyer would be expected to exceed $1,000,000; (j) except for the Transitional Power Purchase Agreement, enter into any wholesale sales agreements having a term extending beyond the Closing Date, where the sale of energy is expected to be supplied via the Purchased Assets; (k) sell, lease or otherwise dispose of SO2 Allowances, except those listed in Schedule 2.2(g) or to the extent necessary to operate the Purchased Assets in accordance with this Section 7.1; or (l) enter into (i) any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (k) or (ii) otherwise enter into any material new contract, agreement, commitment or arrangement affecting the Purchased Assets that will survive Closing other than contracts, agreements, commitments or arrangements entered into in the ordinary and usual course of business consistent with Good Utility Practice (as defined in the Transitional Power Purchase Agreement) and having a term of twelve (12) months or less and a value of $250,000 or less ($1 million in the aggregate) provided that such per contract and aggregate limitations imposed in this subparagraph (l) shall not apply to commitments for the purchase or sale of fuel pursuant to subparagraph (i) of this section (with Buyer's consent to a contract, agreement or commitment that otherwise complies with this subsection (ii) but exceeds the preceding term and value limits not to be unreasonably withheld or delayed) except that in no event shall Seller enter into the Waste Water Treatment Agreement or the Water Supply Agreement with a third party prior to Closing 39 without Buyer's consent, and (iii) Seller shall provide Buyer with prompt notice with respect to any contract, agreement, commitment or arrangement entered into in accordance with the provisions of subsection (ii) of this paragraph. 7.2 Access to Information. (a) Between the date of this Agreement --------------------- and the Closing Date, the Seller shall, during ordinary business hours and upon reasonable notice (i) give the Buyer and the Buyer Representatives reasonable access to all books, records, plants, offices and other facilities and properties constituting the Purchased Assets to which access by Buyer is not prohibited by law excluding information relating to employee records other than the information described on Schedule 2.2(e), (ii) subject to Seller's approval of Buyer's selection (not to be unreasonably withheld) Buyer shall appoint a representative and beginning sixty (60) days prior to Closing such representative shall be permitted to make reasonably frequent visits on reasonable notice to the Purchased Assets for the purpose of performing reasonable inspections thereof; (iii) cause those persons in the positions listed on Schedule 1.1(62) and its advisors to furnish the Buyer with such financial and operating data and other information with respect to the Purchased Assets as the Buyer may from time to time reasonably request; (iv) cause those persons in the positions listed on Schedule 1.1(62) and its advisors to furnish the Buyer a copy of each report, schedule or other document filed or received by them with the SEC, PUCN, CPUC or FERC with respect to the Purchased Assets; and (v) at Buyer's reasonable request, make those persons in the positions listed on Schedule 1.1(62) and its advisors available during regular business hours for reasonable time periods to answer Buyer's questions concerning the Purchased Assets and their operation; provided, however, that (A) any such investigation -------- ------- shall be conducted in such a manner as not to interfere unreasonably with the operation of the Purchased Assets, (B) the Seller shall not be required to take any action which would constitute a waiver of the attorney-client privilege and (C) the Seller need not supply the Buyer with any information which the Seller is under a legal obligation not to supply. Notwithstanding anything in this Section 7.2 to the contrary, (i) the Seller shall only furnish or provide such access to medical records as is required by law and (ii) the Buyer shall not have the right to perform or conduct any environmental sampling or testing at, in, on or underneath the Purchased Assets. (b) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of the Confidentiality Agreement and shall be treated as "Evaluation Material" (as defined in the Confidentiality Agreement) except for items acquired by Buyer as part of the Purchased Assets including but not limited to any books, operation records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications and procedures. 40 (c) Subject to Buyer's rights under the last sentence of this Section 7.2(c), for a period of ten (10) years after the Closing Date, the Seller and its representatives shall have reasonable access to all of the books and records of the Purchased Assets, as the case may be, transferred to the Buyer hereunder to the extent that such access may reasonably be required by the Seller in connection with matters relating to or affected by the operation of the Purchased Assets prior to the Closing Date. Such access shall be afforded by the Buyer upon receipt of reasonable advance notice and during normal business hours. The Seller shall be solely responsible for any costs or expenses incurred by them pursuant to this Section 7.2(c). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such ten-year period, the Buyer shall, prior to such disposition, give the Seller a reasonable opportunity at the Seller's expense, to segregate and remove such books and records as the Seller may select. 7.3 Expenses. Except to the extent specifically provided herein, -------- whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses except that the costs, expenses and premium incurred to obtain title insurance shall be shared equally by Buyer and Seller at Closing. 7.4 Further Assurances. Subject to the terms and conditions of this ------------------ Agreement, each of the parties hereto shall use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the sale of the Purchased Assets pursuant to this Agreement including, without limitation, the use of the Seller's and the Buyer's commercially reasonable efforts to obtain all Permits and Environmental Permits necessary for the Buyer to operate the Purchased Assets. From time to time after the date hereof, without further consideration, the Seller shall, at its own expense, execute and deliver such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Assets. From time to time after the date hereof, the Buyer shall, at its own expense, execute and deliver such documents to the Seller as the Seller may reasonably request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. To the extent that any personal property lease, relating to any assets (the "Leased Assets") which are principally used by the Seller for generation purposes at the Purchased Assets, cannot be assigned to the Buyer, the Seller shall, with Buyer's written consent (which consent shall not be unreasonably withheld), use its commercially reasonable efforts to acquire title to such Leased Assets and to include them in the Purchased Assets before the Closing Date. The Seller's reasonable costs associated with acquiring title to such Leased Assets shall be paid by the Buyer as part of 41 the Purchase Price. The Leased Assets are identified as such on Schedule 1.1(86)(iii). 7.5 Public Statements. The parties shall consult with each other ----------------- prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and neither party may issue any such public announcement, statement or other disclosure without having first received the written consent of the other party, except as may be required by law and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent and under the circumstances in which the parties are expressly permitted by the Confidentiality Agreement to make disclosures of "Evaluation Material" (as defined in the Confidentiality Agreement). 7.6 Consents and Approvals. (a) The Seller and the Buyer shall each ---------------------- file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall consult with each other as to the appropriate time of filing such notifications and shall use their best efforts to make such filings at the agreed upon time, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. (b) The Seller and the Buyer shall cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all commercially reasonable efforts to obtain the transfer or reissuance to the Buyer of all necessary Environmental Permits, Permits, consents, approvals and authorizations of all governmental bodies and (iv) use all commercially reasonable efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, all consents, approvals and authorizations of all governmental bodies to the transfer, reissuance or modification of the Permits and Environmental Permits as necessary to enable Buyer to operate the Purchased Assets at and after Closing substantially as they had been operated immediately prior to the Closing Date, and FERC approval of the Ancillary Agreements and the Generation Tariff applicable to the Purchased Assets) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which the Seller or the Buyer is a party or by which either of them is bound. The Seller shall have the right to review and approve 42 in advance all characterizations of the information relating to Purchased Assets; and each of the Seller and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they shall consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such necessary Environmental Permits, Permits, consents, approvals and authorizations of all third parties and governmental bodies. The Seller and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on behalf of the Seller, on the one hand and the Buyer on the other hand, with all governmental bodies. (c) To the extent that a consent to an assignment of any material Seller Agreement cannot be obtained before the Closing Date, the Seller shall enter into all such agreements with the Buyer as are necessary to give the Buyer the rights, obligations and burdens of such Seller Agreements. (d) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any federal, state or local Governmental Authority or agency or any third party in connection with any federal, state or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. (e) Seller shall use commercially reasonable efforts to defend and support the form of Generation Tariff applicable to the Purchased Assets in the form on file with FERC as of November 14, 2000. Seller shall file with FERC and use commercially reasonable efforts to defend and support the Transitional Power Purchase Agreement and Interconnection Agreement. Seller shall, at Buyer's request, file a certificate of concurrence in and shall use all commercially reasonable efforts to support (i) any filing with the FERC that Buyer is required to make in order to sell energy, capacity and ancillary service pursuant to the Transitional Power Purchase Agreement, and (ii) any tariff filed by Buyer with FERC and containing terms and conditions equivalent to the applicable terms and conditions of the Generation Tariff, previously filed by Seller with FERC and applicable to the Purchased Assets, provided, however, Seller's obligation to support such filings shall continue only until such filings have been approved by FERC. Seller shall not propose or enter into any stipulation or agreement except for any stipulation pending as of the date of this Agreement modifying the form of such tariffs or agreements without Buyer's consent, which Buyer shall not unreasonably withhold. Buyer and Seller shall cooperate in defending and supporting such tariffs and agreements. 43 (f) The Seller shall prepare and submit an application to the PUCN in which the Seller shall seek approval of the sale of both the Purchased Assets hereunder and the Reid Gardner Bundle and at Buyer's request Seller shall include in such application a statement reflecting Buyer's preferences and priorities with respect to the transactions contemplated by this Agreement and the Asset Sale Agreement relating to the Reid Gardner Bundle of even date herewith. 7.7 Fees and Commissions. The Seller and the Buyer each represent -------------------- and warrant to the other that, except for Credit Suisse First Boston ("CSFB"), which is acting for and at the expense of the Seller, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. The Seller and the Buyer shall pay to the other or otherwise discharge, and shall indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 7.8 Use of Pollution Control Facilities. (a) Prior to June 1, 2019, ----------------------------------- the Buyer shall not use any of the Pollution Control Facilities in any manner which would cause (i) interest on any of the Bonds to become includible in the gross income of the owners of such Bonds for purposes of federal income taxation or (ii) the disallowance of any deductions for interest expense payable by the Seller to which the Seller would otherwise be entitled; provided, however, that -------- ------- no violation of this Section 7.8 shall be deemed to have occurred solely as a result of such facilities being (A) unused, (B) abandoned or (C) sent to a landfill. (b) The Buyer shall give the Seller reasonable access to any Pollution Control Facilities included in the Purchased Assets and the books and records with respect to such facilities. (c) The Buyer shall fully cooperate with the issuers of the Bonds and the Seller and its counsel in connection with any audit, investigation or proceeding with respect to the Bonds or the Seller's interest expense deduction with respect thereto by the Internal Revenue Service, the SEC or any other entity. 7.9 Tax and Withholding Matters. (a) Notwithstanding any other --------------------------- provision of this Agreement, the Purchase Price includes all applicable sales and similar taxes (but not real property transfer taxes) imposed by the State of Nevada as the result of the transaction ("Included Taxes"). Buyer shall bear all real estate transfer taxes. At the Closing, Seller shall deliver to Buyer a receipt for Buyer's payment of Included Taxes, and a separate closing certificate setting forth Seller's calculation of the purchase price for that portion of the Purchased Assets with respect 44 to which Included Taxes are anticipated by Seller to be due, as well as Seller's calculation, in the exercise of reasonable judgment, of the amount of those Included Taxes. Seller shall also include in this certificate its unqualified representation, warranty and covenant, which shall survive Closing notwithstanding any other provision of this Agreement, that the amount of taxes so established is in fact the entire and correct amount of Included Taxes. Seller is aware that, because of Seller's familiarity with the Purchased Assets and their previous treatment for tax, accounting and other purposes, Buyer is relying on Seller's calculation of such Included Taxes. Seller shall, as provided by the laws of the State of Nevada, pay over to the Nevada Department of Taxation the Included Taxes. To the extent, if any, that the State of Nevada requires payment of Included Taxes in an amount higher than that certified by Seller, after all opportunity for challenge or rehearing or appeal has been exhausted (provided that Seller bears the costs thereof as incurred), Seller -------- shall immediately adjust its books, nunc pro tunc, by decreasing the purchase price of the Purchased Assets by an amount equal to such additional Included Taxes, which amount shall constitute Included Taxes collected by Seller from Buyer. Seller shall then deliver to Buyer a corrected receipt for payment of Included Taxes and remit to the Nevada Department of Taxation the additional Included Taxes due. The foregoing is in addition to Buyer's right to recover damages for breach of Seller's representation, warranty and covenant in an amount equal to any Included Taxes required to be paid by Buyer (after exhausting all opportunity for appeal or rehearing, provided that Seller bears -------- the costs thereof as incurred). Seller represents and warrants that this Section 7.9(a) is enforceable (which representation and warranty shall survive Closing notwithstanding any contrary provision in this Agreement) and shall deliver a reasoned opinion at Closing confirming that this provision will be enforceable against Seller. The party responsible for remitting a Tax, shall, at its own expense, file, to the extent required by law, all necessary Tax Returns, receipts and other documentation with respect to the Tax. If reasonably requested by the party responsible for paying a Tax the other party shall join in the execution of any such Tax Returns, receipts or other documentation. Notwithstanding the foregoing, the parties shall work together in good faith and each at its own expense to minimize all transfer, sales and similar taxes and shall not make any payment to the Nevada Department of Taxation if the amount of payment is being disputed by either party until all opportunity for challenge or rehearing or appeal has been exhausted (provided that Seller bears the costs -------- thereof as incurred). (b) With respect to Taxes to be prorated in accordance with Section 3.4 hereof only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to the Seller's approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for the Seller's review and approval no later than twenty (20) days 45 prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, the Seller shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with Section 3.4 hereof. In addition to any amount of reimbursement due in accordance with Section 3.4 hereof, Buyer shall reimburse Seller for any Nevada property taxes incurred by Seller which relate to the Purchased Assets and have a lien date after the Closing Date. The amount of such reimbursement shall be determined based upon the proportion of (i) the "historical cost less depreciation" of the Purchased Assets to (ii) the total historical cost less depreciation of all the assets reported on Seller's Nevada Operating Property Appraisal Report. (c) Each of the Buyer and the Seller shall provide the other with such assistance as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each shall retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.9 or pursuant to any other section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. The provisions of Section 7.9 shall survive for a period of two years. (d) The provisions of Section 7.9 shall survive until 30 days after the expiration of all applicable tax statutes of limitation. 7.10 Supplements to Schedules. Prior to the Closing Date, the Seller ------------------------ shall promptly supplement or amend the Schedules required by Article V with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section 7.10 shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.11 Employees. (a) Schedule 7.11(a) sets forth all collective --------- bargaining agreements to which the Seller is a party in connection with the Purchased Assets (the "Collective Bargaining Agreements"), as well any Letters of Agreement between Seller and IBEW Local 396 ("Local 396 LOA"), letters of intent, or other such agreements or understandings related to the sale and transfer of certain plants. The Buyer shall offer employment to begin as of the Closing Date to the Seller's employees who work at the Purchased Assets and who are included in the bargaining units covered by the Collective Bargaining Agreements ("Hourly Employees"). The Buyer shall assume the Collective Bargaining Agreements, and all of the Seller's obligations under such agreements. 46 (b) Continued Employment. The Buyer shall, as of the Closing Date, -------------------- make a Qualifying Offer of Employment (as defined herein) to each employee of Seller who (i) worked at or directly serviced the Purchased Assets and (ii) was an employee of the Seller immediately prior to the Closing Date, other than (x) Hourly Employees and (y) Directors (each such employee who accepts a Qualifying Offer of Employment is a "Management Employee"). An offer of employment shall be deemed a "Qualifying Offer of Employment" if (A) the proposed base salary and level of incentive compensation is at least 90% of the employee's base salary and level of incentive compensation immediately prior to the Closing Date and (B) the proposed principal place of employment is within one hundred (100) miles of the employee's principal place of employment immediately prior to the Closing Date. (c) Benefit Continuation. Subject to applicable law, the Buyer shall -------------------- maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation, welfare and benefit plans, programs, policies and fringe benefits covering Management Employees that will be as economically similar, in the aggregate, as those provided pursuant to those employee compensation, welfare and benefit plans, programs, policies and fringe benefits of the Seller and their subsidiaries as in effect immediately prior to the Closing Date. To the extent permissible under the terms of the Benefit Plans of Buyer and required by applicable law, the Buyer shall waive all limitations as to preexisting conditions exclusions and waiting periods with respect to participation and coverage requirements applicable to the Management Employees under any Benefit Plans of Buyer that are welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Management Employees immediately prior to the Closing Date. (d) Service Credit. The Management Employees shall be given credit -------------- for all service with the Seller or its subsidiaries (and service credited by Seller or such subsidiary), to the same extent as such service was credited for such purpose by Seller or such subsidiary, under all employee benefit plans, programs and policies of the Buyer in which they become participants (the "Benefit Plans of Buyer") for purposes of eligibility, vesting, benefit accrual and determination of level of benefits. Notwithstanding the foregoing, such service with the Seller shall be recognized for purposes of benefit accrual under a defined benefit pension plan or a retiree medical plan (a "plan") sponsored by the Buyer only if assets and liabilities are transferred to the Buyer's plan and trust from the Seller's plan and trust. (e) Assumptions. The Buyer shall assume only those obligations that ----------- are required to be assumed by the Buyer under the Collective Bargaining 47 Agreement or obligations for which there was a transfer of assets and liabilities to the Buyer's plan and trust from the Seller's plan and trust. Absent such transfer of plan assets and liabilities, benefits accrued under such Benefits Plans of Seller and all benefits currently payable as of the Closing Date shall be and shall remain the obligation of the Seller. Any individual covered under any such Benefit Plan of Seller that is a Group Health Plan (as defined in Section 4980B(g)(2) of the Code and Section 607(l) of ERISA) and who is eligible for continued coverage under such Group Health Plan as of the Closing Date, shall continue to be covered under such Group Health Plan after Closing pursuant to the provisions of COBRA. (f) Severance Plan. The Buyer shall maintain the Management -------------- Transition Plan for a period of eighteen (18) months following the Closing Date and shall give all Management Employees service credit for purposes of determining the level of benefits thereunder in the same manner as set forth in Section 7.11(d) hereof. Each of the Buyer and the Seller shall be responsible for 50% of any payments required under the Management Transition Plan for any Management Employee terminated without Cause (as defined in the Management Transition Plan) within eighteen (18) months following the Closing Date. (g) WARN Act. The Seller shall perform timely and discharge all -------- requirements, if any, under the WARN Act and under applicable state and local laws and regulations for the notification of its employees arising from the sale of the Purchased Assets to the Buyer up to and including the Closing Date. The Buyer shall cooperate with the Seller to provide the Seller with such information as may be needed from the Buyer for inclusion in such notices, including providing the Seller at least ninety (90) days prior to the date on which the Closing is anticipated to occur (or such date to which the Buyer and the Seller mutually agree) with a list of all of the Seller's employees to whom the Buyer shall make offers of employment. After the Closing Date, the Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees with respect to the Purchased Assets. 7.12 Risk of Loss. (a) From the date hereof through the Closing ------------ Date, all risk of loss or damage to the property included in the Purchased Assets shall be borne by the Seller. (b) If, before the Closing Date all or any portion of the Purchased Assets are taken by eminent domain, or is the subject of a pending or (to the Knowledge of the Seller) contemplated taking which has not been consummated, the Seller shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, 48 consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such taking, then the Buyer or the Seller may, if such taking relates to the Purchased Assets, terminate this Agreement pursuant to Section 10.1(f) hereof. (c) If, before the Closing Date all or any material portion of the Purchased Assets are damaged or destroyed by fire or other casualty, the Seller shall notify the Buyer promptly in writing of such fact. If such damage or destruction would have a Material Adverse Effect and the Seller has not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such casualty, then the Buyer or the Seller may terminate this Agreement pursuant to Section 10.1(f) hereof. 7.13 Additional Covenants of the Buyer. Notwithstanding any other --------------------------------- provision hereof, Buyer covenants and agrees that, for a period of five (5) years commencing on the Closing Date, Buyer shall not transfer the Purchased Assets, or any material portion of the Purchased Assets, to any entity or Affiliate of such entity who at that time is the owner of any bundle of generation assets previously owned by Seller within the southern regions of Nevada, as such regions are described in the Offering Memorandum dated as of March 2000, as supplemented from time to time. Buyer further covenants and agrees that, in the event that Buyer transfers the Purchased Assets or any material portion of the Purchased Assets during such five (5) year period, Buyer shall obtain from its transferee a covenant and agreement which restricts such transferee's ability to transfer the Purchased Assets that is substantially similar to Buyer's covenant and agreement in the first sentence of this Section 7.13 and an additional covenant and agreement that is substantially similar to that of this sentence, and each such covenant and agreement shall survive and remain in effect until five (5) years from the Closing Date as defined in this Agreement. The covenants and agreements contained in this Section 7.13 shall survive Closing and shall continue in effect for a period of five (5) years commencing on the Closing Date. 7.14 Surveys and Certain Title Matters. Within thirty (30) days --------------------------------- after the date of this Agreement, Seller shall deliver to Buyer final surveys of the Real Property showing the location of (a) all exceptions listed in the preliminary title reports referred to in Schedule 5.8, (b) the easements to be retained and granted as described in Schedule 5.8, (c) all rights-of-way and easements for water and gas 49 pipelines owned or used in connection with the operation of the Clark Bundle, and (d) all roads, rail spurs, and crossing and other access routes owned or controlled by Seller used in connection with the operation of the Clark Bundle. On or before the thirtieth (30th) day (the "Notice Date") after Buyer has received the final surveys of the Real Property, Buyer may notify Seller in writing that Buyer disapproves of any matter disclosed by the final surveys that, individually or in the aggregate, (in Buyer's reasonable judgment) materially interferes with the operation and maintenance of the Clark Bundle, or that, individually or in the aggregate, has a Material Adverse Effect. Buyer's failure to so notify Seller on or before the Notice Date shall be deemed an approval of matters disclosed by and located in the final surveys; likewise, any matters not disapproved in a notice from Buyer to Seller on or before the Notice Date shall be deemed approved by Buyer as disclosed by and located in the final surveys. If any new matters are disclosed by a revised survey, supplemental preliminary title report or title commitment, Buyer shall have fifteen (15) days from the date on which it receives a notice disclosing the new matter(s) in reasonable detail to approve or disapprove of the new matter(s) as set forth above. Seller shall cooperate with the Title Insurer and Buyer, to the extent necessary, to clear any such disapproved matters. The exceptions shown in the preliminary title reports that are approved by the Buyer as of the date of this Agreement are listed in Schedule 5.8, subject to Buyer's review of final surveys. If Buyer and Seller disagree about whether Buyer has properly disapproved a matter under this Section 7.14, the parties shall meet within ten (10) Business Days of the Notice Date to negotiate in good faith to settle their disagreement. In addition, Seller and Buyer shall cooperate in good faith to create and describe such Operating Easements as may be reasonably required or desirable to serve the Purchased Assets or Seller's property to the extent not already covered by the Operating Easements described in Schedule 5.8. 7.15 Documentation. Within sixty (60) days after the date of this ------------- Agreement, Seller shall make available to Buyer copies of all material contracts, leases and permits including all amendments thereto (in either electronic or hard copy format) pertaining to the Purchased Assets which to Seller's Knowledge are a complete set. 7.16 Separation Issues. (a) Seller shall cause the purchaser of the ----------------- Sunrise/Sunpeak Bundle to accept a partial assignment of the Firm Transportation Agreement dated February 1, 1995 ("FTA"), between Seller and Southwest Gas, such that the purchaser of the Sunrise/Sunpeak Bundle would receive an allocation of 4,725 MMBtu/Hour of transportation capacity under the FTA. Buyer shall accept a partial assignment of the FTA such that it would receive an allocation of 7,275 MMBtu/Hour of transportation capacity under the FTA. Capacity, demand and other charges payable under the FTA would be allocated proportionately, such that the owner of the Sunrise/Sunpeak Bundle would bear 4,725/12,000 of such charges and Buyer would bear 7,275/12,000 of such charges. 50 (b) Buyer shall have no duty to make its employees available to provide services to any asset other than the Clark Bundle. (c) To the extent that any contract, agreement, permit, easement or other right serves generation assets other than the Purchased Assets, Seller shall before Closing prepare such partial assignments and separation agreements with the purchaser of the Sunrise/Sunpeak Bundle and the Harry Allen Bundle as may be necessary to separate such rights. All such partial assignments and separation agreements shall be subject to Buyer's consent (which shall not be unreasonably withheld). 7.17 Additional Covenants of the Parties. (a) The parties shall work ----------------------------------- together in good faith to address transition issues and to identify any transition services that Seller will provide for a reasonable period after Closing. If any such services are identified, the parties shall enter into an agreement to be delivered at Closing describing the terms and conditions on which Seller shall provide such transition services, including a provision which limits the charges for such services to Seller's actual reasonable costs. (b) Buyer and Seller shall negotiate in good faith to agree upon a clearance procedure at least thirty (30) days before the expected Closing Date that could make unnecessary certain disconnect switches shown in the one line drawing included in Exhibit F that have not yet been installed. If Buyer and Seller so agree, they shall promptly amend the one line drawing, the Separation Schedule and the separation schedule summary to reflect their agreement. In any event Seller shall be solely responsible for all costs associated with the acquisition and installation of any such switches and related equipment. (c) Seller shall use its commercially reasonable efforts to enter into the Environmental Audit Agreement before Closing. (d) Within fifteen (15) Business Days of the date of this Agreement Buyer agrees to cooperate with Seller to develop a form of agreement, in a form and substance acceptable to Buyer for execution, for each of the Waste Water Treatment Agreement and the Water Supply Agreement which substantially reflect the provisions set forth in Exhibit H and Exhibit I, respectively. Seller shall use its commercially reasonable best efforts to present such forms of agreement to the buyer of the Harry Allen Bundle and the buyer of the Sunrise/Sunpeak Bundle as soon as practicable thereafter. Seller shall include a provision in each of the Asset Sale Agreements relating to the Harry Allen Bundle and the Sunrise/Sunpeak Bundle that would commit the respective buyers of such asset bundles to execute definitive agreements in substantially the form developed by Seller and Buyer. Seller and 51 Buyer shall execute such definitive agreements, which will also be executed by the respective buyers of the Harry Allen Bundle and the Sunrise/Sunpeak Bundle, within 30 Business Days of the date of each of the Asset Sale Agreements relating to the Harry Allen Bundle and the Sunrise/Sunpeak Bundle, respectively. ARTICLE VIII ------------ CLOSING CONDITIONS ------------------ 8.1 Conditions to Each Party's Obligations to Effect the ---------------------------------------------------- Transactions Contemplated Hereby. The respective obligations of each party to - -------------------------------- effect the transactions contemplated hereby or by the Ancillary Agreements shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated; (b) No preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the transactions contemplated hereby or by the Ancillary Agreements shall have been issued and remain in effect (each party agreeing to use its reasonable best efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted by any state or federal government or Governmental Authority in the United States which prohibits the consummation of the transactions contemplated hereby or by the Ancillary Agreements; (c) All federal, state and local government consents and approvals required for the consummation of the transactions contemplated hereby or by the Ancillary Agreements, including, without limitation, the Seller Required Regulatory Approvals, the Buyer Required Regulatory Approvals, and all approvals of FERC required to enable the parties to perform their respective obligations under the Ancillary Agreements shall have become Final Orders (a "Final Order" for purposes of this Agreement means a final order after all opportunities for rehearing are exhausted (whether or not any appeal thereof is pending) that has not been revised, stayed, enjoined, set aside, annulled or suspended, with respect to which any required waiting period has expired; and as to which all conditions to effectiveness prescribed therein or otherwise by law, regulation or order have been satisfied) with such terms and conditions as shall have been imposed by the Governmental Authority issuing such Final Order and such Final Orders shall not have imposed terms and conditions which would have a material adverse effect on the business, results of operations or financial condition of the Purchased Assets; and 52 (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which the Seller or the Buyer, or any of their subsidiaries, is a party for the consummation of the transactions contemplated hereby shall have been obtained, other than those (i) which if not obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii) for which an agreement which is described in Section 7.6(c) hereof has been entered into. 8.2 Conditions to Obligations of Buyer. The obligation of the Buyer ---------------------------------- to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) There shall not have occurred and be continuing, a Material Adverse Effect; (b) The Seller shall have performed and complied with in all material respects the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of the Seller set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of the Seller; (c) The Buyer shall have received a certificate from an authorized officer of the Seller, dated the Closing Date, to the effect that to the best of such officer's knowledge, the conditions set forth in Sections 8.2(a) and (b) hereof have been satisfied; (d) The Buyer shall have received an opinion from Woodburn & Wedge, P.C., dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) The Seller is a corporation organized, existing and in good standing under the laws of the State of Nevada and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by requisite corporate action taken on the part of the Seller; (2) This Agreement and the Ancillary Agreements have been executed and delivered by the Seller and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) 53 are valid and binding obligations of the Seller, enforceable against the Seller in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and except to the extent that the right to indemnification and contribution contained therein may be limited by state or federal securities laws or the public policy underlying such laws; (3) The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Seller shall not constitute a violation of the Certificate of Incorporation or Bylaws of the Seller; and (4) No declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Seller of the Closing other than (i) the Seller Required Regulatory Approvals, (ii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the federal laws of the United States or the laws of the State of Nevada, such counsel may rely upon opinions of counsel admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials; and (e) The Seller shall have executed and delivered as of the Closing, each of the Ancillary Agreements to be executed by the Seller and all required approvals and conditions relating to the Ancillary Agreements shall have been obtained or satisfied; (f) Neither the PUCN nor the Nevada legislature shall have issued any order or passed any legislation the effect of which would be to cause the Buyer, as the owner of the Purchased Assets or the seller of electric power, energy or capacity therefrom, to be regulated as to the wholesale pricing of such electric power, energy or capacity, or to be regulated for any purposes as a public utility under Nevada law; and 54 (g) First American Title Company (or an Affiliate thereof) or another Title Insurer acceptable to Buyer (the "Title Insurer") shall be willing to issue at regular rates ALTA owner's, or lessee's, as the case may be, extended coverage policies of title insurance (1990 Form B) (the "Title Policies"), with the general survey and creditors' rights exceptions removed, in amounts equal to the portion of the Purchase Price allocated to such interests, showing title to the Real Property vested in Buyer, subject to transfer of the Real Property to Buyer. The Title Policies shall show title vested in Buyer subject only to Permitted Encumbrances (not including the lien of the Indenture and the Bond Indentures, from which the Purchased Assets are to be released at or before Closing). Seller shall cooperate with the Title Insurer and Buyer, to the extent necessary, to clear any defects of title. The first sentence of this paragraph shall be deemed to be satisfied either by (i) the issuance of the Title Policies, subject only to Permitted Encumbrances, at Closing, or (ii) by the Title Insurer's delivery at the Closing of written commitments or binders (dated as of the Closing but insuring title as of the date title conveyance documents are recorded), to issue the Title Policies, subject only to Permitted Encumbrances, within a reasonable time after the Closing Date, subject to actual transfer of the Real Property. If the Title Insurer is unwilling to issue any such Title Policy, it shall be required to provide Buyer and Seller, in writing, with notice setting forth the reason(s) for such unwillingness as soon as practicable. Seller shall have the right to seek to cure any defect which is the reason for such unwillingness, and to extend the Closing and the Termination Date, if necessary, for a period of up to thirty (30) Business Days to provide to Seller the opportunity to cure; and (h) Without limiting the generality of Section 8.1(a) of this Agreement, Buyer shall have received the necessary consents, approvals and authorizations required to transfer, re-issue or modify Permits and Environmental Permits as needed to enable Buyer to operate the Purchased Assets at and after the Closing Date substantially consistent with Seller's historical operation. 8.3 Conditions to Obligations of Seller. The obligation of the ----------------------------------- Seller to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed in all material respects its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; 55 (c) The Seller shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b) hereof have been satisfied; and (d) The Seller shall have received an opinion from Stoel Rives LLP and/or Lionel Sawyer & Collins, counsel for the Buyer, dated the Closing Date and satisfactory in form and substance to the Seller and its counsel, substantially to the effect that: (1) Each of NRG and Dynegy is a corporation organized, existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action taken on the part of the Buyer; (2) this Agreement and the Ancillary Agreements have been executed and delivered by the Buyer and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (B) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought; (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Buyer shall not constitute a violation of the Certificate of Incorporation or Bylaws (or other similar governing documents), as currently in effect, of the Buyer; and (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Buyer of the Closing other than the Buyer Required Regulatory Approvals, all of such Buyer Required Regulatory Approvals having been obtained and being in full force and effect with such terms and conditions as shall have been imposed by any applicable Governmental Authority. As to any matter contained in such opinion or opinions which involve the laws of any jurisdiction other than the federal laws of the United States and the 56 States of Oregon and Nevada, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by appropriate officers and directors of the Buyer and its subsidiaries and by public officials; and (e) The Buyer shall have executed and delivered, as of the Closing, each of the Ancillary Agreements to be executed by the Buyer and all required approvals and conditions relating to the Ancillary Agreements have been obtained or satisfied and provided that the Buyer shall be satisfied that the obligations assumed under each of the Water Supply Agreement and the Waste Water Treatment Agreement are not inconsistent with Seller's historical operation of the Purchased Assets as it relates to waste water and water treatment. ARTICLE IX ---------- INDEMNIFICATION --------------- 9.1 Indemnification. (a) The Seller shall indemnify, defend and --------------- hold harmless the Buyer from and against any and all claims, demands or suits (by any Person), losses, liabilities, damages (including consequential or special damages), obligations, payments, costs, Taxes and expenses (including, without limitation, the costs and expenses of any and all actions, suits, proceedings, assessments, judgments, settlements and compromises relating thereto and reasonable attorneys' fees and reasonable disbursements in connection therewith) to the extent the foregoing are not paid by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by the Buyer relating to, resulting from or arising out of (i) any breach by the Seller of any covenant or agreement of the Seller contained in this Agreement or (ii) the Excluded Liabilities. (b) The Buyer shall indemnify, defend and hold harmless the Seller from and against any and all Indemnifiable Losses asserted against or suffered by the Seller relating to, resulting from or arising out of (i) any breach by the Buyer of any covenant or agreement of the Buyer contained in this Agreement or the Ancillary Agreements or (ii) the Assumed Liabilities. (c) Either the person required to provide indemnification under this Agreement (the "Indemnifying Party") or the person entitled to receive indemnification under this Agreement (the "Indemnitee") may assert any offset or similar right in respect of its obligations under this Section 9.1 based upon any actual or alleged breach of any covenant or agreement contained in this Agreement or the Ancillary Agreements. 57 (d) Any Indemnitee having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any Indemnifiable Loss shall be reduced (i) to the extent that the Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take into account any Tax or Income Tax benefit recognized by the Indemnitee arising from the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment, and any payment actually received with respect to an Indemnifiable Loss. (e) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the Indemnifying Party with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (f) The rights and remedies of the Seller and the Buyer under this Article IX are exclusive and in lieu of any and all other rights and remedies which the Seller and the Buyer may have under this Agreement or otherwise for monetary relief with respect to (i) any breach or failure to perform any covenant or agreement set forth in this Agreement or (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be. Without limiting the foregoing, with respect to the Purchased Assets, the Buyer, for itself and its Affiliates, does hereby irrevocably release, hold harmless and forever discharge the Seller from any and all claims of any kind or character, whether known or unknown, hidden or concealed, resulting from or arising out of or in connection with Hazardous Substances or any Environmental Law, other than those liabilities and obligations set forth in Section 2.4(c) hereof. In furtherance of the foregoing, the Buyer, for itself and on behalf of its Affiliates, hereby irrevocably waives any and all rights and benefits with respect to such claims that it now has, or in the future may have conferred upon it by virtue of any statute, regulation or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party's settlement with the obligor. In this connection, the Buyer hereby acknowledges that it is aware that factual matters now unknown to it may have given, or hereafter may give, rise to claims that are presently unknown, unanticipated and unsuspected, and it further agrees that this release has been negotiated and agreed upon in light of that awareness, and the Buyer, for itself and on behalf of its Affiliates, nevertheless hereby intends irrevocably to release the Seller from the claims described in this Section 9.1(f). 58 9.2 Defense of Claims. (a) If any Indemnitee receives notice of the ----------------- assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any Affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee shall give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than ten (10) calendar days after the Indemnitee's receipt of notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and shall indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party shall have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, and the Indemnitee shall cooperate in good faith in such defense at such Indemnitee's own expense. (b) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a) hereof, the Indemnifying Party shall not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying -------- ------- Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party shall be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party shall not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. 59 (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than ten (10) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party shall have a period of thirty (30) calendar days within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party shall be deemed to have accepted such claim. If the Indemnifying Party rejects such claim, the Indemnitee shall be free to seek enforcement of its rights to indemnification under this Agreement. (d) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of The Chase Manhattan Bank), shall promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party shall, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party shall then -------- ------- be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of such indemnity payment are hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party shall duly execute upon request all instruments reasonably necessary to evidence and perfect the foregoing subrogation and subordination rights. Nothing in this Section 9.2(d) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (e) A failure to give timely notice as provided in this Section 9.2 shall not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. 60 ARTICLE X --------- TERMINATION AND ABANDONMENT --------------------------- 10.1 Termination. (a) This Agreement may be terminated at any time ----------- prior to the Closing Date, by mutual written consent of the Buyer and the Seller. (b) This Agreement may be terminated by the Seller or the Buyer if (i) the transactions contemplated hereby shall not have been consummated on or before eighteen (18) months from the date of this Agreement (the "Termination Date"); provided, however, that the right to terminate this Agreement under this -------- ------- Section 10.1(b) shall not be available to either Seller or Buyer if its failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date; provided, further, that if on the Termination Date the conditions to the Closing - -------- ------- set forth in Section 8.1(c) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Termination Date shall be the date which is twenty-four (24) months from the date of this Agreement. (c) This Agreement may be terminated by either the Seller or the Buyer if (i) any Governmental Authority or regulatory body, the consent of which is a condition to the obligations of the Seller and the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent and all appeals of such determination shall have been taken and have been unsuccessful, or (ii) any court of competent jurisdiction in the United States or any State shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, judgment or decree shall have become final and nonappealable. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by the Seller of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer. (e) This Agreement may be terminated by the Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Seller impossible and such violation or breach has not been waived by the Seller. (f) This Agreement may be terminated by either the Seller or the Buyer in accordance with the provisions of Sections 7.12(b) or (c) hereof. 61 10.2 Procedure and Effect of Termination. In the event of termination ----------------------------------- of this Agreement and abandonment of the transactions contemplated hereby by either or both of the parties pursuant to Section 10.1 hereof, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein: (a) such termination shall be the sole remedy of the parties hereto with respect to breaches of any agreement, representation or warranty contained in this Agreement and none of the parties hereto nor any of their respective trustees, directors, officers or Affiliates, as the case may be, shall have any liability or further obligation to the other party or any of their respective trustees, directors, officers or Affiliates, as the case may be, pursuant to this Agreement, except in each case as stated in this Section 10.2 and in Sections 7.2(b), 7.3 and 7.7 hereof; and (b) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. ARTICLE XI ---------- MISCELLANEOUS PROVISIONS ------------------------ 11.1 Amendment and Modification. Subject to applicable law, this -------------------------- Agreement may be amended, modified or supplemented only by written agreement of the Seller and the Buyer. 11.2 Waiver of Compliance; Consents. Except as otherwise provided in ------------------------------ this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.3 No Survival of Representations and Warranties. Each and every --------------------------------------------- representation and warranty contained in this Agreement and each and every covenant contained in this Agreement (other than the covenants in Sections 2.5, 3.2, 3.3, 3.4, 7.1(d), 7.1(f), 7.1(g), 7.1(h), 7.1(i), 7.1(j), 7.1(k), 7.1(l)(i) and 7.1(1)(ii), 7.2(b), 7.2(c), 7.3, 7.4, 7.5, 7.6(e), 7.7, 7.8, 7.9, 7.11, 7.13, 7.17(b) (which covenants shall survive for a period of one year or otherwise in accordance with their terms), 9.1 and 9.2 hereof ) shall expire with, and be terminated and extinguished by, (i) the 62 consummation of the sale of the Purchased Assets and the transfer of the Assumed Liabilities pursuant to this Agreement and shall not survive the Closing Date, or (ii) the termination of this Agreement pursuant to Section 10.1 hereof or otherwise; and none of the Seller, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation or warranty. 11.4 Notices. All notices and other communications hereunder shall be ------- in writing and shall be deemed given if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof): (a) If to the Seller, to: Nevada Power Company c/o Sierra Pacific Resources 6100 Neil Road Reno, Nevada 89511 Attention: William E. Peterson Telecopy: (775) 834-5959 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York 10036-6522 Attention: Sheldon S. Adler, Esq. Telecopy: (212) 735-2000 (b) if to the Buyer, to: NRG Energy, Inc. Symphony Towers Suite 2740 750 "B" Street San Diego, CA 92101-8129 Attention: David Lloyd, Esq. Telecopy: (619) 615-7663 63 Dynegy Holdings Inc. 1000 Louisiana Street, Suite 5800 Houston, TX 77002 Attention: Alisa B. Johnson, Esq. Telecopy: (713) 767-8508 with copies to: Stoel Rives LLP 900 SW Fifth Avenue Suite 2300 Portland, OR 97204-1268 Attention: William H. Holmes, Esq. Telecopy: 503-220-2480 11.5 Assignment. This Agreement and all of the provisions hereof ---------- shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but, except as provided in Section 11.5, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. For purposes of this Agreement, subject to Section 7.13, the term "Affiliate Assignee" shall refer to any direct or indirect subsidiary of Buyer and any constituent partner or participant in Buyer (if Buyer is a partnership, joint venture, consortium or other association or organization) to whom any of Buyer's rights and obligations under this Agreement are assigned in compliance with the requirements of this Section. For purposes of this Agreement, "Financing Entity" shall mean any Person designated by Buyer to Seller as a lessor in connection with any Off-Balance Sheet Lease Facility, and "Permitted Assignee" shall mean any Affiliate Assignee or Financing Entity, as the case may be. For purposes of this Agreement, "Off-Balance Sheet Lease Facility" shall mean any long-term lease of the Purchased Assets, where the lease is accounted for by Buyer on its financial statements, prepared in accordance with GAAP, as an operating lease, whether or not such transaction is a leveraged lease (in which the Financing Entity is the owner of the Purchased Assets for U.S. federal income tax purposes), or a synthetic lease, tax ownership operating lease, tax retention Operating lease or similar lease transaction where Buyer is treated as owner of the leased property for U.S. federal income tax purposes. Notwithstanding any contrary provisions contained in this Agreement, the parties agree that, before and after the Closing, Buyer, in its sole discretion, may assign any or all of its rights and obligations arising under this Agreement or any Ancillary Agreement to one or more Permitted Assignees, provided that, -------- unless Seller shall 64 agree to alternative arrangements in writing, no such assignment shall relieve Buyer of any obligation or liability to Seller under this Agreement or under any Ancillary Agreement, and provided further that, unless Seller shall agree to -------- ------- alternative arrangements in writing, the following shall apply: (a) Buyer shall provide Seller with prompt written notice of any such assignment. (b) No such assignment shall be effected if the making of the assignment will result in Seller's or Buyer's inability to obtain any consent or authorization reasonably required to consummate the transactions contemplated by this Agreement or to avoid economic detriment to the Seller arising from the consummation of such transactions. (c) Irrespective of any such assignment or the identity of the party or parties executing any Ancillary Agreements: (i) Buyer shall remain jointly and severally liable to Seller and to third parties with respect to any Assumed Liabilities transferred to or undertaken by a Permitted Assignee, and shall remain jointly and severally liable to Seller with respect to any other covenant, obligation or liability to Seller under this Agreement or under an Ancillary Agreement that is transferred to, or undertaken by, a Permitted Assignee, including without limitation, the payment of all sums due to Seller hereunder or under an Ancillary Agreement, it being understood that all such covenants, obligations and liabilities shall constitute the direct and primary obligation of Buyer to Seller (and to third parties in the case of the Assumed Liabilities); and (ii) Without limiting the generality of the foregoing, if and to the extent that the application of any principle of law or of common law would construe the retention by Buyer of the direct and primary obligation to perform any and all obligations, liabilities or covenants assigned to or assumed or undertaken by a Permitted Assignee to be a guaranty by the Buyer of the Permitted Assignee's performance, then the Buyer hereby irrevocably, absolutely and unconditionally guarantees to Seller the full, prompt and faithful performance by such Permitted Assignee of all covenants and obligations to be performed by such Permitted Assignee under this Agreement and any Ancillary Agreement assigned to such Permitted Assignee. (d) Buyer further hereby agrees that a separate action or actions may be brought and prosecuted against Buyer for any such covenant, obligation or liability assigned to a Permitted Assignee, whether action is brought against the pertinent Permitted Assignee or whether such Permitted Assignee is joined in any 65 such action or actions (Buyer hereby waiving any right to require Seller to proceed against a Permitted Assignee). (e) Buyer hereby authorizes Seller, without notice and without affecting Buyer's liability hereunder, from time to time to (i) renew, compromise, extend, accelerate, or otherwise change the terms of any obligation of a Permitted Assignee hereunder or under any Ancillary Agreement with the agreement of such Permitted Assignee, (ii) take and hold security for the obligations of any such Permitted Assignee and exchange, enforce, waive and release any such security, and (iii) apply such security and direct the order or manner of sale thereof as Seller in its discretion may determine. (f) Buyer hereby further waives: (i) Any defense that may arise by reason of the incapacity or lack of authority of any Permitted Assignee; (ii) Any defense based upon a statute or rule of law which provides that the obligations of a surety must be neither larger in amount nor in other respects more burdensome than those of the principal; (iii) Any duty on the part of Seller to disclose to Buyer any facts that Seller may now or hereafter know about a Permitted Assignee; and (g) So long as Buyer has any obligation to Seller under this Agreement or the Ancillary Agreements, as to any Affiliate Assignee (but not any Financing Entity), any right to subrogation, reimbursement, exoneration or contribution or any other rights that would result in Buyer being deemed a creditor of a Permitted Assignee under the federal Bankruptcy Code or any other law, in each case resulting from the existence or performance of obligations of a Permitted Assignee hereunder or under any Ancillary Agreement. 11.6 Arbitration. Any dispute, controversy or claim arising out of or ----------- relating to this agreement, or the breach, termination or validity hereof (a "Dispute"), shall be finally settled by arbitration in accordance with the then- prevailing Commercial Arbitration Rules of the American Arbitration Association, as modified herein (the "Rules"). The place of arbitration shall be Nevada. There shall be three arbitrators, of whom the Seller shall appoint one and of whom the Buyer shall appoint one. The two arbitrators so appointed shall select a third arbitrator who shall act as the chairman of the tribunal. If any arbitrator is not appointed within the time limits provided herein or in the Rules, such arbitrator shall be appointed by the American Arbitration Association. The arbitral tribunal is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any 66 right to recover punitive, exemplary or similar damages with respect to any dispute. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act, 9 U.S.C. (S)(S) 1-16, and judgment upon any award may be entered in any court of competent jurisdiction. 11.7 Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Nevada (regardless of the laws that might otherwise govern under applicable Nevada principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. 11.8 Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.9 Interpretation. The article and section headings contained in -------------- this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.10 Entire Agreement. This Agreement, including the documents, ---------------- exhibits, schedules, certificates and instruments referred to herein, and the Confidentiality Agreement embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of the Seller contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Offering Memorandum, dated March 2000) as supplemented, or the correspondence relating to the divestiture of Seller's generation assets previously made available to the Buyer by the Seller and CSFB. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement; (i) provided, however, that the paragraph in the -------- ------- Confidentiality Agreement entitled "Non-Disclosure of Interest in Power Generation Assets" is, only with respect to the Purchased Assets, superceded by Section 7.5 of this Agreement, and (ii) in the event of any conflict between Section 7.2(b) of this Agreement and the Confidentiality Agreement, Section 7.2(b) shall control 11.11 Bulk Sales or Transfer Laws. The Buyer acknowledges that the --------------------------- Seller shall not comply with the provision of any bulk sales or transfer laws of 67 any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by the Seller with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. 68 IN WITNESS WHEREOF, the Seller and the Buyer have caused this Asset Sale Agreement for the Clark Asset Bundle to be signed by their respective duly authorized officers as of the date first above written. NEVADA POWER COMPANY By:___________________________________ Name: William E. Peterson Title: Sr. Vice President, General Counsel And Corporate Secretary Title: NRG ENERGY, INC. By: ___________________________________ Name: Craig A. Mataczynski Title: Senior Vice President Title: DYNEGY HOLDINGS INC. By: ___________________________________ Name: Edward P. Hermann Title: Attorney-in-Fact EX-10.F 15 0015.txt TRANSITIONAL POWER PURCHASE AGREEMENT, CLARK POWER Exhibit 10(F) TRANSITIONAL POWER PURCHASE AGREEMENT BY AND BETWEEN NEVADA POWER COMPANY AND CLARK POWER LLC DATED: NOVEMBER 16, 2000 ASSET BUNDLE: CLARK 1 TABLE OF CONTENTS
Section Page - ------- ---- 1. DEFINITIONS..............................................................................................1 2. TERM.....................................................................................................7 3. SECURITY.................................................................................................9 4. SUPPLY SERVICE..........................................................................................10 5. NOTIFICATION............................................................................................13 6. PRICING OF ENERGY AND ANCILLARY SERVICES................................................................15 7. INVOICING AND PAYMENTS..................................................................................15 8. REGULATORY APPROVALS....................................................................................19 9. COMPLIANCE..............................................................................................19 10. INDEMNIFICATION.........................................................................................20 11. LIMITATION OF LIABILITY.................................................................................21 12. FORCE MAJEURE...........................................................................................22 13. DISPUTES................................................................................................24 14. NATURE OF OBLIGATIONS...................................................................................26 15. SUCCESSORS AND ASSIGNS..................................................................................26 16. REPRESENTATIONS.........................................................................................28 17. DEFAULT AND REMEDIES....................................................................................28 18 FACILITY ADDITIONS AND MODIFICATIONS....................................................................29 19. COORDINATION............................................................................................30 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE...........................................................30 21. OUTAGE SCHEDULING.......................................................................................30 22. REPORTS.................................................................................................32 23. COMMUNICATIONS..........................................................................................32 24. NOTICES.................................................................................................33 25. MERGER..................................................................................................34 26. HEADINGS................................................................................................34 27. COUNTERPARTS AND INTERPRETATION.........................................................................34 28. SEVERABILITY............................................................................................34 29. WAIVERS.................................................................................................35 30. AMENDMENTS..............................................................................................35 31. TIME IS OF THE ESSENCE..................................................................................35 32. APPROVALS...............................................................................................35 33. PLR SERVICE.............................................................................................36 34. CONFIDENTIALITY.........................................................................................36 35. CHOICE OF LAW...........................................................................................38
Exhibits Page - -------- ---- EXHIBIT A ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS..............................................A-1 EXHIBIT B PRICE FLOOR OF ENERGY, PRICE CEILING OF ENERGY, AND PRICE OF ANCILLARY SERVICES............................................................................B-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE....................................................................C-1 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS...................................................D-1 EXHIBIT E YEAR END TRUE-UP INVOICE......................................................................E-1 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS.....................................................F-1 EXHIBIT G FORM OF AVAILABILITY NOTICE...................................................................G-1 EXHIBIT H FORM OF GUARANTEE.............................................................................H-1 EXHIBIT I COMPANY OBSERVED HOLIDAYS.....................................................................I-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT....................................................................J-1 EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE............................................................K-1 EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE......................................................L-1
i TRANSITIONAL POWER PURCHASE AGREEMENT This Agreement is made and entered into as of November 16, 2000 by and between Nevada Power Company, a Nevada corporation ("Buyer"), and Clark Power LLC, a Delaware limited liability company (the "Supplier"). Buyer and Supplier are referred to individually as a "Party" and collectively as the "Parties." WITNESSETH: WHEREAS, Buyer is selling its Clark generating station and other assets associated therewith to NRG Energy, Inc. a Delaware corporation, and Dynegy Holdings Inc., a Delaware corporation, both affiliates of Supplier (the "Asset Sale"); WHEREAS, notwithstanding the Asset Sale, Buyer expects that it has been designated as the Provider of Last Resort ("PLR") for its Nevada retail electric customers who are unable to obtain electric service from an alternative seller or who fail to select an alternative seller. The load required to serve such customers, plus the customers under those wholesale sales agreements existing at the Effective Date, is referred to herein as Buyer's Transitional Resource Requirement; and WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest in the Clark generating station as a source of supply for its Transitional Resource Requirement; and WHEREAS, Supplier has or is willing to secure the necessary resources to provide a portion of Buyer's Transitional Resource Requirement; and WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell Energy and Ancillary Services under contract to Buyer; and NOW, THEREFORE, in consideration of the mutual covenants, representations and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows: 1. DEFINITIONS 1.1 Format. 1.1.1 References to Articles and Sections herein are cross-references to Articles and Sections, respectively, in this Agreement, unless otherwise stated. 1.1.2 Any parts of this Agreement which are incorporated by reference shall have the same meaning as if set forth in full text herein. 2 1.2 Definitions. As used in this Agreement, the following terms ----------- shall have the meanings set forth below: 1.2.1 "Agreement" means this Agreement together with the --------- Exhibits attached hereto, as such may be amended from time to time. 1.2.2 "Adjusted Replacement Cost of Energy" means the ----------------------------------- Replacement Cost of Energy that will be due from Supplier after True-up in accordance with the provisions of Section 7.5. Example determinations of the Adjusted Replacement Cost of Energy are shown on Exhibit E. 1.2.3 "Ancillary Services" means those capacity-related ------------------ services as listed in Exhibit B as well as the Energy component of such services. These services are defined in Buyer's OATT. 1.2.4 "Asset Bundle" means the Clark generating station(s) and ------------ other assets associated therewith pursuant to the terms of the Asset Sale Agreement. 1.2.5 "Asset Bundle Capacity" means, with respect to each unit --------------------- listed in Exhibit A, the net generating capacity (in megawatts ("MW")) of such unit, as modified from time to time in accordance with Section 5.2, Section 20, and Section 21, and not to exceed at any time the net capacity for each unit listed in Exhibit A. Asset Bundle Capacity shall also mean, as the context requires, the Energy (in megawatt-hours ("MWh")) and the Ancillary Services which the units would be capable of producing if they operated at the capacity level described in the first sentence of this Section 1.2.5. 1.2.6 "Asset Sale" has the meaning set forth in the Recitals. ---------- 1.2.7 "Asset Sale Agreement" means the Agreement between Buyer -------------------- and Supplier's affiliates, NRG Energy, Inc., a Delaware corporation, and Dynegy Holdings Inc., a Delaware corporation, dated as of November 16, 2000, to purchase Buyer's Asset Bundle. 1.2.8 "Asset Sale Closing" means the transfer of Buyer's ------------------ ownership of the Asset Bundle through the consummation of the Asset Sale pursuant to the terms of the Asset Sale Agreement. 1.2.9 "Average Cost of Delivered Energy" means the total cost -------------------------------- of Delivered Energy for the Contract Year after the application of the Annual True-up Mechanism from Section 7.5 divided by the total Delivered Energy for the Contract Year. Example determinations of Average Cost of Delivered Energy are shown on Exhibit E. 1.2.10 "Availability Notice" means a notice delivered from time ------------------- to time by Supplier to Buyer pursuant to Section 5.2 notifying Buyer of changes in the availability of the Asset Bundle. 3 1.2.11 "Business Day" means any day other than Saturday, ------------ Sunday, and any day that is an observed holiday by Buyer as shown on Exhibit I. 1.2.12 "Buyer's OATT" means Buyer's then-effective Open Access ------------ Transmission Tariff, as it may be amended, which has been accepted for filing by the FERC. 1.2.13 "CALPX" means the California Power Exchange and any ----- successor entity thereto. 1.2.14 "Confidential Information" has the meaning set forth in ------------------------ Section 34. 1.2.15 "Contract Year" means, with respect to the first ------------- Contract Year, the period beginning on the Effective Date and, with respect to each subsequent Contract Year, the period immediately following the end of the preceding Contract Year, and in each case ending on the earlier of the date which is twelve (12) months thereafter or the termination date of this Agreement. 1.2.16 "Control Area Operator" means an entity or organization, --------------------- and its representatives, which is responsible for operating and maintaining the reliability of the electric power system(s) within the Transmission System. The Control Area Operator is also referred to as the transmission operator. 1.2.17 "Credit Amount" shall mean an amount equal to the TPPA ------------- Amount, plus an additional amount equal to $40/MWh multiplied by 395 megawatts, multiplied by the number of hours remaining in this Agreement until March 1, 2003. 1.2.18 "Delivered Amount" means, with respect to any Dispatch ---------------- Hour, the Energy delivered by Supplier to Buyer at the designated Point(s) of Delivery during such Dispatch Hour, whether or not such Energy was generated by the Asset Bundle, plus any additional amounts pursuant to Section 4.1.2, Section 4.1.3 and the Ancillary Services provided by Supplier for Buyer during any Dispatch Hour pursuant to the terms of this Agreement. 1.2.19 "Derating" means a reduction to the Asset Bundle -------- Capacity. 1.2.20 "Dispatch Hour" means the prescribed hour(s) when Energy ------------- is to be delivered by Supplier to Buyer at the designated Point(s) of Delivery and the prescribed hour(s) when Ancillary Services are to be provided to the ISA by Supplier on behalf of Buyer. 4 1.2.21 "EDU" means electric distribution utility, the --- organization with the responsibility for the distribution of energy over Buyer's distribution system to retail end-users. 1.2.22 "Effective Date" means the date that this Agreement -------------- becomes effective which shall be the date on which the Closing Date, as defined in the Asset Sale Agreement, actually occurs. 1.2.23 "Emergency Condition" shall mean a public declaration by ------------------- the ISA or Control Area Operator that the Transmission System is in danger of imminent voltage collapse or uncontrollable cascading outages. 1.2.24 "Energy" means electricity (measured in MWh) and ------ associated power-producing capacity to be provided by Supplier to Buyer pursuant to this Agreement. Also known as "firm energy and associated firm capacity". 1.2.25 "Event of Default" has the meaning set forth in Section ---------------- 17 hereof. 1.2.26 "FERC" means the Federal Energy Regulatory Commission ---- and any successor agency thereto. 1.2.27 "Force Majeure" has the meaning set forth in Section 12 ------------- hereof. 1.2.28 "GAAP" means Generally Accepted Accounting Principles ---- for the United States. 1.2.29 "Good Utility Practice" means the applicable practices, --------------------- methods, and act: (i) required by applicable Laws, permits and reliability criteria, whether or not the Party whose conduct at issue is a member thereof, and (ii) otherwise engaged in or approved by a significant portion of the United States electric utility industry during the relevant time period, which, in the exercise of reasonable judgement in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, safety, environmental protection, economy and expediency. Good Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to practices, methods or acts generally accepted in the United States electric utility industry. 1.2.30 "Governmental Authority" means any foreign, federal, ---------------------- state, local, tribal or other governmental, regulatory or administrative agency, court, commission, department, board, or other governmental subdivision, legislature, rulemaking board, tribunal, arbitrating body, or other governmental authority. 5 1.2.31 "Gross Replacement Costs of Energy" means Buyer's --------------------------------- Replacement Cost of Energy prior to adjustment for the amount that Buyer would have paid for the Energy if Supplier had delivered the Energy to Buyer. Example determinations of Gross Replacement Costs of Energy are shown on Exhibit D. 1.2.32 "Guarantee" has the meaning set forth in Section 3.1.2 --------- hereof. 1.2.33 "Guarantor" has the meaning set forth in Section 3.1.2 --------- hereof. 1.2.34 "Invoiced Replacement Costs" means the Replacement Costs -------------------------- which have been billed to Supplier or subtracted from payments to Supplier in accordance with the provisions of Section 4.2 and Section 7.4. 1.2.35 "ISA" means the Mountain West Independent System --- Administrator, or the regional transmission organization authorized with the responsibility for the scheduling and administration of Energy and Ancillary Services over, through and within the Transmission System in coordination with other interconnected entities to provide transmission services. The ISA is also referred to herein as transmission administrator. 1.2.36 "ISA's OATT" means the ISA's then-effective Open Access ---------- Transmission Tariff, as it may be amended, which has been accepted for filing by the FERC. 1.2.37 "Law" means any law, treaty, code, rule, regulation, --- order, determination, permit, certificate, authorization, or approval of an arbitrator, court or other Governmental Authority which is binding on a Party or any of its property. 1.2.38 "Limit on Excused Energy" means the amount of energy ----------------------- that can be excused under the provisions of Section 12.4 as shown on Exhibit A. 1.2.39 "Market Price of Energy" has the meaning set forth in ---------------------- Section 6.2.1. 1.2.40 "Minimum Annual Energy Take" has the meaning set forth -------------------------- in Section 4.1.2. 1.2.41 "Minimum Investment Grade Rating" of a Person means that ------------------------------- such Person has a minimum credit rating on its senior unsecured debt securities of at least two of the following ratings: (i) BBB as determined by Standard & Poor's Corporation, (ii) Baa2 as determined by Moody's Investors Service, Inc., or (iii) a comparable rating by another nationally recognized rating service reasonably acceptable to Buyer. 6 1.2.42 "Minimum Tangible Net Worth" means the total book value -------------------------- of shareholder's equity less the balance of goodwill, as reported on the latest quarterly balance sheet prepared in accordance with Generally Accepted Accounting Principles (GAAP). 1.2.43 "NERC" means the North American Electric Reliability ---- Council and any successor entity thereto. 1.2.44 "Nonemergency Condition" shall mean the determination, ---------------------- direction or order by the ISA, or Control Area Operator to Supplier and/or Buyer to change the Supply Amount which is not a result of or due to an Emergency Condition. A Nonemergency Condition includes an insufficiency of Ancillary Services to securely operate the Transmission System. 1.2.45 "Operating Representatives" means the persons designated ------------------------- to transmit and receive routine operating and emergency communications required under this Agreement. 1.2.46 "Party" has the meaning set forth in the preamble of ----- this Agreement. 1.2.47 "Permitted Deratings" means those reductions to the ------------------- Asset Bundle Capacity of which Supplier may notify Buyer from time to time in an Availability Notice pursuant to Section 5.2. 1.2.48 "Person" means any natural person, partnership, limited ------ liability company, joint venture, corporation, trust, unincorporated organization, or governmental entity or any department or agency thereof. 1.2.49 "Point of Delivery" means the point (s) which has (have) ----------------- been specified as the Interconnection Point(s) in the Interconnection Agreement between Buyer and Supplier, dated November 16, 2000, as it may be amended from time to time, as well as any alternative locations agreed upon pursuant to Section 4.1.6. 1.2.50 "Price Ceiling of Energy" means the ceiling price of ----------------------- Energy as stated in Exhibit B. 1.2.51 "Price Floor of Energy" means the floor price of Energy --------------------- as stated in Exhibit B. 1.2.52 "Provider of Last Resort (PLR)" has the meaning set ----------------------------- forth in the Recitals. 1.2.53 "PUCN" means the Public Utilities Commission of Nevada ---- and any successor entity thereto. 7 1.2.54 "Replacement Costs" means with respect to a period of ----------------- time, the difference between (a) the actual costs, including without limitation related penalties and transmission costs, incurred by Buyer to replace any shortfall between (1) the Supply Amount and (2) the Delivered Amounts of Energy, (or in the case of Ancillary Services the Supplier's schedule of Ancillary Services) during such period and (b) the payments the Supplier would have been entitled to in respect of such shortfall in delivery; provided that Replacement Costs shall also be subject to the annual true-up mechanism set forth in Section 7.5. 1.2.55 "Supply Amount" means, with respect to each Dispatch ------------- Hour, the amount of Energy and Ancillary Services, not to exceed the Asset Bundle Capacity for such Dispatch Hour, requested by Buyer to be delivered by Supplier during any Dispatch Hour. The Supply Amount for any Dispatch Hour shall be determined pursuant to Section 5.1. 1.2.56 "Total Amount of Energy Replaced" means the summation of ------------------------------- Replacement Energy as shown on Exhibit E. 1.2.57 "TPPA Amount" means $158,000,000 as such amount may be ----------- adjusted pursuant to Section 2.3. 1.2.58 "Transitional Resource Requirement" or "TRR" means the --------------------------------- Energy and loss compensation necessary for Buyer to meet its obligations as a Provider of Last Resort (PLR) for Nevada and under those wholesale sales agreements existing at the Effective Date. 1.2.59 "Transmission System" means the transmission facilities ------------------- constituting Buyer's control area, as of the date this Agreement is executed, plus any modification, upgrade or expansion of, or additions to, such facilities. 1.2.60 "WSCC" means the Western Systems Coordinating Council ---- and any successor entity thereto. 2. TERM 2.1 Term. Unless terminated earlier pursuant to the terms of this ---- Agreement, the term of this Agreement shall commence on the Effective Date and continue until the earlier of the effective date of an order by a Governmental Authority terminating Buyer's PLR responsibility, or March 1, 2003. Supplier shall provide service under this Agreement commencing on the first hour on the day after the Effective Date. 2.2 Termination. ----------- 2.2.1 Except pursuant to Sections 2.2.2 or 17.4, this Agreement may not be terminated without the explicit prior written approval of Buyer. 2.2.2 If, prior to the Asset Sale Closing, the FERC or any other 8 Governmental Authority places conditions on or requires revisions of this Agreement which have a material adverse effect on Supplier or Buyer, the Parties agree to negotiate in good faith those amendments to the Agreement reasonably needed to preserve the bargain between the Parties. If the Parties fail to negotiate mutually acceptable amendments to this Agreement within sixty (60) days of such action by the FERC or other Governmental Authority, either Party may terminate the Agreement after first notifying the other Party in writing at least ten (10) Business Days prior to the termination date; provided that neither Party may exercise a right of termination pursuant to this Section 2.2.2 after the Asset Sale Closing. 2.2.3 This Agreement may be terminated with the mutual agreement of the Parties. 2.2.4 Any termination of this Agreement pursuant to this Section 2 shall not take effect until FERC either authorizes the termination or accepts a written notice of termination. 2.3 Effect of Termination. --------------------- 2.3.1 Adjustment of TPPA Amount. If the Effective Date of this ------------------------- Agreement is before June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% plus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between the Effective Date and June 1, 2001. An example calculation is shown on Exhibit J. If the Effective Date of this Agreement is after June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% minus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between June 1, 2001 and the Effective Date. An example calculation is shown on Exhibit J. If this Agreement is terminated before March 1, 2003, Supplier shall pay to Buyer an amount, in accordance with the provisions of Section 7, equal to the TPPA Amount which existed before any adjustment in accordance with the first or second paragraph of this Section 2.3.1, multiplied by the sum of the monthly adjustments for each month or portion thereof between the date on which this Agreement is terminated and March 1, 2003. An example calculation is shown on Exhibit J. 2.3.2 Any default or termination of this Agreement shall not release either Party from any applicable provisions of this Agreement with respect to: 2.3.2.1 The payment of liquidated damages pursuant to Sections 4.2, 12, 17, 18, or 21. 2.3.2.2 Indemnity obligations contained in Section 10, to the extent 9 of the statute of limitations period applicable to any third party claim. 2.3.2.3 Limitation of liability provisions contained in Section 11. 2.3.2.4 Payment of any unpaid amounts in respect of obligations arising prior to or resulting from termination. 2.3.2.5 For a period of one (1) year after the termination date, the right to raise a payment dispute and the resolution thereof pursuant to Section 13. 2.3.2.6 The resolution of any dispute submitted pursuant to Section 13 prior to, or resulting from, termination. 3. SECURITY 3.1 Supplier Certification; Guarantee. As a condition of Buyer's --------------------------------- execution of, and continuing compliance with, this Agreement, Supplier shall at Supplier's option comply with the provisions of either Section 3.1.1 or Section 3.1.2. 3.1.1 Supplier Certification. Supplier shall (a) provide a ---------------------- certificate from a duly authorized corporate officer of Supplier certifying that, as of the Effective Date, Supplier has a credit rating equal to or higher than the Minimum Investment Grade Rating; or (b) post a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.1.2 Guarantee. In the alternative to the provisions of --------- Section 3.1.1, the Supplier may provide a corporate guarantee, in form and substance as set forth in Exhibit H, made by an entity (the "Guarantor") that: 3.1.2.1 has a credit rating equal to or higher than the Minimum Investment Grade Rating, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a credit rating equal to or higher than the Minimum Investment Grade Rating; or 3.1.2.2 has a MTNW of no less than one (1) billion dollars, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a MTNW of no less than one (1) billion dollars; or 3.1.2.3 posts a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial 10 institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.2 Compliance. ---------- 3.2.1 Reporting. If at any time during the term of this --------- Agreement, Standard & Poor's Corporation, Moody's Investors Service, Inc. or another nationally recognized firm downgrades the credit rating of Supplier, the Guarantor, or the financial institution that issued the letter of credit, as applicable, then Supplier shall provide Buyer with written notice of such change of circumstance within two (2) Business Days of any such change. In the event such a downgrade also constitutes an Event of Default pursuant to Section 17, the requirements of this Section 3.2.1 are in addition to, and not in lieu of, the requirements of Section 17. 4. SUPPLY SERVICE 4.1 Obligations of the Parties. -------------------------- 4.1.1 Supply Amount. Supplier shall be required to provide the ------------- Supply Amount in any Dispatch Hour. As provided in Section 5.1, Buyer shall makereasonable efforts to ensure that the Supply Amount is no greater than necessary to satisfy Buyer's TRR. 4.1.1.1 With the Buyer's prior consent, not to be unreasonably withheld or delayed, Supplier shall be entitled to generate or otherwise procure the Supply Amount from sources other than the Asset Bundle. 4.1.1.2 Supplier shall deliver the Supply Amount to Buyer during the Dispatch Hour on a continuous basis at the Point(s) of Delivery and shall schedule the Supply Amount in accordance with the Buyer's OATT or the ISA's OATT, as applicable. 4.1.1.3 The Buyer at its sole discretion shall designate the allocation of the Supply Amount between Energy and Ancillary Services in accordance with the notification provisions of Section 5. 4.1.1.3.1 The Parties recognize that operation of the Asset Bundle is subject to, and thus the Supply Amount at times may be limited by, the operational parameters of the Asset Bundle. The Parties further recognize that the consolidation of two or more generating units into an Asset Bundle precludes contractual provisions addressing such operational 11 parameters in a matter normally applied to Energy purchases from specified generating units. Consequently, Supplier will have the right to raise concerns regarding the effect of such operational parameters upon Buyer's scheduling requests, and Buyer will make good faith efforts to alleviate Supplier's concerns. 4.1.2 Minimum Annual Energy Take. The Buyer shall accept a -------------------------- minimum annual energy take during each Contract Year. The Minimum Annual Energy Take shall be set forth on Exhibit A. 4.1.2.1 Buyer's Obligation to Take. If Buyer is -------------------------- unwilling to accept the Minimum Annual Energy Take for any Contract Year, as may be adjusted pursuant to Section 4.1.2.2, the difference (in MWh) between the Supply Amount of Energy (including consideration for Energy that would have been taken but was unavailable due to Permitted Deratings or Force Majeure, as well as the Total Amount of Energy Replaced) and the Minimum Annual Energy Take shall be billed at the Price Ceiling of Energy less the Price Floor of Energy. An example of the monthly determination of the amount of Energy to be credited against the Minimum Annual Energy Take is shown on Exhibit L. 4.1.2.2 Adjustments to Minimum Annual Energy Take. Buyer ----------------------------------------- shall have the right to reduce the Minimum Annual Energy Take if the number of customers taking electric service from Buyer falls below the number of customers on December 31, 2000. Adjustments will be applicable, on a pro rata basis, on the first (1/st/) day of the month immediately following Supplier's receipt of Buyer's notice of adjustment. Buyer shall provide supporting data in reasonable detail to support its calculations. An example of the calculation of a revised Minimum Annual Energy Take is shown on Exhibit K. 4.1.3 Supplier Rights to Output. Supplier may sell to others ------------------------- any portion of the Asset Bundle Capacity in excess of the Supply Amount. 4.1.4 Point(s) of Delivery. Supplier shall deliver, and Buyer -------------------- shall take delivery of, the Supply Amount of Energy at the Point(s) of Delivery. Subject to Section 4.1.6.2, Supplier shall be responsible for all costs associated with delivery of the Supply Amount of Energy to the Point(s) of Delivery. 4.1.5 Alternative Points of Delivery. For any Dispatch Hour, ------------------------------ either Party may designate one or more alternative Points of Delivery, subject to the other Party's prior approval and consistent with the Buyer's OATT or 12 the ISA's OATT, as applicable, such approval not to be unreasonably withheld or delayed. 4.1.5.1 If Supplier has designated an alternative Point of Delivery, Supplier shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.5.2 If Buyer has designated an alternative Point of Delivery, Buyer shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.6 Fuel. Buyer shall have no responsibility for any fuel ---- procurement or fuel transportation costs or activities associated with the Asset Bundle during the term of this Agreement. 4.1.7 Resale. Except as provided in the next sentence, the ------ Supply Amount may be resold by Buyer only as necessary to satisfy Buyer's TRR. If, after submitting the request of the Supply Amount pursuant to Section 5.1, the Buyer determines that the scheduled Supply Amount, together with purchases scheduled under Buyer's other Transitional Power Purchase Agreements, exceeds Buyer's most current projected TRR, then the Buyer also shall resell at wholesale that amount of Energy in excess of Buyer's actual TRR as necessary to balance its load and resources. 4.1.8 Right to Review. Buyer and Supplier each shall have the --------------- right to review during normal business hours the relevant books and records of the other Party to confirm the accuracy of such as it pertains to transactions under this Agreement. The review shall be consistent with standard business practices and shall follow reasonable notice to the other Party. Reasonable notice for a review of the previous month's records shall be at least a twenty-four (24) hour period from a Business Day to a subsequent Business Day. If a review is requested of other than the previous month's records, then notice of that request shall be provided with a minimum of seven (7) calendar days written notice by the requesting Party. The notice shall specify the period to be covered by the review. The Party providing records can make reasonable requests that the receiving Party keep the records confidential, and the receiving Party shall take reasonable steps to accommodate such requests. 4.2 Liquidated Damages. ------------------ 4.2.1 If the Delivered Amount of Energy is less than the Supply Amount of Energy in any Dispatch Hour during a month, and Replacement Costs computed in respect of such month are greater than zero, then Supplier shall reimburse Buyer for such Replacement Costs. If Supplier's schedule of Ancillary Services is less than the Supply Amount of 13 Ancillary Services in any Dispatch Hour during a month, Supplier shall reimburse Buyer for such Replacement Costs for the difference between Supplier's schedule and the Supply Amount of Ancillary Services. An example of the methodology used to calculate Replacement Costs is provided in Exhibit D. 4.2.2 Supplier also shall be responsible for any costs incurred by Buyer associated with a violation of reliability criteria (including but not limited to imbalance costs or penalties) due to a deviation between the Supply Amount and Delivered Amount. 4.2.3 The Parties recognize and agree that the payment of such amounts by Supplier pursuant to this Section 4.2 is an appropriate remedy in the event of such a failure and that any such payment does not constitute a forfeiture or penalty of any kind, but rather constitutes actual costs to Buyer under the terms of this Agreement. 4.3 Supplier Operating Representative. Supplier shall provide and --------------------------------- maintain a twenty-four (24) hour seven (7) day per week communication link with Buyer's control center and with Buyer's schedulers. Supplier's Operating Representatives shall be available to address and make decisions on all operational matters under this Agreement on a twenty-four (24) hour seven (7) day per week basis. 5. NOTIFICATION 5.1 Scheduling Notification. Buyer shall provide Supplier with a ----------------------- request of the Supply Amount no later than twenty-four (24) hours before day-ahead bids must be submitted to the CALPX. Buyer shall make reasonable efforts to ensure that the request of the Supply Amount is no greater than that amount then projected to be necessary to satisfy Buyer's TRR. In addition, for each Supply Amount request, the change in the Supply Amount from one (1) hour to the next hour shall be no greater than the ramping capability of the units within the Asset Bundle as shown in Exhibit A. 5.2 Availability Notification. ------------------------- 5.2.1 No later than 5:00 a.m. (Pacific Time) of each day, Supplier shall deliver to Buyer an Availability Notice in the form set forth in Exhibit G. 5.2.2 Availability Notices shall provide, for the ninety-six (96) hour period starting at 6:00 a.m. (Pacific Time) that day, Supplier's hourly projection of the unavailability or derating ("Derating") of the Asset Bundle compared to the Asset Bundle Capacity figures stated for each unit in Exhibit A. Each Availability Notice also shall contain, as applicable: 14 (a) the units which are subject to a Derating; (b) the magnitude of the Derating; (c) the hours during which the Derating is expected to apply; (d) the cause of the Derating; (e) the extent, if any, to which the Derating is attributable to a Permitted Derating; (f) the projected Asset Bundle Capacity for each unit during the period covered by the Availability Notice, pursuant to Section 5.2.4 below; and (g) remaining freeboard of each of the Asset Bundle water treatment storage ponds and the forecast inlet flow rate to the brine concentrator treatment plant. 5.2.3 If and to the extent a Derating is the result of one or more of the following causes, it shall be a Permitted Derating: (a) approved planned outages pursuant to Section 21; (b) response to an Emergency Condition as described in Section 20; (c) subject to the limitations expressed in Section 12.5, a Force Majeure event; (d) a Control Installation Outage pursuant to Section 21.3; or (e) lack of water treatment pond storage capacity at the Asset Bundle; provided that such lack of water treatment pond storage capacity is not due to Supplier's sales to parties other than Buyer; provided further that (i) Buyer shall have the option to augment the Asset Bundle's brine concentrator treatment plant capacity at Buyer's cost and (ii) notwithstanding subsection 5.2.3(e)(i), Supplier shall pay for the costs of augmenting such brine concentrator treatment plant capacity to the extent that the lack of water treatment pond storage capacity at the Asset Bundle is caused by Supplier's sales to parties other than Buyer. 5.2.4 In respect of any Dispatch Hour, the Asset Bundle Capacity of each unit shall be the Asset Bundle Capacity figure stated in Exhibit A minus any Permitted Derating applicable during such hour. 5.2.5 Neither the Asset Bundle Capacity nor the Supply Amount shall be reduced by Deratings which are not Permitted Deratings. Supplier shall be responsible for all Replacement Costs, pursuant to Section 4.2.1, caused by Deratings that are not Permitted Deratings. 15 6. PRICING OF ENERGY AND ANCILLARY SERVICES 6.1 Overview. The price of Energy paid by Buyer to Supplier shall be -------- based upon a designated hourly market price, subject to monthly floor, monthly ceiling, and annual true-up provisions. The Price Floor of Energy will ensure that Supplier will receive an average price for Energy for each month which is not less than the price stated in Exhibit B. The Price Ceiling of Energy provision provides that the average price of Energy paid to Supplier each month and for each year shall not exceed the price stated in Exhibit B. 6.2 Price of Energy. --------------- 6.2.1 Market Price of Energy. In respect of any Dispatch Hour, ---------------------- the designated Market Price of Energy shall be the South of Path 15 ("SP 15") hourly market-clearing price in the day-ahead market from the CALPX as published at the following Web Site (or its successor web site) http://www.calpx.com/prices/index_prices_dayahead_ -------------------------------------------------- trading.html. Should this hourly market in the day-ahead ------------ market not exist for the entire term, the Parties shall agree upon a similar market price index. 6.2.2 Price Floor of Energy. The Price Floor of Energy is --------------------- stated in Exhibit B and shall not change during the term of this Agreement. 6.2.3 Price Ceiling of Energy. The Price Ceiling of Energy is ----------------------- stated in Exhibit B and shall not change during the term of this Agreement. 6.3 Pricing of Ancillary Services. The price of the capacity ----------------------------- component of Ancillary Services is stated in Exhibit B. The price of Ancillary Services shall not change during the term of the Agreement. Supplier shall make available to Buyer and Buyer shall offer to pass through the Energy portion of Ancillary Services with respect to the Supply Amount to the ISA, or Control Area Operator, at the Price Ceiling of Energy (plus expected direct transaction costs). The net proceeds shall be credited to the Supplier pursuant to Section 7. 6.4 Price Revisions. The Parties waive any and all rights to seek to --------------- revise the provisions of this Agreement, including the prices stated, pursuant to Sections 205 and/or 206 of the Federal Power Act. 7. INVOICING AND PAYMENTS 7.1 Invoicing and Payment. On or before the tenth (10/th/) day of --------------------- each month, Supplier shall send to Buyer an invoice setting forth the Supply Amount, Delivered Amount, the Market Price of Energy pursuant to Section 6.2.1 for each Dispatch Hour in the previous month, any amount due in accordance with Section 7.13 and the total due from Buyer. The invoice shall be calculated based upon data available to Supplier and shall be in accordance with this Section 7 and Exhibit C. Buyer shall promptly notify Supplier if Buyer in good faith disputes any portion 16 of the invoice, stating in reasonable detail the reason for the dispute. 7.2 Monthly Invoice Calculation. On each monthly invoice, Supplier --------------------------- shall calculate the following amounts: 7.2.1 The Delivered Amount in respect of each Dispatch Hour multiplied by the corresponding Market Price of Energy pursuant to Section 6.2.1, summed over the billing period; 7.2.2 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Ceiling of Energy; 7.2.3 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Floor of Energy; 7.2.4 For each Dispatch Hour of the billing period, the shortfall, if any, between the Supply Amount and the Delivered Amount (and in the case of Ancillary Services the shortfall between the Supply Amount of Ancillary Services and Supplier's schedule of Ancillary Services); 7.2.5 The Supply Amount of Ancillary Service for each dispatch hour multiplied by the price of Ancillary Services as stated in Exhibit B; and 7.2.6 The Delivered Amount of Energy related to Ancillary Services for each dispatch hour multiplied by the Price Ceiling of Energy as stated in Exhibit B. 7.2.7 If applicable, any amount to be calculated in accordance with Section 7.13. 7.3 Supplier's Invoice. Supplier will invoice the lesser of the ------------------ amounts calculated in Sections 7.2.1 and 7.2.2, provided that if the amount calculated in Section 7.2.1 is less than the amount calculated in Section 7.2.3, Supplier shall invoice Buyer the amount calculated in Section 7.2.3. Supplier shall also include in its invoice the amounts calculated in Sections 7.2.5, 7.2.6 and 7.2.7. If the Delivered Amount exceeds the Supply Amount, Buyer shall not be obligated to pay for the excess amount. Buyer shall pay Supplier for the amounts invoiced pursuant to Section 7.2.6 upon Buyer's receipt of payment from ISA or Control Area Operator. Examples of this monthly invoice calculation (and annual true-up process) are contained in Exhibit C. 7.4 Buyer's Invoice. In the event any shortfall occurs pursuant to --------------- Section 7.2.4 or payment is due to Buyer pursuant to Section 7.13, Buyer shall within ten (10) Business Days of receipt of Supplier's invoice deliver to Supplier a Buyer's invoice detailing any Replacement Costs or other payment due. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's invoice results in an amount due from Supplier to 17 Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. Buyer shall have the right to adjust the invoices issued in accordance with this Section 7.4 if Buyer incurs Replacement Costs that were not known when earlier invoices were issued. Adjusted invoices shall be issued within thirty (30) days of the date on which the additional Replacement Costs become known. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's adjusted invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. 7.5 Annual True-Up Mechanism for Energy. ----------------------------------- 7.5.1 The annual true-up mechanism will provide adjustments among the Parties with respect to each Contract Year in the following scenarios: (a) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is less than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. (b) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is greater than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Market Price of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. 18 (c) If Buyer incurred Replacement Costs for energy during the Contract year, Supplier shall multiply the Total Amount of Energy Replaced during the Contract Year by the Average Cost of Delivered Energy after true-up as determined in accordance with Section 7.5.1 (a) or 7.5.1 (b). If the amount so obtained is greater than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be zero. If the amount so obtained is less than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be the sum of the monthly Gross Replacement Costs of Energy less the amount obtained in accordance with the first sentence of this Section 7.5.1(c). If the Adjusted Replacement Cost of Energy is greater than the sum of the monthly Invoiced Replacement Costs of Energy from Buyer's Invoices for the Contract Year, Supplier shall pay the difference to Buyer. If the sum of the monthly Invoiced Replacement costs of Energy is greater than the Adjusted Replacement Cost of Energy, Buyer shall pay the difference to Seller. 7.5.2 True-up adjustments will be calculated by Supplier within twenty (20) days after each Contract Year. Examples of the true-up calculations and invoice form are set forth in Exhibit E. Interest shall be calculated pursuant to 18 CFR Section 35.19a and shall be included in the true-up invoice. Invoices for true-up adjustments shall be submitted by Supplier within thirty (30) days after the end of the Contract Year. Payments for such invoices shall be due from Buyer thirty (30) days from receipt of the true-up invoice. 7.6 Invoice Disagreements. Should there be a good faith dispute over --------------------- any invoice, the Parties shall promptly seek resolution pursuant to Section 13. Pending resolution of the invoice dispute, payment shall be made or offsets or credits taken, as applicable, based upon the undisputed portion of the invoice. 7.7 Adjustments. Upon resolution of the dispute, the prevailing ----------- Party shall be entitled to receive the disputed amount, as finally determined to be payable along with interest (calculated pursuant to 18 C.F.R. (S) 35.19a through the date of payment. No invoice (or payment covered thereby) shall be subject to adjustment unless notice or request for adjustment is given within one (1) year of the date payment thereunder was due. 7.8 Method of Payment. Subject to Sections 7.3, 7.6 and 7.7, Buyer ----------------- shall remit all amounts due by wire or electronic fund transfer, pursuant to Supplier's invoice instructions, no later than thirty (30) days after receipt of the invoice. 19 7.9 Overdue Payments. Overdue payments shall bear interest from and ---------------- including, the due date to the date of payment on the unpaid portion calculated pursuant to 18 C.F.R.(S) 35.19a. 7.10 Buyer Right to Offset. Buyer shall have the right to offset any --------------------- amounts Supplier owes to Buyer, including Replacement Costs (except for such amounts disputed in good faith by Supplier), against the amounts owed by Buyer to Supplier. 7.11 Taxes. Each Party shall pay ad valorem and other taxes ----- attributed to its facilities and services provided. Supplier shall not include any taxes of any kind in its invoices to Buyer. The prices of Energy and Ancillary Services shall not change during the term of this Agreement as a result of any changes in local, state or federal taxes, fees or levies. 7.12 Late Invoices. If either Party submits an invoice outside of the ------------- time deadlines set forth herein, that Party shall not forfeit its rights to collect the amounts due thereunder, provided that such invoice is no more than six (6) months late, and provided that changes to invoices remain subject to the deadline in Section 7.7. 7.13 Termination Prior to March 1, 2003. Notwithstanding any other ---------------------------------- provision herein, in the event that this Agreement is terminated before March 1, 2003 and as a result of such termination Buyer is entitled to a payment in accordance with Section 2.3.1, Supplier shall include an amount calculated in accordance with Section 2.3.1 and Exhibit J, to be paid by Supplier to Buyer in the next monthly invoice submitted to Buyer following such termination. 8. REGULATORY APPROVALS 8.1 This Agreement will be filed with the FERC and any other appropriate regulatory agencies by the appropriate Party as may be required. 9. COMPLIANCE 9.1 Each Party shall comply with all relevant Laws and shall, at its sole expense, maintain in full force and effect all relevant permits, authorizations, licenses, and other authorizations material to the maintenance of facilities and the performance of obligations under this Agreement. 9.2 Each Party and its representatives shall comply with all relevant requirements of any authorized Control Area Operator, ISA, and/or EDU to ensure the safety of its employees and the public, and to ensure electric system reliability and integrity, material to the performance of this Agreement. 9.3 Buyer and Supplier shall perform or cause to be performed, their obligations under this Agreement in all material respects in accordance with Good Utility 20 Practices. Supplier covenants and agrees that as of the Effective Date it or its permitted assignee shall (a) have the right to control the operation of the Asset Bundle and (b) be willing and able to perform its obligations under this Agreement. 10. INDEMNIFICATION 10.1 To the fullest extent permitted by law, a Party to this Agreement ("the Indemnifying Party") shall indemnify, defend and hold harmless the other Party, its parent, affiliates, and successors and agents (each an "Indemnified Party") from and against any and all claims, demands, suits, obligations, payments, liabilities, costs, judgments, damages, losses or expenses asserted by third parties against an Indemnified Party and arising out of, relating to, or resulting from the Indemnifying Party's breach of, or the negligent performance of its obligations under this Agreement. 10.1.1 Such indemnity shall also extend to actual courts costs, attorneys' fees, expenses and other liabilities incurred in the defense of any claim, action or proceeding, including negotiation, settlement, defense and appeals, to which this indemnification obligation applies. In furtherance of the foregoing indemnification and not by way of limitation thereof, the Indemnifying Party hereby waives any defense it otherwise might have against the Indemnified Party under applicable workers' compensation laws. 10.1.2 In claims against any Indemnified Party by an agent of the Indemnifying Party, or anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Section 10 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Indemnifying Party or a subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts. 10.1.3 Such indemnity shall also extend to all costs and expenses incurred by the Indemnified Party in any action or proceeding to enforce the provisions of this Agreement, but only if and to the extent the Indemnified Party prevails in such action or proceeding. 10.2 No Negation of Existing Indemnities; Survival. Each Party's --------------------------------------------- indemnity obligations hereunder shall not be construed to negate, abridge or reduce other rights or obligations or indemnity which would otherwise exist at law or equity. The obligations contained herein shall survive any termination, cancellation, or suspension of this Agreement to the extent that any third party claim is commenced during the applicable statute of limitations period. 10.3 Indemnification Procedures. -------------------------- 21 10.3.1 Any Party seeking indemnification under this Agreement shall give the other Party notice of such claim promptly but in any event on or before thirty (30) days after the Party's actual knowledge of such claim or action. Such notice shall describe the claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the claim that has been, or may be sustained by, said Party. To the extent that the other Party will have been actually and materially prejudiced as a result of the failure to provide such notice, such notice will be a condition precedent to any liability of the other Party under the provisions for indemnification contained in this Agreement. 10.3.2 In any action or proceeding brought against an Indemnified Party by reason of any claim indemnifiable hereunder, the Indemnifying Party may, at its sole option, elect to assume the defense at the Indemnifying Party's expense, and shall have the right to control the defense thereof and to determine the settlement or compromise of any such action or proceeding. Notwithstanding the foregoing, an Indemnified Party shall in all cases be entitled to control its defense in any action if it: (i) may result in injunctions or other equitable remedies in respect of the Indemnified Party which would affect its business or operations in any materially adverse manner; (ii) may result in material liabilities which may not be fully indemnified hereunder; or (iii) may have a significant adverse impact on the business or the financial condition of the Indemnified Party (including a material adverse effect on the tax liabilities, earnings or ongoing business relationships of the Indemnified Party) even if the Indemnifying Party pays all indemnification amounts in full. 10.3.3 Subject to Section 10.3.2, neither Party may settle or compromise any claim for which indemnification is sought under this Agreement without the prior consent of the other Party; provided, however, said consent shall not be unreasonably withheld or delayed. 22 11. LIMITATION OF LIABILITY 11.1 Responsibility for Damages: Except as otherwise provided herein -------------------------- or to the extent of the other Party's negligence or willful misconduct, each Party shall be responsible for all physical damage to or destruction of the property, equipment and/or facilities owned by it and its affiliates and any physical injury or death to natural Persons resulting therefrom, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party for such damage; provided, that in any such case the Parties will exercise Due Diligence to remove the cause of any disability at the earliest practicable time. 11.2 No Consequential Damages: To the fullest extent permitted by law ------------------------ and notwithstanding other provisions of this Agreement, in no event shall a Party, or any of its Agents, be liable to the other Party, whether in contract, warranty, tort, negligence, strict liability, or otherwise, for special, indirect, incidental, multiple, consequential (including but not limited to lost profits or revenues and lost business opportunities), or punitive damages related to or resulting from performance or nonperformance of this Agreement or any activity associated with or arising out of this Agreement. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 11.2. In addition, this limitation on liability shall not apply with respect to claims pursuant to Section 10 hereof. 11.3 Survival: The provisions of this Section 11 shall survive any -------- termination, cancellation, or suspension of this Agreement. 12. FORCE MAJEURE 12.1 An event of "Force Majeure" shall be defined as any interruption or failure of service or deficiency in the quality or quantity of service or any other failure to perform any of its obligations hereunder to the extent such failure occurs without fault or negligence on the part of that Party and is caused by factors beyond that Party's reasonable control, which by the exercise of reasonable diligence that Party is unable to prevent, avoid, mitigate or overcome, including: (i) acts of God or the public enemy, such as storms, flood, lightning, and earthquakes, (ii) failure, threat of failure, or unscheduled withdrawal of facilities from operation for maintenance or repair, and including unscheduled transmission and distribution outages, (iii) sabotage of facilities and equipment, (iv) civil disturbance, (v) strike or labor dispute, 23 (vi) action or inaction of a court or public authority, or (vii) any other cause of similar nature beyond the reasonable control of that Party. 12.2 Economic hardship of either Party shall not constitute Force Majeure under this Agreement. Notwithstanding this, if Buyer suffers an event of Force Majeure it shall be relieved of its obligation to take delivery of, or otherwise pay for, Energy and Ancillary Services under this Agreement for the duration of the event of Force Majeure. In addition, if Buyer is unable to have Energy and Ancillary Services delivered from the Point(s) of Delivery to its service territory due to an outage on the Transmission System, that shall be considered a Force Majeure event and shall relieve Buyer of performance for the extent of the event. 12.3 In the event of a Force Majeure, neither Party shall be considered in default under this Agreement or responsible to the other Party in tort, strict liability, contract or other legal theory for damages of any description, and affected performance obligations shall be extended by a period equal to the term of the resultant delay, but in no event shall exceed the term of the Agreement, provided that the Party relying on a claim of Force Majeure: (i) provides prompt written notice of such Force Majeure event to the other Party, giving an estimate of its expected duration and the probable impact on the performance of its obligations hereunder; (ii) exercises all reasonable efforts to continue to perform its obligations under this Agreement; (iii) expeditiously takes action to correct or cure the event or condition excusing performance so that the suspension of performance is no greater in scope and no longer in duration than is dictated by the problem; provided, however, that settlement of strikes or other labor disputes will be completely within the sole discretion of the Party affected by such strike or labor dispute; (iv) exercises all reasonable efforts to mitigate or limit damages to the other Party; and (v) provides prompt notice to the other Party of the cessation of the event or condition giving rise to its excuse from performance. 12.4 Notwithstanding the above provisions, a Force Majeure event shall excuse Supplier from its obligation to deliver the Supply Amount pursuant to Section 4 of this Agreement only for the first twenty-four (24) hours of the Force Majeure event; provided that the total amount of energy excused in accordance with this Section 12.4 during any Contract Year shall not exceed the Limit on Excused Energy set forth in Exhibit A. After such twenty-four (24) hour period, Supplier 24 must either deliver the Supply Amount at the Point(s) of Delivery or pay liquidated damages pursuant to Section 4.2 of this Agreement. Provided further, to the extent a Force Majeure event is caused by an outage on the Transmission System, Supplier shall be excused from its obligations to deliver the Supply Amount for the duration of the outage. 12.5 If Supplier has notified Buyer of an event of Force Majeure, and if Supplier so requests, Buyer will attempt to replace the Supply Amount that is not excused in accordance with Section 12.4 with Energy or Ancillary Services from another Asset Bundle. However, Buyer's inability to acquire such replacement Energy or Ancillary Services shall not excuse Supplier from Supplier's obligation to deliver the Supply Amount not otherwise excused in accordance with Section 12.4 13. DISPUTES 13.1 Any action, claim or dispute which either Party may have against the other arising out of or relating to this Agreement or the transactions contemplated hereunder, or the breach, termination or validity thereof (any such claim or dispute, a "Dispute") shall be submitted in writing to the other Party. The written submission of any Dispute shall include a concise statement of the question or issue in dispute together with a statement listing the relevant facts and documentation that support the claim. 13.2 The Parties agree to cooperate in good faith to expedite the resolution of any Dispute. Pending resolution of a Dispute, the Parties shall proceed diligently with the performance of their obligations under this Agreement. 13.3 The Parties shall first attempt in good faith to resolve any Dispute through informal negotiations by the Contract Representatives. In the event that the Contract Representatives are unable to satisfactorily resolve the Dispute within thirty (30) days from the receipt of notice of the Dispute, either Party may by written notice to the other Party refer the Dispute to its respective senior management for resolution as promptly as practicable. If the Parties' senior management are unable to resolve the Dispute within forty-five (45) days from the date of such referral, thereafter the Parties may agree in writing to extend the time period of such senior management negotiations. In the event the Parties' senior management do not resolve the dispute within the prescribed or extended time period, either Party may initiate arbitration through the serving and filing of a demand for arbitration and the Parties expressly agree that arbitration in accordance with this Section 13 shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time: 13.3.1 A request made by a Party for provisional remedies requesting preservation of the Parties' respective rights and obligations under the Agreement may be resolved by a court of law located in the County of the principal place of business of Buyer. 25 13.3.2 Nothing in this Agreement shall preclude, or be construed to preclude, any Party from filing a petition or complaint with the FERC or PUCN with respect to any arbitrable Dispute over which said agency has jurisdiction. In such case, the other Party may request the FERC or PUCN, as applicable, to reject or to waive jurisdiction. If jurisdiction is rejected or waived with respect to all or a portion of the Dispute, the portion of the Dispute not so accepted by the FERC or PUCN, as applicable, shall be resolved through arbitration in accordance with this Agreement. To the extent that the FERC or PUCN, as applicable, asserts or accepts jurisdiction over the Dispute, the decision, finding of fact or order of FERC shall be final and binding, subject to judicial review under the Federal Power Act or Nevada Revised Statutes and subject to the provisions of Section 2.2.2. Any arbitration proceedings that may have commenced with respect to the Dispute prior to the assertion or acceptance of jurisdiction by the FERC or PUCN, as applicable, shall be terminated to the extent the FERC or PUCN accepts or asserts jurisdiction over such Dispute. 13.4 Unless otherwise agreed by the Parties, any arbitration initiated under this Agreement shall be conducted in accordance with the following: 13.4.1 Arbitrations shall be held within the County of the principal place of business of Buyer. 13.4.2 Except as otherwise modified herein, the arbitration shall be conducted in accordance with the "Commercial Arbitration Rules" of the American Arbitration Association ("AAA") then in effect. 13.4.3 Arbitration shall be conducted by one neutral arbitrator who shall be selected pursuant to the AAA rules and the following: 13.4.3.1 The Parties agree that the list of potential arbitrators provided by the AAA shall, if available, contain twenty (20) candidates, and at least fifty percent (50%) of the candidates shall be members of the AAA National Energy Panel. 13.4.3.2 The Parties also agree that each shall be allowed to strike the names of five candidates before ranking the remaining candidates and returning the list to the AAA in accordance with the Commercial Arbitration Rules. If the Parties are unable to agree on an arbitrator, such arbitrator shall be appointed by the AAA. 13.4.3.3 The arbitrator shall not have any current or past substantial business, financial, or personal relationships with either Party (or their Affiliates) and shall not be a vendor, supplier, customer, employee, consultant, or competitor to either of the Parties or their Affiliates. 26 13.4.3.4 The arbitrator shall be authorized only to interpret and apply the provisions of this Agreement or any related agreements entered into under this Agreement and shall have no power to modify or change any provision of this Agreement. The arbitrator shall have no authority to award punitive or multiple damages or any damages inconsistent with this Agreement. The arbitrator shall within thirty (30) days of the conclusion of the hearing, unless such time is extended by agreement of the Parties, notify the Parties in writing of his or her decision, stating his or her reasons for such decision and separately listing his or her findings of fact and conclusions of law. Judgment on the award may be entered in any court having jurisdiction. 13.5 The Parties shall proceed with the arbitration expeditiously, and the arbitration shall be concluded within five (5) months of the filing of the demand for arbitration pursuant to this Section 13 in order that the decision may be rendered within six (6) months of such filing, unless the arbitrator extends such time at the request of a Party upon a showing of good cause or upon agreement of the Parties. 13.6 Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of any arbitration agreement shall be governed by the Federal Arbitration Act of the United States, 9 U.S.C. (S)(S) 1 et seq. 13.7 The decision of the arbitrator shall be final and binding on both Parties and may be enforced in any court having jurisdiction over the Party against which enforcement is sought. 13.8 The fees and expenses of the arbitrator shall be shared by the Parties equally, unless the decision of the arbitrator shall specify some other apportionment of such fees and expenses. All other expenses and costs of the arbitration shall be borne by the Party incurring the same. 14. NATURE OF OBLIGATIONS 14.1 Except where specifically stated in this Agreement to be otherwise, the duties, obligations, and liabilities of the Parties shall be several; not joint or collective. The provisions of this Agreement shall not be construed to create an association, trust, partnership, or joint venture; to impose a trust or partnership duty, obligation, or liability or agency relationship on or with regard to either Party. 14.2 Nothing in this Agreement nor any action taken hereunder shall be construed to create any duty, liability, or standard of care to any person not a Party to this Agreement. Each Party shall be individually and severally liable for its own obligations under this Agreement. 14.3 By this Agreement, neither Party dedicates any part of its facilities or the service provided under this Agreement to the public. 27 15. SUCCESSORS AND ASSIGNS 15.1 This Agreement may be assigned, without express written consent of the other Party, as follows: 15.1.1 Buyer may assign this Agreement or assign or delegate its rights and obligations under this Agreement, in whole or in part, if such assignment is made to an affiliate, parent, subsidiary, successor or any party, provided that such assignee operates all or a portion of the PLR or if such assignment is required by Law or applicable regulations. 15.1.2 Supplier also may assign this Agreement as provided in Section 11.5 of the Asset Sale Agreement; provided that such assignment is to an entity that (a) has the right to control the operation of the Asset Bundle and (b) is willing and able to perform its obligations under this Agreement. 15.2 Supplier may, without the consent of Buyer, assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee, lending institution, or any Person for the purposes of financing or refinancing the Asset Bundle, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, conveyances of dispositions in lieu thereof; provided, however, that no such assignment or disposition shall relieve or in any way discharge Supplier or such permitted assignee from the performance of its duties and obligations under this Agreement. Buyer agrees to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, conveyance, pledge or disposition of rights hereunder for purposes of the financing or refinancing of the Asset Bundle, so long as Buyer's rights under this Agreement are not thereby materially altered, amended, diminished or otherwise impaired. 15.3 Either Party may, without the consent of the other Party, assign this Agreement to a successor to all or substantially all of the assets of such Party by way of merger, consolidation, sale or otherwise, provided such successor assumes and becomes liable for all of such Party's duties and obligations hereunder including Section 3 hereof. 15.4 Except as stated above, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by either Party, including by operation of law, without the prior written consent of the other Party, said consent not to be unreasonably withheld. Any assignment of this Agreement in violation of the foregoing shall be, at the option of the non-assigning Party, void. 15.5 Except as set forth above, no assignment or transfer of rights or obligations under this Agreement by a Party shall relieve said Party from full liability and financial responsibility for the performance thereof after any such transfer or assignment unless and until the transferee or assignee shall agree in writing to assume the obligations and duties of said Party under this Agreement and the other Party has 28 consented in writing to such assumption; said consent not to be unreasonably withheld. 15.6 This Agreement and all of the provisions hereof are binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns. 16. REPRESENTATIONS 16.1 Representations of the Parties. The Parties represent and ------------------------------ warrant each to the other as follows: 16.1.1 Incorporation. Buyer is a corporation duly incorporated, ------------- validly existing and in good standing under the laws of the State of Nevada. Supplier is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Both Buyer and Supplier have all requisite corporate power and authority to own, lease and operate their material assets and properties and to carry on their business as now being conducted. 16.1.2 Authority. The Party has full corporate power and --------- authority to execute and deliver this Agreement and, subject to the procurement of applicable regulatory approvals, to carry out the actions required of it by this Agreement. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action required on the part of the Party. The Agreement has been duly and validly executed and delivered by the Party and, assuming that it is duly and validly executed and delivered by the other Party, constitutes a legal, valid and binding agreement of the Party. 16.1.3 Compliance With Law. The Party represents and warrants ------------------- that it is not in violation of any applicable Law, or applicable regulation, which violation could reasonably be expected to materially adversely affect the other Party's performance of its obligations under this Agreement. The Party represents and warrants that it will comply with all Laws, and regulations applicable to its compliance with this Agreement, non-compliance with which would reasonably be expected to materially adversely affect either Party's performance of its obligations under this Agreement. 16.1.4 Representations of Both Parties. The representations in ------------------------------- this Section 16 shall continue in full force and effect for the term of this Agreement. 17. DEFAULT AND REMEDIES 17.1 An Event of Default hereunder shall be deemed to have occurred upon a Party's (Defaulting Party) failure to comply with any material obligation imposed upon it by this Agreement. Examples of an Event of Default include, but are not limited 29 to the following: (i) Failure to make any payments due under this Agreement; (ii) Failure to deliver the Supply Amount for a period of five (5) consecutive days; (iii) Failure to follow the directions of a Control Area Operator, ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto where following such directions is required hereunder; (iv) Supplier not being in compliance with Section 3; and (v) Failure of the Guarantor to be in compliance with the terms of the Guarantee delivered under Section 3.1.2. 17.2 An Event of Default shall be excused: 17.2.1 In the event such Event of Default was caused by Force Majeure provided that the Party claiming a Force Majeure complies with the requirements of Section 12; and 17.2.2 In the event such Event of Default was caused by transmission and distribution outages or disruptions. 17.3 Unless excused, in an Event of Default the Non-Defaulting Party shall be entitled to provide written notice (or verbal notice in case of emergency followed by written notice) of the Event of Default to the Defaulting Party and to specify a cure period, which cure period shall be a minimum of thirty (30) days. 17.4 If an Event of Default is not cured by the Defaulting Party during the cure period specified by the Non-Defaulting Party, the Non-Defaulting Party shall be entitled to those remedies which are not inconsistent with the terms of this Agreement, including termination and the payment of liquidated damages. A Defaulting Party shall not be liable to the Non-Defaulting Party for any punitive, consequential or incidental damages. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 17.4. 17.5 Notwithstanding this Section 17, liquidated damages shall be paid to Buyer pursuant to Sections 4.2, 12, 18, and 21. 18. FACILITY ADDITIONS AND MODIFICATIONS 18.1 Supplier shall be entitled to make additions and modifications to the Asset Bundle subject to the following: 18.1.1 To the extent additions and modifications interfere with the operation of the Asset Bundle in providing the Supply Amount to Buyer beyond the limits for planned outages set forth in Section 21, liquidated 30 damages shall be paid to Buyer pursuant to Section 4.2. 18.1.2 Supplier shall use reasonable efforts to minimize any adverse impact on Buyer during the course of making such additions and modifications. 18.1.3 Such additions and modifications shall be conducted in accordance with Good Utility Practice, and all applicable Laws, regulations, reliability criteria and the Interconnection Agreement between Buyer and Supplier, dated November 16, 2000, as it may be amended from time to time. 18.2 Supplier shall seek Buyer's prior written approval for all Supplier's additions or modifications to the Asset Bundle which might reasonably be expected to have an adverse effect upon Buyer with respect to operations or performance under this Agreement. 19. COORDINATION 19.1 Upon knowledge thereof, each Party shall promptly give notice to the other Party of any labor dispute which is delaying or threatens to delay the timely performance of this Agreement, which shall include a description of the general nature of the dispute. 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE 20.1 Buyer and Supplier shall comply with any applicable requirement of any Governmental Authority, NERC, WSCC, ISA, Control Area Operator, transmission operator, EDU or any successor of any of them, regarding the reduced or increased generation of the Asset Bundle in the event of an Emergency Condition or Nonemergency Condition. 20.2 Supplier shall not be obligated to deliver the Supply Amount and no liquidated damages shall become due, if the Supply Amount is reduced in the event of an Emergency Condition or a Nonemergency Condition. 20.3 Each Party shall provide prompt verbal notice to the other Party of any Emergency Condition or Nonemergency Condition. 20.4 Either Party may take reasonable and necessary action to prevent, avoid or mitigate injury, danger, damage or loss to its own equipment and facilities, or to expedite restoration of service; provided, however, that the Party taking such action shall give the other Party prior notice if at all possible before taking any action. However, this Section 20.4 shall not be construed to supersede Sections 20.2 and 20.3. 21. OUTAGE SCHEDULING 21.1 Supplier shall request Buyer's approval prior to any inspections, proposed 31 planned outages or other non-forced outages (all hereinafter referred to as "planned outages") of the Asset Bundle so as to minimize the impact on the availability of the Asset Bundle. Under no circumstances shall Supplier conduct a planned outage without the express prior consent of Buyer pursuant to this Section 21. 21.2 Planned Outages. --------------- 21.2.1 Within sixty (60) days following the Effective Date of this Agreement and on or before October 1 of each Contract Year, Supplier shall provide Buyer with a schedule of proposed planned outages for the period beginning on the date of such proposed schedule for the following twelve (12) months. The proposed planned outage schedule will designate days for each unit in which the Asset Bundle Capacity will be reduced in part or total for each such unit. Each proposed schedule shall include all applicable information, including but not limited to the following: Month, day and time of requested outage; facilities impacted (such as Unit and description); duration of outage; purpose of outage; amount of capacity (in MWs) which is derated; other conditions and remarks; and name of contact and phone number. 21.2.2 Buyer shall promptly review Supplier's proposed schedule and shall either require modifications or approve the proposed schedule. Supplier shall use its best efforts to accomplish all planned outages in accordance with the approved schedule. Supplier shall be responsible to Buyer for Replacement Costs (i) if any outage period exceeds its approved schedule, provided that changes to the approved schedule may be requested by either Party and each Party shall make reasonable efforts to accommodate such changes, provided further the Buyer shall have no obligation to agree to Supplier's revisions to the approved planned outage schedule; and (ii) if Supplier conducts a planned outage without the consent of Buyer as provided herein. 21.3 Control Installation Outages ---------------------------- 21.3.1 Supplier also may schedule such unit outages (each, a "Control Installation Outage") as required to install at the Asset Bundle new or retrofit emission control equipment to the existing Asset Bundle necessary to continue operating the Asset Bundle without sanctions or operating restrictions threatened or imposed by a Governmental Authority. Supplier shall make diligent efforts to include any Control Installation Outage within the proposed planned outage schedule pursuant to Section 21.2.1; provided that, if Supplier is required by such Governmental Authority having jurisdiction over the matter to perform a Control Installation Outage within a specific timeframe and, therefore, Supplier cannot comply with the provisions of the preceding sentence, Supplier at a minimum will provide the following notice: 32 i) Three (3) weeks for each Control Installation Outage with an expected duration of less than one (1) day; ii) Five (5) weeks for each Control Installation Outage with an expected duration between one (1) and five (5) days; and, iii) Fifteen (15) weeks for each Control Installation Outage with an expected duration of longer than five (5) days. Moreover, if Supplier is required to perform a Control Installation Outage within a specific timeframe, Buyer, after consultation with Supplier and in accordance with Good Utility Practice, at its sole discretion may designate the period within such timeframe in which a Control Installation Outage may occur. 21.3.2 Supplier also shall: (i) coordinate and cooperate with Buyer regarding the scheduling of each proposed Control Installation Outage in order to minimize the economic effect on Buyer resulting from such Control Installation Outage; (ii) advise Buyer of its meetings and communications with the Governmental Authority having jurisdiction over the matter and, in its discretion, will invite Buyer to participate in such meetings and communications; and, (iii) take commercially reasonable steps to seek review of any decision of such Governmental Authority requiring a Control Installation Outage during the months of June through September. 22. REPORTS 22.1 Supplier shall promptly provide Buyer with copies of any orders, decrees, letters or other written communications to or from any Governmental Authority asserting or indicating that Supplier and/or its Asset Bundle is in violation of Laws which relate to Supplier, or operations or maintenance of the Asset Bundle and which may have an adverse effect on Buyer. Supplier shall use reasonable efforts to keep Buyer appraised of the status of any such matters. 23. COMMUNICATIONS 23.1 Supplier's Operating Representatives shall be available twenty-four (24) hours per day for communications with the Control Area Operator and/or the ISA and Buyer to facilitate the operations contained in this Agreement. 23.2 Supplier shall, at its expense, maintain and install real-time communications equipment at the Asset Bundle to maintain communications between personnel on site at the Asset Bundle, Buyer and the Control Area Operator at all times. Supplier shall provide at its expense: (i) Ringdown voice telephone lines, and (ii) Equipment to transmit to and receive telecopies from Buyer and the Control Area Operator. 33 23.3 Supplier shall immediately report to Buyer any "Abnormal Condition" that has or may occur, and provide all pertinent information, including but not limited to the following: (i) A description of the "Abnormal Condition" and the actions to be taken to alleviate the "Abnormal Condition"; (ii) The expected duration including the beginning and ending time of the "Abnormal Condition"; and (iii) The amount of any adjustment to the current (real time) level of Energy and Ancillary Services. 23.4 Cause of the Condition. ----------------------- 23.4.1 An "Abnormal Condition" shall include without limitation any conditions that, to Supplier's knowledge, have or are reasonably likely to: (i) Adversely affect Supplier's ability to provide Energy and Ancillary Services to Buyer; (ii) Cause an unplanned reduction in the amount of delivery of Energy and Ancillary Services to Buyer; or (iii) Cause an unplanned isolation of the Asset Bundle from the transmission system. 23.5 Supplier shall immediately notify Buyer after such "Abnormal Condition" has been alleviated. 24. NOTICES 24.1 All notices hereunder shall, unless specified otherwise, be in writing and shall be addressed, except as otherwise stated herein, to the Parties as set forth in Exhibit F. 24.2 All written notices or submittals required by this Agreement shall be sent either by hand-delivery, regular first class U.S. mail, registered or certified U.S. mail postage paid return receipt requested, overnight courier delivery, electronic mail or facsimile transmission and will be effective and deemed to have been received on the date of receipt personally, on the date and time as documented by method of delivery if during normal business hours or on the next succeeding Business Day, or on the third (3/rd/) Business Day following deposit with the U.S. mail if sent regular first class U.S. mail. 34 24.3 Notices of an Event of Default pursuant to Section 17 and or Force Majeure pursuant to Section 12 may not be sent by regular first class U.S. mail. 24.4 Any payments required to be made under this Agreement shall be made to the Party as set forth in Exhibit F. 24.5 Each Party shall have the right to change, at any time upon written notice to the other Party, the name, address and telephone numbers of its representatives under this Agreement for purposes of notices and payments. 25. MERGER 25.1 The Agreement contains the entire agreement and understanding between the Parties with respect to all of the subject matter contained herein, thereby merging and superseding all prior agreements and representations by the Parties with respect to such subject matter. 25.2 In the event of any conflict between this Agreement and the Asset Sale Agreement, the terms of the Asset Sale Agreement shall govern. 26. HEADINGS 26.1 The headings or section titles contained in this Agreement are inserted solely for convenience and do not constitute a part of this Agreement between the Parties, nor should they be used to aid in any manner in the construction of this Agreement. 27. COUNTERPARTS AND INTERPRETATION 27.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 27.2 In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of authorship of any of the provisions of this Agreement. 27.3 Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. 27.4 The word "including" in this Agreement shall mean "including without limitation". 28. SEVERABILITY 28.1 If any term, provision or condition of this Agreement is held to be invalid, void or unenforceable by a court or Governmental Authority of competent jurisdiction 35 and such holding is subject to no further appeal or judicial review, then such invalid, void, or unenforceable term, provision or condition shall be deemed severed from this Agreement and all remaining terms, provisions and conditions of this Agreement shall continue in full force and effect, unless, however, the effect of the severance would vitiate the intent of the Parties hereto, as determined by either Party in its reasonable discretion. 28.2 The Parties shall endeavor in good faith to replace such invalid, void, or unenforceable provisions with a valid and enforceable provision which achieves the purposes intended by the Parties to the greatest extent permitted by law. 29. WAIVERS 29.1 No failure or delay on the part of a Party in exercising any of its rights under this Agreement or in insisting upon strict performance of provisions of this Agreement, no partial exercise by either Party of any of its rights under this Agreement, and no course of dealing between the Parties shall constitute a waiver of the rights of either Party under this Agreement. Any waiver shall be effective only by a written instrument signed by the Party granting such waiver, and such shall not operate as a waiver of, or estoppel with respect to, any subsequent failure to comply therewith. 30. AMENDMENTS 30.1 The Parties shall negotiate in good faith to determine necessary amendments, if any, to this Agreement, provided that in negotiating such amendments the Parties shall attempt, in good faith, to reasonably preserve the bargain initially struck in this Agreement if any Governmental Authority, FERC, any state or the PUCN, implements a change in any Law or applicable regulation that materially affects or is reasonably expected to materially affect Buyer's PLR service under this Agreement. 30.2 The Parties shall meet to discuss the impact of any changes in Buyer's OATT or the ISA's OATT, as applicable, or any rule or practice of NERC, WSCC, or any other Governmental Authority on the terms of this Agreement upon request by either Party during the term of this Agreement. 30.3 In the event that it is deemed necessary to amend this Agreement, the Parties will attempt to agree upon such amendment and will submit such mutually agreed upon amendment(s) to the FERC for filing and acceptance. 30.4 Amendments to this Agreement shall be in writing and shall be executed by an authorized representative of each Party. 31. TIME IS OF THE ESSENCE 31.1 Time is of the essence of this Agreement and in the performance of all of the covenants and conditions hereof. 36 32. APPROVALS 32.1 Each Party's performance under this Agreement is subject to the condition that all requisite governmental and regulatory approvals for such performance are obtained in form and substance satisfactory to the other Party in its reasonable discretion. Each Party shall use best efforts to obtain all required approvals and shall exercise due diligence and shall act in good faith to cooperate and assist each other in acquiring any regulatory approval necessary to effectuate this Agreement. Further, the Parties agree to reasonably support the other Party in any associated regulatory proceedings, including by being a witness on behalf of the other Party. 32.2 Notwithstanding the provisions of Section 2.2.2 of this Agreement, if any Governmental Authority in its review of the Agreement places conditions on or requires revisions of the Agreement that have no more than a de minimus effect on Supplier or Buyer, the Parties agree to execute an amendment to this Agreement reasonably acceptable to each Party incorporating such conditions or revisions. 32.3 This Agreement is made subject to present or future state or federal laws, regulations, or orders properly issued by state or federal bodies having jurisdiction. 32.4 The Parties hereto agree to execute and deliver promptly, at the expense of the Party requesting such action, any and all other and further instruments, documents and information which may reasonably be necessary or appropriate to give full force and effect to the terms and intent of this Agreement. 33. PLR SERVICE 33.1 The Agreement is premised on Buyer providing PLR service. Notwithstanding anything to the contrary contained herein, if Nevada retail electricity restructuring (including implementation of retail customer choice of electricity suppliers) is delayed beyond the Effective Date of this Agreement, the Parties shall continue to perform this Agreement in all respects pursuant to the terms and conditions hereof as if Buyer was the PLR and Buyer's retail and wholesale customers shall be considered as the TRR. 34. CONFIDENTIALITY 34.1 Confidential Information. Certain information provided by a ------------------------ Party (the "Disclosing Party") to the other Party (the "Receiving Party") in connection with the negotiation or performance of this Agreement may be considered confidential and/or proprietary (hereinafter referred to as "Confidential Information") by the Disclosing Party. To be considered Confidential Information hereunder, such information must be clearly labeled or designated by the Disclosing Party as "confidential" or "proprietary" or with words of like meaning. If disclosed orally, such information shall be clearly identified as confidential and such status shall be 37 confirmed promptly thereafter in writing. 34.2 Treatment of Confidential Information. The Receiving Party shall ------------------------------------- treat any Confidential Information with at least the same degree of care regarding its secrecy and confidentiality as the Receiving Party's similar information is treated within the Receiving Party's organization. The Receiving Party shall not disclose the Confidential Information of the Disclosing Party to third parties (except as stated hereinafter) nor use it for any purpose other than the negotiation or performance of this Agreement, without the express prior written consent of the Disclosing Party. The Receiving Party further agrees that it shall restrict disclosure of Confidential Information as follows: 34.2.1 Disclosure shall be restricted solely to its agents as may be necessary to enforce the terms of this Agreement after advising those agents of their obligations under this Section 34.2. 34.2.2 In the event that the Receiving Party is requested, pursuant to or as required by applicable Law or by legal process, to disclose any Confidential Information, the Receiving Party shall provide the Disclosing Party with prompt notice of such request or requirement in order to enable Disclosing Party to seek an appropriate protective order or other remedy and to consult with Disclosing Party with respect to Disclosing Party taking steps to resist or narrow the scope of such request or legal process. The Receiving Party agrees not to oppose any action by the Disclosing Party to obtain a protective order or other appropriate remedy. In the absence of such protective order, and provided that the Receiving Party is advised by its counsel that it is compelled to disclose the Confidential Information, the Receiving Party shall: (i) furnish only that portion of the Confidential Information which the Receiving Party is advised by counsel is legally required; and (ii) use its commercially reasonable best efforts, at the expense of the Disclosing Party, to ensure that all Confidential Information so disclosed will be accorded confidential treatment. 34.3 Excluded Information. Confidential Information shall not be -------------------- deemed to include the following: 34.3.1 information which is or becomes generally available to the public other than as a result of a disclosure by the Receiving Party; 34.3.2 information which was available to the Receiving Party on a non-confidential basis prior to its disclosures by the Disclosing Party; and 34.3.3 information which becomes available to the Receiving Party on a non-confidential basis from a person other than the Disclosing Party or its 38 representative who is not otherwise bound by a confidentiality agreement with Disclosing Party or its agent or is otherwise not under any obligation to Disclosing party or its agent not to disclose the information to the Receiving Party. 34.4 Injunctive Relief Due to Breach. The Parties agree that remedies ------------------------------- at law may be inadequate to protect each other in the event of a breach of this Section 34, and the Receiving Party hereby in advance agrees that the Disclosing Party shall be entitled to seek and obtain, without proof of actual damages, temporary, preliminary and permanent injunctive relief from any court or Governmental Authority of competent jurisdiction restraining the Receiving Party from committing or continuing any breach of this Section 34. 35. CHOICE OF LAW 35.1 This Agreement and the rights and obligations of the Parties shall be construed and governed by the Laws of: (i) the State of Nevada as if executed and performed wholly within that state; and (ii) the Federal Power Act, to the extent the rights and obligations of the Parties are covered by such act. IN WITNESS WHEREOF, the Parties hereto have caused this Transitional Power Purchase Agreement for the Clark Asset Bundle to be executed by their duly authorized representative on the date set forth below. NEVADA POWER COMPANY CLARK POWER LLC - -------------------------- -------------------------- By: William E. Peterson By: Edward P. Hermann Title: Senior Vice President, Title: Vice President General Counsel, and Corporate Secretary Date: November 16, 2000 Date: November 16, 2000 39 EXHIBIT A CLARK BUNDLE ASSET BUNDLE CAPACITY AND OPERATING PARAMETERS
NET SUMMER NET WINTER MINIMUM HOURLY CAPABILITY CAPABILITY RAMP RATE ENERGY TAKE UNIT (MW) (MW) (MW/hr) (MWh) - ----------------------------------------------------------------------------- Unit 1 42 42 42 Unit 2 66 69 69 Unit 3 67 70 70 Unit 4 50 59 59 Unit 5 73 81 81 Unit 6 73 81 81 Unit 7 73 81 81 Unit 8 73 81 81 Unit 9 85 88 88 Unit 10 85 88 88 - ----------------------------------------------------------------------------- Total 687 740 740 n/a =============================================================================
Minimum Annual Energy Take: 2,700,000 Mwh Limit on Excused Energy:* Annual: 40,000 MWh + Winter Months: 2,500 MWh per month *The 40,000 MWh Limit on Excused Energy is an annual amount, to be prorated in any Contract Year that is less than a twelve month period, that can be called on in any month(s). The additional Limit on Excused Energy for Winter months is in excess of the annual amount for the particular month and is not carried forward if not otherwise used during the month. For example, in the month of April, Supplier will have a Limit on Excused Energy of 2,500 MWh plus the unused amount of the 40,000 MWh annual Limit on Excused Energy. For purposes of this Exhibit A, the summer months shall consist of the months of June through September. The winter months shall consist of the months of January through May and the months of October through December. A-1 EXHIBIT B CLARK BUNDLE ENERGY AND ANCILLARY SERVICE PRICES Energy Prices* ------------- Price Floor of Energy: $22.77 per MWh Price Ceiling of Energy: $42.65 per MWh Ancillary Service Prices* ------------------------ Regulation and Frequency Response: Summer On-Peak: $25.75 per MW-reserved per hour Summer Off-Peak: $14.71 per MW-reserved per hour Winter On-Peak: $13.59 per MW-reserved per hour Winter Off-Peak: $ 7.77 per MW-reserved per hour Operating Reserve- Spinning Reserve: Summer On-Peak: $23.45 per MW-reserved per hour Summer Off-Peak: $13.40 per MW-reserved per hour Winter On-Peak: $12.52 per MW-reserved per hour Winter Off-Peak: $ 7.16 per MW-reserved per hour Operating Reserve- Supplemental Reserve: Summer On-Peak: $ 8.82 per MW-reserved per hour Summer Off-Peak: $ 5.04 per MW-reserved per hour Winter On-Peak: $ 4.26 per MW-reserved per hour Winter Off-Peak: $ 2.44 per MW-reserved per hour For purposes of this Exhibit B, the summer months shall consist of the months of June through September. The winter months shall consist of the months of January through May and the months of October through December. The On-Peak periods shall consist of Hour Ending (HE) 0700 through HE 2200 PPT, Monday through Saturday. The Off-Peak periods shall consist of HE 0100 through HE 0600, HE 2300 and HE 2400 PPT, Monday through Saturday; HE 0100 through HE 2400 PPT Sunday and additional Off-Peak days (holidays) as designated annually by the WSCC. * SUBJECT TO FERC APPROVAL ------------------------ B-1 EXHIBIT C CLARK BUNDLE SUPPLIER'S MONTHLY INVOICE A Price Ceiling of Energy $ 42.65 /MWh B Price Floor of Energy $ 22.77 /MWh MONTH 1 - ENERGY - ----------------
C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Capacity ---- -------------- ------------ --------------- ----------------- ---------------- --------------------- (C - D) (D x F) (C x F) 1 687 687 0 40.00 $ 27,480.00 $ 27,480.00 2 687 687 0 40.00 27,480.00 27,480.00 3 687 627 60 40.00 25,080.00 27,480.00 4 687 627 60 40.00 25,080.00 27,480.00 5 557 547 10 30.00 16,410.00 16,710.00 6 587 587 0 30.00 17,610.00 17,610.00 7 677 657 20 20.00 13,140.00 13,540.00 8 687 687 0 20.00 13,740.00 13,740.00 9 687 687 0 20.00 13,740.00 13,740.00 10 687 687 0 25.00 17,175.00 17,175.00 - ------------------------------------------------------------------------------------------------------------------------------------ 6,630 6,480 150 $196,935.00 $202,435.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $196,935.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $202,435.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $276,372.00 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $282,769.50 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $147,549.60 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $150,965.10 L. Invoiced Amount - Energy Sec 7.3 (K ** I ** J) $196,935.00 M. Theoretical Amount for Expected Performance (KT ** IT ** JT) $202,435.00 MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE - ------------------------------------------------------------------------ N O P Q R S Dispatch Schedule of Ancillary Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- ----------------- --------------------- (N - O) (O x Q) (N x Q) 1 0 0 0 14.71 $0.00 $0.00 2 0 0 0 14.71 0.00 0.00 3 0 0 0 25.75 0.00 0.00 4 0 0 0 25.75 0.00 0.00 5 30 30 0 25.75 772.50 772.50 6 0 0 0 25.75 0.00 0.00 7 0 0 0 25.75 0.00 0.00 8 0 0 0 25.75 0.00 0.00 9 0 0 0 25.75 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------
** Less Than C-1 EXHIBIT C CLARK BUNDLE SUPPLIER'S MONTHLY INVOICE 10 0 0 0 25.75 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 30 30 0 $772.50 $772.50 T. Invoiced Amount - Ancillary Service Capacity - Regulation and Frequency Response Sec 7.2.5 $772.50 U. Theoretical Amount for Expected Performance $772.50
MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - ------------------------------------------------------- V W X Y Z AA Dispatch Schedule of Ancillary Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- ----------------- ---------------------- (V - W) (W x Y) (V x Y) 1 0 0 0 13.40 $ 0.00 $ 0.00 2 0 0 0 13.40 0.00 0.00 3 0 0 0 23.45 0.00 0.00 4 0 0 0 23.45 0.00 0.00 5 80 80 0 23.45 1,876.00 1,876.00 6 80 60 20 23.45 1,407.00 1,876.00 7 0 0 0 23.45 0.00 0.00 8 0 0 0 23.45 0.00 0.00 9 0 0 0 23.45 0.00 0.00 10 0 0 0 23.45 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 160 140 20 $3,283.00 $3,752.00 AB. Invoiced Amount - Ancillary Service Capacity - Spinning Reserve Sec 7.2.5 $3,283.00 AC. Theoretical Amount for Expected Performance $3,752.00 MONTH 1 - ANCILLARY SERVICE CAPACITY - SUPPLEMENTAL RESERVE - ----------------------------------------------------------- AD AE AF AG AH AI Dispatch Schedule of Ancillary Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- ----------------- --------------------- (AD - AE) (AE x AG) (AD x AG) 1 0 0 0 5.04 $ 0.00 $ 0.00 2 0 0 0 5.04 0.00 0.00 3 0 0 0 8.82 0.00 0.00 4 0 0 0 8.82 0.00 0.00 5 10 10 0 8.82 88.20 88.20 6 10 10 0 8.82 88.20 88.20 7 10 10 0 8.82 88.20 88.20 8 0 0 0 8.82 0.00 0.00 9 0 0 0 8.82 0.00 0.00 10 0 0 0 8.82 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 30 30 0 $264.60 $264.60 AJ. Invoiced Amount - Ancillary Service Capacity - Supplemental Reserve Sec 7.2.5 $264.60
C-2 EXHIBIT C CLARK BUNDLE SUPPLIER'S MONTHLY INVOICE AK. Theoretical Amount for Expected Performance $264.60 MONTH 1 - ANCILLARY SERVICE ENERGY - ----------------------------------
AL AM AN AO AP AQ Dispatch Schedule of Ancillary Ancillary Energy Supplier Price Ceiling of Price x Ancillary Price x Schedule Hour Energy (MWh) Supplied (MWh) Shortfall (MWh) Energy ($/MWh) Energy Supplied of Ancillary Energy ---- ----------- -------------- --------------- -------------- --------------- ------------------- (AL - AM) (AM x AO) (AL x AO) 1 0 0 0 42.65 $ 0.00 $ 0.00 2 0 0 0 42.65 0.00 0.00 3 0 0 0 42.65 0.00 0.00 4 0 0 0 42.65 0.00 0.00 5 40 40 0 42.65 1,706.00 1,706.00 6 30 10 20 42.65 426.50 1,279.50 7 10 10 0 42.65 426.50 426.50 8 0 0 0 42.65 0.00 0.00 9 0 0 0 42.65 0.00 0.00 10 0 0 0 42.65 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 80 60 20 $426.50 $ 2,559.00 $3,412.00 AR. Invoiced Amount - Ancillary Services Energy Sec 7.2.6 $ 2,559.00 AS. Theoretical Amount for Expected Performance $3,412.00 MONTH 1 - TOTAL INVOICE AMOUNT Sec 7.3 (L + T + AB + AJ + AR) $203,814.10 ==================================================================================================================================== MONTH 2 - ENERGY - ---------------- C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 687 687 0 45.00 $ 30,915.00 $ 30,915.00 2 687 687 0 45.00 30,915.00 30,915.00 3 687 627 60 45.00 28,215.00 30,915.00 4 687 627 60 55.00 34,485.00 37,785.00 5 557 547 10 55.00 30,085.00 30,635.00 6 587 587 0 55.00 32,285.00 32,285.00 7 677 657 20 35.00 22,995.00 23,695.00 8 687 687 0 35.00 24,045.00 24,045.00 9 687 687 0 35.00 24,045.00 24,045.00 10 687 687 0 40.00 27,480.00 27,480.00 - ------------------------------------------------------------------------------------------------------------------------------------ 6,630 6,480 150 $285,465.00 $292,715.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $285,465.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $292,715.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $276,372.00 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $282,769.50
C-3 EXHIBIT C CLARK BUNDLE SUPPLIER'S MONTHLY INVOICE K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $147,549.60 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $150,965.10 L. Invoiced Amount - Energy Sec 7.3 (I *** J) $276,372.00 M. Theoretical Amount for Expected Performance (IT *** JT) $282,769.50
MONTH 3 - ENERGY - ----------------
C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 687 687 0 30.00 $ 20,610.00 $ 20,610.00 2 687 687 0 20.00 13,740.00 13,740.00 3 687 627 60 20.00 12,540.00 13,740.00 4 687 627 60 20.00 12,540.00 13,740.00 5 557 547 10 15.00 8,205.00 8,355.00 6 587 587 0 15.00 8,805.00 8,805.00 7 677 657 20 15.00 9,855.00 10,155.00 8 687 687 0 15.00 10,305.00 10,305.00 9 687 687 0 15.00 10,305.00 10,305.00 10 687 687 0 15.00 10,305.00 10,305.00 - ------------------------------------------------------------------------------------------------------------------------------------ 6,630 6,480 150 $117,210.00 $120,060.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $117,210.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $120,060.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $276,372.00 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $282,769.50 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $147,549.60 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $150,965.10 L. Invoiced Amount - Energy Sec 7.3 (I ** K) $147,549.60 M. Theoretical Amount for Expected Performance (IT ** KT) $150,965.10
For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. ** Less Than *** Greater Than C-4 EXHIBIT D CLARK BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ENERGY - ----------------
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 60 35.00 100.00 2,200.00 4 60 30.00 50.00 1,850.00 5 10 30.00 50.00 350.00 6 0 na 0.00 0.00 7 20 25.00 0.00 500.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - -------------------------------------------------------------------------------------------------- 150 $ 4,900.00 E. Gross Replacement Cost of Energy $ 4,900.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $202,435.00 G. Actual Supplier's Invoice Amount 196,935.00 ------------ H. Avoided Payment to Supplier (F - G) $ 5,500.00 I. Invoiced Replacement Cost - Energy (E ** H) $ 0.00 MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE - ------------------------------------------------------------------------ J K * L * M Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (J x K) + L 1 0 na $0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------ 0 $ 0.00 N. Gross Replacement Cost of Ancillary Capacity - Regulation and Frequency $ 0.00 Response O. Theoretical Supplier's Invoice Amount for Expected Performance $772.50 P. Actual Supplier's Invoice Amount 772.50 -------- Q. Avoided Payment to Supplier (O - P) $ 0.00 R. Invoiced Replacement Cost - Ancillary Capacity (N = Q) $ 0.00
** Less Than D-1 EXHIBIT D CLARK BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - -------------------------------------------------------
S T * U * V Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (S x T) + U 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 40.00 100.00 900.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - -------------------------------------------------------------------------------------------------- 20 $ 900.00 W. Gross Replacement Cost of Ancillary Capacity - Spinning Reserve $ 900.00 X. Theoretical Supplier's Invoice Amount for Expected Performance $3,752.00 Y. Actual Supplier's Invoice Amount 3,283.00 ---------- Z. Avoided Payment to Supplier (X - Y) $ 469.00 AA. Invoiced Replacement Cost - Ancillary Capacity (W GREATER THAN Z) $ 431.00 MONTH 1 - ANCILLARY CAPACITY - SUPPLEMENTAL RESERVE - --------------------------------------------------- AB AC * AD * AE Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (AB x AC) + AD 1 0 na $0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - -------------------------------------------------------------------------------------------------- 0 $ 0.00 AF. Gross Replacement Cost of Ancillary Capacity - Supplemental Reserve $ 0.00 AG. Theoretical Supplier's Invoice Amount for Expected Performance $264.60 AH. Actual Supplier's Invoice Amount 264.60 AI. Avoided Payment to Supplier (AG - AH) $ 0.00 AJ. Invoiced Replacement Cost - Ancillary Capacity (AF = AI) $ 0.00
D-2 EXHIBIT D CLARK BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ANCILLARY SERVICE ENERGY - ----------------------------------
AK AL * AM * AN Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy ** Cost of Energy ---- ------------ ----------------- ------------ -------------- (AK x AL) + AM 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 50.00 20.00 1,020.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ---------------------------------------------------------------------------------------------------- 20 $1,020.00 AO. Gross Replacement Cost of Ancillary Energy $1,020.00 AP. Theoretical Supplier's Invoice Amount for Expected Performance $3,412.00 AQ. Actual Supplier's Invoice Amount 2,559.00 ---------- AR. Avoided Payment to Supplier (AP - AQ) $ 853.00 AS. Invoiced Replacement Cost - Ancillary Energy (AO ** AR) $ 167.00 MONTH 1 - TOTAL INVOICE AMOUNT (I + R + AA + AJ + AS) $ 598.00 ==================================================================================================== MONTH 2 - ENERGY - ---------------- A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 40.00 200.00 2,600.00 4 60 55.00 100.00 3,400.00 5 10 48.00 200.00 680.00 6 0 na 0.00 0.00 7 20 35.00 300.00 1,000.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - -------------------------------------------------------------------------------------------------- 150 $ 7,680.00 E. Gross Replacement Cost of Energy $ 7,680.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $282,769.50 G. Actual Supplier's Invoice Amount 276,372.00 ------------
** Less Than D-3 EXHIBIT D CLARK BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS H. Avoided Payment to Supplier (F - G) $6,397.50 I. Invoiced Replacement Cost - Energy (E ** H) $1,282.50
MONTH 3 - ENERGY - ----------------
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 27.00 100.00 1,720.00 4 60 22.00 50.00 1,370.00 5 10 22.00 0.00 220.00 6 0 na 0.00 0.00 7 20 22.00 50.00 490.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - --------------------------------------------------------------------------------------------------- 150 $ 3,800.00 E. Gross Replacement Cost of Energy $ 3,800.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $150,965.10 G. Actual Supplier's Invoice Amount 147,549.60 ------------ H. Avoided Payment to Supplier (F - G) $ 3,415.50 I. Invoiced Replacement Cost - Energy (E *** H) $ 384.50
For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. ** Less Than *** Greater Than D-4 EXHIBIT E CLARK BUNDLE YEAR END TRUE-UP INVOICE A Price Ceiling of Energy $42.65 /MWh B Price Floor of Energy $22.77 /MWh EXAMPLE 1 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 6,480 $ 196,935.00 $ 276,372.00 $ 147,549.60 $ 196,935.00 2 6,480 285,465.00 276,372.00 147,549.60 276,372.00 3 6,480 117,210.00 276,372.00 147,549.60 147,549.60 4 6,870 329,760.00 293,005.50 156,429.90 293,005.50 5 6,870 302,280.00 293,005.50 156,429.90 293,005.50 6 6,670 293,480.00 284,475.50 151,875.90 284,475.50 7 6,870 316,020.00 293,005.50 156,429.90 293,005.50 8 6,870 322,890.00 293,005.50 156,429.90 293,005.50 9 6,330 303,840.00 269,974.50 144,134.10 269,974.50 10 6,870 309,150.00 293,005.50 156,429.90 293,005.50 11 6,870 370,980.00 293,005.50 156,429.90 293,005.50 12 6,570 321,930.00 280,210.50 149,598.90 280,210.50 - ------------------------------------------------------------------------------------------------------------------ Total 80,230 $3,469,940.00 $3,421,809.50 $1,826,837.10 $3,213,550.10 (Total of Column D) GREATER THAN (Total of Column E) therefore Annual True-up calculated under Section 7.5.1(a) - ---------------------------------------------------------------------------------------------------------------- H. Annual True-up - Delivered Energy (Total E - Total G) $208,259.40 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total E / Total C) $42.65 J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,282.50 3 150 3,800.00 384.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------ Total 450 $19,192.50 $16,380.00 $0.00 $ 1,667.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ 1,667.00
E-1 EXHIBIT E CLARK BUNDLE YEAR END TRUE-UP INVOICE
Total Annual True-up * (H + O) $209,926.40 =================================================================================================================== EXAMPLE 2 - --------- C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 6,480 $ 196,935.00 $ 276,372.00 $ 147,549.60 $ 196,935.00 2 6,480 285,465.00 276,372.00 147,549.60 276,372.00 3 6,480 117,210.00 276,372.00 147,549.60 147,549.60 4 6,870 261,060.00 293,005.50 156,429.90 261,060.00 5 6,870 254,190.00 293,005.50 156,429.90 254,190.00 6 6,670 226,780.00 284,475.50 151,875.90 226,780.00 7 6,870 329,760.00 293,005.50 156,429.90 293,005.50 8 6,870 233,580.00 293,005.50 156,429.90 233,580.00 9 6,330 240,540.00 269,974.50 144,134.10 240,540.00 10 6,870 240,450.00 293,005.50 156,429.90 240,450.00 11 6,870 302,280.00 293,005.50 156,429.90 293,005.50 12 6,570 256,230.00 280,210.50 149,598.90 256,230.00 - -------------------------------------------------------------------------------------------------------------- Total 80,230 $2,944,480.00 $3,421,809.50 $1,826,837.10 $2,919,697.60 (Total of Column E) GREATER THAN (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) - -------------------------------------------------------------------------------------------------------------- H. Annual True-up - Delivered Energy (Total D - Total G) $ 24,782.40 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 36.70 J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,282.50 3 150 3,800.00 384.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------ Total 450 $16,515.22 $16,380.00 $0.00 $ 1,667.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ 1,667.00 Total Annual True-up * (H + O) $26,449.40 ===================================================================================================================
E-2 EXHIBIT E CLARK BUNDLE YEAR END TRUE-UP INVOICE
EXAMPLE 3 - --------- C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- --------------- --------------- (A x C) (B x C) 1 6,480 $ 196,935.00 $ 276,372.00 $ 147,549.60 $ 196,935.00 2 6,480 285,465.00 276,372.00 147,549.60 276,372.00 3 6,480 117,210.00 276,372.00 147,549.60 147,549.60 4 6,870 219,840.00 293,005.50 156,429.90 219,840.00 5 6,870 206,100.00 293,005.50 156,429.90 206,100.00 6 6,670 186,760.00 284,475.50 151,875.90 186,760.00 7 6,870 178,620.00 293,005.50 156,429.90 178,620.00 8 6,870 185,490.00 293,005.50 156,429.90 185,490.00 9 6,330 158,250.00 269,974.50 144,134.10 158,250.00 10 6,870 171,750.00 293,005.50 156,429.90 171,750.00 11 6,870 144,270.00 293,005.50 156,429.90 156,429.90 12 6,570 144,540.00 280,210.50 149,598.90 149,598.90 - ----------------------------------------------------------------------------------------------------------------- Total 80,230 $2,195,230.00 $3,421,809.50 $1,826,837.10 $2,233,695.40 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) - ---------------------------------------------------------------------------------------------------- H. Annual True-up - Delivered Energy (Total D - Total G) $ (38,465.40) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 27.36
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,282.50 3 150 3,800.00 384.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------ Total 450 $ 12,312.77 $ 16,380.00 $ 4,067.23 $ 1,667.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ (2,400.23)
E-3 EXHIBIT E CLARK BUNDLE YEAR END TRUE-UP INVOICE Total Annual True-up * (H + O) $ (40,865.63) ================================================================================ EXAMPLE 4 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 6,480 $ 196,935.00 $ 276,372.00 $ 147,549.60 $ 196,935.00 2 6,480 285,465.00 276,372.00 147,549.60 276,372.00 3 6,480 117,210.00 276,372.00 147,549.60 147,549.60 4 6,870 151,140.00 293,005.50 156,429.90 156,429.90 5 6,870 116,790.00 293,005.50 156,429.90 156,429.90 6 6,670 153,410.00 284,475.50 151,875.90 153,410.00 7 6,870 158,010.00 293,005.50 156,429.90 158,010.00 8 6,870 96,180.00 293,005.50 156,429.90 156,429.90 9 6,330 113,940.00 269,974.50 144,134.10 144,134.10 10 6,870 130,530.00 293,005.50 156,429.90 156,429.90 11 6,870 82,440.00 293,005.50 156,429.90 156,429.90 12 6,570 124,830.00 280,210.50 149,598.90 149,598.90 - --------------------------------------------------------------------------------------------------------------- Total 80,230 $ 1,726,880.00 $ 3,421,809.50 $ 1,826,837.10 $ 2,008,159.10 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) - ---------------------------------------------------------------------------------------------------- H. Annual True-up - Delivered Energy (Total F - Total G) $ (181,322.00) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total F / Total C) $ 22.77
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,282.50 3 150 3,800.00 384.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------- Total 450 $ 10,246.50 $ 16,380.00 $ 6,133.50 $ 1,667.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ (4,466.50) ===================================================================================================================
E-4 EXHIBIT E CLARK BUNDLE YEAR END TRUE-UP INVOICE Total Annual True-up * (H + O) $ (185,788.50) ================================================================================ * Positive Total Annual True-up is indicative of a payment form Buyer to Supplier; Negative Total Annual True-up is indicative of a payment form Supplier to Buyer. E-5 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS Supplier: - -------- a) Agreement Notices: Name and Address:______________________ ------------------ Phone:_________________________________ Fax:___________________________________ b) Payment Check: Name and Address:______________________ -------------- c) Payment Wire Transfer: Bank:__________________________________ ---------------------- ABA#:__________________________________ For: Supplier's Name __________________ Account No: ___________________________ For:___________________________________ d) Invoices: Name and Address:______________________ --------- Phone:_________________________________ Fax:___________________________________ e) Operating Notifications: ------------------------ i) (Management, if required) ii) Pre-Schedule: Phone:_________________________________ Fax:___________________________________ iii) Real Time: Phone:_________________________________ Fax:___________________________________ iv) Monthly Checkout Phone:_________________________________ Person: Fax:___________________________________ F-1 Buyer: a) Agreement Notices: ----------------- Address: Gary Craythorn Manager, Resource Contracts Nevada Power Company 6226 West Sahara Avenue, M/S 26A Las Vegas, Nevada 89146 Phone: 702/367-5425 Fax: 702/227-2455 E-mail: gcraythorn@nevp.com b) Invoices: -------- US Post Office: (Via Certified Mail) Overnight Delivery -------------- ------------------ Address: Nevada Power Company Address: Nevada Power Company Attn: Kathy Crews Attn: Kathy Crews P.O. Box 230, M/S 20 6226 West Sahara Ave., M/S 20 Las Vegas, Nevada 89151 Las Vegas, Nevada 89146 Telephone: 702/227-2476 Fax: 702/367-5096 E-mail: kcrews@nevp.com c) Schedules: i) Pre-Schedule: Primary Name: Rick Engebretson Phone: 702/862-7195 E-mail: rengebretson@nevp.com Alternate Name: Tim Schuster Phone: 702/862-7194 E-mail: tschuster@nevp.com Fax: 702/227-2404 ii) Real Time: Phone: 702/862-7106 Fax: 702/227-2404 iii) Monthly Checkout: Kathy Crews Phone:702/227-2476 Fax:702/367-5096 E-mail:kcrews@nevp.com d) Control Area/Transmission: i) Reliability Dispatch: Phone: (702) 451-2026 Fax: (702) 862-7113 ii) Transmission Dispatch: Phone: (702) 451-8346 Fax: (702) 862-7113
F-2 EXHIBIT G FORM OF AVAILABILITY NOTICE* Date of Notice: Time of Notice: Supplier: Name of Supplier's Representative: Buyer: Asset Bundle: Availability Dates (96 hours total):
A B C D E F G Availability Hour Available from Total Derating of Permitted Asset Bundle Available Total Derating Permitted Date Ending Valmy Unit Valmy Unit (MW) Derating Capacity of from Valmy of Valmy Derating of ---- ------ ---- -------------- Unit 1 (MW) Unit 1 (MW) Unit 2 (MW) Unit 2 (MW) Unit 2 (MW) 1 (MW) ----------- ----------- ---------- ----------- ----------- ----- (A ** or = ____) (___ - A) (C) ** or = B) (A - C) (E ** or = ___) (___ - E) (B ** or = F) 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500 H I** J Asset bundle Alternative Cause and Expected Duration of Availability Hour Capacity of Point(s) of Deratings and Identification Date Ending Unit 2 (MW) Delivery Permitted Deratings ---- ------ ---------- ------- ------------------- (G - E) 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500
* The Parties' operational personnel shall develop a similar form for the other generating units in the bundle. ** The Parties' operational personnel shall develop the necessary procedure to document requests and responses to utilize Alternative Point(s) of Delivery. G-1 EXHIBIT H FORM OF GUARANTEE This Guarantee is entered into as of November 16, 2000 by NRG Energy, Inc., a Delaware corporation, and Dynegy Holdings Inc., a Delaware corporation (each, a "Guarantor"), on behalf of Clark Gardner Power LLC, a Delaware limited liability company ("Supplier"), in favor of and for the benefit of Nevada Power Company, a Nevada corporation ("NPC"). NPC is sometimes referred to herein as "Beneficiary". WHEREAS, Supplier and NPC are entering into a Transitional Power Purchase Agreement dated as of November 16, 2000 (the "TPPA") by which Supplier has agreed to sell and NPC has agreed to buy Energy and Ancillary Services (as defined in the TPPA) produced by the Clark generating station being sold by NPC; and WHEREAS, it is a condition to the obligation of NPC to enter into the TPPA for Guarantor to guarantee the Supplier's obligations under the TPPA in an amount not to exceed the Credit Amount (as defined in the TPPA) (the "Guarantied Obligations"). 1. Guarantee. Each Guarantor jointly and severally, and irrevocably and unconditionally, guaranties, as primary obligor and not merely as surety, the due and punctual payment in full of all Guarantied Obligations (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)). In the event that all or any portion of the Guarantied Obligations is paid by Supplier, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) is rescinded or recovered directly or indirectly from the Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments that are so rescinded or recovered shall constitute Guarantied Obligations (to the extent such payments, in the aggregate, do not exceed the Credit Amount). Subject to the other provisions of this Section 1, upon failure of Supplier to pay any of the Guarantied Obligations when and as the same shall become due, the Guarantors will upon demand pay, or cause to be paid, in cash, to NPC, an amount equal to the aggregate of the unpaid Guarantied Obligations to the extent due. In the event the Guarantors fail to pay the Guarantied Obligations, each and every default in the payment shall give rise to a separate cause of action and separate causes of action may be brought hereunder as each such cause of action arises. In no event shall the amount recoverable hereunder by Beneficiary from the Guarantors, singly or jointly, ever exceed the Credit Amount (as defined in the TPPA). 2. Expenses. Each Guarantor agrees to reimburse NPC for all reasonable costs and expenses (including, without limitation, the reasonable fees and expenses of legal counsel) in connection with (i) any default by such Guarantor hereunder and any enforcement or collection proceeding resulting therefrom, including, without limitation, all manner of participation in or other involvement with bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings of or involving the Guarantor, judicial or regulatory proceedings of or H-3 involving the Guarantor and workout, restructuring or other negotiations or proceedings of or involving the Guarantor (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (ii) the enforcement of this Section 2. 3. Guarantee Absolute; Continuing Guarantee. The obligations of each Guarantor hereunder are joint and several, irrevocable, absolute, independent and unconditional, and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, the Guarantors agree that: (a) this Guarantee is a guarantee of payment when due and not of collectibility; (b) the obligations of each Guarantor hereunder are independent of the obligations of Supplier under the TPPA and a separate action or actions may be brought and prosecuted against either Guarantor whether or not any action is brought against the Supplier and whether or not the Supplier is joined in any such action or actions; and (c) either Guarantor's payment of a portion, but not all, of the Guarantied Obligations shall in no way limit, affect, modify or abridge the Guarantors' liability for any portion of the Guarantied Obligations that has not been paid. This Guarantee is a continuing guarantee and shall be binding upon the Guarantors and its successors and assigns. 4. Actions by Beneficiary. The Beneficiary may from time to time, without notice or demand and without affecting the validity or enforceability of this Guarantee or giving rise to any limitation, impairment or discharge of the Guarantors' liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guarantee or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security hereafter held by or for the benefit of the Beneficiary in respect of this Guarantee or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Beneficiary may have against any such security, and (f) exercise any other rights available to NPC under the TPPA. 5. No Discharge. This Guarantee and the obligations of each Guarantor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Guarantied Obligations), including without limitation the occurrence of any of the following, whether or not Guarantor shall have had notice or knowledge of any of them: (a) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guarantee of or security for the payment of the Guarantied Obligations, (b) any waiver or H-4 modification of, or any consent to departure from, any of the terms or provisions of any other guarantee or security for the Guarantied Obligations, (c) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (d) the application of payments received from any source to the payment of indebtedness other than the Guarantied Obligations, even if the Beneficiary might have elected to apply such payment to any part or all of the Guarantied Obligations, (e) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations, (f) any defenses, set-offs or counterclaims which the Supplier may assert against the Beneficiary in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction (other than the right to set off or recoup overdue undisputed payments due from Beneficiary under the TPPA), and (g) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of either Guarantor as an obligor in respect of the Guarantied Obligations. 6. Waivers for the Benefit of Beneficiary. Each Guarantor waives, for the benefit of Beneficiary, until the Guarantied Obligations are paid in full: (a) any right to require the Beneficiary, as a condition of payment or performance by the Guarantors, to (i) proceed against the Supplier, any other guarantor of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from the Supplier, any other guarantor of the Guarantied Obligations or any other Person, or (iii) pursue any other remedy in the power of the Beneficiary; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Supplier including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Supplier from any cause other than payment in full of the Guarantied Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) (i) any principles or provisions of law, statutory or otherwise, that are or might be in conflict with the terms of this Guarantee and any legal or equitable discharge of Guarantors' obligations hereunder, (ii) the benefit of any statute of limitations affecting Guarantors' liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that the Beneficiary protect, secure, perfect or insure any lien on any property subject thereto; (e) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guarantee; and (f) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guarantee. 7. Waiver of Rights Against Supplier. Until the Guarantied Obligations are paid in full, each Guarantor waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against the Supplier or any of its assets in connection with this Guarantee or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or H-5 indemnification that such Guarantor now has or may hereafter have against the Supplier, (b) any right to enforce, or to participate in, any claim, right or remedy that the Beneficiary now has or may hereafter have against the Supplier, and (c) any benefit of, and any right to participate in, any collateral or security hereafter held by the Beneficiary. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement and indemnification as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against the Supplier or against any collateral or security shall be junior and subordinate to any rights the Beneficiary may have against Supplier, to all right, title and interest the Beneficiary may have in any such collateral or security, and to any right the Beneficiary may have against such other guarantor. 8. Representations and Warranties of Guarantor. Each Guarantor represents and warrants to NPC as follows: (a) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Such Guarantor has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (b) it has the corporate power and authority to execute and deliver this Guarantee and to consummate the transactions contemplated hereby. The execution and delivery of this Guarantee and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of such Guarantor, and no other corporate proceedings on the part of such Guarantor, including the approval of its shareholders, are necessary to authorize this Guarantee or to consummate the transactions so contemplated. This Guarantee has been duly and validly executed and delivered by such Guarantor and constitutes a valid and binding agreement of such Guarantor, enforceable against such Guarantor in accordance with its terms. (c) There are no legal or arbitral proceedings by or before any governmental or regulatory authority or agency, now pending or (to such Guarantor's knowledge) threatened against such Guarantor or its subsidiaries that could reasonably be expected to have a material adverse effect on the consolidated financial condition, operations or business taken as a whole of it and its subsidiaries, except as set forth in periodic filings by such Guarantor with the Securities and Exchange Commission. (d) The representations and warranties made herein will remain true until such Guarantor has fulfilled its obligations to pay in full the Guaranteed Obligations. 9. Set Off. In addition to any other rights the Beneficiary may have under law or in equity, if any amount shall at any time be due and owing by either Guarantor to the Beneficiary under this Guarantee, the Beneficiary is authorized at any time or from time to time, without notice (any such notice being expressly waived), to set off and to appropriate and to apply any indebtedness of the Beneficiary owing to such Guarantor and any other property of such H-6 Guarantor held by the Beneficiary to or for the credit or the account of such Guarantor against and on account of the Guarantied Obligations and liabilities of such Guarantor to the Beneficiary under this Guarantee. 10. Disputes. Any action, claim or dispute arising out of or relating to this Guarantee (any such action, claim or dispute, a "Dispute") shall be submitted in writing to the other Party. In the event the Guarantors and NPC are unable to resolve the Dispute satisfactorily within thirty (30) days from the receipt of notice of the Dispute, either the Guarantors or NPC may initiate arbitration through the serving and filing of a demand for arbitration. The Guarantors and NPC expressly agree that such arbitration shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time a request made for provisional remedies requesting preservation of respective rights and obligations under the Guarantee may be resolved by a court of law located in the County of the principal place of business of NPC. Arbitration shall be conducted in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the TPPA. 11. Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Guarantee, and no consent to any departure by either Guarantor therefrom, shall in any event be effective without the written concurrence of NPC and, in the case of any such amendment or modification, either Guarantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 12. Miscellaneous. It is not necessary for Beneficiary to inquire into the capacity or powers of either Guarantor or Supplier or the officers, directors or any agents acting or purporting to act on behalf of any of them. The rights, powers and remedies given to Beneficiary by this Guarantee are cumulative and shall be in addition to and independent of all rights, powers and remedies given to Beneficiary by virtue of any statute or rule of law or in the TPPA. Any forbearance or failure to exercise, and any delay by Beneficiary in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. In case any provision in or obligation under this Guarantee shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Guarantee shall inure to the benefit of Beneficiary and its respective successors and assigns. 13. Notices. All notices, requests, demands, waivers, consents and other communications hereunder shall be in writing, shall be delivered either in person, by telegraphic, facsimile or other electronic means, by overnight air courier or by mail, and shall be deemed to have been duly given and to have become effective (a) upon receipt if delivered in person or by telegraphic, facsimile or other electronic means, (b) one (1) business day after having been H-7 delivered to an air courier for overnight delivery or (c) three (3) business days after having been deposited in the U.S. mails as certified or registered mail, return receipt requested, all fees prepaid, directed to the parties at the following addresses: If to Guarantors, addressed to: David Lloyd, Esq. NRG Energy, Inc. Symphony Towers Suite 2740 750 "B" Street San Diego, CA 92101-8129 Facsimile: (619) 615-7663 Alisa B. Johnson, Esq. Dynegy Holdings Inc. 1000 Louisiana Street, Suite 5800 Houston, TX 77002 Facsimile:(713) 767-8508 with copies to: William H. Holmes, Esq. Stoel Rives LLP 900 SW Fifth Avenue Suite 2300 Portland, OR 97204-1268 Facsimile: 503-220-2480 If to NPC, addressed to: William E. Peterson Nevada Power Company 6100 Neil Road Reno, Nevada 89511 Facsimile: (775) 834-5959 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officers thereunto duly authorized as of the date first written above. NRG ENERGY, INC. DYNEGY HOLDINGS INC. ________________________________ __________________________________ By: Craig A. Mataczynski By: __________________ Title: President Title: __________________ Address: 901 Marquette Ave., Suite 2300 Address: 1000 Louisiana St., Suite 5800 Minneapolis, MN 55402 Houston, TX 77002 H-8 EXHIBIT I COMPANY OBSERVED HOLIDAYS New Year's Day January 1/st/ Martin Luther King's Day Third Monday in January President's Day Third Monday in February Memorial Day (observed) Last Monday in May Independence Day July 4/th/ Labor Day First Monday in September Veteran's Day November 11/th/ Thanksgiving Day Fourth Thursday in November Thanksgiving Friday Friday after Thanksgiving Christmas Eve December 24/th/ Christmas Day December 25/th/ Holidays falling on Saturday will be observed on the preceding Friday and those falling on Sunday will be observed on the following Monday. I-1 EXHIBIT J CLARK BUNDLE ADJUSTMENTS TO TPPA AMOUNT
Monthly Monthly Month Adjustment Month Adjustment ---------------------------- --------------------------------- Mar-01 2.9% Mar-02 2.3% Apr-01 3.3% Apr-02 2.8% May-01 4.3% May-02 3.6% Jun-01 5.1% Jun-02 4.2% Jul-01 11.7% Jul-02 9.5% Aug-01 11.5% Aug-02 8.4% Sep-01 9.0% Sep-02 6.6% Oct-01 3.2% Oct-02 2.5% Nov-01 2.9% Nov-02 2.1% Dec-01 3.3% Dec-02 2.4% Jan-02 2.5% Jan-03 2.2% Feb-02 2.1% Feb-03 2.1%
Example 1 - Effective Date of Agreement is April 15, 2001 --------------------------------------------------------- A. TPPA Amount: $15,000,000 B C D Monthly Applicable Applicable Month Adjustment Portion * Adjustment ------------------------------------------------------------------------ (B x C) Apr-01 3.3% 50.0% 1.7% May-01 4.3% 100.0% 4.3% ------------------------------------------------------------------------ Total 6.0% E. Total of Monthly Applicable Adjustments 6.0% F Adjusted TPPA Amount (A x (1+D)) $15,900,000 =================================================================================================
Example 2 - Effective Date of Agreement is September 15, 2001 ------------------------------------------------------------- G. TPPA Amount: $15,000,000 H I J Monthly Applicable Applicable Month Adjustment Portion * Adjustment ------------------------------------------------------------------------ J-1 EXHIBIT J CLARK BUNDLE ADJUSTMENTS TO TPPA AMOUNT
(H x I) Jun-01 5.1% 100.0% 5.1% Jul-01 11.7% 100.0% 11.7% Aug-01 11.5% 100.0% 11.5% Sep-01 9.0% 50.0% 4.5% ------------------------------------------------------------------------- Total 32.8% K. Total of Monthly Applicable Adjustments 32.8% L Adjusted TPPA Amount (G x (1-K)) $10,080,000 ========================================================================================================
Example 3 - Termination Date of December 31, 2002 ------------------------------------------------- M. TPPA Amount: $15,000,000
N O P Monthly Applicable Applicable Month Adjustment Portion ** Adjustment ---------------------------------------------------------------------------- (N x O) Jan-03 2.2% 100.0% 2.2% Feb-03 2.1% 100.0% 2.1% ---------------------------------------------------------------------------- Total 4.3% Q. Total of Monthly Applicable Adjustments 4.3% R Payment Amount (M x Q) $645,000 ========================================================================================================
* The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer were made divided by the number of days in the month. ** The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer would have been made divided by the number of days in the month. J-2 EXHIBIT K CLARK BUNDLE ADJUSTMENTS TO MINIMUM ANNUAL TAKE
A B C D E F Base Number Base Energy Sales per Current Number Adjusted Energy Class * of Customers Sales (MWh) Customer (MWh) of Customers Sales (MWh) - ---------------------------------------------------------------------------------------------------------------------- (C / B) (D x E) ** Residential 475,000 5,800,000 12 470,000 5,738,947 Commercial 65,000 2,800,000 43 60,000 2,584,615 Industrial 1,000 4,900,000 800 3,600,000 Street Lighting 5 130,000 5 130,000 Other Retail 50 600,000 50 600,000 Wholesale 5 850,000 5 850,000 - -------------------------------------------------------------------------------------------------------------------- 541,060 15,080,000 530,860 13,503,563 G. Adjustment to Minimum Annual Take (F / C) 89.55% H. Minimum Annual Take from Exhibit A (MWh) 40,000 I. Revised Minimum Annual Take (MWh) (G x H) 35,820 J K Month During Applicable Min. Contract Year Annual Take (MWh) - ----------------------------------------- 1 40,000 2 40,000 3 40,000 4 40,000 5 35,820 6 35,820 7 35,820 8 34,000 9 34,000 10 32,000 11 32,000 12 32,000 - ----------------------------------------- Total 431,460 L. Minimum Take for Contract Year (MWh) (Total of K / 12) 35,955
* As reported on Buyer's FERC Form 1 ** Adjusted Energy Sales for the remaining Industrial, Street Lighting, Other Retail, and Wholesale customers will be based upon actual sales during the base period. K-1 EXHIBIT L CLARK BUNDLE ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE
A B C D E * F G ** Dispatch Supply Delivered Permitted Force Replacement Applicable Hour Amount (MWh) Energy (MWh) Derating(MWh) Majeure(MWh) Energy(MWh) Energy(MWh) - ---------------------------------------------------------------------------------------------------------------- (C+D+E+F) 1 687 687 687 2 687 687 687 3 687 687 687 4 687 687 687 5 687 687 687 6 687 667 20 687 7 687 667 20 687 8 687 667 20 687 9 687 687 687 10 687 687 687 11 687 687 687 12 687 687 687 13 687 0 687 687 14 687 0 687 687 15 687 0 687 687 16 687 0 687 687 17 687 637 30 667 18 687 687 687 19 687 687 687 20 687 687 687 21 687 687 687 22 687 687 687 23 687 687 687 24 657 657 657 25 637 637 637 26 607 607 607 27 637 607 30 637 28 657 657 657 29 687 687 687 30 687 687 687 31 687 687 687 32 687 687 687 33 687 687 687 34 687 687 687 35 687 687 687 36 687 687 687 - ----------------------------------------------------------------------------------------------------------------
K-2 EXHIBIT L CLARK BUNDLE ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE total 24,492 21,604 70 2,748 50 24,472
* Includes energy excused because of Supplier's and Buyer's events of Force Majeure ** G cannot be greater than B L-2 EX-10.G 16 0016.txt ASSET SALE AGREEMENT, NRG ENERGY & DYNEGY HOLDINGS Exhibit 10(G) ________________________________________________________________________________ ASSET SALE AGREEMENT BETWEEN NEVADA POWER COMPANY, NRG ENERGY, INC. AND DYNEGY HOLDINGS INC. FOR THE REID GARDNER ASSET BUNDLE ________________________________________________________________________________ TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS...................................................................................... 1 1.1 Definitions............................................................................. 1 ARTICLE II PURCHASE AND SALE................................................................................ 14 2.1 The Sale................................................................................ 14 2.2 Excluded Assets......................................................................... 14 2.3 Assumed Liabilities..................................................................... 15 2.4 Excluded Liabilities.................................................................... 18 2.5 License of Non-Transferred Intangible Assets............................................ 20 ARTICLE III PURCHASE PRICE................................................................................... 21 3.1 Purchase Price.......................................................................... 21 3.2 Purchase Price Adjustment............................................................... 21 3.3 Allocation of Purchase Price............................................................ 23 3.4 Proration............................................................................... 24 ARTICLE IV THE CLOSING...................................................................................... 25 4.1 Time and Place of Closing............................................................... 25 4.2 Payment of Purchase Price............................................................... 25 4.3 Deliveries by Seller.................................................................... 25 4.4 Deliveries by Buyer..................................................................... 26 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER......................................................... 27 5.1 Organization; Qualification............................................................. 27 5.2 Authority Relative to this Agreement.................................................... 28 5.3 Consents and Approvals; No Violation.................................................... 28 5.4 Reports................................................................................. 29 5.5 Financial Statements.................................................................... 29 5.6 Undisclosed Liabilities................................................................. 30 5.7 Absence of Certain Changes or Events.................................................... 30 5.8 Title to Real Property.................................................................. 30 5.9 Leasehold Interests..................................................................... 30 5.10 Improvements............................................................................ 31 5.11 Insurance............................................................................... 31
i 5.12 Environmental Matters................................................................... 31 5.13 Labor Matters........................................................................... 32 5.14 ERISA; Benefit Plans.................................................................... 33 5.15 Real Property Encumbrances.............................................................. 33 5.16 Condemnation............................................................................ 33 5.17 Certain Contracts and Arrangements...................................................... 34 5.18 Legal Proceedings, etc.................................................................. 34 5.19 Permits................................................................................. 35 5.20 Regulation as a Utility................................................................. 35 5.21 Taxes................................................................................... 35 5.22 Title to Personal Property.............................................................. 35 5.23 Water................................................................................... 36 5.24 Subchapter K Election................................................................... 36 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER.......................................................... 36 6.1 Organization............................................................................ 36 6.2 Authority Relative to this Agreement.................................................... 36 6.3 Consents and Approvals; No Violation.................................................... 37 6.4 Regulation as a Utility................................................................. 38 6.5 Availability of Funds................................................................... 38 ARTICLE VII COVENANTS OF THE PARTIES......................................................................... 38 7.1 Conduct of Business of the Seller....................................................... 38 7.2 Access to Information................................................................... 40 7.3 Expenses................................................................................ 42 7.4 Further Assurances...................................................................... 42 7.5 Public Statements....................................................................... 42 7.6 Consents and Approvals.................................................................. 43 7.7 Fees and Commissions.................................................................... 45 7.8 Use of Pollution Control Facilities..................................................... 45 7.9 Tax and Withholding Matters............................................................. 46 7.10 Supplements to Schedules................................................................ 48 7.11 Employees............................................................................... 48 7.12 Risk of Loss............................................................................ 50 7.13 Additional Covenants of the Buyer....................................................... 51 7.14 Surveys and Certain Title Matters....................................................... 51 7.15 Documentation........................................................................... 52 7.16 Additional Covenants of the Parties..................................................... 52
ii ARTICLE VIII CLOSING CONDITIONS............................................................................... 53 8.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby... 53 8.2 Conditions to Obligations of Buyer...................................................... 54 8.3 Conditions to Obligations of Seller..................................................... 56 ARTICLE IX INDEMNIFICATION.................................................................................. 58 9.1 Indemnification......................................................................... 58 9.2 Defense of Claims....................................................................... 59 ARTICLE X TERMINATION AND ABANDONMENT...................................................................... 61 10.1 Termination............................................................................. 61 10.2 Procedure and Effect of Termination..................................................... 62 ARTICLE XI MISCELLANEOUS PROVISIONS......................................................................... 63 11.1 Amendment and Modification.............................................................. 63 11.2 Waiver of Compliance; Consents.......................................................... 63 11.3 No Survival of Representations and Warranties........................................... 63 11.4 Notices................................................................................. 63 11.5 Assignment.............................................................................. 65 11.6 Arbitration............................................................................. 67 11.7 Governing Law........................................................................... 68 11.8 Counterparts............................................................................ 68 11.9 Interpretation.......................................................................... 68 11.10 Entire Agreement........................................................................ 68 11.11 Bulk Sales or Transfer Laws............................................................. 68
iii ASSET SALE AGREEMENT ASSET SALE AGREEMENT, dated as of November 16, 2000 (the "Agreement"), between Nevada Power Company, a Nevada corporation (the "Seller"), NRG Energy, Inc., a Delaware corporation ("NRG"), and Dynegy Holdings Inc. ("Dynegy"), a Delaware corporation (collectively, the "Buyer"). WHEREAS, the Seller owns and operates the "Purchased Assets" (as defined herein); and WHEREAS, the Buyer desires to purchase and assume from the Seller, and the Seller desires to sell to the Buyer, the Purchased Assets and certain associated liabilities upon the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS ----------- 1.1 Definitions. As used in this Agreement, the following terms have ----------- the meanings specified or referred to in this Section 1.1: (1) "Additional Funds" shall have the meaning set forth in Section 4.6 hereof. (2) "Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (3) "Adjustment Statement" shall have the meaning set forth in Section 3.2(a) hereof. (4) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (5) "Agreement" means the Asset Sale Agreement, dated as of November 16, 2000, together with the Schedules and Exhibits thereto. (6) "Ancillary Agreements" means the Interconnection Agreement, the Transitional Power Purchase Agreement and the Operating Easement Agreements. (7) "Assignment of Leases" means the Assignment of Leases in the form of Exhibit A hereto. (8) "Assumed Liabilities" shall have the meaning set forth in Section 2.3 hereof. (9) "Benefit Plans" shall have the meaning set forth in Section 2.4(i) hereof. (10) "Benefit Plans of Buyer" shall have the meaning set forth in Section 7.11(d) hereof. (11) "Bill of Sale" means the Bill of Sale to be delivered at the Closing with respect to the Purchased Assets which constitute personal property and which are to be transferred at the Closing, substantially in the form of Exhibit B hereto. (12) "Bonds" mean the pollution control bonds, which were used to finance the Pollution Control Facilities, as more fully described on Schedule 5.15. (13) "Business Day" means any day other than Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (14) "Buyer" shall have the meaning set forth in the preface hereto. (15) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (16) "Buyer Required Regulatory Approvals" shall have the meaning set forth in Section 6.3(b) hereof. (17) "Buyer's Easements" shall have the meaning set forth in Section 4.3(f) hereof. (18) "CDWR" means the California Department of Water Resources. 2 (19) "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. (S)9601, et seq., as amended. ------- (20) "Closing" shall have the meaning set forth in Section 4.1 hereof. (21) "Closing Date" shall have the meaning set forth in Section 4.1 hereof. (22) "COBRA" means the Consolidated Omnibus Reconciliation Act of 1985, as amended. (23) "Code" means the Internal Revenue Code of 1986, as amended. (24) "Collective Bargaining Agreements" shall have the meaning set forth in Section 7.11(a) hereof. (25) "Confidentiality Agreement" means the Confidentiality and Auction Protocols Agreement, dated March 14, 2000, between the Seller and NRG Energy, Inc., and the Confidentiality and Auction Protocols Agreement dated April 17, 2000, between the Seller and Dynegy Power Corp. (a wholly owned subsidiary of Dynegy Holdings Inc.). (26) "CPUC" means the Public Utility Commission of California or any successor thereto. (27) "CSFB" shall have the meaning set forth in Section 7.7 hereof. (28) "Intentionally Left Blank" (29) "Direct Claim" shall have the meaning set forth in Section 9.2(c) hereof. (30) "Dispute" shall have the meaning set forth in Section 11.6 hereof. (31) "Intentionally Left Blank" (32) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use 3 limitations, conservation easements, deed restrictions, encumbrances and charges of any kind. (33) "Environmental Audit Agreement" means the proposed Environmental Audit Agreement which Seller has been seeking to execute with the Nevada Division of Environmental Protection ("NDEP") relating to Reid Gardner Station. (34) "Environmental Laws" means all Federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances, laws relating to record keeping, notification, disclosure and reporting requirements respecting Hazardous Substances, and laws relating to the management and use of natural resources. (35) "Environmental Permits" shall have the meaning set forth in Section 5.12(a) hereof. (36) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (37) "ERISA Affiliate" shall have the meaning set forth in Section 2.4(i) hereof. (38) "ERISA Affiliate Plans" shall have the meaning set forth in Section 2.4(i) hereof. (39) "Intentionally Left Blank" (40) "Intentionally Left Blank" (41) "Intentionally Left Blank" (42) "Estimated Adjustment Amount" means (i) the Estimated Maintenance and Capital Expenditures Amount plus (ii) the Estimated Inventory Adjustment Amount plus (iii) the Estimated Materials and Supplies Adjustment Amount. 4 (43) "Estimated Closing Payment" shall have the meaning set forth in Section 4.2 hereof. (44) "Estimated Inventory Adjustment Amount" means the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer, which approval shall not be unreasonably withheld, of the fuel inventory priced as the Seller's weighted average fuel costs used at or in connection with the Purchased Assets as of the date that is ten (10) days before the Closing Date, which valuation shall be provided to the Buyer by the Seller no later than five (5) days before the Closing Date. (45) "Estimated Maintenance and Capital Expenditures Amount" means the Seller's estimate of the Maintenance and Capital Expenditures Amount, which estimate shall be the Seller's good faith reasonable estimate of the Maintenance and Capital Expenditures Amount actually incurred, as set forth in Schedule 1.1(45) attached hereto as of the date set forth in such Schedule 1.1(45). (46) "Estimated Materials and Supplies Adjustment Amount" means the Seller's good faith reasonable estimate of the book value of materials and supplies used at or in connection with the Purchased Assets on the Materials and Supplies Valuation Date. (47) "Intentionally Left Blank" (48) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (49) "Excluded Assets" shall have the meaning set forth in Section 2.2 hereof. (50) "Excluded Liabilities" shall have the meaning set forth in Section 2.4 hereof. (51) "Federal Power Act" means the Federal Power Act of 1935, as amended. (52) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. (53) "Final Order" shall have the meaning set forth in Section 8.1(c) hereof. 5 (54) "Governmental Authority" means any executive, legislative, judicial, regulatory or administrative agency, body, commission, department, board, court, tribunal, arbitrating body or authority of the United States or any foreign country, or any state, local or other governmental subdivision thereof. (55) "Hazardous Substances" means (i) any petrochemical or petroleum products, oil or coal ash, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (ii) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (iii) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law. (56) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (57) "Hourly Employees" shall have the meaning set forth in Section 7.11(a) hereof. (58) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (59) "Income Tax" means any federal, state, local or foreign Tax (i) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains Taxes and minimum Taxes) or (ii) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such Tax may be based, measured by or calculated with respect to, is described in clause (i), in each case together with any interest, penalties, or additions to such Tax. (60) "Indemnifiable Losses" shall have the meaning set forth in Section 9.1(a) hereof. (61) "Indemnifying Party" shall have the meaning set forth in Section 9.1(c) hereof. (62) "Indemnitee" shall have the meaning set forth in Section 9.1(c) hereof. 6 (63) "Indenture" means Indenture of Mortgage and Deed of Trust dated as of October 1, 1953, as amended from time to time between the Seller and Bankers Trust Company, as successor trustee. (64) "Independent Accounting Firm" means Deloitte & Touche LLP or such other independent accounting firm of national reputation mutually appointed by the Seller and the Buyer. (65) "Independent Appraiser" shall have the meaning set forth in Section 3.3 hereof. (66) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit C attached hereto. (67) "Interconnection Agreement" means the Interconnection Agreement, dated as of November 16, 2000, between the Seller and the Buyer. (68) "Inventory Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (69) "Joint Ownership Obligation" means the required consent of CDWR as set forth in Section 37.1 of the Participation Agreement for Reid Gardner Unit No. 4. (70) "Joint Ownership Obligation Condition" shall have the meaning set forth in Section 8.1(d) hereof. (71) "Knowledge" means the actual knowledge of the directors and executive officers of the specified Person, which directors and executive officers are charged with the responsibility for the particular function as of the date of the Agreement, or with respect to any certificate delivered pursuant to the Agreement, the date of delivery of such certificate. In the case of Seller, "executive officer" includes (i) any person listed on Schedule 1.1(71), (ii) any person who replaces a person listed on Schedule 1.1(71) between the date of this Agreement and the Closing Date in a listed position or the successor to that position and (iii) any current employee of Seller who within the past twenty-four (24) months has served as a representative to the coordinating committee for Reid Gardner Unit 4. (72) "Leased Assets" shall have the meaning set forth in Section 7.4 hereof. (73) "Leases" shall have the meaning set forth in Section 5.9 hereof. 7 (74) "Local 396 LOA" shall have the meaning set forth in Section 7.11(a) hereof. (75) "Maintenance and Capital Expenditures Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (76) "Maintenance and Capital Expenditures Amount" means the aggregate amount of all funds actually expended on, or for which liabilities were accrued in accordance with generally accepted accounting principles applied on a consistent basis with respect to any maintenance expenditures and capital expenditures beginning on the date of this Agreement and ending on the Closing Date, excluding (i) any unscheduled maintenance expenditures or capital expenditures which are made by the Seller with the Buyer's consent, which shall not be unreasonably withheld (ii) any maintenance expenditures or capital expenditures made by Seller in breach of Section 7.1, but including (i) any Scheduled Maintenance Expenditures or Scheduled Capital Expenditures, made with respect to the Purchased Assets by the Seller, and (ii) any maintenance expenditures and capital expenditures which were made by the Seller at the Buyer's request, beginning on the date of this Agreement and ending on the Closing Date. (77) "Management Employee" shall have the meaning set forth in Section 7.11(b) hereof. (78) "Management Transition Plan" means the Management Transition Plan, Generation Bundled Employees, as detailed in the Generation Divestiture Severance Packet of the Seller dated July, 2000. (79) "Material Adverse Effect" means any change or changes in or effect on the Purchased Assets that is materially adverse to the business, results of operations, financial condition or physical condition of the Purchased Assets, individually or in the aggregate, except for (i) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power, (ii) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used at the Purchased Assets, (iii) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems, (iv) any change in applicable laws, judgments, orders or decrees, (v) any conditions imposed by a Governmental Authority in connection with the consents or approvals required for the transactions contemplated hereby, and (vi) any materially adverse change in or effect on the Purchased Assets which is cured (including by the payment of money) by the Seller before the Termination Date. 8 (80) "Materials and Supplies Adjustment Amount" shall have the meaning set forth in Section 3.2 hereof. (81) "Materials and Supplies Valuation Date" means the date that is ten (10) days prior to the Closing Date. (82) "Necessary Capital Expenditures" shall have the meaning set forth in Section 7.1(c) hereof. (83) "Necessary Maintenance Expenditures" shall have the meaning set forth in Section 7.1(e) hereof. (84) "Off-Site Location" means any real property other than the Real Property. (85) "Operating Easement Agreements" means the operating easements providing the right to continue operating and maintaining certain generation and transmission facilities at the Purchased Assets, each in substantially the form of Exhibit D or Exhibit E attached hereto. (86) "Operating Easements" means the Seller's Easements and/or Buyer's Easements granted pursuant to the Operating Easement Agreements. (87) "OPUC" means the Oregon Public Utility Commission or any successor thereto. (88) "Ownership Interest" means Seller's undivided thirty-two and two- tenths percent (32.2%) interest in Reid Gardner Unit No. 4. (89) "Participation Agreement" means the Participation Agreement for Reid Gardner Unit No. 4 between CDWR and the Seller dated July 11, 1979. (90) "Permits" shall have the meaning set forth in Section 5.19 hereof. (91) "Permitted Encumbrances" means (i) those exceptions to title to the Purchased Assets listed on Schedule 5.8; (ii) subject to (S)(S) 7.14 and 8.2(g) any state of facts that a current survey of the Real Property would disclose; (iii) with respect to any date before the Closing Date, Encumbrances under the Indenture or under the pollution control bond indentures of trust listed in Schedule 5.15; (iv) mortgages, liens, pledges, charges, Encumbrances and restrictions incurred in connection with the Seller's purchase of properties and assets after the date of the Seller Balance Sheet, but only if and to the extent that such mortgage, lien, pledge, 9 charge, Encumbrance or restriction is against such properties or assets and secures all or a portion of the purchase price therefor; (v) the Buyer's Easements and the Seller's Easements (in accordance with the Operating Easement Agreements applicable to such easements and the Interconnection Agreement); (vi) statutory liens for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings and with respect to which Seller pays the Taxes, assessments or other government charges under protest; (vii) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings in which Seller has posted an appropriate bond to secure payment or placed sufficient Funds in escrow pending the outcome of such dispute; (viii) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities; and (ix) such other liens, imperfections in or failure of title, charges, easements, restrictions and Encumbrances which do not materially detract, individually or in the aggregate, from the value of or materially interfere with the present use of the Purchased Assets and do not, in the aggregate, have a Material Adverse Effect. (92) "Person" means any individual, partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof. (93) "Plan" shall have the meaning set forth in Section 7.11(d). (94) "Pollution Control Facilities" means the pollution control facilities relating to the Reid Gardner Station, as more fully described in Schedule 5.15. (95) "PUCN" means the Public Utilities Commission of Nevada or any successor thereto. (96) "Purchase Price" shall have the meaning set forth in Section 3.1 hereof. (97) "Purchased Assets" means, subject to the Permitted Encumbrances all of the right, title and interest in, to and under the real and personal property, tangible or intangible, of the Seller constituting the Reid Gardner Station or used principally for generation purposes in connection with such sites including, without limitation, all of the Seller's right, title and interest in the following assets: (i) the Real Property described on Schedule 1.1(97)(i) as associated with the Reid Gardner Station (the "Reid Gardner Real Property"); (ii) all inventories of fuels, supplies, materials and critical spares located on or in transit to or in transit to the 10 Reid Gardner Real Property on the Closing Date; (iii) the machinery, equipment, vehicles, furniture and other personal property located on or in transit to the Reid Gardner Real Property on the Closing Date, including, without limitation, the items of personal property included in Schedule 1.1 (97)(iii) as being associated with the Reid Gardner Station, and all warranties against manufacturers or vendors relating thereto, to the extent that such warranties are transferable without consent or with consent obtained through Seller's commercially reasonable efforts pursuant to Section 7.6(b); (iv) the Reid Gardner Unit No. 4 Participation Agreement and the other contracts, agreements and personal property leases listed on Schedule 1.1 (97)(iv) as being associated with the Reid Gardner Station and which are assignable without consent or with consent obtained through Seller's commercially reasonable efforts pursuant to Section 7.6(b); (v) the Permits listed on Schedule 1.1 (97)(v) as being associated with the Reid Gardner Station, to the extent transferable without consent or with consent obtained through Seller's commercially reasonable efforts pursuant to Section 7.6(b); (vi) all books, operating records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications, procedures and similar items of the Seller relating specifically to the aforementioned assets other than books of account associated with the Reid Gardner Station; (vii) the SO2 Allowances identified on Schedule 1.1 (97)(vii) associated with the Reid Gardner Station; and (viii) any assets purchased or to be purchased by the Seller pursuant to Section 7.4 associated with the Reid Gardner Station; (ix) all telephones, computer hardware, firmware, software, and associated licenses located at and used in the operation of the Reid Gardner Station, including but not limited to the computer assets listed on Schedule 1.1(97)(iii) but excluding non-material licenses that cannot be transferred and other intangible assets to be licensed by the Buyer pursuant to Section 2.5 of this Agreement; and (x) all water rights specifically associated with the Reid Gardner Station, including but not limited to the water rights listed on Schedule 5.19(a). (98) "Qualifying Offer of Employment" shall have the meaning set forth in Section 7.11(b) hereof. (99) "Reid Gardner Station" means the Reid Gardner generating station located in Clark County, Nevada. The Seller is the operating agent for Reid Gardner Unit No. 4, which is jointly owned with CDWR. (100) "Reid Gardner Unit No. 4" means the coal-fueled steam-electric generating unit with a net generating capacity of approximately 275 MW jointly owned with CDWR in accordance with the terms of the Participation Agreement and located at the Reid Gardner Station. (101) "Real Property" means each parcel of real property owned by the Seller (or to which the Seller holds an interest therein), including, but not limited 11 to, buildings, structures and improvements located thereon, fixtures contained therein and appurtenances thereto and easements and other rights relating thereto and as more fully described on Schedule 5.8. (102) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment. (103) "Remediation" means an action of any kind to address a Release of Hazardous Substance or the presence of Hazardous Substances at the Purchased Assets or an Off-Site Location, including any or all of the following activities to the extent they relate to or arise from the presence of a Hazardous Substance at the Purchased Assets or an Off-Site Location: (i) monitoring, investigation, assessment, treatment, cleanup, containment, removal, mitigation, response or restoration work; (ii) obtaining any permits, consents, approvals or authorizations of any Governmental Authority necessary to conduct any such activity; (iii) preparing and implementing any plans or studies for any such activity; (iv) obtaining a written notice from a Governmental Authority with jurisdiction over the Purchased Assets or an Off-Site Location under Environmental Laws that no material additional work is required by such Governmental Authority; (v) the use, implementation, application, installation, operation or maintenance of removal actions on the Purchased Assets or an Off- Site Location, remedial technologies applied to the surface or subsurface soils, excavation and treatment or disposal of soils at an Off-Site Location, systems for long-term treatment of surface water or ground water, engineering controls or institutional controls; and (vi) any other activities reasonably determined by a party to be necessary or appropriate or required under Environmental Laws to address the presence or Release of Hazardous Substances at the Purchased Assets or an Off-Site Location. (104) "Rules" shall have the meaning set forth in Section 11.6 hereof. (105) "Scheduled Capital Expenditures" means those capital expenditures included on Schedule 1.1(105). (106) "Scheduled Maintenance Expenditures" means those maintenance expenditures included on Schedule 1.1(106). (107) "SEC" means the Securities and Exchange Commission or any successor thereto. (108) "Securities Act" means the Securities Act of 1933, as amended. 12 (109) "Seller" shall have the meaning set forth in the preface hereto. (110) "Seller Agreements" means those agreements listed on Schedule 5.17(a), the Collective Bargaining Agreements and the Management Transition Plan. (111) "Seller Balance Sheet" shall have the meaning set forth in Section 5.5 hereof. (112) "Seller Required Regulatory Approvals" shall have the meaning set forth in Section 5.3(b) hereof. (113) "Seller's Easements" shall have the meaning set forth in Section 4.4(d) hereof. (114) "Separation Schedule" means the schedule to be delivered to the Buyer by the Seller by the earlier of March 14, 2001 or 30 days prior to the Closing Date, which shall delineate the Purchased Assets from the Seller's other assets and which shall be consistent with the separation schedule summary and one line drawing attached hereto as Exhibit F. (115) "SO2 Allowance" means an authorization by the Administrator of the USEPA under the Clean Air Act, 42 U.S.C. (S)7401, et seq., to emit one ton ------- of sulfur dioxide during or after a specified calendar year. (116) "Subsidiary", when used in reference to any other person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other person. (117) "Tax" means any tax, charge, fee, levy, penalty or other assessment (other than any Income Tax) imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any excise, property, sales, transfer, franchise, payroll, withholding, social security or other tax, including any interest, penalties or additions attributable thereto. (118) "Tax Return" means any return, report, information return, declaration, claim for refund or other document (including any related or supporting information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. 13 (119) "Termination Date" shall have the meaning set forth in Section 10.1(b) hereof. (120) "Third Party Claim" shall have the meaning set forth in Section 9.2(a) hereof. (121) "Transitional Power Purchase Agreement" means Transitional Power Purchase Agreement, dated as of November 16, 2000, between the Buyer and the Seller. (122) "TPPA Amount" shall have the meaning set forth in Section 3.1 hereof. (123) "USEPA" means the United States Environmental Protection Agency, or any successor agency thereto. (124) "WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988, as amended. ARTICLE II ---------- PURCHASE AND SALE ----------------- 2.1 The Sale. Upon the terms and subject to the satisfaction of -------- the conditions contained in this Agreement, at the Closing, the Seller shall sell, assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, free and clear of all Encumbrances (except for Permitted Encumbrances and the Operating Easement(s) granted in accordance with the Operating Easement Agreements and the Interconnection Agreement), the Purchased Assets. 2.2 Excluded Assets. Notwithstanding any provision herein to the --------------- contrary, the Purchased Assets shall not include the following (collectively, the "Excluded Assets"): (a) all cash, cash equivalents, bank deposits, accounts receivable, and any income, sales, payroll or other tax receivables; (b) the names "Sierra Pacific Resources," "Sierra Pacific Power Company," "Sierra Pacific," "Nevada Power Company" and "Nevada Power" or any related or similar trade names, trademarks, service marks or logos; (c) transmission, substation and communication facilities and related support equipment described in Schedule 2.2(c); 14 (d) any refund, credit penalty payment, adjustment or reconciliation (i) related to Real Property, personal property or other Taxes paid prior to the Closing Date in respect of the Purchased Assets, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable, or (ii) arising under the Seller Agreements and relating to a period before the Closing Date; (e) except to the extent specifically required by law and except such personnel records set forth on Schedule 2.2(e), the personnel records relating to any employees of the Seller; (f) the rights and assets described in the Separation Schedule as not part of the Purchased Assets; (g) the SO2 Allowances identified on Schedule 2.2(g); (h) any agreement between Seller and an Affiliate of Seller, except as disclosed on Schedule 2.2(h); and (i) any agreement for the purchase or sale of energy, capacity or ancillary services from the Reid Gardner Station, other than the Transitional Power Purchase Agreement, Interconnection Agreement or as disclosed on Schedule 2.2(i). 2.3 Assumed Liabilities. On the Closing Date, the Buyer shall deliver ------------------- to the Seller the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the liabilities and obligations of the Seller, direct or indirect, known or unknown, absolute or contingent, which relate to the Purchased Assets, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective conditions thereof, including, without limitation, the following liabilities and obligations: (a) all liabilities and obligations of the Seller to be paid or performed after the Closing Date arising under (i) the Seller Agreements, the Environmental Permits, the Permits, the Leases, contracts and any other agreements assigned to the Buyer pursuant to this Agreement in accordance with the terms thereof, and (ii) the leases, contracts and other agreements entered into by the Seller with respect to the Purchased Assets after the date hereof consistent with the terms of this Agreement (including in the case of (i) and (ii), without limitation, agreements with respect to liabilities for real or personal property taxes or other Taxes on any of the Purchased Assets); except, in each case, to the extent such liabilities and obligations, but for a breach or default by the Seller, would have been paid, performed or 15 otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default; (b) all liabilities and obligations associated with the Purchased Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.9 hereof; (c) any liabilities and obligations for which the Buyer has indemnified the Seller pursuant to Section 9.1 hereof; (d) all liabilities to employees for which the Buyer is liable pursuant to Section 7.11 hereof, including the Collective Bargaining Agreements and the Management Transition Plan; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets, including, without limitation, any fines or penalties that arise in connection with the ownership or operation of the Purchased Assets prior to the Closing Date or the costs associated with correcting any such violations; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets prior to the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at the Purchased Assets; and (iii) the investigation and/or Remediation (whether or not such investigation or Remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to the Closing Date at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at the Purchased Assets; provided, as to all of the above, that nothing set forth in this Section 2.3(e) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (f) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such 16 liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or operation of the Purchased Assets; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets on or after the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at the Purchased Assets; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets; (v) the investigation and/or Remediation of Hazardous Substances that are present or have been released on or after the Closing Date at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at the Purchased Assets; and (vi) the investigation and/or Remediation of Hazardous Substances that are disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets, at any Off-Site Location; provided, that nothing set forth in this Section 2.3(f) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (g) all liabilities and obligations of the Seller with respect to the Purchased Assets under the agreements or consent orders set forth on Schedule 5.12; (h) subject to Sections 7.1(c) and (e), all liabilities incurred by the Seller with respect to the Maintenance and Capital Expenditures Amount made with respect to the Purchased Assets by the Seller except for any liabilities that Buyer has already paid to Seller at Closing as an accrued liability included in the Estimated Adjustment Amount; (i) all liabilities or obligations relating to leases for the Purchased Assets; and (j) all other liabilities or obligations exclusively relating to the Purchased Assets no matter when the events or occurrences giving rise to such liabilities or obligations took place. 17 All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are collectively referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between the Seller and the Buyer. Nothing in this Section 2.3 shall be construed to require Buyer to assume any liability excluded by Section 2.4. 2.4 Excluded Liabilities. The Buyer shall not assume or be obligated -------------------- to pay, perform or otherwise discharge the following liabilities (collectively, the "Excluded Liabilities"): (a) any liabilities or obligations of the Seller in respect of any Excluded Assets or other assets of the Seller which are not Purchased Assets; (b) any liabilities or obligations in respect of Taxes attributable to the Purchased Assets for taxable periods ending on or prior to the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.9(a) hereof; (c) any liabilities, obligations or responsibilities relating to the disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, by the Seller, of Hazardous Substances that were generated at the Purchased Assets, at any Off-Site Location, where the disposal, storage, transportation, discharge, Release, recycling or the arrangement for such activities at such Off-Site Location occurred prior to the Closing Date, provided that for purposes of this Section 2.4(c), "Off-Site Location" does not include any location to which Hazardous Substances disposed of, discharged from, emitted from or Released at the Purchased Assets have migrated from the Purchased Assets including, but not limited to, surface waters that have received waste water discharges from the Purchased Assets; (d) any liabilities, obligations or responsibilities relating to (i) the transmission facilities delineated in the Interconnection Agreement or Operating Easement Agreements or (ii) any Seller's operations on, or usage of, the operating easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (A) any violation or alleged violation of Environmental Laws and (B) loss of life, injury to persons or property or damage to natural resources, except to the extent caused by the Buyer; (e) any liabilities or obligations required to be accrued by the Seller in accordance with generally accepted accounting principles and the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities 18 related to the Purchased Assets other than any liability assumed by the Buyer under Sections 2.3(a), (e) or (f) hereof; (f) any liabilities or obligations relating to any personal injury to an employee or a third party (including, without limitation, workers' compensation claims), discrimination, wrongful discharge, unfair labor practice, property damage, breach of contract or tort filed with or pending before any court or administrative agency on the Closing Date, or any claim arising out of an actual event or events of which Seller has Knowledge as of the Closing Date if it is reasonably foreseeable that such event or events will give rise to a claim that may be filed with any court or administrative agency, with respect to liabilities affecting the Purchased Assets, other than any liabilities or obligations assumed by the Buyer under Section 2.3(e) hereof; (g) any payment obligations of the Seller for goods delivered or services rendered prior to the Closing; (h) any liabilities or obligations imposed upon, assumed or retained by the Seller pursuant to the Interconnection Agreement, Operating Easement Agreements or any other Ancillary Agreement; (i) any liabilities, obligations or responsibilities relating to any "employee pension benefit plan" (as defined in Section 3(2) of ERISA) maintained by the Seller and any trade or business (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with the Seller under Sections 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") or to which the Seller and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by the Seller or any ERISA Affiliate (hereinafter referred to as "Benefit Plans"), including any liability (i) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (ii) with respect to non-compliance with the notice and benefit continuation requirements of COBRA; (iii) with respect to any non-compliance with ERISA or any other applicable laws; or (iv) with respect to any suit, proceeding or claim which is brought against any Benefit Plan, ERISA Affiliate Plan, any fiduciary or former fiduciary of any such Benefit Plan or ERISA Affiliate Plan; (j) liabilities or obligations under Section 2.3(e) that are the subject of a claim filed with or pending before any court or administrative agency on or before November 16, 2000, to the extent that any such claim is not disclosed on Schedule 5.18; 19 (k) liabilities arising under any material intercompany agreement between Seller and an Affiliate of Seller that is not disclosed on a Schedule to this Agreement; (l) liabilities arising under any agreement for the purchase or sale of energy, capacity or ancillary services from the Purchased Assets, other than the Transitional Power Purchase Agreement, the Interconnection Agreement or as disclosed on a Schedule to this Agreement; (m) any accrued liability included in the Estimated Adjustment Amount for which Seller is paid at Closing; (n) any liabilities paid or incurred in connection with obtaining consents to assignment of Seller Agreements; (o) any liabilities for borrowed money or guarantees of third party obligations, except purchase money security interests; (p) liabilities with respect to the pollution control Bonds listed on Schedule 5.15, except for the obligations arising out of the covenants of Buyer set forth in Section 7.8; (q) liabilities with respect to any accrued payment obligations incurred by Seller prior to the Closing Date; (r) any liability for which Seller is entitled to payment under any applicable insurance policy before the application of Section 2.3, to the extent of such payment; and (s) any allocation of charges to Seller or the owner of the Purchased Assets by Southwest Gas Corporation of El Paso Natural Gas Company's Risk Sharing Revenue Stability Charges based on gas transportation or purchases with respect to the Purchased Assets that occurred before the Closing Date. 2.5 License of Non-Transferred Intangible Assets. It is understood by -------------------------------------------- the parties that trade names of Seller are Excluded Assets, however, such names appear on certain of the Purchased Assets, such as certain fixtures and equipment, and on supplies, materials and similar consumable items that will be on hand at the Purchased Assets at Closing. Notwithstanding that such trade names are Excluded Assets, Buyer shall be entitled to use such consumable items for a period of three (3) months following the Closing and shall have up to six (6) months following the Closing to remove such names from fixed Purchased Assets, provided that Buyer shall not send correspondence or other materials to third parties on any 20 stationery that contains a trade name or trademark of Seller or any Affiliate of Seller. Seller hereby grants to Buyer a license to use, solely in connection with the operation of the Reid Gardner Station on and after Closing, such proprietary computer software of Seller located at the Reid Gardner Station as is presently used at the Reid Gardner Station exclusively in connection with the operation of the Reid Gardner Station and that would otherwise be an Excluded Asset, except for such computer software that is designed to be part of a networked computer system providing data processing capabilities or services beyond the Reid Gardner Station and any licenses which are not transferable and provided that in no event shall Buyer or any successor have access under such license to Seller's own computer networks. The rights and obligations relating to the licenses contained in this Section 2.5 will be made the subject of a separate software and trademark licensing agreement between the parties which shall address the terms and conditions affecting the irrevocable, fully paid up, royalty-free, transferable, non-exclusive rights and licenses granted therein, in which case the parties shall negotiate such terms and conditions in good faith and deliver such agreement at Closing. ARTICLE III ----------- PURCHASE PRICE -------------- 3.1 Purchase Price. The purchase price for the Purchased Assets shall -------------- be an amount equal to the sum of (i) Five Hundred Thirty Six Million One Hundred Thousand Dollars ($536,100,000), (ii) the Estimated Adjustment Amount, (iii) the Adjustment Amount, (iv) any amounts due to Seller in accordance with Section 3.2(d), and (v) any amounts paid by the Seller with respect to Leased Assets pursuant to Section 7.4 hereof (the "Purchase Price"). Notwithstanding any other provision of this Agreement, the Purchase Price includes all applicable sales and similar taxes. As a result of the execution of the Transitional Power Purchase Agreement, the amount to be paid by Buyer to Seller at Closing shall be reduced by One Hundred Six Million Three Hundred Thousand Dollars ($106,300,000) (the "TPPA Amount"), and such reduction is reflected in Section 4.2(v). 3.2 Purchase Price Adjustment. (a) Within sixty (60) days after the ------------------------- Closing, the Seller shall prepare and deliver to the Buyer a statement (the "Adjustment Statement") which reflects (i) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of all fuel inventory used at or in connection with the Purchased Assets and (B) the Estimated Inventory Adjustment Amount (such difference is referred to as the "Inventory Adjustment Amount"), (ii) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of the materials and supplies used at or in connection with the Purchased Assets and (B) the 21 Estimated Materials and Supplies Adjustment Amount (such difference is referred to as the "Materials and Supplies Adjustment Amount") and (iii) the difference between (A) the Maintenance and Capital Expenditures Amount and (B) the Estimated Maintenance and Capital Expenditures Amount (such difference is referred to as the "Maintenance and Capital Expenditures Adjustment Amount"). The Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount and the Maintenance and Capital Expenditures Adjustment Amount are referred to collectively as the "Adjustment Amount." The Adjustment Statement shall be prepared using the same generally accepted accounting principles, policies and methods as the Seller has historically used in connection with the calculation of the items reflected on the Adjustment Statement. The Buyer agrees to cooperate with the Seller in connection with the preparation of the Adjustment Statement and related information, and shall provide to the Seller such books, records and information as may be reasonably requested from time to time. (b) The Buyer may dispute the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount; provided, however, that the Buyer shall notify the Seller -------- ------- in writing of the disputed amount, and the basis of such dispute, within ten (10) Business Days of the Buyer's receipt of the Adjustment Statement. In the event of a dispute with respect to the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount, the Buyer and the Seller shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the Buyer and the Seller are unable to reach a resolution of such differences within thirty (30) days of receipt of the Buyer's written notice of dispute to the Seller, the Buyer and the Seller shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the parties, within thirty (30) days after such submission, upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. The fees and disbursements of the Independent Accounting Firm shall be allocated between the Buyer and the Seller so that the Buyer's share of such fees and disbursements shall be in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully disputed by the Buyer (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm. (c) Within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Buyer shall pay all undisputed portions of the Adjustment Amount. If there is a dispute with respect to any amount on the Adjustment Statement, within five (5) Business Days after the final determination of such disputed 22 amounts on the Adjustment Statement, the Buyer shall pay to the Seller an amount equal to the disputed portion of the Adjustment Amount as finally determined to be payable with respect to the Adjustment Statement; provided, however, that if -------- ------- such amount shall be less than zero, then the Seller shall pay to the Buyer the amount by which such amount is less than zero within five (5) Business Days of such final determination. All payments made pursuant to this Section 3.2(c) shall be paid together, with interest thereon for the period commencing on the Closing Date through the date of payment, calculated at the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in cash by federal or other wire transfer of immediately available funds. (d) In addition to this Agreement, the parties have entered into a separate Asset Sale Agreement dated as of November 16, 2000 which provides for the sale of the Clark Bundle from Seller to Buyer (the "Clark ASA"). In the event that Buyer and Seller close under both this Agreement and the Clark ASA, Buyer shall make an additional payment to Seller in the amount of Twenty Million Dollars ($20,000,000) at the later to occur of the Closing under this Agreement or the closing under the Clark ASA, and any such payment pursuant to this Section 3.2(d) includes all applicable sales and similar taxes. 3.3 Allocation of Purchase Price. The Buyer and the Seller shall use ---------------------------- their good faith best efforts to agree upon an allocation among the Purchased Assets of the sum of the Purchase Price consistent with Section 1060 of the Code and the Treasury Regulations thereunder within one-hundred twenty (120) days of the date of this Agreement but in no event less than thirty (30) days prior to the Closing. The Buyer and the Seller may jointly agree to obtain the services of an independent appraiser (the "Independent Appraiser") to assist the parties in determining fair value of the Purchased Assets for purposes of such allocation. If such an appraisal is made, both the Buyer and the Seller agree to accept the Independent Appraiser's determination of the fair value of the Purchased Assets. The parties shall jointly select the Independent Appraiser. The cost of the appraisal shall be borne equally by the Buyer and the Seller. Each of the Buyer and the Seller agrees to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns, in accordance with such agreed allocation. Each of the Buyer and the Seller shall report the transactions contemplated by this Agreement for federal Income Tax and all other tax purposes in a manner consistent with the allocation determined pursuant to this Section 3.3. Each of the Buyer and the Seller agrees to provide the other promptly with any other information required to complete Form 8594. Each of the Buyer and the Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. 23 3.4 Proration. (a) The Buyer and the Seller agree that all of the --------- items normally prorated, including those listed below, relating to the business and operation of the Purchased Assets shall be prorated as of the Closing Date or the Effective Date, as the case may be, with the Seller liable to the extent such items relate to any time period through the Closing Date or the Effective Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date or the Effective Date: (i) personal property, real estate, occupancy and any other Taxes, assessments and other charges, if any, on or with respect to the business and operation of the Purchased Assets. In addition, in the event that the Seller is subject to Taxes, assessments and other charges on property of which the Purchased Assets comprises only a portion, the portion of such Taxes, assessments and other charges allocated to the Purchased Assets and subject to proration by this Section 3.4 shall be determined by reference to the relative value of the Purchased Assets, as determined by the Purchase Price paid by the Buyer, compared with the value of the Seller's property subject to such Taxes, assessments and other charges, as assessed by the relevant taxing authority; (ii) rent, Taxes and other items payable by or to the Seller under any of the Seller Agreements to be assigned to and assumed by the Buyer hereunder; (iii) any permit, license or registration fees with respect to any Environmental Permit or other Permit; and (iv) sewer rents and charges for water, telephone, electricity and other utilities. (b) In connection with such proration, in the event that actual figures are not available at the Closing Date or the Effective Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either the Seller or the Buyer made within sixty (60) days of the date that the actual amounts become available. The Seller and the Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 3.4. 24 ARTICLE IV ---------- THE CLOSING ----------- 4.1 Time and Place of Closing. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York, at 10:00 a.m., local time, on the first Business Day following the date on which all of the conditions to each party's obligations hereunder have been satisfied or waived or such other place or time as the parties may mutually agree, provided that such date shall not occur prior to June 1, 2001, unless the parties mutually agree to an earlier date. The date and time at which the Closing actually occurs is hereinafter referred to as the "Closing Date." 4.2 Payment of Purchase Price. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Assets, the Buyer shall pay or cause to be paid to the Seller the Purchase Price. The portion of the Purchase Price to be paid at Closing shall be as follows: (i) an amount equal to the sum of $536,100,000, plus (ii) any amounts with respect to Leased Assets to be paid pursuant to Section 7.4 hereof, plus (iii) the Estimated Adjustment Amount for the Closing, plus (iv) any amounts then due to Seller in accordance with Section 3.2(d), and less (v) the TPPA Amount (the "Estimated Closing Payment"), by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer. 4.3 Deliveries by Seller. At the Closing, the Seller shall deliver to -------------------- the Buyer the following: (a) The Bill of Sale, duly executed by the Seller for the personal property included in the Purchased Assets; (b) The executed consents to transfer the Seller Agreements, the Environmental Permits and the Permits, to the extent required hereunder or under applicable law; (c) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Seller; (d) The certificate and opinion of counsel as contemplated by Section 8.2 hereof; 25 (e) One or more deeds of conveyance transferring the Seller's interest in the Real Property to the Buyer, without covenant or warranty of title other than as provided in the Form of Grant, Bargain, Sale Deed attached as Exhibit G hereto, duly executed and acknowledged by the Seller and in recordable form subject to Permitted Encumbrances and retaining to the extent necessary any existing easements in favor of the Seller with respect to Real Property conveyed to the Buyer, each substantially in the form of Exhibit G attached hereto; (f) One or more easements to the extent necessary to evidence the right of the Buyer to use the Real Property of the Seller (the "Buyer's Easements") associated with the Purchased Assets, duly executed and acknowledged by the Seller and in recordable form, each substantially in the form of Exhibit H attached hereto; (g) The Assignment of Leases, in the form of Exhibit A attached hereto, assigning to the Buyer all of the Seller's right, title and interest as lessor (or lessee, as the case may be) under the Leases; (h) Copies of the resolutions adopted by the board of directors of the Seller, certified by the secretary of the Seller, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Seller of this Agreement, the Ancillary Agreements, the Bill of Sale and other closing documents described in this Agreement to which the Seller is a party, and the performance by the Seller of its obligations hereunder and thereunder; (i) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Assets in accordance with this Agreement and the Ancillary Agreements, and where necessary or desirable, in recordable form; and (j) Such other agreements, documents, instruments and writings as are required to be delivered by the Seller at or prior to the Closing Date pursuant to this Agreement, the Ancillary Agreements or otherwise required in connection herewith or therewith. 4.4 Deliveries by Buyer. At the Closing, the Buyer shall deliver to ------------------- the Seller the following: (a) The Estimated Closing Payment by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer; (b) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Buyer; 26 (c) The certificate and opinion of counsel as contemplated by Section 8.3 hereof; (d) One or more easements to the extent necessary to evidence the right of Seller to use the Real Property of Buyer (the "Seller's Easements"), to the extent necessary for the Seller to continue and maintain its transmission and distribution business, in favor of the Seller with respect to Real Property conveyed to the Buyer, duly executed and acknowledged by the Buyer, each substantially in the form of Exhibit I attached hereto, and the Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.9 hereof; (e) The Instrument of Assumption, duly executed by the Buyer providing for the assumption of all of the Seller's right, title and interest as lessor (or lessee as the case may be) under the Leases; (f) All such other instruments of assumption as shall, in the reasonable opinion of the Seller and its counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (g) Copies of the resolutions adopted by the board of directors of the Buyer, certified by the secretary of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement, the Ancillary Agreements and other closing documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its obligations hereunder and thereunder; and (h) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement, the Ancillary Agreements or otherwise required in connection herewith or therewith. ARTICLE V --------- REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- The Seller represents and warrants to the Buyer as follows: 5.1 Organization; Qualification. The Seller is a corporation duly --------------------------- organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. The Seller is duly qualified or licensed to do business as a foreign corporation and is in 27 good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and Bylaws as currently in effect. 5.2 Authority Relative to this Agreement. The Seller has full ------------------------------------ corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of the Seller and no other corporate proceedings on the part of the Seller are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by the Seller, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Buyer, subject to the receipt of the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitute valid and binding agreements of the Seller, enforceable against the Seller in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 5.3(a), and other than obtaining the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by the Seller nor the sale by the Seller of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws of the Seller, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to the Seller as a result of the specific regulatory status of the Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which the Seller is a party or by which the Seller, or any of the Purchased Assets may be 28 bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Seller, or any of its assets, which violation would have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) approvals or other actions by the PUCN, the CPUC and/or the OPUC, (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by the Seller and the Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through (iv) above are collectively referred to as the "Seller Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory authority is necessary for the consummation by the Seller of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect and other than the Permits and Environmental Permits. 5.4 Reports. Since January 1, 1996, the Seller, pursuant to the ------- Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act, has filed or caused to be filed with the SEC, the applicable state or local utility commissions or regulatory bodies, or the FERC, as the case may be, all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by them with respect to the business and operations of the Seller as it relates to the Purchased Assets under each of the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act and the respective rules and regulations thereunder, all of which complied in all material respects with all applicable requirements of the appropriate act and the rules and regulations thereunder in effect on the date each such report was filed. 5.5 Financial Statements. The Seller has previously furnished to the -------------------- Buyer (i) balance sheets of the Seller as of June 30, 2000, and (ii) the related statements of income and retained earnings and changes in financial position of the Seller for the fiscal year then ended. The balance sheet of the Seller as of June 30, 2000 is referred to herein as the "Seller Balance Sheet." Each of the balance sheets included in the financial statements referred to in this Section 5.5 (including the related notes thereto) presents fairly the financial position of the Seller as of their respective dates, and the other related statements included therein (including the related notes thereto) present fairly the results of operations and changes in financial 29 position for the periods then ended, all in conformity with generally accepted accounting principles applied on a consistent basis, except as otherwise noted therein. 5.6 Undisclosed Liabilities. Except as set forth in Schedule 5.6, the ----------------------- Seller has no liability or obligation relating to the business or operations of the Purchased Assets, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or reserved against in the Seller Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were incurred in the ordinary course of business, whether before or after the date of the Seller Balance Sheet, or those which in the aggregate are not material to the Purchased Assets. 5.7 Absence of Certain Changes or Events. Except as set forth in ------------------------------------ Schedule 5.7, or in the reports, schedules, registration statements and definitive proxy statements filed by the Seller with the SEC, and except as otherwise contemplated by this Agreement, since the date of the Seller Balance Sheet there has not been: (i) any Material Adverse Effect; (ii) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (iii) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing, capital expenditure or capital financing) by the Seller, which is material to the business or operations of the Purchased Assets, except for non-material agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (iv) any change by the Seller, with respect to the Purchased Assets, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.8 Title to Real Property. Set forth in Schedule 5.8 is a true and ---------------------- complete list of the Real Property of the Seller which is part of the Purchased Assets. The Seller has good and marketable title to all of the Real Property (including easements for access and utilities), subject only to Permitted Encumbrances. 5.9 Leasehold Interests. Schedule 5.9 lists, as of the date of this ------------------- Agreement, all Real Property leases (the "Leases") relating to the Purchased Assets under which the Seller is a lessee, lessor or under which Seller otherwise has any interest and which are to be assigned to, and assumed by, the Buyer on the Closing Date. Except as set forth in Schedule 5.9, to the Seller's Knowledge, all such Leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing material defaults by the Seller thereunder; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default thereunder. Subject only to Permitted Encum- 30 brances, Seller has valid and effective leasehold rights in each Lease in which Seller is the lessee. 5.10 Improvements. Except as set forth in Schedule 5.10, the Seller ------------ has not received any written notices from any Governmental Authority stating or alleging that any improvements with respect to the Purchased Assets have not been constructed in compliance with applicable law. Except as set forth in Schedule 5.10, no written notice has been received by the Seller from any Governmental Authority requiring or advising as to the need for any repair, alteration, restoration or improvement in connection with the Purchased Assets. 5.11 Insurance. Except as set forth in Schedule 5.11, all material --------- policies of fire, liability, workers' compensation and other forms of insurance purchased or held by and insuring the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.11, as of the date of this Agreement, the Seller has not been refused any insurance with respect to the Purchased Assets nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last twelve (12) months. 5.12 Environmental Matters. (a) Except as set forth in Schedule 5.12, --------------------- in any public filing by the Seller pursuant to the Securities Act or the Exchange Act, or in any environmental site assessment prepared by or for the Seller and made available to the Buyer, the Seller holds, and is in substantial compliance with, all material permits, licenses and governmental authorizations (the "Environmental Permits") required for the Seller to operate the Purchased Assets under applicable Environmental Laws, and to the Knowledge of the Seller, the Seller is otherwise in compliance with applicable Environmental Laws with respect to the Purchased Assets except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, which, in the aggregate, are not reasonably likely to have a Material Adverse Effect. The Seller's Environmental Permits are set forth on Schedule 5.12. (b) To Seller's Knowledge and except as set forth in Schedule 5.12, Seller has not received any request for information, or been notified in writing or orally that it is a potentially responsible party, under CERCLA or any similar State law with respect to any of the Purchased Assets, except for such liability under such laws as would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. 31 (c) Except as set forth in Schedule 5.12, with respect to the Purchased Assets, the Seller has not entered into or agreed to any consent decree or order, and is not subject to any judgment, decree, or judicial order relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Substances under any Environmental Law, except such consent decrees or orders, judgments, decrees or judicial orders that would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect and has no Knowledge of any pending investigation under any Environmental Law related to the Purchased Assets, other than as contemplated by the Environmental Audit Agreement, if applicable, between Nevada Power Company and the Nevada Division of Environmental Protection related to Reid Gardner Station except for such investigations that would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect and further, Seller shall disclose to Buyer in writing any Remediation or investigation relating to the Purchased Assets that is commenced after the date of this Agreement and prior to the Closing Date. (d) To Seller's Knowledge, Seller has disclosed and made available to Buyer true, complete and correct copies of any material report, study, investigation, audit, analysis, test or monitoring in the possession of or initiated or prepared by Seller within the 5 years preceding the date of this Agreement pertaining to any environmental matter relating to the Purchased Assets, including without limitation, compliance with Environmental Laws or employee safety. (e) The representations and warranties made in this Section 5.12 are the Seller's exclusive representations and warranties relating to environmental matters. 5.13 Labor Matters. The Seller has previously delivered to the Buyer ------------- copies of all labor union and Collective Bargaining Agreements relating to the Purchased Assets to which the Seller is a party or is subject. With respect to its employees at the Purchased Assets, except to the extent set forth in Schedule 5.13 and except for such matters as shall not have a Material Adverse Effect, to the Seller's Knowledge: (i) the Seller is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours; (ii) the Seller has not received written notice of any unfair labor practice charge or complaint against the Seller pending before the National Labor Relations Board; (iii) there is no labor strike, slowdown or stoppage actually pending or threatened against or affecting the Seller; (iv) the Seller has not received notice that any representation petition respecting the employees of the Seller has been filed with the National Labor Relations Board; (v) no arbitration proceeding arising out of or under collective bargaining agreements is pending against the Seller; and (vi) the Seller has not experienced any primary work stoppage since at least December 31, 1995. 32 5.14 ERISA; Benefit Plans. (a) Except as set forth in Schedule -------------------- 5.14(a)(i), with respect to its employees at the Purchased Assets, the Seller has fulfilled its obligations under the minimum funding requirements of Section 302 of ERISA, and Section 412 of the Code, with respect to each "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and the Code. The Seller has not incurred any liability under Section 4062(b) of ERISA to the Pension Benefit Guaranty Corporation in connection with any employee pension benefit plan relating to employees at the Purchased Assets which is subject to Title IV of ERISA. Except as set forth in Schedule 5.14(a)(ii), the Internal Revenue Service has issued a letter for each employee pension benefit plan determining that such plan is exempt from United States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and there has been no occurrence since the date of any such determination letter which has adversely affected such qualification, and no withdrawal liability has been incurred by or asserted against the Seller with respect to any employee pension benefit plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). (b) Schedule 5.14(b) lists, as of the date of this Agreement, all deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all material bonus and other employee benefit or fringe benefit plans maintained or with respect to which contributions are made by the Seller in respect of employees who are the employees of the Seller who work at the Purchased Assets. Accurate and complete copies of all such plans, other than multiemployer plans, have been made available to the Buyer. 5.15 Real Property Encumbrances. Schedule 5.15 describes the -------------------------- indentures of trust concerning the Pollution Control Facilities at the Reid Gardner Station (the "Bond Indentures") and the Indenture. At or before Closing, Seller shall cause the Purchased Assets to be released from the liens of the Indenture and the Bond Indentures. Copies of any surveys in the Seller's possession or any policies of title insurance currently in force and in the possession of the Seller with respect to the Real Property will be delivered by the Seller to the Buyer pursuant to Section 7.14. 5.16 Condemnation. Neither the whole nor any part of the Real Property ------------ or any other real property or rights leased, used or occupied by the Seller in connection with the ownership or operation of the Purchased Assets is subject to any pending suit for condemnation or other taking by any public authority, and, to the Knowledge of the Seller, no such condemnation or other taking is threatened or contemplated. 33 5.17 Certain Contracts and Arrangements. (a) Except for (i) the Seller ---------------------------------- Agreements listed in Schedule 5.17(a) or any other Schedule hereto, (ii) contracts, agreements, personal property leases, commitments, understandings or instruments which shall expire prior to the Closing Date, (iii) non-material agreements with suppliers, distributors and sales representatives entered into in the ordinary course of business, and (iv) contracts, agreements, personal property leases, commitments, understandings or instruments with a value less than $250,000 or with annual payments less than $50,000 the Seller is not a party to any written contract, agreement, personal property lease, commitment, understanding or instrument which is material to the business or operations of the Purchased Assets. Without limiting the generality of the foregoing, Seller represents and warrants that to Seller's Knowledge the Participation Agreement and the following MOAs, 14, 22, 24, 25, 28 (Revision No. 1), 30, 34, 37, 39, 44 (Revision No. 1), 45, 48, 55, 56, 62, 65, 72, 73, 74, 76, 77, 81 and 86 (collectively, the "Participation Agreement") constitute the agreement between the Seller and CDWR concerning the ownership and operation of Reid Gardner Unit 4, except where an agreement or MOA not listed above is not material, either individually or in the aggregate. (b) Except as disclosed in Schedule 5.17(b), each material Seller Agreement constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to the Buyer pursuant to this Agreement and shall continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder. (c) Except as set forth in Schedule 5.17(c), there is not, under any of the Seller Agreements, any default or event which, with notice or lapse of time or both, would constitute a default on the part of the Seller, except, with respect to the Seller Agreements only, such events of default and other events as to which requisite waivers or consents have been obtained or which would not, in the aggregate, have a Material Adverse Effect. Except as set forth in Schedule 5.17(c), Seller has not received written or other notice of a default concerning a Seller Agreement, nor has Seller received any written or other notice that a party intends to cancel or terminate a Seller Agreement. 5.18 Legal Proceedings, etc. Except as set forth in Schedule 5.18 or ----------------------- in any filing made by the Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, proceedings or investigations pending, and to Seller's Knowledge no claims, actions, proceedings or investigations threatened, against the Seller relating to the Purchased Assets before or by any court, Governmental Authority or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect. Except as set forth in Schedule 5.18, the Seller is not subject to any outstanding judgment, rule, 34 order, writ, injunction or decree of any court, Governmental Authority or regulatory authority relating to the Purchased Assets which has a Material Adverse Effect. 5.19 Permits. The Seller has all material permits, licenses, ------- franchises and other governmental authorizations, consents and approvals (other than with respect to the Environmental Permits addressed in Section 5.12) (collectively, "Permits"), as set forth in Schedule 5.19(a), necessary to operate the Purchased Assets as presently operated, except where the failure to have such Permits does not have a Material Adverse Effect. Except as set forth in Schedule 5.19(b), with respect to the Purchased Assets, the Seller has not received any written notification, and does not otherwise have Knowledge, that it is in violation of any of such Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for notifications of violations which would not, in the aggregate, have a Material Adverse Effect. The Seller is in compliance with all Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for violations which, in the aggregate, do not have a Material Adverse Effect. 5.20 Regulation as a Utility. The Seller and certain of its affiliates ----------------------- are regulated as public utilities in the States of Nevada and California. Except as set forth on Schedule 5.20, the Seller is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 5.21 Taxes. The Seller has, in respect of the Purchased Assets, (i) ----- filed all Tax Returns required to be filed other than those Tax Returns the failure of which to file would not have a Material Adverse Effect, and (ii) paid in full or all material Taxes shown to be due on such Tax Returns. Except as set forth in Schedule 5.21, the Seller has not received any notice of deficiency or assessment from any taxing authority with respect to liabilities for Taxes of the Seller in respect of the Purchased Assets, which have not been fully paid or finally settled, and any such deficiency shown in such Schedule 5.21 is being contested in good faith through appropriate proceedings. Except as set forth in Schedule 5.21, there are no outstanding agreements or waivers extending the applicable statutory periods of limitation for Taxes associated with the Purchased Assets for any period. 5.22 Title to Personal Property. Schedule 1.l(97)(iii) sets forth a -------------------------- true and complete list of the material machinery, equipment, vehicles, furniture and other tangible personal property located on the Real Property and used in the operation of the Reid Gardner Station as of the date of this Agreement ("Personal 35 Property"). The Seller has good and marketable title to the Personal Property (or valid and effective leasehold rights in the case of leased Personal Property). 5.23 Water. Seller holds rights, by contract, permit, easement, ----- resolution, ordinance and otherwise, sufficient to enable Seller to legally take, transport and deliver water to the Reid Gardner Station at rates and in quantities sufficient to operate the Reid Gardner Station in the manner in which it has historically been operated. 5.24 Subchapter K Election. Seller has elected pursuant to Treas Reg --------------------- Section 1.761-2(b)(2)(ii) to be excluded from all of Subchapter K of the Internal Revenue Code for federal income tax purposes with respect to the Reid Gardner Unit 4. Seller, and to Seller's Knowledge California Department of Water Resources, have not taken a position inconsistent with the exclusion election or applied to revoke the election. To Seller's Knowledge, no taxing authority has at any time asserted that the Reid Gardner Unit 4 or the joint ownership of Reid Gardner Unit 4 by Seller and California Department of Water Resources was taxable as a partnership or other entity, and Seller has no Knowledge of any intent of any taxing authority to do so. ARTICLE VI ---------- REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- The Buyer represents and warrants to the Seller as follows: 6.1 Organization. Each of NRG and Dynegy is a corporation duly ------------ organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as is now being conducted. Each of NRG and Dynegy is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. Each of NRG and Dynegy has heretofore delivered to the Seller complete and correct copies of its Certificate of Incorporation and Bylaws (or other similar governing documents), as currently in effect. 6.2 Authority Relative to this Agreement. Each of NRG and Dynegy has ------------------------------------ full corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary 36 Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of the Buyer and no other corporate proceedings on the part of NRG and Dynegy are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by NRG and Dynegy, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Seller, subject to the receipt of the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, constitutes a valid and binding agreement of NRG and Dynegy, enforceable against NRG and Dynegy in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 6.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by NRG or Dynegy nor the purchase by NRG or Dynegy of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws (or other similar governing documents) of NRG or Dynegy, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to NRG or Dynegy as a result of the specific regulatory status of the Seller (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Seller (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which NRG or Dynegy or any of their respective subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. (b) Except as set forth in Schedule 6.3(b) and except for (i) filings and approvals required by Section 203 of the Federal Power Act, (ii) a specific determination by the appropriate state commission(s) that allowing the Purchased Assets to be an eligible facility (1) will benefit consumers, (2) is in the public interest, and (3) does not violate State law, as contemplated by Section 32(c) of the Holding Company Act, 15 USC section 79z-5a(c), (iii) an Exempt Wholesale 37 Generator determination made by FERC under Section 32 of the Holding Company Act, 15 USC Section 79z-5a, and (iv) the filings by NRG, Dynegy and the Seller required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in Schedule 6.3(b) and clauses (i), (ii) and (iii) are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not in the aggregate, have a Material Adverse Effect. 6.4 Regulation as a Utility. NRG Energy, Inc., is a subsidiary of a ----------------------- public utility holding company registered under the Holding Company Act. Dynegy Holdings Inc. is neither a public utility company nor a public utility holding company under the Holding Company Act. Except as set forth in Schedule 6.4, the Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.5 Availability of Funds. The Buyer has sufficient funds available --------------------- to it or has received binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. ARTICLE VII ----------- COVENANTS OF THE PARTIES ------------------------ 7.1 Conduct of Business of the Seller. Except as described in --------------------------------- Schedule 7.1, during the period from the date of this Agreement to the Closing Date, the Seller shall operate and maintain the Purchased Assets according to its ordinary and usual course of business consistent with good industry practice and with Schedules 1.1(94) (Scheduled Capital Expenditures) and 1.1(95) (Scheduled Maintenance Expenditures). Without limiting the generality of the foregoing, and, except as contemplated in this Agreement or as described in Schedule 7.1, prior to the Closing Date, without the prior written consent of the Buyer (unless such consent would be prohibited by law), the Seller shall not with respect to the Purchased Assets: (a) (i) create, incur or assume any material amount of indebtedness for money borrowed, other than in the ordinary course of business, including obligations in respect of capital leases but excluding purchase money mortgages granted in connection with the acquisition of property in the ordinary course of 38 business; or (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person except in the ordinary course of business; (b) make any material change in the operations of the Purchased Assets including, without limitation, the levels of fuel inventory and materials and supplies customarily maintained by the Seller; (c) except as set forth in Schedule 1.1(105), make any capital expenditures with respect to the Purchased Assets, except that the Seller shall make any capital expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such capital expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Capital Expenditures"); provided, however, that if the Buyer requests that the Seller -------- ------- make enhancements with a cost in excess of the cost of any Necessary Capital Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancement to the extent that the cost of such enhancement exceeds the cost of the Necessary Capital Expenditures as part of the Adjustment Amount; (d) sell, lease (as lessor), transfer or otherwise dispose of, any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with good industry practice and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Assets other than Permitted Encumbrances; (e) except as set forth in Schedule 1.1(106), make any maintenance expenditures, except that the Seller shall make any maintenance expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such maintenance expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Maintenance Expenditures"); provided, -------- however, that if the Buyer requests that the Seller make enhancements/upgrades - ------- with a cost in excess of the cost of any Necessary Maintenance Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to the extent the cost of such enhancements/upgrades exceeds the cost of the Necessary Maintenance Expenditure as part of the Adjustment Amount; (f) amend any of the Seller Agreements; (g) enter into or amend any real or personal property Tax agreement, treaty or settlement; 39 (h) execute, enter into or amend any agreement, order, decree or judgment relating to any Permit other than non-material renewals of Permits in the ordinary and usual course of business consistent with past practice; (i) enter into any commitment for the purchase or sale of fuel (whether commodity or transportation) that Seller intends to assign to Buyer having a term of greater than 365 days that extends beyond December 31, 2001 if the aggregate payment under such commitment is expected to exceed $1,000,000 or if the aggregate payments under such commitment and all other then outstanding commitments not previously consented to by the Buyer would be expected to exceed $1,500,000; (j) except for the Transitional Power Purchase Agreement, enter into any wholesale sales agreements having a term extending beyond the Closing Date, where the sale of energy is expected to be supplied via the Purchased Assets; (k) sell, lease or otherwise dispose of SO2 Allowances, except those listed in Schedule 2.2(g) or to the extent necessary to operate the Purchased Assets in accordance with this Section 7.1; or (l) enter into (i) any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (k) or (ii) otherwise enter into any material new contract, agreement, commitment or arrangement affecting the Purchased Assets that will survive Closing other than contracts, agreements, commitments or arrangements entered into in the ordinary and usual course of business consistent with Good Utility Practice (as defined in the Transitional Power Purchase Agreement) and having a term of twelve (12) months or less and a value of $250,000 or less ($1 million in the aggregate), provided, that such per contract and aggregate limitations imposed in this subparagraph (l) shall not apply to commitments for the purchase or sale of fuel pursuant to subparagraph (i) of this section (with Buyer's consent to a contract, agreement or commitment that otherwise complies with this subsection (ii) but exceeds the preceding term and value limits not to be unreasonably withheld or delayed), and (iii) Seller shall provide Buyer with prompt notice with respect to any contract, agreement, commitment or arrangement entered into in accordance with the provisions of subsection (ii) of this paragraph. 7.2 Access to Information. (a) Between the date of this Agreement and --------------------- the Closing Date, the Seller shall, during ordinary business hours and upon reasonable notice (i) give the Buyer and the Buyer Representatives reasonable access to all books, records, plants, offices and other facilities and properties constituting the Purchased Assets to which access by Buyer is not prohibited by law excluding information relating to employee records other than the information described on 40 Schedule 2.2(e), (ii) subject to Seller's approval of Buyer's selection (not to be unreasonably withheld) Buyer shall appoint a representative and beginning sixty (60) days prior to Closing such representative shall be permitted to make reasonably frequent visits on reasonable notice to the Purchased Assets for the purpose of performing reasonable inspections thereof; (iii) cause those persons in the positions listed on Schedule 1.1(71) and its advisors to furnish the Buyer with such financial and operating data and other information with respect to the Purchased Assets as the Buyer may from time to time reasonably request; (iv) cause those persons in the positions listed on Schedule 1.1(71) and its advisors to furnish the Buyer a copy of each report, schedule or other document filed or received by them with the SEC, PUCN, CPUC or FERC with respect to the Purchased Assets; and (v) at Buyer's reasonable request, make those persons in the positions listed on Schedule 1.1(71) and its advisors available during regular business hours for reasonable time periods to answer Buyer's questions concerning the Purchased Assets and their operation; provided, however, that (A) -------- ------- any such investigation shall be conducted in such a manner as not to interfere unreasonably with the operation of the Purchased Assets, (B) the Seller shall not be required to take any action which would constitute a waiver of the attorney-client privilege and (C) the Seller need not supply the Buyer with any information which the Seller is under a legal obligation not to supply. Notwithstanding anything in this Section 7.2 to the contrary, (i) the Seller shall only furnish or provide such access to medical records as is required by law and (ii) the Buyer shall not have the right to perform or conduct any environmental sampling or testing at, in, on or underneath the Purchased Assets. (b) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of the Confidentiality Agreement and shall be treated as "Evaluation Material" (as defined in the Confidentiality Agreement) except for items acquired by Buyer as part of the Purchased Assets including but not limited to any books, operation records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications and procedures. (c) Subject to Buyer's rights under the last sentence of this Section 7.2(c), for a period of ten (10) years after the Closing Date, the Seller and its representatives shall have reasonable access to all of the books and records of the Purchased Assets, as the case may be, transferred to the Buyer hereunder to the extent that such access may reasonably be required by the Seller in connection with matters relating to or affected by the operation of the Purchased Assets prior to the Closing Date. Such access shall be afforded by the Buyer upon receipt of reasonable advance notice and during normal business hours. The Seller shall be solely responsible for any costs or expenses incurred by them pursuant to this Section 7.2(c). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such ten-year period, the Buyer shall, prior to such disposition, give the Seller 41 a reasonable opportunity at the Seller's expense, to segregate and remove such books and records as the Seller may select. 7.3 Expenses. Except to the extent specifically provided herein, -------- whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses except that the costs, expenses and premium incurred to obtain title insurance shall be shared equally by Buyer and Seller at Closing. 7.4 Further Assurances. Subject to the terms and conditions of this ------------------ Agreement, each of the parties hereto shall use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the sale of the Purchased Assets pursuant to this Agreement including, without limitation, the use of the Seller's and the Buyer's commercially reasonable efforts to obtain all Permits and Environmental Permits necessary for the Buyer to operate the Purchased Assets. From time to time after the date hereof, without further consideration, the Seller shall, at its own expense, execute and deliver such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Assets. From time to time after the date hereof, the Buyer shall, at its own expense, execute and deliver such documents to the Seller as the Seller may reasonably request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. To the extent that any personal property lease, relating to any assets (the "Leased Assets") which are principally used by the Seller for generation purposes at the Purchased Assets, cannot be assigned to the Buyer, the Seller shall, with Buyer's written consent (which consent shall not be unreasonably withheld), use its commercially reasonable efforts to acquire title to such Leased Assets and to include them in the Purchased Assets before the Closing Date. The Seller's reasonable costs associated with acquiring title to such Leased Assets shall be paid by the Buyer as part of the Purchase Price. The Leased Assets are identified as such on Schedule 1.1(97)(iii). 7.5 Public Statements. The parties shall consult with each other ----------------- prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and neither party may issue any such public announcement, statement or other disclosure without having first received the written consent of the other party, except as may be required by law and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent and under the circumstances in which the parties are expressly 42 permitted by the Confidentiality Agreement to make disclosures of "Evaluation Material" (as defined in the Confidentiality Agreement). 7.6 Consents and Approvals. (a) The Seller and the Buyer shall each ---------------------- file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall consult with each other as to the appropriate time of filing such notifications and shall use their best efforts to make such filings at the agreed upon time, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. (b) The Seller and the Buyer shall cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all commercially reasonable efforts to obtain the transfer or reissuance to the Buyer of all necessary Environmental Permits, Permits, consents, approvals and authorizations of all governmental bodies and (iv) use all commercially reasonable efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, all consents, approvals and authorizations of all governmental bodies to the transfer, reissuance or modification of the Permits and Environmental Permits as necessary to enable Buyer to operate the Purchased Assets at and after Closing substantially as they had been operated immediately prior to the Closing Date, and FERC approval of the Ancillary Agreements and the Generation Tariff applicable to the Purchased Assets) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which the Seller or the Buyer is a party or by which either of them is bound. The Seller shall have the right to review and approve in advance all characterizations of the information relating to Purchased Assets; and each of the Seller and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they shall consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such necessary Environmental Permits, Permits, consents, approvals and authorizations of all third parties and governmental bodies. The Seller and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contem- 43 plated hereby on behalf of the Seller, on the one hand and the Buyer on the other hand, with all governmental bodies. (c) To the extent that a consent to an assignment of any material Seller Agreement cannot be obtained before the Closing Date, the Seller shall enter into all such agreements with the Buyer as are necessary to give the Buyer the rights, obligations and burdens of such Seller Agreements. Without limiting the generality of the foregoing, if on May 1, 2000 (or, if earlier, the date that is thirty (30) days before the expected Closing Date), Seller has not yet obtained the consent of the California Department of Water Resources ("CDWR") to the assignment of the Participation Agreement, the parties shall negotiate diligently to agree upon a back-to-back energy management agreement or other arrangement (the "EMA") that will confer upon Buyer economic benefits equivalent to the ownership of Reid Gardner Unit 4 effective as of June 1, 2000 (or such earlier or later date as all Closing conditions other than CDWR's consent to the assignment of the Participation Agreement have been satisfied or waived or are expected to be accomplished at Closing in accordance with this Agreement). If CDWR has not consented to the assignment of the Participation Agreement but all other conditions to Closing have been satisfied or waived or are expected to be accomplished at Closing in accordance with this Agreement, Seller shall retain title to Reid Gardner Unit 4 and the assets and permits reasonably required to operate Reid Gardner Unit 4 ("Reid Gardner Unit 4 Assets"), and the parties shall enter into the EMA at Closing. Seller shall thereafter continue to use diligent efforts to obtain CDWR's consent to Seller's assignment of the Participation Agreement. Within thirty (30) days of the date on which such consent has been obtained on terms and conditions acceptable to Buyer, Seller shall assign its interest in the Participation Agreement and convey the Reid Gardner Unit 4 assets to Buyer. The parties shall use diligent efforts to enable Buyer to acquire Reid Gardner Units 1-3 and associated Purchased Assets at Closing, while entering into the EMA only with respect to Reid Gardner Unit 4; provided, however, that if separation cannot be accomplished such that Reid Gardner Station can continue to operate as it has been in the past at and after Closing, Seller shall retain the Purchased Assets comprising the Reid Gardner Station and the EMA shall apply to all of them. (d) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any Federal, State or local Governmental Authority or agency or any third party in connection with any Federal, State or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. 44 (e) Seller shall use commercially reasonable efforts to defend and support the form of Generation Tariff applicable to the Purchased Assets in the form on file with FERC as of November 14, 2000. Seller shall file with FERC and use commercially reasonable efforts to defend and support the Transitional Power Purchase Agreement and Interconnection Agreement. Seller shall, at Buyer's request, file a certificate of concurrence in and shall use all commercially reasonable efforts to support (i) any filing with the FERC that Buyer is required to make in order to sell energy, capacity and ancillary service pursuant to the Transitional Power Purchase Agreement, and (ii) any tariff filed by Buyer with FERC and containing terms and conditions equivalent to the applicable terms and conditions of the Generation Tariff previously filed by Seller with FERC and applicable to the Purchased Assets, provided, however Seller's obligation to support such filings shall continue only until such filings have been approved by FERC. Seller shall not propose or enter into any stipulation or agreement except for any stipulation pending as of the date of this Agreement modifying the form of such tariffs or agreements without Buyer's consent, which Buyer shall not unreasonably withhold. Buyer and Seller shall cooperate in defending and supporting such tariffs and agreements. (f) The Seller shall prepare and submit an application to the PUCN in which the Seller shall seek approval of the sale of both the Purchased Assets hereunder and the Clark Bundle and at Buyer's request Seller shall include in such application a statement reflecting Buyer's preferences and priorities with respect to the transactions contemplated by this Agreement and the Clark ASA. 7.7 Fees and Commissions. The Seller and the Buyer each represent and -------------------- warrant to the other that, except for Credit Suisse First Boston ("CSFB"), which is acting for and at the expense of the Seller, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. The Seller and the Buyer shall pay to the other or otherwise discharge, and shall indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 7.8 Use of Pollution Control Facilities. (a) Prior to June 1, 2019, ----------------------------------- October 1, 2011 or October 1, 2023, as applicable, the Buyer shall not use any of the Pollution Control Facilities in any manner which would cause (i) interest on any of the Bonds to become includible in the gross income of the owners of such Bonds for purposes of federal income taxation or (ii) the disallowance of any deductions for interest expense payable by the Seller to which the Seller would otherwise be entitled; provided, however, that no violation of this -------- ------- Section 7.8 shall be deemed to 45 have occurred solely as a result of such facilities being (A) unused, (B) abandoned or (C) sent to a landfill. (b) The Buyer shall give the Seller reasonable access to any Pollution Control Facilities included in the Purchased Assets and the books and records with respect to such facilities. (c) The Buyer shall fully cooperate with the issuers of the Bonds and the Seller and its counsel in connection with any audit, investigation or proceeding with respect to the Bonds or the Seller's interest expense deduction with respect thereto by the Internal Revenue Service, the SEC or any other entity. 7.9 Tax and Withholding Matters. (a) Notwithstanding any other --------------------------- provision of this Agreement, the Purchase Price includes all applicable sales and similar taxes (but not real property transfer taxes) imposed by the State of Nevada as the result of the transaction ("Included Taxes"). Buyer shall bear all real estate transfer taxes. At the Closing, Seller shall deliver to Buyer a receipt for Buyer's payment of Included Taxes, and a separate closing certificate setting forth Seller's calculation of the purchase price for that portion of the Purchased Assets with respect to which Included Taxes are anticipated by Seller to be due, as well as Seller's calculation, in the exercise of reasonable judgment, of the amount of those Included Taxes. Seller shall also include in this certificate its unqualified representation, warranty and covenant, which shall survive Closing notwithstanding any other provision of this Agreement, that the amount of taxes so established is in fact the entire and correct amount of Included Taxes. Seller is aware that, because of Seller's familiarity with the Purchased Assets and their previous treatment for tax, accounting and other purposes, Buyer is relying on Seller's calculation of such Included Taxes. Seller shall, as provided by the laws of the State of Nevada, pay over to the Nevada Department of Taxation the Included Taxes. To the extent, if any, that the State of Nevada requires payment of Included Taxes in an amount higher than that certified by Seller, after all opportunity for challenge or rehearing or appeal has been exhausted (provided that Seller bears the costs -------- thereof as incurred), Seller shall immediately adjust its books, nunc pro tunc, by decreasing the purchase price of the Purchased Assets by an amount equal to such additional Included Taxes, which amount shall constitute Included Taxes collected by Seller from Buyer. Seller shall then deliver to Buyer a corrected receipt for payment of Included Taxes and remit to the Nevada Department of Taxation the additional Included Taxes due. The foregoing is in addition to Buyer's right to recover damages for breach of Seller's representation, warranty and covenant in an amount equal to any Included Taxes required to be paid by Buyer (after exhausting all opportunity for appeal or rehearing, provided that -------- Seller bears the costs thereof as incurred). Seller represents and warrants that this Section 7.9(a) is enforceable (which representation and warranty shall survive Closing notwithstanding any contrary provision in this 46 Agreement) and shall deliver a reasoned opinion at Closing confirming that this provision will be enforceable against Seller. The party responsible for remitting a Tax shall, at its own expense, file, to the extent required by law, all necessary Tax Returns, receipts and other documentation with respect to the Tax. If reasonably requested by the party responsible for paying a Tax the other party shall join in the execution of Tax Returns, receipts or other documentation. Notwithstanding the foregoing, the parties shall work together in good faith and each at its own expense to minimize all transfer, sales and similar taxes and shall not make any payment to the Nevada Department of Taxation if the amount of payment is being disputed by either party until all opportunity for challenge or rehearing or appeal has been exhausted (provided -------- that Seller bears the costs thereof as incurred). (b) With respect to Taxes to be prorated in accordance with Section 3.4 hereof only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to the Seller's approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for the Seller's review and approval no later than twenty (20) days prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, the Seller shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with Section 3.4 hereof. In addition to any amount of reimbursement due in accordance with Section 3.4 hereof, Buyer shall reimburse Seller for any Nevada property taxes incurred by Seller which relate to the Purchased Assets and have a lien date after the Closing Date. The amount of such reimbursement shall be determined based upon the proportion of (i) the "historical cost less depreciation" of the Purchased Assets to (ii) the total historical cost less depreciation of all the assets reported on Seller's Nevada Operating Property Appraisal Report. (c) Each of the Buyer and the Seller shall provide the other with such assistance as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each shall retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.9 or pursuant to any other section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. (d) Seller shall remain responsible for any liabilities and all tax filings, proceedings and other tax matters involving the ownership of Reid Gardner 47 Unit 4 to the extent arising from or relating to the breach of Seller's representation and warranty in Section 5.24 of this Agreement, whether such breach occurs with respect to periods before or after the Closing Date. The provisions of Section 7.9 shall survive for a period of two years. (e) The provisions of Section 7.9 shall survive until 30 days after the expiration of all applicable tax statutes of limitation. 7.10 Supplements to Schedules. Prior to the Closing Date, the Seller ------------------------ shall promptly supplement or amend the Schedules required by Article V with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section 7.10 shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.11 Employees. (a) Schedule 7.11(a) sets forth all collective --------- bargaining agreements to which the Seller is a party in connection with the Purchased Assets (the "Collective Bargaining Agreements"), as well any Letters of Agreement between Seller and IBEW Local 396 ("Local 396 LOA"), letters of intent, or other such agreements or understandings related to the sale and transfer of certain plants. The Buyer shall offer employment to begin as of the Closing Date to the Seller's employees who work at the Purchased Assets and who are included in the bargaining units covered by the Collective Bargaining Agreements ("Hourly Employees"). The Buyer shall assume the Collective Bargaining Agreements, and all of the Seller's obligations under such agreements. (b) Continued Employment. The Buyer shall, as of the Closing Date, -------------------- make a Qualifying Offer of Employment (as defined herein) to each employee of Seller who (i) worked at or directly serviced the Purchased Assets and (ii) was an employee of the Seller immediately prior to the Closing Date, other than (x) Hourly Employees and (y) Directors (each such employee who accepts a Qualifying Offer of Employment is a "Management Employee"). An offer of employment shall be deemed a "Qualifying Offer of Employment" if (A) the proposed base salary and level of incentive compensation is at least 90% of the employee's base salary and level of incentive compensation immediately prior to the Closing Date and (B) the proposed principal place of employment is within one hundred (100) miles of the employee's principal place of employment immediately prior to the Closing Date. (c) Benefit Continuation. Subject to applicable law, the Buyer shall -------------------- maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation, welfare and benefit plans, programs, policies and fringe benefits covering Management Employees that will be as eco- 48 nomically similar, in the aggregate, as those provided pursuant to those employee compensation, welfare and benefit plans, programs, policies and fringe benefits of the Seller and their subsidiaries as in effect immediately prior to the Closing Date. To the extent permissible under the terms of the Benefit Plans of Buyer and required by applicable law, the Buyer shall waive all limitations as to preexisting conditions exclusions and waiting periods with respect to participation and coverage requirements applicable to the Management Employees under any Benefit Plans of Buyer that are welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Management Employees immediately prior to the Closing Date. (d) Service Credit. The Management Employees shall be given credit -------------- for all service with the Seller or its subsidiaries (and service credited by Seller or such subsidiary), to the same extent as such service was credited for such purpose by Seller or such subsidiary, under all employee benefit plans, programs and policies of the Buyer in which they become participants (the "Benefit Plans of Buyer") for purposes of eligibility, vesting, benefit accrual and determination of level of benefits. Notwithstanding the foregoing, such service with the Seller shall be recognized for purposes of benefit accrual under a defined benefit pension plan or a retiree medical plan (a "plan") sponsored by the Buyer only if assets and liabilities are transferred to the Buyer's plan and trust from the Seller's plan and trust. (e) Assumptions. The Buyer shall assume only those obligations that ----------- are required to be assumed by the Buyer under the Collective Bargaining Agreement or obligations for which there was a transfer of assets and liabilities to the Buyer's plan and trust from the Seller's plan and trust. Absent such transfer of plan assets and liabilities, benefits accrued under such Benefits Plans of Seller and all benefits currently payable as of the Closing Date shall be and shall remain the obligation of the Seller. Any individual covered under any such Benefit Plan of Seller that is a Group Health Plan (as defined in Section 4980B(g)(2) of the Code and Section 607(l) of ERISA) and who is eligible for continued coverage under such Group Health Plan as of the Closing Date, shall continue to be covered under such Group Health Plan after Closing pursuant to the provisions of COBRA. (f) Severance Plan. The Buyer shall maintain the Management -------------- Transition Plan for a period of eighteen (18) months following the Closing Date and shall give all Management Employees service credit for purposes of determining the level of benefits thereunder in the same manner as set forth in Section 7.11(d) hereof. Each of the Buyer and the Seller shall be responsible for 50% of any payments required under the Management Transition Plan for any Management Employee 49 terminated without Cause (as defined in the Management Transition Plan) within eighteen (18) months following the Closing Date. (g) WARN Act. The Seller shall perform timely and discharge all -------- requirements, if any, under the WARN Act and under applicable state and local laws and regulations for the notification of its employees arising from the sale of the Purchased Assets to the Buyer up to and including the Closing Date. The Buyer shall cooperate with the Seller to provide the Seller with such information as may be needed from the Buyer for inclusion in such notices, including providing the Seller at least ninety (90) days prior to the date on which the Closing is anticipated to occur (or such date to which the Buyer and the Seller mutually agree) with a list of all of the Seller's employees to whom the Buyer shall make offers of employment. After the Closing Date, the Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees with respect to the Purchased Assets. 7.12 Risk of Loss. (a) From the date hereof through the Closing Date, ------------ all risk of loss or damage to the property included in the Purchased Assets shall be borne by the Seller. (b) If, before the Closing Date all or any portion of the Purchased Assets are taken by eminent domain, or is the subject of a pending or (to the Knowledge of the Seller) contemplated taking which has not been consummated, the Seller shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such taking, then the Buyer or the Seller may, if such taking relates to the Purchased Assets, terminate this Agreement pursuant to Section 10.1(f) hereof. (c) If, before the Closing Date all or any material portion of the Purchased Assets are damaged or destroyed by fire or other casualty, the Seller shall notify the Buyer promptly in writing of such fact. If such damage or destruction would have a Material Adverse Effect and the Seller has not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller 50 has notified the Buyer of such casualty, then the Buyer or the Seller may terminate this Agreement pursuant to Section 10.1(f) hereof. 7.13 Additional Covenants of the Buyer. Notwithstanding any other --------------------------------- provision hereof, Buyer covenants and agrees that, for a period of five (5) years commencing on the Closing Date, Buyer shall not transfer the Purchased Assets, or any material portion of the Purchased Assets, to any entity or Affiliate of such entity who at that time is the owner of any bundle of generation assets previously owned by Seller within the southern regions of Nevada, as such regions are described in the Offering Memorandum dated as of March 2000, as supplemented from time to time. Buyer further covenants and agrees that, in the event that Buyer transfers the Purchased Assets or any material portion of the Purchased Assets during such five (5) year period, Buyer shall obtain from its transferee a covenant and agreement which restricts such transferee's ability to transfer the Purchased Assets that is substantially similar to Buyer's covenant and agreement in the first sentence of this Section 7.13 and an additional covenant and agreement that is substantially similar to that of this sentence, and each such covenant and agreement shall survive and remain in effect until five (5) years from the Closing Date as defined in this Agreement. The covenants and agreements contained in this Section 7.13 shall survive Closing and shall continue in effect for a period of five (5) years commencing on the Closing Date. 7.14 Surveys and Certain Title Matters. Within thirty (30) days after --------------------------------- the date of this Agreement, Seller shall deliver to Buyer final surveys of the Real Property showing the location of (a) all exceptions listed in the preliminary title reports referred to in Schedule 5.8, (b) the easements to be retained and granted as described in Schedule 5.8, (c) all rights-of-way and easements for water and gas pipelines owned or used in connection with the operation of the Reid Gardner Station, and (d) all roads, rail spurs, and crossing and other access routes owned or controlled by Seller used in connection with the operation of the Reid Gardner Station. On or before the thirtieth (30th) day (the "Notice Date") after Buyer has received the final surveys of the Real Property, Buyer may notify Seller in writing that Buyer disapproves of any matter disclosed by the final surveys that, individually or in the aggregate, (in Buyer's reasonable judgment) materially interferes with the operation and maintenance of the Reid Gardner Station, or that, individually or in the aggregate has a Material Adverse Effect. Buyer's failure to so notify Seller on or before the Notice Date shall be deemed an approval of matters disclosed by and located in the final surveys; likewise, any matters not disapproved in a notice from Buyer to Seller on or before the Notice Date shall be deemed approved by Buyer as disclosed by and located in the final surveys. If any new matters are disclosed by a revised survey, supplemental preliminary title report or title commitment, Buyer shall have fifteen (15) days from the date on which it receives a notice disclosing the new matter(s) in reasonable detail to approve or disapprove of the new matter(s) 51 asset forth above. Seller shall cooperate with the Title Insurer and Buyer, to the extent necessary, to clear any such disapproved matters. The exceptions shown in the preliminary title reports that are approved by the Buyer as of the date of this Agreement are listed in Schedule 5.8, subject to Buyer's review of final surveys. If Buyer and Seller disagree about whether Buyer has properly disapproved a matter under this Section 7.14, the parties shall meet within ten (10) Business Days of the Notice Date to negotiate in good faith to settle their disagreement. In addition, Seller and Buyer shall cooperate in good faith to create and describe such Operating Easements as may be reasonably required or desirable to serve the Purchased Assets or Seller's property to the extent not already covered by the Operating Easements described in Schedule 5.8. 7.15 Documentation. Within sixty (60) days after the date of this ------------- Agreement, Seller shall make available to Buyer copies of all material contracts, leases and permits including all amendments thereto (in either electronic or hard copy format) pertaining to the Purchased Assets which to Seller's Knowledge are a complete set. 7.16 Additional Covenants of the Parties. (a) The parties shall work ----------------------------------- together in good faith to address transition issues and to identify any transition services that Seller would be able to provide for a reasonable period after Closing. If any such services are identified, the parties shall enter into an agreement to be delivered at Closing describing the terms and conditions on which Seller shall provide such transition services, including a provision which limits the charges for such services to Seller's actual reasonable costs. (b) Buyer and Seller shall negotiate in good faith to agree upon a clearance procedure at least thirty (30) days before the expected Closing Date that could make unnecessary certain disconnect switches shown in the one line drawing included in Exhibit F that have not yet been installed. If Buyer and Seller so agree, they shall promptly amend the one line drawing, the Separation Schedule and the separation schedule summary to reflect their agreement. In any event Seller shall be solely responsible for all costs associated with the acquisition and installation of any such switches and related equipment. (c) Seller shall use its commercially reasonable efforts to enter into the Environmental Audit Agreement before Closing. 52 ARTICLE VIII ------------ CLOSING CONDITIONS ------------------ 8.1 Conditions to Each Party's Obligations to Effect the Transactions ----------------------------------------------------------------- Contemplated Hereby. The respective obligations of each party to effect the - ------------------- transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated; (b) No preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the transactions contemplated hereby or by the Ancillary Agreements shall have been issued and remain in effect (each party agreeing to use its reasonable best efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted by any State or Federal government or Governmental Authority in the United States which prohibits the consummation of the transactions contemplated hereby or by the Ancillary Agreements; (c) All Federal, State and local government consents and approvals required for the consummation of the transactions contemplated hereby or by the Ancillary Agreements, including, without limitation, the Seller Required Regulatory Approvals, the Buyer Required Regulatory Approvals, and all approvals of FERC required to enable the parties to perform their respective obligations under the Ancillary Agreements, shall have become Final Orders (a "Final Order" for purposes of this Agreement means a final order after all opportunities for rehearing are exhausted (whether or not any appeal thereof is pending) that has not been revised, stayed, enjoined, set aside, annulled or suspended, with respect to which any required waiting period has expired; and as to which all conditions to effectiveness prescribed therein or otherwise by law, regulation or order have been satisfied) with such terms and conditions as shall have been imposed by the Governmental Authority issuing such Final Order and such Final Orders shall not have imposed terms and conditions which would have a material adverse effect on the business, results of operations or financial condition of the Purchased Assets; and (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which the Seller or the Buyer, or any of their subsidiaries, is a party for the consummation of the transactions contemplated hereby shall have been obtained, including, without limitation, the receipt by Seller of the required consent relating to the Joint Ownership Obligation (the "Joint Ownership Obligation Condition"), other than those (i) 53 which if not obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii) for which an agreement as described in Section 7.6(c) hereof has been entered into. 8.2 Conditions to Obligations of Buyer. The obligation of the Buyer ---------------------------------- to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) There shall not have occurred and be continuing, a Material Adverse Effect; (b) The Seller shall have performed and complied with in all material respects the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of the Seller set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of the Seller; (c) The Buyer shall have received a certificate from an authorized officer of the Seller, dated the Closing Date, to the effect that to the best of such officer's knowledge, the conditions set forth in Sections 8.2(a) and (b) hereof have been satisfied; (d) The Buyer shall have received an opinion from Woodburn & Wedge, P.C., dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) The Seller is a corporation organized, existing and in good standing under the laws of the State of Nevada and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby, and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by requisite corporate action taken on the part of the Seller; (2) This Agreement and the Ancillary Agreements have been executed and delivered by the Seller and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Seller, enforceable against the Seller in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless 54 of whether enforceability is considered in a proceeding at law or in equity) and except to the extent that the right to indemnification and contribution contained therein may be limited by state or federal securities laws or the public policy underlying such laws; (3) The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Seller shall not constitute a violation of the Certificate of Incorporation or Bylaws of the Seller; and (4) No declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Seller of the Closing other than (i) the Seller Required Regulatory Approvals, (ii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of Nevada, such counsel may rely upon opinions of counsel admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials; (e) The Seller shall have executed and delivered, as of the Closing, each of the Ancillary Agreements to be executed by the Seller and all required approvals and conditions relating to the Ancillary Agreements shall have been obtained or satisfied; (f) Neither the PUCN nor the Nevada legislature shall have issued any order or passed any legislation the effect of which would be to cause the Buyer, as the owner of the Purchased Assets or the seller of electric power, energy or capacity therefrom, to be regulated as to the wholesale pricing of such electric power, energy or capacity, or to be regulated for any purposes as a public utility under Nevada law; and (g) First American Title Company (or an Affiliate thereof) or another Title Insurer acceptable to Buyer (the "Title Insurer") shall be willing to issue at regular rates ALTA owner's, or lessee's, as the case may be, extended coverage policies of title insurance (1990 Form B) (the "Title Policies"), with the general survey and creditors' rights exceptions removed, in amounts equal to the 55 portion of the Purchase Price allocated to such interests, showing title to the Real Property vested in Buyer, subject to transfer of the Real Property to Buyer. The Title Policies shall show title vested in Buyer subject only to Permitted Encumbrances (not including the lien of the Indenture and the Bond Indentures, from which the Purchased Assets are to be released at or before Closing). Seller shall cooperate with the Title Insurer and Buyer, to the extent necessary, to clear any defects of title. The first sentence of this paragraph shall be deemed to be satisfied either by (i) the issuance of the Title Policies, subject only to Permitted Encumbrances, at Closing, or (ii) by the Title Insurer's delivery at the Closing of written commitments or binders (dated as of the Closing but insuring title as of the date title conveyance documents are recorded), to issue the Title Policies, subject only to Permitted Encumbrances, within a reasonable time after the Closing Date, subject to actual transfer of the Real Property. If the Title Insurer is unwilling to issue any such Title Policy, it shall be required to provide Buyer and Seller, in writing, with notice setting forth the reason(s) for such unwillingness as soon as practicable. Seller shall have the right to seek to cure any defect which is the reason for such unwillingness, and to extend the Closing and the Termination Date, if necessary, for a period of up to thirty (30) Business Days to provide to Seller the opportunity to cure; and (h) Without limiting the generality of Section 8.1(a) of this Agreement, Buyer shall have received the necessary consents, approvals and authorizations required to transfer, re-issue or modify Permits and Environmental Permits as needed to enable Buyer to operate the Purchased Assets at and after the Closing Date substantially consistent with Seller's historical operation. 8.3 Conditions to Obligations of Seller. The obligation of the Seller ----------------------------------- to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed in all material respects its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; (c) The Seller shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b) hereof have been satisfied; 56 (d) The Seller shall have received an opinion from Stoel Rives LLP and/or Lionel Sawyer & Collins, counsel for the Buyer, dated the Closing Date and satisfactory in form and substance to the Seller and its counsel, substantially to the effect that: (1) Each of NRG and Dynegy is a corporation organized, existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action taken on the part of the Buyer; (2) this Agreement and the Ancillary Agreements have been executed and delivered by the Buyer and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (B) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought; (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Buyer shall not constitute a violation of the Certificate of Incorporation or Bylaws (or other similar governing documents), as currently in effect, of the Buyer; and (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Buyer of the Closing other than the Buyer Required Regulatory Approvals, all of such Buyer Required Regulatory Approvals having been obtained and being in full force and effect with such terms and conditions as shall have been imposed by any applicable Governmental Authority. As to any matter contained in such opinion or opinions which involve the laws of any jurisdiction other than the federal laws of the United States and the States of Oregon and Nevada, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by 57 appropriate officers and directors of the Buyer and its subsidiaries and by public officials; and (e) The Buyer shall have executed and delivered, as of the Closing, each of the Ancillary Agreements to be executed by the Buyer and all required approvals and conditions relating to the Ancillary Agreements have been obtained or satisfied. ARTICLE IX ---------- INDEMNIFICATION --------------- 9.1 Indemnification. (a) The Seller shall indemnify, defend and hold --------------- harmless the Buyer from and against any and all claims, demands or suits (by any Person), losses, liabilities, damages (including consequential or special damages), obligations, payments, costs, Taxes and expenses (including, without limitation, the costs and expenses of any and all actions, suits, proceedings, assessments, judgments, settlements and compromises relating thereto and reasonable attorneys' fees and reasonable disbursements in connection therewith) to the extent the foregoing are not paid by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by the Buyer relating to, resulting from or arising out of (i) any breach by the Seller of any covenant or agreement of the Seller contained in this Agreement or (ii) the Excluded Liabilities. (b) The Buyer shall indemnify, defend and hold harmless the Seller from and against any and all Indemnifiable Losses asserted against or suffered by the Seller relating to, resulting from or arising out of (i) any breach by the Buyer of any covenant or agreement of the Buyer contained in this Agreement or the Ancillary Agreements or (ii) the Assumed Liabilities. (c) Either the person required to provide indemnification under this Agreement (the "Indemnifying Party") or the person entitled to receive indemnification under this Agreement (the "Indemnitee") may assert any offset or similar right in respect of its obligations under this Section 9.1 based upon any actual or alleged breach of any covenant or agreement contained in this Agreement or the Ancillary Agreements. (d) Any Indemnitee having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any Indemnifiable Loss shall be reduced (i) to the extent that the Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take into 58 account any Tax or Income Tax benefit recognized by the Indemnitee arising from the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment, and any payment actually received with respect to an Indemnifiable Loss. (e) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the Indemnifying Party with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (f) The rights and remedies of the Seller and the Buyer under this Article IX are exclusive and in lieu of any and all other rights and remedies which the Seller and the Buyer may have under this Agreement or otherwise for monetary relief with respect to (i) any breach or failure to perform any covenant or agreement set forth in this Agreement or (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be. Without limiting the foregoing, with respect to the Purchased Assets, the Buyer, for itself and its Affiliates, does hereby irrevocably release, hold harmless and forever discharge the Seller from any and all claims of any kind or character, whether known or unknown, hidden or concealed, resulting from or arising out of or in connection with Hazardous Substances or any Environmental Law, other than those liabilities and obligations set forth in Section 2.4(c) hereof. In furtherance of the foregoing, the Buyer, for itself and on behalf of its Affiliates, hereby irrevocably waives any and all rights and benefits with respect to such claims that it now has, or in the future may have conferred upon it by virtue of any statute, regulation or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party's settlement with the obligor. In this connection, the Buyer hereby acknowledges that it is aware that factual matters now unknown to it may have given, or hereafter may give, rise to claims that are presently unknown, unanticipated and unsuspected, and it further agrees that this release has been negotiated and agreed upon in light of that awareness, and the Buyer, for itself and on behalf of its Affiliates, nevertheless hereby intends irrevocably to release the Seller from the claims described in this Section 9.1(f). 9.2 Defense of Claims. (a) If any Indemnitee receives notice of the ----------------- assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any Affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee shall give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than ten (10) calendar days after the Indemnitee's receipt of notice of such Third Party Claim. Such notice shall describe the nature of the Third Party 59 Claim in reasonable detail and shall indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party shall have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, and the Indemnitee shall cooperate in good faith in such defense at such Indemnitee's own expense. (b) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a) hereof, the Indemnifying Party shall not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying -------- ------- Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party shall be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party shall not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than ten (10) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party shall have a period of thirty (30) calendar days within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party shall be deemed to have accepted such claim. If 60 the Indemnifying Party rejects such claim, the Indemnitee shall be free to seek enforcement of its rights to indemnification under this Agreement. (d) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of The Chase Manhattan Bank), shall promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party shall, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party shall then -------- ------- be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of such indemnity payment are hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party shall duly execute upon request all instruments reasonably necessary to evidence and perfect the foregoing subrogation and subordination rights. Nothing in this Section 9.2(d) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (e) A failure to give timely notice as provided in this Section 9.2 shall not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. ARTICLE X --------- TERMINATION AND ABANDONMENT --------------------------- 10.1 Termination. (a) This Agreement may be terminated at any time ----------- prior to the Closing Date, by mutual written consent of the Buyer and the Seller. (b) This Agreement may be terminated by the Seller or the Buyer if (i) the transactions contemplated hereby shall not have been consummated on or before eighteen (18) months from the date of this Agreement (the "Termination Date"); provided, however, that the right to terminate this Agreement under this -------- ------- Section 10.1(b) shall not be available to either Seller or Buyer if its failure to fulfill 61 any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date; provided, further, -------- ------- that if on the Termination Date the conditions to the Closing set forth in Section 8.1(c) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Termination Date shall be the date which is twenty-four (24) months from the date of this Agreement. (c) This Agreement may be terminated by either the Seller or the Buyer if (i) any Governmental Authority or regulatory body, the consent of which is a condition to the obligations of the Seller and the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent and all appeals of such determination shall have been taken and have been unsuccessful, or (ii) any court of competent jurisdiction in the United States or any State shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, judgment or decree shall have become final and nonappealable. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by the Seller of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer. (e) This Agreement may be terminated by the Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Seller impossible and such violation or breach has not been waived by the Seller. (f) This Agreement may be terminated by either the Seller or the Buyer in accordance with the provisions of Sections 7.12(b) or (c) hereof. 10.2 Procedure and Effect of Termination. In the event of termination ----------------------------------- of this Agreement and abandonment of the transactions contemplated hereby by either or both of the parties pursuant to Section 10.1 hereof, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein: (a) such termination shall be the sole remedy of the parties hereto with respect to breaches of any agreement, representation or warranty contained in this Agreement and none of the parties hereto nor any of their respective trustees, 62 directors, officers or Affiliates, as the case may be, shall have any liability or further obligation to the other party or any of their respective trustees, directors, officers or Affiliates, as the case may be, pursuant to this Agreement, except in each case as stated in this Section 10.2 and in Sections 7.2(b), 7.3 and 7.7 hereof; and (b) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. ARTICLE XI ---------- MISCELLANEOUS PROVISIONS ------------------------ 11.1 Amendment and Modification. Subject to applicable law, this -------------------------- Agreement may be amended, modified or supplemented only by written agreement of the Seller and the Buyer. 11.2 Waiver of Compliance; Consents. Except as otherwise provided in ------------------------------ this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.3 No Survival of Representations and Warranties. Each and every --------------------------------------------- representation and warranty contained in this Agreement and each and every covenant contained in this Agreement (other than the covenants in Sections 2.5, 3.2, 3.3, 3.4, 7.1(d), 7.1(f), 7.1(g), 7.1(h), 7.1(i), 7.1(j), 7.1(k), 7.1(l)(i) and 7.1(1)(ii), 7.2(b), 7.2(c), 7.3, 7.4, 7.5, 7.6(c), 7.6(e), 7.7, 7.8, 7.9, 7.11, 7.13, 7.16(b) (which covenants shall survive for a period of one year or otherwise in accordance with their terms), 9.1 and 9.2 hereof) shall expire with, and be terminated and extinguished by, (i) the consummation of the sale of the Purchased Assets and the transfer of the Assumed Liabilities pursuant to this Agreement and shall not survive the Closing Date, or (ii) the termination of this Agreement pursuant to Section 10.1 hereof or otherwise; and none of the Seller, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation or warranty. 11.4 Notices. All notices and other communications hereunder shall be ------- in writing and shall be deemed given if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses 63 (or at such other address for a party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof): (a) If to the Seller, to: Nevada Power Company c/o Sierra Pacific Resources 6100 Neil Road Reno, Nevada 89511 Attention: William E. Peterson Telecopy: (775) 834-5959 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York 10036-6522 Attention: Sheldon S. Adler, Esq. Telecopy: (212) 735-2000 (b) if to the Buyer, to: NRG Energy, Inc. Symphony Towers Suite 2740 750 "B" Street San Diego, CA 92101-8129 Attention: David Lloyd, Esq. Telecopy: (619) 615-7663 Dynegy Holdings Inc. 1000 Louisiana Street, Suite 5800 Houston, TX 77002 Attention: Alisa B. Johnson, Esq. Telecopy: (713) 767-8508 64 with copies to: Stoel Rives LLP 900 SW Fifth Avenue Suite 2300 Portland, OR 97204-1268 Attention: William H. Holmes, Esq. Telecopy: 503-220-2480 11.5 Assignment. This Agreement and all of the provisions hereof shall ---------- be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but, except as provided in Section 11.5, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. For purposes of this Agreement, subject to Section 7.13, the term "Affiliate Assignee" shall refer to any direct or indirect subsidiary of Buyer and any constituent partner or participant in Buyer (if Buyer is a partnership, joint venture, consortium or other association or organization) to whom any of Buyer's rights and obligations under this Agreement are assigned in compliance with the requirements of this Section. For purposes of this Agreement, "Financing Entity" shall mean any Person designated by Buyer to Seller as a lessor in connection with any Off-Balance Sheet Lease Facility, and "Permitted Assignee" shall mean any Affiliate Assignee or Financing Entity, as the case may be. For purposes of this Agreement, "Off-Balance Sheet Lease Facility" shall mean any long-term lease of the Purchased Assets, where the lease is accounted for by Buyer on its financial statements, prepared in accordance with GAAP, as an operating lease, whether or not such transaction is a leveraged lease (in which the Financing Entity is the owner of the Purchased Assets for U.S. federal income tax purposes), or a synthetic lease, tax ownership operating lease, tax retention Operating lease or similar lease transaction where Buyer is treated as owner of the leased property for U.S. federal income tax purposes. Notwithstanding any contrary provisions contained in this Agreement, the parties agree that, before and after the Closing, Buyer, in its sole discretion, may assign any or all of its rights and obligations arising under this Agreement or any Ancillary Agreement to one or more Permitted Assignees, provided that, -------- unless Seller shall agree to alternative arrangements in writing, no such assignment shall relieve Buyer of any obligation or liability to Seller under this Agreement or under any Ancillary Agreement, and provided further that, -------- ------- unless Seller shall agree to alternative arrangements in writing, the following shall apply: 65 (a) Buyer shall provide Seller with prompt written notice of any such assignment. (b) No such assignment shall be effected if the making of the assignment will result in Seller's or Buyer's inability to obtain any consent or authorization reasonably required to consummate the transactions contemplated by this Agreement or to avoid economic detriment to the Seller arising from the consummation of such transactions. (c) Irrespective of any such assignment or the identity of the party or parties executing any Ancillary Agreements: (i) Buyer shall remain jointly and severally liable to Seller and to third parties with respect to any Assumed Liabilities transferred to or undertaken by a Permitted Assignee, and shall remain jointly and severally liable to Seller with respect to any other covenant, obligation or liability to Seller under this Agreement or under an Ancillary Agreement that is transferred to, or undertaken by, a Permitted Assignee, including without limitation, the payment of all sums due to Seller hereunder or under an Ancillary Agreement, it being understood that all such covenants, obligations and liabilities shall constitute the direct and primary obligation of Buyer to Seller (and to third parties in the case of the Assumed Liabilities); and (ii) Without limiting the generality of the foregoing, if and to the extent that the application of any principle of law or of common law would construe the retention by Buyer of the direct and primary obligation to perform any and all obligations, liabilities or covenants assigned to or assumed or undertaken by a Permitted Assignee to be a guaranty by the Buyer of the Permitted Assignee's performance, then the Buyer hereby irrevocably, absolutely and unconditionally guarantees to Seller the full, prompt and faithful performance by such Permitted Assignee of all covenants and obligations to be performed by such Permitted Assignee under this Agreement and any Ancillary Agreement assigned to such Permitted Assignee. (d) Buyer further hereby agrees that a separate action or actions may be brought and prosecuted against Buyer for any such covenant, obligation or liability assigned to a Permitted Assignee, whether action is brought against the pertinent Permitted Assignee or whether such Permitted Assignee is joined in any such action or actions (Buyer hereby waiving any right to require Seller to proceed against a Permitted Assignee). (e) Buyer hereby authorizes Seller, without notice and without affecting Buyer's liability hereunder, from time to time to (i) renew, compromise, 66 extend, accelerate, or otherwise change the terms of any obligation of a Permitted Assignee hereunder or under any Ancillary Agreement with the agreement of such Permitted Assignee, (ii) take and hold security for the obligations of any such Permitted Assignee and exchange, enforce, waive and release any such security, and (iii) apply such security and direct the order or manner of sale thereof as Seller in its discretion may determine. (f) Buyer hereby further waives: (i) Any defense that may arise by reason of the incapacity or lack of authority of any Permitted Assignee; (ii) Any defense based upon a statute or rule of law which provides that the obligations of a surety must be neither larger in amount nor in other respects more burdensome than those of the principal; (iii) Any duty on the part of Seller to disclose to Buyer any facts that Seller may now or hereafter know about a Permitted Assignee; and (g) So long as Buyer has any obligation to Seller under this Agreement or the Ancillary Agreements, as to any Affiliate Assignee (but not any Financing Entity), any right to subrogation, reimbursement, exoneration or contribution or any other rights that would result in Buyer being deemed a creditor of a Permitted Assignee under the federal Bankruptcy Code or any other law, in each case resulting from the existence or performance of obligations of a Permitted Assignee hereunder or under any Ancillary Agreement. 11.6 Arbitration. Any dispute, controversy or claim arising out of or ----------- relating to this agreement, or the breach, termination or validity hereof (a "Dispute"), shall be finally settled by arbitration in accordance with the then- prevailing Commercial Arbitration Rules of the American Arbitration Association, as modified herein (the "Rules"). The place of arbitration shall be Nevada. There shall be three arbitrators, of whom the Seller shall appoint one and of whom the Buyer shall appoint one. The two arbitrators so appointed shall select a third arbitrator who shall act as the chairman of the tribunal. If any arbitrator is not appointed within the time limits provided herein or in the Rules, such arbitrator shall be appointed by the American Arbitration Association. The arbitral tribunal is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover punitive, exemplary or similar damages with respect to any dispute. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act, 9 U.S.C. (S)(S) 1-16, and judgment upon any award may be entered in any court of competent jurisdiction. 67 11.7 Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Nevada (regardless of the laws that might otherwise govern under applicable Nevada principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. 11.8 Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.9 Interpretation. The article and section headings contained in -------------- this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.10 Entire Agreement. This Agreement, including the documents, ---------------- exhibits, schedules, certificates and instruments referred to herein, and the Confidentiality Agreement embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of the Seller contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Offering Memorandum, dated March 2000) as supplemented, or the correspondence relating to the divestiture of Seller's generation assets previously made available to the Buyer by the Seller and CSFB. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement ; (i) provided, however, that the paragraph in the -------- ------- Confidentiality Agreement entitled "Non-Disclosure of Interest in Power Generation Assets" is, only with respect to the Purchased Assets, superceded by Section 7.5 of this Agreement, and (ii) in the event of any conflict between Section 7.2(b) of this Agreement and the Confidentiality Agreement, Section 7.2(b) shall control. 11.11 Bulk Sales or Transfer Laws. The Buyer acknowledges that the --------------------------- Seller shall not comply with the provision of any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by the Seller with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. 68 IN WITNESS WHEREOF, the Seller and the Buyer have caused this Asset Sale Agreement for the Reid Gardner Bundle to be signed by their respective duly authorized officers as of the date first above written. NEVADA POWER COMPANY By:______________________________________ Name: William E. Peterson Title: Sr. Vice President, General Counsel And Corporate Secretary NRG ENERGY, INC. By:______________________________________ Name: Craig A. Mataczynski Title: Senior Vice President DYNEGY HOLDINGS INC. By:______________________________________ Name: Edward P. Hermann Title: Attorney-in-Fact EX-10.H 17 0017.txt TRANSITIONAL POWER PURCHASE AGREEMNT, REID GARDNER Exhibit 10(H) TRANSITIONAL POWER PURCHASE AGREEMENT BY AND BETWEEN NEVADA POWER COMPANY AND REID GARDNER POWER LLC DATED: NOVEMBER 16, 2000 ASSET BUNDLE: REID GARDNER TABLE OF CONTENTS
Section Page - ------- ---- 1. DEFINITIONS......................................................................... 1 2. TERM................................................................................ 7 3. SECURITY............................................................................ 9 4. SUPPLY SERVICE...................................................................... 10 5. NOTIFICATION........................................................................ 14 6. PRICING OF ENERGY AND ANCILLARY SERVICES............................................ 15 7. INVOICING AND PAYMENTS.............................................................. 16 8. REGULATORY APPROVALS................................................................ 19 9. COMPLIANCE.......................................................................... 20 10. INDEMNIFICATION..................................................................... 20 11. LIMITATION OF LIABILITY............................................................. 22 12. FORCE MAJEURE....................................................................... 22 13. DISPUTES............................................................................ 24 14. NATURE OF OBLIGATIONS............................................................... 26 15. SUCCESSORS AND ASSIGNS.............................................................. 27 16. REPRESENTATIONS..................................................................... 28 17. DEFAULT AND REMEDIES................................................................ 29 18 FACILITY ADDITIONS AND MODIFICATIONS................................................ 30 19. COORDINATION........................................................................ 30 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE....................................... 30 21. OUTAGE SCHEDULING................................................................... 31 22. REPORTS............................................................................. 31 23. COMMUNICATIONS...................................................................... 32 24. NOTICES............................................................................. 33 25. MERGER.............................................................................. 33 26. HEADINGS............................................................................ 33 27. COUNTERPARTS AND INTERPRETATION..................................................... 33 28. SEVERABILITY........................................................................ 34 29. WAIVERS............................................................................. 34 30. AMENDMENTS.......................................................................... 34 31. TIME IS OF THE ESSENCE.............................................................. 35 32. APPROVALS........................................................................... 35 33. PLR SERVICE......................................................................... 36 34. CONFIDENTIALITY..................................................................... 36 35. CHOICE OF LAW....................................................................... 37 Exhibits Page - -------- ---- EXHIBIT A ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS............................ A-1 EXHIBIT B PRICE FLOOR OF ENERGY, PRICE CEILING OF ENERGY, AND PRICE OF ANCILLARY SERVICES ....................................................... B-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE.................................................. C-1 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS................................. D-1 EXHIBIT E YEAR END TRUE-UP INVOICE.................................................... E-1 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS................................... F-1 EXHIBIT G FORM OF AVAILABILITY NOTICE................................................. G-1 EXHIBIT H FORM OF GUARANTEE........................................................... H-1 EXHIBIT I COMPANY OBSERVED HOLIDAYS................................................... I-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT.................................................. J-1 EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE.......................................... K-1 EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE.................................... L-1 EXHIBIT M ASSET BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS........................ M-1
TRANSITIONAL POWER PURCHASE AGREEMENT This Agreement is made and entered into as of November 16, 2000 by and between Nevada Power Company, a Nevada corporation ("Buyer"), and Reid Gardner Power LLC, a Delaware limited liability company (the "Supplier"). Buyer and Supplier are referred to individually as a "Party" and collectively as the "Parties." WITNESSETH: WHEREAS, Buyer is selling its Reid Gardner generating station and other assets associated therewith to NRG Energy, Inc., a Delaware corporation, and Dynegy Holdings Inc., a Delaware corporation, both affiliates of Supplier (the "Asset Sale"); WHEREAS, notwithstanding the Asset Sale, Buyer expects that it has been designated as the Provider of Last Resort ("PLR") for its Nevada retail electric customers who are unable to obtain electric service from an alternative seller or who fail to select an alternative seller. The load required to serve such customers, plus the customers under those wholesale sales agreements existing at the Effective Date, is referred to herein as Buyer's Transitional Resource Requirement; and WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest in the Reid Gardner generating station as a source of supply for its Transitional Resource Requirement; and WHEREAS, Supplier has or is willing to secure the necessary resources to provide a portion of Buyer's Transitional Resource Requirement; and WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell Energy and Ancillary Services under contract to Buyer; and NOW, THEREFORE, in consideration of the mutual covenants, representations and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows: 1. DEFINITIONS 1.1 Format. 1.1.1 References to Articles and Sections herein are cross-references to Articles and Sections, respectively, in this Agreement, unless otherwise stated. 1.1.2 Any parts of this Agreement which are incorporated by reference shall have the same meaning as if set forth in full text herein. 2 1.2 Definitions. As used in this Agreement, the following terms ----------- shall have the meanings set forth below: 1.2.1 "Agreement" means this Agreement together with the --------- Exhibits attached hereto, as such may be amended from time to time. 1.2.2 "Adjusted Replacement Cost of Energy" means the ----------------------------------- Replacement Cost of Energy that will be due from Supplier after True-up in accordance with the provisions of Section 7.5. Example determinations of the Adjusted Replacement Cost of Energy are shown on Exhibit E. 1.2.3 "Ancillary Services" means those capacity-related ------------------ services as listed in Exhibit B as well as the Energy component of such services. These services are defined in Buyer's OATT. 1.2.4 "Asset Bundle" means the Reid Gardner generating ------------ station(s) and other assets associated therewith pursuant to the terms of the Asset Sale Agreement. 1.2.5 "Asset Bundle Capacity" means, with respect to each --------------------- unit listed in Exhibit A, the net generating capacity (in megawatts ("MW")) of such unit, as modified from time to time in accordance with Section 5.2, Section 20, and Section 21, and not to exceed at any time the net capacity for each unit listed in Exhibit A. Asset Bundle Capacity shall also mean, as the context requires, the Energy (in megawatt-hours ("MWh")) and the Ancillary Services which the units would be capable of producing if they operated at the capacity level described in the first sentence of this Section 1.2.5. Notwithstanding any provision of this Agreement, the portion of the Asset Bundle Capacity attributable to Reid Gardner Unit 4 shall at no time exceed the net generating capacity in megawatts, the Energy, or the Ancillary Services to which Supplier is entitled, as of the Effective Date of this Agreement, under the Participation Agreement (as defined in the Asset Sale Agreement). 1.2.6 "Asset Sale" has the meaning set forth in the ---------- Recitals. 1.2.7 "Asset Sale Agreement" means the Agreement between -------------------- Buyer and Supplier's affiliates, NRG Energy, Inc., a Delaware corporation, and Dynegy Holdings Inc., a Delaware corporation, dated as of November 16, 2000, to purchase Buyer's Asset Bundle. 1.2.8 "Asset Sale Closing" means the transfer of Buyer's ------------------ ownership of the Asset Bundle through the consummation of the Asset Sale pursuant to the terms of the Asset Sale Agreement. 1.2.9 "Average Cost of Delivered Energy" means the total -------------------------------- cost of Delivered Energy for the Contract Year after the application of the Annual True-up Mechanism from Section 7.5 divided by the total Delivered Energy 3 for the Contract Year. Example determinations of Average Cost of Delivered Energy are shown on Exhibit E. 1.2.10 "Availability Notice" means a notice delivered from ------------------- time to time by Supplier to Buyer pursuant to Section 5.2 notifying Buyer of changes in the availability of the Asset Bundle. 1.2.11 "Business Day" means any day other than Saturday, ------------ Sunday, and any day that is an observed holiday by Buyer as shown on Exhibit I. 1.2.12 "Buyer's OATT" means Buyer's then-effective Open ------------ Access Transmission Tariff, as it may be amended, which has been accepted for filing by the FERC. 1.2.13 "CALPX" means the California Power Exchange and any ----- successor entity thereto. 1.2.14 "Confidential Information" has the meaning set forth ------------------------ in Section 34. 1.2.15 "Contract Year" means, with respect to the first ------------- Contract Year, the period beginning on the Effective Date and, with respect to each subsequent Contract Year, the period immediately following the end of the preceding Contract Year, and in each case ending on the earlier of the date which is twelve (12) months thereafter or the termination date of this Agreement. 1.2.16 "Control Area Operator" means an entity or --------------------- organization, and its representatives, which is responsible for operating and maintaining the reliability of the electric power system(s) within the Transmission System. The Control Area Operator is also referred to as the transmission operator. 1.2.17 "Credit Amount" shall mean an amount equal to the ------------- TPPA Amount, plus an additional amount equal to $40/MWh multiplied by 395 megawatts, multiplied by the number of hours remaining in this Agreement until March 1, 2003. 1.2.18 "Delivered Amount" means, with respect to any ---------------- Dispatch Hour, the Energy delivered by Supplier to Buyer at the designated Point(s) of Delivery during such Dispatch Hour, whether or not such Energy was generated by the Asset Bundle, plus any additional amounts pursuant to Section 4.1.2, Section 4.1.3 and the Ancillary Services provided by Supplier for Buyer during any Dispatch Hour pursuant to the terms of this Agreement. 1.2.19 "Derating" means a reduction to the Asset Bundle -------- Capacity. 4 1.2.20 "Dispatch Hour" means the prescribed hour(s) when ------------- Energy is to be delivered by Supplier to Buyer at the designated Point(s) of Delivery and the prescribed hour(s) when Ancillary Services are to be provided to the ISA by Supplier on behalf of Buyer. 1.2.21 "EDU" means electric distribution utility, the --- organization with the responsibility for the distribution of energy over Buyer's distribution system to retail end-users. 1.2.22 "Effective Date" means the date that this Agreement -------------- becomes effective which shall be the date on which the Closing Date, as defined in the Asset Sale Agreement, actually occurs. 1.2.23 "Emergency Condition" shall mean a public declaration ------------------- by the ISA or Control Area Operator that the Transmission System is in danger of imminent voltage collapse or uncontrollable cascading outages. 1.2.24 "Energy" means electricity (measured in MWh) and ------ associated power-producing capacity to be provided by Supplier to Buyer pursuant to this Agreement. Also known as "firm energy and associated firm capacity". 1.2.25 "Event of Default" has the meaning set forth in ---------------- Section 17 hereof. 1.2.26 "FERC" means the Federal Energy Regulatory Commission ---- and any successor agency thereto. 1.2.27 "Force Majeure" has the meaning set forth in Section ------------- 12 hereof. 1.2.28 "GAAP" means Generally Accepted Accounting Principles ---- for the United States. 1.2.29 "Good Utility Practice" means the applicable --------------------- practices, methods, and act: (i) required by applicable Laws, permits and reliability criteria, whether or not the Party whose conduct at issue is a member thereof, and (ii) otherwise engaged in or approved by a significant portion of the United States electric utility industry during the relevant time period, which, in the exercise of reasonable judgement in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, safety, environmental protection, economy and expediency. Good Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to practices, methods or acts generally accepted in the United States electric utility industry. 5 1.2.30 "Governmental Authority" means any foreign, federal, ---------------------- state, local, tribal or other governmental, regulatory or administrative agency, court, commission, department, board, or other governmental subdivision, legislature, rulemaking board, tribunal, arbitrating body, or other governmental authority. 1.2.31 "Gross Replacement Costs of Energy" means Buyer's --------------------------------- Replacement Cost of Energy prior to adjustment for the amount that Buyer would have paid for the Energy if Supplier had delivered the Energy to Buyer. Example determinations of Gross Replacement Costs of Energy are shown on Exhibit D. 1.2.32 "Guarantee" has the meaning set forth in Section --------- 3.1.2 hereof. 1.2.33 "Guarantor" has the meaning set forth in Section --------- 3.1.2 hereo 1.2.34 "Invoiced Replacement Costs" means the Replacement -------------------------- Costs which have been billed to Supplier or subtracted from payments to Supplier in accordance with the provisions of Section 4.2 and Section 7.4. 1.2.35 "ISA" means the Mountain West Independent System ---- Administrator, or the regional transmission organization authorized with the responsibility for the scheduling and administration of Energy and Ancillary Services over, through and within the Transmission System in coordination with other interconnected entities to provide transmission services. The ISA is also referred to herein as transmission administrator. 1.2.36 "ISA's OATT" means the ISA's then-effective ---------- Open Access Transmission Tariff, as it may be amended, which has been accepted for filing by the FERC. 1.2.37 "Law" means any law, treaty, code, rule, regulation, --- order, determination, permit, certificate, authorization, or approval of an arbitrator, court or other Governmental Authority which is binding on a Party or any of its property. 1.2.38 "Market Price of Energy" has the meaning set forth ---------------------- in Section 6.2.1. 1.2.39 "Minimum Annual Energy Take" has the meaning set -------------------------- forth in Section 4.1.2. 1.2.40 "Minimum Hourly Energy Take" has the meaning set -------------------------- forth in Section 4.1.3. 1.2.41 "Minimum Investment Grade Rating" of a Person means ------------------------------- that such Person has a minimum credit rating on its senior unsecured debt 6 securities of at least two of the following ratings: (i) BBB as determined by Standard & Poor's Corporation, (ii) Baa2 as determined by Moody's Investors Service, Inc., or (iii) a comparable rating by another nationally recognized rating service reasonably acceptable to Buyer. 1.2.42 "Minimum Tangible Net Worth" means the total book -------------------------- value of shareholder's equity less the balance of goodwill, as reported on the latest quarterly balance sheet prepared in accordance with Generally Accepted Accounting Principles (GAAP). 1.2.43 "NERC" means the North American Electric Reliability ---- Council and any successor entity thereto. 1.2.44 "Nonemergency Condition" shall mean the ---------------------- determination, direction or order by the ISA, or Control Area Operator to Supplier and/or Buyer to change the Supply Amount which is not a result of or due to an Emergency Condition. A Nonemergency Condition includes an insufficiency of Ancillary Services to securely operate the Transmission System. 1.2.45 "Operating Representatives" means the persons ------------------------- designated to transmit and receive routine operating and emergency communications required under this Agreement. 1.2.46 "Party" has the meaning set forth in the preamble of ----- this Agreement. 1.2.47 "Permitted Deratings" means those reductions to the ------------------- Asset Bundle Capacity of which Supplier may notify Buyer from time to time in an Availability Notice pursuant to Section 5.2. 1.2.48 "Person" means any natural person, partnership, ------ limited liability company, joint venture, corporation, trust, unincorporated organization, or governmental entity or any department or agency thereof. 1.2.49 "Point of Delivery" means the point (s) which has ----------------- (have) been specified as the Interconnection Point(s) in the Interconnection Agreement between Buyer and Supplier, dated November 16, 2000, as it may be amended from time to time, as well as any alternative locations agreed upon pursuant to Section 4.1.6. 1.2.50 "Price Ceiling of Energy" means the ceiling price of ----------------------- Energy as stated in Exhibit B. 1.2.51 "Price Floor of Energy" means the floor price of --------------------- Energy as stated in Exhibit B. 7 1.2.52 "Provider of Last Resort (PLR)" has the meaning set ----------------------------- forth in the Recitals. 1.2.53 "PUCN" means the Public Utilities Commission of ---- Nevada and any successor entity thereto. 1.2.54 "Replacement Costs" means with respect to a period of ----------------- time, the difference between (a) the actual costs, including without limitation related penalties and transmission costs, incurred by Buyer to replace any shortfall between (1) the Supply Amount and (2) the Delivered Amounts of Energy, (or in the case of Ancillary Services the Supplier's schedule of Ancillary Services) during such period and (b) the payments the Supplier would have been entitled to in respect of such shortfall in delivery; provided that Replacement Costs shall also be subject to the annual true-up mechanism set forth in Section 7.5. 1.2.55 "Supply Amount" means, with respect to each Dispatch ------------- Hour, the amount of Energy and Ancillary Services, not to exceed the Asset Bundle Capacity for such Dispatch Hour, requested by Buyer to be delivered by Supplier during any Dispatch Hour. The Supply Amount for any Dispatch Hour shall be determined pursuant to Section 5.1. 1.2.56 "Total Amount of Energy Replaced" means the summation ------------------------------- of Replacement Energy as shown on Exhibit E. 1.2.57 "TPPA Amount" means $106,300,000 as such amount may ----------- be adjusted pursuant to Section 2.3. 1.2.58 "Transitional Resource Requirement" or "TRR" means --------------------------------- the Energy and loss compensation necessary for Buyer to meet its obligations as a Provider of Last Resort (PLR) for Nevada and under those wholesale sales agreements existing at the Effective Date. 1.2.59 "Transmission System" means the transmission ------------------- facilities constituting Buyer's control area, as of the date this Agreement is executed, plus any modification, upgrade or expansion of, or additions to, such facilities. 1.2.60 "WSCC" means the Western Systems Coordinating Council ---- and any successor entity thereto. 2. TERM 2.1 Term. Unless terminated earlier pursuant to the terms of this ---- Agreement, the term of this Agreement shall commence on the Effective Date and continue until the earlier of the effective date of an order by a Governmental Authority terminating Buyer's PLR responsibility, or March 1, 2003. Supplier shall provide service under this Agreement commencing on the first hour on the day after the Effective Date. 2.2 Termination. ----------- 8 2.2.1 Except pursuant to Sections 2.2.2 or 17.4, this Agreement may not be terminated without the explicit prior written approval of Buyer. 2.2.2 If, prior to the Asset Sale Closing, the FERC or any other Governmental Authority places conditions on or requires revisions of this Agreement which have a material adverse effect on Supplier or Buyer, the Parties agree to negotiate in good faith those amendments to the Agreement reasonably needed to preserve the bargain between the Parties. If the Parties fail to negotiate mutually acceptable amendments to this Agreement within sixty (60) days of such action by the FERC or other Governmental Authority, either Party may terminate the Agreement after first notifying the other Party in writing at least ten (10) Business Days prior to the termination date; provided that neither Party may exercise a right of termination pursuant to this Section 2.2.2 after the Asset Sale Closing. 2.2.3 This Agreement may be terminated with the mutual agreement of the Parties. 2.2.4 Any termination of this Agreement pursuant to this Section 2 shall not take effect until FERC either authorizes the termination or accepts a written notice of termination. 2.3 Effect of Termination. --------------------- 2.3.1 Adjustment of TPPA Amount. If the Effective Date of ------------------------- this Agreement is before June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% plus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between the Effective Date and June 1, 2001. An example calculation is shown on Exhibit J. If the Effective Date of this Agreement is after June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% minus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between June 1, 2001 and the Effective Date. An example calculation is shown on Exhibit J. If this Agreement is terminated before March 1, 2003, Supplier shall pay to Buyer an amount, in accordance with the provisions of Section 7, equal to the TPPA Amount which existed before any adjustment in accordance with the first or second paragraph of this Section 2.3.1, multiplied by the sum of the monthly adjustments for each month or portion thereof between the date on which this Agreement is terminated and March 1, 2003. An example calculation is shown on Exhibit J. 2.3.2 Any default or termination of this Agreement shall not release either 9 Party from any applicable provisions of this Agreement with respect to: 2.3.2.1 The payment of liquidated damages pursuant to Sections 4.2, 12, 17, 18, or 21. 2.3.2.2 Indemnity obligations contained in Section 10, to the extent of the statute of limitations period applicable to any third party claim. 2.3.2.3 Limitation of liability provisions contained in Section 11. 2.3.2.4 Payment of any unpaid amounts in respect of obligations arising prior to or resulting from termination. 2.3.2.5 For a period of one (1) year after the termination date, the right to raise a payment dispute and the resolution thereof pursuant to Section 13. 2.3.2.6 The resolution of any dispute submitted pursuant to Section 13 prior to, or resulting from, termination. 3. SECURITY 3.1 Supplier Certification; Guarantee. As a condition of Buyer's --------------------------------- execution of, and continuing compliance with, this Agreement, Supplier shall at Supplier's option comply with the provisions of either Section 3.1.1 or Section 3.1.2. 3.1.1 Supplier Certification. Supplier shall (a) provide a ---------------------- certificate from a duly authorized corporate officer of Supplier certifying that, as of the Effective Date, Supplier has a credit rating equal to or higher than the Minimum Investment Grade Rating; or (b) post a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.1.2 Guarantee. In the alternative to the provisions of --------- Section 3.1.1, the Supplier may provide a corporate guarantee, in form and substance as set forth in Exhibit H, made by an entity (the "Guarantor") that: 3.1.2.1 has a credit rating equal to or higher than the Minimum Investment Grade Rating, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a credit rating equal to or higher than the Minimum Investment Grade Rating; or 10 3.1.2.2 has a MTNW of no less than one (1) billion dollars, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a MTNW of no less than one (1) billion dollars; or 3.1.2.3 posts a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.2 Compliance. ---------- 3.2.1 Reporting. If at any time during the term of this --------- Agreement, Standard & Poor's Corporation, Moody's Investors Service, Inc. or another nationally recognized firm downgrades the credit rating of Supplier, the Guarantor, or the financial institution that issued the letter of credit, as applicable, then Supplier shall provide Buyer with written notice of such change of circumstance within two (2) Business Days of any such change. In the event such a downgrade also constitutes an Event of Default pursuant to Section 17, the requirements of this Section 3.2.1 are in addition to, and not in lieu of, the requirements of Section 17. 4. SUPPLY SERVICE 4.1 Obligations of the Parties. -------------------------- 4.1.1 Supply Amount. Supplier shall be required to provide ------------- the Supply Amount in any Dispatch Hour. As provided in Section 5.1, Buyer shall makereasonable efforts to ensure that the Supply Amount is no greater than necessary to satisfy Buyer's TRR. 4.1.1.1 With the Buyer's prior consent, not to be unreasonably withheld or delayed, Supplier shall be entitled to generate or otherwise procure the Supply Amount from sources other than the Asset Bundle. 4.1.1.2 Supplier shall deliver the Supply Amount to Buyer during the Dispatch Hour on a continuous basis at the Point(s) of Delivery and shall schedule the Supply Amount in accordance with the Buyer's OATT or the ISA's OATT, as applicable. 4.1.1.3 The Buyer at its sole discretion shall designate the allocation of the Supply Amount between Energy and 11 Ancillary Services in accordance with the notification provisions of Section 5. 4.1.1.3.1 The Parties recognize that operation of the Asset Bundle is subject to, and thus the Supply Amount at times may be limited by, the operational parameters of the Asset Bundle. The Parties further recognize that the consolidation of two or more generating units into an Asset Bundle precludes contractual provisions addressing such operational parameters in a matter normally applied to Energy purchases from specified generating units. Consequently, Supplier will have the right to raise concerns regarding the effect of such operational parameters upon Buyer's scheduling requests, and Buyer will make good faith efforts to alleviate Supplier's concerns. 4.1.1.3.2 The Parties further recognize that the Asset Bundle also is subject to the contractual and operating constraints set forth in Exhibit M. 4.1.2 Minimum Annual Energy Take. The Buyer shall accept a -------------------------- minimum annual energy take during each Contract Year. The Minimum Annual Energy Take shall be set forth on Exhibit A. 4.1.2.1 Buyer's Obligation to Take. If Buyer is -------------------------- unwilling to accept the Minimum Annual Energy Take for any Contract Year, as may be adjusted pursuant to Section 4.1.2.2, the difference (in MWh) between the Supply Amount of Energy (including consideration for Energy that would have been taken but was unavailable due to Permitted Deratings or Force Majeure, as well as the Total Amount of Energy Replaced) and the Minimum Annual Energy Take shall be billed at the Price Ceiling of Energy less the Price Floor of Energy. An example of the monthly determination of the amount of Energy to be credited against the Minimum Annual Energy Take is shown on Exhibit L. 4.1.2.2 Adjustments to Minimum Annual Energy Take. ----------------------------------------- Buyer shall have the right to reduce the Minimum Annual Energy Take if the number of customers taking electric service from Buyer falls below the number of customers on December 31, 2000. Adjustments will be applicable, on a pro rata basis, on the first (1st) day of the month immediately following Supplier's receipt of Buyer's notice of adjustment. Buyer shall provide supporting data in 12 reasonable detail to support its calculations. An example of the calculation of a revised Minimum Annual Energy Take is shown on Exhibit K. 4.1.3 Minimum Hourly Energy Take. The Buyer shall accept a -------------------------- Minimum Hourly Energy Take for any Dispatch Hour if the Supply Amount, or a portion thereof, is provided to Buyer from the Asset Bundle. The Minimum Hourly Energy Take is stated in Exhibit A. 4.1.3.1 Buyer's Obligation to Take. If Buyer is -------------------------- unwilling to accept the Minimum Hourly Energy Take, the difference (in MWh) between the Supply Amount of Energy (including consideration for Energy that would have been taken but was unavailable due to Permitted Deratings or Force Majeure, as well as the Total Amount of Energy Replaced) and Minimum Hourly Energy Take shall be billed at the Price Ceiling of Energy less the Price Floor of Energy. 4.1.4 Supplier Rights to Output. Supplier may sell to ------------------------- others any portion of the Asset Bundle Capacity in excess of the Supply Amount. 4.1.5 Point(s) of Delivery. Supplier shall deliver, and -------------------- Buyer shall take delivery of, the Supply Amount of Energy at the Point(s) of Delivery. Subject to Section 4.1.6.2, Supplier shall be responsible for all costs associated with delivery of the Supply Amount of Energy to the Point(s) of Delivery. 4.1.6 Alternative Points of Delivery. For any Dispatch ------------------------------ Hour, either Party may designate one or more alternative Points of Delivery, subject to the other Party's prior approval and consistent with the Buyer's OATT or the ISA's OATT, as applicable, such approval not to be unreasonably withheld or delayed. 4.1.6.1 If Supplier has designated an alternative Point of Delivery, Supplier shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.6.2 If Buyer has designated an alternative Point of Delivery, Buyer shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.7 Fuel. Buyer shall have no responsibility for any fuel ---- procurement or fuel transportation costs or activities associated with the Asset Bundle during the term of this Agreement. 4.1.8 Resale. Except as provided in the next sentence, the ------ Supply Amount may be resold by Buyer only as necessary to satisfy Buyer's TRR. If, after submitting the request of the Supply Amount pursuant to Section 13 5.1, the Buyer determines that the scheduled Supply Amount, together with purchases scheduled under Buyer's other Transitional Power Purchase Agreements, exceeds Buyer's most current projected TRR, then the Buyer also shall resell at wholesale that amount of Energy in excess of Buyer's actual TRR as necessary to balance its load and resources. 4.1.9 Right to Review. Buyer and Supplier each shall have --------------- the right to review during normal business hours the relevant books and records of the other Party to confirm the accuracy of such as it pertains to transactions under this Agreement. The review shall be consistent with standard business practices and shall follow reasonable notice to the other Party. Reasonable notice for a review of the previous month's records shall be at least a twenty-four (24) hour period from a Business Day to a subsequent Business Day. If a review is requested of other than the previous month's records, then notice of that request shall be provided with a minimum of seven (7) calendar days written notice by the requesting Party. The notice shall specify the period to be covered by the review. The Party providing records can make reasonable requests that the receiving Party keep the records confidential, and the receiving Party shall take reasonable steps to accommodate such requests. 4.2 Liquidated Damages. ------------------ 4.2.1 If the Delivered Amount of Energy is less than the Supply Amount of Energy in any Dispatch Hour during a month, and Replacement Costs computed in respect of such month are greater than zero, then Supplier shall reimburse Buyer for such Replacement Costs. If Supplier's schedule of Ancillary Services is less than the Supply Amount of Ancillary Services in any Dispatch Hour during a month, Supplier shall reimburse Buyer for such Replacement Costs for the difference between Supplier's schedule and the Supply Amount of Ancillary Services. An example of the methodology used to calculate Replacement Costs is provided in Exhibit D. 4.2.2 Supplier also shall be responsible for any costs incurred by Buyer associated with a violation of reliability criteria (including but not limited to imbalance costs or penalties) due to a deviation between the Supply Amount and Delivered Amount. 4.2.3 The Parties recognize and agree that the payment of such amounts by Supplier pursuant to this Section 4.2 is an appropriate remedy in the event of such a failure and that any such payment does not constitute a forfeiture or penalty of any kind, but rather constitutes actual costs to Buyer under the terms of this Agreement. 14 4.3 Supplier Operating Representative. Supplier shall provide and --------------------------------- maintain a twenty-four (24) hour seven (7) day per week communication link with Buyer's control center and with Buyer's schedulers. Supplier's Operating Representatives shall be available to address and make decisions on all operational matters under this Agreement on a twenty-four (24) hour seven (7) day per week basis. 5. NOTIFICATION 5.1 Scheduling Notification. Buyer shall provide Supplier with a ----------------------- request of the Supply Amount no later than twenty-four (24) hours before day-ahead bids must be submitted to the CALPX. Buyer shall make reasonable efforts to ensure that the request of the Supply Amount is no greater than that amount then projected to be necessary to satisfy Buyer's TRR. In addition, for each Supply Amount request, the change in the Supply Amount from one (1) hour to the next hour shall be no greater than the ramping capability of the units within the Asset Bundle as shown in Exhibit A. 5.2 Availability Notification. ------------------------- 5.2.1 No later than 5:00 a.m. (Pacific Time) of each day, Supplier shall deliver to Buyer an Availability Notice in the form set forth in Exhibit G. 5.2.2 Availability Notices shall provide, for the ninety-six (96) hour period starting at 6:00 a.m. (Pacific Time) that day, Supplier's hourly projection of the unavailability or derating ("Derating") of the Asset Bundle compared to the Asset Bundle Capacity figures stated for each unit in Exhibit A. Each Availability Notice also shall contain, as applicable: (a) the units which are subject to a Derating; (b) the magnitude of the Derating; (c) the hours during which the Derating is expected to apply; (d) the cause of the Derating; (e) the extent, if any, to which the Derating is attributable to a Permitted Derating; and (f) the projected Asset Bundle Capacity for each unit during the period covered by the Availability Notice, pursuant to Section 5.2.4 below. 5.2.3 If and to the extent a Derating is the result of one or more of the following causes, it shall be a Permitted Derating: (a) approved planned outages pursuant to Section 21; (b) response to an Emergency Condition as described in Section 20; or (c) subject to the limitations expressed in Section 12.5, a Force Majeure event. 15 5.2.4 In respect of any Dispatch Hour, the Asset Bundle Capacity of each unit shall be the Asset Bundle Capacity figure stated in Exhibit A minus any Permitted Derating applicable during such hour. 5.2.5 Neither the Asset Bundle Capacity nor the Supply Amount shall be reduced by Deratings which are not Permitted Deratings. Supplier shall be responsible for all Replacement Costs, pursuant to Section 4.2.1, caused by Deratings that are not Permitted Deratings. 6. PRICING OF ENERGY AND ANCILLARY SERVICES 6.1 Overview. The price of Energy paid by Buyer to Supplier shall -------- be based upon a designated hourly market price, subject to monthly floor, monthly ceiling, and annual true-up provisions. The Price Floor of Energy will ensure that Supplier will receive an average price for Energy for each month which is not less than the price stated in Exhibit B. The Price Ceiling of Energy provision provides that the average price of Energy paid to Supplier each month and for each year shall not exceed the price stated in Exhibit B. 6.2 Price of Energy. --------------- 6.2.1 Market Price of Energy. In respect of any Dispatch ---------------------- Hour, the designated Market Price of Energy shall be the South of Path 15 ("SP 15") hourly market-clearing price in the day-ahead market from the CALPX as published at the following Web Site (or its successor web site) http://www.calpx.com/prices/index_prices_dayahead_ -------------------------------------------------- trading.html. Should this hourly market in the day- ------------ ahead market not exist for the entire term, the Parties shall agree upon a similar market price index. 6.2.2 Price Floor of Energy. The Price Floor of Energy is --------------------- stated in Exhibit B and shall not change during the term of this Agreement. 6.2.3 Price Ceiling of Energy. The Price Ceiling of Energy ----------------------- is stated in Exhibit B and shall not change during the term of this Agreement. 6.3 Pricing of Ancillary Services. The price of the capacity ----------------------------- component of Ancillary Services is stated in Exhibit B. The price of Ancillary Services shall not change during the term of the Agreement. Supplier shall make available to Buyer and Buyer shall offer to pass through the Energy portion of Ancillary Services with respect to the Supply Amount to the ISA, or Control Area Operator, at the Price Ceiling of Energy (plus expected direct transaction costs). The net proceeds shall be credited to the Supplier pursuant to Section 7. 6.4 Price Revisions. The Parties waive any and all rights to seek --------------- to revise the provisions of this Agreement, including the prices stated, pursuant to Sections 205 and/or 206 of the Federal Power Act. 16 7. INVOICING AND PAYMENTS 7.1 Invoicing and Payment. On or before the tenth (10th) day of --------------------- each month, Supplier shall send to Buyer an invoice setting forth the Supply Amount, Delivered Amount, the Market Price of Energy pursuant to Section 6.2.1 for each Dispatch Hour in the previous month, any amount due in accordance with Section 7.13 and the total due from Buyer. The invoice shall be calculated based upon data available to Supplier and shall be in accordance with this Section 7 and Exhibit C. Buyer shall promptly notify Supplier if Buyer in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. 7.2 Monthly Invoice Calculation. On each monthly invoice, Supplier --------------------------- shall calculate the following amounts: 7.2.1 The Delivered Amount in respect of each Dispatch Hour multiplied by the corresponding Market Price of Energy pursuant to Section 6.2.1, summed over the billing period; 7.2.2 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Ceiling of Energy; 7.2.3 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Floor of Energy; 7.2.4 For each Dispatch Hour of the billing period, the shortfall, if any, between the Supply Amount and the Delivered Amount (and in the case of Ancillary Services the shortfall between the Supply Amount of Ancillary Services and Supplier's schedule of Ancillary Services); 7.2.5 The Supply Amount of Ancillary Service for each dispatch hour multiplied by the price of Ancillary Services as stated in Exhibit B; and 7.2.6 The Delivered Amount of Energy related to Ancillary Services for each dispatch hour multiplied by the Price Ceiling of Energy as stated in Exhibit B. 7.2.7 If applicable, any amount to be calculated in accordance with Section 7.13. 7.3 Supplier's Invoice. Supplier will invoice the lesser of the ------------------ amounts calculated in Sections 7.2.1 and 7.2.2, provided that if the amount calculated in Section 7.2.1 is less than the amount calculated in Section 7.2.3, Supplier shall invoice Buyer the amount calculated in Section 7.2.3. Supplier shall also include in its invoice the amounts calculated in Sections 7.2.5, 7.2.6 and 7.2.7. If the Delivered Amount exceeds the Supply Amount, Buyer shall not be obligated to pay for the excess amount. Buyer shall pay Supplier for the amounts invoiced pursuant to Section 7.2.6 upon Buyer's receipt of payment from ISA or Control Area Operator. Examples of this monthly invoice calculation (and annual true-up process) are 17 contained in Exhibit C. 7.4 Buyer's Invoice. In the event any shortfall occurs pursuant to --------------- Section 7.2.4 or payment is due to Buyer pursuant to Section 7.13, Buyer shall within ten (10) Business Days of receipt of Supplier's invoice deliver to Supplier a Buyer's invoice detailing any Replacement Costs or other payment due. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. Buyer shall have the right to adjust the invoices issued in accordance with this Section 7.4 if Buyer incurs Replacement Costs that were not known when earlier invoices were issued. Adjusted invoices shall be issued within thirty (30) days of the date on which the additional Replacement Costs become known. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's adjusted invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. 7.5 Annual True-Up Mechanism for Energy. ----------------------------------- 7.5.1 The annual true-up mechanism will provide adjustments among the Parties with respect to each Contract Year in the following scenarios: (a) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is less than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. (b) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is greater than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall 18 subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Market Price of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. (c) If Buyer incurred Replacement Costs for energy during the Contract year, Supplier shall multiply the Total Amount of Energy Replaced during the Contract Year by the Average Cost of Delivered Energy after true-up as determined in accordance with Section 7.5.1 (a) or 7.5.1 (b). If the amount so obtained is greater than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be zero. If the amount so obtained is less than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be the sum of the monthly Gross Replacement Costs of Energy less the amount obtained in accordance with the first sentence of this Section 7.5.1(c). If the Adjusted Replacement Cost of Energy is greater than the sum of the monthly Invoiced Replacement Costs of Energy from Buyer's Invoices for the Contract Year, Supplier shall pay the difference to Buyer. If the sum of the monthly Invoiced Replacement costs of Energy is greater than the Adjusted Replacement Cost of Energy, Buyer shall pay the difference to Seller. 7.5.2 True-up adjustments will be calculated by Supplier within twenty (20) days after each Contract Year. Examples of the true-up calculations and invoice form are set forth in Exhibit E. Interest shall be calculated pursuant to 18 CFR Section 35.19a and shall be included in the true-up invoice. Invoices for true-up adjustments shall be submitted by Supplier within thirty (30) days after the end of the Contract Year. Payments for such invoices shall be due from Buyer thirty (30) days from receipt of the true-up invoice. 7.6 Invoice Disagreements. Should there be a good faith dispute --------------------- over any invoice, the Parties shall promptly seek resolution pursuant to Section 13. Pending resolution of the invoice dispute, payment shall be made or offsets or credits taken, as applicable, based upon the undisputed portion of the invoice. 7.7 Adjustments. Upon resolution of the dispute, the prevailing ----------- Party shall be entitled 19 to receive the disputed amount, as finally determined to be payable along with interest (calculated pursuant to 18 C.F.R. ss. 35.19a through the date of payment. No invoice (or payment covered thereby) shall be subject to adjustment unless notice or request for adjustment is given within one (1) year of the date payment thereunder was due. 7.8 Method of Payment. Subject to Sections 7.3, 7.6 and 7.7, Buyer ----------------- shall remit all amounts due by wire or electronic fund transfer, pursuant to Supplier's invoice instructions, no later than thirty (30) days after receipt of the invoice. 7.9 Overdue Payments. Overdue payments shall bear interest from ---------------- and including, the due date to the date of payment on the unpaid portion calculated pursuant to 18 C.F.R.ss.35.19a. 7.10 Buyer Right to Offset. Buyer shall have the right to offset --------------------- any amounts Supplier owes to Buyer, including Replacement Costs (except for such amounts disputed in good faith by Supplier), against the amounts owed by Buyer to Supplier. 7.11 Taxes. Each Party shall pay ad valorem and other taxes ----- attributed to its facilities and services provided. Supplier shall not include any taxes of any kind in its invoices to Buyer. The prices of Energy and Ancillary Services shall not change during the term of this Agreement as a result of any changes in local, state or federal taxes, fees or levies. 7.12 Late Invoices. If either Party submits an invoice outside of ------------- the time deadlines set forth herein, that Party shall not forfeit its rights to collect the amounts due thereunder, provided that such invoice is no more than six (6) months late, and provided that changes to invoices remain subject to the deadline in Section 7.7. 7.13 Termination Prior to March 1, 2003. Notwithstanding any other ---------------------------------- provision herein, in the event that this Agreement is terminated before March 1, 2003 and as a result of such termination Buyer is entitled to a payment in accordance with Section 2.3.1, Supplier shall include an amount calculated in accordance with Section 2.3.1 and Exhibit J, to be paid by Supplier to Buyer in the next monthly invoice submitted to Buyer following such termination. 8. REGULATORY APPROVALS 8.1 This Agreement will be filed with the FERC and any other appropriate regulatory agencies by the appropriate Party as may be required. 9. COMPLIANCE 9.1 Each Party shall comply with all relevant Laws and shall, at its sole expense, maintain in full force and effect all relevant permits, authorizations, licenses, and other authorizations material to the maintenance of facilities and the performance of obligations under this Agreement. 20 9.2 Each Party and its representatives shall comply with all relevant requirements of any authorized Control Area Operator, ISA, and/or EDU to ensure the safety of its employees and the public, and to ensure electric system reliability and integrity, material to the performance of this Agreement. 9.3 Buyer and Supplier shall perform or cause to be performed, their obligations under this Agreement in all material respects in accordance with Good Utility Practices. Supplier covenants and agrees that as of the Effective Date it or its permitted assignee shall (a) have the right to control the operation of the Asset Bundle and (b) be willing and able to perform its obligations under this Agreement. 10. INDEMNIFICATION 10.1 To the fullest extent permitted by law, a Party to this Agreement ("the Indemnifying Party") shall indemnify, defend and hold harmless the other Party, its parent, affiliates, and successors and agents (each an "Indemnified Party") from and against any and all claims, demands, suits, obligations, payments, liabilities, costs, judgments, damages, losses or expenses asserted by third parties against an Indemnified Party and arising out of, relating to, or resulting from the Indemnifying Party's breach of, or the negligent performance of its obligations under this Agreement. 10.1.1 Such indemnity shall also extend to actual courts costs, attorneys' fees, expenses and other liabilities incurred in the defense of any claim, action or proceeding, including negotiation, settlement, defense and appeals, to which this indemnification obligation applies. In furtherance of the foregoing indemnification and not by way of limitation thereof, the Indemnifying Party hereby waives any defense it otherwise might have against the Indemnified Party under applicable workers' compensation laws. 10.1.2 In claims against any Indemnified Party by an agent of the Indemnifying Party, or anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Section 10 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Indemnifying Party or a subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts. 10.1.3 Such indemnity shall also extend to all costs and expenses incurred by the Indemnified Party in any action or proceeding to enforce the provisions of this Agreement, but only if and to the extent the Indemnified Party prevails in such action or proceeding. 10.2 No Negation of Existing Indemnities; Survival. Each Party's --------------------------------------------- indemnity 21 obligations hereunder shall not be construed to negate, abridge or reduce other rights or obligations or indemnity which would otherwise exist at law or equity. The obligations contained herein shall survive any termination, cancellation, or suspension of this Agreement to the extent that any third party claim is commenced during the applicable statute of limitations period. 10.3 Indemnification Procedures. -------------------------- 10.3.1 Any Party seeking indemnification under this Agreement shall give the other Party notice of such claim promptly but in any event on or before thirty (30) days after the Party's actual knowledge of such claim or action. Such notice shall describe the claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the claim that has been, or may be sustained by, said Party. To the extent that the other Party will have been actually and materially prejudiced as a result of the failure to provide such notice, such notice will be a condition precedent to any liability of the other Party under the provisions for indemnification contained in this Agreement. 10.3.2 In any action or proceeding brought against an Indemnified Party by reason of any claim indemnifiable hereunder, the Indemnifying Party may, at its sole option, elect to assume the defense at the Indemnifying Party's expense, and shall have the right to control the defense thereof and to determine the settlement or compromise of any such action or proceeding. Notwithstanding the foregoing, an Indemnified Party shall in all cases be entitled to control its defense in any action if it: (i) may result in injunctions or other equitable remedies in respect of the Indemnified Party which would affect its business or operations in any materially adverse manner; (ii) may result in material liabilities which may not be fully indemnified hereunder; or (iii) may have a significant adverse impact on the business or the financial condition of the Indemnified Party (including a material adverse effect on the tax liabilities, earnings or ongoing business relationships of the Indemnified Party) even if the Indemnifying Party pays all indemnification amounts in full. 10.3.3 Subject to Section 10.3.2, neither Party may settle or compromise any claim for which indemnification is sought under this Agreement without the prior consent of the other Party; provided, however, said consent shall not be unreasonably withheld or delayed. 11. LIMITATION OF LIABILITY 22 11.1 Responsibility for Damages: Except as otherwise provided -------------------------- herein or to the extent of the other Party's negligence or willful misconduct, each Party shall be responsible for all physical damage to or destruction of the property, equipment and/or facilities owned by it and its affiliates and any physical injury or death to natural Persons resulting therefrom, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party for such damage; provided, that in any such case the Parties will exercise Due Diligence to remove the cause of any disability at the earliest practicable time. 11.2 No Consequential Damages: To the fullest extent permitted by ------------------------ law and notwithstanding other provisions of this Agreement, in no event shall a Party, or any of its Agents, be liable to the other Party, whether in contract, warranty, tort, negligence, strict liability, or otherwise, for special, indirect, incidental, multiple, consequential (including but not limited to lost profits or revenues and lost business opportunities), or punitive damages related to or resulting from performance or nonperformance of this Agreement or any activity associated with or arising out of this Agreement. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 11.2. In addition, this limitation on liability shall not apply with respect to claims pursuant to Section 10 hereof. 11.3 Survival: The provisions of this Section 11 shall survive any -------- termination, cancellation, or suspension of this Agreement. 12. FORCE MAJEURE 12.1 An event of "Force Majeure" shall be defined as any interruption or failure of service or deficiency in the quality or quantity of service or any other failure to perform any of its obligations hereunder to the extent such failure occurs without fault or negligence on the part of that Party and is caused by factors beyond that Party's reasonable control, which by the exercise of reasonable diligence that Party is unable to prevent, avoid, mitigate or overcome, including: (i) acts of God or the public enemy, such as storms, flood, lightning, and earthquakes, (ii) failure, threat of failure, or unscheduled withdrawal of facilities from operation for maintenance or repair, and including unscheduled transmission and distribution outages, (iii) sabotage of facilities and equipment, (iv) civil disturbance, (v) strike or labor dispute, (vi) action or inaction of a court or public authority, or 23 (vii) any other cause of similar nature beyond the reasonable control of that Party. 12.2 Economic hardship of either Party shall not constitute Force Majeure under this Agreement. Notwithstanding this, if Buyer suffers an event of Force Majeure it shall be relieved of its obligation to take delivery of, or otherwise pay for, Energy and Ancillary Services under this Agreement for the duration of the event of Force Majeure. In addition, if Buyer is unable to have Energy and Ancillary Services delivered from the Point(s) of Delivery to its service territory due to an outage on the Transmission System, that shall be considered a Force Majeure event and shall relieve Buyer of performance for the extent of the event. 12.3 In the event of a Force Majeure, neither Party shall be considered in default under this Agreement or responsible to the other Party in tort, strict liability, contract or other legal theory for damages of any description, and affected performance obligations shall be extended by a period equal to the term of the resultant delay, but in no event shall exceed the term of the Agreement, provided that the Party relying on a claim of Force Majeure: (i) provides prompt written notice of such Force Majeure event to the other Party, giving an estimate of its expected duration and the probable impact on the performance of its obligations hereunder; (ii) exercises all reasonable efforts to continue to perform its obligations under this Agreement; (iii) expeditiously takes action to correct or cure the event or condition excusing performance so that the suspension of performance is no greater in scope and no longer in duration than is dictated by the problem; provided, however, that settlement of strikes or other labor disputes will be completely within the sole discretion of the Party affected by such strike or labor dispute; (iv) exercises all reasonable efforts to mitigate or limit damages to the other Party; and (v) provides prompt notice to the other Party of the cessation of the event or condition giving rise to its excuse from performance. 12.4 Notwithstanding the above provisions, a Force Majeure event shall excuse Supplier from its obligation to deliver the Supply Amount pursuant to Section 4 of this Agreement only for the first forty-eight (48) hours of the Force Majeure event. After such forty-eight (48) hour period, Supplier must either deliver the Supply Amount at the Point(s) of Delivery or pay liquidated damages pursuant to Section 4.2 of this Agreement. Provided that, to the extent a Force Majeure event is caused by an outage on the Transmission System, Supplier shall be excused 24 from its obligations to deliver the Supply Amount for the duration of the outage. 12.5 If Supplier has notified Buyer of an event of Force Majeure, and if Supplier so requests, Buyer will attempt to replace the Supply Amount that is not excused in accordance with Section 12.4 with Energy or Ancillary Services from another Asset Bundle. However, Buyer's inability to acquire such replacement Energy or Ancillary Services shall not excuse Supplier from Supplier's obligation to deliver the Supply Amount not otherwise excused in accordance with Section 12.4 13. DISPUTES 13.1 Any action, claim or dispute which either Party may have against the other arising out of or relating to this Agreement or the transactions contemplated hereunder, or the breach, termination or validity thereof (any such claim or dispute, a "Dispute") shall be submitted in writing to the other Party. The written submission of any Dispute shall include a concise statement of the question or issue in dispute together with a statement listing the relevant facts and documentation that support the claim. 13.2 The Parties agree to cooperate in good faith to expedite the resolution of any Dispute. Pending resolution of a Dispute, the Parties shall proceed diligently with the performance of their obligations under this Agreement. 13.3 The Parties shall first attempt in good faith to resolve any Dispute through informal negotiations by the Contract Representatives. In the event that the Contract Representatives are unable to satisfactorily resolve the Dispute within thirty (30) days from the receipt of notice of the Dispute, either Party may by written notice to the other Party refer the Dispute to its respective senior management for resolution as promptly as practicable. If the Parties' senior management are unable to resolve the Dispute within forty-five (45) days from the date of such referral, thereafter the Parties may agree in writing to extend the time period of such senior management negotiations. In the event the Parties' senior management do not resolve the dispute within the prescribed or extended time period, either Party may initiate arbitration through the serving and filing of a demand for arbitration and the Parties expressly agree that arbitration in accordance with this Section 13 shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time: 13.3.1 A request made by a Party for provisional remedies requesting preservation of the Parties' respective rights and obligations under the Agreement may be resolved by a court of law located in the County of the principal place of business of Buyer. 13.3.2 Nothing in this Agreement shall preclude, or be construed to preclude, any Party from filing a petition or complaint with the FERC or PUCN with respect to any arbitrable Dispute over which said agency has jurisdiction. In such case, the other Party may request the FERC or 25 PUCN, as applicable, to reject or to waive jurisdiction. If jurisdiction is rejected or waived with respect to all or a portion of the Dispute, the portion of the Dispute not so accepted by the FERC or PUCN, as applicable, shall be resolved through arbitration in accordance with this Agreement. To the extent that the FERC or PUCN, as applicable, asserts or accepts jurisdiction over the Dispute, the decision, finding of fact or order of FERC shall be final and binding, subject to judicial review under the Federal Power Act or Nevada Revised Statutes and subject to the provisions of Section 2.2.2. Any arbitration proceedings that may have commenced with respect to the Dispute prior to the assertion or acceptance of jurisdiction by the FERC or PUCN, as applicable, shall be terminated to the extent the FERC or PUCN accepts or asserts jurisdiction over such Dispute. 13.4 Unless otherwise agreed by the Parties, any arbitration initiated under this Agreement shall be conducted in accordance with the following: 13.4.1 Arbitrations shall be held within the County of the principal place of business of Buyer. 13.4.2 Except as otherwise modified herein, the arbitration shall be conducted in accordance with the "Commercial Arbitration Rules" of the American Arbitration Association ("AAA") then in effect. 13.4.3 Arbitration shall be conducted by one neutral arbitrator who shall be selected pursuant to the AAA rules and the following: 13.4.3.1 The Parties agree that the list of potential arbitrators provided by the AAA shall, if available, contain twenty (20) candidates, and at least fifty percent (50%) of the candidates shall be members of the AAA National Energy Panel. 13.4.3.2 The Parties also agree that each shall be allowed to strike the names of five candidates before ranking the remaining candidates and returning the list to the AAA in accordance with the Commercial Arbitration Rules. If the Parties are unable to agree on an arbitrator, such arbitrator shall be appointed by the AAA. 13.4.3.3 The arbitrator shall not have any current or past substantial business, financial, or personal relationships with either Party (or their Affiliates) and shall not be a vendor, supplier, customer, employee, consultant, or competitor to either of the Parties or their Affiliates. 13.4.3.4 The arbitrator shall be authorized only to interpret and apply the provisions of this Agreement or any related agreements entered into under this Agreement and shall 26 have no power to modify or change any provision of this Agreement. The arbitrator shall have no authority to award punitive or multiple damages or any damages inconsistent with this Agreement. The arbitrator shall within thirty (30) days of the conclusion of the hearing, unless such time is extended by agreement of the Parties, notify the Parties in writing of his or her decision, stating his or her reasons for such decision and separately listing his or her findings of fact and conclusions of law. Judgment on the award may be entered in any court having jurisdiction. 13.5 The Parties shall proceed with the arbitration expeditiously, and the arbitration shall be concluded within five (5) months of the filing of the demand for arbitration pursuant to this Section 13 in order that the decision may be rendered within six (6) months of such filing, unless the arbitrator extends such time at the request of a Party upon a showing of good cause or upon agreement of the Parties. 13.6 Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of any arbitration agreement shall be governed by the Federal Arbitration Act of the United States, 9 U.S.C. ss.ss. 1 et seq. 13.7 The decision of the arbitrator shall be final and binding on both Parties and may be enforced in any court having jurisdiction over the Party against which enforcement is sought. 13.8 The fees and expenses of the arbitrator shall be shared by the Parties equally, unless the decision of the arbitrator shall specify some other apportionment of such fees and expenses. All other expenses and costs of the arbitration shall be borne by the Party incurring the same. 14. NATURE OF OBLIGATIONS 14.1 Except where specifically stated in this Agreement to be otherwise, the duties, obligations, and liabilities of the Parties shall be several; not joint or collective. The provisions of this Agreement shall not be construed to create an association, trust, partnership, or joint venture; to impose a trust or partnership duty, obligation, or liability or agency relationship on or with regard to either Party. 14.2 Nothing in this Agreement nor any action taken hereunder shall be construed to create any duty, liability, or standard of care to any person not a Party to this Agreement. Each Party shall be individually and severally liable for its own obligations under this Agreement. 14.3 By this Agreement, neither Party dedicates any part of its facilities or the service provided under this Agreement to the public. 15. SUCCESSORS AND ASSIGNS 27 15.1 This Agreement may be assigned, without express written consent of the other Party, as follows: 15.1.1 Buyer may assign this Agreement or assign or delegate its rights and obligations under this Agreement, in whole or in part, if such assignment is made to an affiliate, parent, subsidiary, successor or any party, provided that such assignee operates all or a portion of the PLR or if such assignment is required by Law or applicable regulations. 15.1.2 Supplier also may assign this Agreement as provided in Section 11.5 of the Asset Sale Agreement; provided that such assignment is to an entity that (a) has the right to control the operation of the Asset Bundle and (b) is willing and able to perform its obligations under this Agreement. 15.2 Supplier may, without the consent of Buyer, assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee, lending institution, or any Person for the purposes of financing or refinancing the Asset Bundle, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, conveyances of dispositions in lieu thereof; provided, however, that no such assignment or disposition shall relieve or in any way discharge Supplier or such permitted assignee from the performance of its duties and obligations under this Agreement. Buyer agrees to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, conveyance, pledge or disposition of rights hereunder for purposes of the financing or refinancing of the Asset Bundle, so long as Buyer's rights under this Agreement are not thereby materially altered, amended, diminished or otherwise impaired. 15.3 Either Party may, without the consent of the other Party, assign this Agreement to a successor to all or substantially all of the assets of such Party by way of merger, consolidation, sale or otherwise, provided such successor assumes and becomes liable for all of such Party's duties and obligations hereunder including Section 3 hereof. 15.4 Except as stated above, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by either Party, including by operation of law, without the prior written consent of the other Party, said consent not to be unreasonably withheld. Any assignment of this Agreement in violation of the foregoing shall be, at the option of the non-assigning Party, void. 15.5 Except as set forth above, no assignment or transfer of rights or obligations under this Agreement by a Party shall relieve said Party from full liability and financial responsibility for the performance thereof after any such transfer or assignment unless and until the transferee or assignee shall agree in writing to assume the obligations and duties of said Party under this Agreement and the other Party has consented in writing to such assumption; said consent not to be unreasonably withheld. 28 15.6 This Agreement and all of the provisions hereof are binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns. 16. REPRESENTATIONS 16.1 Representations of the Parties. The Parties represent and ------------------------------ warrant each to the other as follows: 16.1.1 Incorporation. Buyer is a corporation duly ------------- incorporated, validly existing and in good standing under the laws of the State of Nevada. Supplier is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Both Buyer and Supplier have all requisite corporate power and authority to own, lease and operate their material assets and properties and to carry on their business as now being conducted. 16.1.2 Authority. The Party has full corporate power and --------- authority to execute and deliver this Agreement and, subject to the procurement of applicable regulatory approvals, to carry out the actions required of it by this Agreement. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action required on the part of the Party. The Agreement has been duly and validly executed and delivered by the Party and, assuming that it is duly and validly executed and delivered by the other Party, constitutes a legal, valid and binding agreement of the Party. 16.1.3 Compliance With Law. The Party represents and ------------------- warrants that it is not in violation of any applicable Law, or applicable regulation, which violation could reasonably be expected to materially adversely affect the other Party's performance of its obligations under this Agreement. The Party represents and warrants that it will comply with all Laws, and regulations applicable to its compliance with this Agreement, non-compliance with which would reasonably be expected to materially adversely affect either Party's performance of its obligations under this Agreement. 16.1.4 Representations of Both Parties. The representations ------------------------------- in this Section 16 shall continue in full force and effect for the term of this Agreement. 17. DEFAULT AND REMEDIES 17.1 An Event of Default hereunder shall be deemed to have occurred upon a Party's (Defaulting Party) failure to comply with any material obligation imposed upon it by this Agreement. Examples of an Event of Default include, but are not limited to the following: (i) Failure to make any payments due under this Agreement; 29 (ii) Failure to deliver the Supply Amount for a period of five (5) consecutive days; (iii) Failure to follow the directions of a Control Area Operator, ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto where following such directions is required hereunder; (iv) Supplier not being in compliance with Section 3; and (v) Failure of the Guarantor to be in compliance with the terms of the Guarantee delivered under Section 3.1.2. 17.2 An Event of Default shall be excused: 17.2.1 In the event such Event of Default was caused by Force Majeure provided that the Party claiming a Force Majeure complies with the requirements of Section 12; and 17.2.2 In the event such Event of Default was caused by transmission and distribution outages or disruptions. 17.3 Unless excused, in an Event of Default the Non-Defaulting Party shall be entitled to provide written notice (or verbal notice in case of emergency followed by written notice) of the Event of Default to the Defaulting Party and to specify a cure period, which cure period shall be a minimum of thirty (30) days. 17.4 If an Event of Default is not cured by the Defaulting Party during the cure period specified by the Non-Defaulting Party, the Non-Defaulting Party shall be entitled to those remedies which are not inconsistent with the terms of this Agreement, including termination and the payment of liquidated damages. A Defaulting Party shall not be liable to the Non-Defaulting Party for any punitive, consequential or incidental damages. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 17.4. 17.5 Notwithstanding this Section 17, liquidated damages shall be paid to Buyer pursuant to Sections 4.2, 12, 18, and 21. 18. FACILITY ADDITIONS AND MODIFICATIONS 18.1 Supplier shall be entitled to make additions and modifications to the Asset Bundle subject to the following: 18.1.1 To the extent additions and modifications interfere with the operation of the Asset Bundle in providing the Supply Amount to Buyer beyond the limits for planned outages set forth in Section 21, liquidated damages shall be paid to Buyer pursuant to Section 4.2. 18.1.2 Supplier shall use reasonable efforts to minimize any adverse impact on 30 Buyer during the course of making such additions and modifications. 18.1.3 Such additions and modifications shall be conducted in accordance with Good Utility Practice, and all applicable Laws, regulations, reliability criteria and the Interconnection Agreement between Buyer and Supplier, dated November 16, 2000, as it may be amended from time to time. 18.2 Supplier shall seek Buyer's prior written approval for all Supplier's additions or modifications to the Asset Bundle which might reasonably be expected to have an adverse effect upon Buyer with respect to operations or performance under this Agreement. 19. COORDINATION 19.1 Upon knowledge thereof, each Party shall promptly give notice to the other Party of any labor dispute which is delaying or threatens to delay the timely performance of this Agreement, which shall include a description of the general nature of the dispute. 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE 20.1 Buyer and Supplier shall comply with any applicable requirement of any Governmental Authority, NERC, WSCC, ISA, Control Area Operator, transmission operator, EDU or any successor of any of them, regarding the reduced or increased generation of the Asset Bundle in the event of an Emergency Condition or Nonemergency Condition. 20.2 Supplier shall not be obligated to deliver the Supply Amount and no liquidated damages shall become due, if the Supply Amount is reduced in the event of an Emergency Condition or a Nonemergency Condition. 20.3 Each Party shall provide prompt verbal notice to the other Party of any Emergency Condition or Nonemergency Condition. 20.4 Either Party may take reasonable and necessary action to prevent, avoid or mitigate injury, danger, damage or loss to its own equipment and facilities, or to expedite restoration of service; provided, however, that the Party taking such action shall give the other Party prior notice if at all possible before taking any action. However, this Section 20.4 shall not be construed to supersede Sections 20.2 and 20.3. 21. OUTAGE SCHEDULING 21.1 Supplier shall request Buyer's approval prior to any inspections, proposed planned outages or other non-forced outages (all hereinafter referred to as "planned outages") of the Asset Bundle so as to minimize the impact on the availability of the Asset Bundle. Under no circumstances shall Supplier conduct a 31 planned outage without the express prior consent of Buyer pursuant to this Section 21. 21.2 Planned Outages. --------------- 21.2.1 Within sixty (60) days following the Effective Date of this Agreement and on or before October 1 of each Contract Year, Supplier shall provide Buyer with a schedule of proposed planned outages for the period beginning on the date of such proposed schedule for the following twelve (12) months. The proposed planned outage schedule will designate days for each unit in which the Asset Bundle Capacity will be reduced in part or total for each such unit. Each proposed schedule shall include all applicable information, including but not limited to the following: Month, day and time of requested outage; facilities impacted (such as Unit and description); duration of outage; purpose of outage; amount of capacity (in MWs) which is derated; other conditions and remarks; and name of contact and phone number. 21.2.2 Buyer shall promptly review Supplier's proposed schedule and shall either require modifications or approve the proposed schedule. Supplier shall use its best efforts to accomplish all planned outages in accordance with the approved schedule. Supplier shall be responsible to Buyer for Replacement Costs (i) if any outage period exceeds its approved schedule, provided that changes to the approved schedule may be requested by either Party and each Party shall make reasonable efforts to accommodate such changes, provided further the Buyer shall have no obligation to agree to Supplier's revisions to the approved planned outage schedule; and (ii) if Supplier conducts a planned outage without the consent of Buyer as provided herein. 22. REPORTS 22.1 Supplier shall promptly provide Buyer with copies of any orders, decrees, letters or other written communications to or from any Governmental Authority asserting or indicating that Supplier and/or its Asset Bundle is in violation of Laws which relate to Supplier, or operations or maintenance of the Asset Bundle and which may have an adverse effect on Buyer. Supplier shall use reasonable efforts to keep Buyer appraised of the status of any such matters. 23. COMMUNICATIONS 23.1 Supplier's Operating Representatives shall be available twenty-four (24) hours per day for communications with the Control Area Operator and/or the ISA and Buyer to facilitate the operations contained in this Agreement. 23.2 Supplier shall, at its expense, maintain and install real-time communications equipment at the Asset Bundle to maintain communications between personnel on site at the Asset Bundle, Buyer and the Control Area Operator at all times. Supplier shall provide at its expense: 32 (i) Ringdown voice telephone lines, and (ii) Equipment to transmit to and receive telecopies from Buyer and the Control Area Operator. 23.3 Supplier shall immediately report to Buyer any "Abnormal Condition" that has or may occur, and provide all pertinent information, including but not limited to the following: (i) A description of the "Abnormal Condition" and the actions to be taken to alleviate the "Abnormal Condition"; (ii) The expected duration including the beginning and ending time of the "Abnormal Condition"; and (iii) The amount of any adjustment to the current (real time) level of Energy and Ancillary Services. 23.4 Cause of the Condition. ---------------------- 23.4.1 An "Abnormal Condition" shall include without limitation any conditions that, to Supplier's knowledge, have or are reasonably likely to: (i) Adversely affect Supplier's ability to provide Energy and Ancillary Services to Buyer; (ii) Cause an unplanned reduction in the amount of delivery of Energy and Ancillary Services to Buyer; or (iii) Cause an unplanned isolation of the Asset Bundle from the transmission system. 23.5 Supplier shall immediately notify Buyer after such "Abnormal Condition" has been alleviated. 24. NOTICES 24.1 All notices hereunder shall, unless specified otherwise, be in writing and shall be addressed, except as otherwise stated herein, to the Parties as set forth in Exhibit F. 24.2 All written notices or submittals required by this Agreement shall be sent either by hand-delivery, regular first class U.S. mail, registered or certified U.S. mail postage paid return receipt requested, overnight courier delivery, electronic mail 33 or facsimile transmission and will be effective and deemed to have been received on the date of receipt personally, on the date and time as documented by method of delivery if during normal business hours or on the next succeeding Business Day, or on the third (3rd) Business Day following deposit with the U.S. mail if sent regular first class U.S. mail. 24.3 Notices of an Event of Default pursuant to Section 17 and or Force Majeure pursuant to Section 12 may not be sent by regular first class U.S. mail. 24.4 Any payments required to be made under this Agreement shall be made to the Party as set forth in Exhibit F. 24.5 Each Party shall have the right to change, at any time upon written notice to the other Party, the name, address and telephone numbers of its representatives under this Agreement for purposes of notices and payments. 25. MERGER 25.1 The Agreement contains the entire agreement and understanding between the Parties with respect to all of the subject matter contained herein, thereby merging and superseding all prior agreements and representations by the Parties with respect to such subject matter. 25.2 In the event of any conflict between this Agreement and the Asset Sale Agreement, the terms of the Asset Sale Agreement shall govern. 26. HEADINGS 26.1 The headings or section titles contained in this Agreement are inserted solely for convenience and do not constitute a part of this Agreement between the Parties, nor should they be used to aid in any manner in the construction of this Agreement. 27. COUNTERPARTS AND INTERPRETATION 27.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 27.2 In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of authorship of any of the provisions of this Agreement. 27.3 Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. 34 27.4 The word "including" in this Agreement shall mean "including without limitation". 28. SEVERABILITY 28.1 If any term, provision or condition of this Agreement is held to be invalid, void or unenforceable by a court or Governmental Authority of competent jurisdiction and such holding is subject to no further appeal or judicial review, then such invalid, void, or unenforceable term, provision or condition shall be deemed severed from this Agreement and all remaining terms, provisions and conditions of this Agreement shall continue in full force and effect, unless, however, the effect of the severance would vitiate the intent of the Parties hereto, as determined by either Party in its reasonable discretion. 28.2 The Parties shall endeavor in good faith to replace such invalid, void, or unenforceable provisions with a valid and enforceable provision which achieves the purposes intended by the Parties to the greatest extent permitted by law. 29. WAIVERS 29.1 No failure or delay on the part of a Party in exercising any of its rights under this Agreement or in insisting upon strict performance of provisions of this Agreement, no partial exercise by either Party of any of its rights under this Agreement, and no course of dealing between the Parties shall constitute a waiver of the rights of either Party under this Agreement. Any waiver shall be effective only by a written instrument signed by the Party granting such waiver, and such shall not operate as a waiver of, or estoppel with respect to, any subsequent failure to comply therewith. 30. AMENDMENTS 30.1 The Parties shall negotiate in good faith to determine necessary amendments, if any, to this Agreement, provided that in negotiating such amendments the Parties shall attempt, in good faith, to reasonably preserve the bargain initially struck in this Agreement if any Governmental Authority, FERC, any state or the PUCN, implements a change in any Law or applicable regulation that materially affects or is reasonably expected to materially affect Buyer's PLR service under this Agreement. 30.2 The Parties shall meet to discuss the impact of any changes in Buyer's OATT or the ISA's OATT, as applicable, or any rule or practice of NERC, WSCC, or any other Governmental Authority on the terms of this Agreement upon request by either Party during the term of this Agreement. 30.3 In the event that it is deemed necessary to amend this Agreement, the Parties will attempt to agree upon such amendment and will submit such mutually agreed upon amendment(s) to the FERC for filing and acceptance. 35 30.4 Amendments to this Agreement shall be in writing and shall be executed by an authorized representative of each Party. 31. TIME IS OF THE ESSENCE 31.1 Time is of the essence of this Agreement and in the performance of all of the covenants and conditions hereof. 32. APPROVALS 32.1 Each Party's performance under this Agreement is subject to the condition that all requisite governmental and regulatory approvals for such performance are obtained in form and substance satisfactory to the other Party in its reasonable discretion. Each Party shall use best efforts to obtain all required approvals and shall exercise due diligence and shall act in good faith to cooperate and assist each other in acquiring any regulatory approval necessary to effectuate this Agreement. Further, the Parties agree to reasonably support the other Party in any associated regulatory proceedings, including by being a witness on behalf of the other Party. 32.2 Notwithstanding the provisions of Section 2.2.2 of this Agreement, if any Governmental Authority in its review of the Agreement places conditions on or requires revisions of the Agreement that have no more than a de minimus effect on Supplier or Buyer, the Parties agree to execute an amendment to this Agreement reasonably acceptable to each Party incorporating such conditions or revisions. 32.3 This Agreement is made subject to present or future state or federal laws, regulations, or orders properly issued by state or federal bodies having jurisdiction. 32.4 The Parties hereto agree to execute and deliver promptly, at the expense of the Party requesting such action, any and all other and further instruments, documents and information which may reasonably be necessary or appropriate to give full force and effect to the terms and intent of this Agreement. 33. PLR SERVICE 33.1 The Agreement is premised on Buyer providing PLR service. Notwithstanding anything to the contrary contained herein, if Nevada retail electricity restructuring (including implementation of retail customer choice of electricity suppliers) is delayed beyond the Effective Date of this Agreement, the Parties shall continue to perform this Agreement in all respects pursuant to the terms and conditions hereof as if Buyer was the PLR and Buyer's retail and wholesale customers shall be considered as the TRR. 36 34. CONFIDENTIALITY 34.1 Confidential Information. Certain information provided by a ------------------------ Party (the "Disclosing Party") to the other Party (the "Receiving Party") in connection with the negotiation or performance of this Agreement may be considered confidential and/or proprietary (hereinafter referred to as "Confidential Information") by the Disclosing Party. To be considered Confidential Information hereunder, such information must be clearly labeled or designated by the Disclosing Party as "confidential" or "proprietary" or with words of like meaning. If disclosed orally, such information shall be clearly identified as confidential and such status shall be confirmed promptly thereafter in writing. 34.2 Treatment of Confidential Information. The Receiving Party ------------------------------------- shall treat any Confidential Information with at least the same degree of care regarding its secrecy and confidentiality as the Receiving Party's similar information is treated within the Receiving Party's organization. The Receiving Party shall not disclose the Confidential Information of the Disclosing Party to third parties (except as stated hereinafter) nor use it for any purpose other than the negotiation or performance of this Agreement, without the express prior written consent of the Disclosing Party. The Receiving Party further agrees that it shall restrict disclosure of Confidential Information as follows: 34.2.1 Disclosure shall be restricted solely to its agents as may be necessary to enforce the terms of this Agreement after advising those agents of their obligations under this Section 34.2. 34.2.2 In the event that the Receiving Party is requested, pursuant to or as required by applicable Law or by legal process, to disclose any Confidential Information, the Receiving Party shall provide the Disclosing Party with prompt notice of such request or requirement in order to enable Disclosing Party to seek an appropriate protective order or other remedy and to consult with Disclosing Party with respect to Disclosing Party taking steps to resist or narrow the scope of such request or legal process. The Receiving Party agrees not to oppose any action by the Disclosing Party to obtain a protective order or other appropriate remedy. In the absence of such protective order, and provided that the Receiving Party is advised by its counsel that it is compelled to disclose the Confidential Information, the Receiving Party shall: (i) furnish only that portion of the Confidential Information which the Receiving Party is advised by counsel is legally required; and (ii) use its commercially reasonable best efforts, at the expense of the Disclosing Party, to ensure that all Confidential Information so disclosed will be accorded confidential treatment. 34.3 Excluded Information. Confidential Information shall not be -------------------- deemed to include 37 the following: 34.3.1 information which is or becomes generally available to the public other than as a result of a disclosure by the Receiving Party; 34.3.2 information which was available to the Receiving Party on a non-confidential basis prior to its disclosures by the Disclosing Party; and 34.3.3 information which becomes available to the Receiving Party on a non-confidential basis from a person other than the Disclosing Party or its representative who is not otherwise bound by a confidentiality agreement with Disclosing Party or its agent or is otherwise not under any obligation to Disclosing party or its agent not to disclose the information to the Receiving Party. 34.4 Injunctive Relief Due to Breach. The Parties agree that ------------------------------- remedies at law may be inadequate to protect each other in the event of a breach of this Section 34, and the Receiving Party hereby in advance agrees that the Disclosing Party shall be entitled to seek and obtain, without proof of actual damages, temporary, preliminary and permanent injunctive relief from any court or Governmental Authority of competent jurisdiction restraining the Receiving Party from committing or continuing any breach of this Section 34. 35. CHOICE OF LAW 35.1 This Agreement and the rights and obligations of the Parties shall be construed and governed by the Laws of: (i) the State of Nevada as if executed and performed wholly within that state; and (ii) the Federal Power Act, to the extent the rights and obligations of the Parties are covered by such act. 38 IN WITNESS WHEREOF, the Parties hereto have caused this Transitional Power Purchase Agreement for the Reid Gardner Bundle to be executed by their duly authorized representative on the date set forth below. NEVADA POWER COMPANY REID GARDNER POWER LLC - ---------------------- ---------------------------- By: William E. Peterson By: Edward P. Hermann Title: Senior Vice President, General Title: Vice President Counsel, and Corporate Secretary Date: November 16, 2000 Date: November 16, 2000 39 EXHIBIT A REID GARDNER BUNDLE ASSET BUNDLE CAPACITY AND OPERATING PARAMETERS =============================================================================== UNIT NET SUMMER NET RAMP RATE MINIMUM HOURLY CAPABILITY (MW) WINTERCAPABILITY(MW) (MW)/HOUR ENERGY TAKE (MW) - ------------------------------------------------------------------------------- Unit 1 110 110 60 50 Unit 2 110 110 60 50 Unit 3 110 110 60 50 Unit 4* 260 260 100 24 - ------------------------------------------------------------------------------- Total 590 590 280 174 =============================================================================== Minimum Annual Energy Take: 2,550,000 MWh * The portion of the Asset Bundle Capacity attributable to Reid Gardner Unit 4 shall at no time exceed the net generating capacity in megawatts, the Energy, or the Ancillary Services to which Supplier is entitled, as of the Effective Date, under the Participation Agreement (as defined in the Asset Sale Agreement). For purposes of this Exhibit A, the summer months shall consist of June through September, and the winter months shall consist of the months of January through May and the months of October through December. A-1 EXHIBIT B REID GARDNER BUNDLE ENERGY AND ANCILLARY SERVICES PRICES Energy Prices* - ------------- Price Floor of Energy: $ 23.83 per MWh Price Ceiling of Energy: $ 41.44 per MWh Ancillary Service Prices* - ------------------------ Regulation and Frequency Response: Summer On-Peak: $28.61 per MW-reserved per hour Summer Off-Peak: $16.35 per MW-reserved per hour Winter On-Peak: $16.33 per MW-reserved per hour Winter Off-Peak: $9.33 per MW-reserved per hour Operating Reserve - Spinning Reserve: Summer On-Peak: $23.35 per MW-reserved per hour Summer Off-Peak: $13.34 per MW-reserved per hour Winter On-Peak: $13.32 per MW-reserved per hour Winter Off-Peak: $7.61 per MW-reserved per hour Operating Reserve - Supplemental Reserve: Summer On-Peak: $23.35 per MW-reserved per hour Summer Off-Peak: $13.34 per MW-reserved per hour Winter On-Peak: $13.32 per MW-reserved per hour Winter Off-Peak: $7.61 per MW-reserved per hour The summer months shall consist of the months of June through September. The winter months shall consist of the months of January through May and the months of October through December. The On-Peak periods shall consist of Hour Ending (HE) 0700 through HE 2200 PPT, Monday through Saturday. The Off-Peak periods shall consist of HE 0100 through HE 0600, HE 2300 and HE 2400 PPT, Monday through Saturday; HE 0100 through HE 2400 PPT Sunday and additional Off-Peak days (holidays) as designated annually by WSCC. *SUBJECT TO FERC APPROVAL ------------------------- B-1 EXHIBIT C REID GARDNER BUNDLE SUPPLIER'S MONTHLY INVOICE A Price Ceiling of Energy $41.44 /MWh B Price Floor of Energy $23.83 /MWh
MONTH 1 - ENERGY - ---------------- C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Capacity ---- ------------ ----------- -------------- ----------------- ---------------- --------------------- (C - D) (D x F) (C x F) 1 590 590 - 40.00 $23,600.00 $23,600.00 2 590 590 - 40.00 23,600.00 23,600.00 3 590 530 60 40.00 21,200.00 23,600.00 4 590 530 60 40.00 21,200.00 23,600.00 5 460 450 10 30.00 13,500.00 13,800.00 6 490 490 - 30.00 14,700.00 14,700.00 7 580 560 20 20.00 11,200.00 11,600.00 8 590 590 - 20.00 11,800.00 11,800.00 9 590 590 - 20.00 11,800.00 11,800.00 10 590 590 - 25.00 14,750.00 14,750.00 - -------------------------------------------------------------------------------------------------------------------------------- 5,660 5,510 150 $167,350.00 $ 172,850.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $167,350.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 172,850.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $228,334.40 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 234,550.40 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $131,303.30 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 134,877.80 L. Invoiced Amount - Energy Sec 7.3 (K ** I ** J) $167,350.00 M. Theoretical Amount for Expected Performance (KT ** IT ** JT) $ 172,850.00
** less than *** Greater than
MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE - ------------------------------------------------------------------------ N O P Q R S Schedule of Ancillary Dispatch Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- -------------- ----------------- ---------------------- (N - O) (O x Q) (N x Q) 1 - - - 16.35 $ - $ - 2 - - - 16.35 - - 3 - - - 28.61 - - 4 - - - 28.61 - -
C-1 EXHIBIT C REID GARDNER BUNDLE SUPPLIER'S MONTHLY INVOICE 5 30 30 - 28.61 858.30 858.30 6 - - - 28.61 - - 7 - - - 28.61 - - 8 - - - 28.61 - - 9 - - - 28.61 - - 10 - - - 28.61 - - - ------------------------------------------------------------------------------------------------------------------------------- 30 30 - $ 858.30 $ 858.30 T. Invoiced Amount - Ancillary Service Capacity - Regulation and Frequency Response Sec 7.2.5 $ 858.30 U. Theoretical Amount for Expected Performance $ 858.30
MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - -------------------------------------------------------
V W X Y Z AA Dispatch Schedule of Ancillary Supplier Capacity Price of Price x Ancillary Price x Schedule Ancillary Capacity Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- ----------------- --------------------- (V - W) (W x Y) (V x Y) 1 - - - 13.34 $ - $ - 2 - - - 13.34 - - 3 - - - 23.35 - - 4 - - - 23.35 - - 5 80 80 - 23.35 1,868.00 1,868.00 6 80 60 20 23.35 1,401.00 1,868.00 7 - - - 23.35 - - 8 - - - 23.35 - - 9 - - - 23.35 - - 10 - - - 23.35 - - - ------------------------------------------------------------------------------------------------------------------------------ 160 140 20 $3,269.00 $ 3,736.00 AB. Invoiced Amount - Ancillary Service Capacity - Spinning Reserve Sec 7.2.5 $3,269.00 AC. Theoretical Amount for Expected Performance $ 3,736.00 MONTH 1 - ANCILLARY SERVICE CAPACITY - SUPPLEMENTAL RESERVE - ----------------------------------------------------------- AD AE AF AG AH AI Dispatch Schedule of Ancillary Supplier Capacity Price of Price x Ancillary Price x Schedule Ancillary Capacity Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services --- ------------- ------------ -------------- --------------- ----------------- ---------------------- (AE x AG) (AD x AG) 1 - - - 13.34 $ - $ - 2 - - - 13.34 - - 3 - - - 23.35 - - 4 - - - 23.35 - - 5 10 10 - 23.35 233.50 233.50 6 10 10 - 23.35 233.50 233.50 7 10 10 - 23.35 233.50 233.50
C-2 EXHIBIT C REID GARDNER BUNDLE SUPPLIER'S MONTHLY INVOICE 8 - - - 23.35 - - 9 - - - 23.35 - - 10 - - - 23.35 - - - --------------------------------------------------------------------------------------------------------------------------------- 30 30 - $700.50 $ 700.50 AJ. Invoiced Amount - Ancillary Service Capacity - Supplemental Reserve Sec 7.2.5 $700.50 AK. Theoretical Amount for Expected Performance $ 700.50
MONTH 1 - ANCILLARY SERVICE ENERGY - ----------------------------------
AL AM AN AO AP AQ Dispatch Schedule of Ancillary Energy Supplier Price Ceiling of Price x Ancillary Price x Schedule Ancillary Hour Energy (MWh Supplied (MWh) Shortfall (MWh) Energy ($/MWh) Energy Supplied of Ancillary Energy ---- ----------- -------------- --------------- -------------- --------------- ------------------- (AL - AM) (AM x AO) (AL x AO) 1 - - - 41.44 $ - $ - 2 - - - 41.44 - - 3 - - - 41.44 - - 4 - - - 41.44 - - 5 40 40 - 41.44 1,657.60 1,657.60 6 30 10 20 41.44 414.40 1,243.20 7 10 10 - 41.44 414.40 414.40 8 - - - 41.44 - - 9 - - - 41.44 - - 10 - - - 41.44 - - - --------------------------------------------------------------------------------------------------------------------------------- 80 60 20 $414.40 $2,486.40 $3,315.20 AR. Invoiced Amount - Ancillary Services Energy Sec 7.2.6 $2,486.40 AS. Theoretical Amount for Expected Performance $3,315.20 MONTH 1 - TOTAL INVOICE AMOUNT Sec 7.3 (L + T + AB + AJ + AR) $174,664.20 ==========================================================================================================================
MONTH 2 - ENERGY - ----------------
C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy $/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ---------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 590 590 - 45.00 $26,550.00 $26,550.00 2 590 590 - 45.00 26,550.00 26,550.00 3 590 530 60 45.00 23,850.00 26,550.00 4 590 530 60 55.00 29,150.00 32,450.00
C-3 EXHIBIT C REID GARDNER BUNDLE SUPPLIER'S MONTHLY INVOICE 5 460 450 10 55.00 24,750.00 25,300.00 6 490 490 - 55.00 26,950.00 26,950.00 7 580 560 20 35.00 19,600.00 20,300.00 8 590 590 - 35.00 20,650.00 20,650.00 9 590 590 - 35.00 20,650.00 20,650.00 10 590 590 - 40.00 23,600.00 23,600.00 - ---------------------------------------------------------------------------------------------------------------------- 5,660 5,510 150 $242,300.00 $249,550.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $242,300.00 IT. Sum of (Asset Bundle Capacity times corresponding $249,550.00 J. Sum of hourly Delivered Energy multiplied by the Sec 7.2.2 $228,334.40 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $234,550.40 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $131,303.30 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $134,877.80 L. Invoiced Amount - Energy Sec 7.3 (I > J) $228,334.40 M. Theoretical Amount for Expected Performance (IT > JT) $234,550.40
MONTH 3 - ENERGY - ----------------
C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 590 590 - 30.00 $ 17,700.00 $ 17,700.00 2 590 590 - 20.00 11,800.00 11,800.00 3 590 530 60 20.00 10,600.00 11,800.00 4 590 530 60 20.00 10,600.00 11,800.00 5 460 450 10 15.00 6,750.00 6,900.00 6 490 490 - 15.00 7,350.00 7,350.00 7 580 560 20 15.00 8,400.00 8,700.00 8 590 590 - 15.00 8,850.00 8,850.00 9 590 590 - 15.00 8,850.00 8,850.00 10 590 590 - 15.00 8,850.00 8,850.00 - ------------------------------------------------------------------------------------------------------------------------- 5,660 5,510 150 $ 99,750.00 $102,600.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 99,750.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $102,600.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Sec 7.2.2 $228,334.40 Energy JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $234,550.40
C-4 EXHIBIT C REID GARDNER BUNDLE SUPPLIER'S MONTHLY INVOICE K. Sum of hourly Delivered Energy multiplied by the PriceFloor of Sec 7.2.3 $ 131,303.30 Energy KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $134,877.80 L. Invoiced Amount - Sec 7.3 (I ** K) $ 131,303.30 Energy M. Theoretical Amount for Expected Performance (IT ** KT) $134,877.80
** less than *** Greater than For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. C-5 EXHIBIT D REID GARDNER BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ENERGY - ----------------
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 60 35.00 100.00 2,200.00 4 60 30.00 50.00 1,850.00 5 10 30.00 50.00 350.00 6 0 na 0.00 0.00 7 20 25.00 0.00 500.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------ 150 $ 4,900.00 E. Gross Replacement Cost of Energy $ 4,900.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 172,850.00 G. Actual Supplier's Invoice Amount 167,350.00 -------------------- H. Avoided Payment to Supplier (F - G) $ 5,500.00 I. Invoiced Replacement Cost - Energy (E ** H) $ 0.00
** less than *** Greater than MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE - ------------------------------------------------------------------------
J K * L * M Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------ ------------------ ------------- ---------------- (J x K) + L 1 0 na $0.00 $0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------- 0 $ 0.00 N. Gross Replacement Cost of Ancillary Capacity - $ 0.00 Regulation & Frequency Response O. Theoretical Supplier's Invoice Amount for Expected Performance $ 858.30 P. Actual Supplier's Invoice Amount 858.30 -------------- Q. Avoided Payment to Supplier (O - P) $ 0.00 R. Invoiced Replacement Cost - Ancillary Capacity (N = Q) $ 0.00
D-1 EXHIBIT D REID GARDNER BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - -------------------------------------------------------
S T * U * V Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (S x T) + U 1 0 na $0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 40.00 100.00 900.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ----------------------------------------------------------------------------------------------- 20 $ 900.00 W. Gross Replacement Cost of Ancillary Capacity - Spinning Reserve $ 900.00 X. Theoretical Supplier's Invoice Amount for Expected Performance $ 3,736.00 Y. Actual Supplier's Invoice Amount 3,269.00 ------------------- Z. Avoided Payment to Supplier (X - Y) $ 467.00 AA. Invoiced Replacement Cost - Ancillary Capacity (W > Z) $ 433.00
MONTH 1 - ANCILLARY CAPACITY - SUPPLEMENTAL RESERVE - ---------------------------------------------------
AB AC * AD * AE Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ---------------- ---------------- (AB x AC) + AD 1 0 na $0.00 $0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ----------------------------------------------------------------------------------------------- 0 $ 0.00 AF. Gross Replacement Cost of Ancillary Capacity - Supplemental Reserve $ 0.00 AG. Theoretical Supplier's Invoice Amount for Expected Performance $ 700.50 AH. Actual Supplier's Invoice Amount 700.50 ------------------- AI. Avoided Payment to Supplier (AG - AH) $ 0.00
D-2 EXHIBIT D REID GARDNER BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS
AJ. Invoiced Replacement Cost - Ancillary Capacity (AF = AI) $ 0.00 MONTH 1 - ANCILLARY SERVICE ENERGY - ---------------------------------- AK AL * AM * AN Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy ** Cost of Energy ---- ------------ ----------------- -------------- -------------- (AK x AL) + AM 1 0 na $0.00 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 50.00 20.00 1,020.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ----------------------------------------------------------------------------------------------------- 20 $ 1,020.00 AO. Gross Replacement Cost of Ancillary Energy $ 1,020.00 AP. Theoretical Supplier's Invoice Amount for Expected Performance $ 3,315.20 AQ. Actual Supplier's Invoice Amount 2,486.40 AR. Avoided Payment to Supplier (AP - AQ) $ 828.80 AS. Invoiced Replacement Cost - Ancillary Energy (AO > AR) $ 191.20 MONTH 1 - TOTAL INVOICE AMOUNT (I + R + AA + AJ + AS) $ 624.20 ==================================================================================================
MONTH 2 - ENERGY - ----------------
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $0.00 0.00 2 0 na 0.00 0.00 3 60 40.00 200.00 2,600.00 4 60 55.00 100.00 3,400.00 5 10 48.00 200.00 680.00 6 0 na 0.00 0.00 7 20 35.00 300.00 1,000.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ----------------------------------------------------------------------------------------------- 150 $7,680.00
D-3 EXHIBIT D REID GARDNER BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS E. Gross Replacement Cost of Energy $ 7,680.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 234,550.40 G. Actual Supplier's Invoice Amount 228,334.40 ----------------- H. Avoided Payment to Supplier (F - G) $ 6,216.00 I. Invoiced Replacement Cost - Energy (E *** H) $ 1,464.00
** less than *** Greater than MONTH 3 - ENERGY - ----------------
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $0.00 0.00 2 0 na 0.00 0.00 3 60 27.00 100.00 1,720.00 4 60 22.00 50.00 1,370.00 5 10 22.00 0.00 220.00 6 0 na 0.00 0.00 7 20 22.00 50.00 490.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ----------------------------------------------------------------------------------------------------- 150 $ 3,800.00 E. Gross Replacement Cost of Energy $ 3,800.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 134,877.80 G. Actual Supplier's Invoice Amount 131,303.30 ----------------- H. Avoided Payment to Supplier (F - G) $ 3,574.50 I. Invoiced Replacement Cost - Energy (E ** H) $ 225.50
** less than *** Greater than For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. EXHIBIT E REIN GARDNER BUNDLE YEAR END TRUE-UP INVOICE A Price Ceiling of Energy $ 41.44 /MWh B Price Floor of Energy $ 23.83 /MWh EXAMPLE 1 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Super's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy - ----- ------------ ---------------- ---------------- ---------------- ---------------- (A X C) (B x C) 1 5,510 $ 167,350,00 $ 228,303,30 $ 131,303,30 167,350,00 2 5,510 242,300,00 228,334,40 131,303,30 228,334,40
D-4 EXHIBIT E REID GARDNER BUNDLE YEAR END TRUE-UP INVOICE 3 5,510 99,750.00 228,334.40 131,303.30 131,303.30 4 5,900 283,200.00 244,496.00 140,597.00 244,496.00 5 5,900 259,600.00 244,496.00 140,597.00 244,496.00 6 5,700 250,800.00 236,208.00 135,831.00 236,208.00 7 5,900 271,400.00 244,496.00 140,597.00 244,496.00 8 5,900 259,600.00 244,496.00 140,597.00 244,496.00 9 5,360 241,200.00 222,118.40 127,728.80 222,118.40 10 5,900 247,800.00 244,496.00 140,597.00 244,496.00 11 5,900 300,900.00 244,496.00 140,597.00 244,496.00 12 5,600 257,600.00 232,064.00 133,448.00 232,064.00 - ------------------------------------------------------------------------------------------------------ Total 68,590 $2,881,500.00 $2,842,369.60 $1,634,499.70 $2,684,354.10 (Total of Column D) > (Total of Column E) therefore Annual True-up calculated - ----------------------------------------------------------------------------- under Section 7.5.1(a) - ---------------------- H. Annual True-up - Delivered Energy (Total E - Total G) $158,015.50 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total E / Total C) $ 41.44
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,464.00 3 150 3,800.00 225.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - -------------------------------------------------------------------------------------------------------- Total 450 $18,648.00 $16,380.00 $0.00 $ 1,689.50 O. Annual True-up - Replacement Costs (Total N - Total M) $ 1,689.50 Total Annual True-up * (H + O) $159,705.00 =======================================================================================================
EXAMPLE 2 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ------ ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 5,510 $ 167,350.00 $ 228,334.40 $ 131,303.30 $ 167,350.00 2 5,510 242,300.00 228,334.40 131,303.30 228,334.40 3 5,510 99,750.00 228,334.40 131,303.30 131,303.30
E-2 EXHIBIT E REID GARDNER BUNDLE YEAR END TRUE-UP INVOICE 4 5,900 224,200.00 244,496.00 140,597.00 224,200.00 5 5,900 218,300.00 244,496.00 140,597.00 218,300.00 6 5,700 193,800.00 236,208.00 135,831.00 193,800.00 7 5,900 283,200.00 244,496.00 140,597.00 244,496.00 8 5,900 200,600.00 244,496.00 140,597.00 200,600.00 9 5,360 203,680.00 222,118.40 127,728.80 203,680.00 10 5,900 206,500.00 244,496.00 140,597.00 206,500.00 11 5,900 259,600.00 244,496.00 140,597.00 244,496.00 12 5,600 218,400.00 232,064.00 133,448.00 218,400.00 - ------------------------------------------------------------------------------------------------- Total 68,590 $2,517,680.00 $2,842,369.60 $1,634,499.70 $2,481,459.70 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated - ----------------------------------------------------------------------------- under Section 7.5.1(b) - ---------------------- H. Annual True-up - Delivered Energy (Total D - Total G) $36,220.30 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 36.71
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,464.00 3 150 3,800.00 225.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - -------------------------------------------------------------------------------------------------------------- Total 450 $16,517.80 $16,380.00 $0.00 $ 1,689.50 O. Annual True-up - Replacement Costs (Total N - Total M) $ 1,689.50 Total Annual True-up * (H + O) $37,909.80 ============================================================================================================== EXAMPLE 3 - --------- C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 5,510 $167,350.00 $228,334.40 $131,303.30 $167,350.00 2 5,510 242,300.00 228,334.40 131,303.30 228,334.40 3 5,510 99,750.00 228,334.40 131,303.30 131,303.30 4 5,900 188,800.00 244,496.00 140,597.00 188,800.00
E-3 EXHIBIT E REID GARDNER BUNDLE YEAR END TRUE-UP INVOICE 5 5,900 177,000.00 244,496.00 140,597.00 177,000.00 6 5,700 159,600.00 236,208.00 135,831.00 159,600.00 7 5,900 153,400.00 244,496.00 140,597.00 153,400.00 8 5,900 159,300.00 244,496.00 140,597.00 159,300.00 9 5,360 134,000.00 222,118.40 127,728.80 134,000.00 10 5,900 147,500.00 244,496.00 140,597.00 147,500.00 11 5,900 123,900.00 244,496.00 140,597.00 140,597.00 12 5,600 123,200.00 232,064.00 133,448.00 133,448.00 - ------------------------------------------------------------------------------------------------- Total 68,590 $1,876,100.00 $2,842,369.60 $1,634,499.70 $1,920,632.70 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated - ----------------------------------------------------------------------------- under Section 7.5.1(b) - ---------------------- H. Annual True-up - Delivered Energy (Total D - Total G) $(44,532.70) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 27.35
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ ----------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,464.00 3 150 3,800.00 225.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ---------------------------------------------------------------------------------------------------------- Total 450 $12,308.57 $16,380.00 $4,071.43 $ 1,689.50 O. Annual True-up - Replacement Costs (Total N - Total M) $ (2,381.93) Total Annual True-up * (H + O) $ (46,914.63) ==========================================================================================================
EXAMPLE 4 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 5,510 $167,350.00 $228,334.40 $131,303.30 $167,350.00 2 5,510 242,300.00 228,334.40 131,303.30 228,334.40 3 5,510 99,750.00 228,334.40 131,303.30 131,303.30 4 5,900 129,800.00 244,496.00 140,597.00 140,597.00
E-4 EXHIBIT E REID GARDNER BUNDLE YEAR END TRUE-UP INVOICE 5 5,900 100,300.00 244,496.00 140,597.00 140,597.00 6 5,700 131,100.00 236,208.00 135,831.00 135,831.00 7 5,900 135,700.00 244,496.00 140,597.00 140,597.00 8 5,900 82,600.00 244,496.00 140,597.00 140,597.00 9 5,360 96,480.00 222,118.40 127,728.80 127,728.80 10 5,900 112,100.00 244,496.00 140,597.00 140,597.00 11 5,900 70,800.00 244,496.00 140,597.00 140,597.00 12 5,600 106,400.00 232,064.00 133,448.00 133,448.00 - ------------------------------------------------------------------------------------------------- Total 68,590 $1,474,680.00 $2,842,369.60 $1,634,499.70 $1,767,577.50 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated - ----------------------------------------------------------------------------- under Section 7.5.1(b) - ---------------------- H. Annual True-up - Delivered Energy (Total F - Total G) $(133,077.80) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total F / Total C) $ 23.83
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ----------- -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,464.00 3 150 3,800.00 225.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - --------------------------------------------------------------------------------------------------------- Total 450 $ 10,723.50 $ 16,380.00 $ 5,656.50 $ 1,689.50 O. Annual True-up - Replacement Costs (Total N - Total M) $ (3,967.00) Total Annual True-up * (H + O) $ (137,044.80) =========================================================================================================
* Positive Total Annual True-up is indicative of a payment form Buyer to Supplier; Negative Total Annual True-up is indicative of a payment form Supplier to Buyer. E-5 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS Supplier: - -------- a) Agreement Notices: Name and Address: __________________________ ------------------ Phone: _____________________________________ Fax: _____________________________________ b) Payment Check: Name and Address: __________________________ -------------- c) Payment Wire Transfer: Bank: ______________________________________ ---------------------- ABA #: _____________________________________ For: Supplier's Name _____________________ Account No: ________________________________ For: _______________________________________ d) Invoices: Name and Address: __________________________ -------- Phone: _____________________________________ Fax: _______________________________________ e) Operating Notifications: ----------------------- i) (Management, if required) ii) Pre-Schedule: Phone: _____________________________________ Fax: _______________________________________ iii) Real Time: Phone: _____________________________________ Fax: _______________________________________ iv) Monthly Checkout Phone: _____________________________________ Person: Fax: _______________________________________ F-6 Buyer: - ----- a) Agreement Notices: ----------------- Address: Gary Craythorn Manager, Resource Contracts Nevada Power Company 6226 West Sahara Avenue, M/S 26A Las Vegas, Nevada 89146 Phone: 702/367-5425 Fax: 702/227-2455 E-mail: gcraythorn@nevp.com b) Invoices: -------- US Post Office: (Via Certified Mail) Overnight Delivery -------------- ------------------ Address: Nevada Power Company Address: Nevada Power Company Attn: Kathy Crews Attn: Kathy Crews P.O. Box 230, M/S 20 6226 West Sahara Ave., M/S 20 Las Vegas, Nevada 89151 Las Vegas, Nevada 89146 Telephone: 702/227-2476 Fax: 702/367-5096 E-mail: kcrews@nevp.com
c) Schedules: --------- i) Pre-Schedule: Primary Name: Rick Engebretson Phone: 702/862-7195 E-mail: rengebretson@nevp.com Alternate Name: Tim Schuster Phone: 702/862-7194 E-mail: tschuster@nevp.com Fax: 702/227-2404 ii) Real Time: Phone: 702/862-7106 Fax: 702/227-2404 iii) Monthly Checkout: Kathy Crews Phone: 702/227-2476 Fax: 702/367-5096 E-mail: kcrews@nevp.com
d) Control Area/Transmission: ------------------------- i) Reliability Dispatch: Phone:(702) 451-2026 Fax:(702) 862-7113 ii) Transmission Dispatch: Phone:(702) 451-8346 Fax:(702) 862-7113 F-7 EXHIBIT G FORM OF AVAILABILITY NOTICE* Date of Notice: Time of Notice: Supplier: Name of Supplier's Representative: Buyer: Asset Bundle: Availability Dates (96 hours total):
A B C D E F G Availability Hour Available from Total Derating of Permitted Asset Bundle Available Total Derating Permitted Date Ending Valmy Unit Valmy Unit (MW) Derating Capacity of from Valmy Of Valmy Derating of ---- ------ ---- -------------- Unit 1 (MW) Unit 1 (MW) Unit 2 (MW) Unit 2 (MW) Unit 2 (MW) 1 (MW) ----------- ----------- ---------- ----------- ----------- ----- (A *** or = ____) (___ - A) (C) *** or = B) (A - C) (E *** or = ___) (___ - E) (B *** or = F) 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500 H I** J Asset bundle Alternative Cause and Expected Duration of Availability Hour Capacity of Point(s) of Deratings and Identification Date Ending Unit 2 (MW) Delivery Permitted Deratings ---- ------ ---------- ------- ------------------- (G - E) 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500
* The Parties' operational personnel shall develop a similar form for the other generating units in the bundle. ** The Parties' operational personnel shall develop the necessary procedure to document requests and responses to utilize Alternative Point(s) of Delivery. *** less than **** Greater than G-1 EXHIBIT H FORM OF GUARANTEE This Guarantee is entered into as of November 16, 2000 by NRG Energy, Inc., a Delaware corporation, and Dynegy Holdings Inc., a Delaware corporation (each, a "Guarantor"), on behalf of Reid Gardner Power LLC, a Delaware limited liability company ("Supplier"), in favor of and for the benefit of Nevada Power Company, a Nevada corporation ("NPC"). NPC is sometimes referred to herein as "Beneficiary". WHEREAS, Supplier and NPC are entering into a Transitional Power Purchase Agreement dated as of November 16, 2000 (the "TPPA") by which Supplier has agreed to sell and NPC has agreed to buy Energy and Ancillary Services (as defined in the TPPA) produced by the Reid Gardner generating station being sold by NPC; and WHEREAS, it is a condition to the obligation of NPC to enter into the TPPA for Guarantor to guarantee the Supplier's obligations under the TPPA in an amount not to exceed the Credit Amount (as defined in the TPPA) (the "Guarantied Obligations"). 1. Guarantee. Each Guarantor jointly and severally, and irrevocably and unconditionally, guaranties, as primary obligor and not merely as surety, the due and punctual payment in full of all Guarantied Obligations (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.(S)362(a)). In the event that all or any portion of the Guarantied Obligations is paid by Supplier, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) is rescinded or recovered directly or indirectly from the Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments that are so rescinded or recovered shall constitute Guarantied Obligations (to the extent such payments, in the aggregate, do not exceed the Credit Amount). Subject to the other provisions of this Section 1, upon failure of Supplier to pay any of the Guarantied Obligations when and as the same shall become due, the Guarantors will upon demand pay, or cause to be paid, in cash, to NPC, an amount equal to the aggregate of the unpaid Guarantied Obligations to the extent due. In the event the Guarantors fail to pay the Guarantied Obligations, each and every default in the payment shall give rise to a separate cause of action and separate causes of action may be brought hereunder as each such cause of action arises. In no event shall the amount recoverable hereunder by Beneficiary from the Guarantors, singly or jointly, ever exceed the Credit Amount (as defined in the TPPA). 2. Expenses. Each Guarantor agrees to reimburse NPC for all reasonable costs and expenses (including, without limitation, the reasonable fees and expenses of legal counsel) in connection with (i) any default by such Guarantor hereunder and any enforcement or collection proceeding resulting therefrom, including, without limitation, all manner of participation in or other involvement with bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings of or involving the Guarantor, judicial or regulatory proceedings of or H-3 involving the Guarantor and workout, restructuring or other negotiations or proceedings of or involving the Guarantor (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (ii) the enforcement of this Section 2. 3. Guarantee Absolute; Continuing Guarantee. The obligations of each Guarantor hereunder are joint and several, irrevocable, absolute, independent and unconditional, and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, the Guarantors agree that: (a) this Guarantee is a guarantee of payment when due and not of collectibility; (b) the obligations of each Guarantor hereunder are independent of the obligations of Supplier under the TPPA and a separate action or actions may be brought and prosecuted against either Guarantor whether or not any action is brought against the Supplier and whether or not the Supplier is joined in any such action or actions; and (c) either Guarantor's payment of a portion, but not all, of the Guarantied Obligations shall in no way limit, affect, modify or abridge the Guarantors' liability for any portion of the Guarantied Obligations that has not been paid. This Guarantee is a continuing guarantee and shall be binding upon the Guarantors and its successors and assigns. 4. Actions by Beneficiary. The Beneficiary may from time to time, without notice or demand and without affecting the validity or enforceability of this Guarantee or giving rise to any limitation, impairment or discharge of the Guarantors' liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guarantee or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security hereafter held by or for the benefit of the Beneficiary in respect of this Guarantee or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Beneficiary may have against any such security, and (f) exercise any other rights available to NPC under the TPPA. 5. No Discharge. This Guarantee and the obligations of each Guarantor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Guarantied Obligations), including without limitation the occurrence of any of the following, whether or not Guarantor shall have had notice or knowledge of any of them: (a) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guarantee of or security for the payment of the Guarantied Obligations, (b) any waiver or H-4 modification of, or any consent to departure from, any of the terms or provisions of any other guarantee or security for the Guarantied Obligations, (c) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (d) the application of payments received from any source to the payment of indebtedness other than the Guarantied Obligations, even if the Beneficiary might have elected to apply such payment to any part or all of the Guarantied Obligations, (e) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations, (f) any defenses, set-offs or counterclaims which the Supplier may assert against the Beneficiary in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction (other than the right to set off or recoup overdue undisputed payments due from Beneficiary under the TPPA), and (g) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of either Guarantor as an obligor in respect of the Guarantied Obligations. 6. Waivers for the Benefit of Beneficiary. Each Guarantor waives, for the benefit of Beneficiary, until the Guarantied Obligations are paid in full: (a) any right to require the Beneficiary, as a condition of payment or performance by the Guarantors, to (i) proceed against the Supplier, any other guarantor of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from the Supplier, any other guarantor of the Guarantied Obligations or any other Person, or (iii) pursue any other remedy in the power of the Beneficiary; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Supplier including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Supplier from any cause other than payment in full of the Guarantied Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) (i) any principles or provisions of law, statutory or otherwise, that are or might be in conflict with the terms of this Guarantee and any legal or equitable discharge of Guarantors' obligations hereunder, (ii) the benefit of any statute of limitations affecting Guarantors' liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that the Beneficiary protect, secure, perfect or insure any lien on any property subject thereto; (e) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guarantee; and (f) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guarantee. 7. Waiver of Rights Against Supplier. Until the Guarantied Obligations are paid in full, each Guarantor waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against the Supplier or any of its assets in connection with this Guarantee or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or H-5 indemnification that such Guarantor now has or may hereafter have against the Supplier, (b) any right to enforce, or to participate in, any claim, right or remedy that the Beneficiary now has or may hereafter have against the Supplier, and (c) any benefit of, and any right to participate in, any collateral or security hereafter held by the Beneficiary. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement and indemnification as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against the Supplier or against any collateral or security shall be junior and subordinate to any rights the Beneficiary may have against Supplier, to all right, title and interest the Beneficiary may have in any such collateral or security, and to any right the Beneficiary may have against such other guarantor. 8. Representations and Warranties of Guarantor. Each Guarantor represents and warrants to NPC as follows: (a) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Such Guarantor has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (b) it has the corporate power and authority to execute and deliver this Guarantee and to consummate the transactions contemplated hereby. The execution and delivery of this Guarantee and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of such Guarantor, and no other corporate proceedings on the part of such Guarantor, including the approval of its shareholders, are necessary to authorize this Guarantee or to consummate the transactions so contemplated. This Guarantee has been duly and validly executed and delivered by such Guarantor and constitutes a valid and binding agreement of such Guarantor, enforceable against such Guarantor in accordance with its terms. (c) There are no legal or arbitral proceedings by or before any governmental or regulatory authority or agency, now pending or (to such Guarantor's knowledge) threatened against such Guarantor or its subsidiaries that could reasonably be expected to have a material adverse effect on the consolidated financial condition, operations or business taken as a whole of it and its subsidiaries, except as set forth in periodic filings by such Guarantor with the Securities and Exchange Commission. (d) The representations and warranties made herein will remain true until such Guarantor has fulfilled its obligations to pay in full the Guaranteed Obligations. 9. Set Off. In addition to any other rights the Beneficiary may have under law or in equity, if any amount shall at any time be due and owing by either Guarantor to the Beneficiary under this Guarantee, the Beneficiary is authorized at any time or from time to time, without notice (any such notice being expressly waived), to set off and to appropriate and to apply any indebtedness of the Beneficiary owing to such Guarantor and any other property of such H-6 Guarantor held by the Beneficiary to or for the credit or the account of such Guarantor against and on account of the Guarantied Obligations and liabilities of such Guarantor to the Beneficiary under this Guarantee. 10. Disputes. Any action, claim or dispute arising out of or relating to this Guarantee (any such action, claim or dispute, a "Dispute") shall be submitted in writing to the other Party. In the event the Guarantors and NPC are unable to resolve the Dispute satisfactorily within thirty (30) days from the receipt of notice of the Dispute, either the Guarantors or NPC may initiate arbitration through the serving and filing of a demand for arbitration. The Guarantors and NPC expressly agree that such arbitration shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time a request made for provisional remedies requesting preservation of respective rights and obligations under the Guarantee may be resolved by a court of law located in the County of the principal place of business of NPC. Arbitration shall be conducted in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the TPPA. 11. Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Guarantee, and no consent to any departure by either Guarantor therefrom, shall in any event be effective without the written concurrence of NPC and, in the case of any such amendment or modification, either Guarantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 12. Miscellaneous. It is not necessary for Beneficiary to inquire into the capacity or powers of either Guarantor or Supplier or the officers, directors or any agents acting or purporting to act on behalf of any of them. The rights, powers and remedies given to Beneficiary by this Guarantee are cumulative and shall be in addition to and independent of all rights, powers and remedies given to Beneficiary by virtue of any statute or rule of law or in the TPPA. Any forbearance or failure to exercise, and any delay by Beneficiary in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. In case any provision in or obligation under this Guarantee shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Guarantee shall inure to the benefit of Beneficiary and its respective successors and assigns. 13. Notices. All notices, requests, demands, waivers, consents and other communications hereunder shall be in writing, shall be delivered either in person, by telegraphic, facsimile or other electronic means, by overnight air courier or by mail, and shall be deemed to have been duly given and to have become effective (a) upon receipt if delivered in person or by telegraphic, facsimile or other electronic means, (b) one (1) business day after having been H-7 delivered to an air courier for overnight delivery or (c) three (3) business days after having been deposited in the U.S. mails as certified or registered mail, return receipt requested, all fees prepaid, directed to the parties at the following addresses: If to Guarantors, addressed to: David Lloyd, Esq. NRG Energy, Inc. Symphony Towers Suite 2740 750 "B" Street San Diego, CA 92101-8129 Facsimile: (619) 615-7663 Alisa B. Johnson, Esq. Dynegy Holdings Inc. 1000 Louisiana Street, Suite 5800 Houston, TX 77002 Facsimile: (713) 767-8508 with copies to: William H. Holmes, Esq. Stoel Rives LLP 900 SW Fifth Avenue Suite 2300 Portland, OR 97204-1268 Facsimile: 503-220-2480 If to NPC, addressed to: William E. Peterson Nevada Power Company 6100 Neil Road Reno, Nevada 89511 Facsimile: (775) 834-5959 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officers thereunto duly authorized as of the date first written above. NRG ENERGY, INC. DYNEGY HOLDINGS INC. - -------------------------------- -------------------------------- By: Craig A. Mataczynski By: _______________________ Title: President Title: _______________________ Address: 901 Marquette Ave., Suite 2300 Address: 1000 Louisiana St., Suite 5800 Minneapolis, MN 55402 Houston, TX 77002 H-8 EXHIBIT I COMPANY OBSERVED HOLIDAYS New Year's Day January 1/st/ Martin Luther King's Day Third Monday in January President's Day Third Monday in February Memorial Day (observed) Last Monday in May Independence Day July 4/th/ Labor Day First Monday in September Veteran's Day November 11/th/ Thanksgiving Day Fourth Thursday in November Thanksgiving Friday Friday after Thanksgiving Christmas Eve December 24/th/ Christmas Day December 25/th/ Holidays falling on Saturday will be observed on the preceding Friday and those falling on Sunday will be observed on the following Monday. I-1 EXHIBIT J REID GARDNER BUNDLE ADJUSTMENTS TO TPPA AMOUNT
Monthly Monthly Month Adjustment Month Adjustment ---------------------------- --------------------------- Mar-01 3.7% Mar-02 2.9% Apr-01 3.2% Apr-02 2.7% May-01 4.8% May-02 4.0% Jun-01 5.6% Jun-02 4.5% Jul-01 8.8% Jul-02 9.2% Aug-01 8.3% Aug-02 7.3% Sep-01 8.8% Sep-02 7.1% Oct-01 4.4% Oct-02 3.4% Nov-01 3.8% Nov-02 2.5% Dec-01 3.9% Dec-02 2.5% Jan-02 3.1% Jan-03 2.6% Feb-02 2.5% Feb-03 2.1%
Example 1 - Effective Date of Agreement is April 15, 2001 - --------------------------------------------------------- A. TPPA Amount: $15,000,000 B C D Monthly Applicable Applicable Month Adjustment Portion * Adjustment - -------------------------------------------------------------------------- (B x C) Apr-01 3.2% 50.0% 1.6% May-01 4.8% 100.0% 4.8% - -------------------------------------------------------------------------- Total 6.4% E. Total of Monthly Applicable Adjustments 6.4% F Adjusted TPPA Amount (A x (1+D)) $15,960,000 ============================================================================================
Example 2 - Effective Date of Agreement is September 15, 2001 - ------------------------------------------------------------- G. TPPA Amount: $15,000,000
H I J Monthly Applicable Applicable Month Adjustment Portion * Adjustment - ---------------------------------------------------------------------------------------- (H x I) Jun-01 5.6% 100.0% 5.6% Jul-01 8.8% 100.0% 8.8% Aug-01 8.3% 100.0% 8.3% - ----------------------------------------------------------------------------------------
J-1 EXHIBIT J REID GARDNER BUNDLE ADJUSTMENTS TO TPPA AMOUNT Sep-01 8.8% 50.0% 4.4% - -------------------------------------------------------------------------- Total 27.1% K. Total of Monthly Applicable Adjustments 27.1% L Adjusted TPPA Amount (G x (1-K)) $10,935,000 ========================================================================================
Example 3 - Termination Date of December 31, 2002 - ------------------------------------------------- M. TPPA Amount: $15,000,000
N O P Monthly Applicable Applicable Month Adjustment Portion ** Adjustment - ---------------------------------------------------------------------------------- (N x O) Jan-03 2.6% 100.0% 2.6% Feb-03 2.1% 100.0% 2.1% - ---------------------------------------------------------------------------------- Total 4.7% Q. Total of Monthly Applicable Adjustments 4.7% R Payment Amount (M x Q) $705,000 ===============================================================================================
* The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer were made divided by the number of days in the month. ** The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer would have been made divided by the number of days in the month. J-2 EXHIBIT K REID GARDNER BUNDLE ADJUSTMENTS TO MINIMUM ANNUAL TAKE
A B C D E F Base Number Base Energy Sales per Current Adjusted Number Energy Class * of Customers Sales Customer (MWh) (MWh) of Customers Sales (MWh) - ------------------------------------------------------------------------------------------- (C / B) (D x E) ** Residential 475,000 5,800,000 12 470,000 5,738,947 Commercial 65,000 2,800,000 43 60,000 2,584,615 Industrial 1,000 4,900,000 800 3,600,000 Street Lighting 5 130,000 5 130,000 Other Retail 50 600,000 50 600,000 Wholesale 5 850,000 5 850,000 - ------------------------------------------------------------------------------------------- 541,060 15,080,000 530,860 13,503,563 G. Adjustment to Minimum Annual Take (F / C) 89.55% H. Minimum Annual Take from Exhibit A (MWh) 2,550,000 I. Revised Minimum Annual Take (MWh) (G x H) 2,283,525 J K Month During Applicable Min. Contract Year Annual Take(MWh) - --------------------------------- 1 2,550,000 2 2,550,000 3 2,550,000 4 2,550,000 5 2,283,525 6 2,283,525 7 2,283,525 8 2,167,500 9 2,167,500 10 2,040,000 11 2,040,000 12 2,040,000 - --------------------------------- Total 27,505,575 L. Minimum Take for Contract Year (MWh) (Total of K / 12) 2,292,131
* As reported on Buyer's FERC Form 1 ** Adjusted Energy Sales for the remaining Industrial, Street Lighting, Other Retail, and Wholesale customers will be based upon actual sales during the base period. K-1 EXHIBIT L REID GARDNER BUNDLE ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE
A B C D E * F G ** Dispatch Supply Delivered Permitted Force Replacement Applicable Hour Amount (MWh) Energy (MWh) Derating(MWh) Majeure(MWh) Energy(MWh) Energy(MWh) - -------------------------------------------------------------------------------------------- (C+D+E+F) 1 590 590 590 2 590 590 590 3 590 590 590 4 590 590 590 5 590 590 590 6 590 570 20 590 7 590 570 20 590 8 590 570 20 590 9 590 590 590 10 590 590 590 11 590 590 590 12 590 590 590 13 590 0 590 590 14 590 0 590 590 15 590 0 590 590 16 590 0 590 590 17 590 540 30 570 18 590 590 590 19 590 590 590 20 590 590 590 21 590 590 590 22 590 590 590 23 590 590 590 24 560 560 560 25 540 540 540 26 510 510 510 27 540 510 30 540 28 560 560 560 29 590 590 590 30 590 590 590 31 590 590 590 32 590 590 590
K-2 EXHIBIT L REID GARDNER BUNDLE ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE 33 590 590 590 34 590 590 590 35 590 590 590 36 590 590 590 - ------------------------------------------------------------------------------- total 21,000 18,500 70 2,360 50 20,980
* Includes energy excused because of Supplier's and Buyer's events of Force Majeure ** G cannot be greater than B EXHIBIT M REID GARDNER BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS 1. For the purposes of this Exhibit M, "Constrained Capacity" shall mean that portion of the Asset Bundle Capacity that has been designated as being subject to contractual and operational constraints in accordance with the provisions of this Exhibit M. 2. Section 4.1.4 of the Agreement, which addresses Supplier's right to Asset Bundle Capacity in excess of the Supply Amount, shall not be applicable to Constrained Capacity. 3. Asset Bundle Capacity scheduled in accordance with Section 5.1 of the Agreement, which addresses Buyer's notifications to Supplier, shall not be deemed to include Constrained Capacity unless Buyer's schedules specifically designate Constrained Capacity as being applicable to the schedules. 4. The Asset Bundle Capacity described in the following table shall be deemed Constrained Capacity.
--------------------------------------------------------------------------------------- Asset Bundle Source of Capacity Annual Limit Monthly Limit Daily Limit --------------------------------------------------------------------------------------- Reid Gardner Unit 4 Peaking 1,500 hours at 300 hours at 12 hours at (235 MW summer)/1/ max. capacity max. capacity max. capacity ---------------------------------------------------------------------------------------
____________________ /1/ As defined in Section 12.2 of the Participation Agreement (as defined in the Asset Sale Agreement). L-2 EXHIBIT L REID GARDNER BUNDLE ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE 33 590 590 590 34 590 590 590 35 590 590 590 36 590 590 590 70 2,360 50 20,980 total 21,000 18,500
* Includes energy excused because of Supplier's and Buyer's events of Force Majeure ** G cannot be greater than B EXHIBIT M REID GARDNER BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS 1. For the purposes of this Exhibit M, "Constrained Capacity" shall mean that portion of the Asset Bundle Capacity that has been designated as being subject to contractual and operational constraints in accordance with the provisions of this Exhibit M. 2. Section 4.1.4 of the Agreement, which addresses Supplier's right to Asset Bundle Capacity in excess of the Supply Amount, shall not be applicable to Constrained Capacity. 3. Asset Bundle Capacity scheduled in accordance with Section 5.1 of the Agreement, which addresses Buyer's notifications to Supplier, shall not be deemed to include Constrained Capacity unless Buyer's schedules specifically designate Constrained Capacity as being applicable to the schedules. 4. The Asset Bundle Capacity described in the following table shall be deemed Constrained Capacity.
--------------------------------------------------------------------------------------- Asset Bundle Source of Capacity Annual Limit Monthly Limit Daily Limit --------------------------------------------------------------------------------------- Reid Gardner Unit 4 Peaking 1,500 hours at 300 hours at 12 hours at (235 MW summer)1 max. capacity max. capacity max. capacity ---------------------------------------------------------------------------------------
____________________ 1 As defined in Section 12.2 of the Participation Agreement (as defined in the Asset Sale Agreement). L-2 70 EX-10.I 18 0018.txt ASSET SALE AGREEMENT, PINNACLE WEST ENERGY Exhibit 10(I) [EXECUTION COPY] ________________________________________________________________________________ ASSET SALE AGREEMENT BETWEEN NEVADA POWER COMPANY AND PINNACLE WEST ENERGY CORPORATION FOR THE HARRY ALLEN ASSET BUNDLE December 1, 2000 ________________________________________________________________________________ ASSET SALE AGREEMENT ASSET SALE AGREEMENT, dated as of December 1, 2000 (the "Agreement"), between Nevada Power Company, a Nevada corporation (the "Seller"), and Pinnacle West Energy Corporation, an Arizona corporation (the "Buyer"). WHEREAS, the Seller owns and operates the "Purchased Assets" (as defined herein); and WHEREAS, the Buyer desires to purchase and assume from the Seller, and the Seller desires to sell to the Buyer, the Purchased Assets and certain associated liabilities upon the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS ----------- 1.1 Definitions. As used in this Agreement, the following terms have ----------- the meanings specified or referred to in this Section 1.1: (1) "Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (2) "Adjustment Statement" shall have the meaning set forth in Section 3.2(a) hereof. (3) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (4) "Agreement" means the Asset Sale Agreement, dated December 1, 2000, together with the Schedules and Exhibits thereto. (5) "Ancillary Agreements" means the Interconnection Agreement, the Transition Power Purchase Agreement, the Operating Easement Agreements and the Water Supply Agreement. (6) "Assignment of Leases" means the Assignment of Leases in the form of Exhibit A hereto. (7) "Assumed Liabilities" shall have the meaning set forth in Section 2.3 hereof. (8) "Benefit Plans" shall have the meaning set forth in Section 2.4(i) hereof. (9) "Benefit Plans of Buyer" shall have the meaning set forth in Section 7.11(d) hereof. (10) "Bill of Sale" means the Bill of Sale to be delivered at the Closing with respect to the Purchased Assets which constitute personal property and which are to be transferred at the Closing, substantially in the form of Exhibit B hereto. (11) "Business Day" means any day other than Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (12) "Buyer" shall have the meaning set forth in the preface hereto. (13) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (14) "Buyer Required Regulatory Approvals" shall have the meaning set forth in Section 6.3(b) hereof. (15) "Buyer's Easements" shall have the meaning set forth in Section 4.3(f) hereof. (16) "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. (S)9601, et seq., as amended. ------- (17) "Closing" shall have the meaning set forth in Section 4.1 hereof. (18) "Closing Date" shall have the meaning set forth in Section 4.1 hereof. 2 (19) "COBRA" means the Consolidated Omnibus Reconciliation Act of 1985, as amended. (20) "Code" means the Internal Revenue Code of 1986, as amended. (21) "Collective Bargaining Agreements" shall have the meaning set forth in Section 7.11(a) hereof. (22) "Confidentiality Agreement" means the Confidentiality and Auction Protocols Agreement, dated March 1, 2000, between the Seller and the Buyer. (23) "CPUC" means the California Public Utility Commission or any successor thereto. (24) "CSFB" shall have the meaning set forth in Section 7.7 hereof. (25) "Direct Claim" shall have the meaning set forth in Section 9.2(c) hereof. (26) "Dispute" shall have the meaning set forth in Section 11.6 hereof. (27) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, conservation easements, deed restrictions, encumbrances and charges of any kind. (28) "Environmental Laws" means all federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances, laws relating to record keeping, notification, disclosure and reporting requirements respecting Hazardous Substances, and laws relating to the management and use of natural resources. (29) "Environmental Permits" shall have the meaning set forth in Section 5.12(a) hereof. 3 (30) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (31) "ERISA Affiliate" shall have the meaning set forth in Section 2.4(i) hereof. (32) "ERISA Affiliate Plans" shall have the meaning set forth in Section 2.4(i) hereof. (33) "Estimated Adjustment Amount" means (i) the Estimated Maintenance and Capital Expenditures Amount plus (ii) the Estimated Inventory Adjustment Amount plus (iii) the Estimated Materials and Supplies Adjustment Amount. (34) "Estimated Inventory Adjustment Amount" means the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer, which approval shall not be unreasonably withheld, of the fuel inventory priced as the Seller's weighted average fuel costs used at or in connection with the Purchased Assets as of the date that is ten (10) days before the Closing Date, which valuation shall be provided to the Buyer by the Seller no later than five (5) days before the Closing Date. (35) "Estimated Maintenance and Capital Expenditures Amount" means the Seller's estimate of the Maintenance and Capital Expenditures Amount, which estimate shall be the Seller's good faith reasonable estimate of the Maintenance and Capital Expenditures Amount actually incurred, as set forth in Schedule 1.1(35) attached hereto as of the date set forth in such Schedule 1.1(35). (36) "Estimated Materials and Supplies Adjustment Amount" means the Seller's good faith reasonable estimate of the book value of materials and supplies used at or in connection with the Purchased Assets on the Materials and Supplies Valuation Date. (37) "Estimated Purchase Price" shall have the meaning set forth in Section 4.2 hereof. (38) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (39) "Excluded Assets" shall have the meaning set forth in Section 2.2 hereof. 4 (40) "Excluded Liabilities" shall have the meaning set forth in Section 2.4 hereof. (41) "Federal Power Act" means the Federal Power Act of 1935, as amended. (42) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. (43) "Final Order" shall have the meaning set forth in Section 8.1(c) hereof. (44) "Governmental Authority" means any executive, legislative, judicial, regulatory or administrative agency, body, commission, department, board, court, tribunal, arbitrating body or authority of the United States or any foreign country, or any state, local or other governmental subdivision thereof. (45) "Harry Allen Station" means the Harry Allen generating station located in Clark County, Nevada. (46) "Hazardous Substances" means (i) any petrochemical or petroleum products, oil or coal ash, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (ii) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (iii) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law. (47) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (48) "Hourly Employees" shall have the meaning set forth in Section 7.11(a) hereof. (49) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (50) "Income Tax" means any federal, state, local or foreign Tax (i) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains Taxes and minimum Taxes) or (ii) based 5 upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such Tax may be based, measured by or calculated with respect to, is described in clause (i), in each case together with any interest, penalties, or additions to such Tax. (51) "Indemnifiable Losses" shall have the meaning set forth in Section 9.1(a) hereof. (52) "Indemnifying Party" shall have the meaning set forth in Section 9.1(c) hereof. (53) "Indemnitee" shall have the meaning set forth in Section 9.1(c) hereof. (54) "Indenture" means Indenture of Mortgage and Deed of Trust dated as of October 1, 1953, as amended from time to time, between the Seller and the Bankers Trust Company, as successor trustee. (55) "Independent Accounting Firm" means Deloitte & Touche LLP or such other independent accounting firm of national reputation mutually appointed by the Seller and the Buyer. (56) "Independent Appraiser" shall have the meaning set forth in Section 3.3 hereof. (57) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit C attached hereto. (58) "Interconnection Agreement" means the Interconnection Agreement, dated as of December 1, 2000, between the Seller and the Buyer. (59) "Inventory Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (60) "Knowledge" means the actual knowledge of the directors and executive officers of the specified Person, which directors and executive officers are charged with the responsibility for the particular function as of the date of the Agreement, or with respect to any certificate delivered pursuant to the Agreement, the date of delivery of such certificate. In the case of Seller, "executive officer" includes any person listed on Schedule 1.1(60). (61) "Leased Assets" shall have the meaning set forth in Section 7.4 hereof. 6 (62) "Leases" shall have the meaning set forth in Section 5.9 hereof. (63) "Local 396 LOA" shall have the meaning set forth in Section 7.11(a) hereof. (64) "Maintenance and Capital Expenditures Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (65) "Maintenance and Capital Expenditures Amount" means the aggregate amount of all funds actually expended on, or for which liabilities were accrued in accordance with generally accepted accounting principles applied on a consistent basis with respect to any maintenance expenditures and capital expenditures beginning on the date of this Agreement and ending on the Closing Date, excluding any unscheduled maintenance expenditures or capital expenditures which are made by the Seller with the Buyer's consent, which shall not be unreasonably withheld, but including (i) any Scheduled Maintenance Expenditures or Scheduled Capital Expenditures, made with respect to the Purchased Assets by the Seller, and (ii) any maintenance expenditures and capital expenditures which were made by the Seller at the Buyer's request, beginning on the date of this Agreement and ending on the Closing Date. (66) "Management Employee" shall have the meaning set forth in Section 7.11(b) hereof. (67) "Intentionally Left Blank" (68) "Material Adverse Effect" means any change or changes in or effect on the Purchased Assets that is materially adverse to the business, results of operations, financial condition or physical condition of the Purchased Assets, individually or in the aggregate, except for (i) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power, (ii) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used at the Purchased Assets, (iii) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems, (iv) any change in applicable laws, judgments, orders or decrees, (v) any conditions imposed by a Governmental Authority in connection with the consents or approvals required for the transactions contemplated hereby, and (vi) any materially adverse change in or effect on the Purchased Assets which is cured (including by the payment of money) by the Seller before the Termination Date. 7 (69) "Materials and Supplies Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (70) "Materials and Supplies Valuation Date" means the date that is ten (10) days prior to the Closing Date. (71) "Necessary Capital Expenditures" shall have the meaning set forth in Section 7.1(c) hereof. (72) "Necessary Maintenance Expenditures" shall have the meaning set forth in Section 7.1(e) hereof. (73) "Off-Site Location" means any real property other than the Real Property. (74) "Operating Easement Agreements" means the operating easements providing the right to continue operating and maintaining certain generation and transmission facilities at the Purchased Assets, each in substantially the form of Exhibit D or Exhibit E attached hereto. The parties recognize that the form and substance of the Operating Easement Agreements will be controlled by BLM procedures, however the parties acknowledge their intent that the definitive Operating Easement Agreements, and such other documents as may be reasonably necessary, shall substantially accomplish the objective and intent of the Operating Easement Agreements attached hereto as Exhibit D and Exhibit E. (75) "Operating Easements" means the Seller's Easements and/or Buyer's Easements granted pursuant to the Operating Easement Agreements. (76) "OPUC" means the Oregon Public Utility Commission or any successor thereto. (77) "Permits" shall have the meaning set forth in Section 5.19 hereof. (78) "Permitted Encumbrances" means (i) those exceptions to title to the Purchased Assets contained in the documents listed on Schedule 5.8; (ii) all exceptions, restrictions, easements, covenants, charges, rights of way and monetary and non-monetary Encumbrances of record or that are set forth in an applicable FERC project license, except for such Encumbrances which secure indebtedness; (iii) any state of facts that a current survey of the Real Property would disclose, except for such facts which would have a Material Adverse Effect; (iv) with respect to any date before the Closing Date, Encumbrances under the Indenture; (v) mortgages, liens, pledges, charges, Encumbrances and restrictions incurred in 8 connection with the Seller's purchase of properties and assets after the date of the Seller Balance Sheet securing all or a portion of the purchase price therefor; (vi) the Buyer's Easements and the Seller's Easements (in accordance with the Operating Easement Agreements applicable to such easements and the Interconnection Agreement); (vii) statutory liens for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings; (viii) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings; (ix) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities; and (x) such other liens, imperfections in or failure of title, charges, easements, restrictions and Encumbrances which do not materially detract from the value of or materially interfere with the present use of the Purchased Assets and do not, in the aggregate, have a Material Adverse Effect. (79) "Person" means any individual, partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof. (80) "Plan" shall have the meaning set forth in Section 7.11(d). (81) "PUCN" means the Public Utilities Commission of Nevada or any successor thereto. (82) "Purchase Price" shall have the meaning set forth in Section 3.1 hereof. (83) "Purchased Assets" means, subject to the Permitted Encumbrances, all of the right, title and interest in, to and under the real and personal property, tangible or intangible, of the Seller constituting the Harry Allen Station or used principally for generation purposes in connection with such sites including, without limitation, the following assets owned by the Seller: (i) the Real Property described on Schedule 1.1(83)(i) as associated with the Harry Allen Station (the "Harry Allen Real Property"); (ii) all inventories of fuels, supplies, materials and critical spares located on or in transit to the Harry Allen Real Property on the Closing Date; (iii) the machinery, equipment, vehicles, furniture and other personal property located on the Harry Allen Real Property on the Closing Date, including, without limitation, the items of personal property included in Schedule 1.1(83)(iii) as being associated with Harry Allen Station, and all warranties against manufacturers or vendors relating thereto, to the extent that such warranties are freely transferable; (iv) the contracts, agreements and personal property leases listed on Schedules 1.1(83)(iv) as being associated with Harry Allen Station and which are assignable; 9 (v) the Permits listed on Schedule 1.1(83)(v) as being associated with Harry Allen Station, to the extent transferable; (vi) all books, operating records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications, procedures and similar items of the Seller relating specifically to the aforementioned assets other than books of account associated with Harry Allen Station; (vii) the SO2 Allowances identified on Schedule 1.1(83)(vii) associated with Harry Allen Station; (viii) any assets purchased or to be purchased by the Seller pursuant to Section 7.4 associated with Harry Allen Station; and (ix) any applications or permits, to the extent transferrable with or without consent, to appropriate public waters, certificates of appropriation, adjudicated or unadjudicated water rights, applications to change the place of diversion, manner of use, or place of use, decreed water rights, and any other claims to water associated with the Harry Allen Station and the Real Property or personal property associated with the Harry Allen Station, including without limitation, the applications or permits listed on Schedule 1.1(83)(ix). (84) "Qualifying Offer of Employment" shall have the meaning set forth in Section 7.11(b) hereof. (85) "Real Property" means each parcel of real property associated with the Harry Allen Station owned by the Seller (or to which the Seller holds an interest therein), including, but not limited to, buildings, structures and improvements located thereon, fixtures contained therein and appurtenances thereto and easements and other rights relating thereto and as more fully described on Schedule 5.8. (86) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment. (87) "Remediation" means an action of any kind to address a Release of Hazardous Substance or the presence of Hazardous Substances at the Purchased Assets or an Off-Site Location, including any or all of the following activities to the extent they relate to or arise from the presence of a Hazardous Substance at the Purchased Assets or an Off-Site Location: (i) monitoring, investigation, assessment, treatment, cleanup, containment, removal, mitigation, response or restoration work; (ii) obtaining any permits, consents, approvals or authorizations of any Governmental Authority necessary to conduct any such activity; (iii) preparing and implementing any plans or studies for any such activity; (iv) obtaining a written notice from a Governmental Authority with jurisdiction over the Purchased Assets or an Off-Site Location under Environmental Laws that no material additional work is required by such Governmental Authority; (v) the use, implementation, application, installation, operation or maintenance of removal actions on the Purchased Assets or 10 an Off-Site Location, remedial technologies applied to the surface or subsurface soils, excavation and treatment or disposal of soils at an Off-Site Location, systems for long-term treatment of surface water or ground water, engineering controls or institutional controls; and (vi) any other activities reasonably determined by a party to be necessary or appropriate or required under Environmental Laws to address the presence or Release of Hazardous Substances at the Purchased Assets or an Off-Site Location. (88) "Rules" shall have the meaning set forth in Section 11.6 hereof. (89) "Scheduled Capital Expenditures" means those capital expenditures included on Schedule 1.1(89). (90) "Scheduled Maintenance Expenditures" means those maintenance expenditures included on Schedule 1.1(90). (91) "SEC" means the Securities and Exchange Commission or any successor thereto. (92) "Securities Act" means the Securities Act of 1933, as amended. (93) "Seller" shall have the meaning set forth in the preface hereto. (94) "Seller Agreements" means those agreements listed on Schedule 5.17(a). (95) "Seller Balance Sheet" shall have the meaning set forth in Section 5.5 hereof. (96) "Seller Required Regulatory Approvals" shall have the meaning set forth in Section 5.3(b) hereof. (97) "Seller's Easements" shall have the meaning set forth in Section 4.4(d) hereof. (98) "Separation Schedule" means the schedule to be delivered to the Buyer by the Seller by the earliest of March 29, 2001 or thirty (30) days prior to the Closing Date, which shall delineate the Purchased Assets from the Seller's other assets and which shall be consistent with the separation schedule summary attached hereto as Exhibit F. 11 (99) "SO2 Allowance" means an authorization by the Administrator of the USEPA under the Clean Air Act, 42 U.S.C. (S)7401, et seq., to emit one ton ------- of sulfur dioxide during or after a specified calendar year. (100) "Subsidiary," when used in reference to any other person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other person. (101) "Tax" means any tax, charge, fee, levy, penalty or other assessment (other than any Income Tax) imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any excise, property, sales, transfer, franchise, payroll, withholding, social security or other tax, including any interest, penalties or additions attributable thereto. (102) "Tax Return" means any return, report, information return, declaration, claim for refund or other document (including any related or supporting information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. (103) "Termination Date" shall have the meaning set forth in Section 10.1(b) hereof. (104) "Third Party Claim" shall have the meaning set forth in Section 9.2(a) hereof. (105) "Transition Power Purchase Agreement" means the Transition Power Purchase Agreement, dated as of December 1, 2000, between the Buyer and the Seller. (106) "TPPA Amount" shall have the meaning set forth in Section 3.1 hereof. (107) "USEPA" means the United States Environmental Protection Agency, or any successor agency thereto. (108) "WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988, as amended. (109) "Water Supply Agreement" means a Water Supply Agreement to be negotiated and executed by and among the Seller, the Buyer and the buyer of the Clark Bundle located in Clark County, Nevada, pursuant to Section 7.14. 12 ARTICLE II ---------- PURCHASE AND SALE ----------------- 2.1 The Sale. Upon the terms and subject to the satisfaction of the -------- conditions contained in this Agreement, at the Closing, the Seller shall sell, assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, free and clear of all Encumbrances (except for Permitted Encumbrances and the operating easement(s) granted in accordance with the Operating Easement Agreements and the Interconnection Agreement), all of the Seller's right, title and interest in, to and under the real and personal property, tangible or intangible, owned by the Seller and constituting the Purchased Assets. 2.2 Excluded Assets. Notwithstanding any provision herein to the --------------- contrary, the Purchased Assets shall not include the following (collectively, the "Excluded Assets"): (a) all cash, cash equivalents, bank deposits, accounts receivable, and any income, sales, payroll or other tax receivables; (b) the names "Sierra Pacific Resources," "Sierra Pacific Power Company," "Sierra Pacific," "Nevada Power Company" and "Nevada Power" or any related or similar trade names, trademarks, service marks or logos; (c) transmission, substation and communication facilities and related support equipment described in Schedule 2.2(c); (d) any refund, credit penalty payment, adjustment or reconciliation (i) related to Real Property, personal property or other Taxes paid prior to the Closing Date in respect of the Purchased Assets, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable, or (ii) arising under the Seller Agreements and relating to a period before the Closing Date; (e) except to the extent specifically required by law, the personnel records relating to any employees of the Seller; (f) the rights and assets described in the Separation Schedule as not part of the Purchased Assets; and (g) the SO2 Allowances identified on Schedule 2.2(g). 13 2.3 Assumed Liabilities. On the Closing Date, the Buyer shall ------------------- deliver to the Seller the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the liabilities and obligations of the Seller, direct or indirect, known or unknown, absolute or contingent, which relate to the Purchased Assets, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective conditions thereof, including, without limitation, the following liabilities and obligations: (a) all liabilities and obligations of the Seller to be paid or performed after the Closing Date arising under (i) the Seller Agreements, the Environmental Permits, the Permits, the Leases, contracts and any other agreements assigned to the Buyer pursuant to this Agreement in accordance with the terms thereof, and (ii) the leases, contracts and other agreements entered into by the Seller with respect to the Purchased Assets after the date hereof consistent with the terms of this Agreement (including in the case of (i) and (ii), without limitation, agreements with respect to liabilities for real or personal property taxes or other Taxes on any of the Purchased Assets); except, in each case, to the extent such liabilities and obligations, but for a breach or default by the Seller, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default; (b) all liabilities and obligations associated with the Purchased Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.9 hereof; (c) any liabilities and obligations for which the Buyer has indemnified the Seller pursuant to Section 9.1 hereof; (d) all liabilities to employees for which the Buyer is liable pursuant to Section 7.11 hereof; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets, including, without limitation, any fines or penalties that arise in connection with the ownership or operation of the Purchased Assets prior to the Closing Date or the costs associated with correcting any such violations; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), 14 caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets prior to the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; and (iii) the investigation and/or Remediation (whether or not such investigation or Remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; provided, as to all of the above, that nothing set forth in this Section 2.3(e) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (f) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or operation of the Purchased Assets; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets on or after the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets; (v) the investigation and/or Remediation of Hazardous Substances that are present or have been released on or after the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at or adjacent to the Purchased Assets; and (vi) the investigation and/or Remediation of Hazardous Substances that are disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or 15 after the Closing Date, in connection with the ownership or operation of the Purchased Assets, at any Off-Site Location; provided, that nothing set forth in this Section 2.3(f) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (g) all liabilities and obligations of the Seller with respect to the Purchased Assets under the agreements or consent orders set forth on Schedule 5.12; (h) all liabilities incurred by the Seller with respect to the Maintenance and Capital Expenditures Amount made with respect to the Purchased Assets by the Seller; (i) all liabilities or obligations relating to leases for the Purchased Assets; and (j) all other liabilities or obligations exclusively relating to the Purchased Assets no matter when the events or occurrences giving rise to such liabilities or obligations took place. All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are collectively referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between the Seller and the Buyer. 2.4 Excluded Liabilities. The Buyer shall not assume or be -------------------- obligated to pay, perform or otherwise discharge the following liabilities (collectively, the "Excluded Liabilities"): (a) any liabilities or obligations of the Seller in respect of any Excluded Assets or other assets of the Seller which are not Purchased Assets; (b) any liabilities or obligations in respect of Taxes attributable to the Purchased Assets for taxable periods ending on or prior to the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.9(a) hereof; (c) any liabilities, obligations or responsibilities relating to the disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, by the Seller, of Hazardous Substances that were generated at the Purchased Assets, at any Off-Site Location, where the disposal, storage, transportation, discharge, Release, recycling or the arrangement for such activities at such Off-Site Location occurred prior to the Closing Date, provided that for purposes of this Section 2.4(c), "Off-Site Location" does not include any location to which 16 Hazardous Substances disposed of, discharged from, emitted from or Released at the Purchased Assets have migrated including, but not limited to, surface waters that have received waste water discharges from the Purchased Assets; (d) any liabilities, obligations or responsibilities relating to (i) the transmission facilities delineated in the Interconnection Agreement or Operating Easement Agreements or (ii) any Seller's operations on, or usage of, the operating easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (A) any violation or alleged violation of Environmental Laws and (B) loss of life, injury to persons or property or damage to natural resources, except to the extent caused by the Buyer; (e) any liabilities or obligations required to be accrued by the Seller in accordance with generally accepted accounting principles and the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities related to the Purchased Assets other than any liability assumed by the Buyer under Section 2.3(a), (e) or (f) hereof; (f) any liabilities or obligations relating to any personal injury (including, without limitation, workers' compensation claims), discrimination, wrongful discharge, or unfair labor practice filed with or pending before any court or administrative agency on the Closing Date, with respect to liabilities principally relating to the Purchased Assets, other than any liabilities or obligations assumed by the Buyer under Section 2.3(e) hereof; (g) any payment obligations of the Seller for goods delivered or services rendered prior to the Closing; (h) any liabilities or obligations imposed upon, assumed or retained by the Seller pursuant to the Interconnection Agreement, Operating Easement Agreements or any other Ancillary Agreement; and (i) any liabilities, obligations or responsibilities relating to any "employee pension benefit plan" (as defined in Section 3(2) of ERISA) maintained by the Seller and any trade or business (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with the Seller under Section 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") or to which the Seller and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by the Seller or any ERISA Affiliate (hereinafter referred to as "Benefit Plans"), including any liability (i) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (ii) with respect to non-compliance with the notice and benefit continuation require- 17 ments of COBRA; (iii) with respect to any non-compliance with ERISA or any other applicable laws; or (iv) with respect to any suit, proceeding or claim which is brought against any Benefit Plan, ERISA Affiliate Plan, any fiduciary or former fiduciary of any such Benefit Plan or ERISA Affiliate Plan. ARTICLE III ----------- PURCHASE PRICE -------------- 3.1 Purchase Price. The purchase price for the Purchased Assets shall -------------- be an amount equal to the sum of (i) Sixty-Nine Million Eight Hundred and Ten Thousand Dollars ($69,810,000), (ii) the Estimated Adjustment Amount, (iii) the Adjustment Amount, and (iv) any amounts paid by the Seller with respect to Leased Assets pursuant to Section 7.4 hereof (the "Purchase Price"). The amount to be paid by Seller to Buyer for the Transition Power Purchase Agreement being entered into by Buyer and Seller hereunder shall be Four Million Six Hundred and Ten Thousand Dollars ($4,610,000) (the "TPPA Amount"). 3.2 Purchase Price Adjustment. (a) Within sixty (60) days after ------------------------- the Closing, the Seller shall prepare and deliver to the Buyer a statement (the "Adjustment Statement") which reflects (i) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of all fuel inventory used at or in connection with the Purchased Assets and (B) the Estimated Inventory Adjustment Amount (such difference is referred to as the "Inventory Adjustment Amount"), (ii) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of the materials and supplies used at or in connection with the Purchased Assets and (B) the Estimated Materials and Supplies Adjustment Amount (such difference is referred to as the "Materials and Supplies Adjustment Amount") and (iii) the difference between (A) the Maintenance and Capital Expenditures Amount and (B) the Estimated Maintenance and Capital Expenditures Amount (such difference is referred to as the "Maintenance and Capital Expenditures Adjustment Amount"). The Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount and the Maintenance and Capital Expenditures Adjustment Amount are referred to collectively as the "Adjustment Amount." The Adjustment Statement shall be prepared using the same generally accepted accounting principles, policies and methods as the Seller has historically used in connection with the calculation of the items reflected on the Adjustment Statement. The Buyer agrees to cooperate with the Seller in connection with the preparation of the Adjustment Statement and related information, and shall provide to the Seller such books, records and information as may be reasonably requested from time to time. 18 (b) The Buyer may dispute the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount; provided, however, that the Buyer shall notify the Seller -------- ------- in writing of the disputed amount, and the basis of such dispute, within ten (10) Business Days of the Buyer's receipt of the Adjustment Statement. In the event of a dispute with respect to the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount, the Buyer and the Seller shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the Buyer and the Seller are unable to reach a resolution of such differences within thirty (30) days of receipt of the Buyer's written notice of dispute to the Seller, the Buyer and the Seller shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the parties, within thirty (30) days after such submission, upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. The fees and disbursements of the Independent Accounting Firm shall be allocated between the Buyer and the Seller so that the Buyer's share of such fees and disbursements shall be in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully disputed by the Buyer (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm. (c) Within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Buyer shall pay all undisputed portions of the Adjustment Amount. If there is a dispute with respect to any amount on the Adjustment Statement, within five (5) Business Days after the final determination of such disputed amounts on the Adjustment Statement, the Buyer shall pay to the Seller an amount equal to the disputed portion of the Adjustment Amount as finally determined to be payable with respect to the Adjustment Statement; provided, however, that if such amount shall be less than -------- ------- zero, then the Seller shall pay to the Buyer the amount by which such amount is less than zero. All payments made pursuant to this Section 3.2(c) shall be paid together, with interest thereon for the period commencing on the Closing Date through the date of payment, calculated at the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in cash by federal or other wire transfer of immediately available funds. 3.3 Allocation of Purchase Price. The Buyer and the Seller shall ---------------------------- use their good faith best efforts to agree upon an allocation among the Purchased Assets of the sum of the Purchase Price consistent with Section 1060 of the Code and the Treasury Regulations thereunder within one-hundred twenty (120) days of the date of this Agreement but in no event less than thirty (30) days prior to the Closing. 19 The Buyer and the Seller may jointly agree to obtain the services of an independent appraiser (the "Independent Appraiser") to assist the parties in determining fair value of the Purchased Assets for purposes of such allocation. If such an appraisal is made, both the Buyer and the Seller agree to accept the Independent Appraiser's determination of the fair value of the Purchased Assets. The parties shall jointly select the Independent Appraiser. The cost of the appraisal shall be borne equally by the Buyer and the Seller. Each of the Buyer and the Seller agrees to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns, in accordance with such agreed allocation. Each of the Buyer and the Seller shall report the transactions contemplated by this Agreement for federal Income Tax and all other tax purposes in a manner consistent with the allocation determined pursuant to this Section 3.3. Each of the Buyer and the Seller agrees to provide the other promptly with any other information required to complete Form 8594. Each of the Buyer and the Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. 3.4 Proration. (a) The Buyer and the Seller agree that all of the --------- items normally prorated, including those listed below, relating to the business and operation of the Purchased Assets shall be prorated as of the Closing Date, with the Seller liable to the extent such items relate to any time period through the Closing Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date: (i) personal property, real estate, occupancy and any other Taxes, assessments and other charges, if any, on or with respect to the business and operation of the Purchased Assets. In addition, in the event that the Seller is subject to Taxes, assessments and other charges on property of which the Purchased Assets comprises only a portion, the portion of such Taxes, assessments and other charges allocated to the Purchased Assets and subject to proration by this Section 3.4 shall be determined by reference to the relative value of the Purchased Assets, as determined by the Purchase Price paid by the Buyer, compared with the value of the Seller's property subject to such Taxes, assessments and other charges, as assessed by the relevant taxing authority; (ii) rent, Taxes and other items payable by or to the Seller under any of the Seller Agreements to be assigned to and assumed by the Buyer hereunder; (iii) any permit, license or registration fees with respect to any Environmental Permit or other Permit; and 20 (iv) sewer rents and charges for water, telephone, electricity and other utilities. (b) In connection with such proration, in the event that actual figures are not available at the Closing Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either the Seller or the Buyer made within sixty (60) days of the date that the actual amounts become available. The Seller and the Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 3.4. ARTICLE IV ---------- THE CLOSING ----------- 4.1 Time and Place of Closing. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York, at 10:00 a.m., local time, on the first Business Day following the date on which all of the conditions to each party's obligations hereunder have been satisfied or waived, or at such other place or time as the parties may agree. The date and time at which the Closing actually occurs is hereinafter referred to as the "Closing Date." 4.2 Payment of Purchase Price. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Assets, the Buyer shall pay or cause to be paid to the Seller the Purchase Price. The Purchase Price shall be paid as follows: (i) an amount at Closing equal to the sum of $69,810,000, plus (ii) any amounts with respect to Leased Assets to be paid pursuant to Section 7.4 hereof, plus (iii) the Estimated Adjustment Amount for the Closing pursuant to Section 3.2 hereof, and less (iv) the TPPA Amount (the "Estimated Purchase Price"), by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer. 4.3 Deliveries by Seller. At the Closing, the Seller shall deliver to -------------------- the Buyer the following: (a) The Bill of Sale, duly executed by the Seller for the personal property included in the Purchased Assets; 21 (b) The executed consents to transfer the Seller Agreements, the Environmental Permits and the Permits, to the extent specifically required hereunder; (c) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Seller; (d) The certificate and opinion of counsel as contemplated by Section 8.2 hereof; (e) One or more deeds of conveyance transferring the Seller's interest in the Real Property to the Buyer, without covenant or warranty of title, duly executed and acknowledged by the Seller and in recordable form subject to Permitted Encumbrances and retaining to the extent necessary or any existing easements in favor of the Seller with respect to Real Property conveyed to the Buyer, each substantially in the form of Exhibit G attached hereto; (f) One or more easements to the extent necessary to evidence the right of the Buyer to use the Real Property of the Seller (the "Buyer's Easements") associated with the Purchased Assets, duly executed and acknowledged by the Seller and in recordable form, each substantially in the form of Exhibit D attached hereto; (g) The Assignment of Leases, in the form of Exhibit A attached hereto, assigning to the Buyer all of the Seller's right, title and interest as lessor (or lessee, as the case may be) under the Leases; (h) Copies of the resolutions adopted by the board of directors of the Seller, certified by the secretary of the Seller, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Seller of this Agreement, the Ancillary Agreements, the Bill of Sale and other closing documents described in this Agreement to which the Seller is a party, and the performance by the Seller of its obligations hereunder and thereunder; (i) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Assets in accordance with this Agreement, the Ancillary Agreements and where necessary or desirable, in recordable form; and (j) Such other agreements, documents, instruments and writings as are required to be delivered by the Seller at or prior to the Closing Date pursuant to this Agreement, the Ancillary Agreements or otherwise required in connection herewith or therewith. 22 4.4 Deliveries by Buyer. At the Closing, the Buyer shall deliver ------------------- to the Seller the following: (a) The Estimated Purchase Price by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer; (b) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Buyer; (c) The certificate and opinion of counsel as contemplated by Section 8.3 hereof; (d) One or more easements, to the extent necessary for the Seller to use the Real Property of the Buyer (the "Seller's Easements") to the extent necessary for the Seller to continue and maintain its transmission and distribution business, in favor of the Seller with respect to Real Property conveyed to the Buyer, duly executed and acknowledged by the Buyer, each substantially in the form of Exhibit E attached hereto, and the Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.9 hereof; (e) The Instrument of Assumption, duly executed by the Buyer providing for the assumption of all of the Seller's right, title and interest as lessor (or lessee as the case may be) under the Leases; (f) All such other instruments of assumption as shall, in the reasonable opinion of the Seller and its counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (g) Copies of the resolutions adopted by the board of directors of the Buyer, certified by the secretary of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement, the Ancillary Agreements and other closing documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its obligations hereunder and thereunder; and (h) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement, the Ancillary Agreements or otherwise required in connection herewith or therewith. 23 ARTICLE V --------- REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- The Seller represents and warrants to the Buyer as follows (all such representations and warranties, except those regarding the Seller, being made to the best Knowledge of the Seller): 5.1 Organization; Qualification. The Seller is a corporation duly --------------------------- organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. The Seller is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and Bylaws as currently in effect. 5.2 Authority Relative to this Agreement. The Seller has full ------------------------------------ corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of the Seller and no other corporate proceedings on the part of the Seller are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by the Seller, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Buyer, subject to the receipt of the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitute valid and binding agreements of the Seller, enforceable against the Seller in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 5.3(a), and other than obtaining the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by the Seller nor the sale by the Seller of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the 24 Certificate of Incorporation or Bylaws of the Seller, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to the Seller as a result of the specific regulatory status of the Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which the Seller is a party or by which the Seller, or any of the Purchased Assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Seller, or any of its assets, which violation would have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) approvals or other actions by the PUCN, the CPUC and/or the OPUC (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by the Seller and the Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through (iv) above are collectively referred to as the "Seller Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory authority is necessary for the consummation by the Seller of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect and other than the Permits and Environmental Permits. 5.4 Reports. Since January 1, 1996, the Seller, pursuant to the ------- Securities Act, the Exchange Act, the applicable state public utility laws, the Federal Power Act and the Holding Company Act, has filed or caused to be filed with the SEC, the applicable state or local utility commissions or regulatory bodies, or the FERC, as the case may be, all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by them with respect to the business and operations of the Seller as it relates to the Purchased Assets under each of the Securities Act, the Exchange Act, the applicable state public utility laws, the Federal Power Act and the Holding Company Act and the respective rules and regulations thereunder, all of which complied in all material 25 respects with all applicable requirements of the appropriate act and the rules and regulations thereunder in effect on the date each such report was filed. 5.5 Financial Statements. The Seller has previously furnished to -------------------- the Buyer (i) balance sheets of the Seller as of September 30, 2000, and (ii) the related statements of income and retained earnings and changes in financial position of the Seller for the fiscal year then ended. The balance sheet of the Seller as of September 30, 2000 is referred to herein as the "Seller Balance Sheet." Each of the balance sheets included in the financial statements referred to in this Section 5.5 (including the related notes thereto) presents fairly the financial position of the Seller as of their respective dates, and the other related statements included therein (including the related notes thereto) present fairly the results of operations and changes in financial position for the periods then ended, all in conformity with generally accepted accounting principles applied on a consistent basis, except as otherwise noted therein. 5.6 Undisclosed Liabilities. Except as set forth in Schedule 5.6, the ----------------------- Seller has no liability or obligation relating to the business or operations of the Purchased Assets, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or reserved against in the Seller Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were incurred in the ordinary course of business, whether before or after the date of the Seller Balance Sheet, or those which in the aggregate are not material to the Purchased Assets. 5.7 Absence of Certain Changes or Events. Except as set forth in ------------------------------------ Schedule 5.7, or in the reports, schedules, registration statements and definitive proxy statements filed by the Seller with the SEC, and except as otherwise contemplated by this Agreement, since the date of the Seller Balance Sheet there has not been: (i) any Material Adverse Effect; (ii) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (iii) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing, capital expenditure or capital financing) by the Seller, which is material to the business or operations of the Purchased Assets, except agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (iv) any change by the Seller, with respect to the Purchased Assets, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.8 Title to Real Property. Set forth in Schedule 5.8 is a true and ---------------------- complete list of the Real Property of the Seller which is part of the Purchased Assets. 26 The Seller has insurable title to all of the Real Property, subject only to Permitted Encumbrances. 5.9 Leasehold Interests. Schedule 5.9 lists, as of the date of this ------------------- Agreement, all Real Property leases (the "Leases") relating to the Purchased Assets under which the Seller is a lessee, lessor or under which Seller otherwise has any interest and which are to be assigned to, and assumed by, the Buyer on the Closing Date. Except as set forth in Schedule 5.9, to the Seller's Knowledge, all such Leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing material defaults by the Seller thereunder; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default thereunder. 5.10 Improvements. Except as set forth in Schedule 5.10, the Seller ------------ has not received any written notices from any Governmental Authority stating or alle ging that any improvements with respect to the Purchased Assets have not been constructed in compliance with applicable law. Except as set forth in Schedule 5.10, no written notice has been received by the Seller from any Governmental Authority requiring or advising as to the need for any repair, alteration, restoration or improvement in connection with the Purchased Assets. 5.11 Insurance. Except as set forth in Schedule 5.11, all material --------- policies of fire, liability, workers' compensation and other forms of insurance purchased or held by and insuring the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.11, as of the date of this Agreement, the Seller has not been refused any insurance with respect to the Purchased Assets nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last twelve (12) months. 5.12 Environmental Matters. (a) Except as set forth in Schedule 5.12, --------------------- in any public filing by the Seller pursuant to the Securities Act or the Exchange Act, or in any environmental site assessment prepared by or for the Seller and made available to the Buyer, the Seller holds, and is in substantial compliance with, all material permits, licenses and governmental authorizations (the "Environmental Permits") required for the Seller to operate the Purchased Assets under applicable Environmental Laws, and to the Knowledge of the Seller, the Seller is otherwise in compliance with applicable Environmental Laws with respect to the Purchased Assets except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, 27 which, in the aggregate, are not reasonably likely to have a Material Adverse Effect. The Seller's Environmental Permits are set forth on Schedule 5.12. (b) Except as set forth in Schedule 5.12, the Seller has not received any written request for information, or been notified in writing that it is a potentially responsible party, under CERCLA or any similar state law with respect to any of the Purchased Assets, except for such liability under such laws as would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. (c) Except as set forth in Schedule 5.12, with respect to the Purchased Assets, the Seller has not entered into or agreed to any consent decree or order, and is not subject to any judgment, decree, or judicial order relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Substances under any Environmental Law, except such consent decrees or orders, judgments, decrees or judicial orders that would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. (d) The representations and warranties made in this Section 5.12 are the Seller's exclusive representations and warranties relating to environmental matters. 5.13 Labor Matters. The Seller has previously delivered to the Buyer ------------- copies of all labor union and Collective Bargaining Agreements relating to the Purchased Assets to which the Seller is a party or is subject, if any. With respect to its employees at the Purchased Assets, except to the extent set forth in Schedule 5.13 and except for such matters as shall not have a Material Adverse Effect, to the Seller's Knowledge: (i) the Seller is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours; (ii) the Seller has not received written notice of any unfair labor practice complaint against the Seller pending before the National Labor Relations Board; (iii) there is no labor strike, slowdown or stoppage actually pending or threatened against or affecting the Seller; (iv) the Seller has not received notice that any representation petition respecting the employees of the Seller has been filed with the National Labor Relations Board; (v) no arbitration proceeding arising out of or under collective bargaining agreements is pending against the Seller; and (vi) the Seller has not experienced any primary work stoppage since at least December 31, 1995. There are no employees of Seller who work full time at the Harry Allen Station. 5.14 ERISA; Benefit Plans. (a) Except as set forth in Schedule -------------------- 5.14(a)(i), with respect to its employees, if any, at the Purchased Assets, the Seller has fulfilled its obligations under the minimum funding requirements of Section 302 28 of ERISA, and Section 412 of the Code, with respect to each "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and the Code. The Seller has not incurred any liability under Section 4062(b) of ERISA to the Pension Benefit Guaranty Corporation in connection with any employee pension benefit plan relating to employees, if any, at the Purchased Assets which is subject to Title IV of ERISA. Except as set forth in Schedule 5.14(a)(ii), the Internal Revenue Service has issued a letter for each employee pension benefit plan determining that such plan is exempt from United States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and there has been no occurrence since the date of any such determination letter which has adversely affected such qualification, and no withdrawal liability has been incurred by or asserted against the Seller with respect to any employee pension benefit plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). (b) Schedule 5.14(b) lists, as of the date of this Agreement, all deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all material bonus and other employee benefit or fringe benefit plans maintained or with respect to which contributions are made by the Seller in respect of employees who are the employees of the Seller who work at the Purchased Assets. Accurate and complete copies of all such plans, other than multiemployer plans, have been made available to the Buyer. 5.15 Real Property Encumbrances. Schedule 5.15 describes any -------------------------- Permitted Encumbrances on the Real Property. Copies of any surveys in the Seller's possession or any policies of title insurance currently in force and in the possession of the Seller with respect to such Real Property have been delivered by the Seller to the Buyer. 5.16 Condemnation. Neither the whole nor any part of the Real Property ------------ or any other real property or rights leased, used or occupied by the Seller in connection with the ownership or operation of the Purchased Assets is subject to any pending suit for condemnation or other taking by any public authority, and, to the Knowledge of the Seller, no such condemnation or other taking is threatened or contemplated. 5.17 Certain Contracts and Arrangements. (a) Except (i) the Seller ---------------------------------- Agreements listed in Schedule 5.17(a) or any other Schedule hereto, (ii) for contracts, agreements, personal property leases, commitments, understandings or instruments which shall expire prior to the Closing Date, (iii) for agreements with suppliers, distributors and sales representatives entered into in the ordinary course of business, and (iv) for contracts, agreements, personal property leases, commitments, understandings or instruments with a value less than $250,000 or with annual 29 payments less than $50,000 the Seller is not a party to any written contract, agreement, personal property lease, commitment, understanding or instrument which is material to the business or operations of the Purchased Assets. (b) Except as disclosed in Schedule 5.17(b), each material Seller Agreement listed on Schedule 5.17(a) constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to the Buyer pursuant to this Agreement and shall continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder. (c) Except as set forth in Schedule 5.17(c), there is not, under any of the Seller Agreements listed on Schedule 5.17(a), any default or event which, with notice or lapse of time or both, would constitute a default on the part of the Seller, except, with respect to the Seller Agreements only, such events of default and other events as to which requisite waivers or consents have been obtained or which would not, in the aggregate, have a Material Adverse Effect. 5.18 Legal Proceedings, etc. Except as set forth in Schedule 5.18 ----------------------- or in any filing made by the Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, or proceedings pending or investigation pending or threatened against the Seller relating to the Purchased Assets before any court, Governmental Authority or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect. Except as set forth in Schedule 5.18, the Seller is not subject to any outstanding judgment, rule, order, writ, injunction or decree of any court, Governmental Authority or regulatory authority relating to the Purchased Assets which has a Material Adverse Effect. 5.19 Permits. The Seller has all material permits, licenses, ------- franchises and other governmental authorizations, consents and approvals, other than with respect to Environmental Laws (collectively, "Permits"), as set forth in Schedule 5.19(a), necessary to operate the Purchased Assets as presently operated, except where the failure to have such Permits does not have a Material Adverse Effect. Except as set forth in Schedule 5.19(b), with respect to the Purchased Assets, the Seller has not received any written notification that it is in violation of any of such Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for notifications of violations which would not, in the aggregate, have a Material Adverse Effect. The Seller is in compliance with all Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for violations which, in the aggregate, do not have a Material Adverse Effect. 30 5.20 Regulation as a Utility. The Seller and certain of its affiliates ----------------------- are regulated as public utilities in the States of Nevada and California. Except as set forth on Schedule 5.20, the Seller is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any state of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 5.21 Taxes. The Seller has, in respect of the Purchased Assets, (i) ----- filed all Tax Returns required to be filed other than those Tax Returns the failure of which to file would not have a Material Adverse Effect, and (ii) paid in full or all material Taxes shown to be due on such Tax Returns. Except as set forth in Schedule 5.21, the Seller has not received any notice of deficiency or assessment from any taxing authority with respect to liabilities for Taxes of the Seller in respect of the Purchased Assets, which have not been fully paid or finally settled, and any such deficiency shown in such Schedule 5.21 is being contested in good faith through appropriate proceedings. Except as set forth in Schedule 5.21, there are no outstanding agreements or waivers extending the applicable statutory periods of limitation for Taxes associated with the Purchased Assets for any period. ARTICLE VI ---------- REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- The Buyer represents and warrants to the Seller as follows: 6.1 Organization. The Buyer is a corporation duly organized, validly ------------ existing and in good standing under the laws of the State of Arizona and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as is now being conducted. The Buyer is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Buyer has heretofore delivered to the Seller complete and correct copies of its Certificate of Incorporation and Bylaws (or other similar governing documents), as currently in effect. 6.2 Authority Relative to this Agreement. The Buyer has full ------------------------------------ corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby 31 have been duly and validly authorized by the board of directors of the Buyer and no other corporate proceedings on the part of the Buyer are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by the Buyer, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Seller, subject to the receipt of the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, constitute valid and binding agreements of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 6.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by the Buyer nor the purchase by the Buyer of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws (or other similar governing documents) of the Buyer, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to the Buyer as a result of the specific regulatory status of the Seller (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Seller (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which the Buyer or any of its Subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. (b) Except as set forth in (i) Schedule 6.3(b) and (ii) the filings by the Buyer and the Seller required by the HSR Act and the expirations or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) and (ii) are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, 32 authorizations, consents or approvals which if not obtained or made, shall not in the aggregate, have a Material Adverse Effect. 6.4 Regulation as a Utility. Except as set forth in Schedule 6.4, the ----------------------- Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any state of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.5 Availability of Funds. The Buyer has sufficient funds available --------------------- to it or has received binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. ARTICLE VII ----------- COVENANTS OF THE PARTIES ------------------------ 7.1 Conduct of Business of the Seller. Except as described in --------------------------------- Schedule 7.1, during the period from the date of this Agreement to the Closing Date, the Seller shall operate and maintain the Purchased Assets according to its ordinary and usual course of business consistent with good industry practice. Without limiting the generality of the foregoing, and, except as contemplated in this Agreement or as described in Schedule 7.1, prior to the Closing Date, without the prior written consent of the Buyer (unless such consent would be prohibited by law), the Seller shall not with respect to the Purchased Assets: (a) (i) create, incur or assume any material amount of indebtedness for money borrowed, other than in the ordinary course of business, including obligations in respect of capital leases but excluding purchase money mortgages granted in connection with the acquisition of property in the ordinary course of business; or (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person except in the ordinary course of business; (b) make any material change in the operations of the Purchased Assets including, without limitation, the levels of fuel inventory and materials and supplies customarily maintained by the Seller; (c) except as set forth in Schedule 1.1(89), make any capital expenditures with respect to the Purchased Assets or enter into any contract or commitment therefor, except that the Seller shall make any capital expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such capital expenditures as part of the Adjustment Amount and (ii) deemed necessary by 33 the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Capital Expenditures"); provided, however, -------- ------- that if the Buyer requests that the Seller make enhancements with a cost in excess of the cost of any Necessary Capital Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancement to the extent that the cost of such enhancement exceeds the cost of the Necessary Capital Expenditures as part of the Adjustment Amount; (d) sell, lease (as lessor), transfer or otherwise dispose of, any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with good industry practice and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Assets other than Permitted Encumbrances; (e) except as set forth in Schedule 1.1(90), make any maintenance expenditures, except that the Seller shall make any maintenance expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such maintenance expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Maintenance Expenditures"); provided, -------- however, that if the Buyer requests that the Seller make enhancements/upgrades - ------- with a cost in excess of the cost of any Necessary Maintenance Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to the extent the cost of such enhancements/upgrades exceeds the cost of the Necessary Maintenance Expenditure as part of the Adjustment Amount; (f) amend any of the Seller Agreements; (g) enter into or amend any real or personal property Tax agreement, treaty or settlement; (h) execute, enter into or amend any agreement, order, decree or judgment relating to any Permit; (i) enter into any commitment for the purchase or sale of fuel (whether commodity or transportation) that Seller intends to assign to Buyer having a term of greater than ninety (90) days that extends beyond December 31, 2001 if the aggregate payment under such commitment is expected to exceed $500,000 or if the aggregate payments under such commitment and all other then outstanding commitments not previously consented to by the Buyer would be expected to exceed $1,000,000; 34 (j) except for the Transition Power Purchase Agreement, enter into any wholesale sale agreements having a term extending beyond the Closing Date where the sale of energy is expected to be supplied via the Purchased Assets; (k) sell, lease or otherwise dispose of SO2 Allowances, except those listed in Schedule 2.2(g) or to the extent necessary to operate the Purchased Assets in accordance with this Section 7.1; or (l) enter into any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (k). 7.2 Access to Information. (a) Between the date of this Agreement and --------------------- the Closing Date, the Seller shall, during ordinary business hours and upon reasonable notice (i) give the Buyer and the Buyer Representatives reasonable access to all books, records, plants, offices and other facilities and properties constituting the Purchased Assets to which the Buyer is permitted access by law, (ii) permit the Buyer to make such reasonable inspections thereof as the Buyer may reasonably request; (iii) cause its officers and advisors to furnish the Buyer with such financial and operating data and other information with respect to the Purchased Assets as the Buyer may from time to time reasonably request; (iv) cause its officers and advisors to furnish the Buyer a copy of each report, schedule or other document filed or received by them with the SEC, PUCN, CPUC or FERC with respect to the Purchased Assets; provided, -------- however, that (A) any such investigation shall be conducted in such a manner as - ------- not to interfere unreasonably with the operation of the Purchased Assets, (B) the Seller shall not be required to take any action which would constitute a waiver of the attorney-client privilege and (C) the Seller need not supply the Buyer with any information which the Seller is under a legal obligation not to supply. Notwithstanding anything in this Section 7.2 to the contrary, (i) the Seller shall only furnish or provide such access to medical records as is required by law and (ii) except as provided in Section 7.2(d), the Buyer shall not have the right to perform or conduct any environmental sampling or testing at, in, on or underneath the Purchased Assets. (b) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of the Confidentiality Agreement and shall be treated as "Evaluation Material" (as defined in the Confidentiality Agreement). (c) For a period of ten (10) years after the Closing Date, the Seller and its representatives shall have reasonable access to all of the books and records of the Purchased Assets, as the case may be, transferred to the Buyer hereunder to the extent that such access may reasonably be required by the Seller in connection with 35 matters relating to or affected by the operation of the Purchased Assets prior to the Closing Date. Such access shall be afforded by the Buyer upon receipt of reasonable advance notice and during normal business hours. The Seller shall be solely responsible for any costs or expenses incurred by them pursuant to this Section 7.2(c). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such ten-year period, the Buyer shall, prior to such disposition, give the Seller a reasonable opportunity at the Seller's expense, to segregate and remove such books and records as the Seller may select. (d) Buyer shall, upon 48 hour notice to Seller, have reasonable access at reasonable times to the Harry Allen Station and other property associated with the Purchased Assets, as may be reasonably necessary, to perform (i) a geotechnical investigation to determine the subsurface conditions in connection with the development of additional generating facilities and (ii) hydrologic studies, pump testing, water analysis and well inspections associated with or necessary to obtain cooling water, permits and engineering review associated with securing permits and rights to water for development of additional generating facilities, provided, that neither the access nor any of the activities described in this Section 7.2(d) shall interfere with the use or operation of the Purchased Assets, and provided, further, that Buyer shall provide copies to Seller of all data, studies, tests, analyses, and reports generated in connection with such access and activities. Buyer hereby agrees to indemnify and hold Seller harmless from and against, any and all claims or liabilities incurred as a result of or in any way associated with any action by Buyer in connection with the access or activities described in the preceding sentence. 7.3 Expenses. Except to the extent specifically provided herein, -------- whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses. 7.4 Further Assurances. Subject to the terms and conditions of ------------------ this Agreement, each of the parties hereto shall use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the sale of the Purchased Assets pursuant to this Agreement including, without limitation, the use of the Seller's and the Buyer's commercially reasonable efforts to obtain all Permits and Environmental Permits necessary for the Buyer to operate the Purchased Assets. From time to time after the date hereof, without further consideration, the Seller shall, at its own expense, execute and deliver such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Assets. From time to time after the date hereof, the Buyer shall, at its own expense, execute and deliver such documents to the Seller as the Seller may reasonably 36 request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. To the extent that any personal property lease, relating to any assets (the "Leased Assets") which are principally used by the Seller for generation purposes at the Purchased Assets, cannot be assigned to the Buyer, the Seller shall use its commercially reasonable efforts to acquire title to such Leased Assets and to include them in the Purchased Assets before the Closing Date. The Seller's costs associated with acquiring title to such Leased Assets shall be paid by the Buyer as part of the Purchase Price. During the period from the date of this Agreement to the Closing Date, the Seller agrees to take no action which would materially limit or impair Buyer's efforts to commence permitting activities related to the expansion at the Harry Allen Station. In addition, Seller shall consult with Buyer on matters relating to Seller's pending permit applications, permit assignments and permit consents related to site expansion and shall work with Buyer in good faith to manage and control such pending permit applications, permit assignments and permit consents. 7.5 Public Statements. The parties shall consult with each other ----------------- prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and the Buyer shall not issue any such public announcement, statement or other disclosure without having first received the written consent of the Seller, except as may be required by law and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent and under the circumstances in which the parties are expressly permitted by the Confidentiality Agreement to make disclosures of "Evaluation Material" (as defined in the Confidentiality Agreement). 7.6 Consents and Approvals. (a) The Seller and the Buyer shall each ---------------------- file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall consult with each other as to the appropriate time of filing such notifications and shall use their best efforts to make such filings at the agreed upon time, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. (b) The Seller and the Buyer shall cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all commercially reasonable efforts to obtain the transfer or reissuance to the Buyer of all necessary Environmental Permits, Permits, consents, approvals and authorizations of all governmental bodies and (iv) use all commercially reasonable 37 efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Seller Required Regulatory Approvals, the Buyer Required Regulatory Approvals and assignment of the Seller Agreements) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which the Seller or the Buyer is a party or by which either of them is bound. The Seller shall have the right to review and approve in advance all characterizations of the information relating to Purchased Assets; and each of the Seller and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they shall consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such necessary Environmental Permits, Permits, consents, approvals and authorizations of all third parties and governmental bodies. The Seller and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on behalf of the Seller, on the one hand and the Buyer on the other hand, with all governmental bodies. To the extent that a consent to an assignment of any material Seller Agreement cannot be obtained before the Closing Date, the Seller shall enter into all such agreements with the Buyer as are necessary to give the Buyer the rights, obligations and burdens of such Seller Agreements. (c) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any federal, state or local Governmental Authority or agency or any third party in connection with any federal, state or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. 7.7 Fees and Commissions. The Seller and the Buyer each represent and -------------------- warrant to the other that, except for Credit Suisse First Boston ("CSFB"), which is acting for and at the expense of the Seller, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. The Seller and the Buyer shall pay to the other or otherwise discharge, and shall indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 38 7.8 Intentionally Left Blank. ------------------------ 7.9 Tax Matters. (a) Notwithstanding any other provision of this ----------- Agreement, all transfer, sales and similar Taxes incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Buyer, and the Buyer shall, at its own expense, file, to the extent required by law, all necessary Tax Returns and other documentation with respect to all such Taxes, and, if required by applicable law, the Seller shall join in the execution of any such Tax Returns or other documentation, provided, however, Seller shall work with Buyer in good faith to minimize all transfer, sales and similar taxes and Buyer shall indemnify Seller for any reasonable out-of-pocket expenses incurred by Seller in minimizing such taxes. (b) With respect to Taxes to be prorated in accordance with Section 3.4 hereof only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to the Seller's approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for the Seller's review and approval no later than twenty (20) days prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, the Seller shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with Section 3.4 hereof. In addition to any amount of reimbursement due in accordance with Section 3.4 hereof, Buyer shall reimburse Seller for any Nevada property taxes incurred by Seller which relate to the Purchased Assets and have a lien date after the Closing Date. The amount of such reimbursement shall be determined based upon the proportion of (i) the "historical cost less depreciation" of the Purchased Assets to (ii) the total historical cost less depreciation of all the assets reported on Seller's Nevada Operating Property Appraisal Report. (c) Each of the Buyer and the Seller shall provide the other with such assistance as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each shall retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.9 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. 39 7.10 Supplements to Schedules. Prior to the Closing Date, the ------------------------ Seller shall supplement or amend the Schedules required by Article V with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section 7.10 shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.11 Employees. (a) Schedule 7.11(a) sets forth all collective --------- bargaining agreements to which the Seller is a party in connection with Seller's employees assigned on a full-time basis to the Purchased Assets, if any (the "Collective Bargaining Agreements"), as well as any Letters of Agreement between Seller and IBEW Local 396 ("Local 396 LOA"), letters of intent, or other such agreements or understandings related to the sale and transfer of certain plants. The Buyer shall offer employment to begin as of the Closing Date to the Seller's employees, if any, who work full time at the Purchased Assets and who are included in the bargaining units covered by the Collective Bargaining Agreements ("Hourly Employees"). (b) Continued Employment. The Buyer shall, as of the Closing Date, -------------------- make a Qualifying Offer of Employment (as defined herein) to each employee of Seller who (i) worked full-time at the Purchased Assets and (ii) was an employee of the Seller immediately prior to the Closing Date, other than (x) Hourly Employees and (y) Directors (each such employee who accepts a Qualifying Offer of Employment, a "Management Employee"). An offer of employment shall be deemed a "Qualifying Offer of Employment" if (A) the proposed base salary and level of incentive compensation is at least 90% of the employee's base salary and level of incentive compensation immediately prior to the Closing Date and (B) the proposed principal place of employment is within one hundred (100) miles of the employee's principal place of employment immediately prior to the Closing Date. (c) Benefit Continuation. Subject to applicable law, the Buyer shall -------------------- maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation, welfare and benefit plans, programs, policies and fringe benefits covering Management Employees that will be as economically similar, in the aggregate, as those provided pursuant to those employee compensation, welfare and benefit plans, programs, policies and fringe benefits of the Seller and their Subsidiaries as in effect immediately prior to the Closing Date. To the extent permissible under the terms of the Benefit Plans of Buyer and required by applicable law, the Buyer shall waive all limitations as to preexisting conditions exclusions and waiting periods with respect to participation and coverage requirements applicable to the Management Employees under any Benefit Plans of Buyer that are welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in 40 effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Management Employees immediately prior to the Closing Date. (d) Service Credit. The Management Employees shall be given credit -------------- for all service with the Seller or its Subsidiaries (and service credited by Seller or such Subsidiary), to the same extent as such service was credited for such purpose by Seller or such Subsidiary, under all employee benefit plans, programs and policies of the Buyer in which they become participants (the "Benefit Plans of Buyer") for purposes of eligibility, vesting, benefit accrual and determination of level of benefits. Notwithstanding the foregoing, such service with the Seller shall be recognized for purposes of benefit accrual under a defined benefit pension plan or a retiree medical plan (a "Plan") sponsored by the Buyer only if assets and liabilities are transferred to the Buyer's plan and trust from the Seller's plan and trust. (e) Assumptions. The Buyer shall assume only those obligations that ----------- are required to be assumed by the Buyer under the Collective Bargaining Agreement or obligations for which there was a transfer of assets and liabilities to the Buyer's plan and trust from the Seller's plan and trust. Absent such transfer of plan assets and liabilities, benefits accrued under such Benefits Plans of Seller and all benefits currently payable as of the Closing Date shall be and shall remain the obligation of the Seller. Any individual covered under any such Benefit Plan of Seller that is a Group Health Plan (as defined in Section 4980B(g)(2) of the Code and Section 607(l) of ERISA) and who is eligible for continued coverage under such Group Health Plan as of the Closing Date, shall continue to be covered under such Group Health Plan after Closing pursuant to the provisions of COBRA. (f) Neutrality Regarding Future Employees. Subject to federal labor ------------------------------------- law requirements, if Buyer hires employees whose duties are significantly the same duties covered under the Generation Collective Bargaining Agreement between Nevada Power Company and Local Union 396 of the IBEW (the "Union") that was effective June 25, 1999, then the Buyer shall notify the Union of this circumstance and, upon written request by the Union: (1) Allow representatives of the Union reasonable access to the business of the Buyer for the purpose of informing such employees of their rights to form and join organizations of their own choosing for the purpose of representation with their employer with respect to wages, hours, and other terms and conditions of employment and to explain the benefits of membership in and representation for such purposes by the Union. "Reasonable access" shall include the right to meet with employees on at least three (3) occasions at the business of the Buyer on non-work time (e.g., lunch hour) during normal business hours. 41 (2) Buyer shall supply the Union with a list of such employees. Such list shall contain the names, home addresses and home phone numbers of such employees. The Union shall at all times maintain the confidentiality of any such list. (3) Buyer shall submit to a card check election to determine the desires of such employees to be represented for the purpose of collective bargaining by the Union. If a majority of such employees have signed cards authorizing the Union to act as their collective bargaining representative, and such authorization card majority is verified by the Federal Mediation and Conciliation Service, then the Buyer shall recognize the Union as the exclusive bargaining representative of such employees. (4) If the Union is selected by a majority of such employees as their collective bargaining representative, then the Buyer shall, immediately upon the request by the Union, bargain in good faith with the Union for the purpose of concluding a collective bargaining agreement. (5) At all times Buyer shall remain neutral with regard to any question concerning the representation of such employees by the Union. "Neutral" shall mean that the Buyer or its affiliate(s) shall take no official position, nor shall it direct or condone any of its agents or representatives, including any attorneys or consultants, to take any position against the exercise by its employees of their right to select the Union as their collective bargaining representative or to oppose the selection of the Union as the employees' collective bargaining representative. (g) WARN Act. The Seller shall perform timely and discharge all -------- requirements, if any, under the WARN Act and under applicable state and local laws and regulations for the notification of its employees arising from the sale of the Purchased Assets to the Buyer up to and including the Closing Date. The Buyer shall cooperate with the Seller to provide the Seller with such information as may be needed from the Buyer for inclusion in such notices, including providing the Seller at least 90 days prior to the date on which the Closing is anticipated to occur (or such date to which the Buyer and the Seller mutually agree) with a list of all of the Seller's employees to whom the Buyer shall make offers of employment. After the Closing Date, the Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees with respect to the Purchased Assets. 7.12 Risk of Loss. (a) From the date hereof through the Closing Date, ------------ all risk of loss or damage to the property included in the Purchased Assets shall be borne by the Seller. 42 (b) If, before the Closing Date all or any portion of the Purchased Assets are taken by eminent domain, or is the subject of a pending or (to the knowledge of the Seller) contemplated taking which has not been consummated, the Seller shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such taking, then the Buyer or the Seller may, if such taking relates to the Purchased Assets, terminate this Agreement pursuant to Section 10.1(f) hereof. (c) If, before the Closing Date all or any material portion of the Purchased Assets are damaged or destroyed by fire or other casualty, the Seller shall notify the Buyer promptly in writing of such fact. If such damage or destruction would have a Material Adverse Effect and the Seller has not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such casualty, then the Buyer or the Seller may terminate this Agreement pursuant to Section 10.1(f) hereof. 7.13 Additional Covenants of the Buyer. Notwithstanding any other --------------------------------- provision hereof, Buyer covenants and agrees that, for a period of five (5) years commencing on the Closing Date, Buyer shall not transfer the Purchased Assets, or any material portion of the Purchased Assets, to any entity or Affiliate of such entity who at that time is the owner of any bundle of generation assets previously owned by Seller within the southern regions of Nevada, as such regions are described in the Offering Memorandum dated as of March 2000, as supplemented from time to time. Buyer further covenants and agrees that, in the event that Buyer transfers the Purchased Assets or any material portion of the Purchased Assets during such five (5) year period, Buyer shall obtain from its transferee a covenant and agreement which restricts such transferee's ability to transfer the Purchased Assets that is substantially similar to Buyer's covenant and agreement in the first sentence of this Section 7.13 and an additional covenant and agreement that is substantially similar to that of this sentence, and each such covenant and agreement shall survive and remain in effect until five (5) years from the Closing Date as defined in this Agreement. The covenants and agreements contained in this Section 7.13 shall survive Closing and 43 shall continue in effect for a period of five (5) years commencing on the Closing Date. 7.14 Additional Covenants of the Parties. (a) Within fifteen (15) ----------------------------------- Business Days of the date of this Agreement, Buyer agrees to cooperate with Seller in the development of a form of water supply agreement which substantially reflects the provisions set forth in Exhibit H hereto. Seller shall use its commercially reasonable best efforts to present such form of agreement to the buyer of the Clark Bundle as soon as practicable thereafter. Seller and Buyer shall execute such definitive agreement, which will also be executed by the buyer of the Clark Bundle, within thirty (30) Business Days of the date of this Agreement. (b) Seller shall conduct a performance test of the Harry Allen turbogenerator system (the "Test") within 45 days of completion of the combustion turbine overhaul scheduled for February, 2001 to confirm the unit is able to perform at rated summer and winter capacity output levels presented in Exhibit A to the Transitional Power Purchase Agreement. Seller shall give Buyer reasonable notice, but not less than thirty (30) days, of the scheduled date of such Test and protocols to be utilized therein. Buyer shall be entitled to review and comment on such Test and protocols, and Seller shall consider the incorporation of such comments in good faith. Buyer shall be entitled to observe the conduct of such Test. Seller shall provide copies of the reports prepared following such Test. The Test shall correct observed (measured) data site conditions to International Standards Organization (ISO) standard conditions, accounting for non-standard ambient temperature, relative humidity and atmospheric pressure, utilizing the original General Electric turbine correction curves for the turbine. The Test shall be conducted utilizing natural gas fuel and shall measure output utilizing the evaporative cooler, if meteorological conditions permit and consistent with good utility practice. The correction curves will be utilized as the basis to extrapolate to typical summer and winter conditions at the site of 90 degrees F (with the evaporative cooler on) and 72 degrees F (with the evaporative cooler off) respectively. (c) The parties agree to negotiate in good faith to reach an agreement which will permit Buyer to store certain of Buyer's spare parts at the Harry Allen Station prior to Closing. ARTICLE VIII ------------ CLOSING CONDITIONS ------------------ 8.1 Conditions to Each Party's Obligations to Effect the Transactions ----------------------------------------------------------------- Contemplated Hereby. The respective obligations of each party to effect the - ------------------- 44 transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated; (b) No preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the transactions contemplated hereby or by the Ancillary Agreements shall have been issued and remain in effect (each party agreeing to use its reasonable best efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted by any state or federal government or Governmental Authority in the United States which prohibits the consummation of the transactions contemplated hereby or by the Ancillary Agreements. (c) All federal, state and local government consents and approvals required for the consummation of the transactions contemplated hereby or by the Ancillary Agreements, including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, shall have become Final Orders (a "Final Order" for purposes of this Agreement means a final order after all opportunities for rehearing are exhausted (whether or not any appeal thereof is pending) that has not been revised, stayed, enjoined, set aside, annulled or suspended, with respect to which any required waiting period has expired; and as to which all conditions to effectiveness prescribed therein or otherwise by law, regulation or order have been satisfied) with such terms and conditions as shall have been imposed by the Governmental Authority issuing such Final Order and such Final Orders shall not have imposed terms and conditions which would have a material adverse effect on the Purchased Assets; and (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which the Seller or the Buyer, or any of their Subsidiaries, is a party for the consummation of the transactions shall have been obtained, other than those (i) which if not obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii) for which an agreement which is described in the last sentence of Section 7.6(b) hereof has been entered into. 8.2 Conditions to Obligations of Buyer. The obligation of the ---------------------------------- Buyer to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: 45 (a) There shall not have occurred and be continuing, a Material Adverse Effect; (b) The Seller shall have performed and complied with in all material respects the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of the Seller set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of the Seller; (c) The Buyer shall have received a certificate from an authorized officer of the Seller, dated the Closing Date, to the effect that to the best of such officer's knowledge, the conditions set forth in Sections 8.2(a) and (b) hereof have been satisfied; (d) The Buyer shall have received an opinion from Woodburn & Wedge, P.C., dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) The Seller is a corporation organized, existing and in good standing under the laws of the State of Nevada and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by requisite corporate action taken on the part of the Seller; (2) This Agreement and the Ancillary Agreements have been executed and delivered by the Seller and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Seller, enforceable against the Seller in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and except to the extent that the right to indemnification and contribution contained therein may be limited by state or federal securities laws or the public policy underlying such laws; (3) The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Seller shall not constitute a violation of the Certificate of Incorporation or Bylaws of the Seller; and 46 (4) No declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Seller of the Closing other than (i) the Seller Required Regulatory Approvals, (ii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of Nevada, such counsel may rely upon opinions of counsel admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials; and (e) The Seller shall have executed and delivered, as of the Closing, each of the Ancillary Agreements to be executed by the Seller and all required approvals and conditions relating to the Ancillary Agreements shall have been obtained or satisfied. 8.3 Conditions to Obligations of Seller. The obligation of the ----------------------------------- Seller to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed in all material respects its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; (c) The Seller shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b) hereof have been satisfied; and (d) The Seller shall have received an opinion from Snell & Wilmer L.L.P., counsel for the Buyer, dated the Closing Date and satisfactory in form and substance to the Seller and its counsel, substantially to the effect that: 47 (1) The Buyer is a corporation organized, existing and in good standing under the laws of the State of Arizona and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action taken on the part of the Buyer; (2) This Agreement and the Ancillary Agreements have been executed and delivered by the Buyer and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (B) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought; (3) The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Buyer shall not constitute a violation of the Certificate of Incorporation or Bylaws (or other similar governing documents), as currently in effect, of the Buyer; and (4) No declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Buyer of the Closing other than (i) the Buyer Required Regulatory Approvals, (ii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the federal laws of the United States and the State of Arizona, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by appropriate officers and directors of the Buyer and its Subsidiaries and by public officials; and 48 (e) The Buyer shall have executed and delivered, as of the Closing, each of the Ancillary Agreements to be executed by the Buyer and all required approvals and conditions relating to the Ancillary Agreements have been obtained or satisfied. ARTICLE IX ---------- INDEMNIFICATION --------------- 9.1 Indemnification. (a) The Seller shall indemnify, defend and hold --------------- harmless the Buyer from and against any and all claims, demands or suits (by any Person), losses, liabilities, damages (including consequential or special damages), obligations, payments, costs, Taxes and expenses (including, without limitation, the costs and expenses of any and all actions, suits, proceedings, assessments, judgments, settlements and compromises relating thereto and reasonable attorneys' fees and reasonable disbursements in connection therewith) to the extent the foregoing are not covered by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by the Buyer relating to, resulting from or arising out of (i) any breach by the Seller of any covenant or agreement of the Seller contained in this Agreement or the Ancillary Agreements or (ii) the Excluded Liabilities. (b) The Buyer shall indemnify, defend and hold harmless the Seller from and against any and all Indemnifiable Losses asserted against or suffered by the Seller relating to, resulting from or arising out of (i) any breach by the Buyer of any covenant or agreement of the Buyer contained in this Agreement or the Ancillary Agreements or (ii) the Assumed Liabilities. (c) Either the person required to provide indemnification under this Agreement (the "Indemnifying Party") or the person entitled to receive indemnification under this Agreement (the "Indemnitee") may assert any offset or similar right in respect of its obligations under this Section 9.1 based upon any actual or alleged breach of any covenant or agreement contained in this Agreement or the Ancillary Agreements or the Ancillary Agreements . (d) Any Indemnitee having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any Indemnifiable Loss shall be reduced (i) to the extent that the Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take into account any Tax or Income Tax benefit recognized by the Indemnitee arising from the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment, and any payment actually received with respect to an Indemnifiable Loss. 49 (e) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the Indemnifying Party with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (f) The rights and remedies of the Seller and the Buyer under this Article IX are exclusive and in lieu of any and all other rights and remedies which the Seller and the Buyer may have under this Agreement or otherwise for monetary relief with respect to (i) any breach or failure to perform any covenant or agreement set forth in this Agreement or (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be. Without limiting the foregoing, with respect to the Purchased Assets, the Buyer, for itself and its Affiliates, does hereby irrevocably release, hold harmless and forever discharge the Seller from any and all claims of any kind or character, whether known or unknown, hidden or concealed, resulting from or arising out of or in connection with Hazardous Substances or any Environmental Law, other than those liabilities and obligations set forth in Section 2.4(c) hereof. In furtherance of the foregoing, the Buyer, for itself and on behalf of its Affiliates, hereby irrevocably waives any and all rights and benefits with respect to such claims that it now has, or in the future may have conferred upon it by virtue of any statute, regulation or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party's settlement with the obligor. In this connection, the Buyer hereby acknowledges that it is aware that factual matters now unknown to it may have given, or hereafter may give, rise to claims that are presently unknown, unanticipated and unsuspected, and it further agrees that this release has been negotiated and agreed upon in light of that awareness, and the Buyer, for itself and on behalf of its Affiliates, nevertheless hereby intends irrevocably to release the Seller from the claims described in this Section 9.1(f). 9.2 Defense of Claims. (a) If any Indemnitee receives notice of the ----------------- assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any Affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee shall give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than ten (10) calendar days after the Indemnitee's receipt of notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and shall indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party shall have the right to participate in or, by giving written notice 50 to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, and the Indemnitee shall cooperate in good faith in such defense at such Indemnitee's own expense. (b) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a) hereof, the Indemnifying Party shall not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying -------- ------- Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party shall be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party shall not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than ten (10) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party shall have a period of thirty (30) calendar days within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party shall be deemed to have accepted such claim. If the Indemnifying Party rejects such claim, the Indemnitee shall be free to seek enforcement of its rights to indemnification under this Agreement. 51 (d) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of The Chase Manhattan Bank), shall promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party shall, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party shall then -------- ------- be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of such indemnity payment are hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party shall duly execute upon request all instruments reasonably necessary to evidence and perfect the foregoing subrogation and subordination rights. Nothing in this Section 9.2(d) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (e) A failure to give timely notice as provided in this Section 9.2 shall not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. ARTICLE X --------- TERMINATION AND ABANDONMENT --------------------------- 10.1 Termination. (a) This Agreement may be terminated at any time ----------- prior to the Closing Date, by mutual written consent of the Buyer and the Seller. (b) This Agreement may be terminated by the Seller or the Buyer if (i) the transactions contemplated hereby shall not have been consummated on or before eighteen (18) months from the date of this Agreement (the "Termination Date"); provided, however, that the right to terminate this Agreement under this -------- ------- Section 10.1(b) shall not be available to either Seller or Buyer if its failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date; provided, further, that if on the Termination Date the conditions to the Closing - ----------------- set forth in Section 8.1(c) shall not 52 have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Termination Date shall be the date which is twenty-four (24) months from the date of this Agreement or the Ancillary Agreements. (c) This Agreement may be terminated by either the Seller or the Buyer if (i) any Governmental Authority or regulatory body, the consent of which is a condition to the obligations of the Seller and the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent and all appeals of such determination shall have been taken and have been unsuccessful, or (ii) any court of competent jurisdiction in the United States or any state shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, judgment or decree shall have become final and nonappealable. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by the Seller of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer. (e) This Agreement may be terminated by the Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Seller impossible and such violation or breach has not been waived by the Seller. (f) This Agreement may be terminated by either the Seller or the Buyer in accordance with the provisions of Section 7.12(b) or (c) hereof. 10.2 Procedure and Effect of Termination. In the event of termination ----------------------------------- of this Agreement and abandonment of the transactions contemplated hereby by either or both of the parties pursuant to Section 10.1 hereof, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein: (a) such termination shall be the sole remedy of the parties hereto with respect to breaches of any agreement, representation or warranty contained in this Agreement and none of the parties hereto nor any of their respective trustees, directors, officers or Affiliates, as the case may be, shall have any liability or further obligation to the other party or any of their respective trustees, directors, officers or 53 Affiliates, as the case may be, pursuant to this Agreement, except in each case as stated in this Section 10.2 and in Sections 7.2(b), 7.3 and 7.7 hereof; and (b) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. ARTICLE XI ---------- MISCELLANEOUS PROVISIONS ------------------------ 11.1 Amendment and Modification. Subject to applicable law, this -------------------------- Agreement may be amended, modified or supplemented only by written agreement of the Seller and the Buyer. 11.2 Waiver of Compliance; Consents. Except as otherwise provided in ------------------------------ this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.3 No Survival of Representations and Warranties. Each and every --------------------------------------------- representation and warranty contained in this Agreement and each and every covenant contained in this Agreement (other than the covenants in Section 3.2, 3.3, 3.4, 7.2(b), 7.2(c), 7.2(d), 7.3, 7.7, 7.11(f), 7.13, 9.1 and 9.2 hereof (which covenants shall survive in accordance with their terms)) shall expire with, and be terminated and extinguished by, (i) the consummation of the sale of the Purchased Assets and the transfer of the Assumed Liabilities pursuant to this Agreement and shall not survive the Closing Date, or (ii) the termination of this Agreement pursuant to Section 10.1 hereof or otherwise; and none of the Seller, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation, warranty or covenant. 11.4 Notices. All notices and other communications hereunder shall be ------- in writing and shall be deemed given if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof): 54 (a) If to the Seller, to: Sierra Pacific Resources 6100 Neil Road Reno, Nevada 89511 Attention: William E. Peterson, Esq. Telecopy: (775) 834-5959 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036-6522 Attention: Sheldon S. Adler, Esq. Telecopy: (212) 735-2000 (b) if to the Buyer, to: Pinnacle West Energy Corporation 400 North 5/th/ Street Phoenix, Arizona 85004 Attention: Ajoy K. Banerjee Vice President Telecopy: (602) 250-2175 with copies to: Pinnacle West Capital Corporation 400 North 5/th/ Street Phoenix, Arizona 85004 Attention: Nancy L. Loftin, Esq. Vice President and General Counsel Telecopy: (602) 250-3701 11.5 Assignment. This Agreement and all of the provisions hereof shall ---------- be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. Notwithstanding the foregoing, the Buyer may assign the rights, but not the obligations, under this Agreement to a wholly-owned Subsidiary or limited liability company prior to or at Closing. 55 11.6 Arbitration. Any dispute, controversy or claim arising out of or ----------- relating to this agreement, or the breach, termination or validity hereof (a "Dispute"), shall be finally settled by arbitration in accordance with the then-prevailing Commercial Arbitration Rules of the American Arbitration Association, as modified herein (the "Rules"). The place of arbitration shall be Nevada. There shall be three arbitrators, of whom the Seller shall appoint one and of whom the Buyer shall appoint one. The two arbitrators so appointed shall select a third arbitrator who shall act as the chairman of the tribunal. If any arbitrator is not appointed within the time limits provided herein or in the Rules, such arbitrator shall be appointed by the American Arbitration Association. The arbitral tribunal is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover punitive, exemplary or similar damages with respect to any dispute. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act, 9 U.S.C. (S)(S) 1-16, and judgment upon any award may be entered in any court of competent jurisdiction. 11.7 Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Nevada (regardless of the laws that might otherwise govern under applicable Nevada principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. 11.8 Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.9 Interpretation. The article and section headings contained in -------------- this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.10 Entire Agreement. This Agreement, including the documents, ---------------- exhibits, schedules, certificates and instruments referred to herein, and the Confidentiality Agreement embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of the Seller contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Offering Memorandum, dated March 2000) as supplemented, or the 56 correspondence relating to the divestiture of Seller's generation assets previously made available to the Buyer by the Seller and CSFB. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement. 11.11 Bulk Sales or Transfer Laws. The Buyer acknowledges that the --------------------------- Seller shall not comply with the provision of any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by the Seller with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. 57 IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. NEVADA POWER COMPANY By:____________________________________ Name: William E. Peterson Title: Sr. Vice President, General Counsel and Corporate Secretary PINNACLE WEST ENERGY CORPORATION By:____________________________________ Name: William L. Stewart Title: President 58 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS...................................................... 1 1.1 Definitions.................................. 1 ARTICLE II PURCHASE AND SALE................................................ 13 2.1 The Sale..................................... 13 2.2 Excluded Assets.............................. 13 2.3 Assumed Liabilities.......................... 14 2.4 Excluded Liabilities......................... 16 ARTICLE III PURCHASE PRICE................................................... 18 3.1 Purchase Price........................... 18 3.2 Purchase Price Adjustment................ 18 3.3 Allocation of Purchase Price............. 19 3.4 Proration................................ 20 ARTICLE IV THE CLOSING...................................................... 21 4.1 Time and Place of Closing................ 21 4.2 Payment of Purchase Price................ 21 4.3 Deliveries by Seller..................... 21 4.4 Deliveries by Buyer...................... 23 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER......................... 24 5.1 Organization; Qualification................ 24 5.2 Authority Relative to this Agreement....... 24 5.3 Consents and Approvals; No Violation....... 24 5.4 Reports.................................... 25 5.5 Financial Statements....................... 26 5.6 Undisclosed Liabilities.................... 26 5.7 Absence of Certain Changes or Events....... 26 5.8 Title to Real Property..................... 26 5.9 Leasehold Interests........................ 27 5.10 Improvements............................... 27 5.11 Insurance.................................. 27 5.12 Environmental Matters...................... 27
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Page ---- 5.13 Labor Matters..................................... 28 5.14 ERISA; Benefit Plans.............................. 28 5.15 Real Property Encumbrances........................ 29 5.16 Condemnation...................................... 29 5.17 Certain Contracts and Arrangements................ 29 5.18 Legal Proceedings, etc............................ 30 5.19 Permits........................................... 30 5.20 Regulation as a Utility........................... 31 5.21 Taxes............................................. 31 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER................................. 31 6.1 Organization...................................... 31 6.2 Authority Relative to this Agreement.............. 31 6.3 Consents and Approvals; No Violation.............. 32 6.4 Regulation as a Utility........................... 33 6.5 Availability of Funds............................. 33 ARTICLE VII COVENANTS OF THE PARTIES................................................ 33 7.1 Conduct of Business of the Seller................. 33 7.2 Access to Information............................. 35 7.3 Expenses.......................................... 36 7.4 Further Assurances................................ 36 7.5 Public Statements................................. 37 7.6 Consents and Approvals............................ 37 7.7 Fees and Commissions.............................. 38 7.8 Intentionally Left Blank.......................... 39 7.9 Tax Matters....................................... 39 7.10 Supplements to Schedules.......................... 40 7.11 Employees......................................... 40 7.12 Risk of Loss...................................... 42 7.13 Additional Covenants of the Buyer................. 43 7.14 Additional Covenants of the Parties............... 44 ARTICLE VIII CLOSING CONDITIONS...................................................... 44 8.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby....... 44 8.2 Conditions to Obligations of Buyer................ 45 8.3 Conditions to Obligations of Seller............... 47
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Page ---- ARTICLE IX INDEMNIFICATION.......................................................... 49 9.1 Indemnification................................... 49 9.2 Defense of Claims................................. 50 ARTICLE X TERMINATION AND ABANDONMENT.............................................. 52 10.1 Termination....................................... 52 10.2 Procedure and Effect of Termination............... 53 ARTICLE XI MISCELLANEOUS PROVISIONS................................................. 54 11.1 Amendment and Modification........................ 54 11.2 Waiver of Compliance; Consents.................... 54 11.3 No Survival of Representations and Warranties..... 54 11.4 Notices........................................... 54 11.5 Assignment........................................ 55 11.6 Arbitration....................................... 56 11.7 Governing Law..................................... 56 11.8 Counterparts...................................... 56 11.9 Interpretation.................................... 56 11.10 Entire Agreement.................................. 56 11.11 Bulk Sales or Transfer Laws....................... 57
iii EX-10.J 19 0019.txt TRANSITIONAL POWER PURCHASE AGREEMENT, PINNACLE Exhibit 10(J) TRANSITIONAL POWER PURCHASE AGREEMENT BY AND BETWEEN NEVADA POWER COMPANY AND PINNACLE WEST ENERGY CORPORATION __________________________________ ASSET BUNDLE: HARRY ALLEN TABLE OF CONTENTS
Section Page - ------- ---- 1. DEFINITIONS........................................................ 1 2. TERM............................................................... 8 3. SECURITY........................................................... 9 4. SUPPLY SERVICE..................................................... 10 5. NOTIFICATION....................................................... 14 6. PRICING OF ENERGY AND ANCILLARY SERVICES........................... 15 7. INVOICING AND PAYMENTS............................................. 16 8. REGULATORY APPROVALS............................................... 19 9. COMPLIANCE......................................................... 20 10. INDEMNIFICATION.................................................... 20 11. LIMITATION OF LIABILITY............................................ 22 12. FORCE MAJEURE...................................................... 22 13. DISPUTES........................................................... 24 14. NATURE OF OBLIGATIONS.............................................. 27 15. SUCCESSORS AND ASSIGNS............................................. 27 16. REPRESENTATIONS.................................................... 28 17. DEFAULT AND REMEDIES............................................... 29 18 FACILITY ADDITIONS AND MODIFICATIONS............................... 30 19. COORDINATION....................................................... 30 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE...................... 30 21. OUTAGE SCHEDULING.................................................. 31 22. REPORTS............................................................ 32 23. COMMUNICATIONS..................................................... 32 24. NOTICES............................................................ 33 25. MERGER............................................................. 33 26. HEADINGS........................................................... 34 27. COUNTERPARTS AND INTERPRETATION.................................... 34 28. SEVERABILITY....................................................... 34 29. WAIVERS............................................................ 34 30. AMENDMENTS......................................................... 35 31. TIME IS OF THE ESSENCE............................................. 35 32. APPROVALS.......................................................... 35 33. PLR SERVICE........................................................ 36 34. CONFIDENTIALITY.................................................... 36 35. CHOICE OF LAW...................................................... 37
Exhibits Page - -------- ---- EXHIBIT A ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS............. A-1 EXHIBIT B PRICE FLOOR OF ENERGY, PRICE CEILING OF ENERGY, AND PRICE OF ANCILLARY SERVICES...................................... B-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE................................... C-1 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS.................. D-1 EXHIBIT E YEAR END TRUE-UP INVOICE..................................... E-1 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS.................... F-1 EXHIBIT G FORM OF AVAILABILITY NOTICE.................................. G-1 EXHIBIT H FORM OF GUARANTEE............................................ H-1 EXHIBIT I COMPANY OBSERVED HOLIDAYS.................................... I-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT................................... J-1 EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE........................... K-1 EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE..................... L-1 EXHIBIT M ASSET BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS......... M-1
i TRANSITIONAL POWER PURCHASE AGREEMENT This Agreement is made and entered into as of December 1, 2000 by and between Nevada Power Company, a Nevada corporation ("Buyer"), and Pinnacle West Energy Corporation, an Arizona corporation (the "Supplier"). Buyer and Supplier are referred to individually as a "Party" and collectively as the "Parties." WITNESSETH: WHEREAS, Buyer is selling its Harry Allen generating station and other assets associated therewith to Supplier or an affiliate thereof (the "Asset Sale"); WHEREAS, notwithstanding the Asset Sale, Buyer expects that it has been designated as the Provider of Last Resort ("PLR") for its Nevada retail electric customers who are unable to obtain electric service from an alternative seller or who fail to select an alternative seller. The load required to serve such customers, plus the customers under those wholesale sales agreements existing at the Effective Date, is referred to herein as Buyer's Transitional Resource Requirement; and WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest in the Harry Allen generating station as a source of supply for its Transitional Resource Requirement; and WHEREAS, Supplier has or is willing to secure the necessary resources to provide a portion of Buyer's Transitional Resource Requirement; and WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell Energy and Ancillary Services under contract to Buyer; and NOW, THEREFORE, in consideration of the mutual covenants, representations and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows: 1. DEFINITIONS 1.1 Format. 1.1.1 References to Articles and Sections herein are cross-references to Articles and Sections, respectively, in this Agreement, unless otherwise stated. 1.1.2 Any parts of this Agreement which are incorporated by reference shall have the same meaning as if set forth in full text herein. 2 1.2 Definitions. As used in this Agreement, the following terms shall ----------- have the meanings set forth below: 1.2.1 "Agreement" means this Agreement together with the Exhibits --------- attached hereto, as such may be amended from time to time. 1.2.2 "Adjusted Replacement Cost of Energy" means the Replacement ----------------------------------- Cost of Energy that will be due from Supplier after true-up in accordance with the provisions of Section 7.5. Example determinations of the Adjusted Replacement Cost of Energy are shown on Exhibit E. 1.2.3 "Ancillary Services" means those capacity-related services as ------------------- listed in Exhibit B as well as the Energy component of such services. These services are defined in Buyer's OATT. 1.2.4 "Asset Bundle" means the Harry Allen generating station and ------------ other assets associated therewith pursuant to the terms of the Asset Sale Agreement. 1.2.5 "Asset Bundle Capacity" means, with respect to each unit listed --------------------- in Exhibit A, the net generating capacity (in megawatts ("MW")) of such unit, as may be adjusted therein and as modified from time to time in accordance with Section 5.2, Section 20, and Section 21, and not to exceed at any time the net capacity for each unit listed in Exhibit A. Asset Bundle Capacity shall also mean, as the context requires, the Energy (in megawatt-hours ("MWh")) and the Ancillary Services which the units would be capable of producing if they operated at the capacity level described in the first sentence of this Section 1.2.6. 1.2.6 "Asset Sale" has the meaning set forth in the Recitals. ---------- 1.2.7 "Asset Sale Agreement" means the Asset Sale Agreement between -------------------- Buyer and Supplier or Supplier's affiliate dated as of December 1, 2000, to purchase Buyer's Asset Bundle. 1.2.8 "Asset Sale Closing" means the transfer of Buyer's ownership of ------------------ the Asset Bundle through the consummation of the Asset Sale pursuant to the terms of the Asset Sale Agreement. 1.2.9 "Average Cost of Delivered Energy" means the total cost of -------------------------------- Delivered Energy for the Contract Year after the application of the annual true-up mechanism from Section 3 7.5 divided by the total Delivered Energy for the Contract Year. Example determinations of Average Cost of Delivered Energy are shown on Exhibit E. 1.2.10 "Availability Notice" means a notice delivered from time to ------------------- time by Supplier to Buyer pursuant to Section 5.2 notifying Buyer of changes in the availability of the Asset Bundle. 1.2.11 "Business Day" means any day other than Saturday, Sunday, and ------------ any day that is an observed holiday by Buyer as shown on Exhibit I. 1.2.12 "CALPX" means the California Power Exchange and any successor ----- entity thereto. 1.2.13 "Confidential Information" has the meaning set forth in ------------------------ Section 34. 1.2.14 "Contract Year" means, with respect to the first Contract ------------- Year, to each subsequent Contract Year, the period immediately following the end of the preceding Contract Year, and in each case ending on the earlier of the date which is twelve (12) months thereafter or the termination date of this Agreement. 1.2.15 "Control Area" has the meaning set forth in the OATT. ------------ 1.2.16 "Control Area Operator" means an entity and its agents which --------------------- are responsible for the operation of the Transmission System and for maintaining the reliability of the electrical transmission system(s), including the Transmission System, within the Control Area. 1.2.17 "Credit Amount" shall mean an amount equal to the TPPA Amount, ------------- plus an additional amount equal to $40/MWh multiplied by 76 megawatts, multiplied by the number of hours remaining in this Agreement until March 1, 2003. 1.2.18 "Delivered Amount" means, with respect to any Dispatch Hour, ---------------- the Energy delivered by Supplier to Buyer at the designated Point(s) of Delivery during such Dispatch Hour, whether or not such Energy was generated by the Asset Bundle, plus any additional amounts pursuant to Section 4.1.2, Section 4.1.3 and the Ancillary Services provided by Supplier for Buyer during any Dispatch Hour pursuant to the terms of this Agreement. 4 1.2.19 "Derating" means a reduction to the Asset Bundle Capacity. -------- 1.2.20 "Dispatch Hour" means the prescribed hour(s) when Energy is ------------- to be delivered by Supplier to Buyer at the designated Point(s) of Delivery and the prescribed hour(s) when Ancillary Services are to be provided to the ISA by Supplier on behalf of Buyer. 1.2.21 "EDU" means electric distribution utility, the organization --- with the responsibility for the distribution of energy over Buyer's distribution system to retail end-users. 1.2.22 "Effective Date" means the date that this Agreement becomes -------------- effective which shall be the date on which the Closing Date, as defined in the Asset Sale Agreement, actually occurs. 1.2.23 "Emergency Condition" shall mean a public declaration by the ------------------- ISA or Control Area Operator that the Control Area is in danger of imminent voltage collapse or uncontrollable cascading outages. 1.2.24 "Energy" means electricity (measured in MWh) and associated ------ power-producing capacity to be provided by Supplier to Buyer pursuant to this Agreement. Also known as "firm energy and associated firm capacity". 1.2.25 "Event of Default" has the meaning set forth in Section 17 ---------------- hereof. 1.2.26 "FERC" means the Federal Energy Regulatory Commission and any ---- successor agency thereto. 1.2.27 "Force Majeure" has the meaning set forth in Section 12 ------------- hereof. 1.2.28 "GAAP" means Generally Accepted Accounting Principles for the ---- United States. 1.2.29 "Good Utility Practice" means the applicable practices, --------------------- methods, and act: (i) required by applicable Laws, permits and reliability criteria, whether or not the Party whose conduct at issue is a member thereof, and (ii) otherwise engaged in or approved by a significant portion of the United States electric utility industry during the relevant time period, which, in the exercise 5 of reasonable judgement in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, safety, environmental protection, economy and expediency. Good Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to practices, methods or acts generally accepted in the United States electric utility industry. 1.2.30 "Governmental Authority" means any foreign, federal, state, ---------------------- local, tribal or other governmental, regulatory or administrative agency, court, commission, department, board, or other governmental subdivision, legislature, rulemaking board, tribunal, arbitrating body, or other governmental authority. 1.2.31 "Gross Replacement Costs of Energy" means Buyer's Replacement --------------------------------- Cost of Energy prior to adjustment for the amount that Buyer would have paid for the Energy if Supplier had delivered the Energy to Buyer. Example determinations of Gross Replacement Costs of Energy are shown on Exhibit D. 1.2.32 "Guarantee" has the meaning set forth in Section 3.1.2 hereof. --------- 1.2.33 "Guarantor" has the meaning set forth in Section 3.1.2 hereof. --------- 1.2.34 "Invoiced Replacement Costs" means the Replacement Costs which -------------------------- have been billed to Supplier or subtracted from payments to Supplier in accordance with the provisions of Section 4.2 and Section 7.4. 1.2.35 "ISA" means the Mountain West Independent System --- Administrator, or the regional transmission organization authorized with the responsibility for the scheduling and administration of Energy and Ancillary Services over, through and within the Transmission System in coordination with other interconnected entities to provide transmission services. The ISA is also referred to herein as transmission administrator. 1.2.36 "Law" means any law, treaty, code, rule, regulation, order, --- determination, permit, certificate, authorization, or approval of an arbitrator, court or other Governmental Authority which is binding on a Party or any of its property. 6 1.2.37 "Limit on Excused Energy" means the amount of energy that ----------------------- can be excused under the provisions of Section 12.4 as shown on Exhibit A. 1.2.38 "Market Price of Energy" has the meaning set forth in Section ---------------------- 6.2.1. 1.2.39 "Minimum Annual Energy Take" has the meaning set forth in -------------------------- Section 4.1.2. 1.2.40 "Minimum Investment Grade Rating" of a Person means that such ------------------------------- Person has a minimum credit rating on its senior unsecured debt securities of at least two of the following ratings: (i) BBB as determined by Standard & Poor's Corporation, (ii) Baa2 as determined by Moody's Investors Service, Inc., or (iii) a comparable rating by another nationally recognized rating service reasonably acceptable to Buyer. 1.2.41 "Minimum Tangible Net Worth" means the total book value of -------------------------- shareholder's equity less the balance of goodwill, as reported on the latest quarterly balance sheet prepared in accordance with Generally Accepted Accounting Principles (GAAP). 1.2.42 "NERC" means the North American Electric Reliability Council ---- and any successor entity thereto. 1.2.43 "Nonemergency Condition" shall mean the determination, ---------------------- direction or order by the ISA, or Control Area Operator to Supplier and/or Buyer to change the Supply Amount which is not a result of or due to an Emergency Condition. A Nonemergency Condition includes an insufficiency of Ancillary Services to securely operate the Control Area. 1.2.44 "OATT" means Buyer's, or the Control Area Operator's as its ---- successor hereto, as applicable, then-effective Open Access Transmission Tariff, or such entities' successor tariff, which has been accepted for filing by the FERC. 1.2.45 "Operating Representatives" means the persons designated to ------------------------- transmit and receive routine operating and emergency communications required under this Agreement. 1.2.46 "Party" has the meaning set forth in the preamble of this ----- Agreement. 7 1.2.47 "Permitted Deratings" means those reductions to the Asset ------------------- Bundle Capacity of which Supplier may notify Buyer from time to time in an Availability Notice pursuant to Section 5.2. 1.2.48 "Person" means any natural person, partnership, limited ------ liability company, joint venture, corporation, trust, unincorporated organization, or governmental entity or any department or agency thereof. 1.2.49 "Point of Delivery" means the point (s) which has (have) been ----------------- specified as the Interconnection Point(s) in the Interconnection Agreement between Nevada Power Company and Pinnacle West Energy Corporation dated as of December 1, 2000, as it may be amended from time to time, as well as any alternative locations agreed upon pursuant to Section 4.1.6. 1.2.50 "Price Ceiling of Energy" means the ceiling price of Energy ----------------------- as stated in Exhibit B. 1.2.51 "Price Floor of Energy" means the floor price of Energy as --------------------- stated in Exhibit B. 1.2.52 "Provider of Last Resort (PLR)" has the meaning set forth in ----------------------------- the Recitals. 1.2.53 "PUCN" means the Public Utilities Commission of Nevada and ---- any successor entity thereto. 1.2.54 "Replacement Costs" means with respect to a period of time, ----------------- the difference between (a) the actual costs, including without limitation related penalties and transmission costs, incurred by Buyer to replace any shortfall between (1) the Supply Amount and (2) the Delivered Amounts of Energy, (or in the case of Ancillary Services the Supplier's schedule of Ancillary Services) during such period and (b) the payments the Supplier would have been entitled to in respect of such shortfall in delivery; provided that Replacement Costs shall also be subject to the annual true-up mechanism set forth in Section 7.5. 1.2.55 "Supply Amount" means, with respect to each Dispatch Hour, ------------- the amount of Energy and Ancillary Services, not to exceed the Asset Bundle Capacity for such Dispatch Hour, requested by Buyer to be delivered by Supplier during any Dispatch Hour. The Supply Amount for any Dispatch Hour shall be determined pursuant to Section 5.1. 8 1.2.56 "Total Amount of Energy Replaced" means the summation of ------------------------------- Replacement Energy as shown on Exhibit E. 1.2.57 "TPPA Amount" means the amount paid by Buyer to Supplier in ----------- consideration of this Agreement. 1.2.58 "Transitional Resource Requirement" or "TRR" means the --------------------------------- Energy and loss compensation necessary for Buyer to meet its obligations as a Provider of Last Resort (PLR) for Nevada and under those wholesale sales agreements existing at the Effective Date. 1.2.59 "Transmission System" means the facilities owned, controlled, ------------------- or operated by Buyer, or its successors and assigns, that are used to provide transmission service under the OATT. 1.2.60 "WSCC" means the Western Systems Coordinating Council and any ---- successor entity thereto. 2. TERM 2.1 Term. Unless terminated earlier pursuant to the terms of this ---- Agreement, the term of this Agreement shall commence on the Effective Date and continue until the earlier of the effective date of an order by a Governmental Authority terminating Buyer's PLR responsibility, or March 1, 2003. Supplier shall provide service under this Agreement commencing on the first hour on the day after the Effective Date. 2.2 Termination. ----------- 2.2.1 Except pursuant to Sections 2.2.2 or 17.4, this Agreement may not be terminated without the explicit prior written approval of Buyer. 2.2.2 If, prior to the Asset Sale Closing, the FERC or any other Governmental Authority places conditions on or requires revisions of this Agreement which have a material adverse effect on Supplier or Buyer, the Parties agree to negotiate in good faith amendments to the Agreement to preserve the bargain between the Parties. If the Parties fail to negotiate mutually acceptable amendments to this Agreement within sixty (60) days of such action by the FERC or other Governmental Authority, either Party may terminate the Agreement after first notifying the other Party in writing at least ten (10) Business Days prior to the termination date; provided that neither Party may exercise a right of termination pursuant to this Section 2.2.2 after the Asset Sale Closing. 9 2.2.3 This Agreement may be terminated with the mutual agreement of the Parties. 2.2.4 Any termination of this Agreement pursuant to this Section 2 shall not take effect until FERC either authorizes the termination or accepts a written notice of termination. 2.3 Effect of Termination. ---------------------- 2.3.1 Adjustment of TPPA Amount. If the Effective Date of this ------------------------- Agreement is before June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% plus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between the Effective Date and June 1, 2001. An example calculation is shown on Exhibit J. If the Effective Date of this Agreement is after June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% minus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between June 1, 2001 and the Effective Date. An example calculation is shown on Exhibit J. If this Agreement is terminated before March 1, 2003, Supplier shall pay to Buyer an amount, in accordance with the provisions of Section 7, equal to the TPPA Amount which existed before any adjustment in accordance with the first or second paragraph of this Section 2.3.1, multiplied by the sum of the monthly adjustments for each month or portion thereof between the date on which this Agreement is terminated and March 1, 2003. An example calculation is shown on Exhibit J. 2.3.2 Any default or termination of this Agreement shall not release either Party from any applicable provisions of this Agreement with respect to: 2.3.2.1 The payment of liquidated damages pursuant to Sections 4.2, 12, 17, 18, or 21. 2.3.2.2 Indemnity obligations contained in Section 10, to the extent of the statute of limitations period applicable to any third party claim. 10 2.3.2.3 Limitation of liability provisions contained in Section 11. 2.3.2.4 Payment of any unpaid amounts in respect of obligations arising prior to or resulting from termination. 2.3.2.5 For a period of one (1) year after the termination date, the right to raise a payment dispute and the resolution thereof pursuant to Section 13. 2.3.2.6 The resolution of any dispute submitted pursuant to Section 13 prior to, or resulting from, termination. 3. SECURITY 3.1 Supplier Certification; Guarantee. As a condition of Buyer's execution of, and continuing compliance with, this Agreement, Supplier shall at --------------------------------- Supplier's option comply with the provisions of either Section 3.1.1 or Section 3.1.2. 3.1.1 Supplier Certification. Supplier shall (a) provide a ---------------------- certificate from a duly authorized corporate officer of Supplier certifying that, as of the Effective Date, Supplier has a credit rating equal to or higher than the Minimum Investment Grade Rating; or (b) post a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.1.2 Guarantee. In the alternative to the provisions of Section --------- 3.1.1, the Supplier may provide a corporate guarantee, in form and substance as set forth in Exhibit H, made by an entity (the "Guarantor") that: 3.1.2.1 has a credit rating equal to or higher than the Minimum Investment Grade Rating, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a credit rating equal to or higher than the Minimum Investment Grade Rating; or 11 3.1.2.2 has a MTNW of no less than one (1) billion dollars, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a MTNW of no less than one (1) billion dollars; or 3.1.2.3 posts a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.2 Compliance. ---------- 3.2.1 Reporting. If at any time during the term of this Agreement, --------- Standard & Poor's Corporation, Moody's Investors Service, Inc. or another nationally recognized firm downgrades the credit rating of Supplier, the Guarantor, or the financial institution that issued the letter of credit, as applicable, then Supplier shall provide Buyer with written notice of such change of circumstance within two (2) Business Days of any such change. In the event such a downgrade also constitutes an Event of Default pursuant to Section 17, the requirements of this Section 3.2.1 are in addition to, and not in lieu of, the requirements of Section 17. 4. SUPPLY SERVICE 4.1 Obligations of the Parties. -------------------------- 4.1.1 Supply Amount. Supplier shall be required to provide the ------------- Supply Amount in any Dispatch Hour. As provided in Section 5.1, Buyer shall make reasonable efforts to ensure that the Supply Amount is no greater than necessary to satisfy Buyer's TRR. 4.1.1.1 With the Buyer's prior consent, not to be unreasonably withheld or delayed, Supplier shall be entitled to generate or otherwise procure the Supply Amount from sources other than the Asset Bundle. 4.1.1.2 Supplier shall deliver the Supply Amount to Buyer during the Dispatch Hour on a continuous 12 basis at the Point(s) of Delivery and shall schedule the Supply Amount in accordance with the applicable OATT. 4.1.1.3 The Buyer at its sole discretion shall designate the allocation of the Supply Amount between Energy and Ancillary Services in accordance with the notification provisions of Section 5. 4.1.1.3.1 The Parties recognize that the Asset Bundle also is subject to the contractual and operating constraints set forth in Exhibit M. 4.1.2 Minimum Annual Energy Take. The Buyer shall accept a minimum -------------------------- annual energy take during each Contract Year. The Minimum Annual Energy Take shall be set forth on Exhibit A. 4.1.2.1 Buyer's Obligation to Take. If Buyer is unwilling -------------------------- to accept the Minimum Annual Energy Take for any Contract Year, as may be adjusted pursuant to Section 4.1.2.2, the difference (in MWh) between the Supply Amount of Energy (including consideration for Energy that would have been taken but was unavailable due to Permitted Deratings or Force Majeure, as well as the Total Amount of Energy Replaced) and the Minimum Annual Energy Take shall be billed at the Price Ceiling of Energy less the Price Floor of Energy. An example of the monthly determination of the amount of Energy to be credited against the Minimum Annual Energy Take is shown on Exhibit L. 4.1.2.2 Adjustments to Minimum Annual Energy Take. Buyer ----------------------------------------- shall have the right to reduce the Minimum Annual Energy Take if the number of customers taking electric service from Buyer falls below the number of customers on December 31, 2000./1/1/ Adjustments will be applicable, on a pro rata basis, on the first (1/st/) day of the month immediately following Supplier's __________________ /1/ If the retail markets are opened to competition prior to December 31, 2000, the date immediately preceding the date on which the markets are opened will be substituted for December 31, 2000. 13 receipt of Buyer's notice of adjustment. Buyer shall provide supporting data in reasonable detail to support its calculations. An example of the calculation of a revised Minimum Annual Energy Take is shown on Exhibit K. 4.1.3 Supplier Rights to Output. Supplier may sell to others any ------------------------- portion of the Asset Bundle Capacity in excess of the Supply Amount. 4.1.4 Point(s) of Delivery. Supplier shall deliver, and Buyer -------------------- shall take delivery of, the Supply Amount of Energy at the Point(s) of Delivery. Subject to Section 4.1.5.2, Supplier shall be responsible for all costs associated with delivery of the Supply Amount of Energy to the Point(s) of Delivery. 4.1.5 Alternative Points of Delivery. For any Dispatch Hour, ------------------------------ either Party may designate one or more alternative Points of Delivery, subject to the other Party's prior approval and consistent with the OATT, such approval not to be unreasonably withheld or delayed. 4.1.5.1 If Supplier has designated an alternative Point of Delivery, Supplier shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.5.2 If Buyer has designated an alternative Point of Delivery, Buyer shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.6 Fuel. Buyer shall have no responsibility for any fuel ---- procurement or fuel transportation costs or activities associated with the Asset Bundle during the term of this Agreement. 4.1.7 Resale. Except as provided in the next sentence, the Supply ------ Amount may be resold by Buyer only as necessary to satisfy Buyer's TRR. If, after submitting the request of the Supply Amount pursuant to Section 5.1, the Buyer determines that the scheduled Supply Amount, together with purchases scheduled under Buyer's other Transitional Power Purchase Agreements, exceeds Buyer's most-current projected TRR, then the Buyer also shall resell at wholesale that amount of Energy in excess of Buyer's actual TRR as necessary to balance its load and resources. 4.1.8 Right to Review. Buyer and Supplier each shall have the --------------- right to review during normal business hours the relevant 14 books and records of the other Party to confirm the accuracy of such as it pertains to transactions under this Agreement. The review shall be consistent with standard business practices and shall follow reasonable notice to the other Party. Reasonable notice for a review of the previous month's records shall be at least a twenty-four (24) hour period from a Business Day to a subsequent Business Day. If a review is requested of other than the previous month's records, then notice of that request shall be provided with a minimum of seven (7) calendar days written notice by the requesting Party. The notice shall specify the period to be covered by the review. The Party providing records can make reasonable requests that the receiving Party keep the records confidential, and the receiving Party shall take reasonable steps to accommodate such requests. 4.2 Liquidated Damages. ------------------ 4.2.1 If the Delivered Amount of Energy is less than the Supply Amount of Energy in any Dispatch Hour during a month, and Replacement Costs computed in respect of such month are greater than zero, then Supplier shall reimburse Buyer for such Replacement Costs. If Supplier's schedule of Ancillary Services is less than the Supply Amount of Ancillary Services in any Dispatch Hour during a month, Supplier shall reimburse Buyer for such Replacement Costs for the difference between Supplier's schedule and the Supply Amount of Ancillary Services. An example of the methodology used to calculate Replacement Costs is provided in Exhibit D. 4.2.2 Supplier also shall be responsible for any costs incurred by Buyer associated with Supplier's violation of reliability criteria (including but not limited to imbalance costs or penalties), due to a deviation between the Supply Amount and Delivered Amount. 4.2.3 The Parties recognize and agree that the payment of such amounts by Supplier pursuant to this Section 4.2 is an appropriate remedy in the event of such a failure and that any such payment does not constitute a forfeiture or penalty of any kind, but rather constitutes actual costs to Buyer under the terms of this Agreement. 4.3 Supplier Operating Representative. Supplier shall provide and --------------------------------- maintain a twenty-four (24) hour seven (7) day per week communication link with Buyer's control center and with Buyer's schedulers. Supplier's Operating Representatives shall be available to address and 15 make decisions on all operational matters under this Agreement on a twenty-four (24) hour seven (7) day per week basis. 5. NOTIFICATION 5.1 Scheduling Notification. Buyer shall provide Supplier with a request ----------------------- of the Supply Amount no later than twenty-four (24) hours before day- ahead bids must be submitted to the CALPX. Buyer shall make reasonable efforts to ensure that the day-ahead request of the Supply Amount is no greater than that amount then projected to be necessary to satisfy Buyer's TRR. In addition, for each supply amount request, the change in the Supply Amount from one (1) hour to the next hour shall be no greater than the ramping capability of the units within the Asset Bundle as shown in Exhibit A and the minimum load and the number of daily start-ups shall not exceed the amount shown in Exhibit M. 5.2 Availability Notification. ------------------------- 5.2.1 No later than 5:00 a.m. (Pacific Time) of each day, Supplier shall deliver to Buyer an Availability Notice in the form set forth in Exhibit G. 5.2.2 Availability Notices shall provide, for the ninety-six (96) hour period starting at 6:00 a.m. (Pacific Time) that day, Supplier's hourly projection of the unavailability or derating ("Derating") of the Asset Bundle compared to the Asset Bundle Capacity figures stated for each unit in Exhibit A. Each Availability Notice also shall contain, as applicable: (a) the units which are subject to a Derating; (b) the magnitude of the Derating; (c) the hours during which the Derating is expected to apply; (d) the cause of the Derating; (e) the extent, if any, to which the Derating is attributable to a Permitted Derating; (f) the projected Asset Bundle Capacity for each unit during the period covered by the Availability Notice, pursuant to Section 5.2.4 below; and (g) in the first Availability Notice to be provided for each calendar month, the current amount of water stored in the Asset Bundle treated water storage tank. 5.2.3 If and to the extent a Derating is the result of one or more of the following causes, it shall be a Permitted Derating: (a) approved planned outages pursuant to Section 21; 16 (b) response to an Emergency Condition as described in Section 20; (c) subject to the limitations expressed in Section 12.5, a Force Majeure event; or (d) unavailability of water supply to Supplier for use at the Asset Bundle for the operation of the combustion turbine evaporator cooler and, in the event Asset Bundle must be operated using distillate oil for reasons only involving the physical inability to have natural gas delivered to the Asset Bundle, also for use in the operation of the Asset Bundle's combustion turbine emissions control water injectors; (i) provided that, a Permitted Derating due to such unavailability of water supply shall (A) only be allowed to the extent that inoperation of such evaporator cooler, and if applicable in the operation of such emissions control water injectors, would actually reduce Asset Bundle Capacity during the affected time period and (B) not be due to Supplier's (x) failure to maintain a permit to treat and use 30 acre feet of water, treated water or effluent per year, or (y) sales to parties other than Buyer, provided that (1) Supplier has received its necessary water entitlements pursuant to the Water Supply Agreement (as defined in the Asset Sale Agreement), or deliveries pursuant to Section 5.2.3(d)(ii)(B), (2) Supplier has not terminated such Water Supply Agreement and is not in, or alleged to be in, breach or default of such Water Supply Agreement, and (3) Supplier has not otherwise arranged to procure other water resources for this facility. (ii) provided further that, (A) Supplier shall maintain the amount of water in the Asset Bundle treated water storage tank consistent with Good Utility Practice, (B) Buyer, in its sole discretion, shall have the option to augment such water supply with quality and price no less favorable to Supplier than that provided for in the Water Supply Agreement between Supplier and the owner of the Clark Asset Bundle (as defined in the Asset Sale Agreement) to allow for the operation of such 17 evaporative cooler, and if applicable the operation of such emmissions contol water injectors, to increase the otherwise then- available Asset Bundle Capacity, and (C) notwithstanding subsection 5.2.3(d)(ii)(B) above, Supplier shall pay for the costs of augmenting such water supply to the extent that the lack of water supply is caused by Supplier's (x) sales to parties other than Buyer or (y) failure to maintain either the amount of water in the Asset Bundle treated water storage tank or the failure to maintain a permit to receive and use water, treated water or effluent, each in accordance with this section. 5.2.4 In respect of any Dispatch Hour, the Asset Bundle Capacity of each unit shall be the Asset Bundle Capacity figure stated in Exhibit A minus any Permitted Derating applicable during such hour. 5.2.5 Neither the Asset Bundle Capacity nor the Supply Amount shall be reduced by Deratings which are not Permitted Deratings. Supplier shall be responsible for all Replacement Costs, pursuant to Section 4.2.1, caused by Deratings that are not Permitted Deratings. 6. PRICING OF ENERGY AND ANCILLARY SERVICES 6.1 Overview. The price of Energy paid by Buyer to Supplier shall be -------- based upon a designated hourly market price, subject to monthly floor, monthly ceiling, and annual true-up provisions. The Price Floor of Energy will ensure that Supplier will receive an average price for Energy for each month which is not less than the price stated in Exhibit B. The Price Ceiling of Energy provision provides that the average price of Energy paid to Supplier each month and for each year shall not exceed the price stated in Exhibit B. 6.2 Price of Energy. --------------- 6.2.1 Market Price of Energy. In respect of any Dispatch Hour, the ---------------------- designated Market Price of Energy shall be the South of Path 15 ("SP 15") hourly market-clearing price in the day-ahead market from the CALPX as published at the following Web Site (or its successor web site) http://www.calpx.com/prices/index_prices_dayahead_trading.html. --------------------------------------------------------------- Should this hourly market in the day- ahead 18 market not exist for the entire term, the Parties shall agree upon a similar market price index. 6.2.2 Price Floor of Energy. The Price Floor of Energy is stated in --------------------- Exhibit B and shall not change during the term of this Agreement. 6.2.3 Price Ceiling of Energy. The Price Ceiling of Energy is ----------------------- stated in Exhibit B and shall not change during the term of this Agreement. 6.3 Pricing of Ancillary Services. The price of the capacity component of ------------------------------ Ancillary Services is stated in Exhibit B. The price of Ancillary Services shall not change during the term of the Agreement. Supplier shall make available to Buyer and Buyer shall offer to pass through the Energy portion of Ancillary Services with respect to the Supply Amount to the ISA, or Control Area Operator, at the Price Ceiling of Energy (plus expected direct transaction costs). The net proceeds shall be credited to the Supplier pursuant to Section 7. 6.4 Price Revisions. The Parties waive any and all rights to seek to --------------- revise the provisions of this Agreement, including the prices stated, pursuant to Sections 205 and/or 206 of the Federal Power Act. 7. INVOICING AND PAYMENTS 7.1 Invoicing and Payment. On or before the tenth (10/th/) day of each --------------------- month, Supplier shall send to Buyer an invoice setting forth the Supply Amount, Delivered Amount, the Market Price of Energy pursuant to Section 6.2.1 for each Dispatch Hour in the previous month, any amount due in accordance with Section 7.13 and the total due from Buyer. The invoice shall be calculated based upon data available to Supplier and shall be in accordance with this Section 7 and Exhibit C. Buyer shall promptly notify Supplier if Buyer in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. 7.2 Monthly Invoice Calculation. On each monthly invoice, Supplier shall --------------------------- calculate the following amounts: 7.2.1 The Delivered Amount in respect of each Dispatch Hour multiplied by the corresponding Market Price of Energy pursuant to Section 6.2.1, summed over the billing period; 7.2.2 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Ceiling of Energy; 19 7.2.3 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Floor of Energy; 7.2.4 For each Dispatch Hour of the billing period, the shortfall, if any, between the Supply Amount and the Delivered Amount (and in the case of Ancillary Services the shortfall between the Supply Amount of Ancillary Services and Supplier's schedule of Ancillary Services); 7.2.5 The Supply Amount of Ancillary Services for each dispatch hour multiplied by the price of Ancillary Services as stated in Exhibit B; and 7.2.6 The Delivered Amount of Energy related to Ancillary Services for each dispatch hour multiplied by the Price Ceiling of Energy as stated in Exhibit B. 7.2.7 If applicable, any amount to be calculated in accordance with Section 7.13. 7.3 Supplier's Invoice. Supplier will invoice the lesser of the amounts ------------------ calculated in Sections 7.2.1 and 7.2.2, provided that if the amount calculated in Section 7.2.1 is less than the amount calculated in Section 7.2.3, Supplier shall invoice Buyer the amount calculated in Section 7.2.3. Supplier shall also include in its invoice the amounts calculated in Sections 7.2.5, 7.2.6 and 7.2.7. If the Delivered Amount exceeds the Supply Amount, Buyer shall not be obligated to pay for the excess amount. Buyer shall pay Supplier for the amounts invoiced pursuant to Section 7.2.6 upon Buyer's receipt of payment from ISA or Control Area Operator. Examples of this monthly invoice calculation (and annual true-up process) are contained in Exhibit C. 7.4 Buyer's Invoice. In the event any shortfall occurs pursuant to Section --------------- 7.2.4 or payment is due to Buyer pursuant to Section 7.13, Buyer shall within ten (10) Business Days of receipt of Supplier's invoice deliver to Supplier a Buyer's invoice detailing any Replacement Costs or other payment due. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. Buyer shall have the right to adjust the invoices issued in accordance with this Section 7.4 if Buyer incurs Replacement Costs that were not 20 known when earlier invoices were issued. Adjusted invoices shall be issued within thirty (30) days of the date on which the additional Replacement Costs become known. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's adjusted invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. 7.5 Annual True-Up Mechanism for Energy. ----------------------------------- 7.5.1 The annual true-up mechanism will provide adjustments among the Parties with respect to each Contract Year in the following scenarios: (a) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is less than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. (b) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is greater than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Market Price of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. 21 (c) If Buyer incurred Replacement Costs for energy during the Contract Year, Supplier shall multiply the Total Amount of Energy Replaced during the Contract Year by the Average Cost of Delivered Energy after true-up as determined in accordance with Section 7.5.1 (a) or 7.5.1 (b). If the amount so obtained is greater than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be zero. If the amount so obtained is less than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be the sum of the monthly Gross Replacement Costs of Energy less the amount obtained in accordance with the first sentence of this Section 7.5.1(c). If the Adjusted Replacement Cost of Energy is greater than the sum of the monthly Invoiced Replacement Costs of Energy from Buyer's Invoices for the Contract Year, Supplier shall pay the difference to Buyer. If the sum of the monthly Invoiced Replacement costs of Energy is greater than the Adjusted Replacement Cost of Energy, Buyer shall pay the difference to Seller. 7.5.2 True-up adjustments will be calculated by Supplier within twenty (20) days after each Contract Year. Examples of the true-up calculations and invoice form are set forth in Exhibit E. Interest shall be calculated pursuant to 18 CFR Section 35.19a and shall be included in the true-up invoice. Invoices for true-up adjustments shall be submitted by Supplier within thirty (30) days after the end of the Contract Year. Payments for such invoices shall be due from Buyer thirty (30) days from receipt of the true-up invoice. 7.6 Invoice Disagreements. Should there be a good faith dispute over any --------------------- invoice, the Parties shall promptly seek resolution pursuant to Section 13. Pending resolution of the invoice dispute, payment shall be made or offsets or credits taken, as applicable, based upon the undisputed portion of the invoice. 7.7 Adjustments. Upon resolution of the dispute, the prevailing Party ----------- shall be entitled to receive the disputed amount, as finally determined to be payable along with interest (calculated pursuant to 18 C.F.R. (S) 35.19a through the date of payment. No invoice (or payment covered thereby) shall be subject to adjustment unless notice or 22 request for adjustment is given within one (1) year of the date payment thereunder was due. 7.8 Method of Payment. Subject to Sections 7.3, 7.6 and 7.7, Buyer shall ----------------- remit all amounts due by wire or electronic fund transfer, pursuant to Supplier's invoice instructions, no later than thirty (30) days after receipt of the invoice. 7.9 Overdue Payments. Overdue payments shall bear interest from and ---------------- including, the due date to the date of payment on the unpaid portion calculated pursuant to 18 C.F.R. (S) 35.19a. 7.10 Buyer Right to Offset. Buyer shall have the right to offset any --------------------- amounts Supplier owes to Buyer, including Replacement Costs (except for such amounts disputed in good faith by Supplier), against the amounts owed by Buyer to Supplier. 7.11 Taxes. Each Party shall pay ad valorem and other taxes attributed to ----- its facilities and services provided. Supplier shall not include any taxes of any kind in its invoices to Buyer. The prices of Energy and Ancillary Services shall not change during the term of this Agreement as a result of any changes in local, state or federal taxes, fees or levies. 7.12 Late Invoices. If either Party submits an invoice outside of the time ------------- deadlines set forth herein, that Party shall not forfeit its rights to collect the amounts due thereunder, provided that such invoice is no more than six (6) months late, and provided that changes to invoices remain subject to the deadline in Section 7.7 7.13 Termination Prior to March 1, 2003. Notwithstanding any other ---------------------------------- provision herein, in the event that this Agreement is terminated before March 1, 2003 and as a result of such termination Buyer is entitled to a payment in accordance with Section 2.3.1, Supplier shall include an amount calculated in accordance with Section 2.3.1 and Exhibit J, to be paid by Supplier to Buyer in the next monthly invoice submitted to Buyer following such termination. 8. REGULATORY APPROVALS 8.1 This Agreement will be filed with the FERC and any other appropriate regulatory agencies by the appropriate Party as may be required. 9. COMPLIANCE 23 9.1 Each Party shall comply with all relevant Laws and shall, at its sole expense, maintain in full force and effect all relevant permits, authorizations, licenses, and other authorizations material to the maintenance of facilities and the performance of obligations under this Agreement. 9.2 Each Party and its representatives shall comply with all relevant requirements of any authorized Control Area Operator, ISA, and/or EDU to ensure the safety of its employees and the public, and to ensure electric system reliability and integrity, material to the performance of this Agreement. 9.3 Buyer and Supplier shall perform or cause to be performed, their obligations under this Agreement in all material respects in accordance with Good Utility Practices. 10. INDEMNIFICATION 10.1 To the fullest extent permitted by law, a Party to this Agreement ("the Indemnifying Party") shall indemnify, defend and hold harmless the other Party, its parent, affiliates, and successors and agents (each an "Indemnified Party") from and against any and all claims, demands, suits, obligations, payments, liabilities, costs, judgments, damages, losses or expenses asserted by third parties against an Indemnified Party and arising out of, relating to, or resulting from the Indemnifying Party's breach of, or the negligent performance of its obligations under this Agreement. 10.1.1 Such indemnity shall also extend to actual courts costs, attorneys' fees, expenses and other liabilities incurred in the defense of any claim, action or proceeding, including negotiation, settlement, defense and appeals, to which this indemnification obligation applies. In furtherance of the foregoing indemnification and not by way of limitation thereof, the Indemnifying Party hereby waives any defense it otherwise might have against the Indemnified Party under applicable workers' compensation laws. 10.1.2 In claims against any Indemnified Party by an agent of the Indemnifying Party, or anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Section 10 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Indemnifying Party or a subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts. 24 10.1.3 Such indemnity shall also extend to all costs and expenses incurred by the Indemnified Party in any action or proceeding to enforce the provisions of this Agreement, but only if and to the extent the Indemnified Party prevails in such action or proceeding. 10.2 No Negation of Existing Indemnities; Survival. Each Party's indemnity --------------------------------------------- obligations hereunder shall not be construed to negate, abridge or reduce other rights or obligations or indemnity which would otherwise exist at law or equity. The obligations contained herein shall survive any termination, cancellation, or suspension of this Agreement to the extent that any third party claim is commenced during the applicable statute of limitations period. 10.3 Indemnification Procedures. -------------------------- 10.3.1 Any Party seeking indemnification under this Agreement shall give the other Party notice of such claim promptly but in any event on or before thirty (30) days after the Party's actual knowledge of such claim or action. Such notice shall describe the claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the claim that has been, or may be sustained by, said Party. To the extent that the other Party will have been actually and materially prejudiced as a result of the failure to provide such notice, such notice will be a condition precedent to any liability of the other Party under the provisions for indemnification contained in this Agreement. 10.3.2 In any action or proceeding brought against an Indemnified Party by reason of any claim indemnifiable hereunder, the Indemnifying Party may, at its sole option, elect to assume the defense at the Indemnifying Party's expense, and shall have the right to control the defense thereof and to determine the settlement or compromise of any such action or proceeding. Notwithstanding the foregoing, an Indemnified Party shall in all cases be entitled to control its defense in any action if it: (i) may result in injunctions or other equitable remedies in respect of the Indemnified Party which would affect its business or operations in any materially adverse manner; (ii) may result in material liabilities which may not be fully indemnified hereunder; or 25 (iii) may have a significant adverse impact on the business or the financial condition of the Indemnified Party (including a material adverse effect on the tax liabilities, earnings or ongoing business relationships of the Indemnified Party) even if the Indemnifying Party pays all indemnification amounts in full. 10.3.3 Subject to Section 10.3.2, neither Party may settle or compromise any claim for which indemnification is sought under this Agreement without the prior consent of the other Party; provided, however, said consent shall not be unreasonably withheld or delayed. 11. LIMITATION OF LIABILITY 11.1 Responsibility for Damages: Except as otherwise provided herein or to -------------------------- the extent of the other Party's negligence or willful misconduct, each Party shall be responsible for all physical damage to or destruction of the property, equipment and/or facilities owned by it and its affiliates and any physical injury or death to natural Persons resulting therefrom, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party for such damage; provided, that in any such case the Parties will exercise Due Diligence to remove the cause of any disability at the earliest practicable time. 11.2 No Consequential Damages: To the fullest extent permitted by law and ------------------------ notwithstanding other provisions of this Agreement, in no event shall a Party, or any of its Agents, be liable to the other Party, whether in contract, warranty, tort, negligence, strict liability, or otherwise, for special, indirect, incidental, multiple, consequential (including but not limited to lost profits or revenues and lost business opportunities), or punitive damages related to or resulting from performance or nonperformance of this Agreement or any activity associated with or arising out of this Agreement. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 11.2. In addition, this limitation on liability shall not apply with respect to claims pursuant to Section 10 hereof. 11.3 Survival: The provisions of this Section 11 shall survive any -------- termination, cancellation, or suspension of this Agreement. 12. FORCE MAJEURE 12.1 An event of "Force Majeure" shall be defined as any interruption or failure of service or deficiency in the quality or quantity of service or any other failure to perform any of its obligations hereunder to the extent such failure occurs without fault or negligence on the part of 26 that Party and is caused by factors beyond that Party's reasonable control, which by the exercise of reasonable diligence that Party is unable to prevent, avoid, mitigate or overcome, including: (i) acts of God or the public enemy, such as storms, flood, lightning, and earthquakes, (ii) failure, threat of failure, or unscheduled withdrawal of facilities from operation for maintenance or repair, and including unscheduled transmission and distribution outages, (iii) sabotage of facilities and equipment, (iv) civil disturbance, (v) strike or labor dispute, (vi) action or inaction of a court or public authority, or (vii) any other cause of similar nature beyond the reasonable control of that Party. 12.2 Economic hardship of either Party shall not constitute Force Majeure under this Agreement. Notwithstanding this, if Buyer suffers an event of Force Majeure it shall be relieved of its obligation to take delivery of, or otherwise pay for, Energy and Ancillary Services under this Agreement for the duration of the event of Force Majeure. In addition, if Buyer is unable to have Energy and Ancillary Services delivered from the Point(s) of Delivery to its service territory due to transmission outages, that shall be considered a Force Majeure event and shall relieve Buyer of performance for the extent of the event. 12.3 In the event of a Force Majeure, neither Party shall be considered in default under this Agreement or responsible to the other Party in tort, strict liability, contract or other legal theory for damages of any description, and affected performance obligations shall be extended by a period equal to the term of the resultant delay, but in no event shall exceed the term of the Agreement, provided that the Party relying on a claim of Force Majeure: (i) provides prompt written notice of such Force Majeure event to the other Party, giving an estimate of its expected duration and the probable impact on the performance of its obligations hereunder; (ii) exercises all reasonable efforts to continue to perform its obligations under this Agreement; 27 (iii) expeditiously takes action to correct or cure the event or condition excusing performance so that the suspension of performance is no greater in scope and no longer in duration than is dictated by the problem; provided, however, that settlement of strikes or other labor disputes will be completely within the sole discretion of the Party affected by such strike or labor dispute; (iv) exercises all reasonable efforts to mitigate or limit damages to the other Party; and (v) provides prompt notice to the other Party of the cessation of the event or condition giving rise to its excuse from performance. 12.4 Notwithstanding the above provisions, a Force Majeure event shall excuse Supplier from its obligation to deliver the Supply Amount pursuant to Section 4 of this Agreement only for the first twenty-four (24) hours of the Force Majeure event, provided that the total amount of energy excused in accordance with this Section 12.4 during any Contract Year shall not exceed the Limit on Excused Energy set forth in Exhibit A. After such twenty-four (24) hour period, Supplier must either deliver the Supply Amount at the Point(s) of Delivery or pay liquidated damages pursuant to Section 4.2 of this Agreement. 12.5 If Supplier has notified Buyer of an event of Force Majeure, and if Supplier so requests, Buyer will attempt to replace the Supply Amount that is not excused in accordance with Section 12.4 with Energy or Ancillary Services from another Asset Bundle. However, Buyer's inability to acquire such replacement Energy or Ancillary Services shall not excuse Supplier from Supplier's obligation to deliver the Supply Amount not otherwise excused in accordance with Section 12.4 13. DISPUTES 13.1 Any action, claim or dispute which either Party may have against the other arising out of or relating to this Agreement or the transactions contemplated hereunder, or the breach, termination or validity thereof (any such claim or dispute, a "Dispute") shall be submitted in writing to the other Party. The written submission of any Dispute shall include a concise statement of the question or issue in dispute together with a statement listing the relevant facts and documentation that support the claim. 13.2 The Parties agree to cooperate in good faith to expedite the resolution of any Dispute. Pending resolution of a Dispute, the Parties shall 28 proceed diligently with the performance of their obligations under this Agreement. 13.3 The Parties shall first attempt in good faith to resolve any Dispute through informal negotiations by the Contract Representatives. In the event that the Contract Representatives are unable to satisfactorily resolve the Dispute within thirty (30) days from the receipt of notice of the Dispute, either Party may by written notice to the other Party refer the Dispute to its respective senior management for resolution as promptly as practicable. If the Parties' senior management are unable to resolve the Dispute within forty-five (45) days from the date of such referral, thereafter the Parties may agree in writing to extend the time period of such senior management negotiations. In the event the Parties' senior management do not resolve the dispute within the prescribed or extended time period, either Party may initiate arbitration through the serving and filing of a demand for arbitration and the Parties expressly agree that arbitration in accordance with this Section 13 shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time: 13.3.1 A request made by a Party for provisional remedies requesting preservation of the Parties' respective rights and obligations under the Agreement may be resolved by a court of law located in the County of the principal place of business of Buyer. 13.3.2 Nothing in this Agreement shall preclude, or be construed to preclude, any Party from filing a petition or complaint with the FERC or PUCN with respect to any arbitrable Dispute over which said agency has jurisdiction. In such case, the other Party may request the FERC or PUCN, as applicable, to reject or to waive jurisdiction. If jurisdiction is rejected or waived with respect to all or a portion of the Dispute, the portion of the Dispute not so accepted by the FERC or PUCN, as applicable, shall be resolved through arbitration in accordance with this Agreement. To the extent that the FERC or PUCN, as applicable, asserts or accepts jurisdiction over the Dispute, the decision, finding of fact or order of FERC shall be final and binding, subject to judicial review under the Federal Power Act or Nevada Revised Statutes and subject to the provisions of Section 2.2.2. Any arbitration proceedings that may have commenced with respect to the Dispute prior to the assertion or acceptance of jurisdiction by the FERC or PUCN, as applicable, shall be terminated to the extent the FERC or PUCN accepts or asserts jurisdiction over such Dispute. 29 13.4 Unless otherwise agreed by the Parties, any arbitration initiated under this Agreement shall be conducted in accordance with the following: 13.4.1 Arbitrations shall be held within the County of the principal place of business of Buyer. 13.4.2 Except as otherwise modified herein, the arbitration shall be conducted in accordance with the "Commercial Arbitration Rules" of the American Arbitration Association ("AAA") then in effect. 13.4.3 Arbitration shall be conducted by one neutral arbitrator who shall be selected pursuant to the AAA rules and the following: 13.4.3.1 The Parties agree that the list of potential arbitrators provided by the AAA shall, if available, contain twenty (20) candidates, and at least fifty percent (50%) of the candidates shall be members of the AAA National Energy Panel. 13.4.3.2 The Parties also agree that each shall be allowed to strike the names of five candidates before ranking the remaining candidates and returning the list to the AAA in accordance with the Commercial Arbitration Rules. If the Parties are unable to agree on an arbitrator, such arbitrator shall be appointed by the AAA. 13.4.3.3 The arbitrator shall not have any current or past substantial business, financial, or personal relationships with either Party (or their Affiliates) and shall not be a vendor, supplier, customer, employee, consultant, or competitor to either of the Parties or their Affiliates. 13.4.3.4 The arbitrator shall be authorized only to interpret and apply the provisions of this Agreement or any related agreements entered into under this Agreement and shall have no power to modify or change any provision of this Agreement. The arbitrator shall have no authority to award punitive or multiple damages or any damages inconsistent with this Agreement. The arbitrator shall within thirty (30) days of the conclusion of the hearing, unless such time is extended by agreement of the Parties, notify the Parties in writing of his or her decision, stating his or her 30 reasons for such decision and separately listing his or her findings of fact and conclusions of law. Judgment on the award may be entered in any court having jurisdiction. 13.5 The Parties shall proceed with the arbitration expeditiously, and the arbitration shall be concluded within five (5) months of the filing of the demand for arbitration pursuant to this Section 13 in order that the decision may be rendered within six (6) months of such filing, unless the arbitrator extends such time at the request of a Party upon a showing of good cause or upon agreement of the Parties. 13.6 Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of any arbitration agreement shall be governed by the Federal Arbitration Act of the United States, 9 U.S.C. (S)(S) 1 et seq. 13.7 The decision of the arbitrator shall be final and binding on both Parties and may be enforced in any court having jurisdiction over the Party against which enforcement is sought. 13.8 The fees and expenses of the arbitrator shall be shared by the Parties equally, unless the decision of the arbitrator shall specify some other apportionment of such fees and expenses. All other expenses and costs of the arbitration shall be borne by the Party incurring the same. 14. NATURE OF OBLIGATIONS 14.1 Except where specifically stated in this Agreement to be otherwise, the duties, obligations, and liabilities of the Parties shall be several, not joint or collective. The provisions of this Agreement shall not be construed to create an association, trust, partnership, or joint venture; to impose a trust or partnership duty, obligation, or liability or agency relationship on or with regard to either Party. 14.2 Nothing in this Agreement nor any action taken hereunder shall be construed to create any duty, liability, or standard of care to any person not a Party to this Agreement. Each Party shall be individually and severally liable for its own obligations under this Agreement. 14.3 By this Agreement, neither Party dedicates any part of its facilities or the service provided under this Agreement to the public. 15. SUCCESSORS AND ASSIGNS 15.1 This Agreement may be assigned, without express written consent of the other Party, as follows: 31 15.1.1 Buyer may assign this Agreement or assign or delegate its rights and obligations under this Agreement, in whole or in part, if such assignment is made to an affiliate, parent, subsidiary, successor or any party, provided that such assignee operates all or a portion of the PLR or if such assignment is required by Law or applicable regulations. 15.2 Supplier may, without the consent of Buyer, assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee, lending institution, or any Person for the purposes of financing or refinancing the Asset Bundle, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, conveyances of dispositions in lieu thereof; provided, however, that no such assignment or disposition shall relieve or in any way discharge Supplier or such permitted assignee from the performance of its duties and obligations under this Agreement. Buyer agrees to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, conveyance, pledge or disposition of rights hereunder for purposes of the financing or refinancing of the Asset Bundle, so long as Buyer's rights under this Agreement are not thereby materially altered, amended, diminished or otherwise impaired. 15.3 Either Party may, without the consent of the other Party, assign this Agreement to a successor to all or substantially all of the assets of such Party by way of merger, consolidation, sale or otherwise, provided such successor assumes and becomes liable for all of such Party's duties and obligations hereunder including Section 3 hereof. 15.4 Except as stated above, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by either Party, including by operation of law, without the prior written consent of the other Party, said consent not to be unreasonably withheld. Any assignment of this Agreement in violation of the foregoing shall be, at the option of the non-assigning Party, void. 15.5 Except as set forth above, no assignment or transfer of rights or obligations under this Agreement by a Party shall relieve said Party from full liability and financial responsibility for the performance thereof after any such transfer or assignment unless and until the transferee or assignee shall agree in writing to assume the obligations and duties of said Party under this Agreement and the other Party has consented in writing to such assumption; said consent not to be unreasonably withheld. 32 15.6 This Agreement and all of the provisions hereof are binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns. 16. REPRESENTATIONS 16.1 Representations of the Parties. The Parties represent and warrant each ------------------------------ to the other as follows: 16.1.1 Incorporation. Buyer is a corporation duly incorporated, ------------- validly existing and in good standing under the laws of the State of Nevada. Supplier is a corporation duly organized, validly existing and in good standing under the laws of the State of Arizona. Both Buyer and Supplier have all requisite corporate power and authority to own, lease and operate their material assets and properties and to carry on their business as now being conducted. 16.1.2 Authority. The Party has full corporate power and authority --------- to execute and deliver this Agreement and, subject to the procurement of applicable regulatory approvals, to carry out the actions required of it by this Agreement. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action required on the part of the Party. The Agreement has been duly and validly executed and delivered by the Party and, assuming that it is duly and validly executed and delivered by the other Party, constitutes a legal, valid and binding agreement of the Party. 16.1.3 Compliance With Law. The Party represents and warrants ------------------- that it is not in violation of any applicable Law, or applicable regulation, which violation could reasonably be expected to materially adversely affect the other Party's performance of its obligations under this Agreement. The Party represents and warrants that it will comply with all Laws, and regulations applicable to its compliance with this Agreement, non-compliance with which would reasonably be expected to materially adversely affect either Party's performance of its obligations under this Agreement. 16.1.4 Representations of Both Parties. The representations in ------------------------------- this Section 16 shall continue in full force and effect for the term of this Agreement. 17. DEFAULT AND REMEDIES 33 17.1 An Event of Default hereunder shall be deemed to have occurred upon a Party's (Defaulting Party) failure to comply with any material obligation imposed upon it by this Agreement. Examples of an Event of Default include, but are not limited to the following: (i) Failure to make any payments due under this Agreement; (ii) Failure to deliver the Supply Amount for a period of five (5) consecutive days; (iii) Failure to follow the directions of a Control Area Operator, ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto where following such directions is required hereunder; (iv) Supplier not being in compliance with Section 3; and (v) Failure of the Guarantor to be in compliance with the terms of the Guarantee delivered under Section 3.1.2. 17.2 An Event of Default shall be excused: 17.2.1 In the event such Event of Default was caused by Force Majeure provided that the Party claiming a Force Majeure complies with the requirements of Section 12; and 17.2.2 In the event such Event of Default was caused by transmission and distribution outages or disruptions. 17.3 Unless excused, in an Event of Default the Non-Defaulting Party shall be entitled to provide written notice (or verbal notice in case of emergency followed by written notice) of the Event of Default to the Defaulting Party and to specify a cure period, which cure period shall be a minimum of thirty (30) days. 17.4 If an Event of Default is not cured by the Defaulting Party during the cure period specified by the Non-Defaulting Party, the Non-Defaulting Party shall be entitled to those remedies which are not inconsistent with the terms of this Agreement, including termination and the payment of liquidated damages. A Defaulting Party shall not be liable to the Non-Defaulting Party for any punitive, consequential or incidental damages. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 17.4. 17.5 Notwithstanding this Section 17, liquidated damages shall be paid to Buyer pursuant to Sections 4.2, 12, 18, and 21. 34 18. FACILITY ADDITIONS AND MODIFICATIONS 18.1 Supplier shall be entitled to make additions and modifications to the Asset Bundle subject to the following: 18.1.1 To the extent additions and modifications interfere with the operation of the Asset Bundle in providing the Supply Amount to Buyer beyond the limits for planned outages set forth in Section 21, liquidated damages shall be paid to Buyer pursuant to Section 4.2. 18.1.2 Supplier shall use reasonable efforts to minimize any adverse impact on Buyer during the course of making such additions and modifications. 18.1.3 Such additions and modifications shall be conducted in accordance with Good Utility Practice, and all applicable Laws, regulations, reliability criteria and the Interconnection Agreement between Nevada Power Company and Pinnacle West Energy Corporation dated as of December 1, 2000, as it may be amended from time to time. 18.2 Supplier shall seek Buyer's prior written approval, which shall not be unreasonably withheld, for all Supplier's additions or modifications to the Asset Bundle which might reasonably be expected to have an adverse effect upon Buyer with respect to operations or performance under this Agreement. 19. COORDINATION 19.1 Upon knowledge thereof, each Party shall promptly give notice to the other Party of any labor dispute which is delaying or threatens to delay the timely performance of this Agreement, which shall include a description of the general nature of the dispute. 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE 20.1 Buyer and Supplier shall comply with any applicable requirement of any Governmental Authority, NERC, WSCC, ISA, Control Area Operator, transmission operator, EDU or any successor of any of them, regarding the reduced or increased generation of the Asset Bundle in the event of an Emergency Condition or Nonemergency Condition. 20.2 Supplier shall not be obligated to deliver the Supply Amount and no liquidated damages shall become due, if the Supply Amount is reduced in the event of an Emergency Condition or a Nonemergency Condition. 35 20.3 Each Party shall provide prompt verbal notice to the other Party of any Emergency Condition or Nonemergency Condition. 20.4 Either Party may take reasonable and necessary action to prevent, avoid or mitigate injury, danger, damage or loss to its own equipment and facilities, or to expedite restoration of service; provided, however, that the Party taking such action shall give the other Party prior notice if at all possible before taking any action. However, this Section 20.4 shall not be construed to supersede Sections 20.2 and 20.3. 21. OUTAGE SCHEDULING 21.1 Supplier shall request Buyer's approval, which shall not be unreasonably withheld, prior to any inspections, proposed planned outages or other non-forced outages (all hereinafter referred to as "planned outages") of the Asset Bundle so as to minimize the impact on the availability of the Asset Bundle. Under no circumstances shall Supplier conduct a planned outage without the express prior consent of Buyer pursuant to this Section 21. 21.2 Planned Outages. --------------- 21.2.1 Within sixty (60) days following the Effective Date of this Agreement and on or before October 1 of each Contract Year, Supplier shall provide Buyer with a schedule of proposed planned outages for the period beginning on the date of such proposed schedule for the following twelve (12) months. The proposed planned outage schedule will designate days for each unit in which the Asset Bundle Capacity will be reduced in part or total for each such unit. Each proposed schedule shall include all applicable information, including but not limited to the following: Month, day and time of requested outage; facilities impacted (such as Unit and description); duration of outage; purpose of outage; amount of capacity (in MWs) which is derated; other conditions and remarks; and name of contact and phone number. 21.2.2 Buyer shall promptly review Supplier's proposed schedule and shall either require modifications or approve the proposed schedule, which approval shall not be unreasonably withheld. Supplier shall use its best efforts to accomplish all planned outages in accordance with the approved schedule. Supplier shall be responsible to Buyer for Replacement Costs (i) if any outage period exceeds its approved schedule, provided that changes to the approved schedule may be requested by either Party and each Party shall make reason- 36 able efforts to accommodate such changes, provided further the Buyer shall have no obligation to agree to Supplier's revisions to the approved planned outage schedule; and (ii) if Supplier conducts a planned outage without the consent of Buyer as provided herein. 22. REPORTS 22.1 Supplier shall promptly provide Buyer with copies of any orders, decrees, letters or other written communications to or from any Governmental Authority asserting or indicating that Supplier and/or its Asset Bundle is in violation of Laws which relate to Supplier, or operations or maintenance of the Asset Bundle and which may have an adverse effect on Buyer. Supplier shall use reasonable efforts to keep Buyer appraised of the status of any such matters. 23. COMMUNICATIONS 23.1 Supplier's Operating Representatives shall be available twenty-four (24) hours per day for communications with the Control Area Operator and/or the ISA and Buyer to facilitate the operations contained in this Agreement. 23.2 Supplier shall, at its expense, maintain and install real-time communications equipment at the Asset Bundle to maintain communications between personnel on site at the Asset Bundle, Buyer and the Control Area Operator at all times. Supplier shall provide at its expense: (i) Ringdown voice telephone lines, and (ii) Equipment to transmit to and receive telecopies from Buyer and the Control Area Operator. 23.3 Supplier shall immediately report to Buyer any "Abnormal Condition" that has or may occur, and provide all pertinent information, including but not limited to the following: (i) A description of the "Abnormal Condition" and the actions to be taken to alleviate the "Abnormal Condition"; (ii) The expected duration including the beginning and ending time of the "Abnormal Condition"; and (iii) The amount of any adjustment to the current (real time) level of Energy and Ancillary Services. 23.4 Cause of the Condition. ----------------------- 37 23.4.1 An "Abnormal Condition" shall include without limitation any conditions that, to Supplier's knowledge, have or are reasonably likely to: (i) Adversely affect Supplier's ability to provide Energy and Ancillary Services to Buyer; (ii) Cause an unplanned reduction in the amount of delivery of Energy and Ancillary Services to Buyer; or (iii) Cause an unplanned isolation of the Asset Bundle from the transmission system. 23.5 Supplier shall immediately notify Buyer after such "Abnormal Condition" has been alleviated. 24. NOTICES 24.1 All notices hereunder shall, unless specified otherwise, be in writing and shall be addressed, except as otherwise stated herein, to the Parties as set forth in Exhibit F. 24.2 All written notices or submittals required by this Agreement shall be sent either by hand-delivery, regular first class U.S. mail, registered or certified U.S. mail postage paid return receipt requested, overnight courier delivery, electronic mail or facsimile transmission and will be effective and deemed to have been received on the date of receipt personally, on the date and time as documented by method of delivery if during normal business hours or on the next succeeding Business Day, or on the third (3/rd/) Business Day following deposit with the U.S. mail if sent regular first class U.S. mail. 24.3 Notices of an Event of Default pursuant to Section 17 and or Force Majeure pursuant to Section 12 may not be sent by regular first class U.S. mail. 24.4 Any payments required to be made under this Agreement shall be made to the Party as set forth in Exhibit F. 24.5 Each Party shall have the right to change, at any time upon written notice to the other Party, the name, address and telephone numbers of its representatives under this Agreement for purposes of notices and payments. 25. MERGER 25.1 The Agreement contains the entire agreement and understanding between the Parties with respect to all of the subject matter contained 38 herein, thereby merging and superseding all prior agreements and representations by the Parties with respect to such subject matter. 25.2 In the event of any conflict between this Agreement and the Asset Sale Agreement, the terms of the Asset Sale Agreement shall govern. 26. HEADINGS 26.1 The headings or section titles contained in this Agreement are inserted solely for convenience and do not constitute a part of this Agreement between the Parties, nor should they be used to aid in any manner in the construction of this Agreement. 27. COUNTERPARTS AND INTERPRETATION 27.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 27.2 In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of authorship of any of the provisions of this Agreement. 27.3 Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. 27.4 The word "including" in this Agreement shall mean "including without limitation". 28. SEVERABILITY 28.1 If any term, provision or condition of this Agreement is held to be invalid, void or unenforceable by a court or Governmental Authority of competent jurisdiction and such holding is subject to no further appeal or judicial review, then such invalid, void, or unenforceable term, provision or condition shall be deemed severed from this Agreement and all remaining terms, provisions and conditions of this Agreement shall continue in full force and effect, unless, however, the effect of the severance would vitiate the intent of the Parties hereto, as determined by either Party in its reasonable discretion. 28.2 The Parties shall endeavor in good faith to replace such invalid, void, or unenforceable provisions with a valid and enforceable provision which achieves the purposes intended by the Parties to the greatest extent permitted by law. 39 29. WAIVERS 29.1 No failure or delay on the part of a Party in exercising any of its rights under this Agreement or in insisting upon strict performance of provisions of this Agreement, no partial exercise by either Party of any of its rights under this Agreement, and no course of dealing between the Parties shall constitute a waiver of the rights of either Party under this Agreement. Any waiver shall be effective only by a written instrument signed by the Party granting such waiver, and such shall not operate as a waiver of, or estoppel with respect to, any subsequent failure to comply therewith. 30. AMENDMENTS 30.1 The Parties shall negotiate in good faith to determine necessary amendments, if any, to this Agreement, provided that in negotiating such amendments the Parties shall attempt, in good faith, to reasonably preserve the bargain initially struck in this Agreement if any Governmental Authority, FERC, any state or the PUCN, implements a change in any Law or applicable regulation that materially affects or is reasonably expected to materially affect Buyer's PLR service under this Agreement. 30.2 The Parties shall meet to discuss the impact of any changes in Buyer's OATT, or any rule or practice of NERC, WSCC, or any other Governmental Authority on the terms of this Agreement upon request by either Party during the term of this Agreement. 30.3 In the event that it is deemed necessary to amend this Agreement, the Parties will attempt to agree upon such amendment and will submit such mutually agreed upon amendment(s) to the FERC for filing and acceptance. 30.4 Amendments to this Agreement shall be in writing and shall be executed by an authorized representative of each Party. 31. TIME IS OF THE ESSENCE 31.1 Time is of the essence of this Agreement and in the performance of all of the covenants and conditions hereof. 32. APPROVALS 32.1 Each Party's performance under this Agreement is subject to the condition that all requisite governmental and regulatory approvals for such performance are obtained in form and substance satisfactory to the other Party in its reasonable discretion. Each Party shall use best efforts to obtain all required approvals and shall exercise due diligence and shall act in good faith to cooperate and assist each other in 40 acquiring any regulatory approval necessary to effectuate this Agreement. Further, the Parties agree to reasonably support the other Party in any associated regulatory proceedings, including by being a witness on behalf of the other Party. 32.2 This Agreement is made subject to present or future state or federal laws, regulations, or orders properly issued by state or federal bodies having jurisdiction. 32.3 The Parties hereto agree to execute and deliver promptly, at the expense of the Party requesting such action, any and all other and further instruments, documents and information which may reasonably be necessary or appropriate to give full force and effect to the terms and intent of this Agreement. 33. PLR SERVICE 33.1 The Agreement is premised on Buyer providing PLR service. Notwithstanding anything to the contrary contained herein, if Nevada retail electricity restructuring (including implementation of retail customer choice of electricity suppliers) is delayed beyond the Effective Date of this Agreement, the Parties shall continue to perform this Agreement in all respects pursuant to the terms and conditions hereof as if Buyer was the PLR and Buyer's retail and wholesale customers shall be considered as the TRR. 34. CONFIDENTIALITY 34.1 Confidential Information. Certain information provided by a Party (the ------------------------ "Disclosing Party") to the other Party (the "Receiving Party") in connection with the negotiation or performance of this Agreement may be considered confidential and/or proprietary (hereinafter referred to as "Confidential Information") by the Disclosing Party. To be considered Confidential Information hereunder, such information must be clearly labeled or designated by the Disclosing Party as "confidential" or "proprietary" or with words of like meaning. If disclosed orally, such information shall be clearly identified as confidential and such status shall be confirmed promptly thereafter in writing. 34.2 Treatment of Confidential Information. The Receiving Party shall treat ------------------------------------- any Confidential Information with at least the same degree of care regarding its secrecy and confidentiality as the Receiving Party's similar information is treated within the Receiving Party's organization. The Receiving Party shall not disclose the Confidential Information of the Disclosing Party to third parties (except as stated hereinafter) nor use it for any purpose other than the negotiation or performance of this Agreement, without the express prior written consent of 41 the Disclosing Party. The Receiving Party further agrees that it shall restrict disclosure of Confidential Information as follows: 34.2.1 Disclosure shall be restricted solely to its agents as may be necessary to enforce the terms of this Agreement after advising those agents of their obligations under this Section 34.2. 34.2.2 In the event that the Receiving Party is requested, pursuant to or as required by applicable Law or by legal process, to disclose any Confidential Information, the Receiving Party shall provide the Disclosing Party with prompt notice of such request or requirement in order to enable Disclosing Party to seek an appropriate protective order or other remedy and to consult with Disclosing Party with respect to Disclosing Party taking steps to resist or narrow the scope of such request or legal process. The Receiving Party agrees not to oppose any action by the Disclosing Party to obtain a protective order or other appropriate remedy. In the absence of such protective order, and provided that the Receiving Party is advised by its counsel that it is compelled to disclose the Confidential Information, the Receiving Party shall: (i) furnish only that portion of the Confidential Information which the Receiving Party is advised by counsel is legally required; and (ii) use its commercially reasonable best efforts, at the expense of the Disclosing Party, to ensure that all Confidential Information so disclosed will be accorded confidential treatment. 34.3 Excluded Information. Confidential Information shall not be deemed to -------------------- include the following: 34.3.1 information which is or becomes generally available to the public other than as a result of a disclosure by the Receiving Party; 34.3.2 information which was available to the Receiving Party on a non-confidential basis prior to its disclosures by the Disclosing Party; and 34.3.3 information which becomes available to the Receiving Party on a non-confidential basis from a person other than the Disclosing Party or its representative who is not otherwise bound by a confidentiality agreement with Disclosing 42 Party or its agent or is otherwise not under any obligation to Disclosing party or its agent not to disclose the information to the Receiving Party. 34.4 Injunctive Relief Due to Breach. The Parties agree that remedies at ------------------------------- law may be inadequate to protect each other in the event of a breach of this Section 34, and the Receiving Party hereby in advance agrees that the Disclosing Party shall be entitled to seek and obtain, without proof of actual damages, temporary, preliminary and permanent injunctive relief from any court or Governmental Authority of competent jurisdiction restraining the Receiving Party from committing or continuing any breach of this Section 34. 35. CHOICE OF LAW 35.1 This Agreement and the rights and obligations of the Parties shall be construed and governed by the Laws of: (i) the State of Nevada as if executed and performed wholly within that state; and (ii) the Federal Power Act, to the extent the rights and obligations of the Parties are covered by such act. [SIGNATURES APPEAR ON NEXT PAGE] 43 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date and year first above written. NEVADA POWER COMPANY, as Buyer ________________________________________ By: William E. Peterson Title: Sr. Vice President, General Counsel and Corporate Secretary PINNACLE WEST ENERGY CORPORATION, as Supplier ________________________________________ By: William L. Stewart Title: President EXHIBIT A ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS ================================================================================ UNIT NET SUMMER NET WINTER RAMP RATE MINIMUM HOURLY CAPABILITY CAPABILITY (MW)/HOUR ENERGY TAKE (MW) (MW) (MW) - ------------------------------------------------------------------------------- HA 3 72* 76* 76* N/A ================================================================================ Minimum Annual Energy Take: 40,000 MWh Limit on Excused Energy: 4,000 MWh For purposes of this Exhibit A, summer months shall consist of the months of June through September and winter months shall consist of the months of January through May and the months of October through December. *Subject to confirmation in accordance with Section 7.14(b) of the Asset Sale Agreement. A-1 EXHIBIT B ENERGY AND ANCILLARY SERVICE PRICES Energy Prices* - ------------- Price Floor of Energy: $ 21.06 per MWh Price Ceiling of Energy: $ 135.76 per MWh Ancillary Service Prices* - ------------------------ Regulation and Frequency Response: Summer On-Peak: $ 40.82 per MW-reserved per hour Summer Off-Peak: $ 23.33 per MW-reserved per hour Winter On-Peak: $ 22.07 per MW-reserved per hour Winter Off-Peak: $ 12.61 per MW-reserved per hour Operating Reserve - Supplemental Reserve: Summer On-Peak: $ 40.82 per MW-reserved per hour Summer Off-Peak: $ 23.33 per MW-reserved per hour Winter On-Peak: $ 22.07 per MW-reserved per hour Winter Off-Peak: $ 12.61 per MW-reserved per hour For purposes of this Exhibit B, summer months shall consist of the months of June through September and winter months shall consist of the months of January through May and October through December. For purposes of this Exhibit B, On-Peak periods shall consist of Hour Ending (HE) 0700 through HE 2200 PPT, Monday through Saturday. Off-Peak periods shall consist of HE 0100 through HE 0600, HE 2300 and HE 2400 PPT, Monday through Saturday; HE 0100 through HE 2400 PPT Sunday and additional Off-Peak days (holidays) as designated annually by WSCC. *SUBJECT TO FERC APPROVAL ------------------------ B-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE A Price Ceiling $ 135.76 /MWh of Energy B Price Floor $ 21.06 /Mwh of Energy
MONTH 1 - ENERGY - ---------------- C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Capacity ---- -------------- ------------ --------------- ----------------- ---------------- --------------------- (C - D) (D x F) (C x F) 1 72 72 0 60.00 $ 4,320.00 $ 4,320.00 2 72 72 0 60.00 4,320.00 4,320.00 3 72 12 60 60.00 720.00 4,320.00 4 72 12 60 60.00 720.00 4,320.00 5 42 32 10 50.00 1,600.00 2,100.00 6 42 42 0 50.00 2,100.00 2,100.00 7 62 42 20 40.00 1,680.00 2,480.00 8 72 72 0 40.00 2,880.00 2,880.00 9 72 72 0 40.00 2,880.00 2,880.00 10 72 72 0 45.00 3,240.00 3,240.00 - ---------------------------------------------------------------------------------------------------------------------------------- 650 500 150 $24,460.00 $32,960.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $24,460.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $32,960.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $67,880.00 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $88,244.00 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $10,530.00 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $13,689.00 L. Invoiced Amount - Energy Sec 7.3 (K * I * J) $24,460.00 M. Theoretical Amount for Expected Performance (KT * IT * JT) $32,960.00
* LESS THAN
MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE - ------------------------------------------------------------------------ N O P Q R S Dispatch Schedule of Ancillary Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- ----------------- --------------------- (N - O) (O x Q) (N x Q) 1 0 0 0 23.33 $ 0.00 $ 0.00 2 0 0 0 23.33 0.00 0.00 3 0 0 0 40.82 0.00 0.00 4 0 0 0 40.82 0.00 0.00 5 10 10 0 40.82 408.20 408.20 6 20 10 10 40.82 408.20 816.40 7 0 0 0 40.82 0.00 0.00 8 0 0 0 40.82 0.00 0.00 9 0 0 0 40.82 0.00 0.00 10 0 0 0 40.82 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------------- 30 20 10 $ 816.40 $ 1,224.60 T. Invoiced Amount - Ancillary Service Capacity - Regulation and Frequency Response Sec 7.2.5 $ 816.40
C-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE U. Theoretical Amount for Expected Performance $ 1,224.60
MONTH 1 - ANCILLARY SERVICE CAPACITY - SUPPLEMENTAL RESERVE - ----------------------------------------------------------- V W X Y Z AA Dispatch Schedule of Ancillary Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- ----------------- --------------------- (V - W) (W x Y) (V x Y) 1 0 0 0 23.33 $ 0.00 $ 0.00 2 0 0 0 23.33 0.00 0.00 3 0 0 0 40.82 0.00 0.00 4 0 0 0 40.82 0.00 0.00 5 10 10 0 40.82 408.20 408.20 6 10 10 0 40.82 408.20 408.20 7 10 10 0 40.82 408.20 408.20 8 0 0 0 40.82 0.00 0.00 9 0 0 0 40.82 0.00 0.00 10 0 0 0 40.82 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 30 30 0 $ 1,224.60 $ 1,224.60 AB. Invoiced Amount - Ancillary Service Capacity - Supplemental Reserve Sec 7.2.5 $ 1,224.60 AC. Theoretical Amount for Expected Performance $ 1,224.60 MONTH 1 - ANCILLARY SERVICE ENERGY - ---------------------------------- AD AE AF AG AH AI Dispatch Schedule of Ancillary Ancillary Energy Supplier Price Ceiling of Price x Ancillary Price x Schedule Hour Energy (MWh) Supplied (MWh) Shortfall (MWh) Energy ($/MWh) Energy Supplied of Ancillary Energy ---- ------------ -------------- --------------- -------------- --------------- ------------------- (AD - AE) (AE x AG) (AD x AG) 1 0 0 0 135.76 $ 0.00 $ 0.00 2 0 0 0 135.76 0.00 0.00 3 0 0 0 135.76 0.00 0.00 4 0 0 0 135.76 0.00 0.00 5 0 0 0 135.76 0.00 0.00 6 20 10 10 135.76 1,357.60 2,715.20 7 10 10 0 135.76 1,357.60 1,357.60 8 0 0 0 135.76 0.00 0.00 9 0 0 0 135.76 0.00 0.00 10 0 0 0 135.76 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 30 20 10 $ 1,357.60 $ 2,715.20 $ 4,072.80 AJ. Invoiced Amount - Ancillary Services Energy Sec 7.2.6 $ 2,715.20 AK. Theoretical Amount for Expected Performance $ 4,072.80 MONTH 1 - TOTAL INVOICE AMOUNT Sec 7.3 (L + T + AB + AJ) $29,216.20 ==================================================================================================================================== MONTH 2 - ENERGY - ---------------- C D E F G H
C-2 EXHIBIT C SUPPLIER'S MONTHLY INVOICE
Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 72 72 0 140.00 $ 10,080.00 $ 10,080.00 2 72 72 0 140.00 10,080.00 10,080.00 3 72 12 60 140.00 1,680.00 10,080.00 4 72 12 60 150.00 1,800.00 10,800.00 5 42 32 10 150.00 4,800.00 6,300.00 6 42 42 0 150.00 6,300.00 6,300.00 7 62 42 20 130.00 5,460.00 8,060.00 8 72 72 0 130.00 9,360.00 9,360.00 9 72 72 0 130.00 9,360.00 9,360.00 10 72 72 0 135.00 9,720.00 9,720.00 - ----------------------------------------------------------------------------------------------------------------------------------- 650 500 150 $ 68,640.00 $ 90,140.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 68,640.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 90,140.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $ 67,880.00 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 88,244.00 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $ 10,530.00 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 13,689.00 L. Invoiced Amount - Energy Sec 7.3 (I > J) $ 67,880.00 M. Theoretical Amount for Expected Performance (IT > JT) $ 88,244.00 MONTH 3 - ENERGY - ---------------- C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 72 72 0 30.00 $ 2,160.00 $ 2,160.00 2 72 72 0 20.00 1,440.00 1,440.00 3 72 12 60 20.00 240.00 1,440.00 4 72 12 60 20.00 240.00 1,440.00 5 42 32 10 15.00 480.00 630.00 6 42 42 0 15.00 630.00 630.00 7 62 42 20 15.00 630.00 930.00 8 72 72 0 15.00 1,080.00 1,080.00 9 72 72 0 15.00 1,080.00 1,080.00 10 72 72 0 15.00 1,080.00 1,080.00 - ---------------------------------------------------------------------------------------------------------------------------------- 650 500 150 $ 9,060.00 $ 11,910.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 9,060.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 11,910.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $ 67,880.00
C-3 EXHIBIT C SUPPLIER'S MONTHLY INVOICE JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 88,244.00 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $ 10,530.00 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 13,689.00 L. Invoiced Amount - Energy Sec 7.3 (I ** K) $ 10,530.00 M. Theoretical Amount for Expected Performance (IT ** KT) $ 13,689.00
** Less than *** Greater than For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. C-4 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ENERGY - ----------------
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 60 35.00 100.00 2,200.00 4 60 30.00 50.00 1,850.00 5 10 30.00 50.00 350.00 6 0 na 0.00 0.00 7 20 25.00 0.00 500.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ----------------------------------------------------------------------------------------------------------- 150 $ 4,900.00 E. Gross Replacement Cost of Energy $ 4,900.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $32,960.00 G. Actual Supplier's Invoice Amount 24,460.00 ---------- H. Avoided Payment to Supplier (F - G) $ 8,500.00 I. Invoiced Replacement Cost - Energy (E ** H) $ 0.00 MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE - ------------------------------------------------------------------------ J K * L * M Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (J x K) + L 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 10 40.00 100.00 500.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - --------------------------------------------------------------------------------------------------------- 10 $ 500.00 N. Gross Replacement Cost of Ancillary Capacity - Regulation and Frequency Response $ 500.00 O. Theoretical Supplier's Invoice Amount for Expected Performance $ 1,224.60 P. Actual Supplier's Invoice Amount 816.40 ------------ Q. Avoided Payment to Supplier (O - P) $ 408.20 R. Invoiced Replacement Cost - Ancillary Capacity (N *** Q) $ 91.80
** Less than *** Greater than D-1 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ANCILLARY CAPACITY - SUPPLEMENTAL RESERVE - ---------------------------------------------------
S T * U * V Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (S x T) + U 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------- 0 $ 0.00 W. Gross Replacement Cost of Ancillary Capacity - Supplemental Reserve $ 0.00 X. Theoretical Supplier's Invoice Amount for Expected Performance $ 1,224.60 Y. Actual Supplier's Invoice Amount 1,224.60 ----------- Z. Avoided Payment to Supplier (X - Y) $ 0.00 AA. Invoiced Replacement Cost - Ancillary Capacity (W = Z) $ 0.00 MONTH 1 - ANCILLARY SERVICE ENERGY - ---------------------------------- AB AC * AD * AE Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy ** Cost of Energy ---- ------------ ----------------- ------------ -------------- (AB x AC) + AD 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 10 150.00 100.00 1,600.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ---------------------------------------------------------------------------------------------- 10 $ 1,600.00 AF. Gross Replacement Cost of Ancillary Energy $ 1,600.00 AG. Theoretical Supplier's Invoice Amount for Expected Performance $ 4,072.80 AH. Actual Supplier's Invoice Amount 2,715.20 ----------------- AI. Avoided Payment to Supplier (AG - AH) $ 1,357.60 AJ. Invoiced Replacement Cost - Ancillary Energy (AF > AI) $ 242.40 ==============================================================================================
D-2 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS (I + R + AA + AJ) $ 334.20 MONTH 1 - TOTAL INVOICE AMOUNT ===============================================================================
MONTH 2 - ENERGY - ---------------- A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 190.00 200.00 11,600.00 4 60 175.00 100.00 10,600.00 5 10 88.00 200.00 1,080.00 6 0 na 0.00 0.00 7 20 105.00 300.00 2,400.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - --------------------------------------------------------------------------------------------------- 150 $ 25,680.00 E. Gross Replacement Cost of Energy $ 25,680.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 88,244.00 G. Actual Supplier's Invoice Amount 67,880.00 --------------------- H. Avoided Payment to Supplier (F - G) $ 20,364.00 I. Invoiced Replacement Cost - Energy (E *** H) $ 5,316.00 MONTH 3 - ENERGY - ---------------- A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 32.00 100.00 2,020.00 4 60 28.00 50.00 1,730.00 5 10 28.00 0.00 280.00 6 0 na 0.00 0.00 7 20 24.00 50.00 530.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - --------------------------------------------------------------------------------------------------- 150 $ 4,560.00 E. Gross Replacement Cost of Energy $ 4,560.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 13,689.00 G. Actual Supplier's Invoice Amount 10,530.00 --------------------- H. Avoided Payment to Supplier (F - G) $ 3,159.00
** Less than *** Greater than D-3 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS I. Invoiced Replacement Cost - Energy (E > H) $ 1,401.00
For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. EXHIBIT E YEAR END TRUE-UP INVOICE A Price Ceiling of Energy $ 135.76 /MWh B Price Floor of Energy $ 21.06 /MWh EXAMPLE 1 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 500 $ 24,460.00 $ 67,880.00 $ 10,530.00 $ 24,460.00 2 500 68,640.00 67,880.00 10,530.00 67,880.00 3 500 9,060.00 67,880.00 10,530.00 10,530.00 4 720 116,640.00 97,747.20 15,163.20 97,747.20 5 720 113,760.00 97,747.20 15,163.20 97,747.20 6 520 82,160.00 70,595.20 10,951.20 70,595.20 7 720 115,200.00 97,747.20 15,163.20 97,747.20 8 720 113,760.00 97,747.20 15,163.20 97,747.20 9 350 55,650.00 47,516.00 7,371.00 47,516.00 10 720 112,320.00 97,747.20 15,163.20 97,747.20 11 720 118,800.00 97,747.20 15,163.20 97,747.20 12 420 67,200.00 57,019.20 8,845.20 57,019.20 - ------------------------------------------------------------------------------------------------------------- Total 7,110 $ 997,650.00 $ 965,253.60 $ 149,736.60 $ 864,483.60 (Total of Column D) > (Total of Column E) therefore Annual True-up calculated under Section 7.5.1(a) - ---------------------------------------------------------------------------------------------------- H. Annual True-up - Delivered Energy (Total E - Total G) $ 100,770.00 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total E / Total C) $ 135.76 J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 25,680.00 5,316.00 3 150 4,560.00 1,401.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 - ----------------------------------------------------------------------------------------------
D-4 EXHIBIT E YEAR END TRUE-UP INVOICE 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------- Total 450 $ 61,092.00 $ 35,140.00 $ 0.00 $ 6,717.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ 6,717.00 TOTAL ANNUAL TRUE-UP * (H + O) $107,487.00 ===============================================================================================================================
EXAMPLE 2 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 500 $ 24,460.00 $ 67,880.00 $ 10,530.00 $ 24,460.00 2 500 68,640.00 67,880.00 10,530.00 67,880.00 3 500 9,060.00 67,880.00 10,530.00 10,530.00 4 720 113,760.00 97,747.20 15,163.20 97,747.20 5 720 24,480.00 97,747.20 15,163.20 24,480.00 6 520 17,680.00 70,595.20 10,951.20 17,680.00 7 720 25,920.00 97,747.20 15,163.20 25,920.00 8 720 24,480.00 97,747.20 15,163.20 24,480.00 9 350 14,000.00 47,516.00 7,371.00 14,000.00 10 720 23,040.00 97,747.20 15,163.20 23,040.00 11 720 104,400.00 97,747.20 15,163.20 97,747.20 12 420 65,520.00 57,019.20 8,845.20 57,019.20 - ------------------------------------------------------------------------------------------------------------------------------ Total 7,110 $515,440.00 $965,253.60 $149,736.60 $484,983.60 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) - ---------------------------------------------------------------------------------------------------- H. Annual True-up - Delivered Energy (Total D - Total G) $ 30,456.40 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 72.50 J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ --------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 25,680.00 5,316.00 3 150 4,560.00 1,401.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------ Total 450 $ 32,622.78 $ 35,140.00 $ 2,517.22 $ 6,717.00
D-5 EXHIBIT E YEAR END TRUE-UP INVOICE O. Annual True-up - Replacement Costs (Total N - Total M) $ 4,199.78 Total Annual True-up * (H + O) $ 34,656.18 ================================================================================ EXAMPLE 3 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 500 $ 24,460.00 $ 67,880.00 $ 10,530.00 $ 24,460.00 2 500 68,640.00 67,880.00 10,530.00 67,880.00 3 500 9,060.00 67,880.00 10,530.00 10,530.00 4 720 23,040.00 97,747.20 15,163.20 23,040.00 5 720 21,600.00 97,747.20 15,163.20 21,600.00 6 520 14,560.00 70,595.20 10,951.20 14,560.00 7 720 18,720.00 97,747.20 15,163.20 18,720.00 8 720 20,160.00 97,747.20 15,163.20 20,160.00 9 350 9,800.00 47,516.00 7,371.00 9,800.00 10 720 23,040.00 97,747.20 15,163.20 23,040.00 11 720 20,160.00 97,747.20 15,163.20 20,160.00 12 420 10,920.00 57,019.20 8,845.20 10,920.00 - ------------------------------------------------------------------------------------------------------------------------------- Total 7,110 $264,160.00 $965,253.60 $149,736.60 $264,870.00 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) - ---------------------------------------------------------------------------------------------------- H. Annual True-up - Delivered Energy (Total D - Total G) $ (710.00) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 37.15 J K L M N Replacement Replacement Gross Replacement Adjusted Replacement Invoiced Energy Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ --------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 25,680.00 5,316.00 3 150 4,560.00 1,401.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------- Total 450 $ 16,718.99 $ 35,140.00 $ 18,421.01 $ 6,717.00 O. Annual True-up - Replacement Costs (Total N - Total M) $(11,704.01)
D-6 EXHIBIT E YEAR END TRUE-UP INVOICE Total Annual True-up * (H + O) $(12,414.01) ================================================================================ EXAMPLE 4 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------- ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 500 $ 24,460.00 $ 67,880.00 $ 10,530.00 $ 24,460.00 2 500 68,640.00 67,880.00 10,530.00 67,880.00 3 500 9,060.00 67,880.00 10,530.00 10,530.00 4 720 5,760.00 97,747.20 15,163.20 15,163.20 5 720 5,760.00 97,747.20 15,163.20 15,163.20 6 520 4,160.00 70,595.20 10,951.20 10,951.20 7 720 5,760.00 97,747.20 15,163.20 15,163.20 8 720 5,760.00 97,747.20 15,163.20 15,163.20 9 350 2,800.00 47,516.00 7,371.00 7,371.00 10 720 5,760.00 97,747.20 15,163.20 15,163.20 11 720 5,760.00 97,747.20 15,163.20 15,163.20 12 420 3,360.00 57,019.20 8,845.20 8,845.20 - ------------------------------------------------------------------------------------------------------------------------------- Total 7,110 $147,040.00 $965,253.60 $149,736.60 $221,016.60
(Total of Column E) > (Total of Column D) therefore Annual True-up calculated - ----------------------------------------------------------------------------- under Section 7.5.1(b) - ---------------------- H. Annual True-up - Delivered Energy (Total F - Total G) $ (71,280.00) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total F / Total C) $ 21.06
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 25,680.00 5,316.00 3 150 4,560.00 1,401.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------- Total 450 $ 9,477.00 $ 35,140.00 $ 25,663.00 $ 6,717.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ (18,946.00) Total Annual True-up * (H + O) $ (90,226.00) ===============================================================================================================================
D-7 EXHIBIT E YEAR END TRUE-UP INVOICE * Positive Total Annual True-up is indicative of a payment form Buyer to Supplier; Negative Total Annual True-up is indicative of a payment form Supplier to Buyer. D-8 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS Supplier: - -------- a) Agreement Notices: Name and Address ------------------ Phone: Fax: b) Payment Check: Name and Address -------------- c) Payment Wire Transfer: Bank: ---------------------- ABA #: For: Supplier's Name Account No: For: d) Invoices: Name and Address -------- Phone: Fax: e) Operating Notifications: ----------------------- i) (Management, if required) ii) Pre-Schedule: Phone: Fax: iii) Real Time: Phone: Fax: iv) Monthly Checkout Phone: Person: Fax: F-2 Buyer: - ----- a) Agreement Notices: ----------------- Address: Gary Craythorn Manager, Resource Contracts Nevada Power Company 6226 West Sahara Avenue, M/S 26A Las Vegas, Nevada 89146 Phone: 702/367-5425 Fax: 702/227-2455 E-mail: gcraythorn@nevp.com b) Invoices: -------- US Post Office: (Via Certified Mail) Overnight Delivery --------------- ------------------ Address: Nevada Power Company Address: Nevada Power Company Attn: Kathy Crews Attn: Kathy Crews P.O. Box 230, M/S 20 6226 West Sahara Ave., M/S 20 Las Vegas, Nevada 89151 Las Vegas, Nevada 89146 Telephone: 702/227-2476 Fax: 702/367-5096 E-mail: kcrews@nevp.com c) Schedules: --------- i) Pre-Schedule: Primary Name: Rick Engebretson Phone: 702/862-7195 E-mail: rengebretson@nevp.com Alternate Name: Tim Schuster Phone: 702/862-7194 E-mail: tschuster@nevp.com Fax: 702/227-2404 ii) Real Time: Phone: 702/862-7106 Fax: 702/227-2404 iii) Monthly Checkout: Kathy Crews Phone: 702/227-2476 Fax:702/367-5096 E-mail: kcrews@nevp.com
d) Control Area/Transmission: ------------------------- i) Reliability Dispatch: Phone: (702) 451-2026 Fax: (702) 862-7113 ii) Transmission Dispatch: Phone: (702) 451-8346 Fax: (702) 862-7113 F-3 EXHIBIT G FORM OF AVAILABILITY NOTICE Date of Notice: Time of Notice: Supplier: Name of Supplier's Representative: Buyer: Asset Bundle: Availability Dates (96 hours total):
A B C D E* Permitted Asset Bundle Availability Hour Available from Total Derating Derating of Capacity of Alternative Point(s) Date Ending Unit 1 (MW) of Unit 1 (MW) Unit 1 (MW) Unit 1 (MW) of Delivery ---- ------ ---------- ------------- ---------- ---------- ----------- (A ** or (___ - A) (C ** or = B) (A - C) = ---) 600 700 800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500 F Availability Hour Cause and Expected Duration of Deratings Date Ending and Identification of Permitted Deratings ---- ------ ----------------------------------------- 600 700 800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500
* The Parties' operational personnel shall develop the necessary procedure to document requests and responses to utilize Alternative Point(s) of Delivery. ** less than *** Greater than G-1 EXHIBIT H FORM OF GUARANTY This Guaranty is entered into as of ______________, 2000 by _______________, a ___________ corporation ("Guarantor"), on behalf of _________________, a ___________ corporation ("Supplier"), in favor of and for the benefit of Nevada Power Company, a Nevada corporation ("NPC")./2/2 NPC is sometimes referred to herein as "Beneficiary". WHEREAS, Supplier and NPC are entering into a Transitional Power Purchase Agreement dated as of _____________, 2000 (the "TPPA") by which Supplier has agreed to sell and NPC has agreed to buy Energy and Ancillary Services (as defined in the TPPA) produced by the ______________ generating station being sold by NPC; and WHEREAS, it is a condition to the obligation of NPC to enter into the TPPA for Guarantor to guaranty the Supplier's obligations under the TPPA in an amount not to exceed the Credit Amount (as defined in the TPPA) (the "Guarantied Obligations"). 1. Guaranty. Guarantor irrevocably and unconditionally guaranties, as primary obligor and not merely as surety, the due and punctual payment in full of all Guarantied Obligations (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.(S) 362(a)). In the event that all or any portion of the Guarantied Obligations is paid by Supplier, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) is rescinded or recovered directly or indirectly from the Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments that are so rescinded or recovered shall constitute Guarantied Obligations (to the extent such payments, in the aggregate, do not exceed the Credit Amount). Subject to the other provisions of this Section 1, upon failure of Supplier to pay any of the Guarantied Obligations when and as the same shall become due, Guarantor will upon demand pay, or cause to be paid, in cash, to NPC, an amount equal to the aggregate of the unpaid Guarantied Obligations. In the event Guarantor fails to pay the Guarantied Obligations, each and every default in the payment shall give rise to a separate cause of action and separate causes of action may be brought hereunder as each such cause of action arises. _____________________ /2/ Sierra Pacific Power Company, as the case may be. H-2 2. Expenses. The Guarantor agrees to reimburse NPC for all reasonable costs and expenses (including, without limitation, the reasonable fees and expenses of legal counsel) in connection with (i) any default by Guarantor hereunder and any enforcement or collection proceeding resulting therefrom, including, without limitation, all manner of participation in or other involvement with bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings of or involving the Guarantor, judicial or regulatory proceedings of or involving the Guarantor and workout, restructuring or other negotiations or proceedings of or involving the Guarantor (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (ii) the enforcement of this Section 2. 3. Guaranty Absolute; Continuing Guaranty. The obligations of Guarantor hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, Guarantor agrees that: (a) this Guaranty is a guaranty of payment when due and not of collectibility; (b) the obligations of Guarantor hereunder are independent of the obligations of Supplier under the TPPA and a separate action or actions may be brought and prosecuted against Guarantor whether or not any action is brought against the Supplier and whether or not the Supplier is joined in any such action or actions; and (c) Guarantor's payment of a portion, but not all, of the Guarantied Obligations shall in no way limit, affect, modify or abridge Guarantor's liability for any portion of the Guarantied Obligations that has not been paid. This Guaranty is a continuing guaranty and shall be binding upon Guarantor and its successors and assigns. 4. Actions by Beneficiary. The Beneficiary may from time to time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation, impairment or discharge of Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security hereafter held by or for the benefit of the Beneficiary in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Beneficiary may have against any such security, and (f) exercise any other rights available to NPC under the TPPA. H-3 5. No Discharge. This Guaranty and the obligations of Guarantor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Guarantied Obligations), including without limitation the occurrence of any of the following, whether or not Guarantor shall have had notice or knowledge of any of them: (a) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guarantied Obligations, (b) any waiver or modification of, or any consent to departure from, any of the terms or provisions of any other guaranty or security for the Guarantied Obligations, (c) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (d) the application of payments received from any source to the payment of indebtedness other than the Guarantied Obligations, even if the Beneficiary might have elected to apply such payment to any part or all of the Guarantied Obligations, (e) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations, (f) any defenses, set-offs or counterclaims which the Supplier may assert against the Beneficiary in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction, and (g) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of Guarantor as an obligor in respect of the Guarantied Obligations. 6. Waivers for the Benefit of Beneficiary. Guarantor waives, for the benefit of Beneficiary: (a) any right to require the Beneficiary, as a condition of payment or performance by Guarantor, to (i) proceed against the Supplier, any other guarantor of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from the Supplier, any other guarantor of the Guarantied Obligations or any other Person, or (iii) pursue any other remedy in the power of the Beneficiary; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Supplier including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Supplier from any cause other than payment in full of the Guarantied Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) (i) any principles or provisions of law, statutory or otherwise, that are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that the H-4 Beneficiary protect, secure, perfect or insure any lien on any property subject thereto; (e) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guaranty; and (f) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty. 7. Waiver of Rights Against Supplier. Guarantor waives any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against the Supplier or any of its assets in connection with this Guaranty or the performance by Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against the Supplier, (b) any right to enforce, or to participate in, any claim, right or remedy that the Beneficiary now has or may hereafter have against the Supplier, and (c) any benefit of, and any right to participate in, any collateral or security hereafter held by the Beneficiary. Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement and indemnification as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Guarantor may have against the Supplier or against any collateral or security shall be junior and subordinate to any rights the Beneficiary may have against Supplier, to all right, title and interest the Beneficiary may have in any such collateral or security, and to any right the Beneficiary may have against such other guarantor. 8. Representations and Warranties of Guarantor. Guarantor represents and warrants to NPC as follows: (a) Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Guarantor has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (b) Guarantor has the corporate power and authority to execute and deliver this Guaranty and to consummate the transactions contemplated hereby. The execution and delivery of this Guaranty and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Guarantor, and no other corporate proceedings on the part of Guarantor, including the approval of its shareholders, are necessary to authorize this Guaranty or to consummate the transactions so contemplated. This Guaranty has been duly and validly executed and delivered by Guarantor and constitutes a valid and binding agreement of Guarantor, enforceable against Guarantor in accordance with its terms. (c) There are no legal or arbitral proceedings by or before any governmental or regulatory authority or agency, now pending or (to Guarantor's H-5 knowledge) threatened against Guarantor or its subsidiaries that could reasonably be expected to have a material adverse effect on the consolidated financial condition, operations or business taken as a whole of it and its subsidiaries. (d) The representations and warranties made herein will remain true until Guarantor has fulfilled all obligations to pay in full the Guaranteed Obligations. 9. Set Off. In addition to any other rights the Beneficiary may have under law or in equity, if any amount shall at any time be due and owing by Guarantor to the Beneficiary under this Guaranty, the Beneficiary is authorized at any time or from time to time, without notice (any such notice being expressly waived), to set off and to appropriate and to apply any indebtedness of the Beneficiary owing to Guarantor and any other property of Guarantor held by the Beneficiary to or for the credit or the account of Guarantor against and on account of the Guarantied Obligations and liabilities of Guarantor to the Beneficiary under this Guaranty. 10. Disputes. Any action, claim or dispute arising out of or relating to this Guaranty (any such action, claim or dispute, a "Dispute") shall be submitted in writing to the other Party. In the event Guarantor and NPC are unable to resolve the Dispute satisfactorily within thirty (30) days from the receipt of notice of the Dispute, either Guarantor or NPC may initiate arbitration through the serving and filing of a demand for arbitration. Guarantor and NPC expressly agree that such arbitration shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time a request made for provisional remedies requesting preservation of respective rights and obligations under the Guaranty may be resolved by a court of law located in the County of the principal place of business of NPC. Arbitration shall be conducted in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the TPPA. 11. Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall in any event be effective without the written concurrence of NPC and, in the case of any such amendment or modification, Guarantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 12. Miscellaneous. It is not necessary for Beneficiary to inquire into the capacity or powers of Guarantor or Supplier or the officers, directors or any agents acting or purporting to act on behalf of any of them. The rights, powers and remedies given to Beneficiary by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to Beneficiary by virtue of any statute or rule of law or in the TPPA. Any forbearance or failure to exercise, and any delay by Beneficiary in exercising, any right, power or remedy hereunder shall not impair any such right, power or H-6 remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. In case any provision in or obligation under this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Guaranty shall inure to the benefit of Beneficiary and its respective successors and assigns. 13. Notices. All notices, requests, demands, waivers, consents and other communications hereunder shall be in writing, shall be delivered either in person, by telegraphic, facsimile or other electronic means, by overnight air courier or by mail, and shall be deemed to have been duly given and to have become effective (a) upon receipt if delivered in person or by telegraphic, facsimile or other electronic means, (b) one (1) business day after having been delivered to an air courier for overnight delivery or (c) three (3) business days after having been deposited in the U.S. mails as certified or registered mail, return receipt requested, all fees prepaid, directed to the parties at the following addresses: If to Guarantor, addressed to: If to NPC, addressed to: William E. Peterson Nevada Power Company 6100 Neil Road Reno, Nevada 89511 Facsimile: (775) 834-5959 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officers thereunto duly authorized as of the date first written above. By: __________________________ Title:_________________________ Address: __________________________ ___________________________ ___________________________ H-7 EXHIBIT I COMPANY OBSERVED HOLIDAYS New Year's Day January 1/st/ Martin Luther King's Day Third Monday in January President's Day Third Monday in February Memorial Day (observed) Last Monday in May Independence Day July 4/th/ Labor Day First Monday in September Veteran's Day November 11/th/ Thanksgiving Day Fourth Thursday in November Thanksgiving Friday Friday after Thanksgiving Christmas Eve December 24/th/ Christmas Day December 25/th/ Holidays falling on Saturday will be observed on the preceding Friday and those falling on Sunday will be observed on the following Monday. I-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT
Monthly Monthly Month Adjustment Month Adjustment - --------------------------------------------- --------------------------------------------- Mar-01 1.1% Mar-02 1.4% Apr-01 2.4% Apr-02 3.1% May-01 2.7% May-02 3.2% Jun-01 3.0% Jun-02 3.3% Jul-01 12.4% Jul-02 9.7% Aug-01 12.7% Aug-02 9.9% Sep-01 12.9% Sep-02 10.0% Oct-01 2.2% Oct-02 1.8% Nov-01 2.3% Nov-02 1.9% Dec-01 2.4% Dec-02 1.9% Jan-02 1.3% Jan-03 1.6% Feb-02 1.4% Feb-03 1.6%
Example 1 - Effective Date of Agreement is April 15, 2001 - --------------------------------------------------------- A. TPPA Amount: $ 15,000,000
B C D Monthly Applicable Applicable Month Adjustment Portion * Adjustment - --------------------------------------------------------------------------------------------- (B x C) Apr-01 2.4% 50.0% 1.2% May-01 2.7% 100.0% 2.7% - --------------------------------------------------------------------------------------------- Total 3.9% E. Total of Monthly Applicable Adjustments 3.9% F Adjusted TPPA Amount (A x (1+D)) $ 15,585,000 =======================================================================================================================
Example 2 - Effective Date of Agreement is September 15, 2001 - -------------------------------------------------------------
G. TPPA Amount: $ 15,000,000 H I J Monthly Applicable Applicable Month Adjustment Portion * Adjustment - ---------------------------------------------------------------------------------------------- (H x I) Jun-01 3.0% 100.0% 3.0% Jul-01 12.4% 100.0% 12.4%
J-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT Aug-01 12.7% 100.0% 12.7% Sep-01 12.9% 50.0% 6.5% - ------------------------------------------------------------------------------------------------- Total 34.6% K. Total of Monthly Applicable Adjustments 34.6% L Adjusted TPPA Amount (G x (1-K)) $ 9,810,000 ===================================================================================================================
Example 3 - Termination Date of December 31, 2002 - ------------------------------------------------- M. TPPA Amount: $ 15,000,000
N O P Monthly Applicable Applicable Month Adjustment Portion ** Adjustment - ------------------------------------------------------------------------------------------------ (N x O) Jan-03 1.6% 100.0% 1.6% Feb-03 1.6% 100.0% 1.6% - ------------------------------------------------------------------------------------------------ Total 3.2% Q. Total of Monthly Applicable Adjustments 3.2% R Payment Amount (M x Q) $ 480,000 ====================================================================================================================
* The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer were made divided by the number of days in the month. ** The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer would have been made divided by the number of days in the month. EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE
A B C D E F Base Number Base Energy Sales per Current Number Adjusted Energy Class * of Customers Sales (MWh) Customer (MWh) of Customers Sales (MWh) - -------------------------------------------------------------------------------------------------------------------------- (C / B) (D x E) ** Residential 475,000 5,800,000 12 470,000 5,738,947 Commercial 65,000 2,800,000 43 60,000 2,584,615 Industrial 1,000 4,900,000 800 3,600,000 Street Lighting 5 130,000 5 130,000
J-2 EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE Other Retail 50 600,000 50 600,000 Wholesale 5 850,000 5 850,000 - ------------------------------------------------------------------------------- 541,060 15,080,000 530,860 13,503,563 G. Adjustment to Minimum Annual Take (F / C) 89.55% H. Minimum Annual Take from Exhibit A (MWh) 40,000 I. Revised Minimum Annual Take (MWh) (G x H) 35,820 J K Month During Applicable Min. Contract Year Annual Take (MWh) - ---------------------------------- 1 40,000 2 40,000 3 40,000 4 40,000 5 35,820 6 35,820 7 35,820 8 34,000 9 34,000 10 32,000 11 32,000 12 32,000 - ---------------------------------- Total 431,460 L. Minimum Take for Contract Year (MWh) (Total of K / 12) 35,955 * As reported on Buyer"s FERC Form 1 ** Adjusted Energy Sales for the remaining Industrial, Street Lighting, Other Retail, and Wholesale customers will be based upon actual sales during the base period. EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE
A B C D E * F G ** Dispatch Supply Delivered Permitted Force Replacement Applicable Hour Amount (MWh) Energy (MWh) Derating(MWh) Majeure(MWh) Energy(MWh) Energy(MWh) - ------------------------------------------------------------------------------------------------------- (C+D+E+F) 1 72 72 72 2 72 72 72 3 72 72 72
K-2 EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE
4 72 72 72 5 72 72 72 6 72 52 20 72 7 72 52 20 72 8 72 52 20 72 9 72 72 72 10 72 72 72 11 72 72 72 12 72 72 72 13 72 0 72 72 14 72 0 72 72 15 72 0 72 72 16 72 0 72 72 17 72 22 30 52 18 72 72 72 19 72 72 72 20 72 72 72 21 72 72 72 22 72 72 72 23 72 72 72 24 52 52 52 25 42 42 42 26 52 52 52 27 42 12 30 42 28 52 52 52 29 72 72 72 30 72 72 72 31 72 72 72 32 72 72 72 33 72 72 72 34 72 72 72 35 72 72 72 36 72 72 72 - --------------------------------------------------------------------------------------------------------------------------- total 2,472 2,044 70 288 50 2,452
* Includes energy excused because of Supplier's and Buyer's events of Force Majeure ** G cannot be greater than B L-2 EXHIBIT M CONTRACTUAL AND OPERATIONAL CONSTRAINTS 1. For the purposes of this Exhibit M, "Constrained Capacity" shall mean that portion of the Asset Bundle Capacity that has been designated as being subject to contractual and operational constraints in accordance with the provisions of this Exhibit M. 2. Section 4.1.4 of the Agreement, which addresses Supplier's right to Asset Bundle Capacity in excess of the Supply Amount, shall not be applicable to Constrained Capacity. 3. Asset Bundle Capacity scheduled in accordance with Section 5.1 of the Agreement, which addresses Buyer's notifications to Supplier, shall not be deemed to include Constrained Capacity unless Buyer's schedules specifically designate Constrained Capacity as being applicable to the schedules. 4. The Asset Bundle Capacity described in the following table shall be deemed Constrained Capacity.
- ----------------------------------------------------------------------------------------------------------------------------------- Source of Capac- Monthly Daily ity Annual Limit Limit Daily Limit Start-Up Minimum Load - ----------------------------------------------------------------------------------------------------------------------------------- 6,135 hours if operated on Unit 3 natural gas/1/ 20 hours at (72 MW summer) None max. capacity 1 30 MW - ----------------------------------------------------------------------------------------------------------------------------------
_____________________ /1/ The number of operating hours shall be decreased in accordance with the environmental permits for the Harry Allen Unit if that unit is operated on oil. The basis for such reductions will be the overall level of NOx emissions. M-2 EX-10.K 20 0020.txt ASSET SALE AGREEMENT, RELIENT ENERGY SUNRISE Exhibit 10(K) [EXECUTION COPY] ________________________________________________________________________________ ASSET SALE AGREEMENT BETWEEN NEVADA POWER COMPANY AND RELIANT ENERGY SUNRISE, LLC FOR THE SUNRISE/SUN-PEAK BUNDLE December 9, 2000 ________________________________________________________________________________ TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS......................................................... 1 1.1 Definitions.............................................. 1 ARTICLE II PURCHASE AND SALE................................................... 13 2.1 The Sale................................................. 13 2.2 Excluded Assets.......................................... 13 2.3 Assumed Liabilities...................................... 14 2.4 Excluded Liabilities..................................... 16 ARTICLE III PURCHASE PRICE...................................................... 18 3.1 Purchase Price........................................... 18 3.2 Purchase Price Adjustment................................ 18 3.3 Allocation of Purchase Price............................. 20 3.4 Proration................................................ 20 ARTICLE IV THE CLOSING......................................................... 21 4.1 Time and Place of Closing................................ 21 4.2 Payment of Purchase Price................................ 22 4.3 Deliveries by Seller..................................... 22 4.4 Deliveries by Buyer...................................... 23 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER............................ 24 5.1 Organization; Qualification.............................. 24 5.2 Authority Relative to this Agreement..................... 24 5.3 Consents and Approvals; No Violation..................... 25 5.4 Reports.................................................. 26 5.5 Financial Statements..................................... 26 5.6 Undisclosed Liabilities.................................. 26 5.7 Absence of Certain Changes or Events..................... 27 5.8 Title to Real Property................................... 27 5.9 Leasehold Interests...................................... 27 5.10 Improvements............................................. 27 5.11 Insurance................................................ 28 5.12 Environmental Matters.................................... 28
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Page ---- 5.13 Labor Matters............................................ 29 5.14 Intentionally Left Blank................................. 29 5.15 Real Property Encumbrances............................... 29 5.16 Condemnation............................................. 29 5.17 Certain Contracts and Arrangements....................... 29 5.18 Legal Proceedings, etc................................... 30 5.19 Permits.................................................. 30 5.20 Regulation as a Utility.................................. 31 5.21 Taxes.................................................... 31 5.22 Sufficiency of Assets.................................... 31 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER............................. 31 6.1 Organization............................................. 31 6.2 Authority Relative to this Agreement..................... 32 6.3 Consents and Approvals; No Violation..................... 32 6.4 Regulation as a Utility.................................. 33 6.5 Availability of Funds.................................... 33 ARTICLE VII COVENANTS OF THE PARTIES............................................ 33 7.1 Conduct of Business of the Seller........................ 33 7.2 Access to Information.................................... 35 7.3 Expenses................................................. 36 7.4 Further Assurances....................................... 36 7.5 Public Statements........................................ 37 7.6 Consents and Approvals................................... 37 7.7 Fees and Commissions..................................... 38 7.8 Use of Pollution Control Facilities...................... 38 7.9 Tax Matters.............................................. 39 7.10 Supplements to Schedules................................. 40 7.11 Employees................................................ 40 7.12 Risk of Loss............................................. 42 7.13 Additional Covenants of the Buyer........................ 42 7.14 Additional Covenants of the Parties...................... 43 ARTICLE VIII CLOSING CONDITIONS.................................................. 45 8.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby....................... 45 8.2 Conditions to Obligations of Buyer....................... 46 8.3 Conditions to Obligations of Seller...................... 48
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Page ---- ARTICLE IX INDEMNIFICATION..................................................... 50 9.1 Indemnification.......................................... 50 9.2 Defense of Claims........................................ 51 ARTICLE X TERMINATION AND ABANDONMENT......................................... 53 10.1 Termination.............................................. 53 10.2 Procedure and Effect of Termination...................... 54 ARTICLE XI MISCELLANEOUS PROVISIONS............................................ 55 11.1 Amendment and Modification............................... 55 11.2 Waiver of Compliance; Consents........................... 55 11.3 No Survival of Representations and Warranties............ 55 11.4 Notices.................................................. 55 11.5 Assignment............................................... 57 11.6 Arbitration.............................................. 57 11.7 Governing Law............................................ 57 11.8 Counterparts............................................. 57 11.9 Interpretation........................................... 57 11.10 Entire Agreement......................................... 58 11.11 Bulk Sales or Transfer Laws.............................. 58
iii ASSET SALE AGREEMENT ASSET SALE AGREEMENT, dated as of December 9, 2000 (the "Agreement"), between Nevada Power Company, a Nevada corporation (the "Seller"), and Reliant Energy Sunrise, LLC, a Delaware limited liability company (the "Buyer"). WHEREAS, the Seller owns and operates the "Purchased Assets" (as defined herein); and WHEREAS, the Buyer desires to purchase and assume from the Seller, and the Seller desires to sell to the Buyer, the Purchased Assets and certain associated liabilities upon the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS ----------- 1.1 Definitions. As used in this Agreement, the following terms have ----------- the meanings specified or referred to in this Section 1.1: (1) "Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (2) "Adjustment Statement" shall have the meaning set forth in Section 3.2(a) hereof. (3) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (4) "Agreement" means the Asset Sale Agreement, dated December 9, 2000, together with the Schedules and Exhibits thereto. (5) "Ancillary Agreements" means the Interconnection Agreement, the Transitional Power Purchase Agreement, the Operating Easement Agreements, the Waste Water Treatment Agreement and the Guaranty relating to performance under this Agreement to be executed by Reliant Energy Power Generation, Inc. in favor of the Seller (the "Guaranty"). (6) "Assignment of Leases" means the Assignment of Leases in the form of Exhibit A hereto. (7) "Assumed Liabilities" shall have the meaning set forth in Section 2.3 hereof. (8) "Benefit Plans" shall have the meaning set forth in Section 2.4(i) hereof. (9) "Intentionally Left Blank"; (10) "Bill of Sale" means the Bill of Sale to be delivered at the Closing with respect to the Purchased Assets which constitute personal property and which are to be transferred at the Closing, substantially in the form of Exhibit B hereto. (11) "Bonds" means the Pollution Control Bonds, as more fully described in Schedule 5.15, which were used to finance the Pollution Control Facilities. (12) "Business Day" means any day other than Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (13) "Buyer" shall have the meaning set forth in the preface hereto. (14) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (15) "Buyer Required Regulatory Approvals" shall have the meaning set forth in Section 6.3(b) hereof. (16) "Buyer's Easements" shall have the meaning set forth in Section 4.3(f) hereof. (17) "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. (S)9601, et seq., as amended. ------- (18) "Closing" shall have the meaning set forth in Section 4.1 hereof. 2 (19) "Closing Date" shall have the meaning set forth in Section 4.1 hereof. (20) "COBRA" means the Consolidated Omnibus Reconciliation Act of 1985, as amended. (21) "Code" means the Internal Revenue Code of 1986, as amended. (22) "Intentionally Left Blank"; (23) "Confidentiality Agreement" means the Confidentiality and Auction Protocols Agreement, dated March 28, 2000, between the Seller and the Buyer. (24) "CPUC" means the California Public Utility Commission or any successor thereto. (25) "CSFB" shall have the meaning set forth in Section 7.7 hereof. (26) "Direct Claim" shall have the meaning set forth in Section 9.2(c) hereof. (27) "Dispute" shall have the meaning set forth in Section 11.6 hereof. (28) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, easements, deed restrictions, title defects, reservations, encumbrances and charges of any kind. (29) "Intentionally Left Blank"; (30) "Environmental Laws" means all federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances, laws relating to record keeping, notification, disclosure and reporting requirements 3 respecting Hazardous Substances, and laws relating to the management and use of natural resources. (31) "Environmental Permits" shall have the meaning set forth in Section 5.12(a) hereof. (32) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (33) "ERISA Affiliate" shall have the meaning set forth in Section 2.4(i) hereof. (34) "ERISA Affiliate Plans" shall have the meaning set forth in Section 2.4(i) hereof. (35) "Estimated Adjustment Amount" means (i) the Estimated Maintenance and Capital Expenditures Amount plus (ii) the Estimated Inventory Adjustment Amount plus (iii) the Estimated Materials and Supplies Adjustment Amount. (36) "Estimated Inventory Adjustment Amount" means the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer, which approval shall not be unreasonably withheld, of the fuel inventory priced as the Seller's weighted average fuel costs used at or in connection with the Purchased Assets as of the date that is ten (10) days before the Closing Date, which valuation shall be provided to the Buyer by the Seller no later than five (5) days before the Closing Date. (37) "Estimated Maintenance and Capital Expenditures Amount" means the Seller's estimate of the Maintenance and Capital Expenditures Amount, which estimate shall be the Seller's good faith reasonable estimate of the Maintenance and Capital Expenditures Amount actually incurred, as set forth in Schedule 1.1(37) attached hereto as of the date set forth in such Schedule 1.1(37). (38) "Estimated Materials and Supplies Adjustment Amount" means the Seller's good faith reasonable estimate of the book value of materials and supplies used at or in connection with the Purchased Assets on the Materials and Supplies Valuation Date. (39) "Estimated Purchase Price" shall have the meaning set forth in Section 4.2 hereof. 4 (40) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (41) "Excluded Assets" shall have the meaning set forth in Section 2.2 hereof. (42) "Excluded Liabilities" shall have the meaning set forth in Section 2.4 hereof. (43) "Federal Power Act" means the Federal Power Act of 1935, as amended. (44) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. (45) "Final Order" shall have the meaning set forth in Section 8.1(c) hereof. (46) "Governmental Authority" means any executive, legislative, judicial, regulatory or administrative agency, body, commission, department, board, court, tribunal, arbitrating body or authority of the United States or any foreign country, or any state, local or other governmental subdivision thereof. (47) "Hazardous Substances" means (i) any petrochemical or petroleum products, oil or coal ash, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (ii) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (iii) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law. (48) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (49) "Intentionally Left Blank"; (50) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 5 (51) "Income Tax" means any federal, state, local or foreign tax (i) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains taxes and minimum Taxes) or (ii) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such tax may be based, measured by or calculated with respect to, is described in clause (i), in each case together with any interest, penalties, or additions to such tax. (52) "Indemnifiable Losses" shall have the meaning set forth in Section 9.1(a) hereof. (53) "Indemnifying Party" shall have the meaning set forth in Section 9.1(c) hereof. (54) "Indemnitee" shall have the meaning set forth in Section 9.1(c) hereof. (55) "Indenture" means the Indenture of Mortgage and Deed of Trust dated as of October 1, 1953, as amended from time to time, between the Seller and Bankers Trust Company, as successor trustee. (56) "Independent Accounting Firm" means Deloitte & Touche LLP or such other independent accounting firm of national reputation mutually appointed by the Seller and the Buyer. (57) "Independent Appraiser" shall have the meaning set forth in Section 3.3 hereof. (58) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit C attached hereto. (59) "Interconnection Agreement" means the Interconnection Agreement, dated as of December 9, 2000, between the Seller and the Buyer. (60) "Inventory Adjustment Amount" will have the meaning set forth in Section 3.2(a) hereof. (61) "Intentionally Left Blank"; (62) "Knowledge" means the actual knowledge of the directors and executive officers of the specified Person, and in the case of the Seller, the Director of Southern Generation - Maintenance, responsible for maintenance of the Purchased Assets, which directors and executive officers are charged with the responsibility for 6 the particular function as of the date of the Agreement, or with respect to any certificate delivered pursuant to the Agreement, the date of delivery of such certificate. (63) "Leased Assets" shall have the meaning set forth in Section 7.4 hereof. (64) "Leases" shall have the meaning set forth in Section 5.9 hereof. (65) "Intentionally Left Blank"; (66) "Maintenance and Capital Expenditures Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (67) "Maintenance and Capital Expenditures Amount" means the aggregate amount of all funds actually expended on, or for which liabilities were accrued in accordance with generally accepted accounting principles applied on a consistent basis with respect to any maintenance expenditures and capital expenditures beginning on the date of this Agreement and ending on the Closing Date, excluding any unscheduled maintenance expenditures or capital expenditures which are made by the Seller with the Buyer's consent, which shall not be unreasonably withheld, but including (i) any Scheduled Maintenance Expenditures or Scheduled Capital Expenditures, made with respect to the Purchased Assets by the Seller, and (ii) any maintenance expenditures and capital expenditures which were made by the Seller at the Buyer's request, beginning on the date of this Agreement and ending on the Closing Date. (68) "Intentionally Left Blank"; (69) "Intentionally Left Blank"; (70) "Material Adverse Effect" means any change or changes in or effect on the Purchased Assets that is materially adverse to the business, results of operations, financial condition or physical condition of the Purchased Assets, individually or in the aggregate, except for (i) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power, (ii) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used at the Purchased Assets, (iii) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems, (iv) any change in applicable laws, judgments, orders or decrees, (v) any conditions imposed by a Governmental Authority in connection with the consents or approvals required for the transactions 7 contemplated hereby, and (vi) any materially adverse change in or effect on the Purchased Assets which is cured (including by the payment of money) by the Seller before the Termination Date. (71) "Materials and Supplies Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (72) "Materials and Supplies Valuation Date" means the date that is ten (10) days prior to the Closing Date. (73) "Necessary Capital Expenditures" shall have the meaning set forth in Section 7.1(c) hereof. (74) "Necessary Maintenance Expenditures" shall have the meaning set forth in Section 7.1(e) hereof. (75) "NSLP" means Nevada Sun-Peak Limited Partnership, a Nevada Limited Partnership. (76) "Off-Site Location" means any real property other than the Real Property. (77) "Operating Easement Agreements" means the operating easements providing the right to continue operating and maintaining certain generation and transmission facilities at the Purchased Assets, each in substantially the form of Exhibit D or Exhibit E attached hereto. (78) "Operating Easements" means the Seller's Easements and/or Buyer's Easements granted pursuant to the Operating Easement Agreements. (79) "OPUC" means the Oregon Public Utility Commission or any successor thereto. (80) "Permits" shall have the meaning set forth in Section 5.19 hereof. (81) "Permitted Encumbrances" means (i) those exceptions to title to the Purchased Assets contained in the documents listed on Schedule 5.8; (ii) all exceptions, restrictions, easements, covenants, charges, rights of way and monetary and non-monetary Encumbrances filed in the official records in the Clark County Recorder's office and listed in the Title Report in Schedule 5.8, or that are set forth in an applicable FERC project license, except for such Encumbrances which secure indebtedness; (iii) any state of facts that the survey of the Real Property in Schedule 8 5.8 discloses; (iv) with respect to any date before the Closing Date, Encumbrances under the Indenture; (v) mortgages, liens, pledges, charges, Encumbrances and restrictions incurred in connection with the Seller's purchase of properties and assets after the date of the Seller Balance Sheet securing all or a portion of the purchase price therefor which are acquired pursuant to the terms of this Agreement; (vi) the Buyer's Easements and the Seller's Easements (in accordance with the Operating Easement Agreements applicable to such easements and the Interconnection Agreement); (vii) statutory liens for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings, with sufficient bonds or security being posted to cover such amounts; (viii) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings; (ix) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities; and (x) such other minor imperfections in or failure of title, easements, restrictions and Encumbrances (excluding mortgages, pledges, liens, security interests and charges dischargeable by the payment of money) which do not materially or actually detract from the value of or materially interfere with the present use of the Purchased Assets and do not actually, in the aggregate, have a Material Adverse Effect. (82) "Person" means any individual, partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof. (83) "Intentionally Left Blank"; (84) "Pollution Control Facilities" means pollution control facilities relating to the Sunrise Station, as more fully described in Schedule 5.15. (85) "PUCN" means the Public Utilities Commission of Nevada or any successor thereto. (86) "Purchase Price" shall have the meaning set forth in Section 3.1 hereof. (87) "Purchased Assets" means, subject to the Permitted Encumbrances, the real and personal property, tangible or intangible, used by the Seller in connection with the Sunrise Station (provided, however, that, if any of the foregoing is used by the Seller pursuant to a lease or other contractual arrangement, the relevant "Purchased Asset" shall be the lease or other contractual arrangement and not title), including, without limitation, the following assets owned by the Seller: (i) 9 the Real Property; (ii) all inventories of fuels, supplies, materials and material spares located on or in transit to the Real Property on the Closing Date; (iii) the machinery, equipment, vehicles, furniture and other personal property constituting, or used for generation purposes in connection with, the Sunrise Station on the Closing Date, including, without limitation, the items of personal property included in Schedule 1.1(87)(iii) and designated to be associated with Sunrise Station, and all warranties from third parties relating thereto, to the extent that such warranties are transferable; (iv) the Sun-Peak Power Purchase Agreement and the other contracts, agreements and personal property leases listed on Schedules 1.1(87)(iv) and designated to be associated with Sunrise Station and to the extent assignable; (v) the Permits listed on Schedule 1.1(87)(v) and designated to be associated with Sunrise Station, to the extent transferable; (vi) all books, operating records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications, procedures and similar items of the Seller relating specifically to the aforementioned assets other than books of account relating to the Seller and not to the aforementioned assets; (vii) the SO2 Allowances identified on Schedule 1.1(87)(vii) and designated to be associated with Sunrise Station; (viii) any assets purchased or to be purchased by the Seller pursuant to Section 7.4 ; (ix) the items designated to be "Purchased Assets" on the Separation Schedule; and (x) the name of the Sunrise Station. (88) "Intentionally Left Blank"; (89) "Real Property" means each parcel of real property owned by the Seller associated with the Sunrise Station (or to which the Seller holds an interest therein), including, but not limited to, buildings, structures and improvements located thereon, fixtures contained therein and appurtenances thereto and easements and other rights relating thereto and as more fully described on Schedule 5.8. (90) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment. (91) "Remediation" means an action of any kind to address a Release of Hazardous Substance or the presence of Hazardous Substances at the Purchased Assets or an Off-Site Location, including any or all of the following activities to the extent they relate to or arise from the presence of a Hazardous Substance at the Purchased Assets or an Off-Site Location: (i) monitoring, investigation, assessment, treatment, cleanup, containment, removal, mitigation, response or restoration work; (ii) obtaining any permits, consents, approvals or authorizations of any Governmental Authority necessary to conduct any such activity; (iii) preparing and implementing any plans or studies for any such activity; (iv) obtaining a written notice from a Governmental Authority with jurisdiction over the Purchased 10 Assets or an Off-Site Location under Environmental Laws that no material additional work is required by such Governmental Authority; (v) the use, implementation, application, installation, operation or maintenance of removal actions on the Purchased Assets or an Off-Site Location, remedial technologies applied to the surface or subsurface soils, excavation and treatment or disposal of soils at an Off-Site Location, systems for long-term treatment of surface water or ground water, engineering controls or institutional controls; and (vi) any other activities reasonably determined by a party to be necessary or appropriate or required under Environmental Laws to address the presence or Release of Hazardous Substances at the Purchased Assets or an Off-Site Location. (92) "Rules" shall have the meaning set forth in Section 11.6 hereof. (93) "Scheduled Capital Expenditures" means those capital expenditures included on Schedule 1.1(93). (94) "Scheduled Maintenance Expenditures" means those maintenance expenditures included on Schedule 1.1(94). (95) "SEC" means the Securities and Exchange Commission or any successor thereto. (96) "Securities Act" means the Securities Act of 1933, as amended. (97) "Seller" shall have the meaning set forth in the preface hereto. (98) "Seller Agreements" means those agreements listed on Schedule 5.17(a). (99) "Seller Balance Sheet" shall have the meaning set forth in Section 5.5 hereof. (100) "Seller Required Regulatory Approvals" shall have the meaning set forth in Section 5.3(b) hereof. (101) "Seller's Easements" shall have the meaning set forth in Section 4.4(d) hereof. (102) "Separation Schedule" means the schedule to be delivered to the Buyer by the Seller by the earlier of April 9, 2001 or thirty days prior to the Closing Date, which shall delineate the Purchased Assets from the Seller's other 11 assets and which shall be consistent with the separation schedule summary attached hereto as Exhibit F. (103) "SO2 Allowance" means an authorization by the Administrator of the USEPA under the Clean Air Act, 42 U.S.C. (S)7401, et seq., to emit one ton ------- of sulfur dioxide during or after a specified calendar year. (104) "Subsidiary," when used in reference to any other person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other person. (105) "Sunrise Station" means the Sunrise generating station located in Clark County Nevada. (106) "Sun-Peak Power Purchase Agreement" means the Amended and Restated Power Purchase Contract dated as of October 29, 1998 by and between NSLP and the Seller. (107) "Tax" means any tax, charge, fee, levy, penalty or other assessment (other than any Income Tax) imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any excise, property, sales, transfer, franchise, payroll, withholding, social security or other tax, including any interest, penalties or additions attributable thereto. (108) "Tax Return" means any return, report, information return, declaration, claim for refund or other document (including any related or supporting information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. (109) "Termination Date" shall have the meaning set forth in Section 10.1(b) hereof. (110) "Third Party Claim" shall have the meaning set forth in Section 9.2(a) hereof. (111) "Transitional Power Purchase Agreement" means the Transitional Power Purchase Agreement, dated as of December 9, 2000, between the Buyer and the Seller. (112) "TPPA Amount" shall have the meaning set forth in Section 3.1 hereof. 12 (113) "USEPA" means the United States Environmental Protection Agency, or any successor agency thereto. (114) "WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988, as amended. (115) "Waste Water Treatment Agreement" means a Waste Water Treatment Agreement, to be negotiated and executed between the Seller, the Buyer and the buyer of the Clark Bundle located in Clark County, Nevada, pursuant to Section 7.14(d). ARTICLE II ---------- PURCHASE AND SALE ----------------- 2.1 The Sale. Upon the terms and subject to the satisfaction of the -------- conditions contained in this Agreement, at the Closing, the Seller shall sell, assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, free and clear of all Encumbrances (except for Permitted Encumbrances and the operating easement(s) granted in accordance with the Operating Easement Agreements and the Interconnection Agreement), all of the Seller's right, title and interest in, to and under the real and personal property, tangible or intangible, owned by the Seller and constituting the Purchased Assets. 2.2 Excluded Assets. Notwithstanding any provision herein to the --------------- contrary, the Purchased Assets shall not include the following (collectively, the "Excluded Assets"): (a) all cash, cash equivalents, bank deposits, accounts receivable, and any income, sales, payroll or other tax receivables; (b) the names "Sierra Pacific Resources," "Sierra Pacific Power Company," "Sierra Pacific," "Nevada Power Company" and "Nevada Power" or any related or similar trade names, trademarks, service marks or logos; (c) transmission, substation and communication facilities and related support equipment described in Schedule 2.2(c); (d) any refund, credit penalty payment, adjustment or reconciliation (i) related to Real Property, personal property or other Taxes paid prior to the Closing Date in respect of the Purchased Assets, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable, or 13 (ii) arising under the Seller Agreements and relating to a period before the Closing Date; (e) "Intentionally Left Blank"; (f) the rights and assets described in the Separation Schedule as not part of the Purchased Assets; and (g) the SO2 Allowances identified on Schedule 2.2(g). 2.3 Assumed Liabilities. On the Closing Date, the Buyer shall deliver ------------------- to the Seller the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the liabilities and obligations of the Seller, direct or indirect, known or unknown, absolute or contingent, which relate to the Purchased Assets, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective conditions thereof, including, without limitation, the following liabilities and obligations: (a) all liabilities and obligations of the Seller to be paid or performed after the Closing Date arising under (i) the Seller Agreements, the Environmental Permits, the Permits, the Leases, contracts and any other agreements assigned to the Buyer pursuant to this Agreement in accordance with the terms thereof, and (ii) the leases, contracts and other agreements entered into by the Seller with respect to the Purchased Assets after the date hereof consistent with the terms of this Agreement (including in the case of (i) and (ii), without limitation, agreements with respect to liabilities for real or personal property taxes or other Taxes on any of the Purchased Assets); except, in each case, to the extent such liabilities and obligations, but for a breach or default by the Seller, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default; (b) all liabilities and obligations associated with the Purchased Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.9 hereof; (c) any liabilities and obligations for which the Buyer has indemnified the Seller pursuant to Section 9.1 hereof; (d) "Intentionally Left Blank"; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such 14 liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets, including, without limitation, any fines or penalties that arise in connection with the ownership or operation of the Purchased Assets prior to the Closing Date or the costs associated with correcting any such violations; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets prior to the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; and (iii) the investigation and/or Remediation (whether or not such investigation or Remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; provided, as to all of the above, that nothing set forth in this Section 2.3(e) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (f) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or operation of the Purchased Assets; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets on or after the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing 15 Date, in connection with the ownership or operation of the Purchased Assets; (v) the investigation and/or Remediation of Hazardous Substances that are present or have been released on or after the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at or adjacent to the Purchased Assets; and (vi) the investigation and/or Remediation of Hazardous Substances that are disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets, at any Off-Site Location; provided, that nothing set forth in this Section 2.3(f) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (g) all liabilities and obligations of the Seller with respect to the Purchased Assets under the agreements or consent orders set forth on Schedule 5.12; (h) all liabilities incurred by the Seller with respect to the Maintenance and Capital Expenditures Amount made with respect to the Purchased Assets by the Seller; (i) all liabilities or obligations relating to leases for the Purchased Assets; and (j) all other liabilities or obligations exclusively relating to the Purchased Assets no matter when the events or occurrences giving rise to such liabilities or obligations took place. All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are collectively referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between the Seller and the Buyer. 2.4 Excluded Liabilities. The Buyer shall not assume or be obligated -------------------- to pay, perform or otherwise discharge the following liabilities (collectively, the "Excluded Liabilities"): (a) any liabilities or obligations of the Seller in respect of any Excluded Assets or other assets of the Seller which are not Purchased Assets; 16 (b) any liabilities or obligations in respect of Taxes attributable to the Purchased Assets for taxable periods ending on or prior to the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.9(a) hereof; (c) any liabilities, obligations or responsibilities relating to the disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, by the Seller, of Hazardous Substances that were generated at or from the Purchased Assets, at any Off-Site Location, where the transportation to such Off-Site Location occurred prior to the Closing Date, provided that for purposes of this Section 2.4(c), "Off-Site Location" does not include any location to which Hazardous Substances disposed of, discharged from, emitted from or Released at the Purchased Assets have migrated including, but not limited to, surface waters that have received waste water discharges from the Purchased Assets; (d) any liabilities, obligations or responsibilities relating to (i) the transmission facilities delineated in the Interconnection Agreement or Operating Easement Agreements or (ii) any Seller's operations on, or usage of, the operating easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (A) any violation or alleged violation of Environmental Laws and (B) loss of life, injury to persons or property or damage to natural resources, except to the extent caused by the Buyer; (e) any liabilities or obligations required to be accrued by the Seller in accordance with generally accepted accounting principles and the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities related to the Purchased Assets other than any liability assumed by the Buyer under Section 2.3(a), (e) or (f) hereof; (f) any liabilities or obligations relating to any personal injury (including, without limitation, workers' compensation claims), discrimination, wrongful discharge, or unfair labor practice filed with or pending before any court or administrative agency on the Closing Date, with respect to liabilities principally relating to the Purchased Assets, other than any liabilities or obligations assumed by the Buyer under Section 2.3(e) hereof; (g) any payment obligations of the Seller for goods delivered or services rendered prior to the Closing; (h) any liabilities or obligations imposed upon, assumed or retained by the Seller pursuant to the Interconnection Agreement, Operating Easement Agreements, any other Ancillary Agreement, the Bill of Sale, the deeds of conveyance required by Section 4.3(e), the Assignment of Leases or the Instrument of Assumption; and 17 (i) any liabilities, obligations or responsibilities relating to any "employee benefit plan" (as defined in Section 3(3) of ERISA) sponsored or maintained by the Seller and any trade or business or entity (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with the Seller under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA (collectively, an "ERISA Affiliate") or to which the Seller and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by the Seller or any ERISA Affiliate (hereinafter referred to as "Benefit Plans"), including any liability (i) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (ii) with respect to non-compliance with the notice and benefit continuation requirements of COBRA; (iii) with respect to any non- compliance with ERISA or any other applicable laws; or (iv) with respect to any suit, proceeding or claim which is brought against any Benefit Plan, ERISA Affiliate Plan, any fiduciary or former fiduciary of any such Benefit Plan or ERISA Affiliate Plan. ARTICLE III ----------- PURCHASE PRICE -------------- 3.1 Purchase Price. The purchase price for the Purchased Assets shall -------------- be an amount equal to the sum of (i) One Hundred Six Million Dollars ($106,000,000), (ii) the Estimated Adjustment Amount, (iii) the Adjustment Amount and (iv) any amounts paid by the Seller with respect to Leased Assets pursuant to Section 7.4 hereof (the "Purchase Price"). The amount to be paid by Seller to Buyer for the Transitional Power Purchase Agreement being entered into by Buyer and Seller hereunder shall be Seventy Three Million Dollars ($73,000,000) as adjusted in accordance with Section 2.3.1 of the Transitional Power Purchase Agreement (the "TPPA Amount"). 3.2 Purchase Price Adjustment. (a) Within sixty (60) days after the ------------------------- Closing, the Seller shall prepare and deliver to the Buyer a statement (the "Adjustment Statement") which reflects (i) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of all fuel inventory priced at the Seller's weighted average fuel costs located on or in transit to the Real Property and (B) the Estimated Inventory Adjustment Amount (such difference is referred to as the "Inventory Adjustment Amount"), (ii) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of the materials and supplies used at or in connection with the Purchased Assets and (B) the Estimated Materials and Supplies 18 Adjustment Amount (such difference is referred to as the "Materials and Supplies Adjustment Amount") and (iii) the difference between (A) the Maintenance and Capital Expenditures Amount and (B) the Estimated Maintenance and Capital Expenditures Amount (such difference is referred to as the "Maintenance and Capital Expenditures Adjustment Amount"). The Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount and the Maintenance and Capital Expenditures Adjustment Amount are referred to collectively as the "Adjustment Amount." The Adjustment Statement shall be prepared using the same generally accepted accounting principles, policies and methods as the Seller has historically used in connection with the calculation of the items reflected on the Adjustment Statement. The Buyer agrees to cooperate with the Seller in connection with the preparation of the Adjustment Statement and related information, and shall provide to the Seller such books, records and information as may be reasonably requested from time to time. If the Seller does not provide the Adjustment Statement within 60 days after the Closing, the Buyer shall have the right to provide the Adjustment Statement for the Seller's review. (b) The Buyer may dispute the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount; provided, however, that the Buyer shall notify the Seller -------- ------- in writing of the disputed amount, and the basis of such dispute, within ten (10) Business Days of the Buyer's receipt of the Adjustment Statement. In the event of a dispute with respect to the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount, the Buyer and the Seller shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the Buyer and the Seller are unable to reach a resolution of such differences within thirty (30) days of receipt of the Buyer's written notice of dispute to the Seller, the Buyer and the Seller shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the parties, within thirty (30) days after such submission, upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. The fees and disbursements of the Independent Accounting Firm shall be allocated between the Buyer and the Seller so that the Buyer's share of such fees and disbursements shall be in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully disputed by the Buyer (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm. (c) Within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Buyer shall pay all undisputed portions of the Adjustment 19 Amount; provided, however, that if such portions shall be less than zero, then the Seller shall pay to the Buyer the amount by which such portions are less than zero. If there is a dispute with respect to any amount on the Adjustment Statement, within five (5) Business Days after the final determination of such disputed amounts on the Adjustment Statement, the Buyer shall pay to the Seller an amount equal to the disputed portion of the Adjustment Amount as finally determined to be payable with respect to the Adjustment Statement; provided, -------- however, that if such amount shall be less than zero, then the Seller shall pay - ------- to the Buyer the amount by which such amount is less than zero. All payments made pursuant to this Section 3.2(c) shall be paid together, with interest thereon for the period commencing on the Closing Date through the date of payment, calculated at the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in cash by federal or other wire transfer of immediately available funds. 3.3 Allocation of Purchase Price. The Buyer and the Seller shall use ---------------------------- their good faith best efforts to agree upon an allocation among the Purchased Assets of the sum of the Purchase Price consistent with Section 1060 of the Code and the Treasury Regulations thereunder within one-hundred twenty (120) days of the date of this Agreement but in no event less than thirty (30) days prior to the Closing. The Buyer and the Seller may jointly agree to obtain the services of an independent appraiser (the "Independent Appraiser") to assist the parties in determining fair value of the Purchased Assets for purposes of such allocation. If such an appraisal is made, both the Buyer and the Seller agree to accept the Independent Appraiser's determination of the fair value of the Purchased Assets. The parties shall jointly select the Independent Appraiser. The cost of the appraisal shall be borne equally by the Buyer and the Seller. Each of the Buyer and the Seller agrees to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns, in accordance with such agreed allocation. Each of the Buyer and the Seller shall report the transactions contemplated by this Agreement for federal Income Tax and all other tax purposes in a manner consistent with the allocation determined pursuant to this Section 3.3. Each of the Buyer and the Seller agrees to provide the other promptly with any other information required to complete Form 8594. Each of the Buyer and the Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. 3.4 Proration. (a) The Buyer and the Seller agree that all of the --------- items normally prorated, including those listed below, relating to the business and operation of the Purchased Assets shall be prorated as of the Closing Date, with the Seller liable to the extent such items relate to any time period through the Closing Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date: 20 (i) personal property, real estate, occupancy and any other Taxes, assessments and other charges, if any, on or with respect to the business and operation of the Purchased Assets. (ii) rent, Taxes and other items payable by or to the Seller under any of the Seller Agreements to be assigned to and assumed by the Buyer hereunder; (iii) any permit, license or registration fees with respect to any Environmental Permit or other Permit; and (iv) sewer rents and charges for water, telephone, electricity and other utilities. (b) In connection with such proration, in the event that actual figures are not available at the Closing Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either the Seller or the Buyer made within sixty (60) days of the date that the actual amounts become available. The Seller and the Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 3.4. (c) In connection with any proration of property taxes, in the event that the Purchased Assets are not separately valued and assessed, the proration of such property taxes shall be determined based upon the proportion of (i) the "historic cost less depreciation" of the Purchased Assets to (ii) the total historic cost less depreciation of all the assets reported on the applicable Nevada Operating Property Appraisal Report. ARTICLE IV ---------- THE CLOSING ----------- 4.1 Time and Place of Closing. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall, subject to Section 7.14(e), take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York, at 10:00 a.m., local time, on the first Business Day following the date on which all of the conditions to each party's obligations hereunder have been satisfied or waived, or at such other place or time as the parties 21 may agree. The date and time at which the Closing actually occurs is hereinafter referred to as the "Closing Date." 4.2 Payment of Purchase Price. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Assets, the Buyer shall pay or cause to be paid to the Seller the Purchase Price. The Purchase Price shall be paid as follows: (i) an amount at Closing equal to the sum of One Hundred Six Million Dollars ($106,000,000), plus (ii) any amounts with respect to Leased Assets to be paid pursuant to Section 7.4 hereof, plus (iii) the Estimated Adjustment Amount for the Closing pursuant to Section 3.2 hereof and less (iv) the TPPA Amount (the "Estimated Purchase Price"), by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer. 4.3 Deliveries by Seller. At the Closing, the Seller shall deliver to -------------------- the Buyer the following: (a) The Bill of Sale, duly executed and acknowledged by the Seller for the personal property included in the Purchased Assets; (b) The executed consents to transfer the Seller Agreements, the Environmental Permits and the Permits, to the extent specifically required hereunder; (c) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Seller; (d) The certificate and opinion of counsel as contemplated by Section 8.2 hereof; (e) One or more deeds of conveyance transferring the Seller's interest in the Real Property to the Buyer (but including warranty of good and marketable title as to water rights), substantially in the form of Exhibit G attached hereto, duly executed and acknowledged by the Seller and in recordable form subject to Permitted Encumbrances and retaining to the extent necessary any existing easements in favor of the Seller with respect to Real Property conveyed to the Buyer, subject to arrangements for splitting such easements being made in the same manner contemplated in Section 7.14(b); (f) One or more easements to the extent necessary to evidence the right of the Buyer to use the Real Property of the Seller (the "Buyer's Easements") associated with the Purchased Assets, duly executed and acknowledged by the Seller and in recordable form, each substantially in the form of Exhibit E attached hereto; 22 (g) The Assignment of Leases, in the form of Exhibit A attached hereto, assigning to the Buyer all of the Seller's right, title and interest as lessor (or lessee, as the case may be) under the Leases; (h) Copies of the resolutions adopted by the board of directors of the Seller, certified by the secretary of the Seller, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Seller of this Agreement, the Ancillary Agreements, the Bill of Sale and other closing documents described in this Agreement to which the Seller is a party, and the performance by the Seller of its obligations hereunder and thereunder; (i) The executed partial assignment of the current Southwest Gas contract to the Buyer pursuant to Section 7.14(a) hereof; (j) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Assets in accordance with this Agreement, the Ancillary Agreements, and where necessary or desirable, in recordable form; and (k) Such other agreements, documents, instruments and writings as are required to be delivered by the Seller at or prior to the Closing Date pursuant to this Agreement, the Ancillary Agreements, or otherwise required in connection herewith or therewith. 4.4 Deliveries by Buyer. At the Closing, the Buyer shall deliver to ------------------- the Seller the following: (a) The Estimated Purchase Price by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer; (b) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Buyer; (c) The certificate and opinion of counsel as contemplated by Section 8.3 hereof; (d) One or more easements to the extent necessary to evidence the right of the Seller to use the Real Property of the Buyer (the "Seller's Easements") to the extent necessary for the Seller to continue and maintain its transmission and distribution business, in favor of the Seller with respect to Real Property conveyed to the Buyer, duly executed and acknowledged by the Buyer, each substantially in the form of Exhibit D attached hereto, and the Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.9 hereof; 23 (e) The Instrument of Assumption, duly executed by the Buyer providing for the assumption of all of the Seller's right, title and interest as lessor (or lessee as the case may be) under the Leases; (f) All such other instruments of assumption as shall, in the reasonable opinion of the Seller and its counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (g) Copies of the resolutions adopted by the board of directors of the Buyer, certified by the secretary of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement, the Ancillary Agreements, and other closing documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its obligations hereunder and thereunder; and (h) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement, the Ancillary Agreements, or otherwise required in connection herewith or therewith. ARTICLE V --------- REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- The Seller represents and warrants to the Buyer as follows: 5.1 Organization; Qualification. The Seller is a corporation duly --------------------------- organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. The Seller is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and Bylaws as currently in effect. 5.2 Authority Relative to this Agreement. The Seller has full ------------------------------------ corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agree- 24 ments and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of the Seller and no other corporate proceedings on the part of the Seller are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by the Seller, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Buyer, subject to the receipt of the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitute valid and binding agreements of the Seller, enforceable against the Seller in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 5.3(a), and other than obtaining the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by the Seller nor the sale by the Seller of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws of the Seller, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not, individually or in the aggregate, have a Material Adverse Effect or (y) for those requirements which become applicable to the Seller as a result of the specific regulatory status of the Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which the Seller is a party or by which the Seller, or any of the Purchased Assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Seller, or any of its assets, which violation would have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) approvals or other actions by the PUCN, the CPUC and/or the OPUC (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by the Seller and the 25 Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through (iv) above are collectively referred to as the "Seller Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory authority is necessary for the consummation by the Seller of the transactions contemplated hereby and by the Ancillary Agreements, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect and other than the Permits and Environmental Permits. 5.4 Reports. Since January 1, 1996, the Seller, pursuant to the ------- Securities Act, the Exchange Act, the applicable state public utility laws, the Federal Power Act and the Holding Company Act, has filed or caused to be filed with the SEC, the applicable state or local utility commissions or regulatory bodies, or the FERC, as the case may be, all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by them with respect to the business and operations of the Seller as it relates to the Purchased Assets under each of the Securities Act, the Exchange Act, the applicable state public utility laws, the Federal Power Act and the Holding Company Act and the respective rules and regulations thereunder, all of which complied in all material respects with all applicable requirements of the appropriate act and the rules and regulations thereunder in effect on the date each such report was filed. 5.5 Financial Statements. The Seller has previously furnished to the -------------------- Buyer (i) balance sheets of the Seller as of September 30, 2000 and (ii) the related statements of income and retained earnings and changes in financial position of the Seller for the fiscal year then ended. The balance sheet of the Seller as of September 30, 2000 is referred to herein as the "Seller Balance Sheet." Each of the balance sheets included in the financial statements referred to in this Section 5.5 (including the related notes thereto) presents fairly the financial position of the Seller as of their respective dates, and the other related statements included therein (including the related notes thereto) present fairly the results of operations and changes in financial position for the periods then ended, all in conformity with generally accepted accounting principles applied on a consistent basis, except as otherwise noted therein. 5.6 Undisclosed Liabilities. To Seller's Knowledge and except as set ----------------------- forth in Schedule 5.6, the Seller has no liability or obligation relating to the business or operations of the Purchased Assets, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or 26 reserved against in the Seller Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were incurred in the ordinary course of business, whether before or after the date of the Seller Balance Sheet, or those which in the aggregate are not material to the Purchased Assets. 5.7 Absence of Certain Changes or Events. To Seller's Knowledge and ------------------------------------ except as set forth in Schedule 5.7 or in the reports, schedules, registration statements and definitive proxy statements filed by the Seller with the SEC, and except as otherwise contemplated by this Agreement, since the date of the Seller Balance Sheet there has not been: (i) any Material Adverse Effect; (ii) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (iii) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing, capital expenditure or capital financing) by the Seller, which is material to the business or operations of the Purchased Assets, except agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (iv) any change by the Seller, with respect to the Purchased Assets, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.8 Title to Real Property. Set forth in Schedule 5.8 is a true and ---------------------- complete list of the Real Property of the Seller which is part of the Purchased Assets. The Seller has insurable title to all of the Real Property, subject only to Permitted Encumbrances. 5.9 Leasehold Interests. Schedule 5.9 lists, as of the date of this ------------------- Agreement, all Real Property leases (the "Leases") relating to the Purchased Assets under which the Seller is a lessee, lessor or under which Seller otherwise has any interest and which are to be assigned to, and assumed by, the Buyer on the Closing Date. Except as set forth in Schedule 5.9, to the Seller's Knowledge, all such Leases are valid, binding and enforceable in accordance with their terms against the Seller and, to the Seller's Knowledge, against every other party thereto, and are in full force and effect; there are no existing material defaults thereunder by the Seller or, to the Seller's Knowledge, by any party thereto; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default thereunder by the Seller or, to the Seller's Knowledge, by any other party thereto. 5.10 Improvements. Except as set forth in Schedule 5.10, the Seller ------------ has not received any written notices from any Governmental Authority stating or alleging that any improvements with respect to the Purchased Assets have not been constructed in compliance with applicable law. Except as set forth in Schedule 5.10, no written notice has been received by the Seller from any Governmental Authority requiring or advising as to the need for any repair, alteration, restoration or 27 improvement in connection with the Purchased Assets. Except as set forth in Schedule 5.10, to Seller's Knowledge , with respect to the Purchased Assets, Seller has complied in all material respects with applicable zoning, land use and subdivision requirements. 5.11 Insurance. Except as set forth in Schedule 5.11, all material --------- policies of fire, liability, workers' compensation and other forms of insurance purchased or held by and insuring the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.11, as of the date of this Agreement, the Seller has not been refused any insurance with respect to the Purchased Assets nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last twelve (12) months. 5.12 Environmental Matters. (a) Except as set forth in Schedule 5.12, --------------------- in any public filing by the Seller pursuant to the Securities Act or the Exchange Act, or in any environmental site assessment prepared by or for the Seller and made available to the Buyer, the Seller holds, and is in substantial compliance with, all material permits, licenses and governmental authorizations (the "Environmental Permits") required for the Seller to operate the Purchased Assets under applicable Environmental Laws, and to the Knowledge of the Seller, the Seller is otherwise in compliance with applicable Environmental Laws with respect to the Purchased Assets except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, which, in the aggregate, are not reasonably likely to have a Material Adverse Effect. The Seller's Environmental Permits are set forth on Schedule 5.12. (b) Except as set forth in Schedule 5.12, the Seller has not received any written request for information, or been notified in writing that it is a potentially responsible party, under CERCLA or any similar state law with respect to any of the Purchased Assets, except for such liability under such laws as would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. (c) Except as set forth in Schedule 5.12, with respect to the Purchased Assets, the Seller has not entered into or agreed to any consent decree or order, and is not subject to any judgment, decree, or judicial order relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Substances under any Environmental Law, except such consent decrees or orders, 28 judgments, decrees or judicial orders that would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. (d) The representations and warranties made in this Section 5.12 are the Seller's exclusive representations and warranties relating to environmental matters. 5.13 Labor Matters. The Seller has no full time employees assigned to ------------- the Purchased Assets. Accordingly, except as set forth in Schedule 5.13 there are no labor union and/or collective bargaining agreements relating to the Purchased Assets to which the Seller is a party or is subject. With respect to any employees who have ever been associated with the Purchased Assets, to the Seller's Knowledge: (i) the Seller is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours; (ii) the Seller has not received written notice of any unfair labor practice complaint against the Seller pending before the National Labor Relations Board; (iii) there is no labor strike, slowdown or stoppage actually pending or threatened against or affecting the Seller; (iv) the Seller has not received notice that any representation petition respecting the employees of the Seller has been filed with the National Labor Relations Board; (v) no arbitration proceeding arising out of or under collective bargaining agreements is pending against the Seller; and (vi) the Seller has not experienced any primary work stoppage since at least December 31, 1995. 5.14 Intentionally Left Blank. ------------------------ 5.15 Real Property Encumbrances. Schedule 5.15 describes any Permitted -------------------------- Encumbrances on the Real Property. Copies of any surveys in the Seller's possession or any policies of title insurance currently in force and in the possession of the Seller with respect to such Real Property have been delivered by the Seller to the Buyer. 5.16 Condemnation. Neither the whole nor any part of the Real Property ------------ or any other real property or rights leased, used or occupied by the Seller in connection with the ownership or operation of the Purchased Assets is subject to any pending suit for condemnation or other taking by any public authority, and, to the Knowledge of the Seller, no such condemnation or other taking is threatened or contemplated. 5.17 Certain Contracts and Arrangements. (a) Except (i) the Seller ---------------------------------- Agreements listed in Schedule 5.17(a) or any other Schedule hereto, (ii) for contracts, agreements, personal property leases, commitments, understandings or instruments which shall expire prior to the Closing Date, (iii) for agreements with 29 suppliers, distributors and sales representatives entered into in the ordinary course of business, and (iv) for contracts, agreements, personal property leases, commitments, understandings or instruments with a value less than $250,000 or with annual payments less than $50,000 the Seller is not a party to any written contract, agreement, personal property lease, commitment, understanding or instrument which is material to the business or operations of the Purchased Assets. (b) Except as disclosed in Schedule 5.17(b), each material Seller Agreement listed on Schedule 5.17(a) constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to the Buyer pursuant to this Agreement and shall continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder. (c) Except as set forth in Schedule 5.17(c), there is not, under any of the Seller Agreements listed on Schedule 5.17(a), any default or event which, with notice or lapse of time or both, would constitute a default on the part of the Seller, except, with respect to the Seller Agreements only, such events of default and other events as to which requisite waivers or consents have been obtained or which would not, in the aggregate, have a Material Adverse Effect. 5.18 Legal Proceedings, etc. Except as set forth in Schedule 5.18 or ----------------------- in any filing made by the Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, or proceedings pending or investigation pending, and to Seller's Knowledge no claims, actions, proceedings or investigations threatened against the Seller relating to the Purchased Assets before any court, Governmental Authority or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect. Except as set forth in Schedule 5.18, the Seller is not subject to any outstanding judgment, rule, order, writ, injunction or decree of any court, Governmental Authority or regulatory authority relating to the Purchased Assets which has a Material Adverse Effect. 5.19 Permits. The Seller has all material permits, licenses, ------- franchises and other governmental authorizations, consents and approvals, other than with respect to Environmental Laws (collectively, "Permits"), as set forth in Schedule 5.19(a), necessary to operate the Purchased Assets as presently operated, except where the failure to have such Permits does not have a Material Adverse Effect. Except as set forth in Schedule 5.19(b), with respect to the Purchased Assets, the Seller has not received any written notification, and does not otherwise have Knowledge, that it is in violation of any of such Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for notifications of violations which would not, in the aggregate, have a Material Adverse Effect. The Seller is in 30 compliance with all Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for violations which, in the aggregate, do not have a Material Adverse Effect. 5.20 Regulation as a Utility. The Seller and certain of its affiliates ----------------------- are regulated as public utilities in the States of Nevada and California. Except as set forth on Schedule 5.20, the Seller is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any state of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 5.21 Taxes. The Seller has (i) filed all Tax Returns required to be ----- filed other than those Tax Returns the failure of which to file would not have a Material Adverse Effect, and (ii) paid in full or all Taxes shown to be due on such Tax Returns. Except as set forth in Schedule 5.21, the Seller has not received any notice of deficiency or assessment from any taxing authority with respect to liabilities for Taxes of the Seller, which have not been fully paid or finally settled, and any such deficiency shown in such Schedule 5.21 is being contested in good faith and with diligence through appropriate proceedings. Except as set forth in Schedule 5.21, there are no outstanding agreements or waivers extending or having the effect of extending or waiving the applicable statutory periods of limitation for assessment or collection of Taxes associated with the Purchased Assets for any period (nor will such agreements or waivers be entered into or executed prior to the close of business on the Closing Date), and the Seller has not executed or entered into (nor will execute or enter into on or prior to the close of business on the Closing Date) any closing agreement pursuant to Section 7121 of the Code, or any predecessor provision thereof or any similar provision of state, local or foreign tax law that relates to the Purchased Assets. Seller is not a foreign person within the meaning of Section 1445 of the Code. 5.22 Sufficiency of Assets. The Purchased Assets are sufficient for --------------------- the operation of Sunrise Station as it has been operated, and the Purchased Assets are all the assets required to operate Sunrise Station as it has been operated by the Seller. ARTICLE VI ---------- REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- The Buyer represents and warrants to the Seller as follows: 6.1 Organization. The Buyer is a limited liability company organized, ------------ validly existing and in good standing under the laws of the State of 31 Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and to carry on its business as is now being conducted. The Buyer is duly qualified or licensed to do business as a foreign limited liability company and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Buyer has heretofore delivered to the Seller complete and correct copies of its certificate of formation (or other similar governing documents), as currently in effect. 6.2 Authority Relative to this Agreement. The Buyer has full limited ------------------------------------ liability company power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the sole member of the Buyer and no other limited liability company proceedings on the part of the Buyer are necessary to authorize this Agreement or the Ancillary Agreements to which it is a party or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements to which it is a party have been duly and validly executed and delivered by the Buyer, and assuming that this Agreement and the Ancillary Agreements to which it is a party constitute valid and binding agreements of the Seller, subject to the receipt of the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, constitute valid and binding agreements of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 6.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by the Buyer nor the purchase by the Buyer of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the certificate of formation (or other similar governing documents) of the Buyer, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have, individually or in the aggregate, a Material Adverse Effect or (y) for those requirements which become applicable to the Buyer as a result of the specific regulatory status of the Seller (or any of its 32 Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Seller (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which the Buyer or any of its Subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. (b) Except as set forth in Schedule 6.3(b) and except for (i) FERC approval of the Seller's disposition of FERC jurisdictional facilities to Buyer under Section 203 of the Federal Power Act, (ii) FERC acceptance of the Interconnection Agreement to be filed by Seller, (iii) FERC acceptance of the Transition Power Purchase Agreement, and (iv) the filings by the Buyer and the Seller required by the HSR Act, (the filings and approvals referred to in Schedule 6.3(b) and clauses (i) through (iv) are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby and by the Ancillary Agreements, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect. 6.4 Regulation as a Utility. Except as set forth in Section 6.3(b) ----------------------- and Schedule 6.4, the Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any state of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.5 Availability of Funds. The Buyer has sufficient funds available --------------------- to it or has received binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. ARTICLE VII ----------- COVENANTS OF THE PARTIES ------------------------ 7.1 Conduct of Business of the Seller. Except as described in --------------------------------- Schedule 7.1, during the period from the date of this Agreement to the Closing Date, the Seller shall operate and maintain the Purchased Assets according to its ordinary and usual course of business consistent with good industry practice. Without limiting the generality of the foregoing, and, except as contemplated in this Agree- 33 ment or as described in Schedule 7.1, prior to the Closing Date, without the prior written consent of the Buyer (unless such consent would be prohibited by law), the Seller shall not with respect to the Purchased Assets: (a) (i) create, incur or assume any material amount of indebtedness for money borrowed, other than in the ordinary course of business, including obligations in respect of capital leases but excluding purchase money mortgages granted in connection with the acquisition of property in the ordinary course of business; or (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person except in the ordinary course of business; (b) make any material change in the operations of the Purchased Assets including, without limitation, the levels of fuel inventory and materials and supplies customarily maintained by the Seller; (c) except as set forth in Schedule 1.1(93), make any capital expenditures with respect to the Purchased Assets or enter into any contract or commitment therefor, except that the Seller shall make any capital expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such capital expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Capital Expenditures"); provided, however, -------- ------- that if the Buyer requests that the Seller make enhancements with a cost in excess of the cost of any Necessary Capital Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancement to the extent that the cost of such enhancement exceeds the cost of the Necessary Capital Expenditures as part of the Adjustment Amount; (d) sell, lease (as lessor), transfer or otherwise dispose of, any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with good industry practice and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Assets other than Permitted Encumbrances; (e) except as set forth in Schedule 1.1(94), make any maintenance expenditures, except that the Seller shall make any maintenance expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such maintenance expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Maintenance Expenditures"); provided, -------- however, that if the Buyer requests that the Seller make enhancements/upgrades - ------- with a cost in excess of the cost of any Necessary Maintenance Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to the extent the 34 cost of such enhancements/upgrades exceeds the cost of the Necessary Maintenance Expenditure as part of the Adjustment Amount; (f) amend any of the Seller Agreements; (g) enter into or amend any real or personal property Tax agreement, treaty or settlement; (h) execute, enter into or amend any agreement, order, decree or judgment relating to any Permit; (i) enter into any commitment for the purchase or sale of fuel (whether commodity or transportation) that Seller intends to assign to Buyer having a term of greater than ninety (90) days that extends beyond December 31, 2001 if the aggregate payment under such commitment is expected to exceed $500,000 or if the aggregate payments under such commitment and all other then outstanding commitments not previously consented to by the Buyer would be expected to exceed $1,000,000; (j) except for the Transitional Power Purchase Agreement, enter into any wholesale sales agreement having a term extending beyond the Closing Date, where the sales of energy are expected to be supplied via the Purchased Assets (k) sell, lease or otherwise dispose of SO2 Allowances, except those listed in Schedule 2.2(g) or to the extent necessary to operate the Purchased Assets in accordance with this Section 7.1; (l) enter into commitments to sell power from the Purchased Assets beyond the Closing Date; or (m) enter into any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (l). 7.2 Access to Information. (a) Between the date of this Agreement and --------------------- the Closing Date, the Seller shall, during ordinary business hours and upon reasonable notice (i) give the Buyer and the Buyer Representatives reasonable access to all books, records, plants, offices and other facilities and properties constituting the Purchased Assets to which the Buyer is permitted access by law, (ii) permit the Buyer to make such reasonable inspections thereof as the Buyer may reasonably request; (iii) cause its officers and advisors to furnish the Buyer with such financial and operating data and other information with respect to the Purchased Assets as the Buyer may from time to time reasonably request; (iv) cause its officers and advisors 35 to furnish the Buyer a copy of each report, schedule or other document filed or received by them with the SEC, PUCN, CPUC or FERC with respect to the Purchased Assets; provided, however, that (A) any such investigation shall be conducted in -------- ------- such a manner as not to interfere unreasonably with the operation of the Purchased Assets, (B) the Seller shall not be required to take any action which would constitute a waiver of the attorney-client privilege and (C) the Seller need not supply the Buyer with any information which the Seller is under a legal obligation not to supply. Notwithstanding anything in this Section 7.2 to the contrary, (i) the Seller shall only furnish or provide such access to medical records as is required by law and (ii) the Buyer shall not have the right to perform or conduct any environmental sampling or testing at, in, on or underneath the Purchased Assets. (b) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of the Confidentiality Agreement and shall be treated as "Evaluation Material" (as defined in the Confidentiality Agreement). (c) For a period of ten (10) years after the Closing Date, the Seller and its representatives shall have reasonable access to all of the books and records of the Purchased Assets, as the case may be, transferred to the Buyer hereunder to the extent that such access may reasonably be required by the Seller in connection with matters relating to or affected by the operation of the Purchased Assets prior to the Closing Date. Such access shall be afforded by the Buyer upon receipt of reasonable advance notice and during normal business hours. The Seller shall be solely responsible for any costs or expenses incurred by them pursuant to this Section 7.2(c). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such ten-year period, the Buyer shall, prior to such disposition, give the Seller a reasonable opportunity at the Seller's expense, to segregate and remove such books and records as the Seller may select. 7.3 Expenses. Except to the extent specifically provided herein, -------- whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses. 7.4 Further Assurances. Subject to the terms and conditions of this ------------------ Agreement, each of the parties hereto shall use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the sale of the Purchased Assets pursuant to this Agreement including, without limitation, the use of the Seller's and the Buyer's commercially reasonable efforts to obtain all Permits and Environmental Permits necessary for the Buyer to operate the Purchased Assets. From time to time after the 36 date hereof, without further consideration, the Seller shall, at its own expense, execute and deliver such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Assets. From time to time after the date hereof, the Buyer shall, at its own expense, execute and deliver such documents to the Seller as the Seller may reasonably request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. To the extent that any personal property lease, relating to any assets (the "Leased Assets") which are principally used by the Seller for generation purposes at the Purchased Assets, cannot be assigned to the Buyer, the Seller shall use its commercially reasonable efforts to acquire title to such Leased Assets and to include them in the Purchased Assets before the Closing Date. The Seller's costs associated with acquiring title to such Leased Assets (to the extent approved by the Buyer) shall be paid by the Buyer as part of the Purchase Price. 7.5 Public Statements. The parties shall consult with each other ----------------- prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and the Buyer shall not issue any such public announcement, statement or other disclosure without having first received the written consent of the Seller, except as may be required by law and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent and under the circumstances in which the parties are expressly permitted by the Confidentiality Agreement to make disclosures of "Evaluation Material" (as defined in the Confidentiality Agreement). 7.6 Consents and Approvals. (a) The Seller and the Buyer shall each ---------------------- file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall consult with each other as to the appropriate time of filing such notifications and shall use their best efforts to make such filings at the agreed upon time, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. (b) The Seller and the Buyer shall cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all commercially reasonable efforts to obtain the transfer or reissuance to the Buyer of all necessary Environmental Permits, Permits, consents, approvals and authorizations of all governmental bodies and (iv) use all commercially reasonable efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or 37 advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which the Seller or the Buyer is a party or by which either of them is bound. The Seller shall have the right to review and approve in advance all characterizations of the information relating to Purchased Assets; and each of the Seller and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they shall consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such necessary Environmental Permits, Permits, consents, approvals and authorizations of all third parties and governmental bodies. The Seller and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on behalf of the Seller, on the one hand and the Buyer on the other hand, with all governmental bodies. To the extent that a consent to an assignment of any material Seller Agreement cannot be obtained before the Closing Date, the Seller shall enter into all such agreements with the Buyer as are necessary to give the Buyer the rights, obligations and burdens of such Seller Agreements. (c) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any federal, state or local Governmental Authority or agency or any third party in connection with any federal, state or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. 7.7 Fees and Commissions. The Seller and the Buyer each represent and -------------------- warrant to the other that, except for Credit Suisse First Boston ("CSFB"), which is acting for and at the expense of the Seller, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. The Seller and the Buyer shall pay to the other or otherwise discharge, and shall indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 7.8 Use of Pollution Control Facilities. (a) Prior to June 1, 2019, ----------------------------------- the Buyer shall not use any of the Pollution Control Facilities in any manner which 38 would cause (i) interest on any of the Bonds to become includible in the gross income of the owners of such Bonds for purposes of federal income taxation or (ii) the disallowance of any deductions for interest expense payable by the Seller to which the Seller would otherwise be entitled; provided, however, that -------- ------- no violation of this Section 7.8 shall be deemed to have occurred solely as a result of such facilities being (A) unused, (B) abandoned or (C) sent to a landfill. (b) The Buyer shall (to the extent required in connection with the Bonds or under this Agreement) give the Seller reasonable access to any Pollution Control Facilities included in the Purchased Assets and the books and records with respect to such facilities. (c) The Buyer shall fully cooperate with the issuers of the Bonds and the Seller and its counsel in connection with any audit, investigation or proceeding with respect to the Bonds or the Seller's interest expense deduction with respect thereto by the Internal Revenue Service, the SEC or any other entity. 7.9 Tax Matters. (a) Notwithstanding any other provision of this ----------- Agreement, all transfer, sales and similar Taxes (other than Nevada real property transfer taxes) incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Buyer, and the Buyer shall, at its own expense, file, to the extent required by law, all necessary Tax Returns and other documentation with respect to all such Taxes, and, if required by applicable law, the Seller shall join in the execution of any such Tax Returns or other documentation. If governing law does not allow Buyer, but requires Seller, to file a Tax Return with respect to a transfer, sales, or similar Tax for which Buyer bears liability under this Agreement, Buyer shall prepare such Tax Return, present such Tax Return to Seller within 10 days of the due date of such Tax Return, and Seller shall sign and file such Tax Return as prepared by Buyer unless filing such Tax Return in the manner prepared by Buyer would violate governing law. Any Nevada Tax on the transfer of real property incurred in connection with this Agreement or the transactions contemplated hereby (including the recordation of transfer of title to the Real Property) shall be borne by the Seller, and the Seller shall, at its own expense, file, to the extent required by law, all necessary Tax Returns and other documentation with respect to the Nevada Tax on the transfer of real property, and, if required by applicable law, the Buyer shall join in the execution of any such Tax Returns or other documentation. The Buyer shall at its expense control the defense and settlement of any audit or other examination by any taxing authority, and any judicial or administrative proceeding, relating to liability for transfer, sales and similar Taxes incurred in connection with this Agreement and the transactions contemplated hereby that are borne by the Buyer. 39 (b) With respect to Taxes to be prorated in accordance with Section 3.4 hereof only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to the Seller's approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for the Seller's review and approval no later than twenty (20) days prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, the Seller shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with Section 3.4 hereof. In addition to any amount of reimbursement due in accordance with Section 3.4 hereof, Buyer shall reimburse Seller for any Nevada property taxes incurred by Seller which relate to the Purchased Assets and have a lien date after the Closing Date. The amount of such reimbursement shall be determined based upon the proportion of (i) the "historical cost less depreciation" of the Purchased Assets to (ii) the total historical cost less depreciation of all the assets reported on Seller's Nevada Operating Property Appraisal Report. (c) Each of the Buyer and the Seller shall provide the other with such assistance as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each shall retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.9 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. 7.10 Supplements to Schedules. Prior to the Closing Date, the Seller ------------------------ shall supplement or amend the Schedules required by Article V with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section 7.10 shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.11 Employees. (a) Subject to federal labor law requirements, if --------- Buyer hires employees at the Sunrise Station whose duties are significantly the same duties covered under the Generation Collective Bargaining Agreement between Nevada Power Company and Local Union 396 of the IBEW (the "Union") that was effective June 25, 1999, then the Buyer shall notify the Union of this circumstance and, upon written request by the Union: 40 (1) Allow representatives of the Union reasonable access to the Sunrise Station for the purpose of informing such employees of their rights to form and join organizations of their own choosing for the purpose of representation with their employer with respect to wages, hours, and other terms and conditions of employment and to explain the benefits of membership in and representation for such purposes by the Union. "Reasonable access" shall include the right to meet with employees on at least three (3) occasions at the Sunrise Station on non-work time (e.g., lunch hour) during normal business hours. (2) Buyer shall supply the Union with a list of such employees. Such list shall contain the names, home addresses and home phone numbers of such employees. The Union shall at all times maintain the confidentiality of any such list. (3) Buyer shall submit to a card check election to determine the desires of such employees to be represented for the purpose of collective bargaining by the Union. If a majority of such employees have signed cards authorizing the Union to act as their collective bargaining representative, and such authorization card majority is verified by the Federal Mediation and Conciliation Service, then the Buyer shall recognize the Union as the exclusive bargaining representative of such employees. (4) If the Union is selected by a majority of such employees as their collective bargaining representative, then the Buyer shall, immediately upon the request by the Union, bargain in good faith with the Union for the purpose of concluding a collective bargaining agreement. (5) At all times Buyer shall remain neutral with regard to any question concerning the representation of such employees by the Union. "Neutral" shall mean that the Buyer or its affiliate(s) shall take no official position, nor shall it direct or condone any of its agents or representatives, including any attorneys or consultants, to take any position against the exercise by its employees of their right to select the Union as their collective bargaining representative or to oppose the selection of the Union as the employees' collective bargaining representative. (b) WARN Act. The Seller shall perform timely and discharge all -------- requirements, if any, under the WARN Act and under applicable state and local laws and regulations for the notification of its employees arising from the sale of the Purchased Assets to the Buyer up to and including the Closing Date. 41 7.12 Risk of Loss. (a) From the date hereof through the Closing Date, ------------ all risk of loss or damage to the property included in the Purchased Assets shall be borne by the Seller. (b) If, before the Closing Date all or any portion of the Purchased Assets are taken by eminent domain, or is the subject of a pending or (to the Knowledge of the Seller) contemplated taking which has not been consummated, the Seller shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such taking, then the Buyer or the Seller may, if such taking relates to the Purchased Assets, terminate this Agreement pursuant to Section 10.1(f) hereof. (c) If, before the Closing Date all or any material portion of the Purchased Assets are damaged or destroyed by fire or other casualty, the Seller shall notify the Buyer promptly in writing of such fact. If such damage or destruction has no Material Adverse Effect, Seller shall make such repairs or replacements (i) as necessary, consistent with Good Utility Practice (as such term is defined in the Interconnection Agreement) to cure such damage or destruction as soon as reasonably practicable, or (ii) if Good Utility Practice would not otherwise dictate that such repairs or replacements should be made but such repairs or replacements are covered by Seller's insurance in effect at the time of such damage or destruction. If Seller makes any repairs or replacements in accordance with subparagraph (ii) in the preceding sentence, Buyer shall reimburse Seller for any amount not covered by Seller's insurance plus the applicable deductible under such insurance. If such damage or destruction would have a Material Adverse Effect and the Seller has not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such casualty, then the Buyer or the Seller may terminate this Agreement pursuant to Section 10.1(f) hereof. 7.13 Additional Covenants of the Buyer. Notwithstanding any other --------------------------------- provision hereof, Buyer covenants and agrees that, for a period of five (5) years commencing on the Closing Date, Buyer shall not transfer the Purchased Assets, or any material portion of the Purchased Assets, to any entity or Affiliate of such entity 42 who at that time is the owner of any bundle of generation assets previously owned by Seller within the southern regions of Nevada, as such regions are described in the Offering Memorandum dated as of March 2000, as supplemented from time to time. Buyer further covenants and agrees that, in the event that Buyer transfers the Purchased Assets or any material portion of the Purchased Assets during such five (5) year period, Buyer shall obtain from its transferee a covenant and agreement which restricts such transferee's ability to transfer the Purchased Assets that is substantially similar to Buyer's covenant and agreement in the first sentence of this Section 7.13 and an additional covenant and agreement that is substantially similar to that of this sentence, and each such covenant and agreement shall survive and remain in effect until five (5) years from the Closing Date as defined in this Agreement. The covenants and agreements contained in this Section 7.13 shall survive Closing and shall continue in effect for a period of five (5) years commencing on the Closing Date. 7.14 Additional Covenants of the Parties. (a) Buyer hereby agrees to ----------------------------------- accept an assignment of a portion of Seller's rights under the Firm Transportation Agreement dated February 1, 1995 ("FTA"), between Seller and Southwest Gas such that it would receive an allocation of 4,725 MMBtu/Hour of transportation capacity under the FTA. Capacity, demand and other charges payable under the FTA would be allocated proportionately, such that the Buyer would bear 4,725/12,000 of such charges and purchaser of the Clark Bundle would bear 7,275/12,000 of such charges. Seller and Buyer shall cooperate in good faith to effect such an assignment (in the form of a partial assignment, bifurcation, new agreement or other structure) on terms acceptable to Seller and Buyer and to obtain Southwest Gas's consent to such assignment. (b) To the extent that any contract, agreement, permit, easement or other right serves or benefits generation assets other than the Purchased Assets, Seller shall, before Closing, prepare such assignments to or agreements with (in whole or in part) the purchaser of the other generation assets served or such third party as may be necessary to separate such rights or benefits. All such assignments and agreements shall be subject to Buyer's consent (which shall not be unreasonably withheld). Each agreement or contract with a third party shall be bifurcated into separate agreements or contracts for each bundle of generation assets served or affected by it such that (i) none can be affected in any way by others, (ii) the rights, benefits and obligations provided for under the agreement or contract prior to bifurcation are allocated fairly among the generation assets to which it related, and (iii) there are no changes materially adverse to the Buyer as compared with the agreement or contract prior to bifurcation insofar as such agreement or contract related to Sunrise Station. 43 (c) Seller shall use its commercially reasonable efforts to negotiate with Nevada Sun-Peak Limited Partnership to bifurcate the Sun-Peak Power Purchase Contract in order to separate the rights, benefits and obligations related to power generation on the one hand and transmission and interconnection on the other hand. If, however, the Sun-Peak Power Purchase Contract has not been bifurcated by the earlier of April 30, 2001 or the date that is 60 days from the expected Closing Date, Buyer and Seller shall negotiate in good faith either (i) an assignment to Buyer of the relevant portions of the Sun-Peak Power Purchase Contract, or (ii) an agreement between Buyer and Seller pursuant to which Seller shall supply the power (together with all the rights, benefits and obligations associated therewith) to Buyer and Buyer shall purchase the power from Seller on the terms and conditions of the Sun-Peak Power Purchase Contract, provided, that any assignment or agreement executed pursuant to clause (i) or (ii) of this sentence shall contain a provision whereby Buyer and Seller would each agree to hold the other party harmless for any obligation, liability, claim or event which would not have been such other party's responsibility if the Sun- Peak Power Purchase Contract had been bifurcated prior to Closing. (d) Within fifteen (15) Business Days of the date of this Agreement, Buyer agrees to cooperate with Seller in the development of a form of waste water treatment agreement which substantially reflects the provisions set forth in Exhibit H hereto. Seller shall use its commercially reasonable best efforts to present such form of agreement to the buyer of the Clark Bundle as soon as practicable thereafter. Seller and Buyer shall execute such definitive agreement, which will also be executed by the buyer of the Clark Bundle, within thirty (30) Business Days of the date of this Agreement. (e) Seller hereby agrees to make certain filings with the PUCN and, if required, with the OPUC and CPUC, which shall indicate Seller's acceptance of Buyer's bid for and its disposition to Buyer of the Purchased Assets and request findings by the PUCN and, if required, the OPUC and CPUC, necessary for Buyer to obtain EWG status with respect to its ownership and operation of the Purchased Assets, provided, however, that the Closing Date shall not occur until the earlier of (i) seventy-five days from the date of receipt of all required state certification pursuant to Section 32 of the Holding Company Act, or (ii) the date of FERC's determination that Buyer is an Exempt Wholesale Generator, under Section 32 of the Holding Company Act ("EWG"). (f) To the extent Seller has entered into an agreement or agreements pursuant to the last sentence of Section 7.6(b) Seller shall continue, for as long as shall be reasonably necessary, to seek any necessary consents required to assign the underlying Seller Agreement or Agreements to Buyer. 44 (g) The Seller shall make the repairs or modifications, if any, necessary for the Purchased Assets to comply, as of the Closing Date, with applicable noise regulations. (h) The Seller owns the necessary easements, permits, leases and rights-of-way covering all of the water and effluent pipelines, pumps and related facilities (as generally described in Schedule 5.8) which are to be transferred or conveyed to Buyer and which are located offsite of Sunrise Station, and shall convey, assign and deliver the same (together with any surveys or line drawings) to the Buyer at Closing. ARTICLE VIII ------------ CLOSING CONDITIONS ------------------ 8.1 Conditions to Each Party's Obligations to Effect the Transactions ----------------------------------------------------------------- Contemplated Hereby. The respective obligations of each party to effect the - ------------------- transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated; (b) No preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the transactions contemplated hereby or by the Ancillary Agreements shall have been issued and remain in effect (each party agreeing to use its reasonable best efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted by any state or federal government or Governmental Authority in the United States which prohibits the consummation of the transactions contemplated hereby or by the Ancillary Agreements; (c) All federal, state and local government consents and approvals required for the consummation of the transactions contemplated hereby or by the Ancillary Agreements, including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, shall have become Final Orders (a "Final Order" for purposes of this Agreement means a final order after all opportunities for rehearing are exhausted (whether or not any appeal thereof is pending) that has not been revised, stayed, enjoined, set aside, annulled or suspended, with respect to which any required waiting period has expired; and as to which all conditions to effectiveness prescribed therein or otherwise by law, regulation or order have been satisfied) with such terms and conditions as shall have been 45 imposed by the Governmental Authority issuing such Final Order and such Final Orders shall not have imposed terms and conditions which would have a material adverse effect on the Purchased Assets; and (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which the Seller or the Buyer, or any of their Subsidiaries, is a party for the consummation of the transactions contemplated hereby shall have been obtained, other than those (i) which if not obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii) for which an agreement which is described in the last sentence of Section 7.6(b) hereof has been entered into. (e) There shall have been no changes in applicable Laws, judgements, orders or decrees which would, in the aggregate, have a material adverse effect on the business, results of operations, financial condition or physical condition of the Purchased Assets. 8.2 Conditions to Obligations of Buyer. The obligation of the Buyer ---------------------------------- to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) There shall not have occurred and be continuing, a Material Adverse Effect; (b) The Seller shall have performed and complied with in all material respects the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of the Seller set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of the Seller; (c) The Buyer shall have received a certificate from an authorized officer of the Seller, dated the Closing Date, to the effect that to the best of such officer's knowledge, the conditions set forth in Sections 8.2(a) and (b) hereof have been satisfied; (d) The Buyer shall have received an opinion from Woodburn & Wedge, P.C., dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) the Seller is a corporation organized, existing and in good standing under the laws of the State of Nevada and has the corporate power and 46 authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by requisite corporate action taken on the part of the Seller; (2) this Agreement and the Ancillary Agreements have been executed and delivered by the Seller and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Seller, enforceable against the Seller in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and except to the extent that the right to indemnification and contribution contained therein may be limited by state or federal securities laws or the public policy underlying such laws; (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Seller shall not constitute a violation of the Certificate of Incorporation or Bylaws of the Seller; and (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Seller of the Closing other than (i) the Seller Required Regulatory Approvals, all of such Seller Required Regulatory Approvals having been obtained and being in full force and effect with such terms and conditions as shall have been imposed by any applicable Governmental Authority, (ii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the federal laws of the United States or the laws of the State of Nevada, such counsel may rely upon opinions of counsel admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials; 47 (e) The Seller shall have executed and delivered, as of the Closing, (i) the documents and instruments required pursuant to 4.3(a), 4.3(e), 4.3(g), 4.3(i), 4.3(j), and 4.3(k); (ii) either (x) a bifurcated Sun Peak Power Purchase Contract related to power generation as described in Section 7.14(c), (y) an assignment pursuant to clause (i) of Section 7.14(c) or (z) an agreement pursuant to clause (ii) of Section 7.14(c); (iii) the partial assignment of the current Southwest Gas contract (or bifurcation, new agreement or other structure as the case may be) as described in Section 7.14(a); (iv) the assignments and conveyances described in Section 7.14(h); and (v) each of the Ancillary Agreements to be executed by the Seller and all required approvals and conditions relating to the Ancillary Agreements shall have been obtained or satisfied, and no termination thereof shall have occurred; (f) A title company approved by the Buyer be committed to issue to the Buyer an ALTA policy of title insurance satisfactory to the Buyer and with such endorsements selected by Buyer including, without limitation, a legal parcel endorsement, all at regular rates; and (g) Buyer shall have received a final survey of the Real Property in form and substance satisfactory to the Buyer. 8.3 Conditions to Obligations of Seller. The obligation of the Seller ----------------------------------- to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed in all material respects its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; (c) The Seller shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b) hereof have been satisfied; (d) The Seller shall have received an opinion from Jones Vargas, counsel for the Buyer, dated the Closing Date and satisfactory in form and substance to the Seller and its counsel, substantially to the effect that: (1) the Buyer is a limited liability company organized, existing and in good standing under the laws of the State of Delaware and has the 48 limited liability company power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby have been duly authorized by all requisite limited liability company action taken on the part of the Buyer; (2) this Agreement and the Ancillary Agreements have been executed and delivered by the Buyer and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and except to the extent that the right to indemnification and contribution contained therein may be limited by state or federal securities laws or the public policy underlying such laws; (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Buyer shall not constitute a violation of the certificate of formation (or other similar governing documents), as currently in effect, of the Buyer; and (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Buyer of the Closing other than (i) the Buyer Required Regulatory Approvals, all of such Buyer Required Regulatory Approvals having been obtained and being in full force and effect with such terms and conditions as shall have been imposed by any applicable Governmental Authority, (ii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the federal laws of the United States and the State of Nevada, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by appropriate officers and directors of the Buyer and its Subsidiaries and by public officials; and 49 (e) The Buyer shall have executed and delivered, as of the Closing, (i) the documents and instruments required pursuant to 4.4(e), 4.4(f) and 4.4(h); and (ii) each of the Ancillary Agreements to be executed by the Buyer and all required approvals and conditions relating to the Ancillary Agreements have been obtained or satisfied. ARTICLE IX ---------- INDEMNIFICATION --------------- 9.1 Indemnification. (a) The Seller shall indemnify, defend and hold --------------- harmless the Buyer from and against any and all claims, demands or suits (by any Person), losses, liabilities, damages (including consequential or special damages, but only if awarded in respect of a Third Party Claim), obligations, payments, costs, Taxes and expenses (including, without limitation, the costs and expenses of any and all actions, suits, proceedings, assessments, judgments, settlements and compromises relating thereto and reasonable attorneys' fees and reasonable disbursements in connection therewith) to the extent the foregoing are not covered by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by the Buyer relating to, resulting from or arising out of (i) any breach by the Seller of any covenant or agreement of the Seller contained in this Agreement or (ii) the Excluded Liabilities. (b) The Buyer shall indemnify, defend and hold harmless the Seller from and against any and all Indemnifiable Losses asserted against or suffered by the Seller relating to, resulting from or arising out of (i) any breach by the Buyer of any covenant or agreement of the Buyer contained in this Agreement or (ii) the Assumed Liabilities. (c) Either the person required to provide indemnification under this Agreement (the "Indemnifying Party") or the person entitled to receive indemnification under this Agreement (the "Indemnitee") may assert any offset or similar right in respect of its obligations under this Section 9.1 based upon any actual or alleged breach of any covenant or agreement contained in this Agreement. (d) Any Indemnitee having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any Indemnifiable Loss shall be reduced (i) to the extent that the Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take into account any Tax or Income Tax benefit recognized by the Indemnitee arising from 50 the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment, and any payment actually received with respect to an Indemnifiable Loss. (e) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the Indemnifying Party with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (f) The rights and remedies of the Seller and the Buyer under this Article IX are in lieu of any and all other rights and remedies which the Seller and the Buyer may have under this Agreement or otherwise for monetary relief with respect to (i) any breach or failure to perform any covenant or agreement set forth in this Agreement or (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be. Without limiting the foregoing, with respect to the Purchased Assets, the Buyer, for itself and its Affiliates, does hereby irrevocably release, hold harmless and forever discharge the Seller from any and all claims of any kind or character, whether known or unknown, hidden or concealed, resulting from or arising out of or in connection with Hazardous Substances or any Environmental Law, other than those liabilities and obligations set forth in Section 2.4(c) hereof. In furtherance of the foregoing, the Buyer, for itself and on behalf of its Affiliates, hereby irrevocably waives any and all rights and benefits with respect to such claims that it now has, or in the future may have conferred upon it by virtue of any statute, regulation or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party's settlement with the obligor. In this connection, the Buyer hereby acknowledges that it is aware that factual matters now unknown to it may have given, or hereafter may give, rise to claims that are presently unknown, unanticipated and unsuspected, and it further agrees that this release has been negotiated and agreed upon in light of that awareness, and the Buyer, for itself and on behalf of its Affiliates, nevertheless hereby intends irrevocably to release the Seller from the claims described in this Section 9.1(f). 9.2 Defense of Claims. (a) If any Indemnitee receives notice of the ----------------- assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any Affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee shall give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than ten (10) calendar days after the Indemnitee's receipt of notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and shall indicate the estimated amount, if practicable, of 51 the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party shall have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, and the Indemnitee shall cooperate in good faith in such defense at such Indemnitee's own expense. (b) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a) hereof, the Indemnifying Party shall not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying -------- ------- Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party shall be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party shall not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than ten (10) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party shall have a period of thirty (30) calendar days within which to respond to such Direct Claim. If 52 the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party shall be deemed to have accepted such claim. If the Indemnifying Party rejects such claim, the Indemnitee shall be free to seek enforcement of its rights to indemnification under this Agreement. (d) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of The Chase Manhattan Bank), shall promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party shall, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party shall then -------- ------- be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of such indemnity payment are hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party shall duly execute upon request all instruments reasonably necessary to evidence and perfect the foregoing subrogation and subordination rights. Nothing in this Section 9.2(d) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (e) A failure to give timely notice as provided in this Section 9.2 shall not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. ARTICLE X --------- TERMINATION AND ABANDONMENT --------------------------- 10.1 Termination. (a) This Agreement may be terminated at any time ----------- prior to the Closing Date, by mutual written consent of the Buyer and the Seller. (b) This Agreement may be terminated by the Seller or the Buyer if (i) the transactions contemplated hereby shall not have been consummated on or before eighteen (18) months from the date of this Agreement (the "Termination Date"); provided, however, that the right to terminate this Agreement under this -------- ------- Section 10.1(b) shall not be available to either Seller or Buyer if its failure to fulfill 53 any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date; provided, further, -------- ------- that if on the Termination Date the conditions to the Closing set forth in Section 8.1(c) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Termination Date shall be the date which is twenty-four (24) months from the date of this Agreement. (c) This Agreement may be terminated by either the Seller or the Buyer if (i) any Governmental Authority or regulatory body, the consent of which is a condition to the obligations of the Seller and the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent and all appeals of such determination shall have been taken and have been unsuccessful, or (ii) any court of competent jurisdiction in the United States or any state shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, judgment or decree shall have become final and nonappealable. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by the Seller of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer. (e) This Agreement may be terminated by the Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Seller impossible and such violation or breach has not been waived by the Seller. (f) This Agreement may be terminated by either the Seller or the Buyer in accordance with the provisions of Section 7.12(b) or (c) hereof. 10.2 Procedure and Effect of Termination. In the event of termination ----------------------------------- of this Agreement and abandonment of the transactions contemplated hereby by either or both of the parties pursuant to Section 10.1 hereof, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein: (a) such termination shall be the sole remedy of the parties hereto with respect to breaches of any agreement, representation or warranty contained in this Agreement and none of the parties hereto nor any of their respective trustees, 54 directors, officers or Affiliates, as the case may be, shall have any liability or further obligation to the other party or any of their respective trustees, directors, officers or Affiliates, as the case may be, pursuant to this Agreement, except in each case as stated in this Section 10.2 and in Sections 7.2(b), 7.3 and 7.7 hereof; and (b) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. ARTICLE XI ---------- MISCELLANEOUS PROVISIONS ------------------------ 11.1 Amendment and Modification. Subject to applicable law, this -------------------------- Agreement may be amended, modified or supplemented only by written agreement of the Seller and the Buyer. 11.2 Waiver of Compliance; Consents. Except as otherwise provided in ------------------------------ this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.3 No Survival of Representations and Warranties. Each and every --------------------------------------------- representation and warranty contained in this Agreement and each and every covenant contained in this Agreement (other than the covenants in Section 3.2, 3.3, 3.4, 7.2(b), 7.2(c), 7.3, 7.4, 7.6(b), 7.7, 7.8, 7.9, 7.12(c), 7.13, 7.14(f), 9.1 and 9.2 hereof (which covenants shall survive in accordance with their terms)) shall expire with, and be terminated and extinguished by, (i) the consummation of the sale of the Purchased Assets and the transfer of the Assumed Liabilities pursuant to this Agreement and shall not survive the Closing Date, or (ii) the termination of this Agreement pursuant to Section 10.1 hereof or otherwise; and none of the Seller, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation, warranty or covenant. 11.4 Notices. All notices and other communications hereunder shall be ------- in writing and shall be deemed given if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof): 55 (a) If to the Seller, to: Sierra Pacific Resources 6100 Neil Road Reno, Nevada 89511 Attention: William E. Peterson Telecopy: (775) 834-5959 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York 10036-6522 Attention: Sheldon S. Adler, Esq. Telecopy: (212) 735-2000 (b) if to the Buyer, to: Reliant Energy Sunrise, LLC Attention: J. Douglas Divine Telecopy: (713) 207-9605 (For courier delivery) 1111 Louisiana Street, 16/th/ Floor Houston, Texas 77002 (For mail delivery) P.O. Box 286 Houston, Texas 77001-0286 with copies to: Reliant Energy Sunrise, LLC Attention: Michael L. Jines Telecopy: (713) 207-0116 (For courier delivery) 1111 Louisiana Street, 43/th/ Floor Houston, Texas 77002 56 (For mail delivery) P.O. Box 61867 Houston, Texas 77002-1867 11.5 Assignment. This Agreement and all of the provisions hereof shall ---------- be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. Notwithstanding the foregoing, the Buyer shall have the right to assign its rights under this Agreement to a lender in connection with a financing. 11.6 Arbitration. Any dispute, controversy or claim arising out of or ----------- relating to this agreement, or the breach, termination or validity hereof (a "Dispute"), shall be finally settled by arbitration in accordance with the then- prevailing Commercial Arbitration Rules of the American Arbitration Association, as modified herein (the "Rules"). The place of arbitration shall be Nevada. There shall be three arbitrators, of whom the Seller shall appoint one and of whom the Buyer shall appoint one. The two arbitrators so appointed shall select a third arbitrator who shall act as the chairman of the tribunal. If any arbitrator is not appointed within the time limits provided herein or in the Rules, such arbitrator shall be appointed by the American Arbitration Association. The arbitral tribunal is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover punitive, exemplary or similar damages with respect to any dispute. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act, 9 U.S.C. (S)(S) 1-16, and judgment upon any award may be entered in any court of competent jurisdiction. 11.7 Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Nevada (regardless of the laws that might otherwise govern under applicable Nevada principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. 11.8 Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.9 Interpretation. The article and section headings contained in -------------- this Agreement are solely for the purpose of reference, are not part of the agreement 57 of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.10 Entire Agreement. This Agreement, including the documents, ---------------- exhibits, schedules, certificates and instruments referred to herein, and the Confidentiality Agreement embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of the Seller contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Offering Memorandum, dated March 2000) as supplemented, or the correspondence relating to the divestiture of Seller's generation assets previously made available to the Buyer by the Seller and CSFB. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement. 11.11 Bulk Sales or Transfer Laws. The Buyer acknowledges that the --------------------------- Seller shall not comply with the provision of any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by the Seller with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. 58 IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. NEVADA POWER COMPANY By: _______________________________________ Name: William E. Peterson Title: Sr. Vice President, General Counsel and Corporate Secretary RELIANT ENERGY SUNRISE, LLC By: _______________________________________ Name: J. Douglas Divine Title: Senior Vice President 59 EX-10.L 21 0021.txt TRANSITIONAL POWER PURCHASE AGREEMENT, RELIANT EN Exhibit 10(L) TRANSITIONAL POWER PURCHASE AGREEMENT BY AND BETWEEN NEVADA POWER COMPANY AND RELIANT ENERGY SUNRISE, LLC ASSET BUNDLE: SUNRISE TABLE OF CONTENTS
Section Page - ------- ---- 1. DEFINITIONS............................................................................... 1 2. TERM...................................................................................... 8 3. SECURITY.................................................................................. 9 4. SUPPLY SERVICE............................................................................ 10 5. NOTIFICATION.............................................................................. 14 6. PRICING OF ENERGY AND ANCILLARY SERVICES.................................................. 15 7. INVOICING AND PAYMENTS.................................................................... 16 8. REGULATORY APPROVALS...................................................................... 19 9. COMPLIANCE................................................................................ 20 10. INDEMNIFICATION........................................................................... 20 11. LIMITATION OF LIABILITY................................................................... 22 12. FORCE MAJEURE............................................................................. 22 13. DISPUTES.................................................................................. 24 14. NATURE OF OBLIGATIONS..................................................................... 27 15. SUCCESSORS AND ASSIGNS.................................................................... 27 16. REPRESENTATIONS........................................................................... 28 17. DEFAULT AND REMEDIES...................................................................... 29 18 FACILITY ADDITIONS AND MODIFICATIONS...................................................... 30 19. COORDINATION.............................................................................. 30 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE............................................. 30 21. OUTAGE SCHEDULING......................................................................... 31 22. REPORTS................................................................................... 32 23. COMMUNICATIONS............................................................................ 32 24. NOTICES................................................................................... 33 25. MERGER.................................................................................... 33 26. HEADINGS.................................................................................. 34 27. COUNTERPARTS AND INTERPRETATION........................................................... 34 28. SEVERABILITY.............................................................................. 34 29. WAIVERS................................................................................... 34 30. AMENDMENTS................................................................................ 35 31. TIME IS OF THE ESSENCE.................................................................... 35 32. APPROVALS................................................................................. 35 33. PLR SERVICE............................................................................... 36 34. CONFIDENTIALITY........................................................................... 36 35. CHOICE OF LAW............................................................................. 37 Exhibits Page - -------- ---- EXHIBIT A ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS................................. A-1 EXHIBIT B PRICE FLOOR OF ENERGY, PRICE CEILING OF ENERGY, AND PRICE OF ANCILLARY SERVICES............................................................... B-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE....................................................... C-1 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS...................................... D-1 EXHIBIT E YEAR END TRUE-UP INVOICE......................................................... E-1 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS........................................ F-1 EXHIBIT G FORM OF AVAILABILITY NOTICE...................................................... G-1 EXHIBIT H FORM OF GUARANTY................................................................. H-1 EXHIBIT I COMPANY OBSERVED HOLIDAYS........................................................ I-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT....................................................... J-1 EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE............................................... K-1 EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE......................................... L-1 EXHIBIT M ASSET BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS............................. M-1
TRANSITIONAL POWER PURCHASE AGREEMENT This Agreement is made and entered into as of December 9, 2000 by and between Nevada Power Company, a Nevada corporation ("Buyer"), and Reliant Energy Sunrise, LLC, a Delaware limited liability company (the "Supplier"). Buyer and Supplier are referred to individually as a "Party" and collectively as the "Parties." WITNESSETH: WHEREAS, Buyer is selling its Sunrise/Sunpeak generating station and other assets associated therewith to Supplier or an affiliate thereof (the "Asset Sale"); WHEREAS, notwithstanding the Asset Sale, Buyer expects that it has been designated as the Provider of Last Resort ("PLR") for its Southern Nevada retail electric customers who are unable to obtain electric service from an alternative seller or who fail to select an alternative seller. The load required to serve such customers, plus the customers under those wholesale sales agreements existing at the Effective Date, is referred to herein as Buyer's Transitional Resource Requirement; and WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest in the Sunrise/Sunpeak generating station as a source of supply for its Transitional Resource Requirement; and WHEREAS, Supplier has or is willing to secure the necessary resources to provide a portion of Buyer's Transitional Resource Requirement; and WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell Energy and Ancillary Services under contract to Buyer; and NOW, THEREFORE, in consideration of the mutual covenants, representations and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows: 1. DEFINITIONS 1.1 Format. ------ 1.1.1 References to Articles and Sections herein are cross-references to Articles and Sections, respectively, in this Agreement, unless otherwise stated. 1.1.2 Any parts of this Agreement which are incorporated by reference shall have the same meaning as if set forth in full text herein. 1 1.2 Definitions. As used in this Agreement, the following terms shall ----------- have the meanings set forth below: 1.2.1 "Agreement" means this Agreement together with the Exhibits --------- attached hereto, as such may be amended from time to time. 1.2.2 "Adjusted Replacement Cost of Energy" means the Replacement ----------------------------------- Cost of Energy that will be due from Supplier after True-up in accordance with the provisions of Section 7.5. Example determinations of the Adjusted Replacement Cost of Energy are shown on Exhibit E. 1.2.3 "Ancillary Services" means those capacity-related services as ------------------- listed in Exhibit B as well as the Energy component of such services. These services are defined in Buyer's OATT. 1.2.4 "Asset Bundle" means the Sunrise/Sunpeak generating stations ------------ and other assets associated therewith pursuant to the terms of the Asset Sale Agreement. 1.2.5 "Asset Bundle Capacity" means, with respect to each unit listed --------------------- in Exhibit A, the net generating capacity (in megawatts ("MW")) of such unit, as modified from time to time in accordance with Section 5.2, Section 20, and Section 21, and not to exceed at any time the net capacity for each unit listed in Exhibit A. Asset Bundle Capacity shall also mean, as the context requires, the Energy (in megawatt-hours ("MWh")) and the Ancillary Services which the units would be capable of producing if they operated at the capacity level described in the first sentence of this Section 1.2.5. 1.2.6 "Asset Sale" has the meaning set forth in the Recitals. ---------- 1.2.7 "Asset Sale Agreement" means the Asset Sale Agreement between -------------------- Buyer and Supplier or Supplier's affiliate dated as of December 9, 2000, to purchase Buyer's Asset Bundle. 1.2.8 "Asset Sale Closing" means the transfer of Buyer's ownership of ------------------ the Asset Bundle through the consummation of the Asset Sale pursuant to the terms of the Asset Sale Agreement. 1.2.9 "Average Cost of Delivered Energy" means the total cost of -------------------------------- Delivered Energy for the Contract Year after the application of the annual true-up mechanism from Section 7.5 divided by the total Delivered Energy for the Contract Year. Example determinations of Average Cost of Delivered Energy are shown on Exhibit E. 2 1.2.10 "Availability Notice" means a notice delivered from time to ------------------- time by Supplier to Buyer pursuant to Section 5.2 notifying Buyer of changes in the availability of the Asset Bundle. 1.2.11 "Business Day" means any day other than Saturday, Sunday, and ------------ any day that is an observed holiday by Buyer as shown on Exhibit I. 1.2.12 "CALPX" means the California Power Exchange and any successor ----- entity thereto. 1.2.13 "Confidential Information" has the meaning set forth in ------------------------ Section 34. 1.2.14 "Contract Year" means, with respect to the first Contract ------------- Year, the period beginning on the Effective Date and, with respect to each subsequent Contract Year, the period immediately following the end of the preceding Contract Year, and in each case ending on the earlier of the date which is twelve (12) months thereafter or the termination date of this Agreement. 1.2.15 "Control Area" has the meaning set forth in the OATT. ------------ 1.2.16 "Control Area Operator" means an entity and its agents which --------------------- are responsible for the operation of the Transmission System and for maintaining reliability of the electrical transmission system(s), including the Transmission System, within the Control Area. 1.2.17 "Credit Amount" shall mean an amount equal to the TPPA Amount, ------------- plus an additional amount equal to $40/MWh multiplied by 378 megawatts, multiplied by the number of hours remaining in this Agreement until March 1, 2003. 1.2.18 "Delivered Amount" means, with respect to any Dispatch Hour, ---------------- the Energy delivered by Supplier to Buyer at the designated Point(s) of Delivery during such Dispatch Hour, whether or not such Energy was generated by the Asset Bundle, plus any additional amounts pursuant to Section 4.1.2 and the Ancillary Services provided by Supplier for Buyer during any Dispatch Hour pursuant to the terms of this Agreement. 1.2.19 "Derating" means a reduction to the Asset Bundle Capacity. -------- 1.2.20 "Dispatch Hour" means the prescribed hour(s) when Energy is to ------------- be delivered by Supplier to Buyer at the designated Point(s) of Delivery and the prescribed hour(s) when Ancillary Services are to be provided to the ISA by Supplier on behalf of Buyer. 3 1.2.21 "EDU" means electric distribution utility, the organization --- with the responsibility for the distribution of energy over Buyer's distribution system to retail end-users. 1.2.22 "Effective Date" means the date that this Agreement becomes -------------- effective which shall be the date on which the Closing Date, as defined in the Asset Sale Agreement, actually occurs. 1.2.23 "El Dorado Delivery Point" means the Delivery Point as defined ------------------------ in the 230kV Facilities Interconnection Agreement between Buyer and El Dorado Energy, L.L.C., dated October 1, 1998, as may be amended. 1.2.24 "El Dorado Generating Station" means the 480 MW (nominal) ---------------------------- electricity generating station located in Boulder City, Nevada. 1.2.25 "Emergency Condition" shall mean a public declaration by the ------------------- ISA or Control Area Operator that the Control Area is in danger of imminent voltage collapse or uncontrollable cascading outages. 1.2.26 "Energy" means electricity (measured in MWh) and associated ------ power-producing capacity to be provided by Supplier to Buyer pursuant to this Agreement. Also known as "firm energy and associated firm capacity". 1.2.27 "Event of Default" has the meaning set forth in Section 17 ---------------- hereof. 1.2.28 "FERC" means the Federal Energy Regulatory Commission and any ---- successor agency thereto. 1.2.29 "Force Majeure" has the meaning set forth in Section 12 ------------- hereof. 1.2.30 "GAAP" means Generally Accepted Accounting Principles for the ---- United States. 1.2.31 "Good Utility Practice" means the applicable practices, --------------------- methods, and act: (i) required by applicable Laws, permits and reliability criteria, whether or not the Party whose conduct at issue is a member thereof, and (ii) otherwise engaged in or approved by a significant portion of the United States electric utility industry during the relevant time period, which, in the exercise of reasonable judgement in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, safety, environmental protection, economy and expediency. Good Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to practices, methods or acts 4 generally accepted in the United States electric utility industry. 1.2.32 "Governmental Authority" means any foreign, federal, state, ---------------------- local, tribal or other governmental, regulatory or administrative agency, court, commission, department, board, or other governmental subdivision, legislature, rulemaking board, tribunal, arbitrating body, or other governmental authority. 1.2.33 "Gross Replacement Costs of Energy" means Buyer's Replacement --------------------------------- Cost of Energy prior to adjustment for the amount that Buyer would have paid for the Energy if Supplier had delivered the Energy to Buyer. Example determinations of Gross Replacement Costs of Energy are shown on Exhibit D. 1.2.34 "Guaranty" has the meaning set forth in Section 3.1.2 hereof. -------- 1.2.35 "Guarantor" has the meaning set forth in Section 3.1.2 hereof. --------- 1.2.36 "Invoiced Replacement Costs" means the Replacement Costs which -------------------------- have been billed to Supplier or subtracted from payments to Supplier in accordance with the provisions of Section 4.2 and Section 7.4. 1.2.37 "ISA" means the Mountain West Independent System --- Administrator, or the regional transmission organization authorized with the responsibility for the scheduling and administration of Energy and Ancillary Services over, through and within the Transmission System in coordination with other interconnected entities to provide transmission services. The ISA is also referred to herein as transmission administrator. 1.2.38 "Law" means any law, treaty, code, rule, regulation, order, --- determination, permit, certificate, authorization, or approval of an arbitrator, court or other Governmental Authority which is binding on a Party or any of its property. 1.2.39 "Limit on Excused Energy" means the amount of energy that can ----------------------- be excused under the provisions of Section 12.4 as shown on Exhibit A. 1.2.40 "Market Price of Energy" has the meaning set forth in Section ---------------------- 6.2.1. 1.2.41 "Minimum Annual Energy Take" has the meaning set forth in -------------------------- Section 4.1.2. 1.2.42 "Minimum Investment Grade Rating" of a Person means that ------------------------------- such Person has a minimum credit rating on its senior unsecured debt securities of at least two of the following ratings: (i) BBB as determined by Standard & Poor's Corporation, (ii) Baa2 as determined 5 by Moody's Investors Service, Inc., or (iii) a comparable rating by another nationally recognized rating service reasonably acceptable to Buyer. 1.2.43 "Minimum Tangible Net Worth" means the total book value of -------------------------- shareholder's equity less the balance of goodwill, as reported on the latest quarterly balance sheet prepared in accordance with Generally Accepted Accounting Principles (GAAP). 1.2.44 "NERC" means the North American Electric Reliability Council ---- and any successor entity thereto. 1.2.45 "Nonemergency Condition" shall mean the determination, ---------------------- direction or order by the ISA, or Control Area Operator to Supplier and/or Buyer to change the Supply Amount which is not a result of or due to an Emergency Condition. A Nonemergency Condition includes an insufficiency of Ancillary Services to securely operate the Control Area. 1.2.46 "OATT" means Buyer's, or the Control Area Operator's as its ---- successor hereto, as applicable, then-effective Open Access Transmission Tariff, or such entities' successor tariff, which has been accepted for filing by the FERC. 1.2.47 "Operating Representatives" means the persons designated to ------------------------- transmit and receive routine operating and emergency communications required under this Agreement. 1.2.48 "Party" has the meaning set forth in the preamble of this ----- Agreement. 1.2.49 "Permitted Deratings" means those reductions to the Asset ------------------- Bundle Capacity of which Supplier may notify Buyer from time to time in an Availability Notice pursuant to Section 5.2. 1.2.50 "Person" means any natural person, partnership, limited ------ liability company, joint venture, corporation, trust, unincorporated organization, or governmental entity or any department or agency thereof. 1.2.51 "Point of Delivery" means the point(s) which has (have) been ----------------- specified as the Interconnection Point(s) in the Interconnection Agreement between Nevada Power Company and Supplier, dated December 9, 2000, as it may be amended from time to time, as well as any alternative locations agreed upon pursuant to Section 4.1.5 and, with respect to any portion of the Supply Amount delivered from the El Dorado Generating Station, the El Dorado Delivery Point. 1.2.52 "PPT" means Pacific Prevailing Time. --- 6 1.2.53 "Price Ceiling of Energy" means the ceiling price of Energy as ----------------------- stated in Exhibit B. 1.2.54 "Price Floor of Energy" means the floor price of Energy as --------------------- stated in Exhibit B. 1.2.55 "Provider of Last Resort (PLR)" has the meaning set forth in ----------------------------- the Recitals. 1.2.56 "PUCN" means the Public Utilities Commission of Nevada and any ---- successor entity thereto. 1.2.57 "Replacement Costs" means with respect to a period of time, ----------------- the difference (whether positive or negative) between (a) the actual costs, including without limitation related penalties and transmission costs, incurred by Buyer to replace any shortfall (whether secured directly by Buyer or indirectly by the Control Area Operator) between (1) the Supply Amount and (2) the Delivered Amounts of Energy, (or in the case of Ancillary Services the Supplier's schedule of Ancillary Services) during such period and (b) the payments the Supplier would have been entitled to in respect of such shortfall in delivery; provided that Replacement Costs shall also be subject to the annual true-up mechanism set forth in Section 7.5. 1.2.58 "Sunpeak Power Purchase Contract Assignment (SPPCA)" means the -------------------------------------------------- terms and conditions of the Amended and Restated Power Purchase Contract between Nevada Sun-Peak Limited Partnership and Buyer, dated October 29, 1998, assumed by or assigned to Supplier pursuant to Section 7.14(c) of the Asset Sale Agreement. For purposes of this Agreement, the terms and conditions of the SPPCA shall be only those terms and conditions existing as of the date of assumption or assignment of the SPPCA and shall not include any modifications made to the SPPCA after such date. 1.2.59 "Supply Amount" means, with respect to each Dispatch Hour, the ------------- amount of Energy and Ancillary Services, not to exceed the Asset Bundle Capacity for such Dispatch Hour, requested by Buyer to be delivered by Supplier during any Dispatch Hour. The Supply Amount for any Dispatch Hour shall be determined pursuant to Section 5.1. 1.2.60 "Total Amount of Energy Replaced" means the summation of ------------------------------- Replacement Energy as shown on Exhibit E. 1.2.61 "TPPA Amount" means the amount paid by Buyer to Supplier in ----------- consideration of this Agreement. 7 1.2.62 "Transitional Resource Requirement" or "TRR" means the Energy --------------------------------- and transmission and distribution loss compensation necessary for Buyer to meet its obligations as a Provider of Last Resort (PLR) for Southern Nevada and under those wholesale sales agreements existing at the Effective Date. 1.2.63 "Transmission System" means the facilities owned, controlled, ------------------- or operated by Buyer, or its successors and assigns, that are used to provide transmission service under the OATT. 1.2.64 "WSCC" means the Western Systems Coordinating Council and any ---- successor entity thereto. 2. TERM 2.1 Term. Unless terminated earlier pursuant to the terms of this ---- Agreement, the term of this Agreement shall commence on the Effective Date and continue until the earlier of the effective date of an order by a Governmental Authority terminating Buyer's PLR responsibility, or March 1, 2003. Supplier shall provide service under this Agreement commencing on the first hour on the day after the Effective Date. 2.2 Termination. ----------- 2.2.1 Except pursuant to Sections 2.2.2, 2.2.3, or 17.4, this Agreement may not be terminated without the explicit prior written approval of Buyer. 2.2.2 If, prior to the Asset Sale Closing, the FERC or any other Governmental Authority places conditions on or requires revisions of this Agreement which have a material adverse effect on Supplier or Buyer, the Parties agree to negotiate in good faith amendments to the Agreement to preserve the bargain between the Parties. If the Parties fail to negotiate mutually acceptable amendments to this Agreement within sixty (60) days of such action by the FERC or other Governmental Authority, either Party may terminate the Agreement after first notifying the other Party in writing at least ten (10) Business Days prior to the termination date; provided that neither Party may exercise a right of termination pursuant to this Section 2.2.2 after the Asset Sale Closing. 2.2.3 In the event the Asset Sale Agreement is terminated prior to the Asset Sale Closing, this Agreement shall not become effective and shall otherwise be considered terminated, and neither Party shall have any rights or obligations hereunder. 8 2.2.4 This Agreement may be terminated with the mutual agreement of the Parties. 2.2.5 Any termination of this Agreement pursuant to this Section 2.2 shall not take effect until FERC either authorizes the termination or accepts a written notice of termination. 2.3 Effect of Termination. ---------------------- 2.3.1 Adjustment of TPPA Amount. If the Effective Date of this ------------------------- Agreement is before June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% plus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between the Effective Date and June 1, 2001. An example calculation is shown on Exhibit J. If the Effective Date of this Agreement is after June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% minus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between June 1, 2001 and the Effective Date. An example calculation is shown on Exhibit J. If this Agreement is terminated after the Effective Date, but before March 1, 2003, Supplier shall pay to Buyer an amount, in accordance with the provisions of Section 7, equal to the TPPA Amount which existed before any adjustment in accordance with the first or second paragraph of this Section 2.3.1, multiplied by the sum of the monthly adjustments for each month or portion thereof between the date on which this Agreement is terminated and March 1, 2003. An example calculation is shown on Exhibit J. 2.3.2 Any default or termination of this Agreement shall not release either Party from any applicable provisions of this Agreement with respect to: 2.3.2.1 The payment of liquidated damages pursuant to Sections 4.2, 12, 17, 18, or 21. 2.3.2.2 Indemnity obligations contained in Section 10, to the extent of the statute of limitations period applicable to any third party claim. 2.3.2.3 Limitation of liability provisions contained in Section 11. 2.3.2.4 Payment of any unpaid amounts in respect of obligations arising prior to or resulting from termination. 2.3.2.5 For a period of one (1) year after the termination date, the 9 right to raise a payment dispute and the resolution thereof pursuant to Section 13. 2.3.2.6 The resolution of any dispute submitted pursuant to Section 13 prior to, or resulting from, termination. 3. SECURITY 3.1 Supplier Certification; Guaranty. As a condition of Buyer's execution -------------------------------- of, and continuing compliance with, this Agreement, Supplier shall at Supplier's option comply with the provisions of either Section 3.1.1 or Section 3.1.2. 3.1.1 Supplier Certification. Supplier shall (a) provide a ---------------------- certificate from a duly authorized corporate officer of Supplier certifying that, as of the Effective Date, Supplier has a credit rating equal to or higher than the Minimum Investment Grade Rating; or (b) post a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.1.2 Guaranty. In the alternative to the provisions of Section -------- 3.1.1, the Supplier may provide a corporate guaranty (the "Guaranty"), in form and substance as set forth in Exhibit H, made by an entity (the "Guarantor") that: 3.1.2.1 has a credit rating equal to or higher than the Minimum Investment Grade Rating, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a credit rating equal to or higher than the Minimum Investment Grade Rating; or 3.1.2.2 has a MTNW of no less than one (1) billion dollars, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a MTNW of no less than one (1) billion dollars; or 3.1.2.3 posts a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) 10 billion dollars. Upon receipt of a successor Guaranty executed by a successor Guarantor that meets the requirements of this Section 3.1.2, Buyer shall release any prior Guaranty. 3.2 Compliance. ---------- 3.2.1 Reporting. If at any time during the term of this Agreement, --------- Standard & Poor's Corporation, Moody's Investors Service, Inc. or another nationally recognized firm downgrades the credit rating of Supplier, the Guarantor, or the financial institution that issued the letter of credit, as applicable, then Supplier shall provide Buyer with written notice of such change of circumstance within two (2) Business Days of any such change. In the event such a downgrade also constitutes an Event of Default pursuant to Section 17, the requirements of this Section 3.2.1 are in addition to, and not in lieu of, the requirements of Section 17. 4. SUPPLY SERVICE 4.1 Obligations of the Parties. -------------------------- 4.1.1 Supply Amount. Supplier shall be required to provide the ------------- Supply Amount in any Dispatch Hour. As provided in Section 5.1, Buyer shall make reasonable efforts to ensure that the Supply Amount is no greater than necessary to satisfy Buyer's TRR. 4.1.1.1 With the Buyer's prior consent, not to be unreasonably withheld or delayed, Supplier shall be entitled to generate or otherwise procure the Supply Amount from sources other than the Asset Bundle; provided that, such consent shall not be required if Supplier elects to provide the Supply Amount from the El Dorado Generating Station; provided further that, in the event Supplier delivers the Supply Amount from the El Dorado Generating Station, unless otherwise agreed by the Parties, Supplier shall deliver such Supply Amount at the El Dorado Delivery Point and also shall provide, acquire, or otherwise pay for all transmission costs and Firm Import Rights, as defined in the OATT, necessary to deliver the Supply Amount to that point immediately past the last FIR Interface, as defined in the OATT, between the El Dorado Delivery Point and the load pocket in which the Asset Bundle is located. 4.1.1.2 Supplier shall deliver the Supply Amount to Buyer during the Dispatch Hour on a continuous basis at the Point(s) of 11 Delivery and shall schedule the Supply Amount in accordance with the applicable OATT. 4.1.1.3 The Buyer at its sole discretion shall designate the allocation of the Supply Amount between Energy and Ancillary Services in accordance with the notification provisions of Section 5. 4.1.1.3.1 The Parties recognize that operation of the Asset Bundle is subject to, and thus the Supply Amount at times may be limited by, the operational and contractual parameters set forth in Exhibit M, as well as Good Utility Practices. 4.1.1.3.2 In addition, Buyer will pay to Supplier the cost for the peak firings, in excess of the six (6) cumulative peak firing hours per calendar year available without cost, of Sunpeak Units 3, 4 or 5 pursuant to the charges stated in the SPPCA if required to provide the Supply Amount; provided that, (i) Supplier cannot physically provide such capacity from each Sunpeak unit without peak firing (i.e., if either water injection or inlet guide vane adjustment cannot be used or is not sufficient); and provided further that, Supplier shall not perform more than thirty (30) cumulative peak firing hours per calendar year without first informing Buyer of the cost of each such additional peak fire. Supplier shall notify Buyer within a reasonable period when peak firing hours are required to provide the Supply Amount. 4.1.2 Minimum Annual Energy Take. The Buyer shall accept a minimum -------------------------- annual energy take during each Contract Year. The Minimum Annual Energy Take shall be set forth on Exhibit A. 4.1.2.1 Buyer's Obligation to Take. If Buyer is unwilling to -------------------------- accept the Minimum Annual Energy Take for any Contract Year, as may be adjusted pursuant to Section 4.1.2.2, the difference (in MWh) between the Supply Amount (including consideration for Energy that would have been taken but was unavailable due to Permitted Deratings or Force Majeure, as well as the Total Amount of Energy Replaced) and the Minimum Annual Energy Take shall be billed at the Price Ceiling of Energy less the Price Floor of Energy. An example of the monthly determination of the 12 amount of Energy to be credited against the Minimum Annual Energy Take is shown on Exhibit L. 4.1.2.2 Adjustments to Minimum Annual Energy Take. Buyer ----------------------------------------- shall have the right to reduce the Minimum Annual Energy Take if the number of customers taking electric service from Buyer falls below the number of customers on December 31, 2000. Adjustments will be applicable, on a pro rata basis, on the first (1/st/) day of the month immediately following Supplier's receipt of Buyer's notice of adjustment. Buyer shall provide supporting data in reasonable detail to support its calculations. An example of the calculation of a revised Minimum Annual Energy Take is shown on Exhibit K. 4.1.3 Supplier Rights to Output. Buyer shall resell all of the ------------------------- Supply Amount delivered by Supplier under this Agreement, and Supplier may sell to others any portion of the Asset Bundle Capacity in excess of the Supply Amount. 4.1.4 Point(s) of Delivery. Except as provided in Section 4.1.1.1, -------------------- Supplier shall deliver, and Buyer shall take delivery of, the Supply Amount at the Point(s) of Delivery. Subject to Section 4.1.5.2, Supplier shall be responsible for all costs associated with delivery of the Supply Amount of Energy to the Point(s) of Delivery. 4.1.5 Alternative Points of Delivery. For any Dispatch Hour, either ------------------------------ Party may designate one or more alternative Points of Delivery, subject to the other Party's prior approval and consistent with the OATT, such approval not to be unreasonably withheld or delayed. 4.1.5.1 If Supplier has designated an alternative Point of Delivery, Supplier shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.5.2 If Buyer has designated an alternative Point of Delivery, Buyer shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.6 Fuel. Buyer shall have no responsibility for any fuel ---- procurement or fuel transportation costs or activities associated with the Asset Bundle during the term of this Agreement. 4.1.7 Resale. Except as provided in the next sentence, the Supply ------ Amount may be resold by Buyer only as necessary to satisfy Buyer's TRR. If, after submitting the request of the Supply Amount pursuant to Section 5.1, the Buyer determines that the scheduled Supply Amount, together 13 with purchases scheduled under Buyer's other Transitional Power Purchase Agreements, exceeds Buyer's most-current projected TRR, then the Buyer also shall resell at wholesale that amount of Energy in excess of Buyer's actual TRR as necessary to balance its load and resources. 4.1.8 Right to Review. Buyer and Supplier each shall have the right --------------- to review during normal business hours the relevant books and records of the other Party to confirm the accuracy of such as it pertains to transactions under this Agreement. The review shall be consistent with standard business practices and shall follow reasonable notice to the other Party. Reasonable notice for a review of the previous month's records shall be at least a twenty-four (24) hour period from a Business Day to a subsequent Business Day. If a review is requested of other than the previous month's records, then notice of that request shall be provided with a minimum of seven (7) calendar days written notice by the requesting Party. The notice shall specify the period to be covered by the review. The Party providing records can make reasonable requests that the receiving Party keep the records confidential, and the receiving Party shall take reasonable steps to accommodate such requests. 4.2 Liquidated Damages. ------------------ 4.2.1 If the Delivered Amount of Energy is less than the Supply Amount of Energy in any Dispatch Hour during a month, and net Replacement Costs computed in respect of such Dispatch Hours during the month are greater than zero, then Supplier shall reimburse Buyer for net Replacement Costs. If Supplier's schedule of Ancillary Services is less than the Supply Amount of Ancillary Services in any Dispatch Hour during a month, Supplier shall reimburse Buyer for Replacement Costs for the difference between Supplier's schedule and the Supply Amount of Ancillary Services during such month. An example of the methodology used to calculate Replacement Costs is provided in Exhibit D. 4.2.2 If not otherwise recovered under Section 4.2.1, Supplier also shall be responsible for any penalties imposed on Buyer by the WSCC, the ISA, or the Control Area Operator that are caused by Supplier's violation of reliability criteria due to a deviation between the Supply Amount and Delivered Amount, as determined by then current tariffs, operating agreements, or documents governing such reliability criteria; provided that, if such reliability penalty is escalated due to prior violations of reliability criteria which were not caused by Supplier, Supplier shall be responsible only for its equitable share of such escalated penalty, taking into account the number and scope of the reliability violations caused 14 by Supplier and the number and scope of the reliability violations caused by others. 4.2.3 The amounts payable to Supplier under Sections 4.2.1 and 4.2.2 shall be Buyer's exclusive remedy and Supplier's exclusive liability with respect to any failure to deliver the Supply Amount. 4.2.4 The Parties recognize and agree that the payment of such amounts by Supplier pursuant to this Section 4.2 is an appropriate remedy in the event of such a failure and that any such payment does not constitute a forfeiture or penalty of any kind, but rather constitutes actual costs to Buyer under the terms of this Agreement. 4.3 Supplier Operating Representative. Supplier shall provide and --------------------------------- maintain a twenty-four (24) hour seven (7) day per week communication link with Buyer's control center and with Buyer's schedulers. Supplier's Operating Representatives shall be available to address and make decisions on all operational matters under this Agreement on a twenty-four (24) hour seven (7) day per week basis. 5. NOTIFICATION 5.1 Scheduling Notification. Buyer shall provide Supplier with a day- ----------------------- ahead request of the Supply Amount no later than twenty-four (24) hours before day-ahead bids must be submitted to the CALPX. Buyer shall make reasonable efforts to ensure that the request of the Supply Amount, together with purchases scheduled under Buyer's other Transitional Power Purchase Agreements, is no greater than that amount then projected to be necessary to satisfy Buyer's TRR. In addition, for each day-ahead request, the change in the Supply Amount from one (1) hour to the next hour shall be no greater than the ramping capability of the units within the Asset Bundle as shown in Exhibit A. 5.2 Availability Notification. ------------------------- 5.2.1 No later than 5:00 a.m. PPT of each day, Supplier shall deliver to Buyer an Availability Notice in the form set forth in Exhibit G. 5.2.2 Availability Notices shall provide, for the ninety-six (96) hour period starting at 6:00 a.m. PPT that day, Supplier's hourly projection of the unavailability or derating ("Derating") of the Asset Bundle compared to the Asset Bundle Capacity figures stated for each unit in Exhibit A. Each Availability Notice also shall contain, as applicable: (a) the units which are subject to a Derating; (b) the magnitude of the Derating; (c) the hours during which the Derating is expected to apply; (d) the cause of the Derating; (e) the extent, if any, to which the Derating is attributable to a 15 Permitted Derating; (f) the projected Asset Bundle Capacity for each unit during the period covered by the Availability Notice, pursuant to Section 5.2.4 below; and (g) in the first Availability Notice to be provided for each calendar month, the average transfer flow rate through the waste water transfer line to the Clark generating station over the prior month and the projected average transfer flow rate for the upcoming month. 5.2.3 If and to the extent a Derating is the result of one or more of the following causes, it shall be a Permitted Derating: (a) approved planned outages pursuant to Section 21; (b) non-forced outages of Sunpeak Units 3, 4 and 5 either scheduled by Buyer prior to the Effective Date or otherwise contained in the final schedule approved by September 30 of each year pursuant to the maintenance scheduling provisions of the SPPCA; provided that, subsequent changes to such final schedule shall not be considered a Permitted Derating, unless agreed to by Buyer, which agreement shall not be unreasonably withheld; (c) response to an Emergency Condition as described in Section 20; (d) subject to the limitations expressed in Section 12.5, a Force Majeure event; (e) lack of water treatment pond storage at the Clark generating station; provided that such lack of water treatment pond storage capacity is not due to Supplier's sales to parties other than Buyer; and (f) operation of Asset Bundle beyond the operational and contractual parameters set forth in Exhibit M. 5.2.4 In respect of any Dispatch Hour, the Asset Bundle Capacity of each unit shall be the Asset Bundle Capacity figure stated in Exhibit A minus any Permitted Derating applicable during such hour. 5.2.5 Neither the Asset Bundle Capacity nor the Supply Amount shall be reduced by Deratings which are not Permitted Deratings. Supplier shall be responsible for all Replacement Costs, pursuant to Section 4.2.1, caused by Deratings that are not Permitted Deratings. 6. PRICING OF ENERGY AND ANCILLARY SERVICES 6.1 Overview. The price of Energy paid by Buyer to Supplier shall be -------- based upon a designated hourly market price, subject to monthly floor, monthly ceiling, and annual true-up provisions. The Price Floor of Energy will ensure that Supplier will receive an average price for Energy for each month which is not less than the price stated in Exhibit B. The Price Ceiling of Energy provision provides that the 16 average price of Energy paid to Supplier each month and for each year shall not exceed the price stated in Exhibit B. 6.2 Price of Energy. --------------- 6.2.1 Market Price of Energy. In respect of any Dispatch Hour, the ---------------------- designated Market Price of Energy shall be the South of Path 15 ("SP 15") hourly market-clearing price in the day-ahead market from the CALPX as published at the following Web Site (or its successor web site) http://www.calpx.com/prices/index prices dayahead trading.html. -------------------------------------------------------------- Should this hourly market in the day-ahead market not exist for the entire term, the Parties shall agree upon a similar market price index. 6.2.2 Price Floor of Energy. The Price Floor of Energy is stated in --------------------- Exhibit B and shall not change during the term of this Agreement. 6.2.3 Price Ceiling of Energy. The Price Ceiling of Energy is stated ----------------------- in Exhibit B and shall not change during the term of this Agreement. 6.3 Pricing of Ancillary Services. The price of the capacity component of ------------------------------ Ancillary Services is stated in Exhibit B and such price shall not change during the term of the Agreement. If the Energy portion of Ancillary Services is called upon by the ISA or Control Area Operator, Buyer shall pay Supplier the Price Ceiling of Energy for the Delivered Amount of such Energy, as invoiced to Buyer pursuant to Section 7.3. 6.4 Price Revisions. The Parties waive any and all rights to seek to --------------- revise the provisions of this Agreement, including the prices stated, pursuant to Sections 205 and/or 206 of the Federal Power Act. 7. INVOICING AND PAYMENTS 7.1 Invoicing and Payment. On or before the tenth (10/th/) day of each --------------------- month, Supplier shall send to Buyer an invoice setting forth the Supply Amount, Delivered Amount, the Market Price of Energy pursuant to Section 6.2.1 for each Dispatch Hour in the previous month, any amount due in accordance with Section 7.13 and the total due from Buyer. The invoice shall be calculated based upon data available to Supplier and shall be in accordance with this Section 7 and Exhibit C. Buyer shall promptly notify Supplier if Buyer in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. 7.2 Monthly Invoice Calculation. On each monthly invoice, Supplier shall --------------------------- calculate the following amounts: 17 7.2.1 The Delivered Amount in respect of each Dispatch Hour multiplied by the corresponding Market Price of Energy pursuant to Section 6.2.1, summed over the billing period; 7.2.2 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Ceiling of Energy; 7.2.3 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Floor of Energy; 7.2.4 For each Dispatch Hour of the billing period, the shortfall, if any, between the Supply Amount and the Delivered Amount (and in the case of Ancillary Services the shortfall between the Supply Amount of Ancillary Services and Supplier's schedule of Ancillary Services); 7.2.5 The Supply Amount of Ancillary Services for each dispatch hour multiplied by the price of Ancillary Services as stated in Exhibit B; 7.2.6 The Delivered Amount of Energy related to Ancillary Services for each dispatch hour multiplied by the Price Ceiling of Energy as stated in Exhibit B; and 7.2.7 If applicable, any amount to be calculated in accordance with Section 7.13. 7.3 Supplier's Invoice. Supplier will invoice the lesser of the amounts ------------------ calculated in Sections 7.2.1 and 7.2.2, provided that if the amount calculated in Section 7.2.1 is less than the amount calculated in Section 7.2.3, Supplier shall invoice Buyer the amount calculated in Section 7.2.3. Supplier shall also include in its invoice the amounts calculated in Sections 7.2.5, 7.2.6 and 7.2.7. If the Delivered Amount exceeds the Supply Amount, Buyer shall not be obligated to pay for the excess amount. Subject to confirmation that the ISA or Control Area Operator received the Delivered Amount of Energy related to Ancillary Services called upon by the ISA or Control Area Operator, Buyer shall pay Supplier for the amounts invoiced pursuant to Section 7.2.6. Examples of this monthly invoice calculation (and annual true-up process) are contained in Exhibit C. 7.4 Buyer's Invoice. In the event any shortfall occurs pursuant to --------------- Section 7.2.4 or payment is due to Buyer pursuant to Section 7.13, Buyer shall within ten (10) Business Days of receipt of Supplier's invoice deliver to Supplier a Buyer's invoice detailing any Replacement Costs or other payment due. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. 18 Buyer shall have the right to adjust the invoices issued in accordance with this Section 7.4 if Buyer incurs Replacement Costs that were not known when earlier invoices were issued. Adjusted invoices shall be issued within thirty (30) days of the date on which the additional Replacement Costs become known. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's adjusted invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. 7.5 Annual True-Up Mechanism for Energy. ----------------------------------- 7.5.1 The annual true-up mechanism will provide adjustments among the Parties with respect to each Contract Year in the following scenarios: (a) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is less than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. (b) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is greater than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the greater of the Market Price of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year or the Price Floor of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. 19 (c) If Buyer incurred Replacement Costs for energy during the Contract Year, Supplier shall multiply the Total Amount of Energy Replaced during the Contract Year by the Average Cost of Delivered Energy after true-up as determined in accordance with Section 7.5.1 (a) or 7.5.1 (b). If the amount so obtained is greater than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be zero. If the amount so obtained is less than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be the sum of the monthly Gross Replacement Costs of Energy less the amount obtained in accordance with the first sentence of this Section 7.5.1(c). If the Adjusted Replacement Cost of Energy is greater than the sum of the monthly Invoiced Replacement Costs of Energy from Buyer's Invoices for the Contract Year, Supplier shall pay the difference to Buyer. If the sum of the monthly Invoiced Replacement Costs of Energy is greater than the Adjusted Replacement Cost of Energy, Buyer shall pay the difference to Seller. 7.5.2 True-up adjustments will be calculated by Supplier within twenty (20) days after each Contract Year. Examples of the true-up calculations and invoice form are set forth in Exhibit E. Interest shall be calculated pursuant to 18 CFR Section 35.19a and shall be included in the true-up invoice. Invoices for true-up adjustments shall be submitted by Supplier within thirty (30) days after the end of the Contract Year. Payments for such invoices shall be due from Buyer thirty (30) days from receipt of the true-up invoice. 7.6 Invoice Disagreements. Should there be a good faith dispute over any --------------------- invoice, the Parties shall promptly seek resolution pursuant to Section 13. Pending resolution of the invoice dispute, payment shall be made or offsets or credits taken, as applicable, based upon the undisputed portion of the invoice. 7.7 Adjustments. Upon resolution of the dispute, the prevailing Party ----------- shall be entitled to receive the disputed amount, as finally determined to be payable along with interest (calculated pursuant to 18 C.F.R. (S) 35.19a through the date of payment. No invoice (or payment covered thereby) shall be subject to adjustment unless notice or request for adjustment is given within one (1) year of the date payment thereunder was due. 7.8 Method of Payment. Subject to Sections 7.3, 7.6 and 7.7, Buyer shall ----------------- remit all amounts due by wire or electronic fund transfer, pursuant to Supplier's invoice instructions, no later than thirty (30) days after receipt of the invoice. 20 7.9 Overdue Payments. Overdue payments shall bear interest from and ---------------- including, the due date to the date of payment on the unpaid portion calculated pursuant to 18 C.F.R. (S) 35.19a. 7.10 Buyer Right to Offset. Buyer shall have the right to offset any --------------------- amounts Supplier owes to Buyer, including Replacement Costs (except for such amounts disputed in good faith by Supplier), against the amounts owed by Buyer to Supplier. 7.11 Taxes. Each Party shall pay ad valorem and other taxes attributed to ----- its facilities and services provided. Supplier shall be responsible for any and all taxes applicable to the transaction under this Agreement arising prior to and at delivery of the Delivered Amount at the Point of Delivery. Buyer shall be responsible for any and all taxes applicable to the transactions after delivery of the Delivered Amount at the Point of Delivery. To the extent there is a change in Law that imposes any material increase in taxes relating to delivery of the Delivered Amount at the Point of Delivery, Buyer shall be responsible for such increase in tax. 7.12 Late Invoices. If either Party submits an invoice outside of the ------------- time deadlines set forth herein, that Party shall not forfeit its rights to collect the amounts due thereunder, provided that such invoice is no more than six (6) months late, and provided that changes to invoices remain subject to the deadline in Section 7.7 7.13 Termination Prior to March 1, 2003. Notwithstanding any other ---------------------------------- provision herein, in the event that this Agreement is terminated before March 1, 2003 and as a result of such termination Buyer is entitled to a payment in accordance with Section 2.3.1, Supplier shall include an amount calculated in accordance with Section 2.3.1 and Exhibit J, to be paid by Supplier to Buyer in the next monthly invoice submitted to Buyer following such termination. 8. REGULATORY APPROVALS 8.1 This Agreement will be filed with the FERC and any other appropriate regulatory agencies by the appropriate Party as may be required. 9. COMPLIANCE 9.1 Each Party shall comply with all relevant Laws and shall, at its sole expense, maintain in full force and effect all relevant permits, authorizations, licenses, and other authorizations material to the maintenance of facilities and the performance of obligations under this Agreement. 9.2 Each Party and its representatives shall comply with all relevant requirements of any authorized Control Area Operator, ISA, and/or EDU to ensure the safety of its employees and the public, and to ensure electric system reliability and integrity, material to the performance of this Agreement. 21 9.3 Buyer and Supplier shall perform or cause to be performed, their obligations under this Agreement in all material respects in accordance with Good Utility Practices. 10. INDEMNIFICATION 10.1 To the fullest extent permitted by law, a Party to this Agreement ("the Indemnifying Party") shall indemnify, defend and hold harmless the other Party, its parent, affiliates, and successors and agents (each an "Indemnified Party") from and against any and all claims, demands, suits, obligations, payments, liabilities, costs, judgments, damages, losses or expenses asserted by third parties against an Indemnified Party and arising out of, relating to, or resulting from the Indemnifying Party's breach of, or the negligent performance of its obligations under this Agreement. 10.1.1 Such indemnity shall also extend to actual courts costs, attorneys' fees, expenses and other liabilities incurred in the defense of any claim, action or proceeding, including negotiation, settlement, defense and appeals, to which this indemnification obligation applies. In furtherance of the foregoing indemnification and not by way of limitation thereof, the Indemnifying Party hereby waives any defense it otherwise might have against the Indemnified Party under applicable workers' compensation laws. 10.1.2 In claims against any Indemnified Party by an agent of the Indemnifying Party, or anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Section 10 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Indemnifying Party or a subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts. 10.1.3 Such indemnity shall also extend to all costs and expenses incurred by the Indemnified Party in any action or proceeding to enforce the provisions of this Agreement, but only if and to the extent the Indemnified Party prevails in such action or proceeding. 10.2 No Negation of Existing Indemnities; Survival. Each Party's --------------------------------------------- indemnity obligations hereunder shall not be construed to negate, abridge or reduce other indemnity rights or obligations which would otherwise exist at law or equity. The obligations contained herein shall survive any termination, cancellation, or suspension of this Agreement to the extent that any third party claim is commenced during the applicable statute of limitations period. 10.3 Indemnification Procedures. -------------------------- 22 10.3.1 Any Party seeking indemnification under this Agreement shall give the other Party notice of such claim promptly but in any event on or before thirty (30) days after the Party's actual knowledge of such claim or action. Such notice shall describe the claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the claim that has been, or may be sustained by, said Party. To the extent that the other Party will have been actually and materially prejudiced as a result of the failure to provide such notice, such notice will be a condition precedent to any liability of the other Party under the provisions for indemnification contained in this Agreement. 10.3.2 In any action or proceeding brought against an Indemnified Party by reason of any claim indemnifiable hereunder, the Indemnifying Party may, at its sole option, elect to assume the defense at the Indemnifying Party's expense, and shall have the right to control the defense thereof and to determine the settlement or compromise of any such action or proceeding. Notwithstanding the foregoing, an Indemnified Party shall in all cases be entitled to control its defense in any action if it: (i) may result in injunctions or other equitable remedies in respect of the Indemnified Party which would affect its business or operations in any materially adverse manner; (ii) may result in material liabilities which may not be fully indemnified hereunder; or (iii) may have a significant adverse impact on the business or the financial condition of the Indemnified Party (including a material adverse effect on the tax liabilities, earnings or ongoing business relationships of the Indemnified Party) even if the Indemnifying Party pays all indemnification amounts in full. 10.3.3 Subject to Section 10.3.2, neither Party may settle or compromise any claim for which indemnification is sought under this Agreement without the prior consent of the other Party; provided, however, said consent shall not be unreasonably withheld or delayed. 11. LIMITATION OF LIABILITY 11.1 Responsibility for Damages: Except as otherwise provided herein or -------------------------- to the extent of the other Party's negligence or willful misconduct, each Party shall be responsible for all physical damage to or destruction of the property, equipment and/or facilities owned by it and its affiliates and any physical injury or death to natural Persons resulting therefrom, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party for such damage; provided, that in any such case the Parties will exercise Due Diligence to remove the cause of any disability 23 at the earliest practicable time. 11.2 No Consequential Damages: To the fullest extent permitted by law and ------------------------ notwithstanding other provisions of this Agreement, in no event shall a Party, or any of its Agents, be liable to the other Party, whether in contract, warranty, tort, negligence, strict liability, or otherwise, for special, indirect, incidental, multiple, consequential (including but not limited to lost profits or revenues and lost business opportunities), or punitive damages related to or resulting from performance or nonperformance of this Agreement or any activity associated with or arising out of this Agreement. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 11.2. In addition, this limitation on liability shall apply with respect to claims pursuant to Section 10 hereof arising from the failure of Supplier to deliver the Supply Amount. 11.3 Survival: The provisions of this Section 11 shall survive any -------- termination, cancellation, or suspension of this Agreement. 12. FORCE MAJEURE 12.1 An event of "Force Majeure" shall be defined as any interruption or failure of service or deficiency in the quality or quantity of service or any other failure to perform any of its obligations hereunder to the extent such failure occurs without fault or negligence on the part of that Party and is caused by factors beyond that Party's reasonable control, which by the exercise of reasonable diligence that Party is unable to prevent, avoid, mitigate or overcome, including: (i) acts of God or the public enemy, such as storms, flood, lightning, and earthquakes, (ii) failure, threat of failure, or unscheduled withdrawal of facilities from operation for maintenance or repair, and including unscheduled transmission and distribution outages, (iii) sabotage of facilities and equipment, (iv) civil disturbance, (v) strike or labor dispute, (vi) action or inaction of a court or public authority, or (vii) any other cause of similar nature beyond the reasonable control of that Party. 12.2 Economic hardship of either Party shall not constitute Force Majeure under this 24 Agreement. Notwithstanding this, if Buyer suffers an event of Force Majeure it shall be relieved of its obligation to take delivery of, or otherwise pay for, Energy and Ancillary Services under this Agreement for the duration of the event of Force Majeure. In addition, if Buyer is unable to have Energy and Ancillary Services delivered from the Point(s) of Delivery to its service territory due to transmission outages, that shall be considered a Force Majeure event and shall relieve Buyer of performance for the extent of the event. 12.3 In the event of a Force Majeure, neither Party shall be considered in default under this Agreement or responsible to the other Party in tort, strict liability, contract or other legal theory for damages of any description, provided that the Party relying on a claim of Force Majeure: (i) provides prompt written notice of such Force Majeure event to the other Party, giving an estimate of its expected duration and the probable impact on the performance of its obligations hereunder; (ii) exercises all reasonable efforts to continue to perform its obligations under this Agreement; (iii) expeditiously takes action to correct or cure the event or condition excusing performance so that the suspension of performance is no greater in scope and no longer in duration than is dictated by the problem; provided, however, that settlement of strikes or other labor disputes will be completely within the sole discretion of the Party affected by such strike or labor dispute; (iv) exercises all reasonable efforts to mitigate or limit damages to the other Party; and (v) provides prompt notice to the other Party of the cessation of the event or condition giving rise to its excuse from performance. 12.4 Notwithstanding the above provisions, a Force Majeure event shall excuse Supplier from its obligation to deliver the Supply Amount pursuant to Section 4 of this Agreement only for the first twenty- four (24) hours of the Force Majeure event, provided that the total amount of energy excused in accordance with this Section 12.4 during any Contract Year shall not exceed the Limit on Excused Energy set forth in Exhibit A. After such twenty-four (24) hour period, Supplier must either deliver the Supply Amount at the Point(s) of Delivery or pay liquidated damages pursuant to Section 4.2 of this Agreement. 12.5 If Supplier has notified Buyer of an event of Force Majeure, and if Supplier so requests, Buyer will attempt to replace the Supply Amount that is not excused in accordance with Section 12.4 with Energy or Ancillary Services from another 25 Asset Bundle. However, Buyer's inability to acquire such replacement Energy or Ancillary Services shall not excuse Supplier from Supplier's obligation to deliver the Supply Amount not otherwise excused in accordance with Section 12.4 13. DISPUTES 13.1 Any action, claim or dispute which either Party may have against the other arising out of or relating to this Agreement or the transactions contemplated hereunder, or the breach, termination or validity thereof (any such claim or dispute, a "Dispute") shall be submitted in writing to the other Party. The written submission of any Dispute shall include a concise statement of the question or issue in dispute together with a statement listing the relevant facts and documentation that support the claim. 13.2 The Parties agree to cooperate in good faith to expedite the resolution of any Dispute. Pending resolution of a Dispute, the Parties shall proceed diligently with the performance of their obligations under this Agreement. 13.3 The Parties shall first attempt in good faith to resolve any Dispute through informal negotiations by the Contract Representatives. In the event that the Contract Representatives are unable to satisfactorily resolve the Dispute within thirty (30) days from the receipt of notice of the Dispute either Party may initiate arbitration through the serving and filing of a demand for arbitration and the Parties expressly agree that arbitration in accordance with this Section 13 shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a trial with respect to any Dispute, provided that at any time: 13.3.1 A request made by a Party for provisional remedies requesting preservation of the Parties' respective rights and obligations under the Agreement may be resolved by a court of law located in Clark County, Nevada. 13.3.2 Nothing in this Agreement shall preclude, or be construed to preclude, any Party from filing a petition or complaint with the FERC or PUCN with respect to any arbitrable Dispute over which said agency has jurisdiction. In such case, the other Party may request the FERC or PUCN, as applicable, to reject or to waive jurisdiction. If jurisdiction is rejected or waived with respect to all or a portion of the Dispute, the portion of the Dispute not so accepted by the FERC or PUCN, as applicable, shall be resolved through arbitration in accordance with this Agreement. To the extent that the FERC or PUCN, as applicable, asserts or accepts jurisdiction over the Dispute, the decision, finding of fact or order of FERC shall be final and binding, subject to judicial review under the Federal Power Act or Nevada Revised Statutes and subject to the provisions of Section 2.2.2. Any arbitration proceedings that may have commenced with respect to the Dispute prior to the assertion or acceptance of jurisdiction by the FERC or PUCN, as 26 applicable, shall be terminated to the extent the FERC or PUCN accepts or asserts jurisdiction over such Dispute. 13.4 Unless otherwise agreed by the Parties, any arbitration initiated under this Agreement shall be conducted in accordance with the following: 13.4.1 Arbitrations shall be held within the County of the principal place of business of Buyer. 13.4.2 Except as otherwise modified herein, the arbitration shall be conducted in accordance with the "Commercial Arbitration Rules" of the American Arbitration Association ("AAA") then in effect. 13.4.3 Arbitration shall be conducted by three neutral arbitrators who shall be selected pursuant to the AAA rules and the following: 13.4.3.1 The Parties agree that the list of potential arbitrators provided by the AAA shall, if available, contain twenty (20) candidates, and at least fifty percent (50%) of the candidates shall be members of the AAA National Energy Panel. 13.4.3.2 The Parties also agree that each shall be allowed to strike the names of five candidates before ranking the remaining candidates and returning the list to the AAA in accordance with the Commercial Arbitration Rules. From the remaining list, each Party shall appoint one arbitrator and those two arbitrators shall select a third arbitrator who shall act as chairman of the tribunal. If any arbitrator is not appointed within the time limits provided herein or in the AAA rules, such arbitrator shall be appointed by the AAA, which shall appoint the arbitrator with the combined highest rating. 13.4.3.3 Each of the arbitrators shall not have any current or past substantial business, financial, or personal relationships with either Party (or their Affiliates) and shall not be a vendor, supplier, customer, employee, consultant, or competitor to either of the Parties or their Affiliates. 13.4.3.4 The tribunal shall be authorized only to interpret and apply the provisions of this Agreement or any related agreements entered into under this Agreement and shall have no power to modify or change any provision of this Agreement. The tribunal shall have no authority to award punitive or multiple damages or any damages inconsistent with this Agreement. The tribunal shall within thirty (30) days of 27 the conclusion of the hearing, unless such time is extended by agreement of the Parties, notify the Parties in writing of his or her decision, stating his or her reasons for such decision and separately listing his or her findings of fact and conclusions of law. Judgment on the award may be entered in any court having jurisdiction. 13.5 The Parties shall proceed with the arbitration expeditiously, and the arbitration shall be concluded within five (5) months of the filing of the demand for arbitration pursuant to this Section 13 in order that the decision may be rendered within six (6) months of such filing, unless the tribunal extends such time at the request of a Party upon a showing of good cause or upon agreement of the Parties. 13.6 Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of any arbitration agreement shall be governed by the Federal Arbitration Act of the United States, 9 U.S.C. (S)(S) 1 et seq. 13.7 The decision of the tribunal shall be final and binding on both Parties and may be enforced in any court having jurisdiction over the Party against which enforcement is sought. 13.8 The fees and expenses of the tribunal shall be shared by the Parties equally, unless the decision of the tribunal shall specify some other apportionment of such fees and expenses. All other expenses and costs of the arbitration shall be borne by the Party incurring the same. 14. NATURE OF OBLIGATIONS 14.1 Except where specifically stated in this Agreement to be otherwise, the duties, obligations, and liabilities of the Parties shall be several, not joint or collective. The provisions of this Agreement shall not be construed to create an association, trust, partnership, or joint venture; to impose a trust or partnership duty, obligation, or liability or agency relationship on or with regard to either Party. 14.2 Nothing in this Agreement nor any action taken hereunder shall be construed to create any duty, liability, or standard of care to any person not a Party to this Agreement. Each Party shall be individually and severally liable for its own obligations under this Agreement. 14.3 By this Agreement, neither Party dedicates any part of its facilities or the service provided under this Agreement to the public. 15. SUCCESSORS AND ASSIGNS 15.1 This Agreement may be assigned, without express written consent of the other Party, as follows: 28 15.1.1 Buyer may assign this Agreement or assign or delegate its rights and obligations under this Agreement, in whole or in part, if such assignment is made to an affiliate, parent, subsidiary, successor or any party; provided such assignee (or its guarantor) shall have a credit rating equal or superior to that of Buyer. 15.1.2 Buyer also may assign this Agreement, in whole or in part, as necessary to comply with orders of the PUCN regarding the assumption of all or a portion of the PLR by other entities or as otherwise required by Law or applicable regulations. 15.2 Supplier may, without the consent of Buyer, assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee, lending institution, or any Person for the purposes of financing or refinancing the Asset Bundle, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, conveyances of dispositions in lieu thereof; provided, however, that no such assignment or disposition shall relieve or in any way discharge Supplier or such permitted assignee from the performance of its duties and obligations under this Agreement. Buyer agrees to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, conveyance, pledge or disposition of rights hereunder for purposes of the financing or refinancing of the Asset Bundle, so long as Buyer's rights under this Agreement are not thereby materially altered, amended, diminished or otherwise impaired. 15.3 Either Party may, without the consent of the other Party, assign this Agreement to a successor to all or substantially all of the assets of such Party by way of merger, consolidation, sale or otherwise, provided such successor assumes and becomes liable for all of such Party's duties and obligations hereunder including Section 3 hereof. 15.4 Except as stated above, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by either Party, including by operation of law, without the prior written consent of the other Party, said consent not to be unreasonably withheld. Any assignment of this Agreement in violation of the foregoing shall be, at the option of the non-assigning Party, void. 15.5 Except as set forth above, no assignment or transfer of rights or obligations under this Agreement by a Party shall relieve said Party from full liability and financial responsibility for the performance thereof after any such transfer or assignment unless and until the transferee or assignee shall agree in writing to assume the obligations and duties of said Party under this Agreement and the other Party has consented in writing to such assumption; said consent not to be unreasonably withheld. 15.6 This Agreement and all of the provisions hereof are binding upon, and inure to the 29 benefit of, the Parties and their respective successors and permitted assigns. 16. REPRESENTATIONS 16.1 Representations of the Parties. The Parties represent and warrant ------------------------------ each to the other as follows: 16.1.1 Incorporation. Buyer is a corporation duly incorporated, ------------- validly existing and in good standing under the laws of the State of Nevada. Supplier is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Both Buyer and Supplier have all requisite corporate power and authority to own, lease and operate their material assets and properties and to carry on their business as now being conducted. 16.1.2 Authority. The Party has full corporate power and authority --------- to execute and deliver this Agreement and, subject to the procurement of applicable regulatory approvals, to carry out the actions required of it by this Agreement. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action required on the part of the Party. The Agreement has been duly and validly executed and delivered by the Party and, assuming that it is duly and validly executed and delivered by the other Party, constitutes a legal, valid and binding agreement of the Party. 16.1.3 Compliance With Law. The Party represents and warrants that ------------------- it is not in violation of any applicable Law, or applicable regulation, which violation could reasonably be expected to materially adversely affect the other Party's performance of its obligations under this Agreement. The Party represents and warrants that it will comply with all Laws, and regulations applicable to its compliance with this Agreement, non-compliance with which would reasonably be expected to materially adversely affect either Party's performance of its obligations under this Agreement. 16.1.4 Representations of Both Parties. The representations in this ------------------------------- Section 16 shall continue in full force and effect for the term of this Agreement. 17. DEFAULT AND REMEDIES 17.1 An Event of Default hereunder shall be deemed to have occurred upon a Party's (Defaulting Party) failure to comply with any material obligation imposed upon it by this Agreement. Examples of an Event of Default include, but are not limited to the following: (i) Failure to make any payments due under this Agreement; 30 (ii) Failure to deliver the Supply Amount for a period of one hundred twenty (120) consecutive hours; (iii) Failure to follow the directions of a Control Area Operator, ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto where following such directions is required hereunder; (iv) Supplier not being in compliance with Section 3; and (v) Failure of the Guarantor to be in compliance with the terms of the Guaranty delivered under Section 3.1.2. 17.2 An Event of Default shall be excused: 17.2.1 In the event such Event of Default was caused by Force Majeure provided that the Party claiming a Force Majeure complies with the requirements of Section 12; or 17.2.2 In the event such Event of Default was caused by transmission or distribution outages or disruptions. 17.3 Unless excused, in an Event of Default the Non-Defaulting Party shall be entitled to provide written notice (or verbal notice in case of emergency followed by written notice) of the Event of Default to the Defaulting Party and to specify a cure period, which cure period shall be a minimum of thirty (30) days. 17.4 If an Event of Default is not cured by the Defaulting Party during the cure period specified by the Non-Defaulting Party, the Non- Defaulting Party shall be entitled to those remedies which are not inconsistent with the terms of this Agreement, including termination and the payment of liquidated damages as provided in and subject to Section 4.2. A Defaulting Party shall not be liable to the Non- Defaulting Party for any punitive, consequential or incidental damages. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 17.4. 17.5 Notwithstanding this Section 17, liquidated damages shall be paid to Buyer pursuant to Sections 4.2, 12, 18, and 21. 18. FACILITY ADDITIONS AND MODIFICATIONS 18.1 Supplier shall be entitled to make additions and modifications to the Asset Bundle subject to the following: 18.1.1 To the extent additions and modifications interfere with the operation of the Asset Bundle in providing the Supply Amount to Buyer beyond 31 the limits for planned outages set forth in Section 21, liquidated damages shall be paid to Buyer pursuant to Section 4.2. 18.1.2 Supplier shall use reasonable efforts to minimize any adverse impact on Buyer during the course of making such additions and modifications. 18.1.3 Such additions and modifications shall be conducted in accordance with Good Utility Practice, and all applicable Laws, regulations, reliability criteria and the Interconnection Agreement between Nevada Power Company and Supplier, dated December 9, 2000, as it may be amended from time to time. 18.2 Supplier shall seek Buyer's prior written approval for all Supplier's additions or modifications to the Asset Bundle which might reasonably be expected to have an adverse effect upon Buyer with respect to operations or performance under this Agreement. 19. COORDINATION 19.1 Upon knowledge thereof, each Party shall promptly give notice to the other Party of any labor dispute which is delaying or threatens to delay the timely performance of this Agreement, which shall include a description of the general nature of the dispute. 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE 20.1 Buyer and Supplier shall comply with any applicable requirement of any Governmental Authority, NERC, WSCC, ISA, Control Area Operator, transmission operator, EDU or any successor of any of them, regarding the reduced or increased generation of the Asset Bundle in the event of an Emergency Condition or Nonemergency Condition. 20.2 Supplier shall not be obligated to deliver the Supply Amount and no liquidated damages shall become due, if the Supply Amount is reduced in the event of an Emergency Condition or a Nonemergency Condition. 20.3 Each Party shall provide prompt verbal notice to the other Party of any Emergency Condition or Nonemergency Condition. 20.4 Either Party may take reasonable and necessary action to prevent, avoid or mitigate injury, danger, damage or loss to its own equipment and facilities, or to expedite restoration of service; provided, however, that the Party taking such action shall give the other Party prior notice if at all possible before taking any action. However, this Section 20.4 shall not be construed to supersede Sections 20.2 and 20.3. 21. OUTAGE SCHEDULING 32 21.1 Supplier shall request Buyer's approval prior to any inspections, proposed planned outages or other non-forced outages (all hereinafter referred to as "planned outages") of the Asset Bundle so as to minimize the impact on the availability of the Asset Bundle. Under no circumstances shall Supplier conduct a planned outage without the express prior consent of Buyer pursuant to this Section 21. 21.2 Planned Outages. --------------- 21.2.1 Within sixty (60) days following the Effective Date of this Agreement and on or before October 1 of each Contract Year, Supplier shall provide Buyer with a schedule of proposed planned outages for the period beginning on the date of such proposed schedule for the following twelve (12) months, including the non-forced outages scheduled for Sunpeak Units 3, 4, and 5 (as provided for in the SPPCA). The proposed planned outage schedule will designate days for each unit in which the Asset Bundle Capacity will be reduced in part or total for each such unit. Each proposed schedule shall include all applicable information, including but not limited to the following: Month, day and time of requested outage; facilities impacted (such as Unit and description); duration of outage; purpose of outage; amount of capacity (in MWs) which is derated; other conditions and remarks; and name of contact and phone number. 21.2.2 Buyer shall promptly review Supplier's proposed schedule and shall either require modifications or approve the proposed schedule. Supplier shall be responsible to Buyer for Replacement Costs to the extent provided in Section 4.2 (i) if any outage period exceeds its approved schedule, provided that changes to the approved schedule may be requested by either Party and each Party shall make reasonable efforts to accommodate such changes, provided further the Buyer shall have no obligation to agree to Supplier's revisions to the approved planned outage schedule; and (ii) if Supplier conducts a planned outage without the consent of Buyer as provided herein. 22. REPORTS 22.1 Supplier shall promptly provide Buyer with copies of any orders, decrees, letters or other written communications to or from any Governmental Authority asserting or indicating that Supplier and/or its Asset Bundle is in violation of Laws which relate to Supplier, or operations or maintenance of the Asset Bundle and which may have an adverse effect on Buyer. Supplier shall use reasonable efforts to keep Buyer appraised of the status of any such matters. 23. COMMUNICATIONS 23.1 Supplier's Operating Representatives shall be available twenty-four (24) hours per 33 day for communications with the Control Area Operator and/or the ISA and Buyer to facilitate the operations contained in this Agreement. 23.2 Supplier shall, at its expense, maintain and install real-time communications equipment at the Asset Bundle to maintain communications between personnel on site at the Asset Bundle, Buyer and the Control Area Operator at all times. Supplier shall provide at its expense: (i) Ringdown voice telephone lines, and (ii) Equipment to transmit to and receive telecopies from Buyer and the Control Area Operator. 23.3 Supplier shall immediately report to Buyer any "Abnormal Condition" that has or may occur, and provide all pertinent information, including but not limited to the following: (i) A description of the "Abnormal Condition" and the actions to be taken to alleviate the "Abnormal Condition"; (ii) The expected duration including the beginning and ending time of the "Abnormal Condition"; and (iii) The amount of any adjustment to the current (real time) level of Energy and Ancillary Services. 23.4 Cause of the Condition. ----------------------- 23.4.1 An "Abnormal Condition" shall include without limitation any conditions that, to Supplier's knowledge, have or are reasonably likely to: (i) Adversely affect Supplier's ability to provide Energy and Ancillary Services to Buyer; (ii) Cause an unplanned reduction in the amount of delivery of Energy and Ancillary Services to Buyer; or (iii) Cause an unplanned isolation of the Asset Bundle from the transmission system. 23.5 Supplier shall immediately notify Buyer after such "Abnormal Condition" has been alleviated. 24. NOTICES 34 24.1 All notices hereunder shall, unless specified otherwise, be in writing and shall be addressed, except as otherwise stated herein, to the Parties as set forth in Exhibit F. 24.2 All written notices or submittals required by this Agreement shall be sent either by hand-delivery, regular first class U.S. mail, registered or certified U.S. mail postage paid return receipt requested, overnight courier delivery, electronic mail or facsimile transmission and will be effective and deemed to have been received on the date of receipt personally, on the date and time as documented by method of delivery if during normal business hours or on the next succeeding Business Day, or on the third (3/rd/) Business Day following deposit with the U.S. mail if sent regular first class U.S. mail. 24.3 Notices of an Event of Default pursuant to Section 17 and or Force Majeure pursuant to Section 12 may not be sent by regular first class U.S. mail. 24.4 Any payments required to be made under this Agreement shall be made to the Party as set forth in Exhibit F. 24.5 Each Party shall have the right to change, at any time upon written notice to the other Party, the name, address and telephone numbers of its representatives under this Agreement for purposes of notices and payments. 25. MERGER 25.1 The Agreement contains the entire agreement and understanding between the Parties with respect to all of the subject matter contained herein, thereby merging and superseding all prior agreements and representations by the Parties with respect to such subject matter. 25.2 In the event of any conflict between this Agreement and the Asset Sale Agreement, the terms of the Asset Sale Agreement shall govern. 26. HEADINGS 26.1 The headings or section titles contained in this Agreement are inserted solely for convenience and do not constitute a part of this Agreement between the Parties, nor should they be used to aid in any manner in the construction of this Agreement. 27. COUNTERPARTS AND INTERPRETATION 27.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 27.2 In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no 35 presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of authorship of any of the provisions of this Agreement. 27.3 Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. 27.4 The word "including" in this Agreement shall mean "including without limitation". 28. SEVERABILITY 28.1 If any term, provision or condition of this Agreement is held to be invalid, void or unenforceable by a court or Governmental Authority of competent jurisdiction and such holding is subject to no further appeal or judicial review, then such invalid, void, or unenforceable term, provision or condition shall be deemed severed from this Agreement and all remaining terms, provisions and conditions of this Agreement shall continue in full force and effect, unless, however, the effect of the severance would vitiate the intent of the Parties hereto, as determined by either Party in its reasonable discretion. 28.2 The Parties shall endeavor in good faith to replace such invalid, void, or unenforceable provisions with a valid and enforceable provision which achieves the purposes intended by the Parties to the greatest extent permitted by law. 29. WAIVERS 29.1 No failure or delay on the part of a Party in exercising any of its rights under this Agreement or in insisting upon strict performance of provisions of this Agreement, no partial exercise by either Party of any of its rights under this Agreement, and no course of dealing between the Parties shall constitute a waiver of the rights of either Party under this Agreement. Any waiver shall be effective only by a written instrument signed by the Party granting such waiver, and such shall not operate as a waiver of, or estoppel with respect to, any subsequent failure to comply therewith. 30. AMENDMENTS 30.1 The Parties shall negotiate in good faith to determine necessary amendments, if any, to this Agreement, provided that in negotiating such amendments the Parties shall attempt, in good faith, to reasonably preserve the bargain initially struck in this Agreement if any Governmental Authority, FERC, any state or the PUCN, implements a change in any Law or applicable regulation that materially affects or is reasonably expected to materially affect Buyer's PLR service under this Agreement. 30.2 The Parties shall meet to discuss the impact of any changes in Buyer's OATT, or 36 any rule or practice of NERC, WSCC, or any other Governmental Authority on the terms of this Agreement upon request by either Party during the term of this Agreement. 30.3 In the event that it is deemed necessary to amend this Agreement, the Parties will attempt to agree upon such amendment and will submit such mutually agreed upon amendment(s) to the FERC for filing and acceptance. 30.4 Amendments to this Agreement shall be in writing and shall be executed by an authorized representative of each Party. 31. TIME IS OF THE ESSENCE 31.1 Time is of the essence of this Agreement and in the performance of all of the covenants and conditions hereof. 32. APPROVALS 32.1 Each Party's performance under this Agreement is subject to the condition that all requisite governmental and regulatory approvals for such performance are obtained in form and substance satisfactory to the other Party in its reasonable discretion. Each Party shall use best efforts to obtain all required approvals and shall exercise due diligence and shall act in good faith to cooperate and assist each other in acquiring any regulatory approval necessary to effectuate this Agreement. Further, the Parties agree to reasonably support the other Party in any associated regulatory proceedings, including by being a witness on behalf of the other Party. 32.2 This Agreement is made subject to present or future state or federal laws, regulations, or orders properly issued by state or federal bodies having jurisdiction. 32.3 The Parties hereto agree to execute and deliver promptly, at the expense of the Party requesting such action, any and all other and further instruments, documents and information which may reasonably be necessary or appropriate to give full force and effect to the terms and intent of this Agreement. 33. PLR SERVICE 33.1 The Agreement is premised on Buyer providing PLR service. Notwithstanding anything to the contrary contained herein, if Nevada retail electricity restructuring (including implementation of retail customer choice of electricity suppliers) is delayed beyond the Effective Date of this Agreement, the Parties shall continue to perform this Agreement in all respects pursuant to the terms and conditions hereof as if Buyer was the PLR and Buyer's retail and wholesale customers shall be considered as the TRR. 34. CONFIDENTIALITY 37 34.1 Confidential Information. Certain information provided by a Party ------------------------ (the "Disclosing Party") to the other Party (the "Receiving Party") in connection with the negotiation or performance of this Agreement may be considered confidential and/or proprietary (hereinafter referred to as "Confidential Information") by the Disclosing Party. To be considered Confidential Information hereunder, such information must be clearly labeled or designated by the Disclosing Party as "confidential" or "proprietary" or with words of like meaning. If disclosed orally, such information shall be clearly identified as confidential and such status shall be confirmed promptly thereafter in writing. 34.2 Treatment of Confidential Information. The Receiving Party shall ------------------------------------- treat any Confidential Information with at least the same degree of care regarding its secrecy and confidentiality as the Receiving Party's similar information is treated within the Receiving Party's organization. The Receiving Party shall not disclose the Confidential Information of the Disclosing Party to third parties (except as stated hereinafter) nor use it for any purpose other than the negotiation or performance of this Agreement, without the express prior written consent of the Disclosing Party. The Receiving Party further agrees that it shall restrict disclosure of Confidential Information as follows: 34.2.1 Disclosure shall be restricted solely to its agents as may be necessary to enforce the terms of this Agreement, and to its shareholders, directors, officers, employees, advisors, lenders and representatives as necessary to approve, negotiate, consummate, perform and finance the acquisition and operation of the Asset Bundle, in each case after advising those agents of their obligations under this Section 34.2. 34.2.2 In the event that the Receiving Party is requested, pursuant to or as required by applicable Law or by legal process, to disclose any Confidential Information, the Receiving Party shall provide the Disclosing Party with prompt notice of such request or requirement in order to enable Disclosing Party to seek an appropriate protective order or other remedy and to consult with Disclosing Party with respect to Disclosing Party taking steps to resist or narrow the scope of such request or legal process. The Receiving Party agrees not to oppose any action by the Disclosing Party to obtain a protective order or other appropriate remedy. In the absence of such protective order, and provided that the Receiving Party is advised by its counsel that it is compelled to disclose the Confidential Information, the Receiving Party shall: (i) furnish only that portion of the Confidential Information which the Receiving Party is advised by counsel is legally required; and (ii) use its commercially reasonable best efforts, at the expense of the Disclosing Party, to ensure that all Confidential Information so 38 disclosed will be accorded confidential treatment. 34.3 Excluded Information. Confidential Information shall not be deemed -------------------- to include the following: 34.3.1 information which is or becomes generally available to the public other than as a result of a disclosure by the Receiving Party; 34.3.2 information which was available to the Receiving Party on a non-confidential basis prior to its disclosures by the Disclosing Party; and 34.3.3 information which becomes available to the Receiving Party on a non-confidential basis from a person other than the Disclosing Party or its representative who is not otherwise bound by a confidentiality agreement with Disclosing Party or its agent or is otherwise not under any obligation to Disclosing party or its agent not to disclose the information to the Receiving Party. 34.4 Injunctive Relief Due to Breach. The Parties agree that remedies at ------------------------------- law may be inadequate to protect each other in the event of a breach of this Section 34, and the Receiving Party hereby in advance agrees that the Disclosing Party shall be entitled to seek and obtain, without proof of actual damages, temporary, preliminary and permanent injunctive relief from any court or Governmental Authority of competent jurisdiction restraining the Receiving Party from committing or continuing any breach of this Section 34. 35. CHOICE OF LAW 35.1 This Agreement and the rights and obligations of the Parties shall be construed and governed by the Laws of: (i) the State of Nevada as if executed and performed wholly within that state; and (ii) the Federal Power Act, to the extent the rights and obligations of the Parties are covered by such act. 39 IN WITNESS WHEREOF, the Parties hereto have caused this Transitional Power Purchase Agreement for the Sunrise/Sunpeak generating station to be executed by their duly authorized representative on the date first stated above: NEVADA POWER COMPANY RELIANT ENERGY SUNRISE, LLC By: ________________________ By: ________________________ William E. Peterson J. Douglas Divine Title: Senior Vice President, General Title: Senior Vice President Counsel, and Corporate Secretary EXHIBIT A SUNRISE BUNDLE ASSET BUNDLE CAPACITY AND OPERATING PARAMETERSEXHIBIT ASUNRISE BUNDLEASSET BUNDLE CAPACITY AND OPERATING PARAMETERS ========================================================================== UNIT NET SUMMER NET RAMP RATE MINIMUM CAPABILITY WINTERCAPABILI TY (MW)/HOUR HOURLY (MW) (MW) ENERGY TAKE (MW) - -------------------------------------------------------------------------- Sunrise 1 80 80 80 Sunrise 2 69 76 76 Sunpeak 3 74 74 74 Sunpeak 4 74 74 74 Sunpeak 5 74 74 74 - -------------------------------------------------------------------------- Total 371 378 378 n/a ========================================================================== Minimum Annual Energy Take: 310,000 MWh Limit on Excused Energy: 20,000 MWh For purposes of this Exhibit A, summer months shall consist of the months of June through September and winter months shall consist of the months of January through May and the months of October through December. A-1 EXHIBIT B SUNRISE BUNDLE ENERGY AND ANCILLARY SERVICES PRICES Energy Prices* - ------------- Price Floor of Energy: $ 32.68 per MWh Price Ceiling of Energy: $ 46.38 per MWh Ancillary Service Prices* - ------------------------ Operating Reserve - Spinning Reserve: Summer On-Peak: $12.86 per MW-reserved per hour Summer Off-Peak: $7.35 per MW-reserved per hour Winter On-Peak: $7.34 per MW-reserved per hour Winter Off-Peak: $4.19 per MW-reserved per hour Operating Reserve - Supplemental Reserve: Summer On-Peak: $1.53 per MW-reserved per hour Summer Off-Peak: $0.87 per MW-reserved per hour Winter On-Peak: $0.82 per MW-reserved per hour Winter Off-Peak: $0.47 per MW-reserved per hour For purposes of this Exhibit B, summer months shall consist of the months of June through and September, and winter months shall consist of the months of January through May and the months of October through December. The On-Peak periods shall consist of Hour Ending (HE) 0700 through HE 2200 PPT, Monday through Saturday. The Off-Peak periods shall consist of HE 0100 through HE 0600, HE 2300 and HE 2400 PPT, Monday through Saturday; HE 0100 through HE 2400 PPT Sunday and additional Off-Peak days (holidays) as designated annually by WSCC. *SUBJECT TO FERC APPROVAL ------------------------ B-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE
A Price Ceiling of Energy $46.38 /MWh B Price Floor of Energy $32.68 /MWh MONTH 1 - ENERGY - ---------------- C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Capacity ----- ------------- ----------- -------------- ----------------- ---------------- ---------------------- (C - D) (D x F) (C x F) 1 371 371 50.00 $ 18,550.00 $ 18,550.00 2 371 371 0 50.00 18,550.00 18,550.00 3 371 311 60 50.00 15,550.00 18,550.00 4 371 311 60 50.00 15,550.00 18,550.00 5 241 231 10 40.00 9,240.00 9,640.00 6 271 271 0 40.00 10,840.00 10,840.00 7 361 341 20 30.00 10,230.00 10,830.00 8 371 371 0 30.00 11,130.00 11,130.00 9 371 371 0 30.00 11,130.00 11,130.00 10 371 371 0 35.00 12,985.00 12,985.00 - ----------------------------------------------------------------------------------------------------------------------------- 3,470 3,320 150 $133,755.00 $140,755.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $133,755.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $140,755.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $153,981.60 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $160,938.60 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $108,497.60 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $113,399.60 L. Invoiced Amount - Energy Sec 7.3 (K ** I ** J) $133,755.00 M. Theoretical Amount for Expected Performance (KT ** IT ** JT) $140,755.00 ** less than *** Greater than MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - ------------------------------------------------------- N O P Q R S Ancillary Dispatch Schedule of Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------ ------------ ------------- --------------- ----------------- --------------------- (N - O) (O x Q) (N x Q) 1 0 0 0 7.35 $ 0.00 $ 0.00 2 0 0 0 7.35 0.00 0.00 3 0 0 0 12.86 0.00 0.00 4 0 0 0 12.86 0.00 0.00 5 80 80 0 12.86 1,028.80 1,028.80 6 80 60 20 12.86 771.60 1,028.80 7 0 0 0 12.86 0.00 0.00 8 0 0 0 12.86 0.00 0.00 9 0 0 0 12.86 0.00 0.00 10 0 0 0 12.86 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- 160 140 20 $ 1,800.40 $ 2,057.60 T. Invoiced Amount - Ancillary Service Capacity - Spinning Reserve Sec 7.2.5 $ 1,800.40
C-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE U. Theoretical Amount for Expected Performance $ 2,057.60
MONTH 1 - ANCILLARY SERVICE CAPACITY - SUPPLEMENTAL RESERVE - ----------------------------------------------------------- V W X Y Z AA Ancillary Dispatch Schedule of Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------ ------------ ------------- --------------- ----------------- --------------------- (V - W) (W x Y) (V x Y) 1 0 0 0 0.87 $ 0.00 $ 0.00 2 0 0 0 0.87 0.00 0.00 3 0 0 0 1.53 0.00 0.00 4 0 0 0 1.53 0.00 0.00 5 10 10 0 1.53 15.30 15.30 6 10 10 0 1.53 15.30 15.30 7 10 10 0 1.53 15.30 15.30 8 0 0 0 1.53 0.00 0.00 9 0 0 0 1.53 0.00 0.00 10 0 0 0 1.53 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------- 30 30 0 $ 45.90 $ 45.90 AB. Invoiced Amount - Ancillary Service Capacity - Supplemental Reserve Sec 7.2.5 $ 45.90 AC. Theoretical Amount for Expected Performance $ 45.90 MONTH 1 - ANCILLARY SERVICE ENERGY - ---------------------------------- AD AE AF AG AH AI Ancillary Dispatch Schedule of Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule Hour Capacity (MW) Supplied (MW) Shortfall (MW) Energy ($/MW) Energy Supplied of Ancillary Services ---- ------------ ------------ ------------- --------------- ----------------- --------------------- (AD - AE) (AE x AG) (AD x AG) 1 0 0 0 46.38 $ 0.00 $ 0.00 2 0 0 0 46.38 0.00 0.00 3 0 0 0 46.38 0.00 0.00 4 0 0 0 46.38 0.00 0.00 5 40 40 0 46.38 1,855.20 1,855.20 6 30 10 20 46.38 463.80 1,391.40 7 10 10 0 46.38 463.80 463.80 8 0 0 0 46.38 0.00 0.00 9 0 0 0 46.38 0.00 0.00 10 0 0 0 46.38 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------------- 80 60 20 $463.80 $ 2,782.80 $ 3,710.40 AJ. Invoiced Amount - Ancillary Services Energy Sec 7.2.6 $ 2,782.80 AK. Theoretical Amount for Expected Performance $ 3,710.40 MONTH 1 - TOTAL INVOICE AMOUNT Sec 7.3 (L + T + AB + AJ) $138,384.10 ==================================================================================================================================
C-2 MONTH 2 - ENERGY - -----------------
C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 371 371 0 50.00 $ 18,550.00 $ 18,550.00 2 371 371 0 50.00 18,550.00 18,550.00 3 371 311 60 50.00 15,550.00 18,550.00 4 371 311 60 60.00 18,660.00 22,260.00 5 241 231 10 60.00 13,860.00 14,460.00 6 271 271 0 60.00 16,260.00 16,260.00 7 361 341 20 40.00 13,640.00 14,440.00 8 371 371 0 40.00 14,840.00 14,840.00 9 371 371 0 40.00 14,840.00 14,840.00 10 371 371 0 45.00 16,695.00 16,695.00 - -------------------------------------------------------------------------------------------------------------------------------- 3,470 3,320 150 $161,445.00 $ 169,445.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $161,445.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 169,445.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $153,981.60 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 160,938.60 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $108,497.60 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 113,399.60 L. Invoiced Amount - Energy Sec 7.3 (I > J) $153,981.60 M. Theoretical Amount for Expected Performance (IT > JT) $ 160,938.60
MONTH 3 - ENERGY - ----------------
C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 371 371 0 40.00 $ 14,840.00 $14,840.00 2 371 371 0 30.00 11,130.00 11,130.00 3 371 311 60 30.00 9,330.00 11,130.00 4 371 311 60 30.00 9,330.00 11,130.00 5 241 231 10 25.00 5,775.00 6,025.00 6 271 271 0 25.00 6,775.00 6,775.00 7 361 341 20 25.00 8,525.00 9,025.00 8 371 371 0 25.00 9,275.00 9,275.00 9 371 371 0 25.00 9,275.00 9,275.00 10 371 371 0 25.00 9,275.00 9,275.00 - ------------------------------------------------------------------------------------------------------------------------------- 3,470 3,320 150 $ 93,530.00 $ 97,880.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 93,530.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 97,880.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $153,981.60 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $160,938.60 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $108,497.60
C-3 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $113,399.60 L. Invoiced Amount - Energy Sec 7.3 (I ** K) $ 108,497.60 M. Theoretical Amount for Expected Performance (IT ** KT) $113,399.60
** Less than *** Greater than For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. C-4 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ENERGY - ----------------
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy --- ----------- ---------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 60 35.00 100.00 2,200.00 4 60 30.00 50.00 1,850.00 5 10 30.00 50.00 350.00 6 0 na 0.00 0.00 7 20 25.00 0.00 500.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------ 150 $ 4,900.00 E. Gross Replacement Cost of Energy $ 4,900.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $140,755.00 G. Actual Supplier's Invoice Amount 133,755.00 ----------------------- H. Avoided Payment to Supplier (F - G) $ 7,000.00 I. Invoiced Replacement Cost - Energy (E ** H) $ 0.00
** Less than *** Greater than MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - -------------------------------------------------------
J K * L * M Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (J x K) + L 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 40.00 100.00 900.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------------- 20 $ 900.00 N. Gross Replacement Cost of Ancillary Capacity - Spinning Reserve $ 900.00 O. Theoretical Supplier's Invoice Amount for Expected Performance $ 2,057.60 P. Actual Supplier's Invoice Amount 1,800.40 ----------------------- Q. Avoided Payment to Supplier (O - P) $ 257.20 R. Invoiced Replacement Cost - Ancillary Capacity (N > Q) $ 642.80
D-1 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ANCILLARY CAPACITY - SUPPLEMENTAL RESERVE - ---------------------------------------------------
S T * U * V Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (S x T) + U 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- 0 $ 0.00 W. Gross Replacement Cost of Ancillary Capacity - Supplemental Reserve $ 0.00 X. Theoretical Supplier's Invoice Amount for Expected Performance $ 45.90 Y. Actual Supplier's Invoice Amount 45.90 ----------------------- Z. Avoided Payment to Supplier (X - Y) $ 0.00 AA. Invoiced Replacement Cost - Ancillary Capacity (W = Z) $ 0.00
MONTH 1 - ANCILLARY SERVICE ENERGY - ----------------------------------
AB AC * AD * AE Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy ** Cost of Energy ---- ------------ ----------------- ------------ -------------- (AB x AC) + AD 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 50.00 20.00 1,020.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------------- 20 $ 1,020.00 AF. Gross Replacement Cost of Ancillary Energy $ 1,020.00 AG. Theoretical Supplier's Invoice Amount for Expected Performance $ 3,710.40 AH. Actual Supplier's Invoice Amount 2,782.80 ----------------------- AI. Avoided Payment to Supplier (AG - AH) $ 927.60 AJ. Invoiced Replacement Cost - Ancillary Energy (AF > AI) $ 92.40
D-2 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS
MONTH 1 - TOTAL INVOICE AMOUNT (I + R + AA + AJ) $ 735.20 ================================================================================================================================= MONTH 2 - ENERGY - ---------------- A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 40.00 200.00 2,600.00 4 60 55.00 100.00 3,400.00 5 10 48.00 200.00 680.00 6 0 na 0.00 0.00 7 20 35.00 300.00 1,000.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- 150 $ 7,680.00 E. Gross Replacement Cost of Energy $ 7,680.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 160,938.60 G. Actual Supplier's Invoice Amount 153,981.60 ----------------------- H. Avoided Payment to Supplier (F - G) $ 6,957.00 I. Invoiced Replacement Cost - Energy (E > H) $ 723.00
MONTH 3 - ENERGY - ----------------
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 37.00 100.00 2,320.00 4 60 34.00 50.00 2,090.00 5 10 34.00 0.00 340.00 6 0 na 0.00 0.00 7 20 31.00 50.00 670.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------------- 150 $ 5,420.00 E. Gross Replacement Cost of Energy $ 5,420.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 113,399.60 ------------
D-3 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS G. Actual Supplier's Invoice Amount 108,497.60 ----------------------- H. Avoided Payment to Supplier (F - G) $ 4,902.00 I. Invoiced Replacement Cost - Energy (E > H) $ 518.00
For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. EXHIBIT E YEAR END TRUE-UP INVOICE A Price Ceiling of Energy $ 46.38/MWh B Price Floor of Energy $ 32.68/MWh EXAMPLE 1 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 3,320 $ 133,755.00 $ 153,981.60 $ 108,497.60 $ 133,755.00 2 3,320 161,445.00 153,981.60 108,497.60 153,981.60 3 3,320 93,530.00 153,981.60 108,497.60 108,497.60 4 3,710 185,500.00 172,069.80 121,242.80 172,069.80 5 3,710 170,660.00 172,069.80 121,242.80 170,660.00 6 3,510 161,460.00 162,793.80 114,706.80 161,460.00 7 3,710 178,080.00 172,069.80 121,242.80 172,069.80 8 3,710 181,790.00 172,069.80 121,242.80 172,069.80 9 3,170 158,500.00 147,024.60 103,595.60 147,024.60 10 3,710 174,370.00 172,069.80 121,242.80 172,069.80 11 3,710 207,760.00 172,069.80 121,242.80 172,069.80 12 3,410 173,910.00 158,155.80 111,438.80 158,155.80 - ------------------------------------------------------------------------------------------------------------------------------- Total 42,310 $1,980,760.00 $1,962,337.80 $1,382,690.80 $1,893,883.60 (Total of Column D) > (Total of Column E) therefore Annual True-up calculated under Section 7.5.1(a) - ------------------------------------------------------------------------------------------------------------------ H. Annual True-up - Delivered Energy (Total E - Total G) $ 68,454.20 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total E / Total C) $ 46.38
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ --------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 723.00 3 150 5,420.00 518.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00
D-4 EXHIBIT E YEAR END TRUE-UP INVOICE 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------- Total 450 $ 20,871.00 $ 18,000.00 $ 0.00 $ 1,241.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ 1,241.00 Total Annual True-up * (H + O) $ 69,695.20 ===================================================================================================================
EXAMPLE 2 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 3,320 $ 133,755.00 $ 153,981.60 $ 108,497.60 $ 133,755.00 2 3,320 161,445.00 153,981.60 108,497.60 153,981.60 3 3,320 93,530.00 153,981.60 108,497.60 108,497.60 4 3,710 140,980.00 172,069.80 121,242.80 140,980.00 5 3,710 137,270.00 172,069.80 121,242.80 137,270.00 6 3,510 119,340.00 162,793.80 114,706.80 119,340.00 7 3,710 185,500.00 172,069.80 121,242.80 172,069.80 8 3,710 192,920.00 172,069.80 121,242.80 172,069.80 9 3,170 120,460.00 147,024.60 103,595.60 120,460.00 10 3,710 129,850.00 172,069.80 121,242.80 129,850.00 11 3,710 163,240.00 172,069.80 121,242.80 163,240.00 12 3,410 132,990.00 158,155.80 111,438.80 132,990.00 - -------------------------------------------------------------------------------------------------------------------------------- Total 42,310 $1,711,280.00 $1,962,337.80 $1,382,690.80 $1,684,503.80 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) - ------------------------------------------------------------------------------------------------------ H. Annual True-up - Delivered Energy (Total D - Total G) $ 26,776.20 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 40.45
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ --------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 723.00 3 150 5,420.00 518.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------- Total 450 $ 18,200.80 $ 18,000.00 $ 0.00 $ 1,241.00
E-2 EXHIBIT E YEAR END TRUE-UP INVOICE O. Annual True-up - Replacement Costs (Total N - Total M) $ 1,241.00 Total Annual True-up * (H + O) $ 28,017.20 ==================================================================================================================================
EXAMPLE 3 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 3,320 $ 133,755.00 $ 153,981.60 $ 108,497.60 $ 133,755.00 2 3,320 161,445.00 153,981.60 108,497.60 153,981.60 3 3,320 93,530.00 153,981.60 108,497.60 108,497.60 4 3,710 133,560.00 172,069.80 121,242.80 133,560.00 5 3,710 126,140.00 172,069.80 121,242.80 126,140.00 6 3,510 112,320.00 162,793.80 114,706.80 114,706.80 7 3,710 111,300.00 172,069.80 121,242.80 121,242.80 8 3,710 129,850.00 172,069.80 121,242.80 129,850.00 9 3,170 104,610.00 147,024.60 103,595.60 104,610.00 10 3,710 122,430.00 172,069.80 121,242.80 122,430.00 11 3,710 107,590.00 172,069.80 121,242.80 121,242.80 12 3,410 102,300.00 158,155.80 111,438.80 111,438.80 - ---------------------------------------------------------------------------------------------------------------------- Total 42,310 $1,438,830.00 $1,962,337.80 $1,382,690.80 $1,481,455.40 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) - ----------------------------------------------------------------------------------------------------- H. Annual True-up - Delivered Energy (Total D - Total G) $ (42,625.40) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 34.01
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ --------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 723.00 3 150 5,420.00 518.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ Total 450 $ 15,303.08 $ 18,000.00 $ 2,696.92 $ 1,241.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ (1,455.92) ========================================================================================================================
E-3 EXHIBIT E YEAR TRUE-UP INVOICE Total Annual True-up * (H + O) $ (44,081.32) ==================================================================================================================================
EXAMPLE 4 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 3,320 $ 133,755.00 $ 153,981.60 $ 108,497.60 $ 133,755.00 2 3,320 161,445.00 153,981.60 108,497.60 153,981.60 3 3,320 93,530.00 153,981.60 108,497.60 108,497.60 4 3,710 81,620.00 172,069.80 121,242.80 121,242.80 5 3,710 63,070.00 172,069.80 121,242.80 121,242.80 6 3,510 80,730.00 162,793.80 114,706.80 114,706.80 7 3,710 85,330.00 172,069.80 121,242.80 121,242.80 8 3,710 51,940.00 172,069.80 121,242.80 121,242.80 9 3,170 57,060.00 147,024.60 103,595.60 103,595.60 10 3,710 70,490.00 172,069.80 121,242.80 121,242.80 11 3,710 44,520.00 172,069.80 121,242.80 121,242.80 12 3,410 64,790.00 158,155.80 111,438.80 111,438.80 - ----------------------------------------------------------------------------------------------------------------------------- Total 42,310 $ 988,280.00 $1,962,337.80 $1,382,690.80 $1,453,432.20 (Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) - ----------------------------------------------------------------------------------------------------- H. Annual True-up - Delivered Energy (Total F - Total G) $ (70,741.40) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total F / Total C) $ 32.68
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ --------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 723.00 3 150 5,420.00 518.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - -------------------------------------------------------------------------------------------------------------------------------- Total 450 $ 14,706.00 $ 18,000.00 $ 3,294.00 $ 1,241.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ (2,053.00) Total Annual True-up * (H + O) $ (72,794.40) ==================================================================================================================================
* Positive Total Annual True-up is indicative of a payment form Buyer to Supplier; Negative Total Annual True-up is indicative of a payment form Supplier to Buyer. E-4 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS
Supplier: - -------- a) Agreement Notices: Reliant Energy Sunrise, LLC ----------------- Contract Administration Mail: P.O. Box 4455 Courier: 1111 Louisiana Street Houston, TX 77210-4455 Houston, TX 77002 Phone: (703) 207-1300 Fax: (703) 207-9562 Copies to: Reliant Energy, Incorporated Attention: General Counsel, Wholesale Group Mail: P.O. Box 61867 Courier: 1111 Louisiana St, 43 Floor Houston, TX 77208 Houston, TX 77002 Fax: (713) 207-0116 b) Payment Check: Reliant Energy Sunrise, LLC ------------- P.O. Box 201142 Houston, TX 77216-1142 c) Payment Wire Transfer: Bank: Chase Bank of Texas --------------------- ABA #: 113 000 609 For: Reliant Energy Sunrise, LLC Account No: 0010-261-2158 d) Invoices: Reliant Energy Sunrise, LLC -------- Power Accounting Mail: P.O. Box 4455 Courier: 1111 Louisiana Street Houston, TX 77210-4455 Houston, TX 77002 Phone: (713) 207-3573 Fax: (713) 207-9975 e) Operating Notifications: ----------------------- i) Pre-Schedule: Phone: (713) 207-1215 Fax: (713) 207-1135 ii) Real Time: Phone: (713) 207-1215 Fax: (713) 207-1224 iii) Monthly Checkout Phone: (713) 207-3845 Person: Matt Griffin Fax: (713) 207-9975
F-1 Buyer: - ----- a) Agreement Notices: ----------------- Address: Gary Craythorn Manager, Resource Contracts Nevada Power Company 6226 West Sahara Avenue, M/S 26A Las Vegas, Nevada 89146 Phone: 702/367-5425 Fax: 702/227-2455 E-mail: gcraythorn@nevp.com b) Invoices: -------- US Post Office: (Via Certified Mail) Overnight Delivery -------------- ------------------ Address: Nevada Power Company Address: Nevada Power Company Attn: Kathy Crews Attn: Kathy Crews P.O. Box 230, M/S 20 6226 West Sahara Ave., M/S 20 Las Vegas, Nevada 89151 Las Vegas, Nevada 89146 Telephone: 702/227-2476 Fax: 702/367-5096 E-mail: kcrews@nevp.com c) Schedules: --------- i) Pre-Schedule: Primary Name: Rick Engebretson Phone: 702/862-7195 E-mail: rengebretson@nevp.com Alternate Name: Tim Schuster Phone: 702/862-7194 E-mail: tschuster@nevp.com Fax: 702/227-2404 ii) Real Time: Phone: 702/862-7106 Fax: 702/227-2404 iii) Monthly Checkout: Kathy Crews Phone: 702/227-2476 Fax: 702/367-5096 E-mail: kcrews@nevp.com d) Control Area/Transmission: ------------------------- i) Reliability Dispatch: Phone: (702) 451-2026 Fax: (702) 862-7113 ii) Transmission Dispatch: Phone: (702) 451-8346 Fax: (702) 862-7113
F-2 EXHIBIT G FORM OF AVAILABILITY NOTICE* Date of Notice: Time of Notice: Supplier: Name of Supplier's Representative: Buyer: Asset Bundle: Availability Dates (96 hours total):
A B C D E Availability Hour Available from Total Derating Permitted Asset Bundle Available from Date Ending Unit 1 (MW) of Unit 1 (MW) Derating of Capacity of Unit Unit 2 (MW) ---- ------ ------------ ------------- of Unit 1 (MW) ---- ----------- -------------- 1 (MW) ----- (A ** or = ___) (___ - A) (C ** or = B) (A - C) (E ** or = ___) 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500 F G H I** J Availability Hour Total Derating of Permitted Asset Bundle Alternative Cause and Expected Duration of Date Ending Unit 2 (MW) Derating of Capacity of Point(s) of Deratings and Identification of ---- ------ ----------- Unit 2 (MW) Unit 2 (MW) Delivery Permitted Deratings ----------- ------------ -------- ------------------- (___ - E) (B ** or = F) (G - E) 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500
* The Parties' operational personnel will develop a similar form for the other generating units in the bundle. * The Parties' operational personnel shall develop the necessary procedure to document requests and responses to utilize Alternative Point(s) of Delivery. ** Less than *** Greater than G-1 EXHIBIT H FORM OF GUARANTY This Guaranty is entered into as of December 9, 2000 by Reliant Energy Power Generation, Inc., a Delaware corporation ("Guarantor"), on behalf of Reliant Energy Sunrise, LLC, a Delaware limited liability company ("Supplier"), in favor of and for the benefit of Nevada Power Company, a Nevada corporation ("NPC"). NPC is sometimes referred to herein as "Beneficiary". WHEREAS, Supplier and NPC are entering into a Transitional Power Purchase Agreement dated as of December 9, 2000 (the "TPPA") by which Supplier has agreed to sell and NPC has agreed to buy Energy and Ancillary Services (as defined in the TPPA) produced by the Sunrise/Sunpeak generating station being sold by NPC; and WHEREAS, it is a condition to the obligation of NPC to enter into the TPPA for Guarantor to guaranty the Supplier's obligations under the TPPA in an amount not to exceed the Credit Amount (as defined in the TPPA) (the "Guaranteed Obligations"). 1. Guaranty. Guarantor irrevocably and unconditionally guaranties, as primary obligor and not merely as surety, the due and punctual payment in full of all Guaranteed Obligations (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)). In the event that all or any portion of the Guaranteed Obligations is paid by Supplier, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) is rescinded or recovered directly or indirectly from the Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments that are so rescinded or recovered shall constitute Guaranteed Obligations (to the extent such payments, in the aggregate, do not exceed the Credit Amount). Subject to the other provisions of this Section 1, upon failure of Supplier to pay any of the Guaranteed Obligations when and as the same shall become due, Guarantor will upon demand pay, or cause to be paid, in cash, to NPC, an amount equal to the aggregate of the unpaid Guaranteed Obligations. In the event Guarantor fails to pay the Guaranteed Obligations, each and every default in the payment shall give rise to a separate cause of action and separate causes of action may be brought hereunder as each such cause of action arises. 2. Expenses. The Guarantor agrees to reimburse NPC for all reasonable costs and expenses (including, without limitation, the reasonable fees and expenses of legal counsel) in connection with (i) any default by Guarantor hereunder and any enforcement or collection proceeding resulting therefrom, including, without limitation, all manner of participation in or other involvement with bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings of or involving the Guarantor, judicial or regulatory proceedings of or involving the Guarantor and workout, restructuring or other negotiations or proceedings of or involving the Guarantor (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (ii) the enforcement of this Section 2. H-1 3. Guaranty Absolute; Continuing Guaranty. The obligations of Guarantor hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, Guarantor agrees that: (a) this Guaranty is a guaranty of payment when due and not of collectibility; (b) the obligations of Guarantor hereunder are independent of the obligations of Supplier under the TPPA and a separate action or actions may be brought and prosecuted against Guarantor whether or not any action is brought against the Supplier and whether or not the Supplier is joined in any such action or actions; and (c) Guarantor's payment of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge Guarantor's liability for any portion of the Guaranteed Obligations that has not been paid. This Guaranty is a continuing guaranty and shall be binding upon Guarantor and its successors and assigns. 4. Actions by Beneficiary. The Beneficiary may from time to time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation, impairment or discharge of Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment of this Guaranty or the Guaranteed Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person with respect to the Guaranteed Obligations, (e) enforce and apply any security hereafter held by or for the benefit of the Beneficiary in respect of this Guaranty or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Beneficiary may have against any such security, and (f) exercise any other rights available to NPC under the TPPA. 5. No Discharge. This Guaranty and the obligations of Guarantor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Guaranteed Obligations), including without limitation the occurrence of any of the following, whether or not Guarantor shall have had notice or knowledge of any of them: (a) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations, (b) any waiver or modification of, or any consent to departure from, any of the terms or provisions of any other guaranty or security for the Guaranteed Obligations, (c) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (d) the application of payments received from any source to the payment of indebtedness other than the Guaranteed Obligations, even if the Beneficiary might have elected to apply such payment to any part or all of the Guaranteed Obligations, (e) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed H-2 Obligations, (f) any defenses, set-offs or counterclaims which the Supplier may assert against the Beneficiary in respect of the Guaranteed Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction, and (g) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of Guarantor as an obligor in respect of the Guaranteed Obligations. 6. Waivers for the Benefit of Beneficiary. Guarantor waives, for the benefit of Beneficiary: (a) any right to require the Beneficiary, as a condition of payment or performance by Guarantor, to (i) proceed against the Supplier, any other guarantor of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from the Supplier, any other guarantor of the Guaranteed Obligations or any other Person, or (iii) pursue any other remedy in the power of the Beneficiary; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Supplier including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Supplier from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) (i) any principles or provisions of law, statutory or otherwise, that are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that the Beneficiary protect, secure, perfect or insure any lien on any property subject thereto; (e) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guaranty; and (f) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty. 7. Waiver of Rights Against Supplier. Guarantor waives any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against the Supplier or any of its assets in connection with this Guaranty or the performance by Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against the Supplier, (b) any right to enforce, or to participate in, any claim, right or remedy that the Beneficiary now has or may hereafter have against the Supplier, and (c) any benefit of, and any right to participate in, any collateral or security hereafter held by the Beneficiary. Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement and indemnification as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Guarantor may have against the Supplier or against any collateral or security shall be junior and subordinate to any rights the Beneficiary may have against Supplier, to all right, title and interest the Beneficiary may have in any such collateral or security, and to any right the Beneficiary may have against such other guarantor. H-3 8. Representations and Warranties of Guarantor. Guarantor represents and warrants to NPC as follows: (a) Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Guarantor has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (b) Guarantor has the corporate power and authority to execute and deliver this Guaranty and to consummate the transactions contemplated hereby. The execution and delivery of this Guaranty and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Guarantor, and no other corporate proceedings on the part of Guarantor, including the approval of its shareholders, are necessary to authorize this Guaranty or to consummate the transactions so contemplated. This Guaranty has been duly and validly executed and delivered by Guarantor and constitutes a valid and binding agreement of Guarantor, enforceable against Guarantor in accordance with its terms. (c) There are no legal or arbitral proceedings by or before any governmental or regulatory authority or agency, now pending or (to Guarantor's knowledge) threatened against Guarantor or its subsidiaries that could reasonably be expected to have a material adverse effect on the consolidated financial condition, operations or business taken as a whole of it and its subsidiaries. (d) The representations and warranties made herein will remain true until Guarantor has fulfilled all obligations to pay in full the Guaranteed Obligations. 9. Set Off. In addition to any other rights the Beneficiary may have under law or in equity, if any amount shall at any time be due and owing by Guarantor to the Beneficiary under this Guaranty, the Beneficiary is authorized at any time or from time to time, without notice (any such notice being expressly waived), to set off and to appropriate and to apply any indebtedness of the Beneficiary owing to Guarantor and any other property of Guarantor held by the Beneficiary to or for the credit or the account of Guarantor against and on account of the Guaranteed Obligations and liabilities of Guarantor to the Beneficiary under this Guaranty. 10. Disputes. Any action, claim or dispute arising out of or relating to this Guaranty (any such action, claim or dispute, a "Dispute") shall be submitted in writing to the other Party. In the event Guarantor and NPC are unable to resolve the Dispute satisfactorily within thirty (30) days from the receipt of notice of the Dispute, either Guarantor or NPC may initiate arbitration through the serving and filing of a demand for arbitration. Guarantor and NPC expressly agree that such arbitration shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time a request made for provisional remedies requesting preservation of respective rights and obligations under the Guaranty may be resolved by a court of law located in the County of the principal place of business of NPC. Arbitration shall be conducted in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the TPPA. H-4 11. Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall in any event be effective without the written concurrence of NPC and, in the case of any such amendment or modification, Guarantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 12. Miscellaneous. It is not necessary for Beneficiary to inquire into the capacity or powers of Guarantor or Supplier or the officers, directors or any agents acting or purporting to act on behalf of any of them. The rights, powers and remedies given to Beneficiary by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to Beneficiary by virtue of any statute or rule of law or in the TPPA. Any forbearance or failure to exercise, and any delay by Beneficiary in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. This Agreement and the rights and obligations of the Parties shall be construed and governed by the Laws of: (i) the State of Nevada as if executed and performed wholly within that state; and (ii) the Federal Power Act, to the extent the rights and obligations of the Parties are covered by such act. In case any provision in or obligation under this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Guaranty shall inure to the benefit of Beneficiary and its respective successors and assigns. 13. Notices. All notices, requests, demands, waivers, consents and other communications hereunder shall be in writing, shall be delivered either in person, by telegraphic, facsimile or other electronic means, by overnight air courier or by mail, and shall be deemed to have been duly given and to have become effective (a) upon receipt if delivered in person or by telegraphic, facsimile or other electronic means, (b) one (1) business day after having been delivered to an air courier for overnight delivery or (c) three (3) business days after having been deposited in the U.S. mails as certified or registered mail, return receipt requested, all fees prepaid, directed to the parties at the following addresses: If to Guarantor, addressed to: Reliant Energy Power Generation, Inc. Attention: Vice President - Finance Mail: P.O. Box 286 Houston, TX 77001-0286 Courier: 1111 Louisiana Street Houston, TX 77002 H-5 Facsimile: (713) 207-9916 with a copy to: Reliant Energy, Incorporated Attention: General Counsel, Wholesale Group Mail: P.O. Box 61867 Houston, TX 77210-1867 Courier: 1111 Louisiana Street, 43/rd/ Floor Houston, TX 77002 If to NPC, addressed to: William E. Peterson Nevada Power Company 6100 Neil Road Reno, Nevada 89511 Facsimile: (775) 834-5959 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officers thereunto duly authorized as of the date first written above. ____________________ By: J. Douglas Divine Title: Senior Vice President Reliant Energy Power Generation, Inc. By Mail: P.O. Box 286 Houston, TX 77001-0286 By Courier: 111 Louisiana Street Houston, TX 77002 H-6 EXHIBIT I COMPANY OBSERVED HOLIDAYS New Year's Day January 1/st/ Martin Luther King's Day Third Monday in January President's Day Third Monday in February Memorial Day (observed) Last Monday in May Independence Day July 4/th/ Labor Day First Monday in September Veteran's Day November 11/th/ Thanksgiving Day Fourth Thursday in November Thanksgiving Friday Friday after Thanksgiving Christmas Eve December 24/th/ Christmas Day December 25/th/ I-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT Monthly Monthly Month Adjustment Month Adjustment - --------------------------------- ------------------------------------- Mar-01 0.0% Mar-02 2.4% Apr-01 3.0% Apr-02 3.2% May-01 3.3% May-02 2.9% Jun-01 6.1% Jun-02 5.4% Jul-01 11.2% Jul-02 12.7% Aug-01 13.2% Aug-02 13.0% Sep-01 7.2% Sep-02 10.8% Oct-01 1.3% Oct-02 1.6% Nov-01 0.6% Nov-02 0.0% Dec-01 0.7% Dec-02 0.1% Jan-02 3.3% Jan-03 0.8% Feb-02 2.6% Feb-03 0.9% Example 1 - Effective Date of Agreement is April 15, 2001 A. TPPA Amount: $ B C D Monthly Applicable Applicable Month Adjustment Portion * Adjustment - ---------------------------------------------------------- (B x C) Apr-01 3.0% 50.0% 1.5% May-01 3.3% 100.0% 3.3% - ----------------------------------------------------------- Total 4.8% E. Total of Monthly Applicable Adjustments 4.8% F Adjusted TPPA Amount (A x (1+D)) $15,720,000 =============================================================================== Example 2 - Effective Date of Agreement is September 15, 2001 G. TPPA Amount: $15,000,000 H I J Monthly Applicable Applicable Month Adjustment Portion * Adjustment - ------------------------------------------------------------- (H x I) Jun-01 6.1% 100.0% 6.1% Jul-01 11.2% 100.0% 11.2% Aug-01 13.2% 100.0% 13.2% Sep-01 7.2% 50.0% 3.6% - -------------------------------------------------------------- Total 34.1% J-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT K. Total of Monthly Applicable Adjustments 34.1% L Adjusted TPPA Amount (G x (1-K)) $ 9,885,000 ================================================================================ Example 3 - Termination Date of December 31, 2002 M. TPPA Amount: $ 15,000,000 N O P Monthly Applicable Applicable Month Adjustment Portion ** Adjustment - -------------------------------------------------------------------- (N x O) Jan-03 0.8% 100.0% 0.8% Feb-03 0.9% 100.0% 0.9% - --------------------------------------------------------------------- Total 1.7% Q. Total of Monthly Applicable Adjustments 1.7% R Payment Amount (M x Q) $ 255,000 =============================================================================== * The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer were made divided by the number of days in the month. ** The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer would have been made divided by the number of days in the month. J-2 EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE
A B C D E F Base Number Base Energy Sales per Current Number Adjusted Energy Class * of Customers Sales (MWh) Customer (MWh) of Customers Sales (MWh) - ---------------------------------------------------------------------------------------------------------------- (C / B) (D x E) ** Residential 475,000 5,800,000 12 470,000 5,738,947 Commercial 65,000 2,800,000 43 60,000 2,584,615 Industrial 1,000 4,900,000 800 3,600,000 Street Lighting 5 130,000 5 130,000 Other Retail 50 600,000 50 600,000 Wholesale 5 850,000 5 850,000 - ---------------------------------------------------------------------------------------------------------------- 541,060 15,080,000 530,860 13,503,563 G. Adjustment to Minimum Annual Take (F / C) 89.55% H. Minimum Annual Take from Exhibit A (MWh) 310,000 I. Revised Minimum Annual Take (MWh) (G x H) 277,605 J K Month During Applicable Min. Contract Year Annual Take (MWh) - ------------------------------------------------ 1 310,000 2 310,000 3 310,000 4 310,000 5 277,605 6 277,605 7 277,605 8 263,500 9 263,500 10 248,000 11 248,000 12 248,000 - ------------------------------------------------ Total 3,343,815 L. Minimum Take for Contract Year (MWh) (Total of K / 12) 278,651
* As reported on Buyer's FERC Form 1 ** Adjusted Energy Sales for the remaining Industrial, Street Lighting, Other Retail, and Wholesale customers will be based upon actual sales during the base period. K-1 EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE
A B C D E * F G ** Dispatch Supply Delivered Permitted Force Replacement Applicable Hour Amount (MWh) Energy (MWh) Derating(MWh) Majeure(MWh) Energy(MWh) Energy(MWh) - --------------------------------------------------------------------------------------------- (C+D+E+F) 1 371 371 371 2 371 371 371 3 371 371 371 4 371 371 371 5 371 371 371 6 371 351 20 371 7 371 351 20 371 8 371 351 20 371 9 371 371 371 10 371 371 371 11 371 371 371 12 371 371 371 13 371 0 371 371 14 371 0 371 371 15 371 0 371 371 16 371 0 371 371 17 371 321 30 351 18 371 371 371 19 371 371 371 20 371 371 371 21 371 371 371 22 371 371 371 23 371 371 371 24 341 341 341 25 321 321 321 26 291 291 291 27 321 291 30 321 28 341 341 341 29 371 371 371 30 371 371 371 31 371 371 371 32 371 371 371 33 371 371 371 34 371 371 371 35 371 371 371 36 371 371 371 - --------------------------------------------------------------------------------------------- total 13,116 11,492 70 1,484 50 13,096
L-1 EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE * Includes energy excused because of Supplier's and Buyer's events of Force Majeure ** G cannot be greater than B L-2 EXHIBIT M CONTRACTUAL AND OPERATIONAL CONSTRAINTS 1. For the purposes of this Exhibit M, "Constrained Capacity" shall mean that portion of the capacity available from Sunpeak Units 3, 4 and 5 that is subject to contractual and operational constraints identified in this Exhibit M. The contractual and operational constraints of the SPPCA constituting Constrained Capacity are: (a) The Sunpeak units shall be deemed to operate at 3,495 hours per calendar year based on the physical availability of natural gas,/1/ whether or not generated at the Asset Bundle, the El Dorado Generating Station, or another source in accordance with Section 4.1.1.1; provided that, for the first calendar year in which the Effective Date occurs, any Constrained Capacity used prior to the Effective Date shall count against such annual limit; (b) Each Sunpeak unit shall not operate for greater than twelve (12) operating hours per day; and (c) Each Sunpeak unit may operate at reduced capacity resulting from a Performance Test (as defined in the SPPCA); provided that, such reduction in capacity shall only be deemed Constrained Capacity during Non-Peak Periods (as defined in the SPPCA). 2. To the extent Supplier has delivered Buyer's calendar year annual limit of Constrained Capacity in accordance with Buyer's requests hereunder, then the Asset Bundle Capacity (i) shall be reduced by 222 MWs and such reduction shall be a Permitted Derating and (ii) the reduction in the Asset Bundle Capacity associated with Constrained Capacity shall occur regardless of whether or not any of the delivered Constrained Capacity was actually generated at the Asset Bundle, the El Dorado Generating Station, or another source in accordance with Section 4.1.1.1. The capacity of Sunpeak Units 3, 4, and 5 beyond Constrained Capacity limitations identified in paragraphs 1(b) and 1(c) above also shall be a Permitted Derating. 3. To the extent Buyer's requested Supply Amount during any hour does not exceed the total capacity of Sunrise Units 1 and 2 not otherwise subject to a Permitted Derating, the operational constraints of this Exhibit M shall not apply to such Supply Amount. Rather, the Supply Amount shall be deemed to have been delivered from units other than Sunpeak Units 3, 4 and 5, regardless of the actual source of generation. ________________________ /1/The number of operating hours per unit shall be decreased in accordance with the environmental permits for the SunPeak Units if those units are operated on oil. M-1 EX-10.M 22 0022.txt AMENDED & RESTATED CREDIT AGREEMENT Exhibit 10(AA) AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------ ARRANGED BY MELLON BANK, N.A. This AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment and ------------- Restatement"), is made and entered into as of August 28, 2000, among NEVADA - ----------- POWER COMPANY (the "Company"), MELLON BANK, N.A. ("Mellon"), in its capacity as ------- ------ administrative agent under the Credit Agreement described below (the "Administrative Agent"), the financial institutions listed on the signature - --------------------- pages hereto under the caption "Continuing Lenders" (the "Continuing Lenders") ------------------ and the financial institutions, if any, listed on the signature pages hereto under the caption "New Lenders" (the "New Lenders"; the Continuing Lenders and ----------- the New Lenders are hereinafter collectively referred to as the "Lenders"). ------- RECITALS -------- A. The Company, Mellon, in its capacity as Administrative Agent, First Union National Bank and Wells Fargo Bank, N.A., in their capacity as syndication agents, and the other financial institutions listed on the signature pages thereto have entered into a Credit Agreement, dated as of June 24, 1999 (as amended, modified and supplemented through but excluding the date hereof, the "Credit Agreement"). ---------------- B. The Company desires, and the Administrative Agent and the Lenders are willing, upon the terms set forth in this Amendment and Restatement, to amend the Credit Agreement as set forth herein and to restate the Credit Agreement in its entirety to read as set forth in the Credit Agreement with the amendment set forth below. NOW, THEREFORE, in consideration of the foregoing, the premises and mutual covenants contained herein and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby (i) agree that the Credit Agreement shall be amended and restated in its entirety to read as set forth in the Credit Agreement with the amendments set forth below and (ii) further agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms ------------- used herein shall have the meanings given thereto in the Credit Agreement. 2. Effectiveness of this Amendment and Restatement. So long as each ----------------------------------------------- of the following conditions shall be satisfied or waived by the Administrative Agent and the Lenders, this Amendment and Restatement shall become effective and the Credit Agreement shall be amended and restated as provided herein at 9:00 A.M. (Pacific time) (the "Effective Time") on August 28, 2000 (the "Effective -------------- --------- Date"): - ---- (a) Execution of Amendment and Restatement. The Company and the -------------------------------------- Lenders shall have executed a copy of this Amendment and Restatement (whether the same or different copies) and shall have delivered the same to the Administrative Agent. 1 (b) No Litigation. The Administrative Agent and the Lenders shall be ------------- satisfied that, immediately prior to the Effective Time, no judgment, order, injunction or other restraint shall have been issued or filed which restrains, and no hearing seeking injunctive relief or other restraint is pending or has been noticed which seeks to restrain, the Company from consummating the transactions described in the Loan Documents or this Amendment and Restatement. (c) No Default; Representations and Warranties. The Administrative ------------------------------------------ Agent and the Lenders shall be satisfied that, immediately prior to the Effective Time and after giving effect to this Amendment and Restatement, (i) there shall exist no Default or Event of Default and (ii) the representations and warranties of the Company contained in the Loan Documents to which the Company is a party are true and correct in all material respects as of the Effective Time with the same effect as though such representations and warranties had been made on and as of the Effective Time (except for such representations and warranties made as of a specified date, which shall be true and correct in all material respects as of such specified date). (d) Corporate Proceedings. All corporate and legal proceedings and --------------------- all instruments and agreements in connection with the transactions contemplated in this Amendment and Restatement and the other Loan Documents shall be satisfactory in form and substance to the Administrative Agent and the Lenders, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings and governmental approvals, if any, which any Lender reasonably may have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. (e) Amendment and Restatement Fee. The Administrative Agent shall ----------------------------- have received from the Company, for the account of each Lender that executed and delivered its counterpart to this Amendment and Restatement by 5:00 P.M. (Pacific time) on August 18, 2000, an amendment and restatement fee equal to the product of 0.25% and the amount of such Lender's Commitment at the Effective Time. (f) Arrangement Fee. Mellon shall have received the arrangement fee --------------- set forth in the engagement letter dated June 12, 2000 from Mellon to Sierra Pacific Resources. (g) Other Payments. The Administrative Agent and each Lender shall -------------- have received all other amounts, if any, owing from the Company to such Person pursuant to the Credit Agreement through and including the Effective Date. All the certificates and other documents and papers referred to in this Section 2, unless otherwise specified, shall be delivered to the Administrative Agent's counsel, White & Case LLP, at 633 West Fifth Street, 19/th/ Floor, Los Angeles, CA 90071, for the account of each of the Lenders and in sufficient counterparts for each of the Lenders and shall be satisfactory in form and substance to the Administrative Agent and the Lenders. 2 3. Amendment. At the Effective Time, --------- (a) The defined term "Revolving Termination Date" set forth in -------------------------- Section 1.01 of the Credit Agreement shall be deleted in its entirety and the following shall be substituted therefor: ""Revolving Termination Date" means the earlier of (i) August 27, -------------------------- 2001, or such date after August 27, 2001 to which the Commitments are extended in accordance with Section 2.06(e), and (ii) the date the Obligations and Commitments under this Agreement terminate, whether by prepayment, cancellation, acceleration or otherwise.". (b) Section 6.01(b) of the Credit Agreement shall be deleted in its entirety and the following shall be substituted therefor: "(b) Fixed Charge Coverage Ratio. The Borrower shall not permit the Fixed Charge Coverage Ratio, determined as of the last day of each fiscal quarter set forth below for the period consisting of the four consecutive fiscal quarters ended on such last day, to be less than the ratio set forth opposite such last day: Fiscal Quarter Ended Ratio -------------------- ----- September 30, 2000 1.10:1 December 31, 2000 1.20:1 March 31, 2001 1.20:1 June 30, 2001 and each fiscal quarter ended thereafter 1.50:1.". 4. Representations and Warranties. The Company makes, as of the ------------------------------ Effective Date, each of the representations and warranties set forth in Article III of the Credit Agreement and such representations and warranties are, by this reference, incorporated herein as if set forth herein in their entirety, provided that references to "Loan Documents" shall, for purposes of this paragraph, be deemed to include this Amendment and Restatement. 5. Miscellaneous. ------------- (a) Except as expressly modified by this Amendment and Restatement, the Credit Agreement shall continue to be and remain in full force and effect in accordance with its terms. Any future reference to the Credit Agreement shall, from and after the Effective Time, be deemed to be a reference to the Credit Agreement as amended and restated by this Amendment and Restatement. (b) This Amendment and Restatement may be executed in any number of counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. 3 (c) THIS AMENDMENTAND RESTATEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CONFLICTS OF LAW RULES. (d) This Amendment and Restatement may be executed by facsimile signature and each such signature shall be treated in all respects as having the same effect as an original signature. (e) The rules of construction set forth in Section 1.03 of the Credit Agreement are, by this reference, incorporated herein as if set forth in their entirety, provided that references to "this Agreement" in such section shall mean references to this Amendment and Restatement. ***** 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be duly executed as of the date first above written. NEVADA POWER COMPANY By_______________________________ Name: Title: MELLON BANK, N.A., as Administrative Agent By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] Continuing Lenders ------------------ MELLON BANK, N.A. By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] FIRST UNION NATIONAL BANK By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] WELLS FARGO BANK, N.A. By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] BANK OF AMERICA, N.A. By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] THE BANK OF NEW YORK By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] BANK ONE, N.A. (Main Office-Chicago) By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] CREDIT SUISSE FIRST BOSTON By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] BNP PARIBAS By_______________________________ Name: Title: By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] UNION BANK OF CALIFORNIA, N.A. By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] BAYERISCHE LANDESBANK GIROZENTRALE By_______________________________ Name: Title: By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] FLEET NATIONAL BANK By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] FIRST SECURITY BANK OF NEVADA By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] KBC BANK, N.V. By_______________________________ Name: Title: By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] U.S. BANK NATIONAL ASSOCIATION By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] New Lenders ----------- THE INDUSTRIAL BANK OF JAPAN, LIMITED By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] EX-10.N 23 0023.txt AMENDMENT & WAIVER AGREEMENT Exhibit 10(N) AMENDMENT AND WAIVER AGREEMENT ------------------------------ This AMENDMENT AND WAIVER AGREEMENT (this "Agreement"), is made and --------- entered into as of March 1, 2001, among NEVADA POWER COMPANY (the "Company"), ------- MELLON BANK, N.A. ("Mellon"), FIRST UNION NATIONAL BANK ("First Union"), WELLS ------ ----------- FARGO BANK, N.A. ("Wells Fargo"), and the other parties set forth on the ----------- signatures pages hereto (the "Lenders"). ------- RECITALS -------- A. The Company, Mellon, in its capacity as administrative agent (the "Administrative Agent"), First Union and Wells Fargo, each in their capacity as -------------------- syndication agent, and the Lenders have entered into a Credit Agreement, dated as of June 24, 1999 (as amended, modified and supplemented through the date hereof, the "Credit Agreement"). ---------------- B. Pursuant to Section 6.01(a) of the Credit Agreement, the Company's ratio of Total Indebtedness to the sum of Total Indebtedness and Shareholders' Equity (the "Debt to Equity Ratio"), determined as of the last day of each -------------------- fiscal quarter, shall not exceed 0.65 to 1. C. The Company reasonably believes that it will be in breach of its fixed charge coverage ratio set forth in Section 6.01(b) of the Credit Agreement for the four fiscal quarter period ended December 31, 2000 when it delivers its financial statements and compliance certificate for such quarter pursuant to Sections 5.01(a) and (c) of the Credit Agreement (as such breach relates to the four fiscal quarter period ended December 31, 2000 only, the "Financial Covenant ------------------ Breach"). - ------ D. The effect of the Financial Covenant Breach would, if not waived by March 31, 2001, result in a Default. E. The Company has requested that the Lenders (a) amend Section 6.01(a) of the Credit Agreement to reduce the Debt to Equity Ratio to 0.58 to 1 and (b) waive any Default or Event of Default resulting from the Financial Covenant Breach. NOW, THEREFORE, in consideration of the foregoing, the premises and mutual covenants contained herein and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms ------------- used herein shall have the meanings given thereto in the Credit Agreement. 2. Effectiveness of this Agreement. This Agreement shall become ------------------------------- effective and the waiver and amendment described in Section 3 below shall become effective at the time (the "Effective Time") on the first date (the "Effective -------------- --------- Date") on which each of the following conditions shall be satisfied or waived by - ---- the Administrative Agent and the Required Lenders: (a) Execution of Agreement. The Company and the Required Lenders ---------------------- shall have executed a copy of this Agreement (whether the same or different copies) and shall have delivered the same to the Administrative Agent. (b) Quarterly Compliance Certificate. The Company shall have -------------------------------- delivered to the Administrative Agent a Quarterly Compliance Certificate for the four fiscal quarter period ended December 31, 2000, which Quarterly Compliance Certificate shall certify that the Company is in compliance with its financial covenants with respect to such quarter, except that the Fixed Charge Coverage Ratio shall be not less than 0.76 to 1. (c) No Litigation. The Administrative Agent and the Required Lenders ------------- shall be satisfied that, immediately prior to the Effective Time, no judgment, order, injunction or other restraint shall have been issued or filed which restrains, and no hearing seeking injunctive relief or other restraint is pending or has been noticed which seeks to restrain, the Company from consummating the transactions described in the Loan Documents or this Agreement. (d) No Default; Representations and Warranties. The Administrative ------------------------------------------ Agent and the Required Lenders shall be satisfied that, immediately prior to the Effective Time and after giving effect to this Agreement, (i) there shall exist no Default or Event of Default and (ii) the representations and warranties of the Company contained in the Loan Documents to which the Company is a party are true and correct in all material respects as of the Effective Time with the same effect as though such representations and warranties had been made on and as of the Effective Time (except for such representations and warranties made as of a specified date, which shall be true and correct in all material respects as of such specified date). (e) Corporate Proceedings. All corporate and legal proceedings and --------------------- all instruments and agreements in connection with the transactions contemplated in this Agreement and the other Loan Documents shall be satisfactory in form and substance to the Administrative Agent and the Required Lenders, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings and governmental approvals, if any, which any Lender reasonably may have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. (f) Fee. For consenting to the amendment and waiver contained in this --- Agreement, each Lender that executes and delivers this Agreement prior to 5:00 p.m., Pacific Time, on March 1, 2001 shall have received on or before the Effective Date a fee in immediately available funds equal to the product of (i) 0.05% and (ii) the aggregate amount of such Lender's Commitments. (g) Other Payments. The Administrative Agent and each Lender shall -------------- have received all amounts, if any, owing from the Company to such Person through and including the Effective Date. -2- All the certificates and other documents and papers referred to in this Section 2, unless otherwise specified, shall be delivered to the Administrative Agent's counsel, White & Case LLP, at 633 West Fifth Street, 19/th/ Floor, Los Angeles, CA 90071, facsimile (213) 687-0758, for the account of each of the Lenders and in sufficient counterparts for each of the Lenders and shall be satisfactory in form and substance to the Administrative Agent and the Required Lenders. 3. Amendment and Waiver. At and from the Effective Time: -------------------- (a) Section 6.01(a) of the Credit Agreement shall be amended by deleting the text "0.65 to 1" and inserting the text "0.58 to 1" in its place. (b) The Administrative Agent and the Required Lenders agree to waive the Financial Covenant Breach to the extent (and only to the extent) the Company has complied with Section 2(b) of this Agreement. 4. Representations and Warranties. The Company makes, as of the ------------------------------ Effective Date, each of the representations and warranties set forth in Article V of the Credit Agreement and such representations and warranties are, by this reference, incorporated herein as if set forth herein in their entirety; provided that references to "Loan Documents" shall, for purposes of this - -------- paragraph, be deemed to include this Agreement. 5. Miscellaneous. ------------- (a) The waiver contained in this Agreement is a one-time waiver only, is made only with respect to the specific provisions of the Credit Agreement referenced above and is made only to the extent and for the limited purposes described herein. Such waiver shall not be construed as a waiver for any purpose other than as expressly set forth herein and shall not constitute an agreement or obligation on the part of the Administrative Agent or any Lender to grant any other or future waiver, or prevent any of them from enforcing any right or remedy under the Credit Agreement or otherwise with respect thereto. (b) Except as expressly modified by this Agreement, the Credit Agreement shall continue to be and remain in full force and effect in accordance with its terms. Any future reference to the Credit Agreement shall, from and after the Effective Time, be deemed to be a reference to the Credit Agreement as amended by Section 3(a) of this Agreement. (c) This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. (d) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CONFLICTS OF LAW RULES. -3- (e) This Agreement may be executed by facsimile signature and each such signature shall be treated in all respects as having the same effect as an original signature. (f) The rules of construction set forth in Section 1.03 of the Credit Agreement are, by this reference, incorporated herein as if set forth in their entirety, provided that references to "this Agreement" in such section shall mean references to this Agreement. * * * -4- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. NEVADA POWER COMPANY By: _______________________________ Name: Mark A. Ruelle Title: Sr. Vice President, CFO -Signature Page- Amendment and Waiver Agreement MELLON BANK, N.A., as Administrative Agent and as a Lender By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement FIRST UNION NATIONAL BANK, as Syndication Agent and as a Lender By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement WELLS FARGO BANK, N.A., as Syndication Agent and as a Lender By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement BANK OF AMERICA, N.A. By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement THE BANK OF NEW YORK By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement BANK ONE, N.A. (Main Office-Chicago) By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement CREDIT SUISSE FIRST BOSTON By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement BNP PARIBAS By: _______________________________ Name: Title: By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement UNION BANK OF CALIFORNIA, N.A. By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement THE INDUSTRIAL BANK OF JAPAN, LTD. By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement BAYERISCHE LANDESBANK GIROZENTRALE By: _______________________________ Name: Title: By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement FLEETBOSTON FINANCIAL CORP. By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement FIRST SECURITY BANK OF NEVADA By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement KBC BANK, N.V. By: _______________________________ Name: Title: By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement U.S. BANK NATIONAL ASSOCIATION By: _______________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement EX-10.O 24 0024.txt FINANCING AGREEMENT NO.1, CLARK COUNTY, NEVADA Exhibit 10(O) ================================================================================ Financing Agreement No. 1 Dated as of June 1, 2000 By and Between Clark County, Nevada and Nevada Power Company Relating To Industrial Development Refunding Revenue Bonds (Nevada Power Company Project) Series 2000A ================================================================================ The amounts payable to the Issuer (except for amounts payable to, and certain rights and privileges of, the Issuer under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof and any rights of the Issuer to receive any notices, certificates, requests, requisitions or communications hereunder) and certain other rights of the Issuer under this Financing Agreement No. 1 have been pledged and assigned under the Indenture of Trust No. 1 dated as of June 1, 2000, between the Issuer and The Bank of New York, as Trustee. Financing Agreement No. 1 -------------- TABLE OF CONTENTS (This Table of Contents is not a part of this Agreement and is only for convenience of reference).
Section Heading Page Article I Definitions....................................................................... 1 Article II Representations................................................................... 4 Section 2.1. Representations and Covenants by the Issuer....................................... 4 Section 2.2. Representations by the Company.................................................... 5 Article III Issuance of The Bonds............................................................. 6 Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds............................ 6 Section 3.2. Deposit of Additional Funds by Company; Redemption of Prior Bonds................. 6 Section 3.3. Investment of Moneys in the Bond Fund and the Prior Bonds Redemption Fund.......................................................................... 6 Section 3.4. Tax Exempt Status of Bonds........................................................ 7 Article IV Loan and Provisions for Repayment................................................. 8 Section 4.1. Loan of Bond Proceeds............................................................. 8 Section 4.2. Loan Repayments and Other Amounts Payable......................................... 8 Section 4.3. No Defense or Set-Off............................................................. 10 Section 4.4. Payments Pledged and Assigned..................................................... 10 Section 4.5. Payment of the Bonds and Other Amounts............................................ 10 Article V Special Covenants and Agreements.................................................. 11 Section 5.1. Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted.......................................................... 11 Section 5.2. Annual Statement.................................................................. 11 Section 5.3. Maintenance and Repair; Insurance; Taxes; Disposition............................. 11 Section 5.4. Recordation and Other Instruments................................................. 12 Section 5.5. No Warranty by the Issuer......................................................... 12 Section 5.6. Agreement as to Ownership of the Project.......................................... 12 Section 5.7. Company to Furnish Notice of Adjustments of Interest Rate Periods................. 12 Section 5.8. Information Reporting, Etc........................................................ 12 Section 5.9. Limited Liability of Issuer....................................................... 13
Section 5.10. Inspection of Project............................................................. 13 Article VI Events of Default and Remedies.................................................... 13 Section 6.1. Events of Default Defined......................................................... 13 Section 6.2. Remedies on Default............................................................... 15 Section 6.3. No Remedy Exclusive............................................................... 16 Section 6.4. Agreement to Pay Fees and Expenses of Counsel..................................... 16 Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers................... 16 Article VII Options and Obligations of Company; Prepayments; Redemption of Bonds.............. 17 Section 7.1. Option to Prepay.................................................................. 17 Section 7.2. Obligation to Prepay.............................................................. 17 Section 7.3. Notice of Prepayment.............................................................. 17 Article VIII Miscellaneous..................................................................... 18 Section 8.1. Notices........................................................................... 18 Section 8.2. Assignments....................................................................... 18 Section 8.3. Severability...................................................................... 18 Section 8.4. Execution of Counterparts......................................................... 18 Section 8.5. Amounts Remaining in Bond Fund.................................................... 18 Section 8.6. Amendments, Changes and Modifications............................................. 19 Section 8.7. Governing Law..................................................................... 19 Section 8.8. Authorized Issuer and Company Representatives..................................... 19 Section 8.9. Term of the Agreement............................................................. 19 Section 8.10. Cancellation at Expiration of Term................................................ 19 Section 8.11. Bond Insurance.................................................................... 20 Signature............................................................................................... 21
-ii- This Financing Agreement No. 1 made and entered into as of June 1, 2000, by and between Clark County, Nevada, a political subdivision of the State of Nevada, party of the first part (hereinafter referred to as the "Issuer"), and Nevada Power Company, a corporation duly organized and existing under the laws of the State of Nevada, party of the second part (hereinafter referred to as the "Company"), W i t n e s s e t h: In consideration of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided, that in the performance of the agreements of the Issuer herein contained, any obligation it may thereby incur shall not constitute or give rise to a pecuniary liability or a charge upon its general credit or against its taxing powers but shall be payable solely out of the Revenues (as hereinafter defined) derived from this Financing Agreement and the Bonds, as hereinafter defined): Article I Definitions The following terms shall have the meanings specified in this Article unless the context clearly requires otherwise. The singular shall include the plural and the masculine shall include the feminine. "Act" means the County Economic Development Revenue Bond Law, as amended, contained in Sections 244A.669 to 244A.763, inclusive, of the Nevada Revised Statutes. "Act of Bankruptcy" means the filing of a petition in bankruptcy by or against the Company or the Issuer under the Bankruptcy Code. "Administrative Expenses" means the reasonable and necessary expenses (including the reasonable value of employee services and fees of Counsel) incurred by the Issuer in connection with the Bonds, this Agreement, the Indenture and any transaction or event contemplated by this Agreement or the Indenture. "Agreement" means this Financing Agreement No. 1 by and between the Issuer and the Company, as from time to time amended and supplemented. "Auction Agent" means the auction agent appointed in accordance with Section 2.03(e)(iv) of the Indenture. "Authorized Company Representative" means any person who, at the time, shall have been designated to act on behalf of the Company by a written certificate furnished to the Issuer, the Remarketing Agent and the Trustee containing the specimen signature of such person and signed on behalf of the Company by any officer of the Company. Such certificate may designate an alternate or alternates. "Authorized Issuer Representative" means any person at the time designated to act on behalf of the Issuer by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its Chairman. Such certificate may designate an alternate or alternates. "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978, as amended from time to time, or any substitute or replacement legislation. "Bond" or "Bonds" means the Issuer's bonds identified in Section 2.02 of the Indenture. "Bond Counsel" means the Counsel who renders the opinion as to the tax- exempt status of interest on the Bonds or other nationally recognized municipal bond counsel mutually acceptable to the Issuer and the Company. "Bond Fund" means the fund created by Section 6.02 of the Indenture. "Code" means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder. "Company" means Nevada Power Company, a Nevada corporation, and its successors and assigns and any surviving, resulting or transferee corporation as permitted in Section 5.1 hereof. "Counsel" means an attorney at law or a firm of attorneys (who may be an employee of or counsel to the Issuer or the Company or the Trustee) duly admitted to the practice of law before the highest court of any state of the United States of America or of the District of Columbia. "Extraordinary Services" and "Extraordinary Expenses" means all services rendered and all expenses (including fees and expenses of Counsel) incurred under the Indenture and the Tax Agreement other than Ordinary Services and Ordinary Expenses. "Force Majeure" means acts of God, strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the governments of the United States or of the State, or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; lightning; earthquakes; fires; tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or malfunction or accident to machinery, transmission lines, pipes or canals, even if resulting from negligence; civil disturbances; or any other cause not reasonably within the control of the Company. "Governing Body" means the Board of County Commissioners of the Issuer. -2- "Hereof," "herein," "hereunder" and other words of similar import refer to this Agreement as a whole. "Indenture" means the Indenture of Trust No. 1 relating to this Agreement between the Issuer and The Bank of New York, as Trustee, of even date herewith, pursuant to which the Bonds are authorized to be issued, including any indentures supplemental thereto or amendatory thereof. "Insider" shall have the meaning set forth in the Bankruptcy Code. "Issuer" means Clark County, Nevada, and any successor body to the duties or functions of the Issuer. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Ordinary Services" and "Ordinary Expenses" means those services normally rendered and those expenses including fees and expenses of Counsel, normally incurred by a trustee or paying agent under instruments similar to the Indenture and the Tax Agreement. "Owner" or "owner of Bonds" means the Person or Persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Registrar for that purpose in accordance with the terms of the Indenture. "Person" means natural persons, firms, partnerships, associations, corporations, trusts and public bodies. "Prior Agreement" means the Financing Agreement, dated as of June 1, 1990, between the Issuer and the Company relating to the Prior Bonds. "Prior Bonds" means the Issuer's Industrial Development Revenue Bonds (Nevada Power Company Project) Series 1990, currently outstanding in the aggregate principal amount of $100,000,000. "Prior Bond Fund" means the fund established pursuant to Section 5.02 of the Prior Indenture. "Prior Indenture" means the Indenture of Trust, dated as of June 1, 1990, between the Issuer and the Prior Trustee, pursuant to which the Prior Bonds were issued. "Prior Trustee" means United States Trust Company of New York, as trustee under the Prior Indenture. -3- "Project" means the Project as defined in the Prior Agreement. "Project Certificate" means the Company's Project and Refunding Certificate, delivered concurrently with the issuance of the Bonds, with respect to certain facts which are within the knowledge of the Company and certain reasonable assumptions of the Company, to enable Chapman and Cutler, as Bond Counsel, to determine that interest on the Bonds is not includable in the gross income of the Owners of the Bonds for federal income taxes purposes. "Rebate Fund" means the Rebate Fund, if any, created and established pursuant to the Tax Agreement. "Remarketing Agent" means the remarketing agent appointed in accordance with Section 4.08 of the Indenture and any permitted successor thereto. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and if such division or corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "State" means the State of Nevada. "Tax Agreement" means the Tax Exemption Certificate and Agreement No. 1 with respect to the Bonds, dated the date of delivery of the Bonds, among the Company, the Issuer and the Trustee, as from time to time amended and supplemented. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses of the Indenture. "Trustee" means The Bank of New York, as Trustee under the Indenture, and any successor Trustee appointed pursuant to Section 10.06 or 10.09 of the Indenture at the time serving as Trustee thereunder, and any separate or co- trustee serving as such thereunder. All other terms used herein which are defined in the Indenture shall have the same meanings assigned them in the Indenture unless the context otherwise requires. Article II Representations Section 2.1. Representations and Covenants by the Issuer. The Issuer makes the following representations and covenants as the basis for the undertakings on its part herein contained: -4- (a) The Issuer is a duly organized and existing political subdivision of the State of Nevada. Under the provisions of the Act, the Issuer is authorized to enter into the transactions contemplated by this Agreement, the Indenture and the Tax Agreement and to carry out its obligations hereunder and thereunder. The Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Tax Agreement. (b) The Bonds are to be issued under and secured by the Indenture, pursuant to which certain of the Issuer's interests in this Agreement and the Revenues derived by the Issuer pursuant to this Agreement will be pledged and assigned as security for payment of the principal of, premium, if any, and interest on, the Bonds. (c) The Governing Body of the Issuer has found that the issuance of the Bonds will further the public purposes of the Act. (d) The Issuer has not assigned and will not assign any of its interests in this Agreement other than pursuant to the Indenture. (e) No member of the Governing Body of the Issuer, nor any other officer of the Issuer, has any interest, financial (other than ownership of less than one-tenth of one percent (.1%) of the publicly traded securities issued by the Company or its affiliated corporations), employment or other, in the Company or in the transactions contemplated hereby. Section 2.2. Representations by the Company. The Company makes the following representations as the basis for the undertakings on its part herein contained: (a) The Company is a corporation duly incorporated under the laws of the State and is in good standing in the State, is qualified to do business as a foreign corporation in all other states and jurisdictions wherein the nature of the business transacted by the Company or the nature of the property owned or leased by it makes such licensing or qualification necessary, has power to enter into and by proper corporate action has been duly authorized to execute and deliver this Agreement and the Tax Agreement. (b) Neither the execution and delivery of this Agreement or the Tax Agreement, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and the Tax Agreement, conflicts with or results in a breach of any of the terms, conditions or provisions of any corporate restriction or any agreement or instrument to which the Company is now a party or by which it is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any instrument or agreement other than the Indenture. (c) The statements, information and descriptions contained in the Project Certificate and the Tax Agreement, as of the date hereof and at the time of the delivery of -5- the Bonds to the Underwriter, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated therein or necessary to make the statements, information and descriptions contained therein, in the light of the circumstances under which they were made, not misleading. Article III Issuance of the Bonds Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds. In order to provide funds to lend to the Company to refund the Prior Bonds as provided in Section 4.1 hereof, the Issuer agrees that it will issue under the Indenture, sell and cause to be delivered to the Underwriter, its Bonds in the aggregate principal amount of $100,000,000, bearing interest and maturing as set forth in the Indenture. The Issuer will thereupon deposit the proceeds received from the sale of the Bonds as follows: (1) in the Bond Fund, a sum equal to any accrued interest, if any, paid by the Underwriter; and (2) $100,000,000 in the Prior Bonds Redemption Fund to be remitted by the Trustee to the Prior Trustee for deposit in the Prior Bond Fund to be used to pay to the owners thereof the principal of the Prior Bonds upon redemption thereof. Section 3.2. Deposit of Additional Funds by Company; Redemption of Prior Bonds. The Company covenants that such additional amounts as may be required to redeem the Prior Bonds will be deposited with the Prior Trustee pursuant to the Prior Indenture for such purpose. Income derived from the investment of the proceeds of the Bonds deposited in the Prior Bonds Redemption Fund will be used to satisfy the obligations of the Company specified in this Section 3.2. The Company covenants that it will cause the Prior Bonds to be redeemed within 90 days after the issuance and delivery of the Bonds. Section 3.3. Investment of Moneys in the Bond Fund and the Prior Bonds Redemption Fund. Except as otherwise herein provided, any moneys held as a part of the Bond Fund and the Prior Bonds Redemption Fund shall be invested or reinvested by the Trustee at the specific written direction of an Authorized Company Representative as to specific investments, to the extent permitted by law, in: (a) bonds or other obligations of the United States of America; (b) bonds or other obligations, the payment of the principal of and interest on which is unconditionally guaranteed by the United States of America; (c) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; -6- (d) obligations issued or guaranteed by any state of the United States of America, or any political subdivision of any such state, or in funds consisting of such obligations to the extent described in Treasury Regulation 1.148-8(e)(3)(iii); (e) prime commercial paper; (f) prime finance company paper; (g) bankers' acceptances drawn on and accepted by commercial banks; (h) repurchase agreements fully secured by obligations issued or guaranteed as to principal and interest by the United States of America or by any person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (i) certificates of deposit issued by commercial banks, including banks domiciled outside of the United States of America; and (j) units of taxable government money market portfolios composed of obligations guaranteed as to principal and interest by the United States of America or repurchase agreements fully collateralized by such obligations. The investments so purchased shall be held by the Trustee and shall be deemed at all times a part of the fund for which they were made and the interest accruing thereon and any profit realized therefrom shall be credited to such fund, subject to the provisions of the Tax Agreement. The Company agrees that to the extent any moneys in the Bond Fund represent moneys held for the payment of particular Bonds or moneys held for the payment of the purchase price of Bonds pursuant to Article IV of the Indenture, such moneys shall not be invested. Section 3.4. Tax Exempt Status of Bonds. The Company covenants and agrees that it has not taken or permitted and will not take or permit any action which results in interest paid on the Bonds being included in gross income of the holders or beneficial owners of the Bonds for purposes of federal income taxation (other than a holder or beneficial owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code). The Company covenants that none of the proceeds of the Bonds or the payments to be made under this Agreement, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be invested or used in such a way, and that no actions will be taken or not taken, as to cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148(a) of the Code. Without limiting the generality of the foregoing, the Company covenants and agrees that it will comply with the provisions of the Tax Agreement and the Project Certificate. -7- Article IV Loan and Provisions for Repayment Section 4.1. Loan of Bond Proceeds. (a) The Issuer agrees, upon the terms and conditions in this Agreement, to lend to the Company the proceeds (exclusive of accrued interest, if any) received by the Issuer from the sale of the Bonds in order to refund the Prior Bonds and the Company agrees to apply the gross proceeds of such loan to the refunding of the Prior Bonds. (b) The Issuer and the Company expressly reserve the right to enter into, to the extent permitted by law, an agreement or agreements other than this Agreement, with respect to the issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide additional funds to refund all or any principal amount of the Bonds. Section 4.2. Loan Repayments and Other Amounts Payable. (a) On each date provided in or pursuant to the Indenture for the payment (whether at maturity or upon redemption or acceleration) of principal of, and premium, if any, and interest on, the Bonds, until the principal of, and premium, if any, and interest on, the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Company shall pay to the Trustee in immediately available funds, for deposit in the Bond Fund, as a repayment installment of the loan of the proceeds of the Bonds pursuant to Section 4.1(a) hereof, a sum equal to the amount payable on such date (whether at maturity or upon redemption or acceleration) as principal of, and premium, if any, and interest on, the Bonds as provided in the Indenture; provided, however, that the obligation of the Company to make any such repayment installment shall be reduced by the amount of any moneys then on deposit in the Bond Fund and available for such payment. (b) The Company shall pay to the Trustee amounts equal to the amounts to be paid by the Trustee for the purchase of Bonds pursuant to Article IV of the Indenture. Such amounts shall be paid by the Company to the Trustee in immediately available funds on the date such payments pursuant to Section 4.05 of the Indenture are to be made; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent moneys are available from the source described in clause (i) of Section 4.05(a) of the Indenture. (c) The Company agrees to pay to the Trustee (i) the fees of the Trustee for the Ordinary Services rendered by it and an amount equal to the Ordinary Expenses incurred by it under the Indenture and the Tax Agreement, as and when the same become due, and (ii) the reasonable fees, charges and expenses of the Trustee for reasonable Extraordinary Services and Extraordinary Expenses, as and when the same become due, incurred under the Indenture and the Tax Agreement. The Company agrees that the Trustee, its officers, agents, servants and employees, shall not be liable for, and agrees that it will at all times indemnify and hold harmless the Trustee, its officers, agents, servants and employees against, and pay all expenses of the Trustee, its -8- officers, agents, servants and employees, relating to any lawsuit, proceeding or claim and resulting from any action or omission taken or made by or on behalf of the Trustee, its officers, agents, servants and employees pursuant to this Agreement, the Indenture or the Tax Agreement, that may be occasioned by any cause (other than the negligence or willful misconduct of the Trustee, its officers, agents, servants and employees). In case any action shall be brought against the Trustee in respect of which indemnity may be sought against the Company, the Trustee shall promptly notify the Company in writing and the Company shall be entitled to assume control of the defense thereof, including the employment of Counsel and the payment of all expenses. The Trustee shall have the right to employ separate Counsel in any such action and participate in the defense thereof, but the fees and expenses of such Counsel shall be paid by the Trustee unless the employment of such Counsel has been authorized by the Company. The Company shall not be liable for any settlement of any such action without its consent, but if any such action is settled with the consent of the Company or if there be final judgment for the plaintiff in any such action, the Company agrees to indemnify and hold harmless the Trustee from and against any loss or liability by reason of such settlement or final judgment. The Company agrees that the indemnification provided herein shall survive the termination of this Agreement or the Indenture or the resignation of the Trustee. (d) The Company agrees to pay all costs incurred in connection with the issuance of the Bonds from sources other than Bond proceeds and the Issuer shall have no obligation with respect to such costs. (e) The Company agrees to indemnify and hold harmless the Issuer and any member, officer, official or employee of the Issuer against any and all losses, costs, charges, expenses, judgments and liabilities created by or arising out of this Agreement, the Indenture, the Remarketing Agreement, the Auction Agreement, the Bond Purchase Agreement, any Broker-Dealer Agreement or the Tax Agreement or otherwise incurred in connection with the issuance of the Bonds. The Company agrees to pay the Issuer its Closing Fee in connection with the issuance of the Bonds in the amount of $50,000. The Issuer may submit to the Company periodic statements, not more frequently than monthly, for its Administrative Expenses and the Company shall make payment to the Issuer of the full amount of each such statement within 30 days after the Company receives such statement. (f) The Company agrees to pay (i) to the Remarketing Agent the reasonable fees, charges and expenses of such Remarketing Agent and (ii) to the Auction Agent the reasonable fees, charges and expenses of such Auction Agent, and the Issuer shall have no obligation or liability with respect to the payment of any such fees, charges or expenses. (g) In the event the Company shall fail to make any of the payments required by (a) or (b) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid and the Company will pay interest to the extent permitted by law, on any overdue amount at the rate of interest borne by the Bonds on the date on which such amount became due and payable until paid. In the event that the Company shall fail to make any of the payments required by (c), (d), (e) or (f) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid, and the Company agrees to pay the same with interest thereon to the extent permitted by law at a rate 1% above the rate of interest then charged by the Trustee on 90-day commercial loans to its prime commercial borrowers until paid. -9- Section 4.3. No Defense or Set-Off. The obligation of the Company to make the payments pursuant to this Agreement shall be absolute and unconditional without defense or set-off by reason of any default by the Issuer under this Agreement or under any other agreement between the Company and the Issuer or for any other reason, it being the intention of the parties that the payments required hereunder will be paid in full when due without any delay or diminution whatsoever. Section 4.4. Payments Pledged and Assigned. It is understood and agreed that all payments required to be made by the Company pursuant to Section 4.2 hereof (except payments made to the Trustee pursuant to Section 4.2(c) hereof, to the Remarketing Agent and the Auction Agent pursuant to Section 4.2(f) hereof, to the Issuer pursuant to Section 4.2(e) hereof and to any or all the Issuer and the Trustee and the Remarketing Agent pursuant to Section 4.2(g) hereof) and certain rights of the Issuer hereunder are pledged and assigned by the Indenture. The Company consents to such pledge and assignment. The Issuer hereby directs the Company and the Company hereby agrees to pay or cause to be paid to the Trustee all said amounts except payments to be made to the Remarketing Agent and the Auction Agent pursuant to Section 4.2(f) hereof and payments to be made to the Issuer pursuant to Sections 4.2(e) and (g) hereof. The Project will not constitute any part of the security for the Bonds. Section 4.5. Payment of the Bonds and Other Amounts. The Bonds and interest and premium, if any, thereon shall be payable solely from (i) payments made by the Company to the Trustee under Section 4.2(a) hereof and (ii) other moneys on deposit in the Bond Fund and available therefor. Payments of principal of, and premium, if any, or interest on, the Bonds with moneys in the Bond Fund constituting proceeds from the sale of the Bonds or earnings on investments made under the provisions of the Indenture shall be credited against the obligation to pay required by Section 4.2(a) hereof. Whenever any Bonds are redeemable in whole or in part at the option of the Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the request of the Company and such redemption (unless conditional) shall be made from payments made by the Company to the Trustee under Section 4.2(a) hereof equal to the redemption price of such Bonds. Whenever payment or provision therefor has been made in respect of the principal of, or premium, if any, or interest on, all or any portion of the Bonds in accordance with the Indenture (whether at maturity or upon redemption or acceleration or upon provision for payment in accordance with Article VIII of the Indenture), payments shall be deemed paid to the extent such payment or provision therefor has been made and is considered to be a payment of principal of, or premium, if any, or interest on, such Bonds. If such Bonds are thereby deemed paid in full, the Trustee shall notify the Company and the Issuer that such payment requirement has been satisfied. Subject to the foregoing, or unless the Company is entitled to a credit under this Agreement or the Indenture, all payments shall be in the full amount required by Section 4.2(a) hereof. -10- Article V Special Covenants and Agreements Section 5.1. Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted. The Company agrees that during the term of this Agreement, it will maintain its corporate existence and its good standing in the State, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another corporation unless (a) the acquirer of its assets or the corporation with which it shall consolidate or into which it shall merge shall (i) be a corporation organized under the laws of one of the states of the United States of America, (ii) be qualified to do business in the State, (iii) be a public utility, and (iv) assume in writing all of the obligations of the Company under this Agreement and the Tax Agreement. Any transfer of all or substantially all of the Company's generation assets shall not be deemed to constitute a "disposition of all or substantially all of the Company's assets" within the meaning of the preceding paragraph. Any such transfer of the Company's generation assets shall not relieve the Company of any of its obligations under this Agreement. Section 5.2. Annual Statement. The Company agrees to have an annual audit made by its regular independent certified public accountants and to furnish the Trustee (within 30 days after receipt by the Company) with a balance sheet and statement of income and surplus showing the financial condition of the Company and its consolidated subsidiaries, if any, at the close of each fiscal year and the results of operations of the Company and its consolidated subsidiaries, if any, for each fiscal year, accompanied by a report of said accountants that such statements have been prepared in accordance with generally accepted accounting principles. The Company's obligations under this Section 5.2 may be satisfied by delivering a copy of the Company's Annual Report to the Trustee at the same time that it is mailed to stockholders. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on officer's certificates). Section 5.3. Maintenance and Repair; Insurance; Taxes; Disposition. For so long as the Company shall own the Project, (i) the Company shall maintain or cause to be maintained the Project in good repair and keep it properly insured and shall promptly pay or cause to be paid all costs thereof, and (ii) the Company shall promptly pay or cause to be paid all installments of taxes, installments of special assessments, and all governmental, utility and other charges with respect to the Project, when due. The Company may, at its own expense and in its own name in good faith contest or appeal any such taxes, assessments or other charges, or installments thereof, but shall not permit any such taxes, assessments or other charges, or installments thereof, to remain unpaid if such nonpayment shall subject the Project or any part thereof to loss or forfeiture. The Company, subject to the provisions of Section 3.4 hereof, is not required by this -11- Agreement to operate, or cause to be operated, any portion of the Project after the Company shall deem in its discretion that such continued operation is not advisable, and in such event the Company may sell, lease or retire all or any such portion of the Project. Subject to the provisions of Section 3.4 hereof, the net proceeds from such sale, lease or other disposition, if any, shall belong to, and may be used for any lawful purpose by, the Company. Upon disposition of the Project in its entirety by the Company in accordance with this Section 5.3, the Company shall be discharged from its obligations to operate, maintain, repair and insure the Project as set forth in this Section 5.3. Any such sale, lease or other disposition shall comply with the requirements of the Tax Agreement. Under any and all circumstances, the Issuer shall have no obligation whatsoever with respect to the operation, maintenance, repair or insurance of the Project. Section 5.4. Recordation and Other Instruments. The Company shall cause such security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve, protect and perfect the security of the Owners of the Bonds and the rights of the Trustee, and to perfect the security interest created by the Indenture. The Company agrees to abide by the provisions of Section 5.11 of the Indenture to the extent applicable to the Company. Section 5.5. No Warranty by the Issuer. The Issuer makes no warranty, either express or implied, as to the Project or that it will be suitable for the purposes of the Company or needs of the Company. Section 5.6. Agreement as to Ownership of the Project. The Issuer and the Company agree that title to the Project shall not be in the Issuer, and that the Issuer shall have no interest in the Project. Section 5.7. Company to Furnish Notice of Adjustments of Interest Rate Periods. The Company is hereby granted the option to designate from time to time changes in Rate Periods (and to rescind such changes) in the manner and to the extent set forth in Section 2.03 of the Indenture. In the event the Company elects to exercise any such option, the Company agrees that it shall cause notices of adjustments of Rate Periods (or rescissions thereof) to be given to the Issuer, the Trustee and the Remarketing Agent in accordance with Section 2.03(a), (b), (c), (d) or (e) of the Indenture, and a copy of each such notice shall also be given at such time to S&P and Moody's. Section 5.8. Information Reporting, Etc.. The Issuer covenants and agrees that, upon the direction of the Company or Bond Counsel, it will mail or cause to be mailed to the Secretary of the Treasury (or his designee as prescribed by regulation, currently the Internal Revenue Service Center, Ogden, Utah) a statement setting forth the information required by Section 149(e) of the Code, which statement shall be in the form of the Information Return for Tax-Exempt Private Activity Bond Issues (Form 8038) of the Internal Revenue Service (or any successor form) and which shall be completed by the Company and Bond Counsel based in part upon information supplied by the Company and Bond Counsel. -12- Section 5.9. Limited Liability of Issuer. Any obligation or liability of the Issuer created by or arising out of this Agreement or otherwise incurred in connection with the issuance of the Bonds (including without limitation any liability created by or arising out of the representations, warranties or covenants set forth herein or otherwise) shall not impose a debt or pecuniary liability upon the Issuer or the State or any political subdivision thereof, or a charge upon the general credit or taxing powers of any of the foregoing, but shall be payable solely out of the Revenues or other amounts payable by the Company to the Issuer hereunder or otherwise (including without limitation any amounts derived from indemnifications given by the Company). Neither the issuance of the Bonds nor the delivery of this Agreement shall, directly or indirectly or contingently, obligate the Issuer or the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. Nothing in the Bonds or in the Indenture or this Agreement or the proceedings of the Issuer authorizing the Bonds or in the Act or in any other related document shall be construed to authorize the Issuer to create a debt of the Issuer or the State or any political subdivision thereof within the meaning of any constitutional or statutory provision of the State. The principal of, and premium, if any, and interest on, the Bonds shall be payable solely from the funds pledged for their payment in accordance with the Indenture and available therefor under this Agreement. Neither the State nor any political subdivision thereof shall in any event be liable for the payment of the principal of, premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the Issuer or the State or any political subdivision thereof, or any charge upon the general credit or against the taxing power of the Issuer or the State or any political subdivision thereof. Section 5.10. Inspection of Project. The Company agrees that the Issuer and the Trustee and their duly authorized representatives shall have the right at all reasonable times to enter upon and examine and inspect the Project property and shall also be permitted, at all reasonable times, to examine the books and records of the Company insofar as they relate to the Project. Article VI Events of Default and Remedies Section 6.1. Events of Default Defined. The following shall be "events of default" under this Agreement and the terms "event of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: (a) Failure by the Company to pay when due any amounts required to be paid under Section 4.2(a) hereof, which failure results in an event of default under subparagraph (a) or (b) of Section 9.01 of the Indenture; or -13- (b) Failure by the Company to pay or cause to be paid any payment required to be paid under Section 4.2(b) hereof, which failure results in an event of default under subparagraph (c) of Section 9.01 of the Indenture; or (c) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Agreement, other than as referred to in (a) and (b) above, for a period of 90 days after written notice, specifying such failure and requesting that it be remedied and stating that such notice is a "Notice of Default" hereunder, given to the Company by the Trustee or to the Company and the Trustee by the Issuer, unless the Issuer and the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted within the applicable period and diligently pursued until the failure is corrected and such corrective action or diligent pursuit is evidenced to the Trustee by a certificate of an Authorized Company Representative; or (d) A proceeding or case shall be commenced, without the application or consent of the Company, in any court of competent jurisdiction seeking (i) liquidation, reorganization, dissolution, winding-up or composition or adjustment of debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or cause shall continue undismissed, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered and shall continue in effect for a period of 90 days; or an order for relief against the Company shall be entered against the Company in an involuntary case under the Bankruptcy Code (as now or hereafter in effect) or other applicable law; or (e) The Company shall admit in writing its inability to pay its debts generally as they become due or shall file a petition in voluntary bankruptcy or shall make any general assignment for the benefit of its creditors, or shall consent to the appointment of a receiver or trustee of all or substantially all of its property, or shall commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), or shall file in any court of competent jurisdiction a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, or shall fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under such Bankruptcy Code or other applicable law; or (f) Dissolution or liquidation of the Company; provided that the term "dissolution or liquidation of the Company" shall not be construed to include the cessation of the corporate existence of the Company resulting either from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as -14- an entirety, under the conditions permitting such actions contained in Section 5.1 hereof; or (g) The occurrence of an "event of default" under the Indenture. The foregoing provisions of Section 6.1(c) are subject to the following limitations: If by reason of Force Majeure the Company is unable in whole or in part to carry out its agreements on its part herein contained, other than the obligations on the part of the Company contained in Article IV and Sections 5.3 and 6.4 hereof, the Company shall not be deemed in default during the continuance of such inability. The Company agrees, however, to remedy with all reasonable dispatch the cause or causes preventing the Company from carrying out its agreements; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the sole judgment of the Company unfavorable to the Company. Section 6.2. Remedies on Default. Whenever any event of default referred to in Section 6.1 hereof shall have happened and be continuing, the Trustee, as assignee of the Issuer: (a) shall, by notice in writing to the Company, declare the unpaid indebtedness under Section 4.2(a) hereof to be due and payable immediately, if concurrently with or prior to such notice the unpaid principal amount of the Bonds shall have been declared to be due and payable, and upon any such declaration the same (being an amount sufficient, together with other moneys available therefor in the Bond Fund, to pay the unpaid principal of, premium, if any, and interest accrued on, the Bonds) shall become and shall be immediately due and payable as liquidated damages; and (b) may take whatever action at law or in equity as may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due hereunder or to enforce performance and observance of any obligation, agreement or covenant of the Company under this Agreement. Any amounts collected pursuant to action taken under this Section 6.2 shall be paid into the Bond Fund (unless otherwise provided in this Agreement) and applied in accordance with the provisions of the Indenture. No action taken pursuant to this Section 6.2 shall relieve the Company from the Company's obligations pursuant to Section 4.2 hereof. No recourse shall be had for any claim based on this Agreement against any officer, director or stockholder, past, present or future, of the Company as such, either directly or through the Company, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. Nothing herein contained shall be construed to prevent the Issuer from enforcing directly any of its rights under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof. -15- Section 6.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Subject to the provisions of the Indenture and hereof, such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee. The Owners of the Bonds, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained. Section 6.4. Agreement to Pay Fees and Expenses of Counsel. In the event the Company should default under any of the provisions of this Agreement and the Issuer or the Trustee should employ Counsel or incur other expenses for the collection of the indebtedness hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the Issuer, the reasonable fees and expenses of such Counsel and such other expenses so incurred by or on behalf of the Issuer or the Trustee. Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver shall be effective unless in writing and signed by the party making the waiver. The Issuer shall have no power to waive any default hereunder by the Company without the consent of the Trustee to such waiver. The Trustee shall have the power to waive any default by the Company hereunder, except a default under Section 3.4, 4.2(e), 4.2(g), 5.3 or 6.4 hereof, in so far as it pertains to the Issuer, without the prior written concurrence of the Issuer. Notwithstanding the foregoing, if, after the acceleration of the maturity of the outstanding Bonds by the Trustee pursuant to Section 9.02 of the Indenture, (i) all arrears of principal of and interest on the outstanding Bonds and interest on overdue principal and (to the extent permitted by law) on overdue installments of interest at the rate of interest borne by the Bonds on the date on which such principal or interest became due and payable and the premium, if any, on all Bonds then Outstanding which have become due and payable otherwise than by acceleration, and all other sums payable under the Indenture, except the principal of and the interest on such Bonds which by such acceleration shall have become due and payable, shall have been paid, (ii) all other things shall have been performed in respect of which there was a default, (iii) there shall have been paid the reasonable fees and expenses of the Trustee and of the Owners of such Bonds, including reasonable attorneys' fees paid or incurred and (iv) such event of default under the Indenture shall be waived in accordance with Section 9.09 of the Indenture with the consequence that such acceleration under Section 9.02 of the Indenture is rescinded, then the Company's default hereunder shall be deemed to have been waived and its consequences rescinded and no further action or consent by the Trustee or the Issuer shall be required; provided that there has been furnished an opinion of -16- Bond Counsel to the effect that such waiver will not adversely affect the exemption from federal income taxes of interest on the Bonds. Article VII Options and Obligations of Company; Prepayments; Redemption of Bonds Section 7.1. Option to Prepay. The Company shall have, and is hereby granted, the option to prepay the payments due hereunder in whole or in part at any time or from time to time (a) to provide for the redemption of Bonds pursuant to the provisions of Section 3.01(A) of the Indenture or (b) to provide for the defeasance of the Bonds pursuant to Article VIII of the Indenture. In the event the Company elects to provide for the redemption of Bonds as permitted by this Section, the Company shall notify and instruct the Trustee in accordance with Section 7.3 hereof to redeem all or any portion of the Bonds in advance of maturity. If the Company so elects, any redemption of Bonds pursuant to Section 3.01(A) of the Indenture may be made conditional. Section 7.2. Obligation to Prepay. The Company covenants and agrees that if all or any part of the Bonds are unconditionally called for redemption in accordance with the Indenture or become subject to mandatory redemption, it will prepay the indebtedness hereunder in whole or in part, prior to the date on which notice of such redemption is given to the owners of such Bonds, in an amount sufficient to redeem such Bonds on the date fixed for the redemption of the Bonds. Section 7.3. Notice of Prepayment. Upon the exercise of the option granted to the Company in Section 7.1 hereof, or upon the Company having knowledge of the occurrence of any event requiring mandatory redemption of the Bonds in accordance with Section 3.01(B) of the Indenture, the Company shall give written notice to the Issuer, the Bank, the Remarketing Agent, the Auction Agent and the Trustee. The notice shall provide for the date of the application of the prepayment made by the Company hereunder to the retirement of the Bonds in whole or in part pursuant to call for redemption and shall be given by the Company not less than 45 days prior to the date of the redemption which is to occur as a result of such prepayment (or such later date as is acceptable to the Trustee and the Issuer), and in the case of a redemption of Bonds pursuant to Section 3.01(B) of the Indenture shall be given on a date which will permit the redemption of the Bonds within the time required by Section 3.01(B) of the Indenture. Article VIII Miscellaneous Section 8.1. Notices. Except as otherwise provided herein, all notices, certificates or other communications hereunder shall be sufficiently given if in writing and shall be deemed given when mailed by first class mail, postage prepaid, or by qualified overnight courier service, courier charges prepaid, or by facsimile (receipt of which is orally confirmed) addressed as -17- follows: if to the Issuer, at 500 South Grand Central Parkway, 6th Floor (89106), P.O. Box 551601, Las Vegas, Nevada 89155-1601, or to telecopy number (702) 455-3558, Attention: County Manager; if to the Company, at P.O. Box 230, 6226 West Sahara Avenue, Las Vegas, Nevada 89146, or to telecopy number (702) 367-5864, Attention: Treasurer; if to the Trustee, at 101 Barclay Street - 8W, New York, New York 10286, or to telecopy number (212) 815-5096, Attention: Corporate Trust Trustee Administration; if to the Remarketing Agent, at Lehman Brothers, Inc., 200 Vesey Street, New York, New York 10285, Attention: Steve Peters, or to telecopy number (212) 526-3738; and if to the Auction Agent, at The Bank of New York, 100 Church Street, 14th Floor, New York, New York, 10286, Attention: Dealing & Trading Group, Auction Desk, or to telecopy number (212) 437-7255. In case by reason of the suspension of regular mail service, it shall be impracticable to give notice by first class mail of any event to the Issuer, to the Company, to the Remarketing Agent, to the Auction Agent when such notice is required to be given pursuant to any provisions of this Agreement, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice. The Issuer, the Company, the Trustee, the Remarketing Agent and the Auction Agent may, by notice pursuant to this Section 8.1, designate any different addresses to which subsequent notices, certificates or other communications shall be sent. Section 8.2. Assignments. This Agreement may not be assigned by either party without consent of the other and the Trustee, except that the Issuer shall assign to the Trustee its rights under this Agreement (except under Sections 4.2(e), 4.2(g), 5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the Company may assign its rights under this Agreement to any transferee or any surviving or resulting corporation as provided by Section 5.1 hereof. Section 8.3. Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatever. Section 8.4. Execution of Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 8.5. Amounts Remaining in Bond Fund. It is agreed by the parties hereto that after payment in full of (i) the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), (ii) the fees, charges and expenses of the Trustee in accordance with the Indenture, (iii) the Administrative Expenses, (iv) the fees and expenses of the Remarketing Agent, the Auction Agent and the Issuer and (v) all other amounts required to be paid under this Agreement and the Indenture, any amounts remaining in the Bond Fund shall belong to and be paid to the Company by the Trustee. Section 8.6. Amendments, Changes and Modifications. This Agreement may be amended, changed, modified, altered or terminated only by written instrument executed by the Issuer and the Company, and only if the written consent of the Trustee thereto is obtained. Subject to the written consent of the Trustee, the Issuer and the Company agree to enter into such amendments, changes and modifications to this Agreement (i) as may be required by the -18- provisions of this Agreement or the Indenture, (ii) for the purpose of curing any ambiguity, formal defect or omission in this Agreement, (iii) so as to add additional rights acquired in accordance with the provisions of this Agreement, (iv) to preserve the exemption from federal income taxes of interest on the Bonds, or any of them, or (v) in connection with any other change herein which is not to the prejudice of the Trustee or the Owners of the Bonds; provided, however, that the Issuer shall not thereby incur any monetary obligation or liability (except only to the extent that the same shall be payable solely and only out of funds provided or to be provided by the Company) or surrender or abdicate in whole or in part any of its essential governmental functions or powers or any of its discretion in exercising the same. Section 8.7. Governing Law. This Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State. Section 8.8. Authorized Issuer and Company Representatives. Whenever under the provisions of this Agreement the approval of the Issuer or the Company is required to take some action at the request of the other, such approval of such request shall be given for the Issuer by the Authorized Issuer Representative and for the Company by the Authorized Company Representative, and the other party hereto and the Trustee shall be authorized to act on any such approval or request and neither party hereto shall have any complaint against the other or against the Trustee as a result of any such action taken. Section 8.9. Term of the Agreement. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds issued under the Indenture shall have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture), provided that all representations and certifications by the Company as to all matters affecting the tax-exempt status of the Bonds and the covenants of the Company in Sections 4.2(c), 4.2(d), 4.2(e), 4.2(f) and 4.2(g) hereof shall survive the termination of this Agreement. Section 8.10. Cancellation at Expiration of Term. At the acceleration, termination or expiration of the term of this Agreement and following full payment of the Bonds or provision for payment thereof and of all other fees and charges having been made in accordance with the provisions of this Agreement and the Indenture, the Issuer shall deliver to the Company any documents and take or cause the Trustee to take such actions as may be necessary to effectuate the cancellation and evidence the termination of this Agreement. Section 8.11. Bond Insurance. The payment of the principal of and interest on the Bonds when due is to be insured under, and to the extent provided in, the municipal bond insurance policy, including the endorsements thereto, to be issued by Ambac Assurance Corporation, and the Issuer and the Company agree to be bound by the provisions contained in Appendix C to the Indenture. In the event of any conflict between the provisions of Appendix C to the Indenture and the provisions of this Agreement, the provisions of Appendix C shall govern and control. -19- In Witness Whereof, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. CLARK COUNTY, NEVADA By Chairman Board of County Commissioners (SEAL) Attest: ________________________________ County Clerk NEVADA POWER COMPANY By _____________________________ (SEAL) Attest: ________________________________ Secretary -20- EX-10.P 25 0025.txt FINANCING AGREEMENT NO.2, CLARK COUNTY, NEVADA Exhibit 10(P) ================================================================================ FINANCING AGREEMENT NO. 2 Dated as of June 1, 2000 By and Between CLARK COUNTY, NEVADA and NEVADA POWER COMPANY RELATING TO POLLUTION CONTROL REFUNDING REVENUE BONDS (NEVADA POWER COMPANY PROJECT) SERIES 2000B ================================================================================ The amounts payable to the Issuer (except for amounts payable to, and certain rights and privileges of, the Issuer under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof and any rights of the Issuer to receive any notices, certificates, requests, requisitions or communications hereunder) and certain other rights of the Issuer under this Financing Agreement No. 2 have been pledged and assigned under the Indenture of Trust No. 2 dated as of June 1, 2000, between the Issuer and The Bank of New York, as Trustee. Financing Agreement No. 2 -------------- Table of Contents (This Table of Contents is not a part of this Agreement and is only for convenience of reference).
Section Heading Page Article I Definitions........................................................................ 1 Article II Representations.................................................................... 4 Section 2.1. Representations and Covenants by the Issuer........................................ 4 Section 2.2. Representations by the Company..................................................... 5 Article III Issuance of the Bonds.............................................................. 6 Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds............................. 6 Section 3.2. Deposit of Additional Funds by Company; Redemption of Prior Bonds.................. 6 Section 3.3. Investment of Moneys in the Bond Fund and the Prior Bonds Redemption Fund........................................................................... 6 Section 3.4. Tax Exempt Status of Bonds......................................................... 7 Article IV Loan and Provisions for Repayment.................................................. 8 Section 4.1. Loan of Bond Proceeds.............................................................. 8 Section 4.2. Loan Repayments and Other Amounts Payable.......................................... 8 Section 4.3. No Defense or Set-Off.............................................................. 10 Section 4.4. Payments Pledged and Assigned...................................................... 10 Section 4.5. Payment of the Bonds and Other Amounts............................................. 10 Article V Special Covenants and Agreements................................................... 11 Section 5.1. Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted........................................................... 11 Section 5.2. Annual Statement................................................................... 11 Section 5.3. Maintenance and Repair; Insurance; Taxes; Disposition.............................. 11 Section 5.4. Recordation and Other Instruments.................................................. 12 Section 5.5. No Warranty by the Issuer.......................................................... 12 Section 5.6. Agreement as to Ownership of the Project........................................... 12 Section 5.7. Company to Furnish Notice of Adjustments of Interest Rate Periods.................. 12 Section 5.8. Information Reporting, Etc......................................................... 12 Section 5.9. Limited Liability of Issuer........................................................ 13
Section 5.10. Inspection of Project............................................................ 13 Article VI Events of Default and Remedies................................................... 13 Section 6.1. Events of Default Defined........................................................ 13 Section 6.2. Remedies on Default.............................................................. 15 Section 6.3. No Remedy Exclusive.............................................................. 16 Section 6.4. Agreement to Pay Fees and Expenses of Counsel.................................... 16 Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers.................. 16 Article VII Options and Obligations of Company; Prepayments; Redemption of Bonds............. 17 Section 7.1. Option to Prepay................................................................. 17 Section 7.2. Obligation to Prepay............................................................. 17 Section 7.3. Notice of Prepayment............................................................. 17 Article VIII Miscellaneous.................................................................... 18 Section 8.1. Notices.......................................................................... 18 Section 8.2. Assignments...................................................................... 18 Section 8.3. Severability..................................................................... 18 Section 8.4. Execution of Counterparts........................................................ 18 Section 8.5. Amounts Remaining in Bond Fund................................................... 18 Section 8.6. Amendments, Changes and Modifications............................................ 19 Section 8.7. Governing Law.................................................................... 19 Section 8.8. Authorized Issuer and Company Representatives.................................... 19 Section 8.9. Term of the Agreement............................................................ 19 Section 8.10. Cancellation at Expiration of Term............................................... 19 Section 8.11. Bond Insurance................................................................... 20 Signature.............................................................................................. 21
-ii- This Financing Agreement No. 2 made and entered into as of June 1, 2000, by and between Clark County, Nevada, a political subdivision of the State of Nevada, party of the first part (hereinafter referred to as the "Issuer"), and Nevada Power Company, a corporation duly organized and existing under the laws of the State of Nevada, party of the second part (hereinafter referred to as the "Company"), W i t n e s s e t h: In consideration of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided, that in the performance of the agreements of the Issuer herein contained, any obligation it may thereby incur shall not constitute or give rise to a pecuniary liability or a charge upon its general credit or against its taxing powers but shall be payable solely out of the Revenues (as hereinafter defined) derived from this Financing Agreement and the Bonds, as hereinafter defined): Article I Definitions The following terms shall have the meanings specified in this Article unless the context clearly requires otherwise. The singular shall include the plural and the masculine shall include the feminine. "Act" means the County Economic Development Revenue Bond Law, as amended, contained in Sections 244A.669 to 244A.763, inclusive, of the Nevada Revised Statutes. "Act of Bankruptcy" means the filing of a petition in bankruptcy by or against the Company or the Issuer under the Bankruptcy Code. "Administrative Expenses" means the reasonable and necessary expenses (including the reasonable value of employee services and fees of Counsel) incurred by the Issuer in connection with the Bonds, this Agreement, the Indenture and any transaction or event contemplated by this Agreement or the Indenture. "Agreement" means this Financing Agreement No. 2 by and between the Issuer and the Company, as from time to time amended and supplemented. "Auction Agent" means the auction agent appointed in accordance with Section 2.03(e)(iv) of the Indenture. "Authorized Company Representative" means any person who, at the time, shall have been designated to act on behalf of the Company by a written certificate furnished to the Issuer, the Remarketing Agent and the Trustee containing the specimen signature of such person and signed on behalf of the Company by any officer of the Company. Such certificate may designate an alternate or alternates. "Authorized Issuer Representative" means any person at the time designated to act on behalf of the Issuer by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its Chairman. Such certificate may designate an alternate or alternates. "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978, as amended from time to time, or any substitute or replacement legislation. "Bond" or "Bonds" means the Issuer's bonds identified in Section 2.02 of the Indenture. "Bond Counsel" means the Counsel who renders the opinion as to the tax- exempt status of interest on the Bonds or other nationally recognized municipal bond counsel mutually acceptable to the Issuer and the Company. "Bond Fund" means the fund created by Section 6.02 of the Indenture. "Code" means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder. "Company" means Nevada Power Company, a Nevada corporation, and its successors and assigns and any surviving, resulting or transferee corporation as permitted in Section 5.1 hereof. "Counsel" means an attorney at law or a firm of attorneys (who may be an employee of or counsel to the Issuer or the Company or the Trustee) duly admitted to the practice of law before the highest court of any state of the United States of America or of the District of Columbia. "Extraordinary Services" and "Extraordinary Expenses" means all services rendered and all expenses (including fees and expenses of Counsel) incurred under the Indenture and the Tax Agreement other than Ordinary Services and Ordinary Expenses. "Force Majeure" means acts of God, strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the governments of the United States or of the State, or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; lightning; earthquakes; fires; tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or malfunction or accident to machinery, transmission lines, pipes or canals, even if resulting from negligence; civil disturbances; or any other cause not reasonably within the control of the Company. "Governing Body" means the Board of County Commissioners of the Issuer. -2- "Hereof," "herein," "hereunder" and other words of similar import refer to this Agreement as a whole. "Indenture" means the Indenture of Trust No. 2 relating to this Agreement between the Issuer and The Bank of New York, as Trustee, of even date herewith, pursuant to which the Bonds are authorized to be issued, including any indentures supplemental thereto or amendatory thereof. "Insider" shall have the meaning set forth in the Bankruptcy Code. "Issuer" means Clark County, Nevada, and any successor body to the duties or functions of the Issuer. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "Ordinary Services" and "Ordinary Expenses" means those services normally rendered and those expenses including fees and expenses of Counsel, normally incurred by a trustee or paying agent under instruments similar to the Indenture and the Tax Agreement. "Owner" or "owner of Bonds" means the Person or Persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Registrar for that purpose in accordance with the terms of the Indenture. "Person" means natural persons, firms, partnerships, associations, corporations, trusts and public bodies. "Prior Agreement" means the First Supplemental Sublease Agreement, dated as of October 1, 1989, between the Issuer and the Company relating to the Prior Bonds. "Prior Bonds" means the Issuer's Pollution Control Revenue Bonds (Nevada Power Company Project) Series 1989, currently outstanding in the aggregate principal amount of $15,000,000. "Prior Bond Fund" means the fund established pursuant to Section 5.02 of the Prior Indenture. "Prior Indenture" means the Indenture of Trust dated as of March 1, 1974 between the Issuer and Commerce Union Bank as trustee, as supplemented by the First Supplemental Indenture of Trust dated as of October 1, 1989 between the Issuer and Sovran Bank/Central South as successor trustee, pursuant to which the Prior Bonds were issued. -3- "Prior Trustee" means The Bank of New York, as current trustee under the Prior Indenture. "Project" means the Project as defined in the Prior Agreement. "Project Certificate" means the Company's Project and Refunding Certificate, delivered concurrently with the issuance of the Bonds, with respect to certain facts which are within the knowledge of the Company and certain reasonable assumptions of the Company, to enable Chapman and Cutler, as Bond Counsel, to determine that interest on the Bonds is not includable in the gross income of the Owners of the Bonds for federal income taxes purposes. "Rebate Fund" means the Rebate Fund, if any, created and established pursuant to the Tax Agreement. "Remarketing Agent" means the remarketing agent appointed in accordance with Section 4.08 of the Indenture and any permitted successor thereto. "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and if such division or corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company and acceptable to the Bank Agent, with notice to the Trustee. "State" means the State of Nevada. "Tax Agreement" means the Tax Exemption Certificate and Agreement No. 2 with respect to the Bonds, dated the date of delivery of the Bonds, among the Company, the Issuer and the Trustee, as from time to time amended and supplemented. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses of the Indenture. "Trustee" means The Bank of New York, as Trustee under the Indenture, and any successor Trustee appointed pursuant to Section 10.06 or 10.09 of the Indenture at the time serving as Trustee thereunder, and any separate or co- trustee serving as such thereunder. All other terms used herein which are defined in the Indenture shall have the same meanings assigned them in the Indenture unless the context otherwise requires. -4- Article II Representations Section 2.1. Representations and Covenants by the Issuer. The Issuer makes the following representations and covenants as the basis for the undertakings on its part herein contained: (a) The Issuer is a duly organized and existing political subdivision of the State of Nevada. Under the provisions of the Act, the Issuer is authorized to enter into the transactions contemplated by this Agreement, the Indenture and the Tax Agreement and to carry out its obligations hereunder and thereunder. The Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Tax Agreement. (b) The Bonds are to be issued under and secured by the Indenture, pursuant to which certain of the Issuer's interests in this Agreement and the Revenues derived by the Issuer pursuant to this Agreement will be pledged and assigned as security for payment of the principal of, premium, if any, and interest on, the Bonds. (c) The Governing Body of the Issuer has found that the issuance of the Bonds will further the public purposes of the Act. (d) The Issuer has not assigned and will not assign any of its interests in this Agreement other than pursuant to the Indenture. (e) No member of the Governing Body of the Issuer, nor any other officer of the Issuer, has any interest, financial (other than ownership of less than one-tenth of one percent (.1%) of the publicly traded securities issued by the Company or its affiliated corporations), employment or other, in the Company or in the transactions contemplated hereby. Section 2.2. Representations by the Company. The Company makes the following representations as the basis for the undertakings on its part herein contained: (a) The Company is a corporation duly incorporated under the laws of the State and is in good standing in the State, is qualified to do business as a foreign corporation in all other states and jurisdictions wherein the nature of the business transacted by the Company or the nature of the property owned or leased by it makes such licensing or qualification necessary, has power to enter into and by proper corporate action has been duly authorized to execute and deliver this Agreement and the Tax Agreement. (b) Neither the execution and delivery of this Agreement or the Tax Agreement, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and the -5- Tax Agreement, conflicts with or results in a breach of any of the terms, conditions or provisions of any corporate restriction or any agreement or instrument to which the Company is now a party or by which it is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any instrument or agreement other than the Indenture. (c) The statements, information and descriptions contained in the Project Certificate and the Tax Agreement, as of the date hereof and at the time of the delivery of the Bonds to the Underwriter, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated therein or necessary to make the statements, information and descriptions contained therein, in the light of the circumstances under which they were made, not misleading. Article III Issuance of the Bonds Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds. In order to provide funds to lend to the Company to refund the Prior Bonds as provided in Section 4.1 hereof, the Issuer agrees that it will issue under the Indenture, sell and cause to be delivered to the Underwriter, its Bonds in the aggregate principal amount of $15,000,000, bearing interest and maturing as set forth in the Indenture. The Issuer will thereupon deposit the proceeds received from the sale of the Bonds as follows: (1) in the Bond Fund, a sum equal to any accrued interest, if any, paid by the Underwriter; and (2) $15,000,000 in the Prior Bonds Redemption Fund to be remitted by the Trustee to the Prior Trustee for deposit in the Prior Bond Fund to be used to pay to the owners thereof the principal of the Prior Bonds upon redemption thereof. Section 3.2. Deposit of Additional Funds by Company; Redemption of Prior Bonds. The Company covenants that such additional amounts as may be required to redeem the Prior Bonds will be deposited with the Prior Trustee pursuant to the Prior Indenture for such purpose. Income derived from the investment of the proceeds of the Bonds deposited in the Prior Bonds Redemption Fund will be used to satisfy the obligations of the Company specified in this Section 3.2. The Company covenants that it will cause the Prior Bonds to be redeemed within 90 days after the issuance and delivery of the Bonds. Section 3.3. Investment of Moneys in the Bond Fund and the Prior Bonds Redemption Fund. Except as otherwise herein provided, any moneys held as a part of the Bond Fund and the Prior Bonds Redemption Fund shall be invested or reinvested by the Trustee at the specific written direction of an Authorized Company Representative as to specific investments, to the extent permitted by law, in: (a) bonds or other obligations of the United States of America; -6- (b) bonds or other obligations, the payment of the principal of and interest on which is unconditionally guaranteed by the United States of America; (c) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (d) obligations issued or guaranteed by any state of the United States of America, or any political subdivision of any such state, or in funds consisting of such obligations to the extent described in Treasury Regulation 1.148-8(e)(3)(iii); (e) prime commercial paper; (f) prime finance company paper; (g) bankers' acceptances drawn on and accepted by commercial banks; (h) repurchase agreements fully secured by obligations issued or guaranteed as to principal and interest by the United States of America or by any person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (i) certificates of deposit issued by commercial banks, including banks domiciled outside of the United States of America; and (j) units of taxable government money market portfolios composed of obligations guaranteed as to principal and interest by the United States of America or repurchase agreements fully collateralized by such obligations. The investments so purchased shall be held by the Trustee and shall be deemed at all times a part of the fund for which they were made and the interest accruing thereon and any profit realized therefrom shall be credited to such fund, subject to the provisions of the Tax Agreement. The Company agrees that to the extent any moneys in the Bond Fund represent moneys held for the payment of particular Bonds or moneys held for the payment of the purchase price of Bonds pursuant to Article IV of the Indenture, such moneys shall not be invested. Section 3.4. Tax Exempt Status of Bonds. The Company covenants and agrees that it has not taken or permitted and will not take or permit any action which results in interest paid on the Bonds being included in gross income of the holders or beneficial owners of the Bonds for purposes of federal income taxation (other than a holder or beneficial owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 103(b)(13) of the Code-1954). The Company covenants that none of the proceeds of the Bonds or the payments to be made under this Agreement, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be invested or used in such a way, and that no actions will be taken or not taken, as to cause the Bonds to be treated as -7- "arbitrage bonds" within the meaning of Section 148(a) of the Code. Without limiting the generality of the foregoing, the Company covenants and agrees that it will comply with the provisions of the Tax Agreement and the Project Certificate. Article IV Loan and Provisions for Repayment Section 4.1. Loan of Bond Proceeds. (a) The Issuer agrees, upon the terms and conditions in this Agreement, to lend to the Company the proceeds (exclusive of accrued interest, if any) received by the Issuer from the sale of the Bonds in order to refund the Prior Bonds and the Company agrees to apply the gross proceeds of such loan to the refunding of the Prior Bonds. (b) The Issuer and the Company expressly reserve the right to enter into, to the extent permitted by law, an agreement or agreements other than this Agreement, with respect to the issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide additional funds to refund all or any principal amount of the Bonds. Section 4.2. Loan Repayments and Other Amounts Payable. (a) On each date provided in or pursuant to the Indenture for the payment (whether at maturity or upon redemption or acceleration) of principal of, and premium, if any, and interest on, the Bonds, until the principal of, and premium, if any, and interest on, the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Company shall pay to the Trustee in immediately available funds, for deposit in the Bond Fund, as a repayment installment of the loan of the proceeds of the Bonds pursuant to Section 4.1(a) hereof, a sum equal to the amount payable on such date (whether at maturity or upon redemption or acceleration) as principal of, and premium, if any, and interest on, the Bonds as provided in the Indenture; provided, however, that the obligation of the Company to make any such repayment installment shall be reduced by the amount of any moneys then on deposit in the Bond Fund and available for such payment. (b) The Company shall pay to the Trustee amounts equal to the amounts to be paid by the Trustee for the purchase of Bonds pursuant to Article IV of the Indenture. Such amounts shall be paid by the Company to the Trustee in immediately available funds on the date such payments pursuant to Section 4.05 of the Indenture are to be made; provided, however, that the obligation of the Company to make any such payment shall be deemed to be satisfied and discharged to the extent moneys are available from the source described in clause (i) of Section 4.05(a) of the Indenture. (c) The Company agrees to pay to the Trustee (i) the fees of the Trustee for the Ordinary Services rendered by it and an amount equal to the Ordinary Expenses incurred by it under the Indenture and the Tax Agreement, as and when the same become due, and (ii) the reasonable fees, charges and expenses of the Trustee for reasonable Extraordinary Services and Extraordinary Expenses, as and when the same become due, incurred under the Indenture and the Tax Agreement. The Company agrees that the Trustee, its officers, agents, servants and -8- employees, shall not be liable for, and agrees that it will at all times indemnify and hold harmless the Trustee, its officers, agents, servants and employees against, and pay all expenses of the Trustee, its officers, agents, servants and employees, relating to any lawsuit, proceeding or claim and resulting from any action or omission taken or made by or on behalf of the Trustee, its officers, agents, servants and employees pursuant to this Agreement, the Indenture or the Tax Agreement, that may be occasioned by any cause (other than the negligence or willful misconduct of the Trustee, its officers, agents, servants and employees). In case any action shall be brought against the Trustee in respect of which indemnity may be sought against the Company, the Trustee shall promptly notify the Company in writing and the Company shall be entitled to assume control of the defense thereof, including the employment of Counsel and the payment of all expenses. The Trustee shall have the right to employ separate Counsel in any such action and participate in the defense thereof, but the fees and expenses of such Counsel shall be paid by the Trustee unless the employment of such Counsel has been authorized by the Company. The Company shall not be liable for any settlement of any such action without its consent, but if any such action is settled with the consent of the Company or if there be final judgment for the plaintiff in any such action, the Company agrees to indemnify and hold harmless the Trustee from and against any loss or liability by reason of such settlement or final judgment. The Company agrees that the indemnification provided herein shall survive the termination of this Agreement or the Indenture or the resignation of the Trustee. (d) The Company agrees to pay all costs incurred in connection with the issuance of the Bonds from sources other than Bond proceeds and the Issuer shall have no obligation with respect to such costs. (e) The Company agrees to indemnify and hold harmless the Issuer and any member, officer, official or employee of the Issuer against any and all losses, costs, charges, expenses, judgments and liabilities created by or arising out of this Agreement, the Indenture, the Remarketing Agreement, the Auction Agreement, the Bond Purchase Agreement, any Broker-Dealer Agreement or the Tax Agreement or otherwise incurred in connection with the issuance of the Bonds. The Company agrees to pay the Issuer its Closing Fee in connection with the issuance of the Bonds in the amount of $15,000. The Issuer may submit to the Company periodic statements, not more frequently than monthly, for its Administrative Expenses and the Company shall make payment to the Issuer of the full amount of each such statement within 30 days after the Company receives such statement. (f) The Company agrees to pay (i) to the Remarketing Agent the reasonable fees, charges and expenses of such Remarketing Agent and (ii) to the Auction Agent the reasonable fees, charges and expenses of such Auction Agent, and the Issuer shall have no obligation or liability with respect to the payment of any such fees, charges or expenses. (g) In the event the Company shall fail to make any of the payments required by (a) or (b) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid and the Company will pay interest to the extent permitted by law, on any overdue amount at the rate of interest borne by the Bonds on the date on which such amount became due and payable until paid. In the event that the Company shall fail to make any of the payments required by (c), (d), (e) or (f) of this Section 4.2, the -9- payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid, and the Company agrees to pay the same with interest thereon to the extent permitted by law at a rate 1% above the rate of interest then charged by the Trustee on 90-day commercial loans to its prime commercial borrowers until paid. Section 4.3. No Defense or Set-Off. The obligation of the Company to make the payments pursuant to this Agreement shall be absolute and unconditional without defense or set-off by reason of any default by the Issuer under this Agreement or under any other agreement between the Company and the Issuer or for any other reason, it being the intention of the parties that the payments required hereunder will be paid in full when due without any delay or diminution whatsoever. Section 4.4. Payments Pledged and Assigned. It is understood and agreed that all payments required to be made by the Company pursuant to Section 4.2 hereof (except payments made to the Trustee pursuant to Section 4.2(c) hereof, to the Remarketing Agent and the Auction Agent pursuant to Section 4.2(f) hereof, to the Issuer pursuant to Section 4.2(e) hereof and to any or all the Issuer and the Trustee and the Remarketing Agent pursuant to Section 4.2(g) hereof) and certain rights of the Issuer hereunder are pledged and assigned by the Indenture. The Company consents to such pledge and assignment. The Issuer hereby directs the Company and the Company hereby agrees to pay or cause to be paid to the Trustee all said amounts except payments to be made to the Remarketing Agent and the Auction Agent pursuant to Section 4.2(f) hereof and payments to be made to the Issuer pursuant to Sections 4.2(e) and (g) hereof. The Project will not constitute any part of the security for the Bonds. Section 4.5. Payment of the Bonds and Other Amounts. The Bonds and interest and premium, if any, thereon shall be payable solely from (i) payments made by the Company to the Trustee under Section 4.2(a) hereof and (ii) other moneys on deposit in the Bond Fund and available therefor. Payments of principal of, and premium, if any, or interest on, the Bonds with moneys in the Bond Fund constituting proceeds from the sale of the Bonds or earnings on investments made under the provisions of the Indenture shall be credited against the obligation to pay required by Section 4.2(a) hereof. Whenever any Bonds are redeemable in whole or in part at the option of the Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the request of the Company and such redemption (unless conditional) shall be made from payments made by the Company to the Trustee under Section 4.2(a) hereof equal to the redemption price of such Bonds. Whenever payment or provision therefor has been made in respect of the principal of, or premium, if any, or interest on, all or any portion of the Bonds in accordance with the Indenture (whether at maturity or upon redemption or acceleration or upon provision for payment in accordance with Article VIII of the Indenture), payments shall be deemed paid to the extent such payment or provision therefor has been made and is considered to be a payment of principal of, or premium, if any, or interest on, such Bonds. If such Bonds are thereby deemed paid in full, the Trustee shall notify the Company and the Issuer that such payment requirement has been -10- satisfied. Subject to the foregoing, or unless the Company is entitled to a credit under this Agreement or the Indenture, all payments shall be in the full amount required by Section 4.2(a) hereof. Article V Special Covenants and Agreements Section 5.1. Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted. The Company agrees that during the term of this Agreement, it will maintain its corporate existence and its good standing in the State, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another corporation unless (a) the acquirer of its assets or the corporation with which it shall consolidate or into which it shall merge shall (i) be a corporation organized under the laws of one of the states of the United States of America, (ii) be qualified to do business in the State, (iii) be a public utility, and (iv) assume in writing all of the obligations of the Company under this Agreement and the Tax Agreement. Any transfer of all or substantially all of the Company's generation assets shall not be deemed to constitute a "disposition of all or substantially all of the Company's assets" within the meaning of the preceding paragraph. Any such transfer of the Company's generation assets shall not relieve the Company of any of its obligations under this Agreement. Section 5.2. Annual Statement. The Company agrees to have an annual audit made by its regular independent certified public accountants and to furnish the Trustee (within 30 days after receipt by the Company) with a balance sheet and statement of income and surplus showing the financial condition of the Company and its consolidated subsidiaries, if any, at the close of each fiscal year and the results of operations of the Company and its consolidated subsidiaries, if any, for each fiscal year, accompanied by a report of said accountants that such statements have been prepared in accordance with generally accepted accounting principles. The Company's obligations under this Section 5.2 may be satisfied by delivering a copy of the Company's Annual Report to the Trustee at the same time that it is mailed to stockholders. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on officer's certificates). Section 5.3. Maintenance and Repair; Insurance; Taxes; Disposition. For so long as the Company shall own the Project, (i) the Company shall maintain or cause to be maintained the Project in good repair and keep it properly insured and shall promptly pay or cause to be paid all costs thereof, and (ii) the Company shall promptly pay or cause to be paid all installments of taxes, installments of special assessments, and all governmental, utility and other charges with respect to the Project, when due. The Company may, at its own expense and in its own name in -11- good faith contest or appeal any such taxes, assessments or other charges, or installments thereof, but shall not permit any such taxes, assessments or other charges, or installments thereof, to remain unpaid if such nonpayment shall subject the Project or any part thereof to loss or forfeiture. The Company, subject to the provisions of Section 3.4 hereof, is not required by this Agreement to operate, or cause to be operated, any portion of the Project after the Company shall deem in its discretion that such continued operation by the Company is not advisable, and in such event the Company may sell, lease or retire all or any such portion of the Project. Subject to the provisions of Section 3.4 hereof, the net proceeds from such sale, lease or other disposition, if any, shall belong to, and may be used for any lawful purpose by, the Company. Upon disposition of the Project in its entirety by the Company in accordance with this Section 5.3, the Company shall be discharged from its obligations to operate, maintain, repair and insure the Project as set forth in this Section 5.3. Any such sale, lease or other disposition shall comply with the requirements of the Tax Agreement. Under any and all circumstances, the Issuer shall have no obligation whatsoever with respect to the operation, maintenance, repair or insurance of the Project. Section 5.4. Recordation and Other Instruments. The Company shall cause such security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve, protect and perfect the security of the Owners of the Bonds and the rights of the Trustee, and to perfect the security interest created by the Indenture. The Company agrees to abide by the provisions of Section 5.11 of the Indenture to the extent applicable to the Company. Section 5.5. No Warranty by the Issuer. The Issuer makes no warranty, either express or implied, as to the Project or that it will be suitable for the purposes of the Company or needs of the Company. Section 5.6. Agreement as to Ownership of the Project. The Issuer and the Company agree that title to the Project shall not be in the Issuer, and that the Issuer shall have no interest in the Project. Section 5.7. Company to Furnish Notice of Adjustments of Interest Rate Periods. The Company is hereby granted the option to designate from time to time changes in Rate Periods (and to rescind such changes) in the manner and to the extent set forth in Section 2.03 of the Indenture. In the event the Company elects to exercise any such option, the Company agrees that it shall cause notices of adjustments of Rate Periods (or rescissions thereof) to be given to the Issuer, the Trustee and the Remarketing Agent in accordance with Section 2.03(a), (b), (c), (d) or (e) of the Indenture, and a copy of each such notice shall also be given at such time to S&P and Moody's. Section 5.8. Information Reporting, Etc.. The Issuer covenants and agrees that, upon the direction of the Company or Bond Counsel, it will mail or cause to be mailed to the Secretary of the Treasury (or his designee as prescribed by regulation, currently the Internal Revenue Service Center, Ogden, Utah) a statement setting forth the information required by Section 149(e) of the Code, which statement shall be in the form of the Information Return for -12- Tax-Exempt Private Activity Bond Issues (Form 8038) of the Internal Revenue Service (or any successor form) and which shall be completed by the Company and Bond Counsel based in part upon information supplied by the Company and Bond Counsel. Section 5.9. Limited Liability of Issuer. Any obligation or liability of the Issuer created by or arising out of this Agreement or otherwise incurred in connection with the issuance of the Bonds (including without limitation any liability created by or arising out of the representations, warranties or covenants set forth herein or otherwise) shall not impose a debt or pecuniary liability upon the Issuer or the State or any political subdivision thereof, or a charge upon the general credit or taxing powers of any of the foregoing, but shall be payable solely out of the Revenues or other amounts payable by the Company to the Issuer hereunder or otherwise (including without limitation any amounts derived from indemnifications given by the Company). Neither the issuance of the Bonds nor the delivery of this Agreement shall, directly or indirectly or contingently, obligate the Issuer or the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. Nothing in the Bonds or in the Indenture or this Agreement or the proceedings of the Issuer authorizing the Bonds or in the Act or in any other related document shall be construed to authorize the Issuer to create a debt of the Issuer or the State or any political subdivision thereof within the meaning of any constitutional or statutory provision of the State. The principal of, and premium, if any, and interest on, the Bonds shall be payable solely from the funds pledged for their payment in accordance with the Indenture and available therefor under this Agreement. Neither the State nor any political subdivision thereof shall in any event be liable for the payment of the principal of, premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the Issuer or the State or any political subdivision thereof, or any charge upon the general credit or against the taxing power of the Issuer or the State or any political subdivision thereof. Section 5.10. Inspection of Project. The Company agrees that the Issuer and the Trustee and their duly authorized representatives shall have the right at all reasonable times to enter upon and examine and inspect the Project property and shall also be permitted, at all reasonable times, to examine the books and records of the Company insofar as they relate to the Project. Article VI Events of Default and Remedies Section 6.1. Events of Default Defined. The following shall be "events of default" under this Agreement and the terms "event of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: -13- (a) Failure by the Company to pay when due any amounts required to be paid under Section 4.2(a) hereof, which failure results in an event of default under subparagraph (a) or (b) of Section 9.01 of the Indenture; or (b) Failure by the Company to pay or cause to be paid any payment required to be paid under Section 4.2(b) hereof, which failure results in an event of default under subparagraph (c) of Section 9.01 of the Indenture; or (c) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Agreement, other than as referred to in (a) and (b) above, for a period of 90 days after written notice, specifying such failure and requesting that it be remedied and stating that such notice is a "Notice of Default" hereunder, given to the Company by the Trustee or to the Company and the Trustee by the Issuer, unless the Issuer and the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted within the applicable period and diligently pursued until the failure is corrected and such corrective action or diligent pursuit is evidenced to the Trustee by a certificate of an Authorized Company Representative; or (d) A proceeding or case shall be commenced, without the application or consent of the Company, in any court of competent jurisdiction seeking (i) liquidation, reorganization, dissolution, winding-up or composition or adjustment of debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or cause shall continue undismissed, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered and shall continue in effect for a period of 90 days; or an order for relief against the Company shall be entered against the Company in an involuntary case under the Bankruptcy Code (as now or hereafter in effect) or other applicable law; or (e) The Company shall admit in writing its inability to pay its debts generally as they become due or shall file a petition in voluntary bankruptcy or shall make any general assignment for the benefit of its creditors, or shall consent to the appointment of a receiver or trustee of all or substantially all of its property, or shall commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), or shall file in any court of competent jurisdiction a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, or shall fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under such Bankruptcy Code or other applicable law; or (f) Dissolution or liquidation of the Company; provided that the term "dissolution or liquidation of the Company" shall not be construed to include the -14- cessation of the corporate existence of the Company resulting either from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as an entirety, under the conditions permitting such actions contained in Section 5.1 hereof; or (g) The occurrence of an "event of default" under the Indenture. The foregoing provisions of Section 6.1(c) are subject to the following limitations: If by reason of Force Majeure the Company is unable in whole or in part to carry out its agreements on its part herein contained, other than the obligations on the part of the Company contained in Article IV and Sections 5.3 and 6.4 hereof, the Company shall not be deemed in default during the continuance of such inability. The Company agrees, however, to remedy with all reasonable dispatch the cause or causes preventing the Company from carrying out its agreements; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the sole judgment of the Company unfavorable to the Company. Section 6.2. Remedies on Default. Whenever any event of default referred to in Section 6.1 hereof shall have happened and be continuing, the Trustee, as assignee of the Issuer: (a) shall, by notice in writing to the Company, declare the unpaid indebtedness under Section 4.2(a) hereof to be due and payable immediately, if concurrently with or prior to such notice the unpaid principal amount of the Bonds shall have been declared to be due and payable, and upon any such declaration the same (being an amount sufficient, together with other moneys available therefor in the Bond Fund, to pay the unpaid principal of, premium, if any, and interest accrued on, the Bonds) shall become and shall be immediately due and payable as liquidated damages; and (b) may take whatever action at law or in equity as may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due hereunder or to enforce performance and observance of any obligation, agreement or covenant of the Company under this Agreement. Any amounts collected pursuant to action taken under this Section 6.2 shall be paid into the Bond Fund (unless otherwise provided in this Agreement) and applied in accordance with the provisions of the Indenture. No action taken pursuant to this Section 6.2 shall relieve the Company from the Company's obligations pursuant to Section 4.2 hereof. No recourse shall be had for any claim based on this Agreement against any officer, director or stockholder, past, present or future, of the Company as such, either directly or through the Company, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. -15- Nothing herein contained shall be construed to prevent the Issuer from enforcing directly any of its rights under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof. Section 6.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Subject to the provisions of the Indenture and hereof, such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee. The Owners of the Bonds, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained. Section 6.4. Agreement to Pay Fees and Expenses of Counsel. In the event the Company should default under any of the provisions of this Agreement and the Issuer or the Trustee should employ Counsel or incur other expenses for the collection of the indebtedness hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the Issuer, the reasonable fees and expenses of such Counsel and such other expenses so incurred by or on behalf of the Issuer or the Trustee. Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver shall be effective unless in writing and signed by the party making the waiver. The Issuer shall have no power to waive any default hereunder by the Company without the consent of the Trustee to such waiver. The Trustee shall have the power to waive any default by the Company hereunder, except a default under Section 3.4, 4.2(e), 4.2(g), 5.3 or 6.4 hereof, in so far as it pertains to the Issuer, without the prior written concurrence of the Issuer. Notwithstanding the foregoing, if, after the acceleration of the maturity of the outstanding Bonds by the Trustee pursuant to Section 9.02 of the Indenture, (i) all arrears of principal of and interest on the outstanding Bonds and interest on overdue principal and (to the extent permitted by law) on overdue installments of interest at the rate of interest borne by the Bonds on the date on which such principal or interest became due and payable and the premium, if any, on all Bonds then Outstanding which have become due and payable otherwise than by acceleration, and all other sums payable under the Indenture, except the principal of and the interest on such Bonds which by such acceleration shall have become due and payable, shall have been paid, (ii) all other things shall have been performed in respect of which there was a default, (iii) there shall have been paid the reasonable fees and expenses of the Trustee and of the Owners of such Bonds, including reasonable attorneys' fees paid or incurred and (iv) such event of default under the Indenture shall be waived in accordance with Section 9.09 of the Indenture with the consequence that such acceleration -16- under Section 9.02 of the Indenture is rescinded, then the Company's default hereunder shall be deemed to have been waived and its consequences rescinded and no further action or consent by the Trustee or the Issuer shall be required; provided that there has been furnished an opinion of Bond Counsel to the effect that such waiver will not adversely affect the exemption from federal income taxes of interest on the Bonds. Article VII Options and Obligations of Company; Prepayments; Redemption of Bonds Section 7.1. Option to Prepay. The Company shall have, and is hereby granted, the option to prepay the payments due hereunder in whole or in part at any time or from time to time (a) to provide for the redemption of Bonds pursuant to the provisions of Section 3.01(A) of the Indenture or (b) to provide for the defeasance of the Bonds pursuant to Article VIII of the Indenture. In the event the Company elects to provide for the redemption of Bonds as permitted by this Section, the Company shall notify and instruct the Trustee in accordance with Section 7.3 hereof to redeem all or any portion of the Bonds in advance of maturity. If the Company so elects, any redemption of Bonds pursuant to Section 3.01(A) of the Indenture may be made conditional. Section 7.2. Obligation to Prepay. The Company covenants and agrees that if all or any part of the Bonds are unconditionally called for redemption in accordance with the Indenture or become subject to mandatory redemption, it will prepay the indebtedness hereunder in whole or in part, prior to the date on which notice of such redemption is given to the owners of such Bonds, in an amount sufficient to redeem such Bonds on the date fixed for the redemption of the Bonds. Section 7.3. Notice of Prepayment. Upon the exercise of the option granted to the Company in Section 7.1 hereof, or upon the Company having knowledge of the occurrence of any event requiring mandatory redemption of the Bonds in accordance with Section 3.01(B) of the Indenture, the Company shall give written notice to the Issuer, the Bank, the Remarketing Agent, the Auction Agent and the Trustee. The notice shall provide for the date of the application of the prepayment made by the Company hereunder to the retirement of the Bonds in whole or in part pursuant to call for redemption and shall be given by the Company not less than 45 days prior to the date of the redemption which is to occur as a result of such prepayment (or such later date as is acceptable to the Trustee and the Issuer), and in the case of a redemption of Bonds pursuant to Section 3.01(B) of the Indenture shall be given on a date which will permit the redemption of the Bonds within the time required by Section 3.01(B) of the Indenture. -17- Article VIII Miscellaneous Section 8.1. Notices. Except as otherwise provided herein, all notices, certificates or other communications hereunder shall be sufficiently given if in writing and shall be deemed given when mailed by first class mail, postage prepaid, or by qualified overnight courier service, courier charges prepaid, or by facsimile (receipt of which is orally confirmed) addressed as follows: if to the Issuer, at 500 South Grand Central Parkway, 6th Floor (89106), P.O. Box 551601, Las Vegas, Nevada 89155-1601, or to telecopy number (702) 455-3558, Attention: County Manager; if to the Company, at P.O. Box 230, 6226 West Sahara Avenue, Las Vegas, Nevada 89146, or to telecopy number (702) 367-5864, Attention: Treasurer; if to the Trustee, at 101 Barclay Street - 8W, New York, New York 10286, or to telecopy number (212) 815-5096, Attention: Corporate Trust Trustee Administration; if to the Remarketing Agent, at Lehman Brothers Inc., 200 Vesey Street, New York, New York 10285, Attention: Steve Peters, or to telecopy number (212) 526-3738; and if to the Auction Agent, at The Bank of New York, 100 Church Street, 14th Floor, New York, New York 10286, Attention: Dealing & Trading Group, Auction Desk, or to telecopy number (212) 437-7255. In case by reason of the suspension of regular mail service, it shall be impracticable to give notice by first class mail of any event to the Issuer, to the Company, to the Remarketing Agent, to the Auction Agent when such notice is required to be given pursuant to any provisions of this Agreement, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be sufficient giving of such notice. The Issuer, the Company, the Trustee, the Remarketing Agent and the Auction Agent may, by notice pursuant to this Section 8.1, designate any different addresses to which subsequent notices, certificates or other communications shall be sent. Section 8.2. Assignments. This Agreement may not be assigned by either party without consent of the other and the Trustee, except that the Issuer shall assign to the Trustee its rights under this Agreement (except under Sections 4.2(e), 4.2(g), 5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the Company may assign its rights under this Agreement to any transferee or any surviving or resulting corporation as provided by Section 5.1 hereof. Section 8.3. Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatever. Section 8.4. Execution of Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 8.5. Amounts Remaining in Bond Fund. It is agreed by the parties hereto that after payment in full of (i) the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), (ii) the fees, charges and expenses of the Trustee in accordance with the Indenture, (iii) the Administrative Expenses, (iv) the fees and -18- expenses of the Remarketing Agent, the Auction Agent and the Issuer and (v) all other amounts required to be paid under this Agreement and the Indenture, any amounts remaining in the Bond Fund shall belong to and be paid to the Company by the Trustee. Section 8.6. Amendments, Changes and Modifications. This Agreement may be amended, changed, modified, altered or terminated only by written instrument executed by the Issuer and the Company, and only if the written consent of the Trustee thereto is obtained. Subject to the written consent of the Trustee, the Issuer and the Company agree to enter into such amendments, changes and modifications to this Agreement (i) as may be required by the provisions of this Agreement or the Indenture, (ii) for the purpose of curing any ambiguity, formal defect or omission in this Agreement, (iii) so as to add additional rights acquired in accordance with the provisions of this Agreement, (iv) to preserve the exemption from federal income taxes of interest on the Bonds, or any of them, or (v) in connection with any other change herein which is not to the prejudice of the Trustee or the Owners of the Bonds; provided, however, that the Issuer shall not thereby incur any monetary obligation or liability (except only to the extent that the same shall be payable solely and only out of funds provided or to be provided by the Company) or surrender or abdicate in whole or in part any of its essential governmental functions or powers or any of its discretion in exercising the same. Section 8.7. Governing Law. This Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State. Section 8.8. Authorized Issuer and Company Representatives. Whenever under the provisions of this Agreement the approval of the Issuer or the Company is required to take some action at the request of the other, such approval of such request shall be given for the Issuer by the Authorized Issuer Representative and for the Company by the Authorized Company Representative, and the other party hereto and the Trustee shall be authorized to act on any such approval or request and neither party hereto shall have any complaint against the other or against the Trustee as a result of any such action taken. Section 8.9. Term of the Agreement. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds issued under the Indenture shall have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture), provided that all representations and certifications by the Company as to all matters affecting the tax-exempt status of the Bonds and the covenants of the Company in Sections 4.2(c), 4.2(d), 4.2(e), 4.2(f) and 4.2(g) hereof shall survive the termination of this Agreement. Section 8.10. Cancellation at Expiration of Term. At the acceleration, termination or expiration of the term of this Agreement and following full payment of the Bonds or provision for payment thereof and of all other fees and charges having been made in accordance with the provisions of this Agreement and the Indenture, the Issuer shall deliver to the Company any documents and take or cause the Trustee to take such actions as may be necessary to effectuate the cancellation and evidence the termination of this Agreement. Section 8.11. Bond Insurance. The payment of the principal of and interest on the Bonds when due is to be insured under, and to the extent provided in, the municipal bond -19- insurance policy, including the endorsements thereto, to be issued by Ambac Assurance Corporation, and the Issuer and the Company agree to be bound by the provisions contained in Appendix C to the Indenture. In the event of any conflict between the provisions of Appendix C to the Indenture and the provisions of this Agreement, the provisions of Appendix C shall govern and control. -20- In Witness Whereof, the Issuer and the Company have caused this Agreement to be executed in their respective corporate names and their respective corporate seals to be hereunto affixed and attested by their duly authorized officers, all as of the date first above written. Clark County, Nevada By Chairman Board of County Commissioners (SEAL) Attest: ________________________________ County Clerk Nevada Power Company By _____________________________ (SEAL) Attest: ________________________________ Secretary -21- EX-10.Q 26 0026.txt PLANT COLLECTIVE BARGAINING AGREEMENT Exhibit 10(Q) Plant Agreement Table of Contents
Item Page Preface 2 ARTICLES Article No. 1: Introduction/Continuity of Service/Non-Discrimination 2 Article No. 2: Union Security 4 Article No. 3: Exclusive Functions of Management 4 Article No. 4: Union Activity 4 Article No. 5: Status of Employees 6 Article No. 6: Working Hours and Rates of Pay 8 Article No. 7: Seniority and Promotions 23 Article No. 8: Grievance Procedure 27 Article No. 9: Working Safety Committee 29 Article No. 10: Inclement Weather Practice 30 Article No. 11: Holidays 31 Article No. 12: Vacations 33 Article No. 13: Sick Leave 36 Article No. 14: Employee Benefit Plans 38 Article No. 15: Leaves of Absence 49 Article No. 16: Working Rules 51 Article No. 17: Term of Agreement 55 EXHIBITS Exhibit I: Classification Descriptions 57 Exhibit II: Schedule of Wage Rates 62 Exhibit III: Check Off Authorization 65 Exhibit IV: Sick Leave Agreement 66 Exhibit V: Temporary Layoff Provisions 67 LETTERS OF UNDERSTANDING Letter of Understanding - Article 14.4 69 Letter of Understanding: Discipline Relative to Tardiness and Attendance 71 Letter of Understanding: Working Foreman Classification 72 Letter of Understanding: Labor/Management Meetings 73 Letter of Understanding: Vacation/Sick Leave Bonus 74 Letter of Understanding: Organization Study 75 Letter of Understanding: Work/Family Issues 76 Letter of Understanding: Districts 77 Letter of Understanding: Non-Bid Classifications 78
____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 1 of 78 GENERATION ONLY AGREEMENT This agreement, made and entered into as of February 1, 1998, by and between Nevada Power Company, a corporation, hereinafter referred to as the Company, and Local Union No. 396 of the International Brotherhood of Electrical Workers, an affiliate of the A.F.L./C.I.O., hereinafter referred to as the Union. WITNESSETH Whereas, for the purpose of facilitating the peaceful adjustments of differences that may arise from time to time between the parties hereto, and to promote harmony and efficiency to the end that the Company, the Union and the general public may mutually benefit. Now therefore, in consideration of the provisions, covenants and conditions herein contained, the parties hereto agree as follows, to-wit: ARTICLE NO. 1 Introduction/Continuity of Service/Non-Discrimination 1.1 INTRODUCTION: The Company, in Clark and Nye counties, in the state of Nevada, a public utility engaged in the service of generating, hereby recognizes Local Union No. 396 of the International Brotherhood of Electrical Workers, A.F.L./C.I.O., as the exclusive bargaining agent for its employees who are employed in the Generation organization, excluding all clerical, supervisory, confidential and professional employees within the meaning of the National Labor Relations Act, such covered employees more specifically defined in Exhibit I (CLASSIFICATION DESCRIPTIONS), for the purpose of collective bargaining with respect to rates of pay, wages, hours of employment and other conditions of employment which may be subject to collective bargaining. 1.2 CONTINUITY OF SERVICE: It is mutually recognized that the interest of the Company, the Union and the welfare of the general public, requires the continuous rendering of service by the Company, and the parties agree that recognition of such obligations of continuous service is imposed upon both the Company and its employees. The Company, to facilitate the continuous performance of such service, agrees to meet with the Business Manager of the Union or his designated representative in reference to any matter within the scope of the Agreement, and agrees that it will cooperate with the Union in its efforts to promote harmony and efficiency among all of the employees of the Company. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 2 of 78 The Union agrees that the employees covered by this Agreement, will not be called upon or permitted to cease or abstain from the continuous performance of the duties pertaining to the positions held by them with the Company. The Company agrees to do nothing to provoke interruption of or to prevent such continuity of performance as required in the normal and usual operations of the Company's property. It is mutually agreed that any difference that may arise between the above parties shall be settled in the manner hereinafter provided. The Union agrees that the employees covered by this agreement will individually and collectively perform loyal and efficient work and service and that they will cooperate in promoting and advancing the welfare of the Company and the protection of its service to the public at all times. The Union agrees that there will be no strikes, stoppages of work or slowdowns of the Company's operations during the term of this Agreement, and the Company agrees that there will be no lockouts during the term of this Agreement. 1.3 NON-DISCRIMINATION: Neither the Company nor the Union will discriminate against any employee in the application of the terms of this agreement because of race, religion, sex, age, color, national origin, veteran status, disability or any other legally protected status. It is understood that job titles used in this agreement which indicate the male gender are not intended to restrict classifications to employees of the male gender. 1.4 LAWS: It is understood and agreed that if mandatory laws or government rules or regulations applicable to or in conflict with any of the provisions of this Agreement become effective and binding upon the parties, such conflicting provisions of this Agreement shall be subject to modification as required. 1.5 AMENDMENT: This Agreement shall be subject to amendment at any time by mutual consent of the parties. Such amendment must be written, state the effective date of the amendment, and be executed in the same manner as this Agreement. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 3 of 78 ARTICLE NO. 2 Union Security 2.1 UNION DUES: The Company shall deduct money from Union employees' wages and pay it to the proper officers of the Union, provided the employee who is a member of the Union individually and voluntarily authorized such deduction to be made. The form of the check-off authorization is attached to this Agreement as Exhibit III (CHECK OFF AUTHORIZATION). The Union shall hold the Company free and harmless from any claims or damages from any party whatsoever for making deductions and shall indemnify the Company against any and all claims or damages which may originate from the dues check-off process. 2.2 NEW EMPLOYEES: The Company agrees to notify the Union of the name and address of new employees within thirty (30) days of their date of hire. ARTICLE NO. 3 Exclusive Functions of Management 3.1 BUSINESS MANAGEMENT: The supervision and control of all operations and the direction of all working forces, including the right to hire, to suspend or discharge for proper cause, to transfer employees, to relieve employees from duty because of lack of work and for other legitimate reasons, is vested exclusively in the Company. 3.2 DISCIPLINE: The Company retains the right to exercise discipline in the interest of good service and the proper conduct of its business, provided an employee who has been laid off, discharged, or disciplined shall be advised of the reason or reasons for such action and shall be allowed suitable representation, if so desired, at the time such reasons are provided. Furthermore, should the employee or the Union feel that the terms or conditions of this Agreement have been violated, either shall be entitled to grieve such action in accordance with the provisions set forth in Article 8 (GRIEVANCE PROCEDURE) of the Agreement. ARTICLE NO. 4 Union Activity 4.1 UNION BUSINESS: An employee who requests time off for Union activities, in addition to regular time off, shall be granted such request if such time off will not inconvenience the operations of the Company or increase its operating expenses; provided further, that such employee shall receive no compensation from the Company for such time off. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 4 of 78 4.2 BULLETIN BOARDS: The Company agrees to permit the Union to use reasonable space for the purpose of posting officially signed Union bulletins upon the bulletin boards which are furnished by the Company. 4.3 CONTRACTING WORK: In case the Company should contract any type of work customarily performed by bargaining unit employees, the Company shall, before awarding such contract, advise the contractor that the work is to be done under not less than the terms and conditions pertaining to hours and wages set forth in this Agreement. Upon award of such contract, the Company shall notify the Union of such contractor and the nature of the work being performed. The Company will not contract any of its construction and maintenance work while having available competent employees to do such work. In the event the Company has employees on layoff with recall rights, the Company will not establish contracts for work that is customarily performed by such bargaining unit employees unless the affected employees are not qualified to perform the work (as defined in Article 5.4 [LAYOFF PROVISIONS]), or the work requires the use of special construction or other equipment which the Company does not possess. If the Company has employees in layoff status who are qualified to perform work which the Company intends to contract, the Company may recall these employees for the term of the contracted work without creating the liability for an additional severance in accordance with Article 5 (STATUS OF EMPLOYEES) of this agreement. 4.4 UNION/STEWARD BUSINESS: The Union steward shall, upon request to the supervisor, be allowed reasonable time during regular working hours, without loss of pay, to attend to Union matters on the job, provided such time is not used for solicitation of membership or collection of dues, and does not interfere with regular work schedules. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 5 of 78 ARTICLE NO. 5 STATUS OF EMPLOYEES 5.1 STATUS DESIGNATION: Employees shall be designated as temporary, probationary, or regular. TEMPORARY: A temporary employee is one who is hired to fill a position for which there is temporary authorization. After working 1,040 straight time hours, a temporary employee shall be eligible for group life and medical insurance (excluding dental and vision), covering the employee only. If a temporary employee is offered and accepts a regular position, an adjusted date of hire, crediting actual time worked, will be calculated. If the temporary employee has worked at least 1,040 straight time hours, without cumulative absences of thirty (30) days or more at the time the regular position is awarded, the employee shall be eligible for all applicable benefits on the effective date of the award. If a temporary employee is offered and accepts a regular position that the employee has not previously occupied while at the Company, the employee must complete a probationary period to evaluate work performance. If, however, the employee has previously occupied the position being awarded, the employee shall receive credit toward the probationary period for actual time worked in that position. If an employee works at least 1,500 hours during a twelve (12) month period in the same temporary position, the position will become authorized and the employee will be offered regular status in that position. PROBATIONARY: A probationary employee is one who is hired to fill an authorized position. After six (6) months of employment, a probationary employee shall be eligible for all benefits in accordance with this agreement. During the probationary period, the employee may be terminated at the discretion of the Company as long as the termination is not discriminatory and is not for the purpose of keeping jobs filled with probationary employees. Probationary employees who have not satisfactorily completed a formal departmental training and appraisal program may, at the discretion of supervision, have their probationary period extended by up to three (3) months. Supervisors shall not extend the probationary period if they do not have a formal training and appraisal program in place or have failed to use those programs. No later than two (2) weeks prior to the completion of the first six (6) months, the supervisor must notify the employee and the Union Business Manager in writing, if the probationary period will be extended. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 6 of 78 In computing the effective date of a change in status from a probationary to regular employee, interruptions in employment, caused by the following circumstances, shall not be credited: . Discharge . Resignation . Absence for more than an accumulative total of thirty (30) days due to: . Lay off o Sickness . Industrial disability . Other causes. If the employee's combined absences, during the probationary period, are for a period greater than the employee's combined actual work time, the employee shall be terminated. The transfer of a probationary employee from one job to another without interruption of work time shall not be considered a break in employment. At the end of the probationary period as defined above, the employee will become a regular employee and will rank in seniority from the original date of hire. REGULAR: A regular employee is one who has completed a probationary period, is benefit eligible, and is in an authorized position. 5.2 APPLICATION REFERRAL: The Company recognizes the Union as a valuable source for employment referrals, due to the mutual interest in the profitability of the Company. As such, when additional employees are needed to do work which comes under this agreement, the Company will indicate its requirements, relative to knowledge, skills, and abilities, and will give the Union an equal opportunity to refer applicants for employment. The Company retains the right to evaluate each candidate and make the final hiring decision. 5.3 TEMPORARY LAYOFF PROVISIONS: In recognition of the competitive nature of the utility business, innovative solutions are required when unforeseen challenges present themselves. Accordingly, there may be operational circumstances that would permit the temporary layoff of employees for short-term periods of time, out of line of seniority, on a voluntary basis. These provisions are detailed in Exhibit V (TEMPORARY LAYOFF PROVISIONS) of this agreement. 5.4 LAYOFF PROVISIONS: DEFINITION OF QUALIFIED: For purposes of defining "qualified", as ----------------------- used in this Article, the definition shall be that an employee is qualified to perform any position, in either collective bargaining agreement, which the employee has previously occupied at the Company or any position that is an equal or lower classification which has been identified as being part of the employee's current trade/department progression. The progressions are detailed in a memorandum of understanding that is held by both the Company and the Union. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 7 of 78 NOTIFICATION: If it becomes necessary for the Company to layoff ------------ regular employees due to lack of work, the Company shall give affected employees as much notice as possible; but in no event shall employees receive less than fourteen (14) calendar days notice of layoff. Where temporary and probationary employees are involved, no notice of layoff is required. SENIORITY: Layoff in all cases due to lack of work will be determined --------- by Company seniority within the classification affected by the layoff. If two (2) or more employees have the same Company seniority date, the highest score on the most recent performance appraisal will break the tie. Employees who are to be laid-off will be permitted to displace a less senior person in any classification for which they are qualified. RETURN TO BARGAINING UNIT: A member of the bargaining unit being ------------------------- transferred to a non-represented position shall retain Company seniority for all purposes including layoff, if the employee is returned to the bargaining unit within one (1) year of the initial transfer. FOUR (4) YEAR QUALIFIER: Any MPAT employee who accepts a position in ----------------------- the bargaining unit will establish a new date of seniority for the purpose of future layoffs, except as defined above. This date will reflect the day in which these employees accept such a position and will be effective for four (4) years. If there is a reduction in classifications in the bargaining unit, these employees will use the above mentioned date as their seniority date for the purpose of this reduction or layoff. After four (4) years of service in the bargaining unit, any employee impacted by this language, will be credited with all Company seniority for the purposes of reduction in classification or layoff. RECALL: In the event of a recall, the Company shall provide ------ notification to affected employees by certified mail to their address of record. Such employees must keep the Company informed of the address where they can be reached. Recalled employees must report to work no later than fourteen (14) calendar days from the date the certified letter was mailed. Employees who do not report to work within fourteen (14) days from the date the letter was mailed will be considered a voluntary quit. Employees will only be considered for recall to the classification from which they were laid-off, unless they make a written application within fourteen (14) calendar days from the date of notification of layoff, to human resources, for any other position for which they are qualified. Applications that do not meet this time frame will only be considered after all timely applications have been honored. Employees must submit a written notice to human resources to rescind their application for consideration for previously held positions prior to formal notification of return to work. Any employee who refuses a recall to any requested position will be considered a voluntary quit and will waive all recall rights to any other position. Employees who have displaced a less senior person in any classification shall be given an offer to return to their former jobs if the vacancy is in their former classification. Recall rights shall cease on any layoff in excess of twelve (12) months. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 8 of 78 TEMPORARY RECALL: In the event of a temporary recall, in accordance ---------------- with Article 4.3 (CONTRACTING WORK), an employee may decline such temporary recall without waiving their rights for recall to a regular position, provided the temporary assignment is for less than ninety (90) days. If an employee accepts a temporary assignment, all benefits will be reinstated upon return to work and they will have recall rights for one (1) year from the date of any subsequent layoff. This right does not expire until the employee has returned to work or refused an offer to return to work. Any subsequent layoff will not create a liability for an additional severance benefit in accordance with this Article. EMPLOYMENT STATUS: Any regular employee who is laid-off due to lack ----------------- of work has a right to replace any temporary employee within (5) working days after notification of layoff, provided the regular employee is qualified to perform the duties of the position filled by the temporary employee. If a regular employee is laid-off because of lack of work and is subsequently offered and accepts the first recall for employment within one (1) year after layoff, the employee shall resume the status of regular employee and shall be credited with Company seniority previously accrued. Employees who are recalled in a classification previously held, or for one in which they are qualified, will not be required to serve another probationary period and will be eligible for benefits immediately. However, employees who leave the service of the Company due to voluntary severance in accordance with this Article, or layoff and who are re-hired after one (1) year from the date of layoff or severance shall not be credited with Company seniority at the time of re-employment and shall be required to serve a new probationary period. Upon completion of five (5) years of subsequent service, an adjusted date of hire will be calculated crediting actual time worked with the Company. This date will be used for the purposes of Company seniority and all related benefits. 5.5 SEVERANCE: Employees who have been notified of a layoff or a reduction in their classification which would cause them to be displaced from that classification may be eligible for severance benefits. The following define the severance benefit: ELIGIBILITY: Employees must have completed one (1) year of service ------------ to be eligible for the minimum severance benefit. BENEFIT AMOUNT: Employees will be paid forty (40) hours at their -------------- straight time rate for each year of service up to a maximum of three hundred twenty (320) hours. If eligible employees have completed nine (9) months of service since their most recent anniversary date, they will be considered to have completed an additional year of service for the purpose of calculating this benefit. If an employee exercises the right to displace a less-senior employee who occupies a lower paying classification and is laid-off from that classification within sixty (60) calendar days of this assignment, the severance benefit will be calculated at the rate of the employee's original classification. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 9 of 78 MEDICAL COVERAGE: Employees' current medical coverage, excluding ---------------- dental and vision, will be continued at the applicable employee contribution for three (3) months following the effective date of layoff or severance. EMPLOYMENT STATUS: Employees who accept severance in lieu of bumping, ----------------- waive any recall rights and will be considered a voluntary quit with the payment of the appropriate severance benefit. Employees presented this option must notify human resources of their decision within forty-eight (48) hours of the notification of layoff. Employees who do not have the option of bumping, and accept severance benefits, will retain recall rights for one (1) year from the date of layoff. Employees may agree in writing to waive their bumping rights as well as the appropriate severance benefit, thereby maintaining recall rights to the classification from which they were laid-off for a period of one (1) year. This decision must be made at the time of the initial notification of layoff and, once submitted, is irrevocable. Employees who have accepted severance and are subsequently recalled, will use that recall date for the purposes of calculating any severance benefit in the future. PAYMENT: Any severance payment will be paid within five (5) calendar -------- days of the date of layoff. ARTICLE NO. 6 WORKING HOURS AND RATES OF PAY 6.1 DEFINITIONS: SHIFT: Hours of work. ------ SCHEDULE: Days and hours of work. --------- WORK DAY: Eight (8) hours in any one (1) day shall constitute the -------- work day; however the Company and Union may enter into agreements which establish alternative work schedules involving work days which have more than eight hours. WORK WEEK: Five (5) consecutive work days, regularly scheduled --------- between the hours of 12:01 am, Monday, and 12:00 midnight, Sunday, shall constitute the basic work week. The basic work week of regular day-shift employees shall be from Monday through Friday and reflect a schedule of forty (40) hours of straight-time work. REGULAR DAYS OFF: Days off shall be consecutive, however, they may ----------------- not be within the basic work week. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 10 of 78 REGULAR DAY-SHIFT EMPLOYEES: Regular day shift employees are those --------------------------- employees who are assigned to shifts which are established on a Monday through Friday schedule and work a shift which begins between the hours of 7:00 am and 11:59 am. When mutually agreed to by the Union and Company, the day shift starting time may be scheduled as early as 6:00 am to take advantage of daylight hours. SEVEN DAY COVERAGE: A schedule of fixed or rotating shifts that cover ------------------ seven (7) days per week, twenty-four (24) hours per day. SHIFT EMPLOYEES: Shift employees are all employees not defined as ----------------- regular day-shift employees. This includes employees assigned to fixed shifts and seven (7) day coverage. SHIFT DESIGNATIONS: No shift periods shall start between the hours of ------------------ 12:01 am and 5:59 am, unless mutually agreed to by memorandum of understanding between the Company and the Union. The follow designations shall apply: FIRST SHIFT: All eight (8) hour shift periods regularly ------------ scheduled to begin at 6:00 a.m., or thereafter but before 12:00 noon shall be designated as first shifts. SECOND SHIFT: All eight (8) hour shift periods regularly ------------- scheduled to begin at 12:00 noon or thereafter but before 8:00 p.m., shall be designated as second shifts. THIRD SHIFT: All eight (8) hour shift periods regularly ------------ scheduled to begin at 8:00 p.m., or thereafter but before 12:01 a.m., shall be designated as third shifts. SHIFT DIFFERENTIAL: An incremental increase for working on a second ------------------- or third shift. SHIFT PREMIUM: An incremental increase for all hours worked outside ------------- of the employee's previous schedule for the first five (5) working days of a newly established permanent, temporary or emergency schedule. SHORT CHANGE: A transfer from one established schedule to another ------------- with only one shift off between schedules. COMPANY HEADQUARTERS: Any headquarters established for the purpose of -------------------- engaging in work covered by this Agreement when such work will continue for an indeterminate period of time. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 11 of 78 6.2 BREAK PERIODS: A fifteen (15) minute relief period shall be provided for all employees not working seven day coverage during each one-half (1/2) of the shift. Work conditions permitting, each break period shall be given as near the middle of each one-half (1/2) of the shift as possible. 6.3 LUNCH PERIODS: Supervisors will establish a meal period without pay, approximately four (4) hours after the start of a shift. Employees who are required to begin their lunch more than one (1) hour before or after the regular start of lunch time shall be paid during the lunch period at the straight time rate. There are three (3) pay possibilities for employees with an unpaid lunch. For this example the employees shift is from 7:00 am to 3:30 pm with a one-half (1/2) hour lunch from 11:30 am to noon.
EXAMPLE #1 EXAMPLE #2 EXAMPLE #3 ---------- ---------- ---------- Employees who are required to Employees who eat their lunch Employees who work through eat their lunch at 2:00 p.m. from 3:00 pm to 3:30 pm their lunch and complete their would be paid eight and would be paid eight (8) hours shift (work until 3:30 pm) one-half (8 1/2) hours of at straight time and one-half without taking a break for straight-time pay. (1/2) hour at time and lunch would be paid eight (8) one-half (1 1/2). hours at straight-time and one (1) hour at time and one-half (1 1/2).
REGULAR DAY-SHIFT AND SHIFT EMPLOYEES: The unpaid lunch period shall ------------------------------------- not exceed one-half (1/2) hour unless mutually agreed to by the Company and the Union. SEVEN DAY COVERAGE EMPLOYEES: These employees will be considered ------------------------------ to have a paid lunch period as part of their regular shift. EXAMPLE ------- A line troubleman whose shift is from 7:00 am to 3:00 pm will have a thirty (30) minute paid lunch period to be taken in accordance with operational efficiencies 6.4 OVERTIME: In computing overtime, intermission taken out for meals served other than on the job shall be deducted, and any holiday or vacation paid in that pay period will be considered as time worked. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 12 of 78 TIME AND A HALF: Except as otherwise provided in this Article, the ---------------- following situations shall require payment at one and one-half (1 1/2) times the regular established wage rate: . Time worked in excess of eight (8) hours per day. . Time worked in excess of any five (5) scheduled work days in that work week. . Work scheduled in the three (3) hours immediately preceding the normal starting time. . Employees who are scheduled to work on an observed holiday. . Employees on seven (7) day coverage who are scheduled or called out for overtime except as defined in "Double Time." . Employees who are scheduled for overtime and such is canceled per Article 6.9 (REQUIRED NOTICE FOR OVERTIME). DOUBLE TIME: Except as otherwise provided in this Article, the ------------ following situations shall require payment at two (2) times the regular established wage rate: . Employees, other than those assigned to seven (7) day coverage, who are scheduled to work within the first five (5) hours of the eight (8) hour period immediately preceding the normal starting time regardless of the day of the week. . Employees who are called -out for work on an observed holiday. . Employees who work on the second day of a two days off period, or on the second or fourth days off of a four days off period with an overtime minimum as provided in Article 6.7 (CALL-OUTS). . Employees, other than those assigned to seven (7) day coverage, who are called out for overtime work within the eight (8) hour period immediately preceding their normal starting time, regardless of the day of the week with an overtime minimum as provided in Article 6.7 (CALL-OUTS). . Employees who are assigned to seven (7) day coverage (excluding line troubleman), and are called out for work to cover all or part of the third shift, with an overtime minimum as provided in Article 6.7 (CALL-OUTS). . Employees called out while on vacation per the provision of Article 12.10 (CALL-OUT WHILE ON VACATION). DOUBLE TIME AND A HALF: Except as otherwise provided in this Article, ----------------------- the following situations shall require payment at two and one-half (2 1/2) times the regular established wage rate: . For all time worked in excess of sixteen (16) consecutive hours. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 13 of 78 BREAK PERIOD: Employees entitled to pay at this rate will continue at ------------ this rate until they have been released for a period of at least six (6) continuous hours. Any break of six (6) hours will be considered an interruption of continuous work time. It is understood that any employee may be returned to work exactly six (6) hours from their most recent release, satisfying the required break. It is also understood that any employee released for such a break may be called back to work before six (6) hours have elapsed. MEAL PERIODS: Meal periods while working overtime will not be ------------ considered as part of the six (6) hour break and will not be considered time worked, unless employees are directed to work through their meal period. Employee's unpaid meal period which occurs during regular work hours will be included in the computation of the six (6) hour break, when this break is calculated from the end of the employee's last regular shift. Accordingly, an employee may be called out five and one-half (5 1/2) hours from the end of their last regular shift without creating a requirement for this rate. STRAIGHT TIME PAY: Employees sent home for a six (6) hour break will ------------------ not lose any straight time pay for normally scheduled hours, as a result of such a break. EXAMPLE ------- Employees assigned to a 7:00 am to 3:30 pm shift and released two (2) hours early so they may have a six (6) hour break before a scheduled outage would be paid for the two (2) hours at the straight time rate and this would satisfy the six (6) hour break. Employees must use any rest time pay accumulated as a result of an overtime assignment before these provisions would apply. If an employee's accumulated rest time does not cover the entire six (6) hour break, the employee will receive straight time pay for any regularly scheduled hours not worked due to this break. 6.5 OVERTIME EQUALIZATION: The Company will endeavor to distribute overtime work as evenly as possible among those employees qualified to perform such work. For the purpose of distributing overtime, the Company will maintain and post overtime lists in each sub-department indicating time offered and time worked. Each department will create policies and procedures (BY LOCATION, SHIFT - as defined by Article 6.1 AND CLASSIFICATION), for overtime equalization through labor/management meetings. 6.6 PAY PROVISIONS: PAY DAYS: Pay days shall be at biweekly intervals. --------- WAGES: The schedule of job classifications and wage rates, as ------ mutually agreed to, are made a part of this agreement, and are marked "Exhibits I and II" respectively. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 14 of 78 Wages shall be paid at biweekly intervals on the Thursday following the close of the two week pay period provided that if the regular pay day falls on a holiday, payment shall be made on the preceding work day. SPECIAL PAY REQUESTS: The Company recognizes there will be -------------------- circumstances such as weeks of vacation and vacation in association with holidays which will create special requests of the payroll department. Unless the situation is an emergency, all special checks will be limited to individuals who are absent for at least the Wednesday through Friday of a pay week. Exceptions to this practice will require written approval from the department manager and must be presented to payroll no later than forty-eight (48) hours in advance of the requested time for payment. RECOVERING OVERPAYMENTS: Deductions from an employee's wages, to ----------------------- recover overpayments made in error, will not be made unless the employee is notified prior to the end of the month following the month in which the check in question was delivered to the employee. A schedule for re-payment will be agreed upon by the Company and the employee. 6.7 CALL-OUTS: TWO HOUR MINIMUM: Employees called out for overtime duty shall ---------------- receive at least two (2) hours pay. Reasonable travel time (defined below) to and from home will be considered as time worked for the purpose of satisfying the two (2) hour minimum, and will be paid at the appropriate overtime rate.
EXAMPLE #1 EXAMPLE #2 EXAMPLE #3 ---------- ---------- ---------- Employees called out who work Employees called out who work Employees called out who work one (1) hour work two (2) hours and travel one four (4) hours and travel one and travel one (1) hour (round trip) will be (1) (round trip) will be (1) hour (round trip) will be paid for two (2)hours paid for three (3) hours. paid for five (5) EXAMPLE #4 EXAMPLE #5 ---------- ---------- Employees called out who work Employees called out who work fifteen (15) minutes and into their regular shift travel one (1) hour (round shall be paid the appropriate trip) will be paid for two (2) overtime premium for at least hours. two (2) hours, which includes travel time to work only. This does not change the normal starting time for the purpose of extending the shift.
MULTIPLE CALL-OUTS: Employees called-out more than once in the ------------------- twenty-four (24) hour period from midnight one day to midnight the following day shall be paid at least the two (2) hour minimum mentioned above for the first call. For subsequent calls, employees shall be paid for a one (1) hour minimum with the same travel time considerations mentioned above. For the purpose of this section, concurrent calls or successive calls without a break in work time shall be considered as a single call. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 15 of 78 TRAVEL TIME: Employees are entitled to travel time according to the ------------ following chart:
---------------------------------------------------------------------------- WORK LOCATIONS ---------------------------------------------------------------------------- ---------------------------------------------------- Las Vegas Valley Reid Gardner ---------------------------------------------------- ---------------------------------------------------------------------------- Las Vegas Valley .5 hour 1 hour ---------------------------------------------------------------------------- Moapa Valley 1 hour .5 hour ---------------------------------------------------------------------------- Boulder City .75 hour 1.5 hours ---------------------------------------------------------------------------- St. George/Alamo 2 hours 1.5 hours ---------------------------------------------------------------------------- Mesquite 1.5 hours .75 hour ----------------------------------------------------------------------------
6.8 REST TIME: Employees who are required to work overtime within the eight (8) hour period immediately preceding their scheduled starting time on a regular work day, shall be entitled to time off with straight time pay equal to time worked during this time frame. This is not applicable to a call out or scheduled overtime of three (3) hours or less immediately preceding the employee's normal starting time. If an employee is entitled to rest time off, such time off would normally begin at the start of the regular shift. By mutual agreement between the supervisor and the employee, rest time may be taken during the last part of the regular shift. An employee shall not be required to work during his rest period provided adequate relief is available, however, should an employee be required to work during this period, he shall receive straight time for all time worked during his rest period in addition to his rest period pay. 6.9 REQUIRED NOTICE FOR OVERTIME: SCHEDULED OVERTIME: In scheduling overtime work, a minimum of ------------------ fourteen (14) hours notice is required, prior to the start of any overtime for a particular day, and before leaving the worksite on a regular work day. Without this notice, such work will be considered as a call-out. It is understood that overtime, when worked as an extension of a regular shift, does not require such notification. EXAMPLE ------- An employee assigned to a 7:00 am to 3:30 pm shift and held over for overtime and is notified to work the next day (his/her day off) at 7:00 am. If notification is given in the first two (2) hours of held over overtime, this overtime is scheduled. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 16 of 78 CANCELING OVERTIME: A minimum of twelve (12) hours notice is required ------------------- on canceling pre-scheduled overtime. When customer arrangements are involved, the Company must provide twelve (12) hours notice prior to the employee's next normal starting time. When such notice of cancellation of pre-scheduled overtime work is not given in accordance with the above, employees involved will be paid for two (2) hours at established overtime rates if they report and are retained for work. When such notice of cancellation is not given in accordance with the above, but employees are later notified of work cancellation, they will be paid for two (2) hours at time and one-half (1 1/2). If they report and are not retained for work, they shall receive pay for two (2) hours at time and one-half (1 1/2). 6.10 SHIFT DIFFERENTIAL: Seven (7) day coverage employees will be paid the shift differential applicable to the shift under which any hours worked may fall. Fixed shift employees will be paid their shift differential for all hours worked on that day. EXAMPLE ------- A second shift employee who works ten (10) hours on a particular day would be paid ten (10) hours of second shift differential. FIRST SHIFT: No shift differential shall be paid for the first ----------- shift. SECOND SHIFT: A differential shall be paid for the second shift ------------- according to the following schedule: February 1, 1998 .................... $1.20 per hour February 1, 1999 .................... $1.25 per hour February 1, 2000 .................... $1.30 per hour February 1, 2001 .................... $1.35 per hour THIRD SHIFT: A differential shall be paid for the third shift ------------ according to the following schedule: February 1, 1998 .................... $1.35 per hour February 1, 1999 .................... $1.40 per hour February 1, 2000 .................... $1.45 per hour February 1, 2001 .................... $1.50 per hour The appropriate overtime rate will be applied to the shift differential. Shift differentials shall be payable only for hours actually worked and shall not be payable for non-work time such as holidays, sick leave, vacation and rest time. 6.11 ESTABLISHING PERMANENT SCHEDULES: The right to establish working schedules and methods of shift rotation for employees, to assign individuals to schedules and to make changes in schedules, rests with the Company. Whenever the Company assigns an employee to a schedule which is different than the schedule they are regularly assigned and such assignment is expected to last ninety (90) days or more, the following conditions shall apply: ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 17 of 78 NOTIFICATION: Employees will be given as much notice as possible and ------------ in all cases, at least twenty four (24) hours and prior to the end of their last regular shift. In this notification, the employee will be informed of the hours of work, including the days off and meal periods if applicable, work location, expected duration of the shift if other than indefinite, estimated composition of the work force, and the type of the shift (regular day, fixed shift, or rotating). The Company will limit days off to days inclusive of or in conjunction with Saturday or Sunday providing that such schedules will not interfere with the continuous rendering of service by the Company. If the Company fails to satisfy the twenty-four (24) hour notification requirement, the premium for the first five (5) days of the new shift will be extended until the notification requirement has been satisfied. STAFFING OF SCHEDULES: VOLUNTEERS: ---------- When new shifts are announced, the Company will permit affected employees to volunteer for these assignments. The highest Company seniority will be used to select from the volunteers and these employees will not receive a premium for their first five (5) days of this new assignment. LEAST SENIOR QUALIFIED: The least senior, qualified employee in the ----------------------- classification affected, may be assigned. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. RIGHT OF ASSIGNMENT: The Company may assign employees to these -------------------- schedules for operational efficiency purposes. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. SHIFT DIFFERENTIAL: The appropriate shift differential, if any, shall ------------------ apply immediately to all hours worked for those who volunteer for these shifts. For those employees paid a premium for the first five (5) days of such an assignment, the shift differential will apply beginning on the sixth day of the assignment, or the first day on which the premium is not paid. RETURN TO ORIGINAL OR OTHER SCHEDULE: Employees who are assigned to a ------------------------------------ new schedule and are returned to their original schedule before five (5) days have elapsed, will be entitled to the premium mentioned above for the five (5) day period. Employees assigned to a second, new schedule during the initial five (5) day premium payment period will receive an additional five (5) days of premium from the date the new schedule begins.
EXAMPLE EXAMPLE -------- ------- Employees who receive four (4) hours of premium Employees who have worked only two (2) days of a per day who are returned to their former shift new schedule and are notified they will start a after only two (2) days, would continue to receive second, new schedule on the fourth day, will this premium for three (3) additional work days. receive eight (8) days of premium pay (three [3] for the first schedule and five [5] for the second).
____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 18 of 78 TRAINING EXCEPTIONS: The Company may, for the purposes of training -------------------- only, change schedules without incurring the premium penalties mentioned above. The Company will notify all employees as far in advance as possible, but not later than the end of their last scheduled work day in the week prior to such training. This notification will detail the nature, location, and duration of the training. If such notification is not given, and an employee is called at home and informed of a change in schedule for training purposes, this employee will be paid time and one-half (1 1/2) for the first two (2) days of the training for all hours worked outside of their normal schedule. TRAVEL TIME FOR OUT OF TOWN TRAINING: Any employee who is required to ------------------------------------ travel out of town on a normal day off or after normal working hours for the purpose of Company training, will be paid actual driving time to and from the training site. When flying to such training, employees will be paid one (1) hour from their home to the airport, actual flying time to the destination, and one (1) hour from the airport to the hotel. All compensation for such travel time will be at a straight time rate and will not be considered time worked. SCHEDULE PREFERENCE AGREEMENTS: The Company recognizes that in departments where multiple schedules exist, there may be a desire to create a mechanism for movement between such schedules, while protecting the operational efficiencies of the organization. To satisfy these mutual interests, departments are encouraged to create shift preference agreements which will define the terms and conditions for the transfer from one schedule to another. Under no circumstances, would such transfers create premium pay liability in accordance with the provisions of this Article. Each schedule preference agreement will be created through labor/management meetings within the affected work group and will be acknowledged by memorandum of agreement between the Company and the Union. 6.12 ASSIGNMENT TO AN ESTABLISHED SCHEDULE: When seven (7) day coverage employees, other than relief employees, are transferred from one schedule of work days or work hours to another established and populated schedule, they shall not be entitled to overtime compensation for work performed during regular work hours of any day involved in the transfer, provided that: . They have been notified of such transfer not less than twenty-four (24) hours in advance of the starting time of the new shift or work period; . They have had a minimum of one shift off between schedules; . As a result of such transfer they have not been required to work more than forty (40) hours at the straight time rate in any work week involved; . They have not been required to work more than one (1) short change in the work week involved, provided, however, that such short change was not the result of a voluntary action on the part of an employee, (i.e., Calling in sick, taking an unauthorized day off for personal reasons, etc.). ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 19 of 78 6.13 EMERGENCY OR TEMPORARY SCHEDULES: The Company may schedule employees to work for periods other than their regular work hours when additional schedules are required for emergency or temporary conditions. Such conditions are expected to last for less than ninety (90) days and, if they exceed this time frame they will be considered to be established schedules requiring compliance with the procedures for staffing and establishing schedules defined above, unless mutual agreement to extend such schedules is established by the Company and Union. NOTIFICATION: The Company shall communicate the hours of work, meal ------------ periods, days off, location, nature of the work, estimated composition of the workforce, and expected duration of this schedule. STAFFING OF EMERGENCY OR TEMPORARY SCHEDULES: -------------------------------------------- VOLUNTEERS: The Company may solicit volunteers for assignment to ----------- these schedules. If employees volunteer for these assignments, they will receive a premium of time and one-quarter (1 1/4) for all straight time hours worked outside of their normal schedule or shift for the first five (5) days of this assignment. When there are more volunteers than required for the shift, the most senior, qualified employees will be assigned. LEAST SENIOR QUALIFIED: The least senior, qualified employee in the ---------------------- classification affected, may be assigned. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. RIGHT OF ASSIGNMENT: The Company may assign employees to these shifts -------------------- for operational efficiency purposes. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. SHIFT DIFFERENTIAL: After the five (5) day premium requirement has -------------------- been fulfilled, the appropriate shift differential shall apply. RATE OF PAY AND ROTATION: On the first day that there is no ------------------------- requirement for a premium and each day thereafter, the appropriate rate of pay and shift differential, if applicable, will be provided for all hours worked. If any such schedule extends beyond forty-five (45) days, the Company and the Union may agree to rotate the assigned employees. Employees returned to their former schedule as a result of this rotation, will not be entitled to the premium mentioned above. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 20 of 78 RETURN TO ORIGINAL SCHEDULE: At the completion of this assignment, ---------------------------- employees will be returned to their original schedule without a requirement for any additional premium payment. Employees who are assigned to an emergency or temporary schedule and are returned to their original schedule before five (5) days have elapsed, will be entitled to the premium mentioned above for the five (5) day period. 6.14 OUT OF TOWN WORK: BOARD AND LODGING: The Company will furnish adequate board and ----------------- lodging for all employees sent on out-of-town work. This rule does not apply to noon day meals where employees start from and return to headquarters everyday, nor does it apply to employees hired for any particular job which may be outside the city or where employees travel to and from regularly assigned headquarters on Company time. EQUALIZING ASSIGNMENTS: When making temporary out of town ----------------------- assignments, the Company will endeavor to distribute such assignments equally among all employees qualified to perform such work. PER DIEM: Employees temporarily assigned to established headquarters -------- located more than forty (40) miles from their regularly established headquarters who elect not to stay at the assigned work locations will be furnished transportation for the initial trip and final trip at Company expense, and shall receive forty-three dollars ($43.00) for each day they are assigned to and work at a temporary location. If work extends beyond the weekend, the Company may, at its option, pay travel to home base Friday night and return to work location Monday morning. MILEAGE ALLOWANCE: Except as provided herein, employees electing to ----------------- travel to and from their assigned work locations shall do so at their own expense. When an employee is authorized to drive his own car to conduct Company business, he will receive a mileage allowance equal to Internal Revenue Services (IRS) maximum allowable mileage expense. Requests for the allowance described herein shall be submitted to, and distributed by the Company every two (2) weeks and in accordance with procedures established by the Company. 6.15 MEALS: MEAL TIMES: When working overtime before or after the regular day, or ----------- shift, or when called out for overtime work, and such work is continuous for two (2) hours or more, the Company shall provide all meals unless employees are released before the meal time. The normal unpaid meal times shall be: . one and one-half (1 1/2) hours before the employee's normal starting time, . eight (8) hours before the employee's normal starting time, . four (4) hours after the normal starting time, and . two (2) hours after the normal quitting time, ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 21 of 78 Meals will be provided as close to these times as circumstances of the work will permit. Employees may elect to complete their assignment and take their meal period upon completion of their task. This meal period would be unpaid time unless directed by supervision to work through the meal period and such work continues more than one (1) hour from the stated meal time. This paid meal period will be limited to one-half (1/2) hour at the appropriate rate of pay. CALL OUT: When an employee is called out one and one-half (1 --------- 1/2) hours or more previous to his starting time, the Company shall provide breakfast and a reasonable time to eat same. MEAL RATES: When employees are released on or after a normal meal ---------- period, or periods as outlined above, and do not elect to eat a Company provided meal, they shall be given a meal allowance of $9.00. These allowances will be paid through the payroll system in the employee's next paycheck. The meal allowance shall be increased to: . nine dollars and twenty five cents ($9.25) effective February 1, 1999 . nine dollars and fifty cents ($9.50) effective February 1, 2000 . nine dollars and seventy-five cents ($9.75) effective February 1, 2001 ACTUAL COST: If an employee elects to consume a meal in lieu of the ----------- allowance, the cost of any meal shall not exceed two (2) times the allowance as provided for above. If the cost of the meal exceeds this amount, the employee will be notified of the amount of the difference and the employee must reimburse the amount within thirty (30) calendar days after receipt of such notification. These limitations may be waived by the department's Vice President if such limitations place an undue hardship on the employee. 6.16 REPORTING LOCATION: Employees in the bargaining unit shall report for work at regularly established Company headquarters, shall travel from job to job and between job and headquarters on Company time and shall return to the regularly established Company headquarters at the conclusion of the day's work. 6.17 EARLY RELEASE: Employees relieved from duty, for reasons other than misconduct, during the first half of the regular day or regular shift shall be paid for not less than one-half (1/2) of the shift; if relieved after having been on duty more than one-half (1/2) of the regular day, they shall be paid for a full shift, except that if they are relieved at their own request they shall be paid only for time worked. These provisions do not apply to overtime assignments. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 22 of 78 ARTICLE NO. 7 Seniority and Promotions 7.1 SENIORITY: There shall be one (1) type of seniority, namely, Company seniority. Company seniority shall be considered in such matters as retirement, lay off, and whenever provisions of this agreement refer to seniority. In cases where two or more employees have the same Company seniority, the employee with the higher total score on the most recent performance appraisal shall have the greater seniority. 7.2 SENIORITY POSTINGS: The Company shall post a Company seniority list on bulletin boards every six (6) months and shall mail a copy of this list to the Union when the list is posted and after any corrections are made. Any seniority corrections should be made in writing to human resources. 7.3 STAFFING VACANCIES: POSTING REQUIREMENT: When there are no qualified employees who have ------------------- requested an intra-departmental work location change into job vacancies which are expected to last for more than ninety (90) days, and the classifications involved do not fall under the provisions of Article 7.5 (non-bid classifications), the Company shall post such job vacancies or new jobs on bulletin boards for a period of seven (7) calendar days. It shall be the duty of the Company to set forth in said bulletins the nature of the job, its location and duties, reasonable qualifications required and the rate of pay, unless such information is listed in the collective bargaining agreement. At the same time, the Company will furnish the Union a copy of this bulletin. Employees may file their applications in the Human Resources department by Company mail or by U.S. Mail. However, the Company may not consider any application received after the job bid closing date. All job vacancies must be awarded within twenty-one (21) calendar days of the job bid closing date. If the award is not made within twenty-one (21) calendar days, and is not delayed due to vacations or bid hearings, the successful employee will be paid the new rate for the period from the twenty-one (21) days to the date of the award. This does not apply to the time frame of up to three (3) weeks after the award for the purpose of transitioning responsibilities. JOB POSTING SYSTEM: The Company shall publish job posting and ------------------ awarding procedures which, at a minimum, comply with the provisions of this agreement. These procedures will constitute the Company's job posting system. Any bargaining unit employee covered by either the clerical or plant collective bargaining agreements may apply and compete equally for any position within the Company. Employees are disqualified from bidding if their most recent performance appraisal total score is less than 2.5 or if they have a letter of discipline which is less than one (1) year old in their Human Resources personnel file. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 23 of 78 SELECTION CRITERIA: Exclusive of the provisions of Articles 7.5 ------------------ (NON-BID CLASSIFICATIONS) and 7.10 (INTRA-DEPARTMENTAL WORK LOCATION CHANGE), in filling vacancies the following factors shall be considered: . Trade Knowledge . Training . Past Performance with the Company . Ability, skill, adaptability, efficiency . Performance appraisal scores . In addition, the Company retains the right to administer equally fair tests, demonstrations, or physical assessments when such tests will assist materially in determining the qualifications of employees. When, in the discretion of the Company, all factors are substantially equal, Company seniority shall govern. HEARING PROCEDURES: In lieu of any grievance procedure concerning ------------------- Article 7.3 (STAFFING VACANCIES), the Company shall offer the three (3) most senior bidders (if applicable) and the employee with the second highest matrix score (if applicable) who are more senior than the successful bidder a hearing before the bid committee with the steward for the department, the senior person or persons and one (1) other Union member. If the number of senior bidders exceeds the parameters mentioned above, a group meeting will be conducted with the remaining senior bidders to explain the decision and answer any relevant questions. The Company shall not assume any penalty for bid hearings that are delayed. NO QUALIFIED BIDDERS: If no applications are received from any --------------------- qualified bargaining unit employees within the posting period, the Company may then fill the job from outside the bargaining units. 7.4 TEMPORARY APPOINTMENTS: Wherever a vacancy occurs in any job classification, the Company may, at its discretion, temporarily fill such vacancy. If practical, any such temporary appointment shall be given to an employee who would be eligible under the provisions of this agreement. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 24 of 78 7.5 NON-BID CLASSIFICATIONS: When vacancies occur in the classifications listed below, the Company shall fill the vacancies with the most senior employees who are qualified and request the position in accordance with the Company job posting system. To be qualified employees must do the following prior to the vacancies being announced: . Pass a skills qualification test . Complete a prescribed course of study (where applicable) . Have an overall score of at least 2.5 on their most recent performance appraisal . Have no letter(s) of discipline which is less than one (1) year old in their human resources personnel file Prior to awarding positions, employees must pass a physical assessment relating to the new position. These requirements apply to the following job classifications (classifications may be added or deleted upon mutual consent of the Company and Union): . Coal Yard Technician . Communications Groundman . Customer Support Representative . Fleet Utility Technician . Lines Groundman . Maintenance Utility Technician . Meter Reader . Office Support Representative . Rodman-Chainman . Substation Groundman . Utility Operator Employees awarded a position under the provisions of this Article may not request and be awarded a new position for a minimum of six (6) months. 7.6 MOVING EXPENSES: Should the Company assign an employee, who has not volunteered for reassignment, to an established Company headquarters located more than thirty (30) driving miles by the most reasonable route from his regularly established Company headquarters, and such assignment is not temporary in nature, the Company will pay the employee $1200 for moving expenses, for the purpose of establishing a new primary residence, within a two (2) year period immediately following such assignment. In addition, the Company shall pay the actual costs to relocate a mobile home which is the employee's primary residence. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 25 of 78 7.7 SUB-DEPARTMENTS: When employees are awarded bids in the sub-department in which they are working, in accordance with Articles 7.3 (STAFFING VACANCIES) and 7.5 (NON-BID CLASSIFICATIONS) of this agreement, their rate of pay for the awarded job shall be the rate established for the classification as listed in the appropriate agreement. If the awarded job has more than one rate, such rates being based on time spent in classification, the employees shall be assigned the lowest rate in the classification which will provide an increase to the employees. Employees thus assigned a rate step above the starting rate will not advance to a higher step until they have served the time indicated by the assigned step. Should no rate in the classification provide an increase, the employee shall be assigned the "there-after" rate of the new classification. EXAMPLE ------- 7.8 TIME IN CLASSIFICATION PAY: When employees are awarded bids in a different sub-department from which they are working, their rate of pay for the awarded job shall be the rate established for the classification as listed in the appropriate agreement. If an employee has previously occupied the position, the employee shall be given credit for time spent in that position for the purposes of establishing the new rate. Where the awarded job has more than one rate, such rates being based on time spent in classification, employees shall be assigned the starting rate for the new classification unless such rate will result in a lesser rate than their former classification. If assigning the starting rate to employees awarded the job would result in a lesser rate than their last rate, employees shall be granted one year of credit or the amount of their Company seniority, which ever is less, as time spent in the new classification for the purpose of establishing their new rate of pay. 7.9 TRIAL PERIOD: Employees promoted or transferred in accordance with this Article shall be employed on the job to which they were promoted or transferred for a reasonable trial period not to exceed six (6) months. If, following the trial period, they are still unable to perform the job to which they are promoted or transferred, they shall be returned to the former job classification they held or to their former or another job classification of similar requirements and the previous rate of pay, as determined by the Company. Employees who are returned to another classification in accordance with this Article shall not be permitted to bid on another position for six (6) months from the time they are returned. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 26 of 78 7.10 INTRA-DEPARTMENTAL WORK LOCATION CHANGE: Employees desiring to change work locations within the same sub-department and classification shall submit a work location change form to the appropriate department head. Through labor/management meetings, departments shall develop procedures for work location changes. ARTICLE NO. 8 Grievance Procedure 8.1 DEFINITION: A grievance shall be defined as a dispute regarding the interpretation and application of the provisions of this Agreement filed by the Union or by an employee covered by this Agreement alleging a violation of the terms and provisions of this Agreement. However, disputes specifically excluded in other Articles of this Agreement from the Grievance Procedure shall not be construed as within the definition set forth above. 8.2 TIME LIMITATIONS: The Company and the Union recognize the mutual gains process as an effective tool in resolving differences in the work place. Once timely notification of a grievance has been given, the Union and Company may mutually agree to extend the time limitations to ensure that interests are clearly defined, witnesses and all persons involved receive proper notification and are able to attend, evidence is accurate, and remedies are thoroughly explored before moving to the next step. However, it is in the interest of both the Company and the Union to expedite the process and encourage the timely resolution of the issue in order to satisfy established time constraints. The Union and Company, by mutual agreement, may elect to bypass certain steps, due to the nature of the grievance. Except by mutual agreement to extend the time limitations, an arbitrator shall not have the authority to excuse a failure by the Union, the Company or the aggrieved employee to comply with the time limitations set forth, regardless of the reason given for such failure. 8.3 GRIEVANCE PROCESS NOTIFICATION: When a dispute arises relative to the administration of ------------- the provisions of this agreement, the employee and/or Union steward must complete a mutual gains issue form and submit it to the appropriate supervisor for signature no later than thirty (30) calendar days after the grievance first arises. The time period shall start from the first day the Company can show that the Union or an employee affected by the Company's action knew or should have known of the situation. At each step in the process, the Union shall officially sign off on the mutual gains issue and grievance forms, verifying that their interests have been satisfied or to pursue resolution at the next step. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 27 of 78 STEP ONE (MUTUAL GAINS MEETING -SUPERVISOR): The supervisor shall ------------------------------------------- schedule a meeting with the grievant and steward within seven (7) calendar days of receipt of the mutual gains issue form. The grievant and the supervisor will define interests and work on resolving the issue in a manner satisfying those interests. If the issue is not resolved at step one (1), the mutual gains issue form may be referred by the Union to the next level of supervision within three (3) calendar days of the step one (1) meeting. STEP TWO (MUTUAL GAINS MEETING - LEVEL II SUPERVISION): The next ------------------------------------------------------- level of supervision shall schedule a meeting with the grievant, steward, and supervisor within seven (7) calendar days of receipt of the mutual gains issue form. The grievant and supervision will define interests further and work on resolving the issue at this level. If they are unable to satisfy interests, the Union may request a formal hearing within three (3) calendar days of the step two (2) meeting. STEP THREE (MUTUAL GAINS HEARING): The level II supervisor shall ---------------------------------- schedule a hearing with the grievant, steward, supervisor, and official Union and Human Resources representatives within seven (7) calendar days of receipt of the mutual gains issue form. Witnesses will be designated to testify and related evidence shall be submitted. Those in attendance shall discuss possible remedies, which will be implemented upon final approval by the official Union and Human Resources representatives. This joint decision shall be final and binding on all parties. If, at the conclusion of step three (3), the two (2) parties are unable to resolve the issue, the grievance shall be reduced to writing on the grievance report form, citing the Article and/or section of this agreement which has been allegedly violated, and the Company shall sign, date, and acknowledge receipt of such grievance. STEP FOUR (UNION/COMPANY MEETING): The Union Business Manager and --------------------------------- _______________________ shall schedule a meeting within ten (10) calendar days of receipt of the grievance report form. The department supervisor and/or manager, and the grievant and/or Union steward may be present at the request of either party. The Company and Union shall review the information provided, conduct further investigation if necessary, and shall render a joint decision which shall be final and binding on all parties. If the grievance is not settled at step four (4), the Company will communicate its position in writing within five (5) calendar days of the step four (4) meeting. This written notification will be sent via certified mail. STEP FIVE (ARBITRATION): Within fifteen (15) calendar days of receipt ------------------------ of management's position, the Union may request arbitration by delivering a written notice to the ___________________ of its intent to arbitrate the dispute. If the Union does not respond within fifteen (15) calendar days, the issues involved in the grievance will be considered resolved and the matter closed. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 28 of 78 Within five (5) working days after receipt of the notice of intent to arbitrate, the parties will request the Federal Mediation and Conciliation Service to furnish a list of five (5) arbitrators from the southwest region of the United States from which the arbitrator shall be selected. Such selection shall be accomplished by the Union and the Company striking one (1) name from the list in turn until only one (1) name remains. In recognition of the magnitude of such decisions, arbitration relative to termination grievances shall be expedited whenever possible. Unless mutually agreed to extend the time limitations in writing, these grievances should be arbitrated within six (6) months of the termination date. The arbitrator's decision shall be submitted in writing and shall be final and binding on all parties to this Agreement. Nothing contained in this contract or any part thereof shall affect or apply to the Union in action it may take against the Company for failure to comply with any legally enforceable decision reached through arbitration. The cost of the arbitrator and the cost of necessary expenses required to pay for facilities and recording of the hearing of cases, shall be borne equally by the Company and the Union. The arbitrator shall not have the authority to modify, amend, alter, add to, or subtract from any provision of this Agreement. ARTICLE NO. 9 Working Safety Committee 9.1 MUTUAL INTERESTS: The Company and the Union share a mutual interest in fostering safe working conditions for all employees. The Company and Union will endeavor to create programs, procedures and policies which will define Nevada Power Company and IBEW Local No. 396 as leaders in providing and promoting a safe workplace. The Company shall make reasonable provisions for the safety of employees in the performance of their work. The Union shall cooperate in promoting the realization of the responsibility of the individual employee with regard to the prevention of accidents. 9.2 SAFETY COMMITTEE: Each department shall have their own Safety Sub-committee, and at least one (1) representative from each departmental Safety Sub-committee shall serve on the Company's Safety Committee. The selection of the Company's Safety Committee members shall be made jointly by the Chairman of the committee and the Business Manager of the Union. The Chairman of this committee shall be selected by the Company. Each year thirty three and one third percent (33-1/3%) of the committee members shall be replaced in accordance with the selection provision. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 29 of 78 9.3 REPORTING DEFICIENCIES: Each member of the Safety Committee shall be expected to actively participate in identifying and reporting to the area safety representative any deficiency or unsafe condition discovered in the assigned work area. Recommendations to improve the operational safety shall be made to the manager, safety services, and to the department supervisor. A copy shall also be presented to the Chairman at the next Safety Committee meeting. 9.4 SAFETY MEETINGS: Safety meetings shall be held at reasonable intervals subject to call by the Chairman. 9.5 SEMI-ANNUAL INSPECTIONS: Every six (6) months the Safety Committee chairman shall appoint at least three (3) members to perform an inspection of the Company facilities. If required, these inspections may occur more often at particular facilities. The Committee Chairman may request additional employees who work at the site to assist in the inspection. The Company will allow the appointees reasonable time, as determined by the Chairman, to perform this inspection. They will prepare a written report including recommendations for corrective actions and forward it to the Committee Chairman and Company President. 9.6 RULE VIOLATIONS: In the event employees violate safety rules published by the Company, the Company reserves the right to administer appropriate disciplinary action. 9.7 SAFETY INVESTIGATIONS: When a lost time disabling injury occurs as a result of a suspected careless act or unsafe working condition, a safety investigating committee shall be chaired by Safety Services to review the facts and reconcile safety deficiencies and recommend corrective action. A safety committee member designated by the Union and assigned to the work area in which the injury occurred, shall serve on the investigating committee. ARTICLE NO. 10 Inclement Weather Practice 10.1 REGULAR EMPLOYEES: Regular employees who report for work on a scheduled work day and who, because of inclement weather or other similar cause, are unable to work in the field that day, shall receive pay for the full day. However, they may be held pending emergency calls and may be given first-aid, safety or other instruction, or they may be required to perform miscellaneous work in the yard, warehouse, or other sheltered locations. Through labor/management meetings, and in conjunction with safety services, each department shall establish policies which clarify safe work procedures during inclement weather. 10.2 PROBATIONARY AND TEMPORARY EMPLOYEES: These employees shall receive pay for time worked or time held on Company property or two (2) hours, which ever is greater. 10.3 RAIN GEAR: Employees who are required to work in the field will be assigned appropriate rain gear which will be maintained by the employees and replaced ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 30 of 78 by the employees and replaced by the Company when such gear is worn out in the course of employment and returned to the Company by the employee. 10.4 ENERGIZED PANELS: Employees who are assigned to work in the field will not be required to work on exposed and energized metering panels during rainy weather but may be assigned related duties as necessary. ARTICLE NO. 11 Holidays 11.1 ELIGIBLE EMPLOYEES: Regular employees and probationary employees who are eligible for benefits, shall be entitled to holidays off with pay. Employees on leaves of absence or disability leave are not entitled to holiday pay, except if the employee begins leave or returns from leave during the week of a holiday. 11.2 WORKED HOLIDAYS: Shift employees may be permitted to take holidays off which fall on their scheduled work days. Employees scheduled to work on a holiday shall be paid at the rate of time and one-half (1 1/2) for time worked during regular working hours in addition to holiday pay. Employees who are called out to work on a holiday shall be paid at the rate of double time for time worked in addition to holiday pay. Time worked in excess of the regular work day will be paid at the appropriate overtime premium. Except for shift employees, holidays listed below shall not be considered scheduled work days. COMPANY HOLIDAYS: When a holiday falls on a Saturday, the preceding Friday shall be observed, and when a holiday falls on a Sunday the following Monday shall be observed. Whenever an employee's regular days off are other than Saturday and Sunday, the first day off within the work week shall be considered as Saturday and the second day off within the work week shall be considered as Sunday for the purpose of this Article. A rotating shift employee working on a schedule which provides four (4) consecutive days off shall observe the day prior to the four (4) days if the holiday falls on the first of the four (4) days, and shall observe the day following the four (4) days if the holiday falls on any of the other three (3) days for the purpose of this Article. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 31 of 78 Following are to be considered holidays:
---------------------------------------------------- COMPANY HOLIDAYS ---------------------------------------------------- ---------------------------------------------------- 1998 1999 2000 2001 ---------------------------------------------------- ----------------------------------------------------------------------------------------- New Year's Day Jan 1 ----------------------------------------------------------------------------------------- Martin Luther King's Day ----------------------------------------------------------------------------------------- President's Day ----------------------------------------------------------------------------------------- Memorial Day (observed) ----------------------------------------------------------------------------------------- Independence Day ----------------------------------------------------------------------------------------- Labor Day ----------------------------------------------------------------------------------------- Veteran's Day ----------------------------------------------------------------------------------------- Thanksgiving Day ----------------------------------------------------------------------------------------- Thanksgiving Friday ----------------------------------------------------------------------------------------- Christmas Eve Day ----------------------------------------------------------------------------------------- Christmas Day ----------------------------------------------------------------------------------------- Floating Birthday/Holiday See Article 11.3 -----------------------------------------------------------------------------------------
11.3 FLOATING BIRTHDAY/HOLIDAY: An employee may observe the floating holiday any work day of the year with mutual agreement by the employee and supervisor. Or, with seven (7) calendar days notice, an employee shall observe the floating holiday on any work day which falls in the same calendar week as the employee's birthday. For the purpose of this Article, the calendar week begins Sunday and ends Saturday. Should an employee be called in or required to work on a previously approved "holiday," the employee shall be paid the applicable overtime rate, except if both the employee and supervisor mutually agree to change the observance of the holiday. Employees who request to use their floating holiday for the purpose of recognizing a religious observance, will be accommodated whenever possible. Any difficulties in this regard should be forwarded to the Employee Relations area of Human Resources. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 32 of 78 11.4 BANKED HOLIDAYS: If eligible employees are required to work on any day observed as a holiday and are authorized to work for the straight time hourly rate of pay, then an equal number of hours will be allocated to their banked holiday account. With written consent of the Company, employees may carry over up to sixteen (16) hours of banked holidays to the next year. 11.5 TEMPORARY AND BENEFIT INELIGIBLE EMPLOYEES: Temporary, and probationary employees who are not eligible for benefits will not receive pay for holidays not worked but shall be paid the appropriate overtime premium for all time worked on holidays. 11.6 SICK LEAVE IN CONJUNCTION WITH A HOLIDAY: An employee who does not report for work either the day before and/or the day after a paid holiday, and who has not been excused by his or her supervisor for either the day before and/or the day after a paid holiday shall receive no pay for the holiday. The Company may require satisfactory evidence of an employee's illness or injury before holiday pay will be granted. If the Company requires medical evidence, the Company must inform the employee of the requirement to provide evidence no later than two (2) hours after the employee's regular starting time on the day of the absence. If required and the employee does not comply with this request, the employee will not be paid for the holiday or the day of absence, and may be subject to disciplinary action. 11.7 ALTERNATIVE SCHEDULES: As a result of the implementation of alternative work schedules, any issues associated with the provisions of Article 11 will be resolved by memorandum of understanding between the Company and Union. ARTICLE NO. 12 Vacations 12.1 CONSIDERATIONS: Vacation with pay may be granted at any time during the calendar year in which it is earned, subject to the following considerations. . Desirability of scheduling in such a manner as will cause a minimum of interference with service to the Company's customers, and; . The selection of all vacation periods based on the employee's Company seniority, provided the selection is made no later than March 31st. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 33 of 78 12.2 FIRST TWO (2) CALENDAR YEARS OF EMPLOYMENT: Probationary and regular employees shall earn vacation during the first two (2) calendar years of their employment according to the month in which they are hired. Probationary and regular employees may request and be granted vacation anytime during this period.
Month Hired Vacation Hours ----------- -------------- January.........................................................................................80 hours February........................................................................................77 hours March...........................................................................................73 hours April...........................................................................................70 hours May.............................................................................................67 hours June............................................................................................63 hours July............................................................................................60 hours August..........................................................................................57 hours September.......................................................................................53 hours October.........................................................................................50 hours November........................................................................................47 hours December........................................................................................43 hours
12.3 ACCRUED VACATION: Effective January 1995, regular employees will be granted vacations, with straight time pay, according to the following schedule:
After Continuous Service of Vacation Hours --------------------------- -------------- 2 years thru 5 years............................................................................80 hours 6 years thru 12 years..........................................................................120 hours 13 years thru 20 years.........................................................................160 hours 21 years thru 30 years.........................................................................200 hours 31 years and above.............................................................................240 hours
12.4 VACATION ADJUSTMENTS: An employee's vacation accrual shall be adjusted for all periods of leave of absence including leaves for illness or injury as defined elsewhere in this agreement by reducing the number of vacation hours accrued in direct proportion to the number of hours of leave within the employee's anniversary year. Such reductions shall be applied to any accrued and unused vacation available in the calendar year the adjustment is made, or when such adjustment exceeds the employee's available vacation, the excess shall be applied against the employee's next vacation accrual or the employee's final paycheck, whichever occurs first. It is understood that no adjustment to vacation accrual will be made for sick leave or during the first sixty (60) calendar days of any disability leave. 12.5 VACATION BONUS: In addition to the vacation accrued in accordance with the above schedule, any employee who completes ten (10) years continuous service and each five (5) years of continuous service thereafter, shall be granted a vacation bonus of forty (40) hours in the year such term of employment is attained. The vacation bonus will accrue, and may be taken subject to the provisions of this Article. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 34 of 78 12.6 UNUSED VACATION: All unused or carried over vacation time accumulated in the year of termination after an employee's first anniversary date, up to and including the employee's last day worked, shall be paid at termination of employment, at the employee's current base rate. This does not apply to the vacation bonus when the employee has not completed the minimum service specified. It is understood that employees may not carry vacation time over to the following year without the written consent of the Company. A regular employee who has been laid off for lack of work and is recalled within one (1) year, who has in excess of one (1) year Company seniority, shall accrue vacation in accordance with Article 12.4 (VACATION ADJUSTMENTS). 12.7 DEPARTMENTAL POLICIES: Each department will develop standards and procedures for scheduling vacations which, at a minimum comply with Article 12.1 (CONSIDERATIONS). 12.8 HOLIDAY WHILE ON VACATION: If a holiday occurs on a work day during an employee's vacation, it shall not be counted as hours of vacation. The employee shall receive straight time pay for the holiday. 12.9 HOSPITALIZED WHILE ON VACATION: Employees on vacation who become hospitalized for at least one day, shall not be required to use vacation time during the period of incapacitation. Employees who are capable of completing any light duty must choose to remain on vacation or report for light duty. 12.10 CALL-OUT WHILE ON VACATION: An employee shall not be expected to work on his regularly scheduled days off immediately preceding or following pre-scheduled vacation. However, if an employee is called out and accepts such an assignment on the regularly scheduled days off immediately preceding or following pre-scheduled vacation, the employee shall receive the appropriate overtime rate for this work. An employee called out during scheduled vacation will be paid double time for all hours worked and the employee may reschedule the unused portion of his vacation hours in accordance with Article 12.1 (CONSIDERATIONS) above, if the call-out was for work during the employee's normal work hours. Additionally, if the call-out creates rest time, the employee may reschedule vacation equal to the rest time earned from this assignment. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 35 of 78 ARTICLE NO. 13 Sick Leave 13.1 ELIGIBILITY: A regular employee and a temporary employee with more than 1040 hours shall be entitled to accumulate sick leave with pay at the rate of eight (8) hours of sick leave for each month worked. 13.2 NOTIFICATION AND VALIDATION: The Company may require satisfactory evidence of an employee's illness or disability before sick leave will be granted. If an employee abuses the sick leave provisions of this Agreement by misrepresentation or falsification, the employee shall restore to the Company all sick leave payments received as a result of such abuse. An employee must notify their supervisor or a member of management, or see that their supervisor is notified, as soon as it is apparent that the employee will be unable to report for work. The employee must provide this notification before the beginning of the normal work day. The employee should notify the supervisor as far in advance as possible of the expected date of return. Lack of notification without a reasonable explanation will result in denial of sick pay benefits. 13.3 EXCLUSIONS AND EXCEPTIONS. Employees shall not be entitled to sick leave while on vacations (except as provided in Article 12.9 [HOSPITALIZED WHILE ON VACATION]), while temporarily laid off by the Company, during the period of notice of severance of employment, upon severance of employment, or while receiving disability payments or industrial compensation. Exhibit IV (SICK LEAVE AGREEMENT) of this Agreement establishes other rules and interpretations for the administration of these sick leave provisions. 13.4 SICK LEAVE BONUS: Employees who are eligible for sick leave in accordance with Article 13.1 (ELIGIBILITY), who use no more than an average of two hundred twenty (220) hours of sick leave each five (5) years, shall be granted a bonus of five (5) days vacation in addition to that granted under the provisions of Article 12.3 (ACCRUED VACATION), each five (5) years based on the following considerations: . On January 1, 1987, and January 1, of each fifth year thereafter, the sick leave records of those employees with hire dates prior to August 1, 1981, will be audited. Those employees who have used no more than two hundred twenty (220) hours of sick leave during the five (5) year period immediately preceding the audit will be granted five (5) days vacation to be taken within the twelve (12) month period immediately following the audit date and in accordance with the provisions of Article 12 (VACATIONS). ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 36 of 78 . For employees hired after July 31, 1981, their sick leave records will be audited as of the first day following the completion of five (5) years and six (6) months of service and each fifth year following the initial audit. Those employees who have used no more than two hundred twenty (220) hours of sick leave during the five (5) year period immediately preceding the audit will be granted five (5) days vacation to be taken within the next twelve (12) month period immediately following the audit in accordance with Article 12 (VACATIONS). . All unused vacation accumulated under the provisions of this sick leave bonus plan shall be paid at termination of employment as provided under Article 12.6 (UNUSED VACATION) except that no pro rata of vacation entitlements will be allowed for time periods of less than five (5) years. 13.5 LIGHT DUTY: Injured employees who are temporarily unable to perform the functions of their own jobs but are capable of performing light duty work shall be released for light duty assignments either within their own department or another area of the Company where work is available. In the interest of effective case management, the light duty work program shall be administered by the human resources department. Employees working in light duty assignments shall be eligible for a percentage of their base pay according to the following schedule: . 100% of base for the first fourteen (14) calendar days . 95% of base for the second fourteen (14) calendar days . 90% of base for the third fourteen (14) calendar days . 85% of base thereafter Employees who are injured on the job and are unable to perform their regular duties indefinitely due to partial disability, may be subject to the provisions outlined in Article 14.3 (JOB INCURRED INJURY/PARTIALLY DISABLED EMPLOYEES). 13.6 RE-OPENER: The Company and Union may reopen the issue of salary protection relative to sick leave and address common interests at a future date. The request to discuss these issues will be made in accordance with the provisions of Article 17 (TERM OF AGREEMENT). ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 37 of 78 ARTICLE NO. 14 Employee Benefit Plans 14.1 GENERAL: The Nevada Power Company Self-Funded Medical Benefit Plan shall be incorporated, by reference, into the Agreement for purposes of establishing the levels of benefits for each of these plan features: . loss of time . medical expense . vision expense . dental expense . life insurance and accidental death and dismemberment The Company agrees to maintain all of these benefits for eligible employees and will provide medical expense, vision expense, and dental expense coverage for eligible dependents for the life of this Agreement. The Company reserves the right to select any insurance carrier or to self insure for all or any portion of these benefits. PRESCRIPTIVE DRUG BENEFIT: The Company will provide to all eligible ------------------------- employees and eligible dependents the prescription card service (PCS) which is a discounted prescription drug service that allows participants to obtain prescription drugs through preferred pharmaceutical outlets. A service fee of ten dollars ($10.00) per trade name prescription or five dollars ($5.00) for generic prescription will be charged by the druggist. No claim forms need to be presented. The prescriptive drug benefit will continue to allow all eligible employees and dependents to obtain up to three (3) months of maintenance prescription drugs by mail. A service fee of $3.00 per prescription ($1.00 for generic) is charged, and claim forms need not be presented for these drugs. TERM LIFE INSURANCE: The Company will continue to provide a ------------------- supplemental life insurance program that allows employees desiring such coverage to purchase term life insurance for their dependents or additional life insurance for themselves at group rates. Such life insurance premiums will be paid for by the employees through payroll deduction. All administrative expenses, exclusive of carrier expense normally absorbed in the rates, will be paid by the Company. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 38 of 78 DENTAL BENEFIT: The Company will continue to provide a dental care -------------- benefit, expanded to include a dental PPO (effective January 1, 1994) and an orthodontic benefit (effective April 1, 1994), for all eligible employees and dependents. Coverage includes the following: . Maximum payable per year is $1,000 per person. . Preventative care is covered 100%, with the deductible waived. . All other treatments are covered at the rate of 80/20 and are subject to the dental exclusions noted in the Nevada Power Company Self-Funded Medical Benefit Plan. Covered treatments are also subject to a $25 per person deductible. VISION BENEFIT: A vision care program will continue to be available -------------- for eligible employees and eligible dependents. Effective February 1, 1994, this plan covers professional services; examinations every twelve (12) months, lenses every twelve (12) months if needed, frames every twelve (12) months if needed, with a deductible amount of twenty-five dollars ($25.00) to be paid by the employee for each covered examination and fitting. The vision care program also provides one pair of prescription safety glasses to employees whose job duties require eye protection in accordance with the Company's established safety standards, once every twelve (12) months, if needed, with a deductible amount of twenty-five dollars ($25.00) to be paid by the employee. BENEFIT ELIGIBILITY: Eligible employees are all employees who have ------------------- satisfied the requirements defined in Article 5 (STATUS OF EMPLOYEES) of this agreement. Eligible dependents are those dependents of eligible employees which meet the definitions of dependents as contained in the Nevada Power Company Self-Funded Medical Benefit Plan referenced above. EMPLOYEE CONTRIBUTIONS: Employee contributions are defined below. ---------------------- These rates are the maximum rates which employees would be required to pay. They reflect a ninety/ten (90/10) cost sharing arrangement between the Company and its employees. The rates listed below define a maximum increase of ten percent (10%) from the previous year's contribution. If the actual experience of the medical plan reflects an increase of less than ten percent (10%), the monthly contributions will be reduced to reflect an accurate cost sharing arrangement. If the actual experience of the medical plan reflects an increase of greater than ten percent (10%), the Company will absorb that percentage increase. The Company will communicate the actual monthly contribution no later than December 1st for the following year. The rate listed for 1994 will be effective August 1, 1994 and remain until January 1, 1996. The monthly contributions will change on January 1st of each subsequent year. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 39 of 78
------------------------------------------------------------------------ MONTHLY CONTRIBUTIONS ------------------------------------------------------------------------ 8/1/94 thru 1/1/96 1/1/96 thru 1/1/97 HMO NPC Plan HMO NPC Plan (Option C) (Option A/B) (Option C) (Option A/B) ---------------------------------------------------------------------------------------------------------- Employee Only 32 24 35 26.50 ---------------------------------------------------------------------------------------------------------- Employee & Spouse 65 49 71.50 54 ---------------------------------------------------------------------------------------------------------- Employee & Children 59 44 65 48.50 ---------------------------------------------------------------------------------------------------------- Employee, Spouse & Children 97 72 106.50 79 ---------------------------------------------------------------------------------------------------------- Deductible/Co-Insurance Limit 250/4000 300/4500 ---------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------- 1/1/97 thru 1/1/98 1/1/98 thru 1/1/99 HMO NPC Plan HMO NPC Plan (Option C) (Option A/B) (Option C) (Option A/B) ---------------------------------------------------------------------------------------------------------- Employee Only 38.50 29 42.50 32 ---------------------------------------------------------------------------------------------------------- Employee & Spouse 78.50 59.50 86.50 65.50 ---------------------------------------------------------------------------------------------------------- Employee & Children 71.50 53.50 78.50 59 ---------------------------------------------------------------------------------------------------------- Employee, Spouse & Children 117 87 128.50 95.50 ---------------------------------------------------------------------------------------------------------- Deductible/Co-Insurance Limit 350/5000 400/5500 ----------------------------------------------------------------------------------------------------------
PRE-TAX ACCOUNT: The Company will continue to provide a pre-tax --------------- health care contributions account for employees to reduce their taxable income by the amount of their health care contribution. OPTIONS A, B AND C: ------------------ The Company will continue to permit employees to select between the following health care plan options to be effective by August 1, 1994: ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 40 of 78 Option A: . 80/20 Co-insurance factor . $4000.00 Co-insurance limit . $250.00 Individual deductible . Family deductible (Employee & Spouse; Employee & Children; Employee, Spouse & Children) equal to two (2) times the individual deductible . Hospital deductible - $300.00. The hospital deductible shall be increased to $400.00 effective January 1, 1997. Option B: PREFERRED PROVIDER PROGRAM: The Company will continue its Hospital --------------------------- Preferred Provider Organization (HPPO) for voluntary employee participation, which includes a minimum of three hospitals in the Las Vegas, Nevada area. Employees who elect to utilize a PPO hospital will receive reimbursement of hospital expenses at the rate of 90/10 and the hospital deductible will be waived. The Company will continue its Physician Preferred Provider Organization (PPPO) for voluntary employee participation, which includes a minimum of 400 physicians in Southern Nevada. An employee who elects to utilize a PPO physician will pay a service fee in accordance with the PPO medical expense benefit schedule incorporated in the Nevada Power Company Self-Funded Medical Benefit Plan referenced above. No claim forms need to be filed and the PPO physician will bill the Company for the remainder of the office visit charge. HOSPITAL DEDUCTIBLE: The hospital deductible will be waived for those -------------------- employees who reside more than fifty (50) miles from a PPO hospital and use a local hospital which is not a PPO hospital. However, employees who elect to travel to Las Vegas and use a non-PPO hospital will pay the hospital deductible and receive reimbursement for hospital charges at the 80/20 rate. MENTAL HEALTH BENEFIT: The Company will include outpatient mental ---------------------- health counseling in its comprehensive medical plans, subject to utilization review. The lifetime benefit for mental health and substance abuse rehabilitation will be limited to $50,000. The accumulation towards this lifetime limit will begin no later than August 1, 1994. Option C: HEALTH MAINTENANCE ORGANIZATION: The Company will continue to permit -------------------------------- eligible employees to enroll in a Health Maintenance Organization plan (HMO) for the purpose of providing comprehensive medical and prescription drug coverage. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 41 of 78 GENERAL BENEFIT PROVISIONS: --------------------------- . Effective August 1, 1994, the lifetime maximum medical benefit will be increased to $1,000,000. . Effective August 1, 1994, mandatory utilization review will be instituted for a variety of in-patient and out-patient services. Employees who fail to receive the appropriate pre-authorization for these services will receive a fifty percent (50%) reimbursement, in lieu of the stated reimbursement percentage. . Effective August 1, 1994, all benefits are subject to the deductible and/or co-pay plus percentage, thereby eliminating any first dollar coverage. . Effective August 1, 1994, the Nevada Power Company Self-Funded Medical Benefit Plan will pay benefits only to the percentage of coverage under its plan. It will not provide reimbursement beyond the stated coverage in this plan, if it is the secondary provider to another group health plan. . Effective April 1, 1994, an orthodontic benefit of $1,500 will be provided. . Effective January 1, 1994, a dental PPO will be established. . Effective August 1, 1994, a hearing aid benefit of $500 every five (5) years will established for the employee only. DEPENDENT CARE ACCOUNT: The Company will continue its flexible ------------------------ spending account program that allows pre-tax funding of dependent care and child care expenses. 14.2 JOB INCURRED INJURIES/SALARY PROTECTION: Any employee who suffers a job incurred injury during the term of this Agreement and who is awarded temporary total compensation benefits as defined in the Nevada Industrial Insurance Act shall receive supplemental disability payments in such amounts and under such conditions as described below: . The combined amount of disability compensation to which the employee is entitled under any federal, state, and local law, and from the Company shall not exceed the percent of the employee's weekly earnings, from the table listed below, where such earnings are computed at the employee's regular rate for a forty (40) hour, seven (7) day period. . Supplemental payments shall be made for the first day recognized by the State Industrial Insurance System (SIIS), and shall terminate with the date of the last day of disability recognized by the SIIS, as evidenced by the remittance portion of the disability check from the SIIS, which must be presented to the Company, for a maximum period of benefits as defined in the following schedule of benefits, for any one accident regardless of the various periods of disability which may be compensated for the one accident. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 42 of 78
MAXIMUM PERCENT OF LENGTH PERIOD OF BASE OF SERVICE BENEFITS EARNINGS ---------- -------- -------- 6 months 13 weeks 55 5 years 26 weeks 60 10 years 52 weeks 65 15 years 60 weeks 70 20 years 65 weeks 75
. For a job incurred disability of less than five (5) days which does not qualify for SIIS compensation, employees must use any accrued sick leave, and upon exhaustion of such accrued sick leave shall receive disability benefits as defined above . . No supplemental disability payments shall be made for any disabling accident caused by the injured employee's violation of any safety rule. . Any employee who performs activities for which compensation is received or which exceed the scope of the prescribed physical limitation pertaining to such disability while receiving disability compensation described in this section, shall forfeit his entitlement to all disability benefits and his employment shall be terminated. 14.3 JOB INCURRED INJURY/PARTIALLY DISABLED EMPLOYEES: When, in the opinion of the Company's doctor after consultation with the employees' doctor, regular employees with at least one (1) year of Company service cannot perform their regular work because of partial disability, but can perform other work, the following plan shall be applicable: Each case shall be considered on its merits by a committee consisting of the Business Manager of the Union and the Director of Employee Relations, or their designated representative, and two (2) additional members, one (1) of whom shall be designated by the Union and the other by the Company. The committee shall have the authority to waive the seniority and bidding provisions of this Agreement in order to place the disabled employee, and it shall determine the seniority rights of such employee. This committee may call on anyone who may be able to furnish pertinent information. In no event will this Article apply if the employee's disability occurs while self-employed or working for others, for remuneration (except on Union business), or is involved in misconduct or an extreme violation of Company safety rules. The panel shall complete an evaluation of the type of work the employee is able to perform or may be able to perform in the future. Evaluation of the employee's capabilities may include but shall not be limited to a physical examination and doctors reports, the employee's physical and mental ability, willingness to work, and trainability. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 43 of 78 Depending upon the evaluation of the employee and where necessary and practical, the Company shall provide job related education and training. The panel shall also conduct periodic review of these cases to determine if an employee's condition has changed; if the employee's condition has changed, the panel will reevaluate the employee's job assignment. The panel will determine the job classification which is appropriate for the work the employee is able to perform, as well as the proper pay rate, taking into account the new classification pay rate or the rate indicated on the following schedule, whichever is greater.
Years Of Company Service A Pay Rate That Is Not Less Than ------------------------ -------------------------------- 1 to 4 years inclusive 70% base rate when injured 5 to 14 years inclusive 80% base rate when injured 15 to 24 years inclusive 85% base rate when injured 25 years and over 90% base rate when injured
As long as such employee is paid more than the maximum rate for the job classification in which the employee is placed, the employee shall receive only fifty (50) percent of any base wage increase or lump sum payment in lieu of a base wage increase. Such fifty (50) percent shall be calculated on the employee's personal rate at the time of the increase. The placing of a disabled employee in a different job shall not constitute an increase in the Company's normal work force. However, the Company may temporarily increase the number of authorized positions to accommodate an individual when a future vacancy is clearly defined and recognizable. If the committee is unable to place an individual in accordance with these provisions they would be eligible for vocational rehabilitation training, and benefits through the State Industrial Insurance System. Upon this determination, the individual's employment with the Company will be terminated, and any accrued benefits will be paid at the time of termination. The parties agree that the provisions of this Article may be suspended with sixty (60) days written notice, documenting the reasons for this request and the interests which would need to be addressed for the continuance of this program. 14.4 SHORT TERM DISABILITY BENEFIT: A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours who shall suffer any disabling illness or injury while not in work status, shall be entitled to disability payments in such amounts and under such conditions as described herein: ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 44 of 78 . An eligible employee shall be entitled to receive payments not to exceed the percent of the employee's weekly straight time earnings, such earnings to be computed on the employee's regular rate for a forty (40) hour, seven (7) day period, for a maximum period of benefits at the percent of earnings as defined in the following schedule of benefits.
MAXIMUM PERCENT OF LENGTH PERIOD OF BASE OF SERVICE BENEFITS EARNINGS ---------- -------- -------- 6 months* 13 weeks 55 5 years 26 weeks 60 10 years 52 weeks 65 15 years 60 weeks 70 20 years 65 weeks 75
* Employees in this category may be granted up to thirteen (13) additional weeks of leave without pay for continued disability. . No disability payments for an illness shall be made until at least a three (3) day waiting period has been observed, however, an employee must use accrued sick leave to satisfy the waiting period or to extend the waiting period to the maximum of the amount of accrued sick leave. . Any female employee who becomes pregnant and is unable to work shall be entitled to disability benefits under this Article, as described above, subject to the following conditions. She must present a document from her attending physician saying that she is under the doctor's care because of the pregnancy and is unable to work. The period of the disability shall begin at least three (3) days after the attending physician declares the employee disabled and shall end when the employee is no longer disabled as determined by the attending physician. Pregnant employees must use all accumulated sick leave before disability payments will start. A female employee will not be eligible for pregnancy related disability benefits except for her own disability. An employee who is on maternity leave and recovering from disability may request to have her leave extended for up to three (3) months after termination of pregnancy for child care or other reasons. . Any employee who performs activities for which compensation is received or which exceed the scope of the prescribed physical limitation pertaining to such disability while receiving disability compensation described in this section, shall forfeit their entitlement to all disability benefits and their employment shall be terminated. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 45 of 78 . Any employee who returns to work in a light-duty status from short-term disability will not create a new benefit eligibility until they have had a full-duty release and worked for thirty (30) calendar days from the time of that release. If an employee returns to short-term disability without satisfying this requirement, their short-term disability benefit will reflect their prior usage and continue until expiration of such benefits. . Any employee who is unable to perform the duties of their position as a result of a non-job-incurred injury, would be considered for any vacancy for which they are qualified. If awarded a position in accordance with Article 7 (SENIORITY AND PROMOTIONS), the employee would receive the appropriate rate of pay for that position. . Any employee that exhausts their short-term disability benefit and is unable to return to work at that time, may request one unpaid leave of absence for up to ninety (90) days to allow time for further recuperation or possible vacancies for which they are qualified. Such employees will be allowed to continue their medical coverage at the appropriate COBRA rate for this period of time. If this individual is unable to return to work at the expiration of this unpaid leave, their employment with the Company will be terminated and all accrued benefits will be paid at the time of termination. 14.5 RETIREMENT BENEFIT: The Nevada Power Company Retirement Plan, a defined benefit pension plan bearing No. 003, including the amendments dated March 5, 1980, shall be incorporated by reference into this Agreement. The Company has, since January 1, 1976, been paying the entire cost of this retirement plan. All participants in the pension plan which was in effect before January 1, 1976, have and are guaranteed all accrued benefits under that pension plan as computed on December 31, 1975. Effective February 1, 1990, the pension plan was amended to delete the provision that the selection of a surviving spouse benefit will revert to a single life annuity if the spouse predeceases the retired employee. Effective February 1, 1994, the pension plan will be improved to provide for early retirement benefit reductions of 5% per year from age sixty-two (62). Effective January 1, 1989, the pension plan was changed from a social security offset plan to a step rate plan. Effective February 1, 1998, the formula for calculating benefits will be 1.35% of final five-year average earnings up to Social Security Covered Compensation, plus 1.8% of final five-year average earnings exceeding covered compensation, times service up to 35 years, plus 1.35% of final five-year average earnings, times service over 35 years. For this purpose, final five-year average earnings is the average of the highest sixty (60) consecutive months of earnings. Effective February 1, 2001, the formula for calculating benefits will be 1.365% of final five-year average earnings up to Social Security Covered Compensation, plus 1.8% of final five-year average earnings exceeding covered compensation, times service up to 35 years, plus 1.65% of final five-year average earnings, times service over 35 years. For this purpose, final ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 46 of 78 five-year average earnings is the average of the highest sixty (60) consecutive months of earnings. Effective February 1, 1987, entry into the pension plan shall be on the first day of the month coincident with, or following completion of one year of service and attainment of age twenty-one. Participants in the plan prior to February 1, 1987, shall enter the plan on the first day of the month coincident with, or following completion of one (1) year of eligibility service and attainment of age twenty-one, unless those participants had declined enrollment under the eligibility rules in effect when they had first become eligible. Effective February 1, 1987, vesting service shall be measured from the employee's date of hire or age eighteen, whichever is later. The Company shall make such modifications in the plan as may be required by 1) the Internal Revenue Service in order to qualify said benefits under the applicable provisions of the Internal Revenue Code and/or related rules and regulations; or 2) any other governmental agency having jurisdiction. Other modifications may be made as needed but in no event shall any benefits be reduced during the term of this Agreement. 401K CONTRIBUTION/COMPANY MATCH: Effective on March 1, 1998, the Company will provide a matching contribution of 55 cents of the employee's contribution, to a maximum of 7% of gross income, to the Nevada Power Company 401k plan. Company contributions will be invested in Nevada Power Company stock. Effective on February 1, 1999, the Company will provide a matching contribution of 60 cents of the employee's contribution, to a maximum of 7% of gross income, to the Nevada Power Company 401k plan. Company contributions will be invested in Nevada Power Company stock. Effective on February 1, 2000, the Company will provide a matching contribution of 60 cents of the employee's contribution, to a maximum of 8% of gross income, to the Nevada Power Company 401k plan. Company contributions will be invested in Nevada Power Company stock. Effective on February 1, 2001, the Company will provide a matching contribution of 65 cents of the employee's contribution, to a maximum of 8% of gross income, to the Nevada Power Company 401k plan. Company contributions will be invested in Nevada Power Company stock. 14.6 ACCIDENTAL LIFE INSURANCE: All employees covered by this Agreement will be covered by an accidental death and dismemberment policy in the amount of $50,000. This policy shall apply only when an employee is a passenger in an aircraft either fixed wing or helicopter, and while traveling on Company business. Benefits from this policy shall be in addition to any other insurance plan. 14.7 LONG-TERM DISABILITY INSURANCE: The Company will provide a long term disability (LTD) plan by February 1, 1991, to extend disability benefits at a reduced rate upon termination of benefits described in Article 14.2 (JOB INCURRED INJURIES/SALARY PROTECTION) or 14.4 (SHORT TERM ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 47 of 78 DISABILITY BENEFIT) above. Premiums for such coverage will be paid for by the employee, through payroll deduction. All administrative expenses, exclusive of carrier expense normally absorbed in the rates, will be borne by the Company. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 48 of 78 ARTICLE NO. 15 Leaves of Absence 15.1 SHORT TERM LEAVES: Provided the needs of the Company will permit, time off without pay for any period of thirty (30) calendar days or less may be granted employees upon a written application to their department head showing good and sufficient reason for such request. This shall not be construed as a leave of absence without pay, as the term is used in this Agreement. A leave of absence without pay is defined as a period of authorized absence from service in excess of thirty (30) days. 15.2 JUSTIFICATION: Leaves of absence shall be granted to regular employees for urgent substantial personal reasons, provided adequate arrangements can be made to take care of the employee's duties without undue interference with the normal routine of work. Leave will not be granted if the purpose for which it is requested may lead to the employee's resignation. 15.3 DURATION: A leave shall commence on and include the first work day on which an employee is absent and terminate with and include the work day preceding the day the employee's leave expires. The conditions under which an employee shall be restored to employment on the termination of his leave of absence shall be clearly stated by the Company on the form on which application for leave is made. 15.4 SENIORITY: Except as otherwise provided herein, an employee's seniority shall not accrue while on leave without pay. However, an employee's status as a regular employee shall not be impaired by a leave of absence. Any period of authorized absence without pay for thirty (30) days or less shall not affect an employee's seniority status. Upon return from leave, an employee shall return to regular status. 15.5 UNION OFFICE: The Company shall, at the request of the Union, grant a leave of absence without pay for four (4) years or less to an employee who is appointed or elected to any office or position in the Union whose services are required by the Union. The seniority of an employee who is granted a leave of absence under the provisions of this Section shall accrue during the period of such leave. Upon mutual agreement with the Union, the Company may extend the leave of the incumbent for additional terms up to four (4) years per request. The Company will provide medical coverage for this individual at the single coverage rate. This individual must make the established monthly employee contribution for health coverage. 15.6 PUBLIC OFFICE: Employees elected or appointed to public office shall be granted a leave of absence for the duration of such appointment or election. Such absence shall not affect accrual rates for seniority purposes; however, sick leave and vacation shall not accrue during this period and group medical benefits shall be paid by the employee at the Company's current premium rate. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 49 of 78 15.7 MILITARY LEAVE: A leave of absence shall be granted to employees who enter the armed forces of the United States, however, any such leave of absence and the reinstatement of any such employee shall be subject to the terms of the Selective Training and Service Act of 1940, as amended. Employees who are members of the armed services who are drafted and are called to active duty shall accrue Company seniority while they are absent on military duty. A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours, who is a member of the armed forces reserve units, or the National Guard, and who is required to attend annual training sessions, will be granted a leave of absence for the duration of such assignment. In addition, the Company will pay such employee the amount, if any, by which the remuneration received from the government is less than the base straight time earnings the employee would have received for the same period, not to exceed eighty (80) hours in a calendar year. Such items as subsistence, travel, uniform and other allowances will not be included in computing the remuneration received from the government. The Company will require satisfactory evidence of attendance and remuneration received. 15.8 FAILURE TO RETURN FROM LEAVE: If employees fail to return immediately on the expiration of their leave of absence, or if they accept other employment while on leave, they shall forfeit the leave of absence and terminate their employment with the Company. 15.9 FUNERAL LEAVE: A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours, who is absent from duty due to a death in the employee's immediate family will be excused without loss of regular pay for the time required not to exceed thirty-two (32) hours for making funeral arrangements and attending the funeral, provided the employee attends the funeral and furnishes a death certificate to the payroll department within thirty (30) days. Immediate family shall mean the employee's grandparents, mother, father, step-mother, step-father, brother, sister, spouse's grandparents, spouse's parents, spouse's children, spouse, son, daughter, or grandchildren. 15.10 JURY DUTY: When regular employees, or temporary employees who have worked more than one thousand forty (1040) straight time hours, are absent from work in order to serve as a juror or to report to the court in person in response to a jury duty summons or to report for jury examination, they shall be granted pay for those hours spent in such service during their regular work day or regular work week less the fee or other compensation paid them with respect to such jury duty. Employees shall furnish the Company with a statement from an officer of the court setting forth the time and days on which they reported for jury duty and their compensation due or received for jury duty. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 50 of 78 15.11 SUBPOENA: If employees are absent from work, in order to serve as a witness in a case in a court of law to which they are not a party, either directly or as a member of a class action suit, and where such absence is in response to a legally valid subpoena or its equivalent, the employee shall be granted leave with pay for those hours for which the employee is absent from work during the employee's regularly scheduled working hours, provided the employee submits evidence of such service as a witness, detailing the time required to testify. 15.12 FAMILY LEAVE: Employees who are eligible for benefits but have less than one year of service with the Company are entitled to forty-five (45) calendar days of unpaid family leave to use for the birth or adoption of a child. Vacation pay may be used for a portion of this leave of absence but will not extend the leave to more than forty-five (45) days. 15.13 FAMILY AND MEDICAL LEAVE: Employees who are eligible for benefits and have one year or more of Company service may be entitled to twelve (12) weeks of unpaid leave in accordance with the Federal Family and Medical Leave Act of 1993. ARTICLE NO. 16 Working Rules 16.1 SAFETY GEAR: Rubber gloves, hose, hoods and blankets may be used to make as safe as possible any work performed on any equipment having conductors energized in excess of 750 volts, in addition, hot line tools may be used where applicable. The safety precautions taken by the crew are the direct responsibility of the foreman in charge. The Occupational Safety and Health Standards as contained in sub-part "v" of the Occupational Safety and Health Act (OSHA) shall be considered minimum standards for work performed on power transmission and ------------------------------------------------------ distribution equipment. ---------------------- 16.2 APPRENTICE PROGRAM: The Nevada Power Company Apprenticeship Training Program, Revision I, dated December 20, 1982, shall be incorporated by reference into this Agreement and any modifications or amendments must be handled in accordance with Article 17 (TERM OF AGREEMENT). Joint apprenticeship programs shall be established by the Company and the Union. The programs which are to be included in the training programs require the recommendation of the applicable Joint Apprenticeship Committee(s) and approval and acceptance by the President of the Company, and the Business Manager of the Union. JOINT APPRENTICESHIP COMMITTEE: Each Joint Apprenticeship Committee ------------------------------ shall be composed of an equal number of members appointed by the Company and the Union, and an apprentice training supervisor appointed by the Company who will serve as Chairman of the Committees to develop, coordinate and administer the programs. The Joint Apprenticeship Committees ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 51 of 78 shall have the responsibility for investigating problems of apprenticeship training such as standards of progress, methods of testing and scoring progress of apprentices and procedures for demotion or termination when apprentices fail to meet established standards or requirements. The Committee members appointed by the Union shall receive their regular straight time rate of pay for actual time spent in Joint Apprenticeship Committee meetings called by the Chairman, but limited to eight (8) straight time hours in one (1) day. APPRENTICE/JOURNEYMAN RATIO: The ratio of apprentices to journeymen --------------------------- shall not exceed one to two (1:2) or a major fraction thereof. The work performed by apprentices shall be assigned and reviewed by the appropriate working foreman or designated journeyman, subject to the approval of the appropriate supervisor. FIRST YEAR APPRENTICE: An apprentice who has been in the ---------------------- apprenticeship for a period of less than twelve (12) months shall not be assigned any work which, in the opinion of the immediate supervisor, is hazardous. EIGHTEEN (18) MONTH APPRENTICE: Any apprentice who has been in the ------------------------------ apprenticeship for a period of less than eighteen (18) months, shall not work on conductors energized in excess of seven hundred fifty volts (750). After that period, the apprentice may work under the direct supervision of a journeyman on all voltages which, in the opinion of the immediate supervisor, would not create an undue hazard at that stage of the training. APPRENTICE LINEMAN: An apprentice lineman who has completed at least ------------------ twelve (12) months as an apprentice with the Company may be used to install and maintain private area lighting on existing poles and will be assisted by a groundman for this work, contrary to language elsewhere in this Agreement. Private area lighting, which requires the excavation for an installation of a pole, shall be accomplished by a special line crew. The assignment of any apprentice to the private area lighting program shall be on a non-permanent basis and rotated in accordance with the apprentice program. 16.3 TOOLS, EQUIPMENT AND WORK CLOTHES: An employee shall furnish initially all tools and equipment which are acceptable to the Company and necessary for the work to be performed. The Company will furnish a suitable standard pair of gloves and coveralls bearing Company identification to a regular employee, when required in the performance of the employee's work and Company will replace such gloves and coveralls worn out in the Company service. When a safety strap or hook strap is worn out in the Company service or is condemned by the Company, it shall be replaced at no cost to the employee. 16.4 UPGRADE: When an employee relieves an employee of a higher classification for two (2) or more hours, the employee shall receive the rate of pay for the higher classification for the time worked in the higher classification. However, an employee will not be upgraded when employees of that ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 52 of 78 classification who normally report for work at the same location are able and available to do the work for which the upgrade is intended. If a shift employee, for reasons other than a scheduled vacation, is unable to report to work, an employee (who is on the designated days off) from the same classification, including relief employees in that classification, who normally reports for work at the same location will be called by telephone to cover the vacant shift. If an employee, who is on the designated days off, holding the same classification who normally reports for work at the same location is not available, the employee of the same classification who normally reports for work at the same location on the previous shift will work half of the vacant shift and the employee of the same classification who normally reports for work at the same location on the shift following the vacant shift will work the remaining half of the vacant shift. If for any reason these arrangements cannot be made, the Company may upgrade to cover the vacant shift. The Company may upgrade a shift employee for scheduled vacations, provided that all overtime involved from such upgrade be worked by an employee holding the classification who normally reports for work at the same location from which the vacation was granted. If the relief operator is available, that operator may be used to relieve as described under "Exhibit I (CLASSIFICATION DESCRIPTIONS)". 16.5 SUPERVISORY RESPONSIBILITIES IN EMERGENCY CONDITIONS: It is the intention of the Company that supervisors shall generally confine their activities to the supervision of the work or operations being performed. In certain instances, should emergency conditions arise, it may be necessary for them to perform those tasks normally assigned to bargaining unit employees. Under ordinary circumstances, such instances will very rarely occur, but since the safety of personnel or Company property may be in jeopardy, it must remain management's prerogative to determine when conditions require the actions described above. In the same manner it is the intention of management that the "chain of command" be adhered to, by both supervisors and bargaining unit employees. However, in the case of emergencies, there will be occasions when it may be necessary for a senior supervisor to bypass normal chain of command in order to prevent difficulties. Common sense and good judgment must be exercised in applying these paragraphs. 16.6 NEW CLASSIFICATIONS/WAGES: Any new rate covering work normally performed by employees within the bargaining unit shall first be discussed with the Union and the rate established for such work shall be that mutually agreeable to both parties. 16.7 REMOVING LETTERS OF DISCIPLINE: Any employee who receives a written letter of reprimand which is a part of the personnel file maintained in the Company's Human Resources office may, after three (3) years from the date of such letter, request in writing to have the letter removed. Upon such written request, the Company shall remove the letter and return it to the employee. If the behavior that warranted the letter has changed or been corrected, the employee's current supervisor can remove the letter from the employee's ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 53 of 78 personnel file by documenting this change in behavior and providing written authorization to Human Resources. --------------- 16.8 REQUIRED LICENSES, PERMITS, CDLs: Employees required to operate any motorized vehicle or equipment on public roadways in the normal course of employment shall be required to possess and maintain all licenses and permits required by state and/or federal laws. The Company will provide suitable training to all employees required to operate equipment or vehicles where a commercial drivers license (CDL) is required and shall issue a certificate upon satisfactory completion of the driver training and testing program. Employees who by their regular work assignments, may be required, as a condition of employment and Nevada Revised Statue, to maintain an active commercial drivers license (CDL), shall be provided reasonable time with pay during their regular working hours, to obtain or renew such licenses provided such activities are not a result of the employees violation of any state or federal law or public policy. 16.9 VESSEL CONDITIONS: No unprotected employee will be required to enter a vessel or compartment where the temperature inside exceeds one hundred fifty degrees (150o) Fahrenheit. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 54 of 78 ARTICLE NO. 17 Term of Agreement 17.1 DURATION: This Agreement shall take effect on February 1, 1998, and shall continue in effect for the term February 1, 1998 to February 1, 2002, and shall continue in full force and effect from year to year thereafter unless written notice of termination shall be given by either party to the other at least sixty (60) days prior to the end of the then current term. 17.2 AMENDMENTS: If either party desires to amend this agreement, it shall give notice thereof to the other party at least sixty (60) days but not more than seventy (70) days, prior to the end of the then current term, and the party desiring to amend or revise this Agreement shall submit to the party so notified a detailed outline of the Articles and Sections to be amended or revised at the time the notice is given, except and unless otherwise mutually agreed to by the parties during this period of notice defined herein. Negotiations on the amendments or revisions shall take place, so far as possible, in the sixty (60) day period prior to the end of the then current term. Failure of the parties to agree on such proposed amendment or revision shall not cause termination of this Agreement unless either party has given notice of termination as provided in Section 1 above. 17.3 PROVISIONS IN CONFLICT WITH THE LAW: In the event that any provision of this Agreement shall at any time be made invalid by applicable legislation, or be declared invalid by any court of competent jurisdiction, such action shall not invalidate the entire Agreement, it being the express intention of the parties that all other provisions not made invalid shall remain in full force and effect. 17.4 CHANGE IN COMPANY STATUS: This Agreement shall be binding upon the successors and assigns of the Company, and no provisions, terms or obligations herein contained shall be affected, modified, altered or changed in any respect whatsoever by the consolidation, merger, sale, transfer, reorganization or assignment of the Company, or by any change in the legal status, ownership or management thereof. 17.5 EFFECTIVE DATE OF AGREEMENT: It is mutually agreed by and between the parties signatory hereto that the Agreement dated February 1, 1990, is superseded by this Agreement dated as of February 1, 1994. Except as otherwise expressly provided herein, the provisions of this Agreement shall be effective February 1, 1994. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 55 of 78 In witness whereof, the parties hereto have executed this Agreement on January 30, 1998. Local Union #396 of the International Brotherhood of Electrical Workers (AFL-CIO) _____________________________________________________________ Jim C. Anzinger Business Manager and Financial Secretary, IBEW Local 396 _____________________________________________________________ Gloria Banks Weddle Vice President, Human Resources and Corporate Services NEGOTIATING COMMITTEES ---------------------- IBEW, Local No. 396 Nevada Power ------------------- ------------ Jim Anzinger Gloria Banks Weddle Steve Hitchcock Dan Potter Vanessa Farias Trudy Haszlauer Flory Marzan Jose Villa ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 56 of 78 EXHIBIT I CLASSIFICATION DESCRIPTIONS (Alphabetical) APPRENTICE EQUIPMENT MECHANIC Assists the equipment mechanic while undergoing training for the journeyman level. Does such work as tuning motors, adjusting valves and ignitions, cleaning fuel systems and radiators, adjusting clutches, brakes and carburetors, tests compression of oil and fuel pressure. APPRENTICE ELECTRICAL TECHNICIAN Assists the steam plant electrician while in training for journeyman. Assists the journeyman in the installation, maintenance, repair and testing of electrical equipment in a generating station, and may be required to perform other duties as assigned. APPRENTICE INSTRUMENT TECHNICIAN Will assist the journeyman instrument technician while training for journeyman. Renews and calibrates gauges and control devices on control boards; repairs and calibrates transmitters, receivers, and control drives; and does other repair work as directed by journeyman instrument technicians while learning trouble shooting techniques for electronic, solid state and pneumatic instrument servicing. Will perform additional duties as required by the instrument and control supervisor. APPRENTICE MECHANICAL TECHNICIAN / MACHINIST Assists the machinist while in training for journeyman; assists the journeyman in precision work on any type of machine as well as work on the floor in tearing down, repairing and placing into operation any plant equipment and may be required to perform other duties as assigned. APPRENTICE MECHANICAL TECHNICIAN / MECHANIC Assists the mechanic while in training for journeyman; assists the journeyman in doing general mechanic work associated with installing or repairing any plant equipment, and will be required to work with other journeymen to learn basic rigging, machining and welding, and may be required to perform other duties as assigned. APPRENTICE MECHANICAL TECHNICIAN / WELDER Assists the welder while in training for journeyman; assists the journeyman in performing all types of gas or electrical welding, and may be required to perform other duties as assigned. ASSISTANT CONTROL OPERATOR Assists the control operator during operational emergencies, startups, shutdowns and fuel changes. The primary function will be the manual and control work involved in the light-off and shutdown of boilers, start-up and shutdown of turbines and operational procedures required in changing of fuels. May also be required to operate any or all plant mechanical or electrical equipment as directed. Must be familiar with the trip functions and testing of all equipment and keep records and logs as required. When necessary, will work as part of the maintenance crew during plant shutdowns, or any emergency when necessary, may be required to work in any position in the plant. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 57 of 78 Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. AUXILIARY OPERATOR Assists control operator in all phases of operations. Inspects and operates plant auxiliary equipment and water treatment equipment at water treatment plant. Monitors and reads guages, meters, and water treatment control panels to make adjustments that ensure equipment is operating properly. Does switching in and out of breakers. Performs good housekeeping as a matter of clean and safe operations. When necessary will work as part of the maintenance crew during shut downs. Leaves shift upon proper relief and performs other duties as required. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. COAL YARD EQUIPMENT OPERATOR Operates and maintains all equipment assigned to the coal yard including railroad locomotives and cars, shakers, conveyors, separators, feeders and crushers and such other supplemental equipment as may be assigned to the coal yard. Will be required to work intermittently in any other classification when assigned. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. CONTROL OPERATOR Operates the controls of gas, oil or coal fired boilers and auxiliaries such as boiler feed water and other pumps, compressors, condensers, fan motors and all other equipment necessary for the operations of the plant. Clears boilers, generating units and auxiliaries during outages, cooperates with the system dispatcher's relative to load voltage changes, frequency and switch requirements, adjusting controls of generating equipment according to operating conditions and synchronizes the equipment with the system; maintains daily operating log, a record of all dispatcher and trouble calls, and visitors record; maintains in a clean and orderly manner control room, all equipment and panels; informs his relief fully on existing and preceding operating conditions of the plant and system; acts as part of overhaul crew during plant shutdown, or any emergency when necessary, may be required to work in any position in the plant. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. ELECTRICAL/INSTRUMENT TECHNICIAN GENERATION TECHNICIAN Employees will perform any and all tasks for which they are properly trained and can competently perform at the intermediate level in generation classifications. The ratio should not exceed 1 Generation Technician for 4 Maintenance Journeymen (1:4). LABORATORY TECHNICIAN The laboratory technician is directly responsible for all phases of chemical analysis and the treatment of all waters in the plant vital to the production of steam. Must perform daily analysis on the plant's boiler water, feed water and cooling water systems and ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 58 of 78 implement proper treatment to control corrosion or scale formation in all water pipe systems and to insure steam purity. The laboratory technician must have a thorough knowledge of Zeolite softeners, mixed bed demineralizers, chlorine room, and clarifier operation. Takes monthly inventory of all chemicals and chemical supplies throughout the plant and laboratory and makes analysis standards and plots graphs for control limits on all chemically treated water as directed. Unloads caustic, acid and chlorine and maintains a supply of chemicals inside the plant as necessary. The laboratory technician at gas fired plants will calibrate all conductivity meters and replace corrosion coupons and will perform additional duties as required. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. The laboratory technician at a coal fired plant will sample and perform analysis of coal at that plant. Sampling and analysis include collection of the sample, riffling, pulverizing, and actual burning of the sample in the bomb calorimeter. Analysis of the sample includes determination of the external moisture, internal moisture, percent of ash, BTU's per pound, percent of sulfur and ash fusion. Performs normal housekeeping duties to insure a clean laboratory and recommends chemical supplies and materials to insure an adequately supplied laboratory. LEAD In the absence of appropriate supervision and when directed, leads, assists, and works with other departmental personnel to ensure the efficient operation of related activities. May be required to develop schedules, direct work assignments, prepare job related reports, complete other administrative duties, function in a journeyman capacity, and perform other work as needed. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. LINES GROUNDMAN Assists a lineman in a crew in the laboring work involved in the setting up of overhead transmission lines and overhead and underground distribution lines; digs holes; clears rights-of-way; handles tools and materials; steadies poles as they are raised by winch and tamps dirt around the pole to hold it in place: passes work tools, equipment and material from ground to lineman on the poles; may be required to drive a truck; may be permitted to climb. A groundman shall be permitted to climb only in established training sites which are not energized and may be required to perform other duties as assigned. MAINTENANCE TECHNICIAN Performs a variety of skilled work including operating equipment, insulating, painting, lubricating and carpentry. Will be required to perform any of the above tasks if necessary. May be required to assist or perform work in any lower classification. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. MAINTENANCE UTILITY TECHNICIAN Does unskilled work as necessary; keeps journeyman or apprentice supplied with tools, materials, and supplies while assisting with a specific job; cleans working area and equipment. Operates other special equipment including jackhammer as required and drives truck or pickup in performance of duties. A maintenance utility technician shall not displace an apprentice or a journeyman or generation technician. Employees will ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 59 of 78 perform any and all tasks for which they are properly trained and can competently and safely perform. MATERIAL SPECIALIST Performs manual and clerical duties in connection with receiving, storing and issuing supplies, tools, and equipment; unloads and unpacks incoming materials; places, shelves and racks stock of machine, hand and construction tools; measures, counts, cuts, crates, marks and stencils materials, supplies, tools and equipment; keeps the premises clean; drives a car or pickup in local purchases of materials and equipment. Operates special pole yard crane to receive, load and unload poles, large transformers and cable reels, switches and other heavy equipment, and determines location and reordering of same. Supervises the orderly accumulation and removal of scrap materials in the pole yard. MATERIAL UTILITY TECHNICIAN Performs unskilled and semi-skilled labor as necessary. Keeps warehouse and outside areas clean. May operate forklift for loading and unloading of materials for deliveries. Drives warehouse vehicles for material deliveries and local purchases of material and equipment. Two hours minimum upgrade if material is to be purchased during town run. Must be able to obtain a CDL within 90 days of hire date. May assist Material Specialist in putting away material and loading material for crews. The ratio should not exceed 1 Material Utility Technician for 7 Material Specialists (1:7). A material Utility Technician shall not displace a Material Specialist. MECHANIC SPECIALIST Maintains all types of construction and transportation equipment and accessories. Diagnoses mechanical, hydraulic and electrical problems, makes and recommends repairs. Designs equipment modifications. Constructs and installs parts and similar apparatus, including booms and winches, to accommodate the required changes. Performs pressure and structural welding, operates metal lathes, and other precision machinery, and does other related mechanical work as required. MECHANICAL TECHNICIAN / MACHINIST Must be able to do precision work on any type machine as well as actual work on the floor in tearing down, repairing and putting into operation any plant equipment. Will be required to work intermittently in any of the maintenance classifications if necessary. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. MECHANICAL TECHNICIAN / MECHANIC Capable of doing general mechanical work attached to installing or repairing any plant equipment, be familiar with work on high pressure boilers and their auxiliaries. Will be required to work intermittently in any of the maintenance classifications if necessary. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. MECHANICAL TECHNICIAN / WELDER Performs all types of high pressure, gas and electrical welding and layout and must have satisfactorily completed welding tests as designed by, and in accordance with, state boiler safety requirements for high pressure vessels operated by the Company. Will be required to work intermittently in any of the maintenance classifications if ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 60 of 78 necessary. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. RELIEF ASSISTANT CONTROL OPERATOR Performs the duties of an assistant control operator as described in this Exhibit I. The relief assistant control operator shall be assigned to any shift other than the usual schedule for purposes of providing relief to, or coverage for an absent assistant control operator. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. RELIEF AUXILIARY OPERATOR Performs the duties of an auxiliary operator as described in this Exhibit I. The relief auxiliary operator shall be assigned to any shift other than the usual schedule for purposes of providing relief to, or coverage for an absent auxiliary operator. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. RELIEF CONTROL OPERATOR Performs the duties of control operator as described in this Exhibit I. The relief control operator shall be assigned to any shift other than the usual schedule for purposes of providing relief to, or coverage for an absent control operator. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 61 of 78 EXHIBIT II SCHEDULE OF WAGE RATES
Newly Newly Existing Existing Effective Hired Hired EMPL. EMPL. 7/15/99 Empl. Empl. Effective Effective Effective Effective CLASSIFICATIONS: 1/31/2000 1/29/2001 1/31/2000 1/31/2000 MATERIALS Lead Material Specialist 24.56 25.30 20.13 20.13 20.75 Material Specialist 1/st/ six months 20.67 21.29 16.45 16.95 17.46 2/nd/ six months 21.46 22.10 17.08 17.60 18.12 Thereafter 22.33 23.00 17.78 18.31 18.86 (Red Circle) 23.02 23.71 18.33 18.88 19.44 Warehouse Utility Technician 1/st/ six months 15.33 15.79 12.20 12.57 12.95 2/nd/ six months 15.92 16.40 12.68 13.05 13.45 Thereafter 16.51 17.00 13.14 13.54 13.94 GENERATION Lead Coal Yard Operator 28.07 28.91 22.35 23.02 23.71 Lead Laboratory Technician 27.56 28.39 21.94 22.60 23.28 Maintenance Technician 1/st/ six months 18.27 18.82 14.55 14.98 15.43 2/nd/ six months 18.87 19.43 15.02 15.47 15.93 3/rd/ six months 19.45 20.04 15.49 15.95 16.43 4/th/ six months 20.05 20.65 15.96 16.44 16.93 5/th/ six months 20.63 21.25 16.42 16.92 17.43 6/th/ six months 21.23 21.87 16.90 17.41 17.93 Thereafter* 21.81 22.47 17.37 17.88 18.43 (Red Circle) 24.67 25.41 19.64 20.23 20.84 (Red Circle) 25.12 25.88 20.00 20.60 21.22 (Red Circle) 27.05 27.87 21.54 22.18 22.85 Lead 30.36 31.27 24.17 24.90 25.64 Mechanical Technician/Machinist 27.62 28.45 21.98 22.65 23.33 (Red Circle) 30.12 31.02 23.98 24.70 25.44 Mechanical Technician/Mechanic 27.62 28.45 21.98 22.65 23.33 (Red Circle) 30.12 31.02 23.98 24.70 25.44 Mechanical Technician/Welder 27.62 28.45 21.98 22.65 23.33 (Red Circle 30.12 31.02 23.98 24.70 25.44
____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 62 of 78
Newly Newly Existing Existing Effective Hired Hired Empl. empl. 7/15/99 Empl. Empl. Effective Effective Effective Effective CLASSIFICATIONS: 1/31/2000 1/29/2001 1/31/2000 1/29/2001 Electrical/Instrument Technician 27.62 28.45 21.98 22.65 23.33 (Red Circle) 30.12 31.02 23.98 24.70 25.44 (Red Circle) 30.73 31.65 24.46 25.20 25.95 Coal Yard Equipment Operator 25.53 26.30 20.33 20.93 21.57 Relief Control Operator 28.62 29.48 22.79 23.47 24.17 Control Operator 1/st/ six months 27.16 27.98 21.62 22.27 22.94 Thereafter 27.95 28.79 22.25 22.92 23.61 Relief Assistant Control Operator 25.75 26.52 20.50 21.12 21.75 Assistant Control Operator 1/st/ six months 24.37 25.10 19.40 19.98 20.58 Thereafter 25.09 25.84 19.98 20.57 21.19 Relief Auxiliary Operator 24.57 25.31 19.57 20.15 20.75 Auxiliary Operator 1/st/ six months 23.29 23.99 18.54 19.10 19.67 Thereafter 23.93 24.65 19.05 19.62 20.21 Apprentice Mechanical (Machinist, Mechanic, Welder) Apprentice Electrical/Instrument Technician 1/st/ six months 20.51 21.13 16.33 16.82 17.33 2/nd/ six months 21.34 21.98 16.99 17.50 18.02 3/rd/ six months 22.07 22.73 17.56 18.10 18.64 4/th/ six months 22.83 23.51 18.19 18.72 19.28 5/th/ six months 23.60 24.31 18.79 19.35 19.93 6/th/ six months 24.35 25.08 19.38 19.97 20.57 7/th/ six months 25.12 25.88 20.00 20.60 21.22 8/th/ six months 25.88 26.66 20.61 21.22 21.86 Thereafter* 27.62 28.45 21.98 22.65 23.33 Laboratory Technician 1/st/ six months 20.51 21.13 17.91 16.81 17.33 2/nd/ six months 23.34 24.04 18.58 19.14 19.71 3/rd/ six months 24.20 24.92 19.26 19.84 20.43 Thereafter 25.09 25.84 19.98 20.57 21.19
____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 63 of 78
NEWLY NEWLY Existing Existing HIRED HIRED Empl. Empl. EMPL. EMPL. Effective Effective EFFECTIVE EFFECTIVE CLASSIFICATIONS: 1/31/2000 1/29/2001 1/31/2000 1/29/2001 Maintenance Utility Technician (Red Circle) 1/st/ six months 14.94 15.39 14.94 15.39 2/nd/ six months 15.45 15.91 15.45 15.91 3/rd/ six months 15.94 16.42 15.94 16.42 4/th/ six months 16.55 17.05 16.55 17.05 5/th/ six months 17.20 17.72 17.20 17.72 6/th/ six months 17.85 18.39 17.85 18.39 Thereafter 18.47 19.02 18.47 19.02 (Red Circle) 20.12 20.73 20.12 20.73 Maintenance Utility Technician 1/st/ six months 11.20 11.53 11.20 11.53 2/nd/ six months 11.79 12.15 11.79 12.15 3/rd/ six months 12.38 12.75 12.38 12.75 4/th/ six months 12.98 13.36 12.98 13.36 5/th/ six months 13.56 13.97 13.56 13.97 6/th/ six months 14.14 14.57 14.14 14.57 Thereafter 14.74 15.18 14.74 15.18 Trainer - Power Delivery 30.36 31.27 24.90 25.64
* Subject to satisfactory completion of apprentice program. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 64 of 78 EXHIBIT III International Brotherhood of Electrical Workers Local Union No. 396 CHECK OFF AUTHORIZATION I, _____________________________________________________________, herewith (print name) (employee no.) authorize Nevada Power Company to deduct initiation and/or reinstatement fees and monthly dues owing to the Union, in accordance with the Constitution and By- Laws of the Union, and direct such amounts so deducted be sent to the Secretary- Treasurer of the Union for and on my behalf. When the full amount of the initiation or reinstatement fee has been withheld from my earnings, such authorization for deduction of initiation or reinstatement fee only shall be null and void, and shall thereafter have no further force or effect. This authorization shall be irrevocable for the period of the applicable agreement between the Union and the Company, or for one (1) year, whichever is lesser, and shall automatically renew itself for successive yearly or applicable agreement periods thereafter, whichever is lesser, unless I give written notice to the Union, registered, Return Receipt Requested, of my desire to revoke the same. The Union will notify the Company on a biweekly basis if necessary of those employees who wish to revoke this deduction; such deductions will cease in the pay period following receipt of such notice from the Union. It is recognized that neither the Company nor the Union shall be under any liability to me, the undersigned, with respect to the deductions provided herein. Signed __________________________________________________________________ Date ____________________________________________________________________ ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 65 of 78 EXHIBIT IV SICK LEAVE AGREEMENT INTRODUCTION The Union agrees to share the responsibility in protecting the sick leave plan from abuses by any of its members, recognizing that the plan is intended to provide pay coverage under situations of actual need. MEDICAL ATTENTION Sick leave may be used for obtaining medical information or treatment including exams or treatments for care of the eyes or teeth of eligible employees. Such absences should be approved in advance where possible and limited to the time necessary for treatment or examination or recovery. ALCOHOL AND DRUG ABUSE An employee who seeks professional treatment to correct a problem of excessive use or dependence on a alcohol or other controlled substances will be placed on medical leave of absence for such treatment. Available unused sick leave may be used while under professional treatment. Arrangements for treatment must be made with the EAP Provider and the Company and such treatments will be kept as confidential as possible. Employees who receive such treatment will be expected to observe all conditions and attend all meetings which are required as part of the total rehabilitation program. Evidence of abstinence may be required as a follow-up and negative findings may result in termination. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 66 of 78 EXHIBIT V TEMPORARY LAYOFF PROVISIONS The following provisions shall apply relative to a temporary layoff, as referenced in Article 5.4 (LAYOFF PROVISIONS): NOTIFICATION: Should the Company initiate a temporary layoff, affected employees shall be notified in writing as soon as possible, and will have three (3) days to indicate their interest for consideration in the layoff. ELIGIBILITY: Temporary layoffs, out of line of seniority, shall be strictly voluntary. If there are more volunteers than needed within a classification, selection shall be determined by highest Company seniority of the interested employees. If two (2) or more employees have the same Company seniority date, the highest score on the most recent performance appraisal will break the tie. If there are no volunteers, the Company shall explore other alternatives that may satisfy the temporary layoff situation. TIME FRAME: A temporary layoff shall be for the stated time period or less, as indicated in writing at the time of notification. If, during the temporary layoff, the Company recognizes that the layoff may extend beyond the original time frame, employees in layoff status shall be given the option to extend or return to work. If the temporary layoff ends before the stated time frame, employees will be notified immediately, and expected to return to work the next day unless other arrangements are approved by management. PAY: Employees shall be paid approximately 70% of their current income, which includes income received from unemployment compensation as a result of the layoff. The following formula shall be used to calculate an employee's gross wages while on temporary layoff: Base rate x 40 Hrs. x 70% - Unemployment Income = Weekly Gross Wages For the purpose of this calculation, the unemployment compensation amount will be subtracted to arrive at gross wages even if the employee does not receive this benefit. The exception to this provision will be for the first week of the temporary layoff, when employees will be required to serve a waiting week for unemployment compensation. For this initial week, employees will be paid 70% of their base rate. VACATION: No adjustment to vacation accrual shall be made during the first sixty (60) calendar days of a temporary layoff. However, once the sixty (60) day period has elapsed, an employee's vacation accrual shall be adjusted and treated as any other leave, as outlined in Article 12.4 (VACATION ADJUSTMENTS). If employees are in layoff status and unable to use their vacation allotment for that year, the unused vacation shall be automatically carried over to the next year. SICK LEAVE: Employees shall continue to accrue sick leave monthly, as if they were working. However, employees will not be eligible to use sick leave or short-term disability during the period for which they are on temporary layoff. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 67 of 78 HOLIDAYS: Employees shall not be entitled to holiday pay while on temporary layoff. The only situation that would warrant holiday pay is if they began or were recalled from temporary layoff during the week of a holiday. EXAMPLE ------- If the temporary layoff begins on Tuesday of a week with a Monday holiday, the employee would receive holiday pay for that day. These provisions do not apply to the floating holiday, as the employee would be allowed to reschedule the day at a future time. If as a result of a temporary layoff, an employee is unable to schedule their floating holiday, they will be allowed to carry this holiday into the following year. SENIORITY: An employee's seniority shall continue to accrue during the period of layoff. BENEFITS: An employee's benefits shall remain the same during the period of layoff. Employees monthly contribution will be deducted from these bi-weekly checks. PROMOTIONAL OPPORTUNITIES: Employees shall be eligible to indicate their interest in promotional opportunities that may arise during the period of layoff. However, they must individually assume the responsibility of meeting appropriate deadlines for consideration. Any employee awarded a promotion or transfer while on temporary layoff, will be returned to work immediately. RECALL: Should the Company need to recall employees in a specific classification prior to the previously stated date, employees shall be recalled by Company seniority on a volunteer basis. If there are no volunteers to return, inverse seniority will be used to satisfy these requirements. Any issues delaying an employee's return to work will be addressed on an individual basis. However, the monetary benefits associated with a temporary layoff will end on the date of recall. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 68 of 78 May 20, 1988 Mr. James Brimer International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING - ARTICLE 14.4 - -------------------------------------- Dear Mr. Brimer: Prior to January 1, 1976, employee participants in the Nevada Power Company Retirement Plan were required to contribute slightly less than 3% of their straight time earnings to defray the Company cost of retirement benefits. Effective January 1, 1976, the Company paid the full cost of the retirement benefits plan. On January 1, 1988, twenty-eight (28) employees covered by the Clerical Collective Bargaining Agreement were active employees and had made contributions toward their retirement benefits. Records have been maintained on the amount of each of the twenty-eight (28) employees showing the accumulation of the direct contributions made by these employees and the earnings, through investments on their contributions through December 31, 1975. The Company has, in accordance with IRS regulations, agreed to credit the 12/31/75 account balances with five percent (5%) interest per year until disposition of these funds was made individually with each of these employees. The Company has now agreed to standardize the retirement plans in the area of funding for retirement benefits. To standardize, the Company has agreed to return monies contributed prior to January 1, 1976, by the twenty-eight (28) employees to the employees plus earnings and interest at five percent (5%) per year if the employee requests return. The Company is permitting the selection of several options which are described in the following paragraphs: OPTION I: Participants in the Nevada Power Company Retirement and Thrift EMPLOYEE Plan actively employed on January 1, 1988, may elect to receive - -------- CONTRIBUTION their employee contribution to the Plan, along with earnings and - ------------ -------- interest, computed at 5% per annum from January 1, 1976 through April 30, 1988. If the employee's contributions are withdrawn, the monthly benefit that is calculated using final average earnings, credited service and social security benefit will not be reduced. ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 69 of 78 OPTION II: Participants in the Nevada Power Company Retirement and Thrift EMPLOYEE Plan actively employed on January 1, 1988, may choose to leave - -------- CONTRIBUTION their employee contributions in the Plan, along with earnings and - ------------ -------- interest computed at 5% per annum from January 1, 1976, untilretirement or termination from Nevada Power Company and receive a lump sum payment of their employee account at that time. This withdrawal of the employee's contributions will not reduce --- his monthly benefit. OPTION III: At the time of termination or retirement, participants in Nevada EMPLOYER Power Company Retirement and Thrift Plan actively employed on - -------- CONTRIBUTION January 1, 1988, may elect to withdraw the employer contribution - ------------ -------- to the Plan which will include interest computed at 5% per annum from January 1, 1976, until the date of termination or retirement. This election will be available whether they have withdrawn the employee contribution in 1988 or at the time of termination. If the employer's contribution is withdrawn, the employee's annuity would be reduced by an equivalent amount calculated by accumulating the total employer account value with 5% interest to normal Retirement Date dividing by 120 and multiplying by the ratio of actual years of credited service to years of credited service at normal retirement. OPTION IV: Participants in the Nevada Power Company Retirement and Thrift EMPLOYER Plan actively employed on January 1, 1988, may elect to leave the CONTRIBUTION employer's contribution in the Plan, along with earnings and interest computed at 5% per annum from January 1, 1976, until thedate of termination or retirement. If the employer's contribution is not withdrawn, there will be no reduction of the employee's monthly benefit. Very truly Yours, /s/ Cynthia K. Gilliam ACCEPTED: /s/ James Brimer Business Manager and Financial Secretary, IBEW Local 396 ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 70 of 78 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ------------------------ DISCIPLINE RELATIVE TO TARDINESS AND ATTENDANCE Dear Mr. Anzinger: Both the Company and Union recognize that having reliable employees with good attendance is central to achieving the Company's goals and mission. Both parties also recognize that the majority of employees have good attendance records and display a true commitment to their occupation and work groups. However, in an effort to assist those employees who may have an attendance problem and minimize the burden placed on fellow employees, the Company and Union have agreed to waive the time off the job (i.e. one (1) day suspension, three (3) day suspension) and document those steps of progressive discipline on paper only. It is incumbent on both parties to communicate that although employees will not be subject to lost time, this should in no respect minimize the seriousness of this action. This agreement will remain in effect until February 1995, at which time the Company and Union will reconvene to discuss extending or discontinuing this agreement. Very truly yours, Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 71 of 78 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ------------------------ WORKING FOREMAN CLASSIFICATION Dear Mr. Anzinger: Both the Company and Union agree that significant changes in the generation and warehousing departments have resulted in a redistribution of work originally assigned to working foremen. As a result, during negotiations of the Plant agreement, which expires in February 1994, the Company and Union agreed to discuss working foreman pay provisions commensurate to responsibilities and the possibility of a lump sum buy-out in the form of Company stock in the employees' 401K account. These issues and other remedies shall be discussed with the Union and affected employees by February 1995. Very truly yours, Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 72 of 78 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ------------------------ LABOR/MANAGEMENT MEETINGS Dear Mr. Anzinger: Both the Company and Union recognize the value in formally convening to discuss issues that affect departmental policies, procedures, and collective bargaining provisions. As such, during the negotiations of the Plant agreement, which expires in February 1994, the Company and Union agreed to continue holding departmental labor/management meetings as a forum to clarify, address interests, and problem solve solutions that mutually benefit all employees. Attendees shall include stewards, team leaders, and other employees reporting to that department or location, and meetings shall be held as needed, but not less than every sixty (60) days. The Company recognizes the value of participation and input from all its employees and the Union's facilitation of this process is critical to our mutual success. Very truly yours, Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local 396 ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 73 of 78 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ------------------------ VACATION/SICK LEAVE BONUS Dear Mr. Anzinger: During negotiations of the Plant agreement, which expires in February 1994, both the Company and Union recognize that our ability to succeed in a competitive environment is the result of effectively utilizing material and human resources. As such, in an effort to minimize increases in manpower resulting from scheduled time off, the Company and Union agreed to explore an additional option for consideration by employee's eligible for the vacation and sick leave bonus. Issues relative to a buy-out in the form of Company stock placed in the employee's 401K account, or cash, shall be discussed and addressed, including the possible tax ramifications. Very truly yours, Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local 396 ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 74 of 78 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ------------------------ ORGANIZATION STUDY Dear Mr. Anzinger: In May of 1993, the Board of Directors provided the necessary approval for the Company to begin on an Organization Study. This study has provided us with an opportunity to take a fresh look at Nevada Power Company, assess the way our work is organized to provide faster, more efficient service to our customers, and evaluate the way we communicate with each other to resolve problems more efficiently. During the negotiations of the Plant agreement, which expires in February 1994, the Company and Union agreed that as the Company streamlines work processes, there will be occasions which will require the Company and Union to reconvene to discuss issues of flexibility, changes in technology, and maximizing resources. Both parties recognize that changes promoting efficiencies in the work place benefit all employees, and the Company and Union will continue to promote and support ideas that meet those interests. Very truly yours, Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local 396 ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 75 of 78 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ------------------------ WORK/FAMILY ISSUES Dear Mr. Anzinger: During the negotiations of the Plant agreement, which expires in February 1994, the Company and Union recognize that work/family issues will continue to be at the forefront of workplace activities. As such, the Company and Union have agreed to address the issues of job sharing, telecommuting and other alternative work schedules or programs which allow both the Company and employee maximum flexibility without jeopardizing customer service. These issues will be addressed through labor/management meetings and may be initiated on a case by case basis. Very truly yours, Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local 396 ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 76 of 78 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ------------------------ DISTRICTS Dear Mr. Anzinger: During the negotiations of the Plant agreement, which expires in February 1994, the Company and Union agreed to reconvene and further discuss district issues including the Developer Contracts Administration program, underground inspection, clerk dispatcher/planner schedule redundancies, in an effort to promote operational efficiencies by evaluating job responsibilities of both bargaining unit and non-bargaining unit positions. In an effort to allow the districts sufficient time to become operational, the Company and Union will meet to discuss these issues by September 1, 1994. Very truly yours, Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local 396 ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 77 of 78 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ------------------------ NON-BID CLASSIFICATIONS Dear Mr. Anzinger: During the negotiations of the Plant agreement, which expires in February 1994, the Company and Union created a non-bid selection process for specific classifications listed in Article 7.5. Employees who are interested in these positions must complete a curriculum that pre-qualifies them for consideration. The Union and Company have agreed that the development and coordination of this curriculum will be accomplished through labor/management meetings, and that the information must be available and communicated to employees by August 1, 1994. The non-bid selection process for each classification will be effective on the date that an employee has completed the pre-qualifying curriculum for that classification. Very truly yours, Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local 396 ____________ ________ _______________ _______ Initials indicating approval: JA (Union) Date GBW (Company) Date
Page 78 of 78 EX-10.R 27 0027.txt CLERICAL COLLECTIVE BARGAINING AGREEMENT Exhibit 10(R) Clerical Agreement Table of Contents
Article Page Articles Preface.................................................................................. 3 Article No. 1: Introduction/Continuity of Service/Non-Discrimination................... 3 Article No. 2: Union Security.......................................................... 5 Article No. 3: Functions of Management................................................. 5 Article No. 4: Union Activity.......................................................... 6 Article No. 5: Status of Employees..................................................... 6 Article No. 6: Working Hours and Rates of Pay.......................................... 12 Article No. 7: Seniority and Promotions................................................ 19 Article No. 8: Grievance Procedure..................................................... 22 Article No. 9: Working Safety Committee................................................ 25 Article No. 10: Inclement Weather Practice.............................................. 26 Article No. 11: Holidays................................................................ 27 Article No. 12: Vacations............................................................... 29 Article No. 13: Sick Leave.............................................................. 32 Article No. 14: Employee Benefit Plans.................................................. 34 Article No. 15: Leaves of Absence....................................................... 53 Article No. 16: General Provisions...................................................... 56 Article No. 17: Term of Agreement....................................................... 58
Page #1 Exhibits Exhibit I: Classification Descriptions.................................. 60 Exhibit II: Wage Rates - Tier 1......................................... 63 Exhibit II-A: Wage Rates - Tier 2....................................... 68 Exhibit III: Check Off Authorization.................................... 70 Exhibit IV: Sick Leave Agreement........................................ 71 Exhibit V: Temporary Layoff Provisions.................................. 72 Letters of understanding Article 14.4............................................................. 75 Discipline Relative to Tardiness and Attendance.......................... 77 Injuries Relative to Dog Bites........................................... 78 Vacation/Sick Leave Bonus................................................ 79 Organization Study....................................................... 80 Labor/Management Meetings................................................ 81 Work/Family Issues....................................................... 82 Memorandum of Settlement................................................. 83 Flex Scheduling.......................................................... 84 Telephone Service Operations............................................. 86 Performance Evaluations Regarding Seniority.............................. 87 Alternate Field, Field Service, Field Service Investigator............... 88 1994 - Thirty Year Employees Lost Vacation............................... 89 Incentive Programs....................................................... 90 No Layoffs............................................................... 91 Reclassification of Retail Operations Representatives.................... 92 Index Index.................................................................... 93 page #2 Clerical AGREEMENT This agreement, made and entered into as of February 1, 1998, by and between Nevada Power Company, a corporation, hereinafter referred to as the Company, and Local Union No. 396 of the International Brotherhood of Electrical Workers, an affiliate of the A.F.L./C.I.O., hereinafter referred to as the Union. WITNESSETH Whereas, for the purpose of facilitating the peaceful adjustments of differences that may arise from time to time between the parties hereto, and to promote harmony and efficiency to the end that the Company, the Union and the general public may mutually benefit. Now therefore, in consideration of the provisions, covenants and conditions herein contained, the parties hereto agree as follows, to-wit: Article No. 1 Introduction/Continuity of Service/Non-Discrimination 1.1 INTRODUCTION: The Company, in Clark and Nye counties, in the state of Nevada, a public utility engaged in the service of generating, transmitting and distributing electric power and energy, hereby recognizes Local Union No. 396 of the International Brotherhood of Electrical Workers, A.F.L./C.I.O., as the exclusive bargaining agent for its employees who are employed in Customer Service, Energy Services, Major Customer Services (LGS Billing), Field Service, Meter Shop, Districts, Material/Warehousing, Reprographic Services and Mail Room/Receiving Departments excluding all supervisory, confidential and professional employees within the meaning of the National Labor Relations Act, such covered employees more specifically defined in Exhibit I (CLASSIFICATION DESCRIPTIONS), for the purpose of collective bargaining with respect to rates of pay, wages, hours of employment and other conditions of employment which may be subject to collective bargaining. 1.2 CONTINUITY OF SERVICE: It is mutually recognized that the interest of the Company, the Union and the welfare of the general public, requires the continuous rendering of service by the Company, and the parties agree that recognition of such obligations of continuous service is imposed upon both the Company and its employees. Page #3 The Company, to facilitate the continuous performance of such service, agrees to meet with the Business Manager of the Union or his designated representative in reference to any matter within the scope of the Agreement, and agrees that it will cooperate with the Union in its efforts to promote harmony and efficiency among all of the employees of the Company. The Union agrees that the employees covered by this Agreement, will not be called upon or permitted to cease or abstain from the continuous performance of the duties pertaining to the positions held by them with the Company. The Company agrees to do nothing to provoke interruption of or to prevent such continuity of performance as required in the normal and usual operations of the Company's property. It is mutually agreed that any difference that may arise between the above parties shall be settled in the manner hereinafter provided. The Union agrees that the employees covered by this agreement will individually and collectively perform loyal and efficient work and service and that they will cooperate in promoting and advancing the welfare of the Company and the protection of its service to the public at all times. The Union agrees that there will be no strikes, stoppages of work or slowdowns of the Company's operations during the term of this Agreement, and the Company agrees that there will be no lockouts during the term of this Agreement. 1.3 NON-DISCRIMINATION: Neither the Company nor the Union will discriminate against any employee in the application of the terms of this agreement because of race, religion, sex, age, color, national origin, veteran status, disability or any other legally protected status. It is understood that job titles used in this agreement which indicate the male gender are not intended to restrict classifications to employees of the male gender. 1.4 LAWS: It is understood and agreed that if mandatory laws or government rules or regulations applicable to or in conflict with any of the provisions of this Agreement become effective and binding upon the parties, such conflicting provisions of this Agreement shall be subject to modification as required and the parties shall meet and confer to determine mutually agreeable language to conform to the laws, government rules and/or regulations. If laws, government rules and/or regulations hereafter enacted require changes in the structure and/or services provided by the Company, then the Company and Union will, upon mutual consent, reopen negotiations concerning the terms of this Agreement that are directly affected by the changes. 1.5 AMENDMENT: This Agreement shall be subject to amendment at any time by mutual consent of the parties. Such amendment must be written, state the effective date of the amendment, and be executed in the same manner as this Agreement. Page #4 ARTICLE NO. 2 Union Security 2.1 UNION DUES: The Company shall deduct money from Union employees' wages and pay it to the proper officers of the Union, provided the employee who is a member of the Union individually and voluntarily authorized such deduction to be made. The form of the check-off authorization is attached to this Agreement as Exhibit III (CHECK OFF AUTHORIZATION). The Union shall hold the Company free and harmless from any claims or damages from any party whatsoever for making deductions and shall indemnify the Company against any and all claims or damages which may originate from the dues check-off process. 2.2 NEW EMPLOYEES: The Company agrees to notify the Union of the name and address of new employees within thirty (30) days of their date of hire. ARTICLE NO. 3 Exclusive Functions of Management 3.1 BUSINESS MANAGEMENT: The supervision and control of all operations and the direction of all working forces, including the right to hire, to suspend or discharge for proper cause, to transfer employees, to relieve employees from duty because of lack of work and for other legitimate reasons, is vested exclusively in the Company. 3.2 DISCIPLINE: The Company retains the right to exercise discipline in the interest of good service and the proper conduct of its business, provided an employee who has been laid off, discharged, or disciplined shall be advised of the reason or reasons for such action and shall be allowed suitable representation, if so desired, at the time such reasons are provided. Furthermore, should the employee or the Union feel that the terms or conditions of this Agreement have been violated, either shall be entitled to grieve such action in accordance with the provisions set forth in Article 8 (GRIEVANCE PROCEDURE) of the Agreement. Page #5 ARTICLE NO. 4 Union Activity 4.1 UNION BUSINESS: An employee who requests time off for Union activities, in addition to regular time off, shall be granted such request if such time off will not inconvenience the operations of the Company or increase its operating expenses; provided further, that such employee shall receive no compensation from the Company for such time off. 4.2 BULLETIN BOARDS: The Company agrees to permit the Union to use reasonable space for the purpose of posting officially signed Union bulletins upon the bulletin boards which are furnished by the Company. 4.3 UNION/STEWARD BUSINESS: The Union steward shall, upon request to the supervisor, be allowed reasonable time during regular working hours, without loss of pay, to attend to Union matters on the job, provided such time is not used for solicitation of membership or collection of dues, and does not interfere with regular work schedules. 4.4 CONTRACTING WORK: In case the Company should contract any type of work customarily performed by bargaining unit employees, the Company shall, before awarding such contract, advise the contractor that the work is to be done under not less than the terms and conditions pertaining to hours and wages set forth in this Agreement. Upon award of such contract, the Company shall notify the Union of such contractor and the nature of the work being performed. ARTICLE NO. 5 Status Of Employees 5.1 STATUS DESIGNATION: Employees shall be designated as part-time, \ temporary, probationary, or regular. PART-TIME: A part-time employee is one who is hired for a job that is of indefinite duration and whose regular work schedule is not more than thirty (30) hours per week. The number of part-time employees shall not exceed the rate of one part-time employee to five regular employees (1:5) within the same classification. A part-time employee shall not displace any regular employee covered under the terms of this agreement and shall be limited to non-field type activities. After working 1,040 straight time hours, a part- time employee shall be eligible for group life and medical insurance (excluding dental and vision), covering the employee only. If a part-time employee is offered and accepts a regular position, an adjusted date of hire, crediting actual time worked, will be calculated. If the part-time employee has worked at least 1,040 straight time hours at the time the regular position is awarded, the employee shall be eligible for all applicable benefits on the effective date of the award. Page #6 The ratio for part-time Meter Readers will be five (5) full-time employees for every one (1) part-time employee. The ratio for part-time Customer Service - Retail Customer Representatives will be five (5) full-time for every one (1) part-time employee. TEMPORARY: A temporary employee is one who is hired to fill a position for which there is temporary authorization. After working 1,040 straight time hours, a temporary employee shall be eligible for group life and medical insurance (excluding dental and vision), covering the employee only. If a temporary employee is offered and accepts a regular position, an adjusted date of hire, crediting actual time worked, will be calculated. If the temporary employee has worked at least 1,040 straight time hours, without cumulative absences of thirty (30) days or more at the time the regular position is awarded, the employee shall be eligible for all applicable benefits on the effective date of the award. If a temporary employee is offered and accepts a regular position that the employee has not previously occupied while at the Company, the employee must complete a probationary period to evaluate work performance. If, however, the employee has previously occupied the position being awarded, the employee shall receive credit toward the probationary period for actual time worked in that position. If an employee works at least 1,040 straight-time hours during a twelve (12) month period in the same temporary position, the position will become authorized and the employee will be offered regular status in that position at completion of that twelve month period. If an leased/agency employee works at least 1,040 straight-time hours during a twelve (12) month period in the same temporary position, the position will become authorized. The selection for the position will be made in accordance with Article 7, Seniority and Promotions. The Company will endeavor to provide the Union with a list of temporary and leased/agency employees and hours worked. PROBATIONARY: A probationary employee is one who is hired to fill an authorized position. After six (6) months of employment, a probationary employee shall be eligible for all benefits in accordance with this agreement. During the probationary period, the employee may be terminated at the discretion of the Company as long as the termination is not discriminatory and is not for the purpose of keeping jobs filled with probationary employees. Probationary employees who have not satisfactorily completed a formal departmental training and appraisal program may, at the discretion of supervision, have their probationary period extended by up to three (3) months. Supervisors shall not extend the probationary period if they do not have a formal training and appraisal program in place or have failed to use those programs. No later than two (2) weeks prior to the completion of the first six (6) months, the supervisor must notify the employee and the Union Business Manager in writing, if the probationary period will be extended. Page #7 In computing the effective date of a change in status from a probationary to regular employee, interruptions in employment, caused by the following circumstances, shall not be credited: . Discharge . Resignation . Absence for more than an accumulative total of thirty (30) days due to: . Lay off . Sickness . Industrial disability . Other causes. If the employee's combined absences, during the probationary period, are for a period greater than the employee's combined actual work time, the employee shall be terminated. The transfer of a probationary employee from one job to another without interruption of work time shall not be considered a break in employment. At the end of the probationary period as defined above, the employee will become a regular employee and will rank in seniority from the original date of hire. REGULAR: A regular employee is one who has completed a probationary period and is in an authorized position. At that time, the employee is eligible for the benefits included in this agreement. 5.2 APPLICATION REFERRAL: The Company recognizes the Union as a valuable source for employment referrals, due to the mutual interest in the profitability of the Company. As such, when additional employees are needed to do work which comes under this agreement, the Company will indicate its requirements, relative to knowledge, skills, and abilities, and will give the Union an equal opportunity to refer applicants for employment. The Company retains the right to evaluate each candidate and make the final hiring decision. 5.3 TEMPORARY LAYOFF PROVISIONS: In recognition of the competitive nature of the utility business, innovative solutions are required when unforeseen challenges present themselves. Accordingly, there may be operational circumstances that would permit the temporary layoff of employees for short-term periods of time, out of line of seniority, on a voluntary basis. These provisions are detailed in Exhibit V (TEMPORARY LAYOFF PROVISIONS) of this agreement. 5.4 LAYOFF PROVISIONS: DEFINITION OF QUALIFIED: For purposes of defining "qualified", as used in ----------------------- this Article, the definition shall be that an employee is qualified to perform any position, in either collective bargaining agreement, which the employee has previously occupied at the Company or any position that is an equal or lower classification which has been identified as being part of the employee's current trade/department progression. The progressions are detailed in a memorandum of understanding that is held by both the Company and the Union. Page #8 NOTIFICATION: If it becomes necessary for the Company to layoff regular ------------ employees due to lack of work, the Company shall give affected employees as much notice as possible; but in no event shall employees receive less than fourteen (14) calendar days notice of layoff. Where temporary, part-time and probationary employees are involved, no notice of layoff is required. SENIORITY: Layoff in all cases due to lack of work will be determined by --------- Company seniority within the classification affected by the layoff. If two (2) or more employees have the same Company seniority date, the following process will be used for breaking the tie: Alphabetically by Last Name ... if last names are the same, then First Name ... if last name and first name are the same, Middle Name; if last name, first name and middle name are the same, month, day of birth, and year will be used. Employees who are to be laid-off will be permitted to displace a less senior person in any classification for which they are qualified. RETURN TO BARGAINING UNIT: A member of the bargaining unit being ------------------------- transferred to a non-represented position shall retain Company seniority for all purposes including layoff, if the employee is returned to the bargaining unit within one (1) year of the initial transfer. FOUR (4) YEAR QUALIFIER: Any MPAT employee of the company who accepts a ----------------------- position in the bargaining unit will establish a new date of seniority for the purpose of future layoffs, except as defined above. This date will reflect the day in which these employees accept such a position and will be effective for four (4) years. If there is a reduction in classifications in the bargaining unit, these employees will use the above mentioned date as their seniority date for the purpose of this reduction or layoff. After four (4) years of service in the bargaining unit, any employee impacted by this language, will be credited with all Company seniority for the purposes of reduction in classification or layoff. RECALL: In the event of a recall, the Company shall provide notification to ------ affected employees by certified mail to their address of record. Such employees must keep the Company informed of the address where they can be reached. Recalled employees must report to work no later than fourteen (14) calendar days from the date the certified letter was mailed. Employees who do not report to work within fourteen (14) days from the date the letter was mailed will be considered a voluntary quit. Employees will only be considered for recall to the classification from which they were laid-off, unless they make a written application within fourteen (14) calendar days from the date of notification of layoff, to human resources, for any other position for which they are qualified. Applications that do not meet this time frame will only be considered after all timely applications have been honored. Employees must submit a written notice to human resources to rescind their application for consideration for previously held positions prior to formal notification of return to work. Any employee who refuses a recall to any requested position will be considered a voluntary quit and will waive all recall rights to any other position. Employees who have displaced a less senior person in any classification shall be given an offer to return to their former jobs if the vacancy is in their former classification. Recall rights shall cease on any layoff in excess of twelve (12) months. Page #9 EMPLOYMENT STATUS: Any regular employee who is laid-off due to lack of work ----------------- has a right to replace any part-time or temporary employee within (5) working days after notification of layoff, provided the regular employee is qualified to perform the duties of the position filled by the temporary employee. If a regular employee is laid-off because of lack of work and is subsequently offered and accepts the first recall for employment within one (1) year after layoff, the employee shall resume the status of regular employee and shall be credited with Company seniority previously accrued. Employees who are recalled in a classification previously held, or for one in which they are qualified, will not be required to serve another probationary period and will be eligible for benefits immediately. However, employees who leave the service of the Company due to voluntary severance in accordance with this Article, or layoff and who are re-hired after one (1) year from the date of layoff or severance shall not be credited with Company seniority at the time of re-employment and shall be required to serve a new probationary period. Upon completion of five (5) years of subsequent service, an adjusted date of hire will be calculated crediting actual time worked with the Company. This date will be used for the purposes of Company seniority and all related benefits. 5.5 SEVERANCE: Full time employees hired on or before November 18, 1998, and who are laid off during the fourth (4th) year of the Agreement will receive the following benefits: ---------------------------------------------------------------- Continuous Service with Severance Benefit Period Nevada Power ---------------------------------------------------------------- 6 months to 5 years 6 months ---------------------------------------------------------------- 6 years to 10 years 9 months ---------------------------------------------------------------- 11 years to 20 years 12 months ---------------------------------------------------------------- 21 years or more 18 months ---------------------------------------------------------------- The employee shall be entitled to receive the same medical and life insurance coverage that the employee had prior to the layoff for the same period as the Severance Benefit Period above. All other employees who are laid off will receive the following severance benefits: ELIGIBILITY: Employees must have completed one (1) year of service to be ----------- eligible for the minimum severance benefit. BENEFIT AMOUNT: Employees will be paid forty (40) hours at their straight -------------- time rate for each year of service up to a maximum of three hundred twenty (320) hours. If eligible employees have completed nine (9) months of service since their most recent anniversary date, they will be considered to have completed an additional year of service for the purpose of calculating this benefit. If an employee exercises the right to displace a less-senior employee who occupies a lower paying classification and is laid-off from that classification within sixty (60) calendar days of this assignment, the severance benefit will be calculated at the rate of the employee's original classification. Page #10 MEDICAL COVERAGE: Employees' current medical coverage, excluding ---------------- dental and vision, will be continued at the applicable employee contribution for three (3) months following the effective date of layoff or severance. EMPLOYMENT STATUS: Employees who accept severance in lieu of bumping, ----------------- waive any recall rights and will be considered a voluntary quit with the payment of the appropriate severance benefit. Employees presented this option must notify human resources of their decision within forty-eight (48) hours of the notification of layoff. Employees who do not have the option of bumping, and accept severance benefits, will retain recall rights for one (1) year from the date of layoff. Employees may agree in writing to waive their bumping rights as well as the appropriate severance benefit, thereby maintaining recall rights to the classification from which they were laid-off for a period of one (1) year. This decision must be made at the time of the initial notification of layoff and, once submitted, is irrevocable. Employees who have accepted severance and are subsequently recalled, will use that recall date for the purposes of calculating any severance benefit in the future. PAYMENT: Any severance payment will be paid within five (5) calendar ------- days of the date of layoff. 5.6 AFFILIATE COMPANY: It shall not be deemed a severance for the ----------------- purposes of this Article if an employee is transferred to an affiliate of the Employer which is bound to this agreement provided that the Employee's new position is covered by the Collective Bargaining Agreement and is the same as the position held before the transfer. EXAMPLE ------- If Customer Service becomes a wholly owned affiliate of Nevada Power Company severance under this article 5.5, represented employees will not receive severance pay; this will not be considered a break in service. Page #11 ARTICLE NO. 6 Working Hours and Rates of Pay 6.1 DEFINITIONS: SHIFT: Hours of work. ------ SCHEDULE: Days and hours of work. --------- WORK DAY: Eight (8) hours in any one (1) day shall constitute the -------- work day; however the Company and Union may enter into agreements which establish alternative work schedules involving work days which have more than eight hours. WORK WEEK: Except as provided for part-time employees, the basic work --------- week shall consist of five (5) consecutive work days, regularly scheduled between the hours of 12:01 am, Monday, and 12:00 midnight, Sunday, provided that no employee shall be assigned, as part of a regular work schedule, to work on Saturday or Sunday, unless such employee voluntarily requests to work such schedule, or is hired or has requested reclassification for such purpose, and provided further, that employees in the Field Service Representative and Service Dispatcher classifications may be required, as part of their regular work schedule, to work on Saturday.. The basic work week of regular day-shift employees shall be from Monday through Friday and reflect a schedule of forty (40) hours of straight-time work. REGULAR DAYS OFF: Days off shall be consecutive, however, they ---------------- may not be within the basic work week. REGULAR DAY-SHIFT EMPLOYEES: Regular day shift employees are those employees who are assigned to shifts which are established on a Monday through Friday schedule and work a shift which begins between the hours of 7:00 am and 11:59 am. When mutually agreed to by the Union and Company, the day shift starting time may be scheduled as early as 6:00 am to take advantage of daylight hours. SHIFT EMPLOYEES: Shift employees are all employees not defined ---------------- as regular day-shift employees. SHIFT DIFFERENTIAL: An incremental increase for working on a ------------------ second or third shift. SHIFT DESIGNATIONS: No shift periods shall start between the hours of ------------------ 12:01 am and 5:59 am, unless mutually agreed to by memorandum of understanding between the Company and the Union. The following designations shall apply: FIRST SHIFT: All eight (8) hour shift periods regularly ------------ scheduled to begin at 6:00 a.m., or thereafter but before 12:00 noon shall be designated as first shifts. Page #12 SECOND SHIFT: All eight (8) hour shift periods regularly ------------ scheduled to begin at 12:00 noon or thereafter but before 8:00 p.m., shall be designated as second shifts. THIRD SHIFT: All eight (8) hour shift periods regularly ------------ scheduled to begin at 8:00 p.m., or thereafter but before 12:01 a.m., shall be designated as third shifts. 6.2 BREAK PERIODS: A fifteen (15) minute relief period shall be provided for all employees not working seven day coverage during each one-half (1/2) of the shift. Work conditions permitting, each break period shall be given as near the middle of each one-half (1/2) of the shift as possible. 6.3 LUNCH PERIODS: With the exception of part-time employees, supervisors will establish a meal period, without pay, of either one-half (1/2) or one (1) hour. 6.4 OVERTIME: In computing overtime, intermission taken out for meals served other than on the job shall be deducted, and any holiday or vacation paid in that pay period will be considered as time worked. TIME AND A HALF: Except as otherwise provided in this Article, the --------------- following situations shall require payment at one and one-half (1 1/2) times the regular established wage rate: . Time worked in excess of eight (8) hours per day. . Time worked in excess of any five (5) scheduled work days. . Work scheduled in the three (3) hours immediately preceding the normal starting time. . Employees who are scheduled to work on an observed holiday. DOUBLE TIME: Except as otherwise provided in this Article, the ----------- following situations shall require payment at two (2) times the regular established wage rate: . Employees who are scheduled to work within the first five (5) hours of the eight (8) hour period immediately preceding the normal starting time regardless of the day of the week. . Employees who are called -out for work on an observed holiday. . Employees who work on the second day of a two days off period, with an overtime minimum as provided in Article 6.8 (CALL-OUTS). . Employees who are called out for overtime work within the eight (8) hour period immediately preceding their normal starting time, regardless of the day of the week with an overtime minimum as provided in Article 6.8 (CALL-OUTS). . Employees called out while on vacation per the provision of Article 12.10 (CALL-OUT WHILE ON VACATION). Page #13 6.5 OVERTIME EQUALIZATION: The Company will endeavor to distribute overtime work as evenly as possible among those employees qualified and desiring such work. Each department will create policies and procedures for overtime equalization through labor/management meetings. For purposes of distributing overtime, the Company will maintain and post overtime lists in each major sub-department office indicating time offered, time worked and other information for inspection by the employees and the Union. 6.6 BI-LINGUAL REPRESENTATIVES: Employees in Customer Service who are designated as bi-lingual representatives shall be paid a thirty dollar ($30) bonus on a bi-weekly basis. This bonus will be paid when the employee uses sick leave or vacation, but will not be paid when the employee is on disability or using Employers Insurance Company of Nevada benefits. 6.7 PAY PROVISIONS: PAY DAYS: Pay days shall be at biweekly intervals. --------- WAGES: The schedule of job classifications and wage rates, as ----- mutually agreed to, are made a part of this agreement, and are marked "Exhibits I, II and II-A respectively." Wages shall be paid at biweekly intervals on the Thursday following the close of the two week pay period provided that if the regular pay day falls on a holiday, payment shall be made on the preceding work day. SPECIAL PAY REQUESTS: The Company recognizes there will be -------------------- circumstances such as weeks of vacation and vacation in association with holidays which will create special requests of the payroll department. Unless the situation is an emergency, all special checks will be limited to individuals who are absent for at least the Wednesday through Friday of a pay week. Exceptions to this practice will require written approval from the department manager and must be presented to payroll no later than forty-eight (48) hours in advance of the requested time for payment. RECOVERING OVERPAYMENTS: Deductions from an employee's wages, to ----------------------- recover overpayments made in error, will not be made unless the employee is notified prior to the end of the month following the month in which the check in question was delivered to the employee. A schedule for re-payment will be agreed upon by the Company and the employee. Page #14 6.8 CALL-OUTS: TWO HOUR MINIMUM: Employees called out for overtime duty shall ---------------- receive at least two (2) hours pay. Employees called out who work into their regular shift shall be paid the appropriate overtime premium for at least two (2) hours and straight time for the remainder of the shift. The two (2) hour call-out minimum applies but does not change the normal starting time. ------------------------------------------------------- EXAMPLE ------- An employee who is called out one (1) hour before the shift would be paid two (2) hours of double time and seven hours of straight time. ------------------------------------------------------- 6.9 REST TIME: Employees who are required to work overtime within the eight (8) hour period immediately preceding their scheduled starting time on a regular work day, shall be entitled to time off with straight time pay equal to time worked during this time frame. This is not applicable to a call out or scheduled overtime of three (3) hours or less immediately proceeding the employee's normal starting time. If an employee is entitled to rest time off, such time off would normally begin at the start of the regular shift. By mutual agreement between the supervisor and the employee, rest time may be taken during the last part of the regular shift. An employee shall not be required to work during his rest period provided adequate relief is available, however, should an employee be required to work during this period, he shall receive straight time for all time worked during his rest period in addition to his rest period pay. 6.10 CHANGE IN WORK SCHEDULE: Employees shall be provided at least twenty-four (24) hours notice of any change in work schedule. The notification period begins twenty-four (24) hours prior to the start of the changed work schedule. Employees who do not receive such notice shall be paid at one and one-half (1 1/2) times the employee's base rate for all hours worked outside their normal work schedule until such notice requirements have been satisfied. No notice is required to return employees to their regular work schedule. TRAINING EXCEPTIONS: The Company may for the purposes of training only, change schedules without incurring the premium penalties mention above. The Company will notify all employees as far in advance as possible, but not later than the end of their last scheduled work day in the week prior to such training. This notification will detail the nature, location and duration of the training. If such notification is not given, and an employee is called at home and informed of a change in schedule for training purposes, this employee will be paid time and one-half (1 1/2) for the first two (2) days of the training for all hours worked outside of their normal schedule. Page #15 TRAVEL TIME FOR OUT OF TOWN TRAINING: Any employee who is required to travel out of town on a normal day off or after normal working hours for the purpose of Company training, will be paid actual driving time to and from the training site. When flying to such training, employees will be paid one (1) hour from their home to the airport, actual flying time to the destination, and one (1) hour from the airport to the hotel. All compensation for such travel time will be at a straight time rate and will not be considered time worked. 6.11 SHIFT DIFFERENTIAL: Fixed shift employees will be paid their shift differential for all hours worked on that day. For example, a second shift employee who works ten (10) hours on a particular day would be paid ten (10) hours of second shift differential. FIRST SHIFT: No shift differential shall be paid for the first ------------ shift. SECOND SHIFT: A differential shall be paid for the second shift ------------ according to the following schedule: February 1, 1998 .................... $1.20 per hour February 1, 1999 .................... $1.25 per hour February 1, 2000 .................... $1.30 per hour February 1, 2001 .................... $1.35 per hour THIRD SHIFT: A differential shall be paid for the third shift ----------- according to the following schedule: February 1, 1998 .................... $1.35 per hour February 1, 1999 .................... $1.40 per hour February 1, 2000 .................... $1.45 per hour February 1, 2001 .................... $1.50 per hour The appropriate overtime rate will be applied to the shift differential. Shift differentials shall be payable only for hours actually worked and shall not be payable for non-work time such as holidays, sick leave, vacation and rest time. 6.12 MEALS: MEAL TIMES: When working overtime before or after the regular day, or ---------- shift, or when called out for overtime work, and such work is continuous for two (2) hours or more, the Company shall provide all meals unless employees are released before the meal time. The normal unpaid meal times shall be: . one and one-half (1 1/2) hours before the employee's normal starting time, . eight (8) hours before the employee's normal starting time, . four (4) hours after the normal starting time, and . two (2) hours after the normal quitting time, Meals will be provided as close to these times as circumstances of the work will permit. Employees may elect to complete their assignment and take their meal period upon completion of their task. This meal period would be unpaid time unless directed by supervision to work through the meal period and such work continues more than one (1) hour from the stated meal time. This paid meal period will be limited to one-half (1/2) hour at the appropriate rate of pay. Page #16 For purposes of this Article, no meal allowances will be provided for any scheduled overtime work on an employee's usual days off when the Company has given advance notice more than twelve (12) hours prior to the start of scheduled overtime and prior to the end of the last shift. MEAL RATES: When employees are released on or after a normal meal ---------- period, or periods as outlined above, and do not elect to eat a Company provided meal, they shall be given a meal allowance of $9.00. These allowances will be paid through the payroll system in the employee's next paycheck. The meal allowance shall be increased to: . nine dollars and twenty-five cents ($9.25) effective February 1, 1999 . nine dollars and fifty cents ($9.50) effective February 1, 2000 . nine dollars and seventy-five cents ($9.75) effective February 1, 2001. ACTUAL COST: If an employee elects to consume a meal in lieu of the ----------- allowance, the cost of any meal shall not exceed two (2) times the allowance as provided for above. If the cost of the meal exceeds this amount, the employee will be notified of the amount of the difference and the employee must reimburse the amount within thirty (30) calendar days after receipt of such notification. These limitations may be waived by the department's Vice President if such limitations place an undue hardship on the employee. 6.13 VEHICLE USAGE: No employee shall be required to operate a personal vehicle in the course of employment as a condition of employment. Employees shall be required to obtain a Nevada driver's license whenever operation of a Company provided vehicle is a requirement of the job. Employee's who are authorized to use personal vehicles in the course of their employment shall be compensated for use of the vehicle at a rate equal to the Internal Revenue Service (IRS) maximum mileage expense. - -------------------------------------------------------------------------------- Example 1: If employees are assigned to work at an office other than their normal base reporting point, after they have already reported for work at their normal base reporting point, and no Company vehicle is available, they shall be compensated for use of their vehicles for the actual miles traveled from office-to-office as designated on the chart attached at the rate equal to the Internal Revenue Service (IRS) maximum mileage expense. If they return home directly from that office, they shall not be compensated for the miles traveled from the office to their home. Example 2: If employees report for work at an office other than their normal base reporting point directly from home, they shall not be compensated for the miles traveled from their home to the office nor from the office to their home. Only those miles traveled from are office-to-office compensable. - -------------------------------------------------------------------------------- Page #17 Any employee who is authorized the use of a private vehicle during the course of his or her employment shall be provided liability protection under the terms of the public liability and property damage insurance policy maintained by the Company as if the employee were operating a Company-owned vehicle except that if the laws of the State of Nevada establish that the personal insurance policy of the employee shall be the primary insurance, then such consideration shall be first applied. In the event of an accident involving an uninsured motorist where damages to the employee's private vehicle are not recoverable from the responsible party, then costs of repairing such damage shall be reimbursed by the Company. Mileage Chart: CLK DI HCUST HSVC IND LGHLN NLV PRSN RG RYAN SPRNG SNRIS Clark 0 5 7 5 13 13 14 64 19 14 6 Desert Inn 5 0 14 16 6 9 6 59 14 9 4 Hend Cust 7 14 0 2 14 22 22 71 23 20 13 Hend SVC 5 16 2 0 12 12 20 69 21 18 11 Indust Rd 13 6 14 12 0 10 4 54 9 6 7 Laughlin 0 107 NLV 13 9 5 20 10 0 10 51 6 11 9 Pearson 14 6 22 29 4 107 10 0 58 13 3 12 RG Plant 64 59 71 69 54 51 58 0 45 56 58 Ryan SVC 19 14 23 21 9 6 13 45 0 17 13 SV SVC 14 9 20 18 6 11 3 58 17 0 13 Sunrise 6 4 13 11 7 9 12 58 13 13 0 6.14 REQUIRED NOTICE: The Company will provide two (2) days' notice when an employee is assigned to work in an office other than the employee's base reporting point. If the Company does not provide two (2) days notice, the employee shall be paid one (1) hour at time and one-half (1 1/2) for each day until the two (2) day notice period has been satisfied. Page #18 ARTICLE NO. 7 Seniority and Promotions 7.1 SENIORITY: There shall be one (1) type of seniority, namely, Company seniority. Company seniority shall be considered in such matters as retirement, lay off, and whenever provisions of this agreement refer to seniority. In cases where two or more employees have the same Company seniority, the employee with the higher total score on the most recent performance appraisal shall have the greater seniority. 7.2 SENIORITY POSTINGS: The Company shall post a Company seniority list on bulletin boards every six (6) months and shall mail a copy of this list to the Union when the list is posted and after any corrections are made. Any seniority corrections should be made in writing to human resources. 7.3 STAFFING VACANCIES: POSTING REQUIREMENT: When there are no qualified employees who have ------------------- requested an intra-departmental work location change into job vacancies which are expected to last for more than ninety (90) days, the Company shall post such job vacancies or new jobs on bulletin boards for a period of seven (7) calendar days. It shall be the duty of the Company to set forth in said bulletins the nature of the job, its location and duties, reasonable qualifications required and the rate of pay, unless such information is listed in the collective bargaining agreement. At the same time, the Company will furnish the Union a copy of this bulletin. Employees may file their applications in the Human Resources department by Company mail or by U.S. Mail. However, the Company may not consider any application received after the job bid closing date. All job vacancies must be awarded within twenty-one (21) calendar days of the job bid closing date. If the award is not made within twenty-one (21) calendar days, and is not delayed due to vacations or bid hearings, the successful employee will be paid the new rate for the period from the twenty-one (21) days to the date of the award. This does not apply to the time frame of up to three (3) weeks after the award for the purpose of transitioning responsibilities. JOB POSTING SYSTEM: The Company shall publish job posting and ------------------ awarding procedures which, at a minimum, comply with the provisions of this agreement. These procedures will constitute the Company's job posting system. Any bargaining unit employee covered by either the clerical or plant collective bargaining agreements may apply and compete equally for any position within the Company. Employees are disqualified from bidding if their most recent performance appraisal total score is less than 2.5 or if they have a letter of discipline which is less than one (1) year old in their Human Resources personnel file. Page #19 SELECTION CRITERIA: Exclusive of the provisions of Articles 7.9 ------------------ (INTRA-DEPARTMENTAL WORK LOCATION CHANGE), in filling vacancies the following factors shall be considered: . Trade Knowledge . Training . Past Performance with the Company . Ability, skill, adaptability, efficiency . In addition, the Company retains the right to administer equally fair tests, demonstrations, or physical assessments when such tests will assist materially in determining the qualifications of employees. When, in the discretion of the Company, all factors are substantially equal, Company seniority shall govern. HEARING PROCEDURES: In lieu of any grievance procedure concerning ------------------ Article 7.3 (STAFFING VACANCIES), the Company shall offer the three (3) most senior bidders (if applicable) and the employee with the second highest matrix score (if applicable) who are more senior than the successful bidder a hearing before the bid committee with the steward for the department, the senior person or persons and one (1) other Union member. If the number of senior bidders exceeds the parameters mentioned above, a group meeting will be conducted with the remaining senior bidders to explain the decision and answer any relevant questions. The Company shall not assume any penalty for bid hearings that are delayed. NO QUALIFIED BIDDERS: If no applications are received from any -------------------- qualified bargaining unit employees within the posting period, the Company may then fill the job from outside the bargaining units. 7.4 TEMPORARY APPOINTMENTS: Wherever a vacancy occurs in any job classification, the Company may, at its discretion, temporarily fill such vacancy. If practical, any such temporary appointment shall be given to an employee who would be eligible under the provisions of this agreement. 7.5 JOB DESCRIPTIONS: When advances in technology or other changes that materially affect job duties and responsibilities, IBEW and NPC will agree to revise job descriptions as needed. 7.6 MOVING EXPENSES: Should the Company assign an employee, who has not volunteered for reassignment, to an established Company headquarters located more than thirty (30) driving miles by the most reasonable route from his regularly established Company headquarters, and such assignment is not temporary in nature, the Company will pay the employee $1200 for moving expenses, for the purpose of establishing a new primary residence, within a two (2) year period immediately following such assignment. In addition, the Company shall pay the actual costs to relocate a mobile home which is the employee's primary residence. Page #20 7.7 SUB-DEPARTMENTS: When employees are awarded bids in the sub-department in which they are working, in accordance with Article 7.3 (STAFFING VACANCIES) of this agreement, their rate of pay for the awarded job shall be the rate established for the classification as listed in the appropriate agreement. If the awarded job has more than one rate, such rates being based on time spent in classification, the employees shall be assigned the lowest rate in the classification which will provide an increase to the employees. Employees thus assigned a rate step above the starting rate will not advance to a higher step until they have served the time indicated by the assigned step. Should no rate in the classification provide an increase, the employee shall be assigned the "there-after" rate of the new classification. EXAMPLE ------- A Fleet Utility Technician being paid $16.00 per hour, enters an apprentice program which has four (4) annual step rates of $14.50, $15.50, $16.50, and $17.50. The Fleet Utility Technician will receive the rate of $16.50 and remain at that step for three (3) years before advancing to the next step. For purposes of this Article, "sub-departments" are the Customer Service/Energy Services, Major Customer Services (LGS Billing), Field Service, Meter Shop, Districts, Material/Warehousing, Reprographic Services and Mail Room/Receiving Departments. 7.8 TIME IN CLASSIFICATION PAY: When employees are awarded bids in a different sub-department from which they are working, their rate of pay for the awarded job shall be the rate established for the classification as listed in the appropriate agreement. If an employee has previously occupied the position, the employee shall be given credit for time spent in that position for the purposes of establishing the new rate. Where the awarded job has more than one rate, such rates being based on time spent in classification, employees shall be assigned the starting rate for the new classification unless such rate will result in a lesser rate than their former classification. If assigning the starting rate to employees awarded the job would result in a lesser rate than their last rate, employees shall be granted one year of credit or the amount of their Company seniority, which ever is less, as time spent in the new classification for the purpose of establishing their new rate of pay. 7.9 TRIAL PERIOD: Employees promoted or transferred in accordance with this Article shall be employed on the job to which they were promoted or transferred for a reasonable trial period not to exceed six (6) months. If, following the trial period, they are still unable to perform the job to which they are promoted or transferred, they shall be returned to the former job classification they held or to their former or another job classification of similar requirements and the previous rate of pay, as determined by the Company. Employees who are returned to another classification in accordance with this Article shall not be permitted to bid on another position for six (6) months from the time they are returned. Page #21 7.10 INTRA-DEPARTMENTAL WORK LOCATION CHANGE: Employees desiring to change work locations within the same sub-department and classification shall submit a work location change form to the appropriate department head. Through labor/management meetings, departments shall develop procedures for work location changes. ARTICLE NO. 8 Grievance Procedure 8.1 DEFINITION: A grievance shall be defined as a dispute regarding the interpretation and application of the provisions of this Agreement filed by the Union or by an employee covered by this Agreement alleging a violation of the terms and provisions of this Agreement. However, disputes specifically excluded in other Articles of this Agreement from the Grievance Procedure shall not be construed as within the definition set forth above. 8.2 TIME LIMITATIONS: The Company and the Union recognize the mutual gains process as an effective tool in resolving differences in the work place. Once timely notification of a grievance has been given, the Union and Company may mutually agree to extend the time limitations to ensure that interests are clearly defined, witnesses and all persons involved receive proper notification and are able to attend, evidence is accurate, and remedies are thoroughly explored before moving to the next step. However, it is in the interest of both the Company and the Union to expedite the process and encourage the timely resolution of the issue in order to satisfy established time constraints. The Union and Company, by mutual agreement, may elect to bypass certain steps, due to the nature of the grievance. Except by mutual agreement to extend the time limitations, an arbitrator shall not have the authority to excuse a failure by the Union, the Company or the aggrieved employee to comply with the time limitations set forth, regardless of the reason given for such failure. 8.3 GRIEVANCE PROCESS: NOTIFICATION: When a dispute arises relative to the administration of ------------ the provisions of this agreement, the employee and/or Union steward must complete a mutual gains issue form and submit it to the appropriate supervisor for signature no later than thirty (30) calendar days after the grievance first arises. The time period shall start from the first day the Company can show that the Union or an employee affected by the Company's action knew or should have known of the situation. Page #22 At each step in the process, the Union shall officially sign off on the mutual gains issue and grievance forms, verifying that their interests have been satisfied or to pursue resolution at the next step. STEP ONE (MUTUAL GAINS MEETING - SUPERVISOR): The supervisor shall ------------------------------------------- schedule a meeting with the grievant and steward within seven (7) calendar days of receipt of the mutual gains issue form. The grievant and the supervisor will define interests and work on resolving the issue in a manner satisfying those interests. If the issue is not resolved at step one (1), the mutual gains issue form may be referred by the Union to the next level of supervision within three (3) calendar days of the step one (1) meeting. STEP TWO (MUTUAL GAINS MEETING - LEVEL II SUPERVISION): The next ----------------------------------------------------- level of supervision shall schedule a meeting with the grievant, steward, and supervisor within seven (7) calendar days of receipt of the mutual gains issue form. The grievant and supervision will define interests further and work on resolving the issue at this level. If they are unable to satisfy interests, the Union may request a formal hearing within three (3) calendar days of the step two (2) meeting. STEP THREE (MUTUAL GAINS HEARING): The level II supervisor shall -------------------------------- schedule a hearing with the grievant, steward, supervisor, and official Union and Employee Relation representatives within seven (7) calendar days of receipt of the mutual gains issue form. Witnesses will be designated to testify and related evidence shall be submitted. Those in attendance shall discuss possible remedies, which will be implemented upon final approval by the official Union and Employee Relation representatives. This joint decision shall be final and binding on all parties. If, at the conclusion of step three (3), the two (2) parties are unable to resolve the issue, the grievance shall be reduced to writing on the grievance report form, citing the Article and/or section of this agreement which has been allegedly violated, and the Company shall sign, date, and acknowledge receipt of such grievance. STEP FOUR (UNION/COMPANY MEETING): The Union Business Manager and -------------------------------- Director of Employee Relations & Diversity shall schedule a meeting within ten (10) calendar days of receipt of the grievance report form. The department supervisor and/or manager, and the grievant and/or Union steward may be present at the request of either party. The Company and Union shall review the information provided, conduct further investigation if necessary, and shall render a joint decision which shall be final and binding on all parties. If the grievance is not settled at step four (4), the Company will communicate its position in writing within five (5) calendar days of the step four (4) meeting. This written notification will be sent via certified mail. STEP FIVE (ARBITRATION): Within fifteen (15) calendar days of receipt ---------------------- of management's position, the Union may request arbitration by delivering a written notice to the Employee Relations & Diversity office of its intent to arbitrate the dispute. If the Union does not respond within fifteen (15) calendar days, the issues involved in the grievance will be considered resolved and the matter closed. Within five (5) working days after receipt of the notice of intent to arbitrate, the parties will request the Federal Mediation and Conciliation Service to furnish a list of five (5) arbitrators from the southwest region of the United States from which the arbitrator shall be selected. Such selection shall be accomplished by the Union and the Company striking one (1) name from the list in turn until only one (1) name remains. In recognition of the magnitude of such decisions, arbitration relative to termination grievances shall be expedited whenever possible. Unless mutually agreed to extend the time limitations in writing, these grievances should be arbitrated within six (6) months of the termination date. The arbitrator's decision shall be submitted in writing and shall be final and binding on all parties to this Agreement. Nothing contained in this contract or any part thereof shall affect or apply to the Union in action it may take against the Company for failure to comply with any legally enforceable decision reached through arbitration. The cost of the arbitrator and the cost of necessary expenses required to pay for facilities and recording of the hearing of cases, shall be borne equally by the Company and the Union. The arbitrator shall not have the authority to modify, amend, alter, add to, or subtract from any provision of this Agreement. Page #24 ARTICLE NO. 9 Working Safety Committee 9.1 MUTUAL INTERESTS: The Company and the Union share a mutual interest in fostering safe working conditions for all employees. The Company and Union will endeavor to create programs, procedures and policies which will define Nevada Power Company and IBEW Local No. 396 as leaders in providing and promoting a safe workplace. The Company shall make reasonable provisions for the safety of employees in the performance of their work. The Union shall cooperate in promoting the realization of the responsibility of the individual employee with regard to the prevention of accidents. 9.2 SAFETY COMMITTEE: Each department shall have their own Safety Sub-committee, and at least one (1) representative from each departmental Safety Sub-committee shall serve on the Company's Safety Committee. The selection of the Company's Safety Committee members shall be made jointly by the Chairman of the committee and the Business Manager of the Union. The Chairman of this committee shall be selected by the Company. Each year thirty three and one third percent (33-1/3%) of the committee members shall be replaced in accordance with the selection provision. 9.3 REPORTING DEFICIENCIES: Each member of the Safety Committee shall be expected to actively participate in identifying and reporting to the area safety representative any deficiency or unsafe condition discovered in the assigned work area. Recommendations to improve the operational safety shall be made to the manager, safety services, and to the department supervisor. A copy shall also be presented to the Chairman at the next Safety Committee meeting. 9.4 SAFETY MEETINGS: Safety meetings shall be held at reasonable intervals subject to call by the Chairman. 9.5 SEMI-ANNUAL INSPECTIONS: Every six (6) months the Safety Committee chairman shall appoint at least three (3) members to perform an inspection of the Company facilities. If required, these inspections may occur more often at particular facilities. The Committee Chairman may request additional employees who work at the site to assist in the inspection. The Company will allow the appointees reasonable time, as determined by the Chairman, to perform this inspection. They will prepare a written report including recommendations for corrective actions and forward it to the Committee Chairman and Company President. 9.6 RULE VIOLATIONS: In the event employees violate safety rules published by the Company, the Company reserves the right to administer appropriate disciplinary action. Page #25 9.7 SAFETY INVESTIGATIONS: When a lost time disabling injury occurs as a result of a suspected careless act or unsafe working condition, a safety investigating committee shall be chaired by Safety Services to review the facts and reconcile safety deficiencies and recommend corrective action. A safety committee member designated by the Union and assigned to the work area in which the injury occurred, shall serve on the investigating committee. ARTICLE NO. 10 Inclement Weather Practice 10.1 REGULAR EMPLOYEES: Regular employees who report for work on a scheduled work day and who, because of inclement weather or other similar cause, are unable to work in the field that day, shall receive pay for the full day. However, they may be held pending emergency calls and may be given first-aid, safety or other instruction, or they may be required to perform miscellaneous work in the yard, warehouse, or other sheltered locations. Through labor/management meetings, and in conjunction with safety services, each department shall establish policies which clarify safe work procedures during inclement weather. 10.2 PROBATIONARY AND TEMPORARY EMPLOYEES: These employees shall receive pay for time worked or time held on Company property or two (2) hours, which ever is greater. 10.3 RAIN GEAR: Employees who are required to work in the field will be assigned appropriate rain gear which will be maintained by the employees and replaced by the Company when such gear is worn out in the course of employment and returned to the Company by the employee. 10.4 ENERGIZED PANELS: Employees who are assigned to work in the field will not be required to work on exposed and energized metering panels during rainy weather but may be assigned related duties as necessary. Page #26 ARTICLE NO. 11 Holidays 11.1 ELIGIBLE EMPLOYEES: Regular employees and probationary employees who are eligible for benefits, shall be entitled to holidays off with pay. Employees on leaves of absence or disability leave are not entitled to holiday pay, except if the employee begins leave or returns from leave during the week of a holiday. 11.2 WORKED HOLIDAYS: Shift employees may be permitted to take holidays off which fall on their scheduled work days. Employees scheduled to work on a holiday shall be paid at the rate of time and one-half (1 1/2) for time worked during regular working hours in addition to holiday pay. Employees who are called out to work on a holiday shall be paid at the rate of double time for time worked in addition to holiday pay. Time worked in excess of the regular work day will be paid at the appropriate overtime premium. Except for shift employees, holidays listed below shall not be considered scheduled work days. 11.3 COMPANY HOLIDAYS: When a holiday falls on a Saturday, the preceding Friday shall be observed, and when a holiday falls on a Sunday the following Monday shall be observed. Whenever an employee's regular days off are other than Saturday and Sunday, the first day off within the work week shall be considered as Saturday and the second day off within the work week shall be considered as Sunday for the purpose of this Article. A rotating shift employee working on a schedule which provides four (4) consecutive days off shall observe the day prior to the four (4) days if the holiday falls on the first of the four (4) days, and shall observe the day following the four (4) days if the holiday falls on any of the other three (3) days for the purpose of this Article. Page #27 The following are to be considered holidays: -------------------------------------------------- COMPANY holidays -------------------------------------------------- -------------------------------------------------- 1998 1999 2000 2001 -------------------------------------------------- - ----------------------------------------------------------------------------- New Year's Day Jan 1 Jan 1 Dec 31, 1999 Jan 1 - ----------------------------------------------------------------------------- Martin Luther King's Day Jan 19 Jan 18 Jan 17 Jan 15 - ----------------------------------------------------------------------------- President's Day Feb 16 Feb 15 Feb 21 Feb 19 - ----------------------------------------------------------------------------- Memorial Day (observed) May 25 May 31 May 29 May 28 - ----------------------------------------------------------------------------- Independence Day July 3 July 5 July 4 July 4 - ----------------------------------------------------------------------------- Labor Day Sept 7 Sept 6 Sept 4 Sept 3 - ----------------------------------------------------------------------------- Veteran's Day Nov 11 Nov 11 Nov 10 Nov 12 - ----------------------------------------------------------------------------- Thanksgiving Day Nov 26 Nov 25 Nov 23 Nov 22 - ----------------------------------------------------------------------------- Thanksgiving Friday Nov 27 Nov 26 Nov 24 Nov 23 - ----------------------------------------------------------------------------- Christmas Eve Day Dec 24 Dec 24 Dec22 Dec 24 - ----------------------------------------------------------------------------- Christmas Day Dec 25 Dec 27 Dec 25 Dec 25 - ----------------------------------------------------------------------------- Floating Birthday/Holiday See Article 11.4 - ----------------------------------------------------------------------------- 11.4 FLOATING BIRTHDAY/HOLIDAY: An employee may observe the floating holiday on any work day of the year with mutual agreement by the employee and supervisor. Or, with seven (7) calendar days notice, an employee shall observe the floating holiday on any work day which falls in the same calendar week as the employee's birthday. For the purpose of this Article, the calendar week begins Sunday and ends Saturday. Should an employee be called in or required to work on a previously approved "holiday," the employee shall be paid the applicable overtime rate, except if both the employee and supervisor mutually agree to change the observance of the holiday. Employees who request to use their floating holiday for the purpose of recognizing a religious observance, will be accommodated whenever possible. Any difficulties in this regard should be forwarded to the Employee Relations area of Human Resources. Page #28 11.5 BANKED HOLIDAYS: If eligible employees are required to work on any day observed as a holiday and are authorized to work for the straight time hourly rate of pay, then an equal number of hours will be allocated to their banked holiday account. With written consent of the Company, employees may carry over up to sixteen (16) hours of banked holidays to the next year. 11.6 PART-TIME, TEMPORARY AND BENEFIT INELIGIBLE EMPLOYEES: Part-time, temporary, and probationary employees who are not eligible for benefits will not receive pay for holidays not worked but shall be paid the appropriate overtime premium for all time worked on holidays. 11.7 SICK LEAVE IN CONJUNCTION WITH A HOLIDAY: An employee who does not report for work either the day before and/or the day after a paid holiday, and who has not been excused by his or her supervisor for either the day before and/or the day after a paid holiday shall receive no pay for the holiday. The Company may require satisfactory evidence of an employee's illness or injury before holiday pay will be granted. If the Company requires medical evidence, the Company must inform the employee of the requirement to provide evidence no later than two (2) hours after the employee's regular starting time on the day of the absence. If required and the employee does not comply with this request, the employee will not be paid for the holiday or the day of absence, and may be subject to disciplinary action. 11.8 ALTERNATIVE SCHEDULES: As a result of the implementation of alternative work schedules, any issues associated with the provisions of Article 11 will be resolved by memorandum of understanding between the Company and Union. ARTICLE NO. 12 Vacations 12.1 CONSIDERATIONS: Vacation with pay may be granted at any time during the calendar year in which it is earned, subject to the following considerations. . Desirability of scheduling in such a manner as will cause a minimum of interference with service to the Company's customers, and; . The selection of all vacation periods based on the employee's Company seniority, provided the selection is made no later than March 31st. 12.2 FIRST TWO (2) CALENDAR YEARS OF EMPLOYMENT: Probationary and regular employees shall earn vacation during the first two (2) calendar years of their employment according to the month in which they are hired. Probationary and regular employees may request and be granted vacation anytime during this period. Page #29 Month Hired Vacation Hours ----------- -------------- January...................................................80 hours February..................................................77 hours March.....................................................73 hours April.....................................................70 hours May.......................................................67 hours June......................................................63 hours July......................................................60 hours August....................................................57 hours September.................................................53 hours October...................................................50 hours November..................................................47 hours December..................................................43 hours 12.3 ACCRUED VACATION: Regular employees will be granted vacations, with straight time pay, according to the following schedule: After Continuous Service of Vacation Hours --------------------------- -------------- 2 years thru 5 years......................................80 hours 6 years thru 12 years....................................120 hours 13 years thru 20 years...................................160 hours 21 years thru 30 years...................................200 hours 31 years and above.......................................240 hours 12.4 VACATION ADJUSTMENTS: An employee's vacation accrual shall be adjusted for all periods of leave of absence including leaves for illness or injury as defined elsewhere in this agreement by reducing the number of vacation hours accrued in direct proportion to the number of hours of leave within the employee's anniversary year. Such reductions shall be applied to any accrued and unused vacation available in the calendar year the adjustment is made, or when such adjustment exceeds the employee's available vacation, the excess shall be applied against the employee's next vacation accrual or the employee's final paycheck, whichever occurs first. It is understood that no adjustment to vacation accrual will be made for sick leave or during the first sixty (60) calendar days of any disability leave. 12.5 VACATION BONUS: In addition to the vacation accrued in accordance with the above schedule, any employee who completes ten (10) years continuous service and each five (5) years of continuous service thereafter, shall be granted a vacation bonus of forty (40) hours in the year such term of employment is attained. The vacation bonus will accrue, and may be taken subject to the provisions of this Article. Page #30 12.6 UNUSED VACATION: All unused or carried over vacation time accumulated in the year of termination after an employee's first anniversary date, up to and including the employee's last day worked, shall be paid at termination of employment, at the employee's current base rate. This does not apply to the vacation bonus when the employee has not completed the minimum service specified. It is understood that employees may not carry vacation time over to the following year without the written consent of the Company. A regular employee who has been laid off for lack of work and is recalled within one (1) year, who has in excess of one (1) year Company seniority, shall accrue vacation in accordance with Article 12.4 (VACATION ADJUSTMENTS). 12.7 DEPARTMENTAL POLICIES: Each department will develop standards and procedures for scheduling vacations which, at a minimum comply with Article 12.1 (CONSIDERATIONS). 12.8 HOLIDAY WHILE ON VACATION: If a holiday occurs on a work day during an employee's vacation, it shall not be counted as hours of vacation. The employee shall receive straight time pay for the holiday. 12.9 HOSPITALIZED WHILE ON VACATION: Employees on vacation who become hospitalized for at least one day, shall not be required to use vacation time during the period of incapacitation. Employees who are capable of completing any light duty must choose to remain on vacation or report for light duty. 12.10 CALL-OUT WHILE ON VACATION: An employee shall not be expected to work on his regularly scheduled days off immediately preceding or following pre-scheduled vacation. However, if an employee is called out and accepts such an assignment on the regularly scheduled days off immediately preceding or following pre-scheduled vacation, the employee shall receive the appropriate overtime rate for this work. An employee called out during scheduled vacation will be paid double time for all hours worked and the employee may reschedule the unused portion of his vacation hours in accordance with Article 12.1 (CONSIDERATIONS) above, if the call-out was for work during the employee's normal work hours. Additionally, if the call-out creates rest time, the employee may reschedule vacation equal to the rest time earned from this assignment. Page #31 ARTICLE NO. 13 Sick Leave 13.1 ELIGIBILITY: A regular employee and a temporary employee with more than 1040 hours shall be entitled to accumulate sick leave with pay at the rate of eight (8) hours of sick leave for each month worked. 13.2 NOTIFICATION AND VALIDATION: The Company may require satisfactory evidence of an employee's illness or disability before sick leave will be granted. If an employee abuses the sick leave provisions of this Agreement by misrepresentation or falsification, the employee shall restore to the Company all sick leave payments received as a result of such abuse. An employee must notify their supervisor or a member of management, or see that their supervisor is notified, as soon as it is apparent that the employee will be unable to report for work. The employee must provide this notification before the beginning of the normal work day. The employee should notify the supervisor as far in advance as possible of the expected date of return. Lack of notification without a reasonable explanation will result in denial of sick pay benefits. 13.3 EXCLUSIONS AND EXCEPTIONS. Employees shall not be entitled to sick leave while on vacations (except as provided in Article 12.9 [HOSPITALIZED WHILE ON VACATION]), while temporarily laid off by the Company, during the period of notice of severance of employment, upon severance of employment, or while receiving disability payments or industrial compensation. Exhibit IV (SICK LEAVE AGREEMENT) of this Agreement establishes other rules and interpretations for the administration of these sick leave provisions. 13.4 SICK LEAVE BONUS: Employees who are eligible for sick leave in accordance with Article 13.1 (ELIGIBILITY), who use no more than two hundred twenty (220) hours of sick leave each five (5) years, shall be granted a bonus of five (5) days vacation in addition to that granted under the provisions of Article 12.3 (ACCRUED VACATION), each five (5) years based on the following considerations: . On January 1, 1987, and January 1, of each fifth year thereafter, the sick leave records of those employees with hire dates prior to August 1, 1981, will be audited. Those employees who have used no more than two hundred twenty (220) hours of sick leave during the five (5) year period immediately preceding the audit will be granted five (5) days vacation to be taken within the twelve (12) month period immediately following the audit date and in accordance with the provisions of Article 12 (VACATIONS). Page #32 . For employees hired after July 31, 1981, their sick leave records will be audited as of the first day following the completion of five (5) years and six (6) months of service and each fifth year following the initial audit. Those employees who have used no more than two hundred twenty (220) hours of sick leave during the five (5) year period immediately preceding the audit will be granted five (5) days vacation to be taken within the next twelve (12) month period immediately following the audit in accordance with Article 12 (VACATIONS). . All unused vacation accumulated under the provisions of this sick leave bonus plan shall be paid at termination of employment as provided under Article 12.6 (UNUSED VACATION) except that no pro rata of vacation entitlements will be allowed for time periods of less than five (5) years. 13.5 LIGHT DUTY: Injured employees who are temporarily unable to perform the functions of their own jobs but are capable of performing light duty work shall be released for light duty assignments either within their own department or another area of the Company where work is available. In the interest of effective case management, the light duty work program shall be administered by the human resources department. Employees working in light duty assignments shall be eligible for a percentage of their base pay according to the following schedule: . 100% of base for the first fourteen (14) calendar days . 95% of base for the second fourteen (14) calendar days . 90% of base for the third fourteen (14) calendar days . 85% of base thereafter Employees who are injured on the job and are unable to perform their regular duties indefinitely due to partial disability, may be subject to the provisions outlined in Article 14.3 (JOB INCURRED INJURY/PARTIALLY DISABLED EMPLOYEES). 13.6 RE-OPENER: The Company and Union may reopen the issue of salary protection relative to sick leave and address common interests at a future date. The request to discuss these issues will be made in accordance with the provisions of Article 17 (TERM OF AGREEMENT). Page #33 ARTICLE NO. 14 Employee Benefit Plans Tier One Employees Hired On or Before November 18, 1998 14.1 GENERAL: The Nevada Power Company Self-Funded Medical Benefit Plan shall be incorporated, by reference, into the Agreement for purposes of establishing the levels of benefits for each of these plan features: . loss of time . medical expense . vision expense . dental expense . life insurance and accidental death and dismemberment. The Company agrees to maintain all of these benefits for eligible employees and will provide medical expense, vision expense, and dental expense coverage for eligible dependents for the life of this Agreement. The Company reserves the right to select any insurance carrier or to self insure for all or any portion of these benefits. PRESCRIPTIVE DRUG BENEFIT: The Company will provide to all eligible ------------------------- employees and eligible dependents a discounted prescription drug service that allows participants to obtain prescription drugs through preferred pharmaceutical outlets. A service fee of ten dollars ($10.00) per trade name prescription or five dollars ($5.00) for generic prescription will be charged by the druggist. No claim forms need to be presented. The prescriptive drug benefit will continue to allow all eligible employees and dependents to obtain up to three (3) months of maintenance prescription drugs by mail. A service fee of $3.00 per prescription ($1.00 for generic) is charged, and claim forms need not be presented for these drugs. TERM LIFE INSURANCE: The Company will continue to provide a ------------------- supplemental life insurance program that allows employees desiring such coverage to purchase term life insurance for their dependents or additional life insurance for themselves at group rates. Such life insurance premiums will be paid for by the employees through payroll deduction. All administrative expenses, exclusive of carrier expense normally absorbed in the rates, will be paid by the Company. Page #34 DENTAL BENEFIT: The Company will continue to provide a dental care -------------- benefit, expanded to include a dental PPO and an orthodontic benefit for all eligible employees and dependents. Coverage includes the following: . Maximum payable per year is $1,000 per person. . Preventative care is covered 100%, with the deductible waived. . All other treatments are covered at the rate of 80/20 and are subject to the dental exclusions noted in the Nevada Power Company Self-Funded Medical Benefit Plan. Covered treatments are also subject to a $25 per person deductible. VISION BENEFIT: A vision care program will continue to be available -------------- for eligible employees and eligible dependents. This plan covers professional services; examinations every twelve (12) months, lenses every twelve (12) months if needed, frames every twelve (12) months if needed, with a deductible amount of twenty-five dollars ($25.00) to be paid by the employee for each covered examination and fitting. The vision care program also provides one pair of prescription safety glasses to employees whose job duties require eye protection in accordance with the Company's established safety standards, once every twelve (12) months, if needed. BENEFIT ELIGIBILITY: Eligible employees are all employees who have ------------------- satisfied the requirements defined in Article 5 (STATUS OF EMPLOYEES) of this agreement. Eligible dependents are those dependents of eligible employees which meet the definitions of dependents as contained in the Nevada Power Company Self-Funded Medical Benefit Plan referenced above. EMPLOYEE CONTRIBUTIONS: Employee contributions are defined below. ---------------------- These rates are the maximum rates which employees would be required to pay. They reflect a ninety/ten (90/10) cost sharing arrangement between the Company and its employees. The rates listed below define a maximum increase of ten percent (10%) from the previous year's contribution. If the actual experience of the medical plan reflects an increase of less than ten percent (10%), the monthly contributions will be reduced to reflect an accurate cost sharing arrangement. If the actual experience of the medical plan reflects an increase of greater than ten percent (10%), the Company will absorb that percentage increase. The Company will communicate the actual monthly contribution no later than December 1st for the following year. The monthly contributions may change on January 1st of each subsequent year. Page #35
-------------------------------------------------------------- MONTHLY CONTRIBUTIONS -------------------------------------------------------------- 1/01/98 thru 1/01/99 1/1/99 thru 1/1/2000 HMO NPC Plan HMO NPC Plan (Option C) (Option A/B) (Option C) (Option A/B) - ------------------------------------------------------------------------------------------------ Employee Only 18.50 28.00 20.00 31.00 - -------------------------------------------------------------- -------------------------------- Employee & Spouse 37.00 59.00 41.00 65.00 - -------------------------------------------------------------- -------------------------------- Employee & Children 34.00 50.50 37.50 55.50 - -------------------------------------------------------------- -------------------------------- Employee, Spouse & Children 57.00 81.50 63.00 89.50 - -------------------------------------------------------------- -------------------------------- Deductible/Co-Insurance Limit None 400/5500 None 400/5500 - -------------------------------------------------------------- --------------------------------
------------------------------ -------------------------------- 1/1/2000 thru 1/1/2001 1/1/2001 thru 1/1/2002 HMO NPC Plan HMO NPC Plan (Option C) (Option A/B) (Option C) (Option A/B) - ------------------------------------------------------------------------------------------------ Employee Only 22.00 34.00 24.00 37.50 - -------------------------------------------------------------- -------------------------------- Employee & Spouse 45.00 71.50 49.50 78.50 - -------------------------------------------------------------- -------------------------------- Employee & Children 41.00 61.00 45.00 67.00 - -------------------------------------------------------------- -------------------------------- Employee, Spouse & Children 69.50 98.50 76.50 108.50 - -------------------------------------------------------------- -------------------------------- Deductible/Co-Insurance Limit None 400/5500 None 400/5500 - -------------------------------------------------------------- --------------------------------
PRE-TAX Account: The Company will continue to provide a pre-tax health care - --------------- contributions account for employees to reduce their taxable income by the amount of their health care contribution. OPTIONS A, B AND C: - ------------------ The Company will continue to permit employees to select between the following health care plan options: Open enrollment period will take place as of August 1, 1998 and every 12 months thereafter. Page #36 Option A: . 80/20 Co-insurance factor . $5500.00 Co-insurance limit . $400.00 Individual deductible . Family deductible (Employee & Spouse; Employee & Children; Employee, Spouse & Children) equal to two (2) times the individual deductible . Hospital deduction - $400.00. Option B: PREFERRED PROVIDER PROGRAM: The Company will continue its Hospital -------------------------- Preferred Provider Organization (HPPO) for voluntary employee participation, which includes a minimum of three hospitals in the Las Vegas, Nevada area. Employees who elect to utilize a PPO hospital will receive reimbursement of hospital expenses at the rate of 90/10 and the hospital deductible will be waived. The Company will continue its Physician Preferred Provider Organization (PPPO) for voluntary employee participation, which includes a minimum of 400 physicians in Southern Nevada. An employee who elects to utilize a PPO physician will pay a service fee in accordance with the PPO medical expense benefit schedule incorporated in the Nevada Power Company Self-Funded Medical Benefit Plan referenced above. No claim forms need to be filed and the PPO physician will bill the Company for the remainder of the office visit charge. HOSPITAL DEDUCTIBLE: The hospital deductible will be waived for those ------------------- employees who reside more than fifty (50) miles from a PPO hospital and use a local hospital which is not a PPO hospital. However, employees who elect to travel to Las Vegas and use a non-PPO hospital will pay the hospital deductible and receive reimbursement for hospital charges at the 80/20 rate. MENTAL HEALTH BENEFIT: The Company will include outpatient mental --------------------- health counseling in its comprehensive medical plans, subject to utilization review. Substance abuse rehabilitation will be limited to $50,000 lifetime maximum. Option C: HEALTH MAINTENANCE ORGANIZATION: The Company will continue to permit ------------------------------- eligible employees to enroll in a Health Maintenance Organization plan (HMO) for the purpose of providing comprehensive medical and prescription drug coverage. Page #37 GENERAL BENEFIT PROVISIONS: -------------------------- . The lifetime maximum medical benefit is $1,000,000. . Mandatory utilization review will be instituted for a variety of in-patient and out-patient services. Employees who fail to receive the appropriate pre-authorization for these services will receive a fifty percent (50%) penalty, in lieu of the stated reimbursement. . All benefits are subject to the deductible and/or co-pay plus percentage, thereby eliminating any first dollar coverage. . The Nevada Power Company Self-Funded Medical Benefit Plan will pay benefits only to the percentage of coverage under its plan. It will not provide reimbursement beyond the stated coverage in this plan, if it is the secondary provider to another group health plan. . An orthodontic benefit of $1,500 is provided. . A dental PPO is established. . A hearing aid benefit of $500 every five (5) years is for the employee only. DEPENDENT CARE ACCOUNT: The Company will continue its flexible ---------------------- spending account program that allows pre-tax funding of dependent care and child care expenses. 14.2 JOB INCURRED INJURIES/SALARY PROTECTION: Any employee who suffers a job incurred injury during the term of this Agreement and who is awarded temporary total compensation benefits as defined in the Nevada Industrial Insurance Act shall receive supplemental disability payments in such amounts and under such conditions as described below: . The combined amount of disability compensation to which the employee is entitled under any federal, state, and local law, and from the Company shall not exceed the percent of the employee's weekly earnings, from the table listed below, where such earnings are computed at the employee's regular rate for a forty (40) hour, seven (7) day period. . Supplemental payments shall be made for the first day recognized by the Employers Insurance Company Of Nevada, and shall terminate with the date of the last day of disability recognized by the Employers Insurance Company of Nevada, as evidenced by the remittance portion of the disability check from the Employers Insurance Company Of Nevada, which must be presented to the Company, for a maximum period of benefits as defined in the following schedule of benefits, for any one accident regardless of the various periods of disability which may be compensated for the one accident. Page #38 MAXIMUM PERCENT OF LENGTH PERIOD OF BASE OF SERVICE BENEFITS EARNINGS ---------- -------- -------- 6 months 13 weeks 55 5 years 26 weeks 60 10 years 52 weeks 65 20 years 60 weeks 70 65 weeks 75 . For a job incurred disability of less than five (5) days which does not qualify for Employers Insurance Company of Nevada compensation, employees must use any accrued sick leave, and upon exhaustion of such accrued sick leave shall receive disability benefits as defined above. Any medical absence of five (5) calendar days or more related to a work related injury or illness will only be paid by the Workers Compensation Plan; not with accrued sick leave. . No supplemental disability payments shall be made for any disabling accident caused by the injured employee's violation of any safety rule. . Any employee who performs activities for which compensation is received or which exceed the scope of the prescribed physical limitation pertaining to such disability while receiving disability compensation described in this section, shall forfeit his entitlement to all disability benefits and his employment shall be terminated. 14.3 JOB INCURRED INJURY/PARTIALLY DISABLED EMPLOYEES: When, in the opinion of the Company's doctor after consultation with the employees' doctor, regular employees with at least one (1) year of Company service cannot perform their regular work because of partial disability, but can perform other work, the following plan shall be applicable: Each case shall be considered on its merits by a committee consisting of the Business Manager of the Union and the Director of Employee Relations, or their designated representative, and two (2) additional members, one (1) of whom shall be designated by the Union and the other by the Company. The committee shall have the authority to waive the seniority and bidding provisions of this Agreement in order to place the disabled employee, and it shall determine the seniority rights of such employee. This committee may call on anyone who may be able to furnish pertinent information. In no event will this Article apply if the employee's disability occurs while self-employed or working for others, for remuneration (except on Union business), or is involved in misconduct or an extreme violation of Company safety rules. The panel shall complete an evaluation of the type of work the employee is able to perform or may be able to perform in the future. Evaluation of the employee's capabilities may include but shall not be limited to a physical examination and doctors reports, the employee's physical and mental ability, willingness to work, and trainability. Page #39 Depending upon the evaluation of the employee and where necessary and practical, the Company shall provide job related education and training. The panel shall also conduct periodic review of these cases to determine if an employee's condition has changed; if the employee's condition has changed, the panel will reevaluate the employee's job assignment. The panel will determine the job classification which is appropriate for the work the employee is able to perform, as well as the proper pay rate, taking into account the new classification pay rate or the rate indicated on the following schedule, whichever is greater. Years Of Company Service A Pay Rate That Is Not Less Than ------------------------ -------------------------------- 1 to 4 years inclusive 70% base rate when injured 5 to 14 years inclusive 80% base rate when injured 15 to 24 years inclusive 85% base rate when injured 25 years and over 90% base rate when injured As long as such employee is paid more than the maximum rate for the job classification in which the employee is placed, the employee shall receive only fifty (50) percent of any base wage increase or lump sum payment in lieu of a base wage increase. Such fifty (50) percent shall be calculated on the employee's personal rate at the time of the increase. The placing of a disabled employee in a different job shall not constitute an increase in the Company's normal work force. However, the Company may temporarily increase the number of authorized positions to accommodate an individual when a future vacancy is clearly defined and recognizable. If the committee is unable to place an individual in accordance with these provisions they would be eligible for vocational rehabilitation training, and benefits through the Employers Insurance Company of Nevada. Upon this determination, the individual's employment with the Company will be terminated, and any accrued benefits will be paid at the time of termination. The parties agree that the provisions of this Article may be suspended with sixty (60) days written notice, documenting the reasons for this request and the interests which would need to be addressed for the continuance of this program. 14.4 SHORT TERM DISABILITY BENEFIT: A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours who shall suffer any disabling illness or injury while not in work status, shall be entitled to disability payments in such amounts and under such conditions as described herein: Page #40 . An eligible employee shall be entitled to receive payments not to exceed the percent of the employee's weekly straight time earnings, such earnings to be computed on the employee's regular rate for a forty (40) hour, seven (7) day period, for a maximum period of benefits at the percent of earnings as defined in the following schedule of benefits. MAXIMUM PERCENT OF LENGTH PERIOD OF BASE OF SERVICE BENEFITS EARNINGS ---------- -------- -------- 6 months* 13 weeks 55 5 years 26 weeks 60 10 years 52 weeks 65 15 years 60 weeks 70 20 years 65 weeks 75 * Employees in this category may be granted up to thirteen (13) additional weeks of leave without pay for continued disability. . No disability payments for an illness shall be made until at least a three (3) days waiting period has been observed, however, an employee must use accrued sick leave to satisfy the waiting period or to extend the waiting period to the maximum of the amount of accrued sick leave. . Any female employee who becomes pregnant and is unable to work shall be entitled to disability benefits under this Article, as described above, subject to the following conditions. She must present a document from her attending physician saying that she is under the doctor's care because of the pregnancy and is unable to work. The period of the disability shall begin at least three (3) days after the attending physician declares the employee disabled and shall end when the employee is no longer disabled as determined by the attending physician. Pregnant employees must use all accumulated sick leave before disability payments will start. A female employee will not be eligible for pregnancy related disability benefits except for her own disability. An employee who is on maternity leave and recovering from disability may request to have her leave extended for up to three (3) months after termination of pregnancy for child care or other reasons. . Any employee who performs activities for which compensation is received or which exceed the scope of the prescribed physical limitation pertaining to such disability while receiving disability compensation described in this section, shall forfeit their entitlement to all disability benefits and their employment shall be terminated. Page #41 . Any employee who returns to work in a light-duty status from short- term disability will not create a new benefit eligibility until they have had a full-duty release and worked for thirty (30) calendar days from the time of that release. If an employee returns to short- term disability without satisfying this requirement, their short- term disability benefit will reflect their prior usage and continue until expiration of such benefits. . Any employee who is unable to perform the duties of their position as a result of a non-job-incurred injury, would be considered for any vacancy for which they are qualified. If awarded a position in accordance with Article 7 (SENIORITY AND PROMOTIONS), the employee would receive the appropriate rate of pay for that position. . Any employee that exhausts their short-term disability benefit and is unable to return to work at that time, may request one unpaid leave of absence for up to ninety (90) days to allow time for further recuperation or possible vacancies for which they are qualified. Such employees will be allowed to continue their medical coverage at the appropriate COBRA rate for this period of time. If this individual is unable to return to work at the expiration of this unpaid leave, their employment with the Company will be terminated and all accrued benefits will be paid at the time of termination. 14.5 RETIREMENT BENEFIT: The Nevada Power Company Retirement Plan, a defined benefit pension plan bearing No. 003, including the amendments dated March 5, 1980, shall be incorporated by reference into this Agreement. The Company has, since January 1, 1976, been paying the entire cost of this retirement plan. All participants in the pension plan which was in effect before January 1, 1976, have and are guaranteed all accrued benefits under that pension plan as computed on December 31, 1975. Effective February 1, 1990, the pension plan was amended to delete the provision that the selection of a surviving spouse benefit will revert to a single life annuity if the spouse predeceases the retired employee. Effective February 1, 1994, the pension plan was improved to provide for early retirement benefit reductions of 5% per year from age sixty-two (62). Effective January 1, 1989, the pension plan was changed from a social security offset plan to a step rate plan. Effective February 1, 1998, the formula for calculating benefits will be 1.35% of final five-year average earnings up to Social Security Covered Compensation, plus 1.8% of final five-year average earnings exceeding covered compensation, times service up to 35 years, plus 1.35% of final five-year average earnings, times service over 35 years. For this purpose, final five-year average earnings is the average of the highest sixty (60) consecutive months of earnings. Page #42 Effective February 1, 2001, the formula for calculating benefits will be 1.365% of final five-year average earnings up to Social Security Covered Compensation, plus 1.8% of final five-year average earnings exceeding covered compensation, times service up to 35 years, plus 1.365% of final five-year average earnings, times service over 35 years. For this purpose, final five-year average earnings is the average of the highest sixty (60) consecutive months of earnings. Effective February 1, 1987, entry into the pension plan shall be on the first day of the month coincident with, or following completion of one year of service and attainment of age twenty-one. Participants in the plan prior to February 1, 1987, shall enter the plan on the first day of the month coincident with, or following completion of one (1) year of eligibility service and attainment of age twenty-one, unless those participants had declined enrollment under the eligibility rules in effect when they had first become eligible. Effective February 1, 1987, vesting service shall be measured from the employee's date of hire or age eighteen, whichever is later. The Company shall make such modifications in the plan as may be required by 1) the Internal Revenue Service in order to qualify said benefits under the applicable provisions of the Internal Revenue Code and/or related rules and regulations; or 2) any other governmental agency having jurisdiction. Other modifications may be made as needed but in no event shall any benefits be reduced during the term of this Agreement. Effective February 2, 1998, all sick leave accrued at time of retirement will be added to the years of service for fully vested participants only. ---------------------------------------------------------------- Example ------- If an employee retires June 5, 1998 and has 400 hours of sick leave on the books, the calculation would be as follows: 1. They would still officially leave the company on June 5th. 2. When the pension is calculated, it would be increased to read that they received income until August 14, 1998 (400 hours divided by 8 hours a day equals 50 days). 3. The employee would receive a pension calculated through August 14, 1998. ---------------------------------------------------------------- 14.6 401(K) CONTRIBUTION/COMPANY MATCH: In accordance with 401(k) documentation, effective January 1, 1999, the Company will provide a matching contribution of 55 cents of the employee's contribution, to a maximum of 7% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Effective on February 1, 1999, the Company will provide a matching contribution of 60 cents of the employee's contribution, to a maximum of 7% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Effective on January 31, 2000, the Company will provide a matching contribution of 60 cents of the employee's contribution, to a maximum of 8% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Page #43 Effective on January 29, 2001, the Company will provide a matching contribution of 65 cents of the employee's contribution, to a maximum of 8% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. 14.7 ACCIDENTAL LIFE INSURANCE: All employees covered by this Agreement will be covered by an accidental death and dismemberment policy in the amount of $50,000. This policy shall apply only when an employee is a passenger in an aircraft either fixed wing or helicopter, and while traveling on Company business. Benefits from this policy shall be in addition to any other insurance plan. 14.8 LONG-TERM DISABILITY INSURANCE: The Company will provide a long term disability (LTD) plan, to extend disability benefits at a reduced rate upon termination of benefits described in Article 14.2 (JOB INCURRED INJURIES/SALARY PROTECTION) or 14.4 (SHORT TERM DISABILITY BENEFIT) above. Premiums for such coverage will be paid for by the employee, through payroll deduction. All administrative expenses, exclusive of carrier expense normally absorbed in the rates, will be borne by the Company. Employee Benefit Plans Tier Two Employees Hired On or After November 19, 1998 14.9 GENERAL: The Nevada Power Company Medical Benefit Plans shall be incorporated, by reference, into the Agreement for purposes of establishing the levels of benefits for each of these plan features: . loss of time . medical expense . vision expense . dental expense . life insurance and accidental death and dismemberment. The Company agrees to maintain these benefits for eligible employees and will provide medical expense, vision expense, and dental expense coverage for eligible dependents for the life of this Agreement. The Company reserves the right to select any insurance carrier or to self insure for all or any portion of these benefits. PRESCRIPTIVE DRUG BENEFIT: The Company will provide to all eligible ------------------------- employees and eligible dependents a discounted prescription drug service that allows participants to obtain prescription drugs through preferred pharmaceutical outlets. A service fee of twelve dollars ($12.00) per trade name prescription or six dollars ($6.00) for generic prescription will be charged by the druggist. No claim forms need to be presented. Page #44 The prescriptive drug benefit will continue to allow all eligible employees and dependents to obtain up to three (3) months of maintenance prescription drugs by mail. A service fee of $3.00 per prescription ($1.00 for generic) is charged, and claim forms need not be presented for these drugs. TERM LIFE INSURANCE: The Company will continue to provide a supplemental ------------------- life insurance program that allows employees desiring such coverage to purchase term life insurance for their dependents or additional life insurance for themselves at group rates. Such life insurance premiums will be paid for by the employees through payroll deduction. All administrative expenses, exclusive of carrier expense normally absorbed in the rates, will be paid by the Company. DENTAL BENEFIT: The Company will continue to provide a dental care -------------- benefit, expanded to include a dental PPO and an orthodontic benefit for all eligible employees and dependents. Coverage includes the following: . Maximum payable per year is $1,000 per person. . Preventative care is covered 100%, with the deductible waived. . All other treatments are covered at the rate of 80/20 and are subject to the dental exclusions noted in the Nevada Power Company Self-Funded Medical Benefit Plan. Covered treatments are also subject to a $25 per person deductible. VISION BENEFIT: A vision care program will continue to be available for -------------- eligible employees and eligible dependents. This plan covers professional services; examinations every twenty-four (24) months, lenses every twenty- four (24) months if needed, frames every twenty-four (24) months if needed, with a deductible amount of twenty-five dollars ($25.00) to be paid by the employee for each covered examination and fitting. The vision care program also provides one pair of prescription safety glasses to employees whose job duties require eye protection in accordance with the Company's established safety standards, once every twelve (12) months, if needed. BENEFIT ELIGIBILITY: Eligible employees are all employees who have ------------------- satisfied the requirements defined in Article 5 (STATUS OF EMPLOYEES) of this agreement. Eligible dependents are those dependents of eligible employees which meet the definitions of dependents as contained in the Nevada Power Company Self-Funded Medical Benefit Plan referenced above. DEPENDENT CARE ACCOUNT: The Company will continue its flexible spending ---------------------- account program that allows pre-tax funding of dependent care and child care expenses. MENTAL HEALTH BENEFIT: The Company will include outpatient mental health --------------------- counseling in its comprehensive medical plans, subject to utilization review. Substance abuse rehabilitation will be limited to $50,000 lifetime maximum. Page #45 EMPLOYEE CONTRIBUTIONS: Employee contributions are defined below. These ---------------------- rates are the maximum rates which employees would be required to pay. They reflect an eighty-five/fifteen (85/15) cost sharing arrangement between the Company and its employees. PRE-TAX Account: The Company will continue to provide a pre-tax health --------------- care contributions account for employees to reduce their taxable income by the amount of their health care contribution. GENERAL BENEFIT PROVISIONS: -------------------------- . The lifetime maximum medical benefit is no less than $1,000,000. . Mandatory utilization review will be instituted for a variety of in-patient and out-patient services. Employees who fail to receive the appropriate pre-authorization for these services will receive a fifty percent (50%) penalty, in lieu of the stated reimbursement. . All benefits are subject to the deductible and/or co-pay plus percentage, thereby eliminating any first dollar coverage. . An orthodontic benefit of $1,500 is provided. . A dental PPO is established. . A hearing aid benefit of $500 every five (5) years is for the employee only. Mid Level and HMO OPTIONS: ------------------------- The Company will continue to permit employees to select between health care plan options offered in Tier One except for the NPC Self-Funded Plan: Mid Level Plan Option: This option will provide an employer premium that is between the highest level plan and the HMO offered option. Open enrollment period will take place as of August 1, 1998 and every 12 months thereafter. HMO Option: HEALTH MAINTENANCE ORGANIZATION: The Company will continue to permit ------------------------------- eligible employees to enroll in a Health Maintenance Organization plan (HMO) for the purpose of providing comprehensive medical and prescription drug coverage. Page #46 14.10 JOB INCURRED INJURIES/SALARY PROTECTION: Any employee who suffers a job incurred injury during the term of this Agreement and who is awarded temporary total compensation benefits as defined in the Nevada Industrial Insurance Act shall receive supplemental disability payments in such amounts and under such conditions as described below: . The combined amount of disability compensation to which the employee is entitled under any federal, state, and local law, and from the Company shall not exceed the percent of the employee's weekly earnings, from the table listed below, where such earnings are computed at the employee's regular rate for a forty (40) hour, seven (7) day period. . Supplemental payments shall be made for the first day recognized by the Workers Compensation Insurance Plan and shall terminate with the date of the last day of disability recognized by the Workers Compensation Insurance Plan, as evidenced by the remittance portion of the disability check from the Workers Compensation Insurance Plan, which must be presented to the Company, for a maximum period of benefits as defined in the following schedule of benefits, for any one accident regardless of the various periods of disability which may be compensated for the one accident. MAXIMUM PERCENT OF LENGTH PERIOD OF BASE OF SERVICE BENEFITS EARNINGS ---------- -------- -------- 6 months 13 weeks 55 5 years 26 weeks 60 10 years 52 weeks 65 15 years 60 weeks 70 20 years 65 weeks 75 . For a job incurred disability of less than five (5) days which does not qualify for Workers Compensation Insurance Plan compensation, employees must use any accrued sick leave, and upon exhaustion of such accrued sick leave shall receive disability benefits as defined above. Any medical absence of five (5) calendar days or more related to a work related injury or illness will only be paid by the Workers Compensation Plan; not with accrued sick leave. . No supplemental disability payments shall be made for any disabling accident caused by the injured employee's violation of any safety rule. . Any employee who performs activities for which compensation is received or which exceed the scope of the prescribed physical limitation pertaining to such disability while receiving disability compensation described in this section, shall forfeit his entitlement to all disability benefits and his employment shall be terminated. Page #47 14.11 JOB INCURRED INJURY/PARTIALLY DISABLED EMPLOYEES: When, in the opinion of the Company's doctor after consultation with the employees' doctor, regular employees with at least one (1) year of Company service cannot perform their regular work because of partial disability, but can perform other work, the following plan shall be applicable: Each case shall be considered on its merits by a committee consisting of the Business Manager of the Union and the Director of Employee Relations, or their designated representative, and two (2) additional members, one (1) of whom shall be designated by the Union and the other by the Company. The committee shall have the authority to waive the seniority and bidding provisions of this Agreement in order to place the disabled employee, and it shall determine the seniority rights of such employee. This committee may call on anyone who may be able to furnish pertinent information. In no event will this Article apply if the employee's disability occurs while self-employed or working for others, for remuneration (except on Union business), or is involved in misconduct or an extreme violation of Company safety rules. The panel shall complete an evaluation of the type of work the employee is able to perform or may be able to perform in the future. Evaluation of the employee's capabilities may include but shall not be limited to a physical examination and doctors' reports, the employee's physical and mental ability, willingness to work, and trainability. Depending upon the evaluation of the employee and where necessary and practical, the Company shall provide job related education and training. The panel shall also conduct periodic review of these cases to determine if an employee's condition has changed; if the employee's condition has changed, the panel will reevaluate the employee's job assignment. The panel will determine the job classification which is appropriate for the work the employee is able to perform, as well as the proper pay rate, taking into account the new classification pay rate or the rate indicated on the following schedule, whichever is greater. Years Of Company Service A Pay Rate That Is Not Less Than ------------------------ -------------------------------- 1 to 4 years inclusive 70% base rate when injured 5 to 14 years inclusive 80% base rate when injured 15 to 24 years inclusive 85% base rate when injured 25 years and over 90% base rate when injured As long as such employee is paid more than the maximum rate for the job classification in which the employee is placed, the employee shall receive only fifty (50) percent of any base wage increase or lump sum payment in lieu of a base wage increase. Such fifty (50) percent shall be calculated on the employee's personal rate at the time of the increase. The placing of a disabled employee in a different job shall not constitute an increase in the Company's normal work force. However, the Company may temporarily increase the number of authorized positions to accommodate an individual when a future vacancy is clearly defined and recognizable. Page #48 If the committee is unable to place an individual in accordance with these provisions they would be eligible for vocational rehabilitation training, and benefits through the State Industrial Insurance System. Upon this determination, the individual's employment with the Company will be terminated, and any accrued benefits will be paid at the time of termination. The parties agree that the provisions of this Article may be suspended with sixty (60) days written notice, documenting the reasons for this request and the interests which would need to be addressed for the continuance of this program. 14.12 SHORT TERM DISABILITY BENEFIT: A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours who shall suffer any disabling illness or injury while not in work status, shall be entitled to disability payments in such amounts and under such conditions as described herein: . An eligible employee shall be entitled to receive payments not to exceed the percent of the employee's weekly straight time earnings, such earnings to be computed on the employee's regular rate for a forty (40) hour, seven (7) day period, for a maximum period of benefits at the percent of earnings as defined in the following schedule of benefits. MAXIMUM PERCENT OF LENGTH PERIOD OF BASE OF SERVICE BENEFITS EARNINGS ---------- -------- -------- 6 months* 13 weeks 55 5 years 26 weeks 60 10 years 52 weeks 65 15 years 60 weeks 70 20 years 65 weeks 75 * Employees in this category may be granted up to thirteen (13) additional weeks of leave without pay for continued disability. . No disability payments for an illness shall be made until at least a three (3) days waiting period has been observed, however, an employee must use accrued sick leave to satisfy the waiting period or to extend the waiting period to the maximum of the amount of accrued sick leave. . Any female employee who becomes pregnant and is unable to work shall be entitled to disability benefits under this Article, as described above, subject to the following conditions. She must present a document from her attending physician saying that she is under the doctor's care because of the pregnancy and is unable to work. The period of the disability shall begin at least three (3) days after the attending physician declares the employee disabled and shall end when the employee is no longer disabled as determined by the attending physician. Pregnant employees must use all accumulated sick leave before disability payments will start. A female employee will not be eligible for pregnancy related disability Page #49 benefits except for her own disability. An employee who is on maternity leave and recovering from disability may request to have her leave extended for up to three (3) months after termination of pregnancy for child care or other reasons. . Any employee who performs activities for which compensation is received or which exceed the scope of the prescribed physical limitation pertaining to such disability while receiving disability compensation described in this section, shall forfeit their entitlement to all disability benefits and their employment shall be terminated. . Any employee who returns to work in a light-duty status from short- term disability will not create a new benefit eligibility until they have had a full-duty release and worked for thirty (30) calendar days from the time of that release. If an employee returns to short- term disability without satisfying this requirement, their short- term disability benefit will reflect their prior usage and continue until expiration of such benefits. . Any employee who is unable to perform the duties of their position as a result of a non-job-incurred injury, would be considered for any vacancy for which they are qualified. If awarded a position in accordance with Article 7 (SENIORITY AND PROMOTIONS), the employee would receive the appropriate rate of pay for that position. . Any employee that exhausts their short-term disability benefit and is unable to return to work at that time, may request one unpaid leave of absence for up to ninety (90) days to allow time for further recuperation or possible vacancies for which they are qualified. Such employees will be allowed to continue their medical coverage at the appropriate COBRA rate for this period of time. If this individual is unable to return to work at the expiration of this unpaid leave, their employment with the Company will be terminated and all accrued benefits will be paid at the time of termination. 14.13 RETIREMENT BENEFIT: The Nevada Power Company Retirement Plan, a defined benefit pension plan bearing No. 003, including the amendments dated March 5, 1980, shall be incorporated by reference into this Agreement. The Company has, since January 1, 1976, been paying the entire cost of this retirement plan. All participants in the pension plan which was in effect before January 1, 1976, have and are guaranteed all accrued benefits under that pension plan as computed on December 31, 1975. Effective February 1, 1990, the pension plan was amended to delete the provision that the selection of a surviving spouse benefit will revert to a single life annuity if the spouse predeceases the retired employee. Effective February 1, 1994, the pension plan was improved to provide for early retirement benefit reductions of 5% per year from age sixty-two (62). Effective January 1, 1989, the pension plan was changed from a social security offset plan to a step rate plan. Effective February 1, 1998, the formula for calculating benefits will be 1.35% of final five-year average earnings up to Social Security Covered Compensation, plus 1.8% of final five-year average Page #50 earnings exceeding covered compensation, times service up to 35 years, plus 1.35% of final five-year average earnings, times service over 35 years. For this purpose, final five-year average earnings is the average of the highest sixty (60) consecutive months of earnings. Effective February 1, 2001, the formula for calculating benefits will be 1.365% of final five-year average earnings up to Social Security Covered Compensation, plus 1.8% of final five-year average earnings exceeding covered compensation, times service up to 35 years, plus 1.365% of final five-year average earnings, times service over 35 years. For this purpose, final five-year average earnings is the average of the highest sixty (60) consecutive months of earnings. Effective February 1, 1987, entry into the pension plan shall be on the first day of the month coincident with, or following completion of one year of service and attainment of age twenty-one. Participants in the plan prior to February 1, 1987, shall enter the plan on the first day of the month coincident with, or following completion of one (1) year of eligibility service and attainment of age twenty-one, unless those participants had declined enrollment under the eligibility rules in effect when they had first become eligible. Effective February 1, 1987, vesting service shall be measured from the employee's date of hire or age eighteen, whichever is later. The Company shall make such modifications in the plan as may be required by 1) the Internal Revenue Service in order to qualify said benefits under the applicable provisions of the Internal Revenue Code and/or related rules and regulations; or 2) any other governmental agency having jurisdiction. Other modifications may be made as needed but in no event shall any benefits be reduced during the term of this Agreement. Effective February 2, 1998, all sick leave accrued at time of retirement will be added to the years of service for fully vested participants only. ----------------------------------------------------------- Example ------- If an employee retires June 5, 1998 and has 400 hours of sick leave on the books, the calculation would be as follows: 4. They would still officially leave the company on June 5/th/. 5. When the pension is calculated, it would be increased to read that they received income until August 14, 1998 (400 hours divided by 8 hours a day equals 50 days). 6. The employee would receive a pension calculated through August 14, 1998. ----------------------------------------------------------- 14.14 401(K) CONTRIBUTION/COMPANY MATCH: In accordance with 401(k) documentation, effective January 1, 1999, the Company will provide a matching contribution of 55 cents of the employee's contribution, to a maximum of 7% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Effective on February 1, 1999, the Company will provide a matching contribution of 60 cents of the employee's contribution, to a maximum of 7% of Page #51 gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Effective on January 31, 2000, the Company will provide a matching contribution of 60 cents of the employee's contribution, to a maximum of 8% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Effective on January 29, 2001, the Company will provide a matching contribution of 65 cents of the employee's contribution, to a maximum of 8% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. 14.15 ACCIDENTAL LIFE INSURANCE: All employees covered by this Agreement will be covered by an accidental death and dismemberment policy in the amount of $50,000. This policy shall apply only when an employee is a passenger in an aircraft either fixed wing or helicopter, and while traveling on Company business. Benefits from this policy shall be in addition to any other insurance plan. 14.16 LONG-TERM DISABILITY INSURANCE: The Company will provide a long term disability (LTD) plan, to extend disability benefits at a reduced rate upon termination of benefits described in Article 14.2 (JOB INCURRED INJURIES/SALARY PROTECTION) or 14.4 (SHORT TERM DISABILITY BENEFIT) above. Premiums for such coverage will be paid for by the employee, through payroll deduction. All administrative expenses, exclusive of carrier expense normally absorbed in the rates, will be borne by the Company. Page #52 ARTICLE NO. 15 Leaves of Absence 15.1 SHORT TERM LEAVES: Provided the needs of the Company will permit, time off without pay for any period of thirty (30) calendar days or less may be granted employees upon a written application to their department head showing good and sufficient reason for such request. This shall not be construed as a leave of absence without pay, as the term is used in this Agreement. A leave of absence without pay is defined as a period of authorized absence from service in excess of thirty (30) days. 15.2 JUSTIFICATION: Leaves of absence shall be granted to regular employees for urgent substantial personal reasons, provided adequate arrangements can be made to take care of the employee's duties without undue interference with the normal routine of work. Leave will not be granted if the purpose for which it is requested may lead to the employee's resignation. 15.3 DURATION: A leave shall commence on and include the first work day on which an employee is absent and terminate with and include the work day preceding the day the employee's leave expires. The conditions under which an employee shall be restored to employment on the termination of his leave of absence shall be clearly stated by the Company on the form on which application for leave is made. 15.4 SENIORITY: Except as otherwise provided herein, an employee's seniority shall not accrue while on leave without pay. However, an employee's status as a regular employee shall not be impaired by a leave of absence. Any period of authorized absence without pay for thirty (30) days or less shall not affect an employee's seniority status. Upon return from leave, an employee shall return to regular status. 15.5 UNION OFFICE: The Company shall, at the request of the Union, grant a leave of absence without pay for four (4) years or less to an employee who is appointed or elected to any office or position in the Union whose services are required by the Union. The seniority of an employee who is granted a leave of absence under the provisions of this Section shall accrue during the period of such leave. Upon mutual agreement with the Union, the Company may extend the leave of the incumbent for additional terms up to four (4) years per request. The Company will provide medical coverage for this individual at the single coverage rate. This individual must make the established monthly employee contribution for health coverage. 15.6 PUBLIC OFFICE: Employees elected or appointed to public office shall be granted a leave of absence for the duration of such appointment or election. Such absence shall not affect accrual rates for seniority purposes; however, sick leave and vacation shall not accrue during this period and group medical benefits shall be paid by the employee at the Company's current premium rate. Page #53 15.7 MILITARY LEAVE: A leave of absence shall be granted to employees who enter the armed forces of the United States, however, any such leave of absence and the reinstatement of any such employee shall be subject to the terms of the Selective Training and Service Act of 1940, as amended. Employees who are members of the armed services who are drafted and are called to active duty shall accrue Company seniority while they are absent on military duty. A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours, who is a member of the armed forces reserve units, or the National Guard, and who is required to attend annual training sessions, will be granted a leave of absence for the duration of such assignment. In addition, the Company will pay such employee the amount, if any, by which the remuneration received from the government is less than the base straight time earnings the employee would have received for the same period, not to exceed eighty (80) hours in a calendar year. Such items as subsistence, travel, uniform and other allowances will not be included in computing the remuneration received from the government. The Company will require satisfactory evidence of attendance and remuneration received. 15.8 FAILURE TO RETURN FROM LEAVE: If employees fail to return immediately on the expiration of their leave of absence, or if they accept other employment while on leave, they shall forfeit the leave of absence and terminate their employment with the Company. 15.9 FUNERAL LEAVE: A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours, who is absent from duty due to a death in the employee's immediate family will be excused without loss of regular pay for the time required not to exceed thirty-six (36) hours for making funeral arrangements and attending the funeral, provided the employee attends the funeral, furnishes a death certificate to the payroll department within thirty (30) days. Additional time may be taken to insure four working days off; any hours in excess of 36 hours can be taken as vacation or personal time off without pay. Immediate family shall mean the employee's grandparents, mother, father, step-mother, step-father, brother, sister, spouse's grandparents, spouse's parents, spouse's children, spouse, son, daughter, or grandchildren. 15.10 JURY DUTY: When regular employees, or temporary employees who have worked more than one thousand forty (1040) straight time hours, are absent from work in order to serve as a juror or to report to the court in person in response to a jury duty summons or to report for jury examination, they shall be granted pay for those hours spent in such service during their regular work day or regular work week less the fee or other compensation paid them with respect to such jury duty. Employees shall furnish the Company with a statement from an officer of the court setting forth the time and days on which they reported for jury duty and their compensation due or received for jury duty. Page #54 15.11 SUBPOENA: If employees are absent from work, in order to serve as a witness in a case in a court of law to which they are not a party, either directly or as a member of a class action suit, and where such absence is in response to a legally valid subpoena or its equivalent, the employee shall be granted leave with pay for those hours for which the employee is absent from work during the employee's regularly scheduled working hours, provided the employee submits evidence of such service as a witness, detailing the time required to testify. 15.12 FAMILY LEAVE: Employees who are eligible for benefits but have less than one year of service with the Company are entitled to forty-five (45) calendar days of unpaid family leave to use for the birth or adoption of a child. Vacation pay may be used for a portion of this leave of absence but will not extend the leave to more than forty-five (45) days. 15.13 FAMILY AND MEDICAL LEAVE: Employees who are eligible for benefits and have one year or more of Company service may be entitled to twelve (12) weeks of unpaid leave in accordance with the Federal Family and Medical Leave Act of 1993. Page #55 ARTICLE NO. 16 General Provisions 16.1 SUPERVISORY RESPONSIBILITIES IN EMERGENCY CONDITIONS: It is the intention of the Company that supervisors shall generally confine their activities to the supervision of the work or operations being performed. In certain instances, should emergency conditions arise, it may be necessary for them to perform those tasks normally assigned to bargaining unit employees. Under ordinary circumstances, such instances will very rarely occur, but since the safety of personnel or Company property may be in jeopardy, it must remain management's prerogative to determine when conditions require the actions described above. In the same manner it is the intention of management that the "chain of command" be adhered to, by both supervisors and bargaining unit employees. However, in the case of emergencies, there will be occasions when it may be necessary for a senior supervisor to bypass normal chain of command in order to prevent difficulties. Common sense and good judgment must be exercised in applying these paragraphs. 16.2 NEW CLASSIFICATIONS/WAGES: Any new rate covering work normally performed by employees within the bargaining unit shall first be discussed with the Union and the rate established for such work shall be that mutually agreeable to both parties. 16.3 REMOVING LETTERS OF DISCIPLINE: Any employee who receives a written letter of reprimand which is a part of the personnel file maintained in the Company's Human Resources office, may, after three (3) years from the date of such letter, request in writing to have the letter removed. Upon such written request, the Company shall remove the letter and return it to the employee. If the behavior that warranted the letter has changed or been corrected, the employee's current supervisor can remove the letter from the employee's personnel file by documenting this change in behavior and providing written authorization to human resources. 16.4 FACILITIES: The Company will provide on its premises clean, sanitary and reasonably comfortable rest and wash rooms, including first aid cots for female employees, together with a proper place for storing lunches carried by employees, and reasonably safeguarding employee's out-of-door clothing and necessary personal effects on the Company's property during the time employees are on duty. The Union agrees to cooperate with the Company in the maintenance of these facilities. 16.5 HEALTH AND SAFETY: The parties hereto agree to cooperate in using all reasonable means to eliminate conditions of danger to either the general public, the Company or its employees. No employee shall knowingly engage in an unsafe act. Page #56 Whenever it becomes necessary to employ day shift employees assigned to the Company's business offices, where security personnel are assigned, outside the normal work hours, and such work is during the hours of darkness, all arrivals and departures from Company owned parking facilities shall be observed and controlled by security personnel. Parking facilities shall, when possible, be adjacent to the Company's business offices. The Company agrees to furnish such safety devices and equipment including first aid kits, as may be reasonable and necessary for the health and safety of its employees, and the Union agrees, on behalf of the employees, that such equipment will be used. 16.6 LABOR/MANAGEMENT MEETINGS: The parties agree to hold periodic meetings to discuss matters which are covered by the Agreement. These meetings will be held on Company premises during work time and shall, where possible, be scheduled mutually each sixty (60) days. The number of employee attendees who are covered by the agreement shall be limited to the stewards and other employees reporting to the Company premises designated as the site of a particular meeting. 16.7 UPGRADE: When an employee relieves an employee of a higher classification, the employee shall receive the rate of pay for the higher classification for the time worked in the higher classification. However, an employee will not be upgraded when employees of that classification who normally report for work at the same location are able and available to do the work for which the upgrade is intended. All red circle employees when upgraded to Lead positions will receive a 5% wage increase for any time worked in this position. All employees when upgraded for an authorized training capacity will receive a 5% wage increase for any time worked in this position. Page #57 ARTICLE NO. 17 Term of Agreement 17.1 DURATION: This Agreement shall take effect on February 1, 1998, and shall continue in effect for the term February 1, 1998 to February 1, 2002, and shall continue in full force and effect from year to year thereafter unless written notice of termination shall be given by either party to the other at least sixty (60) days prior to the end of the then current term. 17.2 AMENDMENTS: If either party desires to amend this agreement, it shall give notice thereof to the other party at least sixty (60) days but not more than seventy (70) days, prior to the end of the then current term, and the party desiring to amend or revise this Agreement shall submit to the party so notified a detailed outline of the Articles and Sections to be amended or revised at the time the notice is given, except and unless otherwise mutually agreed to by the parties during this period of notice defined herein. Negotiations on the amendments or revisions shall take place, so far as possible, in the sixty (60) day period prior to the end of the then current term. Failure of the parties to agree on such proposed amendment or revision shall not cause termination of this Agreement unless either party has given notice of termination as provided in Section 1 above. 17.3 PROVISIONS IN CONFLICT WITH THE LAW: In the event that any provision of this Agreement shall at any time be made invalid by applicable legislation, or be declared invalid by any court of competent jurisdiction, such action shall not invalidate the entire Agreement, it being the express intention of the parties that all other provisions not made invalid shall remain in full force and effect. 17.4 CHANGE IN COMPANY STATUS: This Agreement shall be binding upon the successors and assigns of the Company, and no provisions, terms or obligations herein contained shall be affected, modified, altered or changed in any respect whatsoever by the consolidation, merger, sale, transfer, reorganization or assignment of the Company, or by any change in the legal status, ownership or management thereof. 17.5 EFFECTIVE DATE OF AGREEMENT: It is mutually agreed by and between the parties signatory hereto that the Agreement dated February 1, 1994, is superseded by this Agreement dated as of February 1, 1998. Except as otherwise expressly provided herein, the provisions of this Agreement shall be effective February 1, 1998. Page #58 In witness whereof, the parties hereto have executed this Agreement on Date February 1, 1999. Local Union #396 of the International Brotherhood of Electrical Workers (AFL-CIO) ________________________________________________________________________________ James C. Anzinger Business Manager and Financial Secretary, IBEW Local 396 ________________________________________________________________________________ Gloria Banks Weddle Vice President, Corporate Services Nevada Power Company NEGOTIATING COMMITTEE --------------------- IBEW, Local No. 396 Nevada Power ------------------- ------------ Jim Anzinger Gloria Banks Weddle Adam Morrison Dan Potter Jeff Ambuehl Gerald Mikesell Madeline Anzinger Vanessa Farias John Caruso Trudy Haszlauer Helen Jenkins Flory Marzan Juan Samayoa Jose Villa Page #59 EXHIBIT I CLASSIFICATION DESCRIPTIONS (Alphabetical) ALTERNATE FIELD REPRESENTATIVE Performs various assignments relating to Customer Field and Metering activities, including the duties of LGS Meter Reader, Field Service Representative and Meter Reader. May be required to perform semi-skilled work in the Meter Shop and other duties as assigned. CUSTOMER SERVICE SPECIALIST Performs very sophisticated clerical tasks which require extensive decision-making authority and independent judgment. Employees in this classification work in the following areas: . Head Cashier . Service Dispatching . LGS Billing . Control Analyst CUSTOMER SUPPORT REPRESENTATIVE Performs intermediate clerical tasks which require the use of typing and personal computer skills. Customer Contact and service skills will be used regularly, requiring a moderate degree of decision-making authority. Employees in this classification work in the following areas: . Commercial Office Support . PBX . Customer Credit and Accounting FIELD SERVICE INVESTIGATOR Performs specialized assignments relating to current diversion and meter tampering. Will perform technical investigations with established procedures on Company equipment; does not include instrument metering. Will be required to work closely with low voltage electricity, while investigating, with various testing equipment. Will be familiar with associated office equipment, and work with and have knowledge of other department's functions, relating to detection and billing. Will drive a Company vehicle and be assigned to the Department of Meter Validity. FIELD SERVICE REPRESENTATIVE Performs a variety of assignments related to the metering function on an individual basis as requested by the commercial department and customer service orders including, but not limited to, turn-ons and turn-offs, check readings, miscellaneous testing of electrical equipment, both customer and Company; drives Company vehicle, acts as field representative in limited capacity and does other related work as required. Page #60 LEAD In the absence of appropriate supervision or when directed, leads, assists, and works with other departmental personnel to ensure the efficient operation of related activities. May be required to develop schedules, direct work assignments, prepare job related reports, complete other administrative duties, function in a customer or field service capacity, and perform other work as needed. MAIL ROOM TECHNICIAN Performs a variety of mail room functions related to overall mail processes and procedures. Pick up, sort and distribute all facets of Company mailings. Coordinate postal pick-ups, deliveries and courier services. Operate mail processing equipment. Responsible for receiving, processing and distributing materials for the Pearson Building. Reconcile mainframe billing with bills processed. Responsible for loading and programming mail machines to process billings; apply necessary postage, monitor and recommend stock levels of machine supplies. May be required to relieve Office Supplies Specialist and drive light vehicles. Performs other duties as assigned. METER READER Reads meters in Company service areas and records readings and miscellaneous information on proper forms. Indicates abnormal or unusual conditions relative to meters and facilities. Prepares reports and performs related duties as required. May be required to operate vehicle for Company. The ratio for part-time Meter Readers will be five (5) full-time employees for every one (1) part-time employee. Meter Readers have the opportunity to be promoted to Alternate Field Representative positions with no bid process, provided prerequisites are met as follows: 1) One year of experience as a Meter Reader, 2) Basic Electricity Class, 3) Hand Tools Class, 4) Basic Math, and 5) satisfactory personnel record, no disciplinary action or at-fault safety/vehicle accidents in the past twelve (12) months in the Human Resources file. Selections for those who satisfy these prerequisites will be made by Company seniority. OFFICE SUPPLY SPECIALIST Performs a variety of duties related to ordering, receiving, storing and issuing office supplies and materials and maintaining related inventories. Receives and distributes bulk items and materials delivered to the administrative offices. Maintains related files and performs other duties as assigned. OFFICE SUPPORT REPRESENTATIVE Performs elementary and repetitive clerical tasks, defined by minimal training requirements on applicable business machines and a lack of, or a minimal amount of office equipment and business software application utilization. Employees in this classification work in the following areas: . Payment Processing . Customer Credit and Accounting . Customer Information Center Page #61 REPROGRAPHIC TECHNICIAN Will be responsible for the production of in-plant printed and copied material. Operates all printing plant equipment, including: lithograph machines, camera, lithograph plate makers, binding machines, type composing machines, photographic developing equipment, offset 2 color presses, offset 1 color presses, collators, plate developer, power cutter, electric hole puncher, electric stitcher, PMT developer, dark room dryer, jogging machine, padding machine, light table for stripping, computerized copying equipment, laminators and folding equipment. Is responsible for maintaining machines in clean and operating condition and will make some maintenance adjustments to the equipment. Will maintain control over printing plant and copying supplies and will perform all related duties as required. RETAIL CUSTOMER REPRESENTATIVE Performs fairly sophisticated clerical functions defined by regular application of office equipment and business software systems. Extensive customer interaction and a significant degree of decision-making authority is required. Employees in this classification work in the following areas: . Customer and Field Operations . Customer Information Center . Districts . Material Management . Customer Credit and Accounting (Edit, Carry File, Collections functions) RETAIL OPERATIONS REPRESENTIVE Responsible for support of customer product/service development. Coordinates and schedules internal/external contractors, suppliers and customers. Extensive marketing functions including but not limited to: contacting customers, contractors, financial institutions, credit reports, suppliers and sales. Performs sophisticated functions defined by regular application of office equipment, business software systems and financial reconciliations. Prepares reports and performs other duties as required. TRAINING ASSISTANT Assists management and the Customer Service Training Department by identifying training needs, participating in job/task analyses, providing small group and/or one-on-one and just-in-time training support, and actively participating in planning the Training Assistant In-Service Program. Responsible for performing regular Customer Service functions and working with training staff on training goals and self-development in training capacity. This position will support the Customer Service Department including, but not limited to: Telephone Service Operations, Meter Reading, and the commercial offices. May be required to work various shifts and at various locations. Page #62 EXHIBIT II SCHEDULE OF WAGE RATES/ TIER ONE Employees Hired On or Before November 18, 1998 EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE CLASSIFICATIONS: 2/2/98 2/1/99 1/31/2000 1/29/2001 ------ ------ --------- --------- CUSTOMER SERVICE Customer Service Specialist 16.54 17.04 17.55 18.08 Lead Retail Customer Representative 16.34 16.83 17.33 17.85 Red Circle 16.93 17.44 17.96 18.50 Training Assistant - TSO 16.93 17.44 17.96 18.50 Retail Customer Representative First six months 13.61 14.02 14.44 14.87 Next six months 14.10 14.52 14.96 15.41 Next six months 14.59 15.03 15.48 15.94 Next six months 15.07 15.52 15.99 16.47 Thereafter 15.56 16.03 16.51 17.01 Red Circle 16.07 16.55 17.05 17.56 Retail Operations Representative First six months 13.61 14.02 14.44 14.87 Next six months 14.10 14.52 14.96 15.41 Next six months 14.59 15.03 15.48 15.94 Next six months 15.07 15.52 15.99 16.47 Thereafter 15.56 16.03 16.51 17.01 Red Circle 16.07 16.55 17.05 17.56 Page #63 EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE CLASSIFICATIONS: 2/2/98 2/1/99 1/31/2000 1/29/2001 ------ ------ --------- --------- Lead Customer Support Representative 15.56 16.03 16.51 17.01 Red Circle 16.93 17.44 17.96 18.50 Customer Support Representative First six months 11.18 11.52 11.87 12.23 Next six months 11.89 12.25 12.62 13.00 Next six months 12.60 12.98 13.37 13.77 Next six months 13.31 13.71 14.12 14.54 Next six months 14.03 14.45 14.88 15.33 Thereafter 14.76 15.20 15.66 16.13 Red Circle 16.07 16.55 17.05 17.56 Office Support Representative First six months 9.44 9.73 10.02 10.32 Next six months 10.23 10.54 10.86 11.19 Next six months 11.02 11.35 11.69 12.04 Next six months 11.81 12.16 12.52 12.90 Thereafter 12.60 12.98 13.37 13.77 Red Circle 13.72 14.13 14.55 14.99 Red Circle 14.76 15.20 15.66 16.13 Red Circle 16.07 16.55 17.05 17.56 Page #64 EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE CLASSIFICATIONS: 2/2/98 2/1/99 1/31/2000 1/29/2001 ------ ------ -------- --------- METER READING Lead Meter Reader 17.20 17.72 18.25 18.80 Meter Reader First three months 11.63 11.98 12.34 12.71 Next three months 11.76 12.11 12.47 12.84 Next six months 11.96 12.32 12.69 13.07 Next six months 12.37 12.74 13.12 13.51 Next six months 12.78 13.16 13.55 13.96 Next six months 13.24 13.64 14.05 14.47 Next six months 13.67 14.08 14.50 14.94 Next six months 14.18 14.61 15.05 15.50 Thereafter 14.76 15.20 15.66 16.13 Red Circle 16.30 16.79 17.29 17.81 Red Circle 17.41 17.93 18.47 19.02 Red Circle 17.80 18.33 18.88 19.45 Training Assistant - Meter Reading 17.20 17.72 18.25 18.80 Page #65 EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE CLASSIFICATIONS: 2/2/98 2/1/99 1/31/2000 1/29/2001 ------ ------ --------- --------- FIELD SERVICE Lead Field Service Investigator 20.66 21.28 21.92 22.58 Red Circle 21.54 22.19 22.86 23.55 Field Service Investigator First six months 16.71 17.21 17.73 18.26 Next six months 17.44 17.96 18.50 19.06 Next six months 18.11 18.65 19.21 19.79 Thereafter 18.78 19.34 19.92 20.52 Red Circle 20.44 21.05 21.68 22.33 Lead Field Service Representative 20.36 20.97 21.60 22.25 Red Circle 21.26 21.90 22.56 23.24 Field Service Representative First six months 16.43 16.92 17.43 17.95 Next six months 17.16 17.67 18.20 18.75 Next six months 17.83 18.36 18.91 19.48 Thereafter 18.50 19.06 19.63 20.22 Red Circle 20.16 20.76 21.38 22.02 Red Circle 20.36 20.97 21.60 22.25 Red Circle 21.13 21.76 22.41 23.08 Alternate Field Representative 16.12 16.60 17.10 17.61 Page #66 EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE CLASSIFICATIONS: 2/2/98 2/1/99 1/31/2000 1/29/2001 ------ ------ --------- --------- REPROGRAPHIC SERVICES Reprographic Technician First six months 13.61 14.02 14.44 14.87 Next six months 14.10 14.52 14.96 15.41 Next six months 14.59 15.03 15.48 15.94 Next six months 15.07 15.52 15.99 16.47 Thereafter 15.56 16.03 16.51 17.01 Red Circle 16.07 16.55 17.05 17.56 Red Circle 17.80 18.33 18.88 19.45 Red Circle 19.09 19.66 20.25 20.86 MAIL ROOM & RECEIVING Office Supply Specialist First six months 13.61 14.02 14.44 14.87 Next six months 14.10 14.52 14.96 15.41 Next six months 14.59 15.03 15.48 15.94 Next six months 15.07 15.52 15.99 16.47 Thereafter 15.56 16.03 16.51 17.01 Red Circle 16.07 16.55 17.05 17.56 Red Circle 21.73 22.06 22.39 22.73 Mail Room Technician First six months 11.18 11.52 11.87 12.23 Next six months 11.89 12.25 12.62 13.00 Next six months 12.60 12.98 13.37 13.77 Next six months 13.31 13.71 14.12 14.54 Next six months 14.03 14.45 14.88 15.33 Thereafter 14.76 15.20 15.66 16.13 Red Circle 16.07 16.55 17.05 17.56 Page #67 EXHIBIT II-A SCHEDULE OF WAGE RATES - TIER TWO Employees Hired On or After November 19, 1998 EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE CLASSIFICATIONS: 2/2/98 2/1/99 1/31/2000 1/29/2001 ------ ------ --------- --------- CUSTOMER SERVICE Customer Service Specialist 13.99 14.41 14.84 15.29 Retail Customer Representative Office Supply Specialist Reprograhic Technician First six months 9.75 10.04 10.34 10.65 Next six months 10.61 10.93 11.26 11.60 Next six months 11.47 11.81 12.16 12.52 Next six months 12.33 12.70 13.08 13.47 Thereafter 13.19 13.59 14.00 14.42 Customer Support Representative Mail Room Technician First six months 8.06 8.30 8.55 8.81 Next six months 8.80 9.06 9.33 9.61 Next six months 9.57 9.86 10.16 10.46 Next six months 10.36 10.67 10.99 11.32 Next six months 11.33 11.67 12.02 12.38 Thereafter 12.48 12.85 13.24 13.64 Page #68 EFFECTIVE EFFECTIVE EFFECTIVE EFFECTIVE CLASSIFICATIONS: 2/2/98 2/1/99 1/31/2000 1/29/2001 ------ ------ --------- --------- CUSTOMER SERVICE Meter Readers First three months 10.50 10.82 11.14 11.47 Next three months 10.88 11.21 11.55 11.90 Next six months 11.26 11.60 11.95 12.31 Next six months 11.64 11.99 12.35 12.72 Next six months 12.02 12.38 12.75 13.13 Next six months 12.40 12.77 13.15 13.54 Next six months 12.78 13.16 13.55 13.96 Next six months 13.16 13.55 13.96 14.38 Thereafter 13.50 13.91 14.33 14.76 FIELD SERVICE Alternate Field Representatives First six months 14.37 14.80 15.24 15.70 Next six months 15.25 15.71 16.18 16.67 Thereafter 16.12 16.60 17.10 17.61 Page #69 EXHIBIT III International Brotherhood of Electrical Workers Local Union No. 396 CHECK OFF AUTHORIZATION I, _________________________________________________, herewith authorize (print name) (employee no.) Nevada Power Company to deduct initiation and/or reinstatement fees and monthly dues owing to the Union, in accordance with the Constitution and By-Laws of the Union, and direct such amounts so deducted be sent to the Secretary-Treasurer of the Union for and on my behalf. When the full amount of the initiation or reinstatement fee has been withheld from my earnings, such authorization for deduction of initiation or reinstatement fee only shall be null and void, and shall thereafter have no further force or effect. This authorization shall be irrevocable for the period of the applicable agreement between the Union and the Company, or for one (1) year, whichever is lesser, and shall automatically renew itself for successive yearly or applicable agreement periods thereafter, whichever is lesser, unless I give written notice to the Union, registered, Return Receipt Requested, of my desire to revoke the same. The Union will notify the Company on a biweekly basis if necessary of those employees who wish to revoke this deduction; such deductions will cease in the pay period following receipt of such notice from the Union. It is recognized that neither the Company nor the Union shall be under any liability to me, the undersigned, with respect to the deductions provided herein. Signed ____________________________________________________________________ Date ______________________________________________________________________ Page #70 EXHIBIT IV SICK LEAVE AGREEMENT INTRODUCTION The Union agrees to share the responsibility in protecting the sick leave plan from abuses by any of its members, recognizing that the plan is intended to provide pay coverage under situations of actual need. MEDICAL ATTENTION Sick leave may be used for obtaining medical information or treatment including exams or treatments for care of the eyes or teeth of eligible employees. Such absences should be approved in advance where possible and limited to the time necessary for treatment or examination or recovery. ALCOHOL AND DRUG ABUSE An employee who seeks professional treatment to correct a problem of excessive use or dependence on an alcohol or other controlled substances will be placed on medical leave of absence for such treatment. Available unused sick leave may be used while under professional treatment. Arrangements for treatment must be made with the EAP Provider and the Company and such treatments will be kept as confidential as possible. Employees who receive such treatment will be expected to observe all conditions and attend all meetings which are required as part of the total rehabilitation program. Evidence of abstinence may be required as a follow-up and negative findings may result in termination. Page #71 EXHIBIT V TEMPORARY LAYOFF PROVISIONS The following provisions shall apply relative to a temporary layoff, as referenced in Article 5.4 (LAYOFF PROVISIONS): NOTIFICATION: Should the Company initiate a temporary layoff, affected employees shall be notified in writing as soon as possible, and will have three (3) days to indicate their interest for consideration in the layoff. ELIGIBILITY: Temporary layoffs, out of line of seniority, shall be strictly voluntary. If there are more volunteers than needed within a classification, selection shall be determined by highest Company seniority of the interested employees. If there are no volunteers, the Company shall explore other alternatives that may satisfy the temporary layoff situation. TIME FRAME: A temporary layoff shall be for the stated time period or less, as indicated in writing at the time of notification. If, during the temporary layoff, the Company recognizes that the layoff may extend beyond the original time frame, employees in layoff status shall be given the option to extend or return to work. If the temporary layoff ends before the stated time frame, employees will be notified immediately, and expected to return to work the next day unless other arrangements are approved by management. PAY: Employees shall be paid approximately 70% of their current income, which includes income received from unemployment compensation as a result of the layoff. The following formula shall be used to calculate an employee's gross wages while on temporary layoff: Base rate x 40 Hrs. x 70% - Unemployment Income = Weekly Gross Wages For the purpose of this calculation, the unemployment compensation amount will be subtracted to arrive at gross wages even if the employee does not receive this benefit. The exception to this provision will be for the first week of the temporary layoff, when employees will be required to serve a waiting week for unemployment compensation. For this initial week, employees will be paid 70% of their base rate. VACATION: No adjustment to vacation accrual shall be made during the first sixty (60) calendar days of a temporary layoff. However, once the sixty (60) day period has elapsed, an employee's vacation accrual shall be adjusted and treated as any other leave, as outlined in Article 12.4 (VACATION ADJUSTMENTS). If employees are in layoff status and unable to use their vacation allotment for that year, the unused vacation shall be automatically carried over to the next year. SICK LEAVE: Employees shall continue to accrue sick leave monthly, as if they were working. However, employees will not be eligible to use sick leave or short-term disability during the period for which they are on temporary layoff. Page #72 HOLIDAYS: Employees shall not be entitled to holiday pay while on temporary layoff. The only situation that would warrant holiday pay is if they began or were recalled from temporary layoff during the week of a holiday. EXAMPLE ------- if the temporary layoff begins on tuesday of a week with a monday holiday, the employee would receive holiday pay for that day. These provisions do not apply to the floating holiday, as the employee would be allowed to reschedule the day at a future time. If as a result of a temporary layoff, an employee is unable to schedule their floating holiday, they will be allowed to carry this holiday into the following year. SENIORITY: An employee's seniority shall continue to accrue during the period of layoff. BENEFITS: An employee's benefits shall remain the same during the period of layoff. Employees monthly contribution will be deducted from these bi-weekly checks. PROMOTIONAL OPPORTUNITIES: Employees shall be eligible to indicate their interest in promotional opportunities that may arise during the period of layoff. However, they must individually assume the responsibility of meeting appropriate deadlines for consideration. Any employee awarded a promotion or transfer while on temporary layoff, will be returned to work immediately. RECALL: Should the Company need to recall employees in a specific classification prior to the previously stated date, employees shall be recalled by Company seniority on a volunteer basis. If there are no volunteers to return, inverse seniority will be used to satisfy these requirements. Any issues delaying an employee's return to work will be addressed on an individual basis. However, the monetary benefits associated with a temporary layoff will end on the date of recall. Page #73 Letters of Agreement Continuing to Remain in Effect The following Letters of Agreement shall remain in force and be included in the Clerical Collective Bargaining Agreement which is effective February 1, 1998 and will continue to remain in effective through February 1, 2002. . Letter of Agreement 14.4 (1988) -- Regarding Retirement Plans (Brimer/Gilliam) . Letter of Agreement (1994) -- Discipline Relative to Tardiness and Attendance (Anzinger/Weddle) . Letter of Agreement (1994) - Injuries Relative to Dog Bites (Anzinger/Weddle) . Letter of Agreement (1994) - Vacation/Sick Leave Bonus (Anzinger/Weddle) . Letter of Agreement (1994) - Organization Study (Anzinger/Weddle) . Letter of Agreement (1994) - Labor/Management Meetings (Anzinger/Weddle) . Letter of Agreement (1994) - Work/Family Issues (Anzinger/Weddle) . Memorandum of Settlement (1995) - Part - Time Employees (Anzinger/Horvath) . Letter of Understanding (1995) - Flex Scheduling (Anzinger/Potter) . Letter of Agreement (1996) - Show of Interest (Anzinger/Potter) Copies of these letters are provided on the next twelve pages, page #75 through #86. Page #74 May 20, 1988 Mr. James Brimer International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING - ARTICLE 14.4 - -------------------------------------- Dear Mr. Brimer: Prior to January 1, 1976, employee participants in the Nevada Power Company Retirement Plan were required to contribute slightly less than 3% of their straight time earnings to defray the Company cost of retirement benefits. Effective January 1, 1976, the Company paid the full cost of the retirement benefits plan. On January 1, 1988, twenty-eight (28) employees covered by the Clerical Collective Bargaining Agreement were active employees and had made contributions toward their retirement benefits. Records have been maintained on the amount of each of the twenty-eight (28) employees showing the accumulation of the direct contributions made by these employees and the earnings, through investments on their contributions through December 31, 1975. The Company has, in accordance with IRS regulations, agreed to credit the 12/31/75 account balances with five percent (5%) interest per year until disposition of these funds was made individually with each of these employees. The Company has now agreed to standardize the retirement plans in the area of funding for retirement benefits. To standardize, the Company has agreed to return monies contributed prior to January 1, 1976, by the twenty-eight (28) employees to the employees plus earnings and interest at five percent (5%) per year if the employee requests return. The Company is permitting the selection of several options which are described in the following paragraphs: OPTION I: Participants in the Nevada Power Company Retirement and Thrift EMPLOYEE Plan actively employed on January 1, 1988, may elect to receive - -------- CONTRIBUTION their employee contribution to the Plan, along with - ------------ -------- earnings and interest, computed at 5% per annum from January 1, 1976 through April 30, 1988. If the employee's contributions are withdrawn, the monthly benefit that is calculated using final average earnings, credited service and social security benefit will not be reduced. Page #75 OPTION II: At the time of termination or retirement, Participants in the EMPLOYEE Nevada Power Company Retirement and Thrift Plan actively employed - -------- CONTRIBUTION on January 1, 1988, may choose to leave their employee - ------------ -------- contributions in the Plan, along with earnings and interest computed at 5% per annum from January 1, 1976, until retirement or termination from Nevada Power Company and receive a lump sum payment of their employee account at that time. This withdrawal of the employee's contributions will not reduce his monthly benefit. --- OPTION III: At the time of termination or retirement, participants in Nevada EMPLOYER Power Company Retirement and Thrift Planer actively employed on - -------- CONTRIBUTION January 1, 1988, may elect to withdraw the employer contribution - ------------ -------- to the Plan which will include interest computed at 5% per annum from January 1, 1976, until the date of termination or retirement. This election will be available whether they have withdrawn the employee contribution in 1988 or at the time of termination. If the employer's contribution is withdrawn, the employee's annuity would be reduced by an equivalent amount calculated by accumulating the total employer account value with 5% interest to normal Retirement Date dividing by 120 and multiplying by the ratio of actual years of credited service to years of credited service at normal retirement. OPTION IV: Participants in the Nevada Power Company Retirement and Plan EMPLOYER actively employed elect to leave the employer's contribution in - -------- CONTRIBUTION the Plan, along ted at 5% per annum from January 1, 1976, until the date. If the employer's contribution is not withdrawn, there will be no reduction of the employee's monthly benefit. Very truly Yours, s/Cynthia K. Gilliam ACCEPTED: s/James Brimer Business Manager and Financial Secretary, IBEW Local 396 Page #76 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- DISCIPLINE RELATIVE TO TARDINESS AND ATTENDANCE Dear Mr. Anzinger: Both the Company and Union recognize that having reliable employees with good attendance is central to achieving the Company's goals and mission. Both parties also recognize that the majority of employees have good attendance records and display a true commitment to their occupation and work groups. However, in an effort to assist those employees who may have an attendance problem and minimize the burden placed on fellow employees, the Company and Union have agreed to waive the time off the job (i.e. one (1) day suspension, three (3) day suspension) and document those steps of progressive discipline on paper only. It is incumbent on both parties to communicate that although employees will not be subject to lost time, this should in no respect minimize the seriousness of this action. This agreement will remain in effect until February 1995, at which time the Company and Union will reconvene to discuss extending or discontinuing this agreement. Very truly yours, S/Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: s/James Anzinger Business Manager and Financial Secretary IBEW Local Page #77 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- INJURIES RELATIVE TO DOG BITE Dear Mr. Anzinger: During the negotiations of the Clerical agreement, which expires in May 1994, the Company and Union discussed meter reading injuries relative to dog bites. The Company and Union agreed to communicate and reinforce, with representative from the CIC and Commercial Offices, the importance of their initial contact with the customer in annotating relevant information regarding animals. The Company will endeavor to locate and provide a list of local attorneys who might be interested in representing employees negatively impacted by dog bites. Very truly yours, s/Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: s/James Anzinger Business Manager and Financial Secretary IBEW Local 396 Page #78 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- VACATION/SICK LEAVE BONUS Dear Mr. Anzinger: During negotiations of the Plant agreement, which expires in February 1994, both the Company and Union recognize that our ability to succeed in a competitive environment is the result of effectively utilizing material and human resources. As such, in an effort to minimize increases in manpower resulting from scheduled time off, the Company and Union agreed to explore an additional option for consideration by employee's eligible for the vacation and sick leave bonus. Issues relative to a buy-out in the form of Company stock placed in the employee's 401K account, or cash, shall be discussed and addressed, including the possible tax ramifications. Very truly yours, s/Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: s/James Anzinger Business Manager and Financial Secretary IBEW Local 396 Page #79 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- ORGANIZATION STUDY Dear Mr. Anzinger: In May of 1993, the Board of Directors provided the necessary approval for the Company to begin on an Organization Study. This study has provided us with an opportunity to take a fresh look at Nevada Power Company, assess the way our work is organized to provide faster, more efficient service to our customers, and evaluate the way we communicate with each other to resolve problems more efficiently. During the negotiations of the Clerical agreement, which expires in May of 1994, the Company and Union agreed that as the Company streamlines work processes, there will be occasions which will require the Company and Union to reconvene to discuss issues of flexibility, changes in technology, and maximizing resources. Both parties recognize that changes promoting efficiencies in the work place benefit all employees, and the Company and Union will continue to promote and support ideas that meet those interests. Very truly yours, s/Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: s/James Anzinger Business Manager and Financial Secretary IBEW Local 396 Page #80 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- LABOR/MANAGEMENT MEETINGS Dear Mr. Anzinger: Both the Company and Union recognize the value in formally convening to discuss issues that affect departmental policies, procedures, and collective bargaining provisions. As such, during the negotiations of the Plant agreement, which expires in February 1994, the Company and Union agreed to continue holding departmental labor/management meetings as a forum to clarify, address interests, and problem solve solutions that mutually benefit all employees. Attendees shall include stewards, team leaders, and other employees reporting to that department or location, and meetings shall be held as needed, but not less than every sixty (60) days. The Company recognizes the value of participation and input from all its employees and the Union's facilitation of this process is critical to our mutual success. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local 396 Page #81 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- WORK/FAMILY ISSUES Dear Mr. Anzinger: During the negotiations of the Plant agreement, which expires in February 1994, the Company and Union recognize that work/family issues will continue to be at the forefront of workplace activities. As such, the Company and Union have agreed to address the issues of job sharing, telecommuting and other alternative work schedules or programs which allow both the Company and employee maximum flexibility without jeopardizing customer service. These issues will be addressed through labor/management meetings and may be initiated on a case by case basis. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/James Anzinger Business Manager and Financial Secretary IBEW Local 396 Page #82 - --------------------------------- MEMORANDUM OF SETTLEMENT between IBEW LOCAL 396 and NEVADA POWER COMPANY - ---------------------------------- Nevada Power Company, hereinafter referred to as the employer, and the International Brotherhood of Electrical Workers, Local 396, hereinafter referred to as the Union, are parties to a collective bargaining agreement which establishes wages and working conditions for certain covered employees. This agreement is described as the Clerical and Plant agreements and contains procedures for the meaning and interpretation of the agreement. The following language covers Clerical, part-time employees: . At least two (2) days off shall be consecutive during the work week, however, the days off may not be Saturday and Sunday. Example: The employee's day off may be Wednesday and Thursday. . At least two (2) hours in any one day shall constitute the work day. . Shift differential will apply as usual. . Bilingual pay will apply at $15.00 per pay period. . Call outs - full-time employees will be called out first. During emergency situations, full-time employees may not be called-out first in the interest of coverage. . At least twenty-four (24) hour notice will be given for change in work schedule. . All language relative to meals in Article 6.12 would apply after completing eight (8) hours of continuous work. . For the purpose of processing step increases, 1040 hours worked will be considered equivalent to "six months," as stated in Exhibit II, Schedule of Wage Rates. IN WITNESS HEREOF, the parties hereto executed this agreement on the 20/th/ day of June, 1995. /s/ Fred Horvath /s/ James Anzinger NEVADA POWER COMPANY IBEW LOCAL 396 Page #83 September 28, 1995 Mr. James Anzinger International Brotherhood of Electric Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING - ----------------------- FLEX SCHEDULING Dear Mr. Anzinger: This is to confirm our agreement made relative to flex scheduling and establishing a program which is available to all departments in the Company (Plant & Clerical Agreements). With prior approval of immediate supervision, regular employees will be allowed flexibility in the starting and quitting times of their regularly scheduled eight (8) hour shifts. The purpose of the program is to enable employees to attend to family, medical, community and other needs which may occasionally arise by reporting to work later than scheduled or leaving work earlier than scheduled, and to make up the scheduled time not worked. The program will be administered subject to service requirements of the Company and the following conditions: 1. An employee who works less than a regular scheduled shift will be paid only for the time actually worked on that shift. 2. Make-up hours must be worked within the work week in which a flex schedule is granted. Also, make-up hours shall not be denied once the flex time has been taken off. 3. Corresponding make-up hours shall be reflected as such in the employee's time card. 4. No more than twenty (20) flex hours will be allowed in any thirty (30) day period. 5. Make-up hours available but not worked within the work week will be treated as an unpaid absence and shall be subject to the attendance policy. 6. Employees may use vacation time as make-up time with supervisory approval. 7. Make-up hours will be paid at straight time regardless of the shift or day on which they are worked. No grievance will be filed asserting that the program violates any provision of the Labor Agreement which may conflict or be inconsistent with the program. Page #84 This agreement will remain in effect from September 28, 1995 through February 2, 1998, unless canceled in writing by either the Company or the Union with two (2) week's notice. Very truly yours, /s/ Daniel S. Potter Director, Diversity & Employee Relations ACCEPTED: /s/ James Anzinger Business Manager & Financial Secretary IBEW Local 396 Page #85 November 25, 1996 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 Dear Mr. Anzinger: This letter will document an agreement between the International Brotherhood of Electrical Workers (IBEW), Local #396, and Nevada Power Company regarding assignments within Telephone Service Operations (TSO). As job functions within TSO become available, TSO employees will be asked to indicate interest for those functions through a "show of interest" process. Information regarding the available function will be published, including: function, shift, description of major duties, skills and knowledge, deadline and means for responding to the show of interest. All TSO employees who indicate an interest will be considered for assignment based on skills, knowledge and Company seniority. When knowledge and skills are substantially equivalent, Company seniority shall govern. This process for assigning functions within the TSO will remain in effect until such time that either party gives written notice to the other party of its desire to discontinue this process. This process will then be discontinued and all vacancies that arise subsequently will be filled in accordance with the applicable job posting system in effect at that time. Very truly yours, /s/ Daniel S. Potter Director, Employee Relations & Diversity AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 Page #86 May 27, 1998 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF AGREEMENT: - ------------------- Performance Evaluations Regarding Seniority Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company relative to performance evaluations scoring and rating as referenced in the contract. We have jointly agreed not to use performance evaluations that utilize a numbered rating system. Therefore, in the contract where is states that for a tie breaker we will use the most recent performance evaluation and the highest score will break the tie, shall be disregarded. Articles 5.4, 7.1 and Exhibit V, all dealing with Seniority, are impacted. The Company and the Union agree to meet to determine a tie breaker. Very truly yours, Gloria Banks Weddle Vice President, Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local #396 Page #87 November 4, 1998 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF AGREEMENT: - ------------------- Alternate Field Representative, Field Service Representative, Field Service Investigator Dear Mr. Anzinger: This letter will document the agreement between Nevada Power Company (NPC) and the International Brotherhood of Electrical Workers (IBEW) Local #396 regarding Alternate Field Representatives (AFR), Field Service Representatives (FSR), and Field Service Investigators (FSI). NPC and IBEW agree that AFRs will replace FSRs through attrition. Selections will be made in accordance with Article 7, Seniority and Promotions, of the current Clerical Collective Bargaining Agreement (CCBA). In addition, if a FSR accepts an apprenticeship, their FSR rate of pay will be frozen until the step wage increase in the new classification reaches their current rate of pay. Also, CCBA increases will be paid in lump sum. Finally, future FSI positions will be filled exclusively from the FSR classification. Once, FSR positions are exhausted or no candidates are available then AFRs will fill the vacant positions. Selections will be made in accordance with Article 7, Seniority and Promotions, of the current CCBA. Very truly yours, Gloria Banks Weddle Vice President, Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local #396 Page #88 November 4, 1998 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF AGREEMENT: - ------------------- 1994 - Thirty Year Employees lost vacation Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company relative to employees who achieved 30 years of employment in 1994. The following employees shall have returned to them the one week (40 hours) of vacation that they lost. Donald Duszynski Gwendolyn Mabry Very truly yours, Gloria Banks Weddle Vice President, Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local #396 Page #89 November 9, 1998 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF AGREEMENT: - ------------------- Incentive Programs This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company relative to incentive programs. NPC and IBEW will agree to discuss any and all incentive programs which are an addition to base wages. Very truly yours, Gloria Banks Weddle Vice President, Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local #396 Page #90 November 19, 1998 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF AGREEMENT: - ------------------- NO LAYOFFS Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company relative to layoffs for Clerical employees. If a full-time Clerical employee was hired on or before November 18, 1998, both the Union and Company agree that there will be no layoffs of those employees for the first three years of the Clerical CBA. If there is a layoff on the fourth year of the contract, the terms and conditions are detailed in Articles 5.4 LAYOFF PROVISIONS and 5.5 SEVERANCE. The Company may utilize clerical employees in MPAT positions to maximize employee's skills and meet business needs. The employee would remain in the Union and keep their seniority. This is not to conclude that the MPAT position would be covered under the Clerical CBA. This agreement will remain in effect until February 1, 2001. Very truly yours, Gloria Banks Weddle Vice President, Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local #396 Page #91 November 19, 1998 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF AGREEMENT: - ------------------- RECLASSIFICATION OF RETAIL OPERATIONS REPRESENTATIVES (ROR) Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396 (IBEW), and Nevada Power Company (NPC) relative to the Retail Operations Representative classification. In a Letter of Understanding dated August 20, 1996, between NPC and IBEW, the ROR classification was created. This letter confirms our agreement that the ROR classification and associated duties have been eliminated. However, the duties performed by these employees prior to the creation of the ROR classification will remain under the jurisdiction of the IBEW. All ROR's will be reclassified as Retail Customer Representatives (RCR) effective immediately. The Company will notify ROR's in advance of the reclassification. Following their reclassification to RCR, NPC may transfer them to the Telephone Service Operations by inverse seniority. The employees affected will maintain their seniority and wages. Very truly yours, Gloria Banks Weddle Vice President, Corporate Services AGREED: James Anzinger Business Manager and Financial Secretary IBEW Local #396 Page #92 Index ============================================================================== 401(K) ============================================================================== 401(K) - Tier One, 43 401(K) - Tier Two, 51 ============================================================================== A ============================================================================== Accidental Life Insurance - Tier One, 44 Accidental Life Insurance - Tier Two, 52 ============================================================================== B ============================================================================== Benefits - Tier One, 34 Benefits - Tier Two, 44 Bi-Lingual Representatives, 14 Break Periods, 13 Bulletin Boards, 6 ============================================================================== C ============================================================================== Call-Outs, 15 Check Off Authorization, 70 Classification Descriptions, 60 Continuity of Service, 3 Contracting Work, 6 ============================================================================== D ============================================================================== Dental Benefit - Tier One, 35 Dental Benefit - Tier Two, 45 Discipline, 5 Dues. See Union Dues ============================================================================== E ============================================================================== Employee Part-Time, 6 Status, 6 Employee Probationary, 7 Regular, 8 Temporary, 7 ============================================================================== F ============================================================================== Family and Medical Leave, 55 Funeral Leave, 54 ============================================================================== G ============================================================================== Grievance Procedure, 22 ============================================================================== H ============================================================================== HMO - Tier One, 37 HMO - Tier Two, 46 Holidays, 27 ============================================================================== I ============================================================================== Inclement Weather, 26 ============================================================================== J ============================================================================== Jury Duty, 54 ============================================================================== L ============================================================================== Labor/Management Meetings, 57 Layoff Provisions, 8 Leaves of Absence, 53 Light Duty, 33 Long Term Disability - Tier Two, 52 Long-Term Disability Insurance - Tier One, 44 Lunch Periods, 13 ============================================================================== M ============================================================================== Meals, 16 Mileage Chart, 18 Moving Expenses, 20 Mutual Gains Meetings, 23 ============================================================================== N ============================================================================== Non-Discrimination, 4 ============================================================================== O ============================================================================== Overtime, 13 Overtime Equalization, 14 ============================================================================== P ============================================================================== Partial Disability - Tier One, 39 Partial Disability - Tier Two, 48 Pay Provisions, 14 Preferred Provider Program - Tier One, 37 Page #93 ============================================================================== R ============================================================================== Rain Gear, 26 Rate of Pay, 12 Recall Rights, 9 Rest Time, 15 Retirement Benefit - Tier One, 42 Retirement Benefit - Tier Two, 50 ============================================================================== S ============================================================================== Seniority, 19 Severance, 10 Shift Differential, 16 Short Term Disability - Tier One, 40 Short Term Disability - Tier Two, 49 Sick Leave, 32 Sick Leave Agreement, 71 Sick Leave Bonus, 32 Staffing Vacancies, 19 Sub-Departments, 21 ============================================================================== T ============================================================================== Temporary Layoff Provisions, 8, 72 Term Life Insurance - Tier One, 34 Term Life Insurance - Tier Two, 45 Term of Agreement, 58 Training Exceptions, 15 ============================================================================== U ============================================================================== Union Business, 6 Union Dues, 5 Union Steward Business, 6 Upgrade, 57 ============================================================================== V ============================================================================== Vacation Bonus, 30 Vacations, 29 Vehicle Usage, 17 Vision Benefit - Tier One, 35 Vision Benefit - Tier Two, 45 ============================================================================== W ============================================================================== Wage Rates - Tier One, 63 Wage Rates - Tier Two, 68 Working Hours, 12 Working Safety Committee, 25 Page #94 EX-10.S 28 0028.txt GENERATION AGREEMENT, IBEW Exhibit 10(S) Table of Contents
Article Page Preface 3 Article No. 1: Introduction/Continuity of Service/Non Discrimination 3 Article No. 2: Union Security 5 Article No. 3: Exclusive Functions of Management 5 Article No. 4: Union Activity 6 Article No. 5: Status of Employees 7 Article No. 6: Working Hours and Rates of Pay 11 Article No. 7: Seniority and Promotions 21 Article No. 8: Grievance Procedure 24 Article No. 9: Working Safety Committee 26 Article No. 10: Inclement Weather Practice 27 Article No. 11: Holidays 28 Article No. 12: Vacations 30 Article No. 13: Sick Leave 32 Article No. 14: Employee Benefit Plans 34 Article No. 15: Leaves of Absence 42 Article No. 16: Working Rules 44 Article No. 17: Term of Agreement 47 Exhibits Exhibit I: Classification Descriptions 50 Exhibit II: Schedule of Wage Rates 54 Exhibit III: Check Off Authorization 58 Exhibit IV: Sick Leave Agreement 59 Exhibit V: Temporary Layoff Provisions 60 Letters of Understanding Letter of Understanding: Article 14.4 62 Letter of Understanding: Discipline Relative to Tardiness and Attendance 64 Letter of Understanding: Labor/Management Meetings 65 Letter of Understanding: Organization Study 66 Letter of Understanding: Work/Family Issues 67 Letter of Understanding: Working Foreman Classification 68 Letter of Understanding: Red Circle Rates 69 Letter of Understanding: Maintenance Technician Classification 70
1 Letter of Understanding: Organizational Restructuring 71 Letter of Understanding: Operations Working In Maintenance 72 Letter of Understanding: Operations Lead Classification 73 Letter of Understanding: Operations Training 74 Letter of Understanding: Retail Customer Representative 75 Letter of Understanding: 10 Hour Rest Period 76 Letter of Understanding: Vacation/Sick Leave Bonus 77 Letter of Understanding: Sick Leave Buy Back 78 Letter of Understanding: Severance Allowance Plan 79 Letter of Understanding: Journeyman, Electrical & Instrumentation 80 Letter of Understanding: Overtime Equalization Amendment 81 Letters of Agreement Letter of Agreement: Status of Maintenance Utility Technicians And Maintenance Technicians 82 Letter of Agreement: Overtime Equalization 83 Letter of Agreement: Flexibility Language 84 Letter of Agreement: Newly Hired Journeymen 85 Letter of Agreement: Status of Utility Operators 86 Letter of Agreement: Power Delivery Apprenticeship Committee 87 Letter of Agreement: Movement of Existing Employees From One Position to Another 88 Letter of Agreement: Contract Education and Intent 89 Letter of Agreement: E/I Classification 90 Letter of Agreement: Contractors for Generation 91 Letter of Agreement: Performance Evaluations Regarding Seniority 93 Letter of Agreement: 1994 - Thirty Year Employees Lost Vacation 94 Letter of Agreement: 36 For 40 Holidays 95 Letter of Agreement: Tier II Wages 96 Alternative Shift Schedules Thirty-Six For Forty Weekend Crew 97 Four Ten Hour Shift Schedule 101 Twelve Hour Shift Schedule 111
2 Generation Agreement This agreement, made and entered into as of June 25, 1999, by and between Nevada Power Company, a corporation, hereinafter referred to as the Company, and Local Union No. 396 of the International Brotherhood of Electrical Workers, an affiliate of the A.F.L./C.I.O., hereinafter referred to as the Union. WITNESSETH Whereas, for the purpose of facilitating the peaceful adjustments of differences that may arise from time to time between the parties hereto, and to promote harmony and efficiency to the end that the Company, the Union and the general public may mutually benefit. Now therefore, in consideration of the provisions, covenants and conditions herein contained, the parties hereto agree as follows, to wit: Article No. 1 - Introduction, Continuity of Service, Non-Discrimination 1.1 INTRODUCTION: The Company, in Clark and Nye counties, in the state of Nevada, a public utility engaged in the service of generating electric power, hereby recognizes Local Union No. 396 of the International Brotherhood of Electrical Workers, A.F.L./C.I.O., as the exclusive bargaining agent for its employees who are employed in Generation, excluding all supervisory, confidential and professional employees within the meaning of the National Labor Relations Act, such covered employees more specifically defined in Exhibit I (CLASSIFICATION DESCRIPTIONS), for the purpose of collective bargaining with respect to rates of pay, wages, hours of employment and other conditions of employment which may be subject to collective bargaining. 1.2 CONTINUITY OF SERVICE: It is mutually recognized that the interest of the Company, the Union and the welfare of the general public, requires the continuous rendering of service by the Company, and the parties agree that recognition of such obligations of continuous service is imposed upon both the Company and its employees. The Company, to facilitate the continuous performance of such service, agrees to meet with the Business Manager of the Union or his designated representative in reference to any matter within the scope of the Agreement, and agrees that it will cooperate with the Union in its efforts to promote harmony and efficiency among all of the employees of the Company. The Union agrees that the employees covered by this Agreement, will not be called upon or permitted to cease or abstain from the continuous performance of the duties pertaining to the positions held by them with the Company. The Company agrees to do nothing to provoke interruption of or to prevent such continuity of performance as required in the normal and usual operations of the Company's property. It is mutually agreed that any difference that may arise between the above parties shall be settled in the manner hereinafter provided. The Union agrees that the employees covered by this agreement will individually and collectively perform loyal and efficient work and service and that they will cooperate in promoting and advancing the welfare of the Company and the protection of its service to the public at all times. The Union agrees that there will be no strikes, stoppages of work or slowdowns of the Company's operations during the term of this Agreement, and the Company agrees that there will be no lockouts during the term of this Agreement. 3 1.3 NON-DISCRIMINATION: Neither the Company nor the Union will discriminate against any employee in the application of the terms of this agreement because of race, religion, sex, age, color, national origin, veteran status, disability or any other legally protected status. It is understood that job titles used in this agreement which indicate the male gender are not intended to restrict classifications to employees of the male gender. 1.4 LAWS: It is understood and agreed that if mandatory laws or government rules or regulations applicable to or in conflict with any of the provisions of this Agreement become effective and binding upon the parties, such conflicting provisions of this Agreement shall be subject to modification as required and the parties shall meet and confer to determine mutually agreeable language to conform to the laws, government rules and/or regulations. If laws, government rules and/or regulations hereafter enacted require changes in the structure and/or services provided by the Company, then the Company and Union will, upon mutual consent, reopen negotiations concerning the terms of this Agreement that are directly affected by the changes. 1.5 AMENDMENT: This Agreement shall be subject to amendment at any time by mutual consent of the parties. Such amendment must be written, state the effective date of the amendment, and be executed in the same manner as this Agreement. 4 Article No. 2 - Union Security 2.1 UNION DUES: The Company shall deduct money from Union employees' wages and pay it to the proper officers of the Union, provided the employee who is a member of the Union individually and voluntarily authorized such deduction to be made. The form of the check-off authorization is attached to this Agreement as Exhibit III (CHECK OFF AUTHORIZATION). The Union shall hold the Company free and harmless from any claims or damages from any party whatsoever for making deductions and shall indemnify the Company against any and all claims or damages which may originate from the dues check-off process. 2.2 NEW EMPLOYEES: The Company agrees to notify the Union of the name and address of new employees within thirty (30) days of their date of hire. Article No. 3 - Exclusive Functions of Management 3.1 BUSINESS MANAGEMENT: The supervision and control of all operations and the direction of all working forces, including the right to hire, to suspend or discharge for proper cause, to transfer employees, to relieve employees from duty because of lack of work and for other legitimate reasons, is vested exclusively in the Company. 3.2 DISCIPLINE: The Company retains the right to exercise discipline in the interest of good service and the proper conduct of its business, provided an employee who has been laid off, discharged, or disciplined shall be advised of the reason or reasons for such action and shall be allowed suitable representation, if so desired, at the time such reasons are provided. Furthermore, should the employee or the Union feel that the terms or conditions of this Agreement have been violated, either shall be entitled to grieve such action in accordance with the provisions set forth in Article 8 (GRIEVANCE PROCEDURE) of the Agreement. 5 Article No. 4 - Union Activity 4.1 UNION BUSINESS: An employee who requests time off for Union activities, in addition to regular time off, shall be granted such request if such time off will not inconvenience the operations of the Company or increase its operating expenses; provided further, that such employee shall receive no compensation from the Company for such time off. 4.2 BULLETIN BOARDS: The Company agrees to permit the Union to use reasonable space for the purpose of posting officially signed Union bulletins upon the bulletin boards which are furnished by the Company. 4.3 CONTRACTING WORK: In case the Company should contract any type of work customarily performed by bargaining unit employees, the Company shall, before awarding such contract, advise the contractor that the work is to be done under not less than the terms and conditions pertaining to hours and wages set forth in this Agreement. Upon award of such contract, the Company shall notify the Union of such contractor and the nature of the work being performed. The Company will not contract any of its construction and maintenance work while having available competent employees to do such work. In the event the Company has employees on layoff with recall rights, the Company will not establish contracts for work that is customarily performed by such bargaining unit employees unless the affected employees are not qualified to perform the work (as defined in Article 5.4 [LAYOFF PROVISIONS]), or the work requires the use of special construction or other equipment which the Company does not possess. If the Company has employees in layoff status who are qualified to perform work which the Company intends to contract, the Company may recall these employees for the term of the contracted work without creating the liability for an additional severance in accordance with Article 5 (STATUS OF EMPLOYEES) of this agreement. 4.4 UNION/STEWARD BUSINESS: The Union steward shall, upon request to the supervisor, be allowed reasonable time during regular working hours, without loss of pay, to attend to Union matters on the job, provided such time is not used for solicitation of membership or collection of dues, and does not interfere with regular work schedules. 6 Article No. 5 - Status of Employees 5.1 STATUS DESIGNATION: Employees shall be designated as temporary, probationary, or regular. TEMPORARY: A temporary employee is one who is hired to fill a position for which there is temporary authorization. After working 1,040 straight time hours, a temporary employee shall be eligible for group life and medical insurance (excluding dental and vision), covering the employee only. If a temporary employee is offered and accepts a regular position, an adjusted date of hire, crediting actual time worked, will be calculated. If the temporary employee has worked at least 1,040 straight time hours, without cumulative absences of thirty (30) days or more at the time the regular position is awarded, the employee shall be eligible for all applicable benefits on the effective date of the award. If a temporary employee is offered and accepts a regular position that the employee has not previously occupied while at the Company, the employee must complete a probationary period to evaluate work performance. If, however, the employee has previously occupied the position being awarded, the employee shall receive credit toward the probationary period for actual time worked in that position. If an employee works at least 1,500 straight time hours during a twelve (12) month period in the same temporary position, the position will become authorized and the employee will be offered regular status in that position. PROBATIONARY: A probationary employee is one who is hired to fill an authorized position. After six (6) months of employment, a probationary employee shall be eligible for all benefits in accordance with this agreement. During the probationary period, the employee may be terminated at the discretion of the Company as long as the termination is not discriminatory and is not for the purpose of keeping jobs filled with probationary employees. Probationary employees who have not satisfactorily completed a formal departmental training and appraisal program may, at the discretion of supervision, have their probationary period extended by up to three (3) months. Supervisors shall not extend the probationary period if they do not have a formal training and appraisal program in place or have failed to use those programs. No later than two (2) weeks prior to the completion of the first six (6) months, the supervisor must notify the employee and the Union Business Manager in writing, if the probationary period will be extended. In computing the effective date of a change in status from a probationary to regular employee, interruptions in employment, caused by the following circumstances, shall not be credited: . Discharge . Resignation . Absence for more than an accumulative total of thirty (30) days due to: . Lay off . Sickness . Industrial disability . Other causes. If the employee's combined absences, during the probationary period, are for a period greater than the employee's combined actual work time, the employee shall be terminated. The transfer of a probationary employee from one job to another without interruption of work time shall not be considered a break in employment. At the end of the probationary period as defined above, the employee will become a regular employee and will rank in seniority from the original date of hire. 7 REGULAR: A regular employee is one who has completed a probationary period, is benefit eligible, and is in an authorized position. 5.2 APPLICATION REFERRAL: The Company recognizes the Union as a valuable source for employment referrals, due to the mutual interest in the profitability of the Company. As such, when additional employees are needed to do work which comes under this agreement, the Company will indicate its requirements, relative to knowledge, skills, and abilities, and will give the Union an equal opportunity to refer applicants for employment. The Company retains the right to evaluate each candidate and make the final hiring decision. 5.3 TEMPORARY LAYOFF PROVISIONS: In recognition of the competitive nature of the utility business, innovative solutions are required when unforeseen challenges present themselves. Accordingly, there may be operational circumstances that would permit the temporary layoff of employees for short-term periods of time, out of line of seniority, on a voluntary basis. These provisions are detailed in Exhibit V (TEMPORARY LAYOFF PROVISIONS) of this agreement. 5.4 LAYOFF PROVISIONS: DEFINITION OF QUALIFIED: For purposes of defining "qualified", as used in ----------------------- this Article, the definition shall be that an employee is qualified to perform any position, in either collective bargaining agreement, which the employee has previously occupied at the Company or any position that is an equal or lower classification which has been identified as being part of the employee's current trade/department progression. The progressions are detailed in a memorandum of understanding that is held by both the Company and the Union. NOTIFICATION: If it becomes necessary for the Company to layoff regular ------------ employees due to lack of work, the Company shall give affected employees as much notice as possible; but in no event shall employees receive less than fourteen (14) calendar days notice of layoff. Where temporary and probationary employees are involved, no notice of layoff is required. SENIORITY: Layoff in all cases due to lack of work will be determined by --------- Company seniority within the classification affected by the layoff. If two (2) or more employees have the same Company seniority date, the highest score on the most recent performance appraisal will break the tie. Employees who are to be laid-off will be permitted to displace a less senior person in any classification for which they are qualified. RETURN TO BARGAINING UNIT: A member of the bargaining unit being ------------------------- transferred to a non-represented position shall retain Company seniority for all purposes including layoff, if the employee is returned to the bargaining unit within one (1) year of the initial transfer. FOUR (4) YEAR QUALIFIER: Any MPAT employee who accepts a position in the ----------------------- bargaining unit will establish a new date of seniority for the purpose of future layoffs, except as defined above. This date will reflect the day in which these employees accept such a position and will be effective for four (4) years. If there is a reduction in classifications in the bargaining unit, these employees will use the above mentioned date as their seniority date for the purpose of this reduction or layoff. After four (4) years of service in the bargaining unit, any employee impacted by this language, will be credited with all Company seniority for the purposes of reduction in classification or layoff. 8 RECALL: In the event of a recall, the Company shall provide notification ------ to affected employees by certified mail to their address of record. Such employees must keep the Company informed of the address where they can be reached. Recalled employees must report to work no later than fourteen (14) calendar days from the date the certified letter was mailed. Employees who do not report to work within fourteen (14) days from the date the letter was mailed will be considered a voluntary quit. Employees will only be considered for recall to the classification from which they were laid-off, unless they make a written application within fourteen (14) calendar days from the date of notification of layoff, to human resources, for any other position for which they are qualified. Applications that do not meet this time frame will only be considered after all timely applications have been honored. Employees must submit a written notice to human resources to rescind their application for consideration for previously held positions prior to formal notification of return to work. Any employee who refuses a recall to any requested position will be considered a voluntary quit and will waive all recall rights to any other position. Employees who have displaced a less senior person in any classification shall be given an offer to return to their former jobs if the vacancy is in their former classification. Recall rights shall cease on any layoff in excess of twelve (12) months. TEMPORARY RECALL: In the event of a temporary recall, in accordance with ---------------- Article 4.3 (CONTRACTING WORK), an employee may decline such temporary recall without waiving their rights for recall to a regular position, provided the temporary assignment is for less than ninety (90) days. If an employee accepts a temporary assignment, all benefits will be reinstated upon return to work and they will have recall rights for one (1) year from the date of any subsequent layoff. This right does not expire until the employee has returned to work or refused an offer to return to work. Any subsequent layoff will not create a liability for an additional severance benefit in accordance with this Article. EMPLOYMENT STATUS: Any regular employee who is laid-off due to lack of ----------------- work has a right to replace any temporary employee within (5) working days after notification of layoff, provided the regular employee is qualified to perform the duties of the position filled by the temporary employee. If a regular employee is laid-off because of lack of work and is subsequently offered and accepts the first recall for employment within one (1) year after layoff, the employee shall resume the status of regular employee and shall be credited with Company seniority previously accrued. Employees who are recalled in a classification previously held, or for one in which they are qualified, will not be required to serve another probationary period and will be eligible for benefits immediately. However, employees who leave the service of the Company due to voluntary severance in accordance with this Article, or layoff and who are re-hired after one (1) year from the date of layoff or severance shall not be credited with Company seniority at the time of re-employment and shall be required to serve a new probationary period. Upon completion of five (5) years of subsequent service, an adjusted date of hire will be calculated crediting actual time worked with the Company. This date will be used for the purposes of Company seniority and all related benefits. 5.5 SEVERANCE: Employees who have been notified of a layoff or a reduction in their classification which would cause them to be displaced from that classification may be eligible for severance benefits. The following define the severance benefit: ELIGIBILITY: Employees must have completed one (1) year of service to be ----------- eligible for the minimum severance benefit. BENEFIT AMOUNT: Employees will be paid forty (40) hours at their straight -------------- time rate for each year of service up to a maximum of three hundred twenty (320) hours. If eligible employees have completed nine (9) months of service since their most recent anniversary date, they will be considered to have completed an additional year of service for the purpose of calculating this benefit. 9 If an employee exercises the right to displace a less-senior employee who occupies a lower paying classification and is laid-off from that classification within sixty (60) calendar days of this assignment, the severance benefit will be calculated at the rate of the employee's original classification. MEDICAL COVERAGE: Employees' current medical coverage, excluding dental ---------------- and vision, will be continued at the applicable employee contribution for three (3) months following the effective date of layoff or severance. EMPLOYMENT STATUS: Employees who accept severance in lieu of bumping, ----------------- waive any recall rights and will be considered a voluntary quit with the payment of the appropriate severance benefit. Employees presented this option must notify human resources of their decision within forty-eight (48) hours of the notification of layoff. Employees who do not have the option of bumping, and accept severance benefits, will retain recall rights for one (1) year from the date of layoff. Employees may agree in writing to waive their bumping rights as well as the appropriate severance benefit, thereby maintaining recall rights to the classification from which they were laid-off for a period of one (1) year. This decision must be made at the time of the initial notification of layoff and, once submitted, is irrevocable. Employees who have accepted severance and are subsequently recalled, will use that recall date for the purposes of calculating any severance benefit in the future. PAYMENT: Any severance payment will be paid within five (5) calendar days ------- of the date of layoff. 5.6 AFFILIATE COMPANY: It shall not be deemed a severance for the purposes of ----------------- this Article if an employee is transferred to a wholly owned affiliate of the Employer which is bound to this agreement provided that the Employee's new position is covered by the Collective Bargaining Agreement and is the same as the position held before the transfer. 10 Article No. 6 - Working Hours and Rates of Pay 6.1 DEFINITIONS: SHIFT: Hours of work. ----- SCHEDULE: Days and hours of work. -------- WORK DAY: Eight (8) hours in any one (1) day shall constitute the work -------- day; however the Company and Union may enter into agreements which establish alternative work schedules involving work days which have more than eight hours. WORK WEEK: Five (5) consecutive work days, regularly scheduled between --------- the hours of 12:01 am, Monday, and 12:00 midnight, Sunday, shall constitute the basic work week. The basic workweek of regular day-shift employees shall be from Monday through Friday and reflect a schedule of forty (40) hours of straight-time work. REGULAR DAYS OFF: Days off shall be consecutive, however, they may not be ---------------- within the basic workweek. REGULAR DAY-SHIFT EMPLOYEES: Regular day shift employees are those --------------------------- employees who are assigned to shifts which are established on a Monday through Friday schedule and work a shift which begins between the hours of 7:00 am and 11:59 am. When mutually agreed to by the Union and Company, the day shift starting time may be scheduled as early as 6:00 am to take advantage of daylight hours. SEVEN DAY COVERAGE: A schedule of fixed or rotating shifts that cover ------------------ seven (7) days per week, twenty-four (24) hours per day. SHIFT EMPLOYEES: Shift employees are all employees not defined as regular --------------- day-shift employees. This includes employees assigned to fixed shifts and seven (7) day coverage. SHIFT DESIGNATIONS: No shift periods shall start between the hours of ------------------ 12:01 am and 5:59 am, unless mutually agreed to by memorandum of understanding between the Company and the Union The follow designations shall apply: FIRST SHIFT: All eight (8) hour shift periods regularly scheduled to ----------- begin at 6:00 a.m., or thereafter but before 12:00 noon shall be designated as first shifts. SECOND SHIFT: All eight (8) hour shift periods regularly scheduled ------------ to begin at 12:00 noon or thereafter but before 8:00 p.m., shall be designated as second shifts. THIRD SHIFT: All eight (8) hour shift periods regularly scheduled to ----------- begin at 8:00 p.m., or thereafter but before 12:01 a.m., shall be designated as third shifts. SHIFT DIFFERENTIAL: An incremental increase for working on a second or ------------------ third shift. SHIFT PREMIUM: An incremental increase for all hours worked outside of ------------- the employee's previous schedule for the first five (5) working days of a newly established permanent, temporary or emergency schedule. SHORT CHANGE: A transfer from one established schedule to another with ------------ only one shift off between schedules. COMPANY HEADQUARTERS: Any headquarters established for the purpose of -------------------- engaging in work covered by this Agreement when such work will continue for an indeterminate period of time. 11 6.2 BREAK PERIODS: A fifteen (15) minute relief period shall be provided for all employees not working seven day coverage during each one-half (1/2) of the shift. Work conditions permitting, each break period shall be given as near the middle of each one-half (1/2) of the shift as possible. 6.3 LUNCH PERIODS: Supervisors will establish a meal period without pay, approximately four (4) hours after the start of a shift. Employees who are required to begin their lunch more than one (1) hour before or after the regular start of lunch time shall be paid during the lunch period at the straight time rate. There are three (3) pay possibilities for employees with an unpaid lunch. For this example the employees shift is from 7:00 am to 3:30 pm with a one-half (1/2) hour lunch from 11:30 am to noon.
------------------------------------------------------------------------------------------------------------------ EXAMPLE #1 EXAMPLE #2 EXAMPLE #3 Employees who are required to Employees who work through their Employees who eat their lunch eat their lunch at 2:00 p.m. lunch from 3:00 pm to 3:30 pm would lunch and complete their shift (work would be paid eight and be paid eight (8) hours at until 3:30 pm) without taking a break one-half (8 1/2) hours of straight time and one-half (1/2) for lunch would be paid eight (8) straight-time pay. hour at time and one-half (1 1/2). hours at straight-time and one (1) hour at time and one-half (1 1/2). ------------------------------------------------------------------------------------------------------------------
REGULAR DAY-SHIFT AND SHIFT EMPLOYEES: The unpaid lunch period shall not ------------------------------------- exceed one-half (1/2) hour unless mutually agreed to by the Company and the Union. SEVEN DAY COVERAGE EMPLOYEES: These employees will be considered to have ---------------------------- a paid lunch period as part of their regular shift. EXAMPLE An employee whose shift is from 7:00 am to 3:00 pm will have a thirty (30) minute paid lunch period to be taken in accordance with operational efficiencies. 6.4 OVERTIME: In computing overtime, intermission taken out for meals served other than on the job shall be deducted, and any holiday or vacation paid in that pay period will be considered as time worked. TIME AND A HALF: Except as otherwise provided in this Article, the --------------- following situations shall require payment at one and one-half (1 1/2) times the regular established wage rate: . Time worked in excess of eight (8) hours per day. . Time worked in excess of any five (5) scheduled work days in that work week. . Work scheduled in the three (3) hours immediately preceding the normal starting time. . Employees who are scheduled to work on an observed holiday. . Employees on seven- (7) day coverage who are scheduled or called out for overtime except as defined in "Double Time." . Employees who are scheduled for overtime and such is canceled per Article 6.9 (REQUIRED NOTICE FOR OVERTIME). 12 DOUBLE TIME: Except as otherwise provided in this Article, the following ----------- situations shall require payment at two (2) times the regular established wage rate: . Employees, other than those assigned to seven (7) day coverage who are scheduled to work within the first five (5) hours of the eight (8) hour period immediately preceding the normal starting time regardless of the day of the week. . Employees who are called -out for work on an observed holiday. . Employees who work on the second day of a two days off period, or on the second or fourth days off of a four days off period with an overtime minimum as provided in Article 6.7 (CALL-OUTS). . Employees, other than those assigned to seven (7) day coverage who are called out for overtime work within the eight (8) hour period immediately preceding their normal starting time, regardless of the day of the week with an overtime minimum as provided in Article 6.7 (CALL-OUTS). . Employees who are assigned to seven (7) day coverage and are called out for work to cover all or part of the third shift, with an overtime minimum as provided in Article 6.7 (CALL-OUTS). . Employees called out while on vacation per the provision of Article 12.10 (CALL-OUT WHILE ON VACATION). DOUBLE TIME AND A HALF: Except as otherwise provided in this Article, the ---------------------- following situations shall require payment at two and one-half (2 1/2) times the regular established wage rate: . For all time worked in excess of sixteen (16) consecutive hours. . BREAK PERIOD: Employees entitled to pay at this rate will ------------ continue at this rate until they have been released for a period of at least six (6) continuous hours. Any break of six (6) hours will be considered an interruption of continuous work time. It is understood that any employee may be returned to work exactly six (6) hours from their most recent release, satisfying the required break. It is also understood that any employee released for such a break may be called back to work before six (6) hours have elapsed. EXAMPLE If an employee's normal quitting time is 4:30 P.M. and who is called back and including travel time, takes their time back before 10:00 , will receive two and one-half (2 1/2) for all time after 10:00 P.M. . MEAL PERIODS: Meal periods while working overtime will not be ------------ considered as part of the six (6) hour break and will not be considered time worked, unless employees are directed to work through their meal period. Employee's unpaid meal period which occurs during regular work hours will be included in the computation of the six (6) hour break, when this break is calculated from the end of the employee's last regular shift. Accordingly, an employee may be called out five and one-half (5 1/2) hours from the end of their last regular shift without creating a requirement for this rate. . STRAIGHT TIME PAY: Employees sent home for a six (6) hour break ----------------- will not lose any straight time pay for normally scheduled hours, as a result of such a break. EXAMPLE Employees assigned to a 7:00 am to 3:30 pm shift and released two (2) hours early so they may have a six (6) hour break before a scheduled outage would be paid for the two (2) hours at the straight time rate and this would satisfy the six (6) hour break. 13 Employees must use any rest time pay accumulated as a result of an overtime assignment before these provisions would apply. If an employee's accumulated rest time does not cover the entire six (6) hour break, the employee will receive straight time pay for any regularly scheduled hours not worked due to this break. 6.5 OVERTIME EQUALIZATION: The Company will endeavor to distribute overtime work as evenly as possible among those employees qualified to perform such work. For the purpose of distributing overtime, the Company will maintain and post overtime lists in each sub-department indicating time offered and time worked. Each department will create policies and procedures (as defined by Article 6.1, BY LOCATION, SHIFT AND CLASSIFICATION), for overtime equalization through labor/management meetings. 6.6 PAY PROVISIONS: PAY DAYS: Pay days shall be at biweekly intervals. -------- WAGES: The schedule of job classifications and wage rates, as mutually ----- agreed to, are made a part of this agreement, and are marked "Exhibits I and II." Wages shall be paid at biweekly intervals on the Thursday following the close of the two week pay period provided that if the regular pay day falls on a holiday, payment shall be made on the preceding work day. SPECIAL PAY REQUESTS: The Company recognizes there will be circumstances -------------------- such as weeks of vacation and vacation in association with holidays which will create special requests of the payroll department. Unless the situation is an emergency, all special checks will be limited to individuals who are absent for at least the Wednesday through Friday of a pay week. Exceptions to this practice will require written approval from the department manager and must be presented to payroll no later than forty-eight (48) hours in advance of the requested time for payment. RECOVERING OVERPAYMENTS: Deductions from an employee's wages, to recover ----------------------- overpayments made in error, will not be made unless the employee is notified prior to the end of the month following the month in which the check in question was delivered to the employee. A schedule for re-payment will be agreed upon by the Company and the employee. 6.7 CALL-OUTS: TWO HOUR MINIMUM: Employees called out for overtime duty shall receive at ---------------- least two (2) hours pay. Reasonable travel time (defined below) to and from home will be considered as time worked for the purpose of satisfying the two (2) hour minimum, and will be paid at the appropriate overtime rate.
--------------------------------------------------------------------------------------------------------------- EXAMPLE #1 EXAMPLE #2 EXAMPLE #3 Employees called out who work two Employees called out who work Employees called out who work one (2) hours and travel one (1) hour four (4) hours and travel one (1) (1) hour and travel one (1) hour (round trip) will be paid for three hour (round trip) will be paid for (round trip) will be paid for two (2) (3) hours. five (5) hours. hours. --------------------------------------------------------------------------------------------------------------- EXAMPLE #4 EXAMPLE #5 Employees called out Employees called out who work into their who work fifteen (15) regular shift shall be paid the appropriate minutes and travel one overtime premium for at least two (2) (1) hour (round trip) will hours, which includes travel time to work be paid for two (2) only. This does not change the normal hours. starting time for the purpose of extending the shift. -----------------------------------------------------------------------------------------
14 MULTIPLE CALL-OUTS: Employees called-out more than once in the twenty- ------------------ four (24) hour period from midnight one day to midnight the following day shall be paid at least the two (2) hour minimum mentioned above for the first call. For subsequent calls, employees shall be paid for a one (1) hour minimum with the same travel time considerations mentioned above. For the purpose of this section, concurrent calls or successive calls without a break in work time shall be considered as a single call. TRAVEL TIME: Employees are entitled to travel time according to the ----------- following chart: WORK LOCATIONS --------------------------------------------------------- Las Vegas Valley Reid Gardner --------------------------------------------------------- Las Vegas Valley .5 hour 1 hour --------------------------------------------------------- Moapa Valley 1 hour .5 hour --------------------------------------------------------- Boulder City .75 hour 1.5 hours --------------------------------------------------------- St. George/Alamo 2 hours 1.5 hours --------------------------------------------------------- Mesquite 1.5 hours .75 hour --------------------------------------------------------- Henderson .75 hour 1.5 hours --------------------------------------------------------- 6.8 REST TIME: Employees who are required to work overtime within the eight (8) hour period immediately preceding their scheduled starting time on a regular work day, shall be entitled to time off with straight time pay equal to time worked during this time frame. This is not applicable to a call out or scheduled overtime of three (3) hours or less immediately proceeding the employee's normal starting time. If an employee is entitled to rest time off, such time off would normally begin at the start of the regular shift. By mutual agreement between the supervisor and the employee, rest time may be taken during the last part of the regular shift. An employee shall not be required to work during his rest period provided adequate relief is available, however, should an employee be required to work during this period, he shall receive straight time for all time worked during his rest period in addition to his rest period pay. 6.9 REQUIRED NOTICE FOR OVERTIME: SCHEDULED OVERTIME: In scheduling overtime work, a minimum of fourteen ------------------ (14) hours notice is required, prior to the start of any overtime for a particular day, and before leaving the work site on a regular work day. Without this notice, such work will be considered as a call-out. It is understood that overtime, when worked as an extension of a regular shift, does not require such notification. EXAMPLE ------- An employee assigned to a 7:00 am to 3:30 pm shift and held over for overtime and is notified to work the next day (his/her day off) at 7:00 am. If notification is given in the first two (2) hours of held over overtime, this overtime is considered scheduled. 15 CANCELING OVERTIME: A minimum of twelve (12) hours notice is required on ------------------ canceling pre-scheduled overtime. When customer arrangements are involved, the Company must provide twelve (12) hours notice prior to the employee's next normal starting time. When such notice of cancellation of pre-scheduled overtime work is not given in accordance with the above, employees involved will be paid for two (2) hours at established overtime rates if they report and are retained for work. When such notice of cancellation is not given in accordance with the above, but employees are later notified of work cancellation, they will be paid for two (2) hours at time and one-half (1 1/2). If they report and are not retained for work, they shall receive pay for two (2) hours at time and one-half (1 1/2). 6.10 SHIFT DIFFERENTIAL: Seven (7) day coverage employees will be paid the shift differential applicable to the shift under which any hours worked may fall. Fixed shift employees will be paid their shift differential for all hours worked on that day. EXAMPLE A second shift employee who works ten (10) hours on a particular day would be paid ten (10) hours of second shift differential. FIRST SHIFT: No shift differential shall be paid for the first shift. ----------- SECOND SHIFT: A differential shall be paid for the second shift according ------------ to the following schedule: February 1, 2000................. $1.30 per hour February 1, 2001................. $1.35 per hour THIRD SHIFT: A differential shall be paid for the third shift according ----------- to the following schedule: February 1, 2000................. $1.45 per hour February 1, 2001................. $1.50 per hour The appropriate overtime rate will be applied to the shift differential. Shift differentials shall be payable only for hours actually worked and shall not be payable for non-work time such as holidays, sick leave, vacation and rest time. 6.11 ESTABLISHING PERMANENT SCHEDULES: The right to establish working -------------------------------- schedules and methods of shift rotation for employees, to assign individuals to schedules and to make changes in schedules, rests with the Company. Whenever the Company assigns an employee to a schedule which is different than the schedule they are regularly assigned and such assignment is expected to last ninety (90) days or more, the following conditions shall apply: NOTIFICATION: Employees will be given as much notice as possible and in ------------ all cases, at least twenty four (24) hours and prior to the end of their last regular shift. In this notification, the employee will be informed of the hours of work, including the days off and meal periods if applicable, work location, expected duration of the shift if other than indefinite, estimated composition of the work force, and the type of the shift (regular day, fixed shift, or rotating). The Company will limit days off to days inclusive of or in conjunction with Saturday or Sunday providing that such schedules will not interfere with the continuous rendering of service by the Company. If the Company fails to satisfy the twenty-four (24) hour notification requirement, the premium for the first five (5) days of the new shift will be extended until the notification requirement has been satisfied. 16 STAFFING OF SCHEDULES: VOLUNTEERS: When new shifts are announced, the Company will permit ---------- affected employees to volunteer for these assignments. The highest Company seniority will be used to select from the volunteers and these employees will not receive a premium for their first five (5) days of this new assignment. LEAST SENIOR QUALIFIED: The least senior, qualified employee in the ---------------------- classification affected, may be assigned. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. RIGHT OF ASSIGNMENT: The Company may assign employees to these schedules ------------------- for operational efficiency purposes. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. SHIFT DIFFERENTIAL: The appropriate shift differential, if any, shall ------------------ apply immediately to all hours worked for those who volunteer for these shifts. For those employees paid a premium for the first five (5) days of such an assignment, the shift differential will apply beginning on the sixth day of the assignment, or the first day on which the premium is not paid. RETURN TO ORIGINAL OR OTHER SCHEDULE: Employees who are assigned to a new ------------------------------------ schedule and are returned to their original schedule before five (5) days have elapsed, will be entitled to the premium mentioned above for the five (5) day period. Employees assigned to a second, new schedule during the initial five (5) day premium payment period will receive an additional five (5) days of premium from the date the new schedule begins.
---------------------------------------------------------------------------------------------------------------- EXAMPLE EXAMPLE Employees who receive four (4) hours of premium per Employees who have worked only two (2) days of a day who are returned to their former shift after only new schedule and are notified they will start a two (2) days, would continue to receive this premium second, new schedule on the fourth day, will receive for three (3) additional work days. eight (8) days of premium pay (three [3] for the first schedule and five [5] for the second). ----------------------------------------------------------------------------------------------------------------
EXAMPLE Employees who are assigned a new schedule during their regular work schedule are entitled to premium pay as outlines in Article 6.0 for the next 40 regular straight time hours. TRAINING EXCEPTIONS: The Company may, for the purposes of training only, change schedules without incurring the premium penalties mentioned above. The Company will notify all employees as far in advance as possible, but not later than the end of their last scheduled work day in the week prior to such training. This notification will detail the nature, location, and duration of the training. If such notification is not given, and an employee is called at home and informed of a change in schedule for training purposes, this employee will be paid time and one-half (1 1/2) for the first two (2) days of the training for all hours worked outside of their normal schedule. TRAVEL TIME FOR OUT OF TOWN TRAINING: Any employee who is required to ------------------------------------ travel out of town on a normal day off or after normal working hours for the purpose of Company training, will be paid actual driving time to and from the training site. When flying to such training, employees will be paid one (1) hour from their home to the airport, actual flying time to the destination, and one (1) hour from the airport to the hotel. All compensation for such travel time will be at a straight time rate and will not be considered time worked. 17 SCHEDULE PREFERENCE AGREEMENTS: The Company recognizes that in ------------------------------ departments where multiple schedules exist, there may be a desire to create a mechanism for movement between such schedules, while protecting the operational efficiencies of the organization. To satisfy these mutual interests, departments are encouraged to create shift preference agreements, which will define the terms and conditions for the transfer from one schedule to another. Under no circumstances, would such transfers create premium pay liability in accordance with the provisions of this Article. Each schedule preference agreement will be created through labor/management meetings within the affected work group and will be acknowledged by memorandum of agreement between the Company and the Union. 6.12 ASSIGNMENT TO AN ESTABLISHED SCHEDULE: When seven (7) day coverage employees, other than relief employees, are transferred from one schedule of work days or work hours to another established and populated schedule, they shall not be entitled to overtime compensation for work performed during regular work hours of any day involved in the transfer, provided that: . They have been notified of such transfer not less than twenty- four (24) hours in advance of the starting time of the new shift or work period; . They have had a minimum of one shift off between schedules; . As a result of such transfer they have not been required to work more than forty (40) hours at the straight time rate in any work week involved; . They have not been required to work more than one (1) short change in the work week involved, provided, however, that such short change was not the result of a voluntary action on the part of an employee, (i.e., Calling in sick, taking an unauthorized day off for personal reasons, etc.). 6.13 EMERGENCY OR TEMPORARY SCHEDULES: The Company may schedule employees to work for periods other than their regular work hours when additional schedules are required for emergency or temporary conditions. Such conditions are expected to last for less than ninety (90) days and, if they exceed this time frame they will be considered to be established schedules requiring compliance with the procedures for staffing and establishing schedules defined above, unless mutual agreement to extend such schedules is established by the Company and Union. NOTIFICATION: The Company shall communicate the hours of work, meal ------------ periods, days off, location, nature of the work, estimated composition of the workforce, and expected duration of this schedule. STAFFING OF EMERGENCY OR TEMPORARY SCHEDULES: -------------------------------------------- VOLUNTEERS: The Company may solicit volunteers for assignment to these ---------- schedules. If employees volunteer for these assignments, they will receive a premium of time and one-quarter (1 1/4) for all straight time hours worked outside of their normal schedule or shift for the first five (5) days of this assignment. When there are more volunteers than required for the shift, the most senior, qualified employees will be assigned. LEAST SENIOR QUALIFIED: The least senior, qualified employee in the ---------------------- classification affected, may be assigned. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. RIGHT OF ASSIGNMENT: The Company may assign employees to these shifts for ------------------- operational efficiency purposes. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. SHIFT DIFFERENTIAL: After the five (5) day premium requirement has been ------------------ fulfilled, the appropriate shift differential shall apply. 18 RATE OF PAY AND ROTATION: On the first day that there is no requirement ------------------------ for a premium and each day thereafter, the appropriate rate of pay and shift differential, if applicable, will be provided for all hours worked. If any such schedule extends beyond forty-five (45) days, the Company and the Union may agree to rotate the assigned employees. Employees returned to their former schedule as a result of this rotation will not be entitled to the premium mentioned above. RETURN TO ORIGINAL SCHEDULE: At the completion of this assignment, --------------------------- employees will be returned to their original schedule without a requirement for any additional premium payment. Employees who are assigned to an emergency or temporary schedule and are returned to their original schedule before five (5) days have elapsed, will be entitled to the premium mentioned above for the five (5) day period. EXAMPLE Employees who are assigned a new schedule during their regular work schedule are entitled to premium pay as outlined in Article 6.0 for the next 40 regular hours straight time hours. 6.14 OUT OF TOWN WORK: BOARD AND LODGING: The Company will furnish adequate board and lodging ----------------- for all employees sent on out-of-town work. This rule does not apply to noon day meals where employees start from and return to headquarters everyday, nor does it apply to employees hired for any particular job which may be outside the city or where employees travel to and from regularly assigned headquarters on Company time. EQUALIZING ASSIGNMENTS: When making temporary out of town assignments, ---------------------- the Company will endeavor to distribute such assignments equally among all employees qualified to perform such work. PER DIEM: Employees temporarily assigned to established headquarters -------- located more than forty (40) miles from their regularly established headquarters who elect not to stay at the assigned work locations will be furnished transportation for the initial trip and final trip at Company expense, and shall receive forty-three dollars ($43.00) for each day they are assigned to and work at a temporary location. If work extends beyond the weekend, the Company may, at its option, pay travel to home base Friday night and return to work location Monday morning. MILEAGE ALLOWANCE: Except as provided herein, employees electing to ----------------- travel to and from their assigned work locations shall do so at their own expense. When an employee is authorized to drive his own car to conduct Company business, he will receive a mileage allowance equal to Internal Revenue Services (IRS) maximum allowable mileage expense. Requests for the allowance described herein shall be submitted to, and distributed by the Company every two (2) weeks and in accordance with procedures established by the Company. 6.15 MEALS: MEAL TIMES: When working overtime before or after the regular day, or ---------- shift, or when called out for overtime work, and such work is continuous for two (2) hours or more, the Company shall provide all meals unless employees are released before the meal time. The normal unpaid meal times shall be: . one and one-half (1 1/2) hours before the employee's normal starting time, . eight (8) hours before the employee's normal starting time, . four (4) hours after the normal starting time, and . two (2) hours after the normal quitting time, 19 EXAMPLE If an employee's normal quitting time is 4:30 P.M. and is held over until 6:00 A.M. the meal times will be 6:30 P.M., 10:00 P.M. and 4:30 A.M. EXAMPLE If an employee is called out on his normal day off (example Saturday) and has a normal schedule of 6:00 A.M. to 4:30 P.M. and reports to work at 6:00 A.M. and works until 6:30 P.M. that day, the meal times will be 12:00 P.M. and 6:30 P.M. EXAMPLE If an employee is scheduled on his normal day off (example Saturday), has a normal schedule of 6:00 A.M. to 4:30 P.M. reports to work at 6:00 A.M. and works until 6:30 P.M. the meal times will be 6:30 P.M. That employee does not get the noon time meal ticket when his day is scheduled. Meals will be provided as close to these times as circumstances of the work will permit. Employees may elect to complete their assignment and take their meal period upon completion of their task. This meal period would be unpaid time unless directed by supervision to work through the meal period and such work continues more than one (1) hour from the stated meal time. This paid meal period will be limited to one-half (1/2) hour at the appropriate rate of pay. CALL OUT: When an employee is called out one and one-half (1 1/2) hours -------- or more previous to his starting time, the Company shall provide breakfast and a reasonable time to eat same. MEAL RATES: When employees are released on or after a normal meal period, ---------- or periods as outlined above, and do not elect to eat a Company provided meal, they shall be given a meal allowance of $9.00. These allowances will be paid through the payroll system in the employee's next paycheck. The meal allowance shall be increased to: . nine dollars and fifty cents ($9.50) effective February 1, 2000 . nine dollars and seventy-five cents ($9.75) effective February 1, 2001. ACTUAL COST: If an employee elects to consume a meal in lieu of the ----------- allowance, the cost of any meal shall not exceed two (2) times the allowance as provided for above. If the cost of the meal exceeds this amount, the employee will be notified of the amount of the difference and the employee must reimburse the amount within thirty (30) calendar days after receipt of such notification. These limitations may be waived by the department's Vice President if such limitations place an undue hardship on the employee. 6.16 REPORTING LOCATION: Employees in the bargaining unit shall report for work at regularly established Company headquarters, shall travel from job to job and between job and headquarters on Company time and shall return to the regularly established Company headquarters at the conclusion of the day's work. 6.17 EARLY RELEASE: Employees relieved from duty, for reasons other than misconduct, during the first half of the regular day or regular shift shall be paid for not less than one-half (1/2) of the shift; if relieved after having been on duty more than one-half (1/2) of the regular day, they shall be paid for a full shift, except that if they are relieved at their own request they shall be paid only for time worked. These provisions do not apply to overtime assignments. 20 Article No. 7 - Seniority and Promotions 7.1 SENIORITY: There shall be one (1) type of seniority, namely, Company seniority. Company seniority shall be considered in such matters as retirement, lay off, and whenever provisions of this agreement refer to seniority. In cases where two or more employees have the same Company seniority, the employee with the higher total score on the most recent performance appraisal shall have the greater seniority. 7.2 SENIORITY POSTINGS: The Company shall post a Company seniority list on bulletin boards every six (6) months and shall mail a copy of this list to the Union when the list is posted and after any corrections are made. Any seniority corrections should be made in writing to human resources. 7.3 STAFFING VACANCIES: POSTING REQUIREMENT: When there are no qualified employees who have -------------------- requested an intra-departmental work location change into job vacancies which are expected to last for more than ninety (90) days, the Company shall post such job vacancies or new jobs on bulletin boards for a period of seven (7) calendar days. It shall be the duty of the Company to set forth in said bulletins the nature of the job, its location and duties, reasonable qualifications required and the rate of pay, unless such information is listed in the collective bargaining agreement. At the same time, the Company will furnish the Union a copy of this bulletin. Employees may file their applications in the Human Resources department by Company mail or by U.S. Mail. However, the Company may not consider any application received after the job bid closing date. All job vacancies must be awarded within twenty-one (21) calendar days of the job bid closing date. If the award is not made within twenty-one (21) calendar days, and is not delayed due to vacations or bid hearings, the successful employee will be paid the new rate for the period from the twenty-one (21) days to the date of the award. This does not apply to the time frame of up to three (3) weeks after the award for the purpose of transitioning responsibilities. JOB POSTING SYSTEM: The Company shall publish job posting and awarding ------------------- procedures which, at a minimum, comply with the provisions of this agreement. These procedures will constitute the Company's job posting system. Any bargaining unit employee covered by either the clerical or plant collective bargaining agreements may apply and compete equally for any position within the Company. Employees are disqualified from bidding if their most recent performance appraisal total score is less than 2.5 or if they have a letter of discipline which is less than one (1) year old in their Human Resources personnel file. SELECTION CRITERIA: Exclusive of the provisions of Articles 7.9 (INTRA- ------------------- DEPARTMENTAL WORK LOCATION CHANGE), in filling vacancies the following factors shall be considered: . Trade Knowledge . Training . Past Performance with the Company . Ability, skill, adaptability, efficiency . Performance appraisal scores . In addition, the Company retains the right to administer equally fair tests, demonstrations, or physical assessments when such tests will assist materially in determining the qualifications of employees. When, in the discretion of the Company, all factors are substantially equal, Company seniority shall govern. 21 HEARING PROCEDURES: In lieu of any grievance procedure concerning Article ------------------- 7.3 (STAFFING VACANCIES), the Company shall offer the three (3) most senior bidders (if applicable) and the employee with the second highest matrix score (if applicable) who are more senior than the successful bidder a hearing before the bid committee with the steward for the department, the senior person or persons and one (1) other Union member. If the number of senior bidders exceeds the parameters mentioned above, a group meeting will be conducted with the remaining senior bidders to explain the decision and answer any relevant questions. The Company shall not assume any penalty for bid hearings that are delayed. NO QUALIFIED BIDDERS: If no applications are received from any qualified --------------------- bargaining unit employees within the posting period, the Company may then fill the job from outside the bargaining units. 7.4 TEMPORARY APPOINTMENTS: Wherever a vacancy occurs in any job classification, the Company may, at its discretion, temporarily fill such vacancy. If practical, any such temporary appointment shall be given to an employee who would be eligible under the provisions of this agreement. 7.5 MOVING EXPENSES: Should the Company assign an employee, who has not volunteered for reassignment, to an established Company headquarters located more than thirty (30) driving miles by the most reasonable route from his regularly established Company headquarters, and such assignment is not temporary in nature, the Company will pay the employee $1200 for moving expenses, for the purpose of establishing a new primary residence, within a two (2) year period immediately following such assignment. In addition, the Company shall pay the actual costs to relocate a mobile home which is the employee's primary residence. 7.6 SUB-DEPARTMENTS: When employees are awarded bids in the sub-department in which they are working, in accordance with Article 7.3 (STAFFING VACANCIES) of this agreement, their rate of pay for the awarded job shall be the rate established for the classification as listed in the appropriate agreement. If the awarded job has more than one rate, such rates being based on time spent in classification, the employees shall be assigned the lowest rate in the classification which will provide an increase to the employees. Employees thus assigned a rate step above the starting rate will not advance to a higher step until they have served the time indicated by the assigned step. Should no rate in the classification provide an increase, the employee shall be assigned the "there-after" rate of the new classification. EXAMPLE A Maintenance Technician being paid $21.81 per hour, enters an apprentice program which has eight (8) annual step rates. The Maintenance Technician will receive the rate of $22.07 and remain at that step for two (2) years before advancing to the next step. For purposes of this Article, "sub-departments" are Operations, Maintenance, Warehouse, Clerical. 7.7 DELETE 7.8 TRIAL PERIOD: Employees promoted or transferred in accordance with this Article shall be 22 employed on the job to which they were promoted or transferred for a reasonable trial period not to exceed six (6) months. If, following the trial period, they are still unable to perform the job to which they are promoted or transferred, they shall be returned to the former job classification they held or to their former or another job classification of similar requirements and the previous rate of pay, as determined by the Company. Employees who are returned to another classification in accordance with this Article shall not be permitted to bid on another position for six (6) months from the time they are returned. 7.9 INTRA-DEPARTMENTAL WORK LOCATION CHANGE: Employees desiring to change work locations within the same sub-department and classification shall submit a work location change form to the appropriate department head. Through labor/management meetings, departments shall develop procedures for work location changes. 7.10 TRANSFERS/POSITION CHANGES: At the time the short list of buyers is finalized, employees will only have the ability to transfer via lateral request or bid on position openings as they occur within generation or within Sierra Pacific Resources. An official vacancy in generation would be posted. This goes into effect at the time the short list of buyers is created.. After the short list, movement between facilities will be prohibited. Employee will be locked into the bundle where they reside. 23 Article No. 8 - Grievance Procedure 8.1 DEFINITION: A grievance shall be defined as a dispute regarding the interpretation and application of the provisions of this Agreement filed by the Union or by an employee covered by this Agreement alleging a violation of the terms and provisions of this Agreement. However, disputes specifically excluded in other Articles of this Agreement from the Grievance Procedure shall not be construed as within the definition set forth above. 8.2 TIME LIMITATIONS: The Company and the Union recognize the mutual gains process as an effective tool in resolving differences in the work place. Once timely notification of a grievance has been given, the Union and Company may mutually agree to extend the time limitations to ensure that interests are clearly defined, witnesses and all persons involved receive proper notification and are able to attend, evidence is accurate, and remedies are thoroughly explored before moving to the next step. However, it is in the interest of both the Company and the Union to expedite the process and encourage the timely resolution of the issue in order to satisfy established time constraints. The Union and Company, by mutual agreement, may elect to bypass certain steps, due to the nature of the grievance. Except by mutual agreement to extend the time limitations, an arbitrator shall not have the authority to excuse a failure by the Union, the Company or the aggrieved employee to comply with the time limitations set forth, regardless of the reason given for such failure. 8.3 GRIEVANCE PROCESS: NOTIFICATION: When a dispute arises relative to the administration of the ------------- provisions of this agreement, the employee and/or Union steward must complete a mutual gains issue form and submit it to the appropriate supervisor for signature no later than thirty (30) calendar days after the grievance first arises. The time period shall start from the first day the Company can show that the Union or an employee affected by the Company's action knew or should have known of the situation. At each step in the process, the Union shall officially sign off on the mutual gains issue and grievance forms, verifying that their interests have been satisfied or to pursue resolution at the next step. STEP ONE (MUTUAL GAINS MEETING - SUPERVISOR): The supervisor shall schedule --------------------------------------------- a meeting with the grievant and steward within seven (7) calendar days of receipt of the mutual gains issue form. The grievant and the supervisor will define interests and work on resolving the issue in a manner satisfying those interests. If the issue is not resolved at step one (1), the mutual gains issue form may be referred by the Union to the next level of supervision within three (3) calendar days of the step one (1) meeting. STEP TWO (MUTUAL GAINS MEETING - LEVEL II SUPERVISION): The next level of ------------------------------------------------------- supervision shall schedule a meeting with the grievant, steward, and supervisor within seven (7) calendar days of receipt of the mutual gains issue form. The grievant and supervision will define interests further and work on resolving the issue at this level. If they are unable to satisfy interests, the Union may request a formal hearing within three (3) calendar days of the step two (2) meeting. 24 STEP THREE (MUTUAL GAINS HEARING): The level II supervisor shall schedule a ---------------------------------- hearing with the grievant, steward, supervisor, and official Union and Employee Relations representatives within seven (7) calendar days of receipt of the mutual gains issue form. Witnesses will be designated to testify and related evidence shall be submitted. Those in attendance shall discuss possible remedies, which will be implemented upon final approval by the official Union and Employee Relations representatives. This joint decision shall be final and binding on all parties. If, at the conclusion of step three (3), the two (2) parties are unable to resolve the issue, the grievance shall be reduced to writing on the grievance report form, citing the Article and/or section of this agreement which has been allegedly violated, and the Company shall sign, date, and acknowledge receipt of such grievance. STEP FOUR (UNION/COMPANY MEETING): The Union Business Manager and the ---------------------------------- corresponding level of management shall schedule a meeting within ten (10) calendar days of receipt of the grievance report form. The department supervisor and/or manager, and the grievant and/or Union steward may be present at the request of either party. The Company and Union shall review the information provided, conduct further investigation if necessary, and shall render a joint decision which shall be final and binding on all parties. If the grievance is not settled at step four (4), the Company will communicate its position in writing within five (5) calendar days of the step four (4) meeting. This written notification will be sent via certified mail. STEP FIVE (ARBITRATION): Within fifteen (15) calendar days of receipt of ------------------------ management's position, the Union may request arbitration by delivering a written notice to the labor office of its intent to arbitrate the dispute. If the Union does not respond within fifteen (15) calendar days, the issues involved in the grievance will be considered resolved and the matter closed. Within five (5) working days after receipt of the notice of intent to arbitrate, the parties will request the Federal Mediation and Conciliation Service to furnish a list of five (5) arbitrators from the southwest region of the United States from which the arbitrator shall be selected. Such selection shall be accomplished by the Union and the Company striking one (1) name from the list in turn until only one (1) name remains. In recognition of the magnitude of such decisions, arbitration relative to termination grievances shall be expedited whenever possible. Unless mutually agreed to extend the time limitations in writing, these grievances should be arbitrated within six (6) months of the termination date. The arbitrator's decision shall be submitted in writing and shall be final and binding on all parties to this Agreement. Nothing contained in this contract or any part thereof shall affect or apply to the Union in action it may take against the Company for failure to comply with any legally enforceable decision reached through arbitration. The cost of the arbitrator and the cost of necessary expenses required to pay for facilities and recording of the hearing of cases, shall be borne equally by the Company and the Union. The arbitrator shall not have the authority to modify, amend, alter, add to, or subtract from any provision of this Agreement. 25 Article No. 9 - Working Safety Committee 9.1 MUTUAL INTERESTS: The Company and the Union share a mutual interest in fostering safe working conditions for all employees. The Company and Union will endeavor to create programs, procedures and policies which will define Nevada Power Company and IBEW Local No. 396 as leaders in providing and promoting a safe workplace. The Company shall make reasonable provisions for the safety of employees in the performance of their work. The Union shall cooperate in promoting the realization of the responsibility of the individual employee with regard to the prevention of accidents. 9.2 SAFETY COMMITTEE: Each department shall have their own Safety Sub- committee, and at least one (1) representative from each departmental Safety Sub-committee shall serve on the Company's Safety Committee. The selection of the Company's Safety Committee members shall be made jointly by the Chairman of the committee and the Business Manager of the Union. The Chairman of this committee shall be selected by the Company. Each year thirty three and one third percent (33-1/3%) of the committee members shall be replaced in accordance with the selection provision. 9.3 REPORTING DEFICIENCIES: Each member of the Safety Committee shall be expected to actively participate in identifying and reporting to the area safety representative any deficiency or unsafe condition discovered in the assigned work area. Recommendations to improve the operational safety shall be made to the manager, safety services, and to the department supervisor. A copy shall also be presented to the Chairman at the next Safety Committee meeting. 9.4 SAFETY MEETINGS: Safety meetings shall be held at reasonable intervals subject to call by the Chairman. 9.5 SEMI-ANNUAL INSPECTIONS: Every six (6) months the Safety Committee chairman shall appoint at least three (3) members to perform an inspection of the Company facilities. If required, these inspections may occur more often at particular facilities. The Committee Chairman may request additional employees who work at the site to assist in the inspection. The Company will allow the appointees reasonable time, as determined by the Chairman, to perform this inspection. They will prepare a written report including recommendations for corrective actions and forward it to the Committee Chairman and Company President. 9.6 RULE VIOLATIONS: In the event employees violate safety rules published by the Company, the Company reserves the right to administer appropriate disciplinary action. 9.7 SAFETY INVESTIGATIONS: When a lost time disabling injury occurs as a result of a suspected careless act or unsafe working condition, a safety investigating committee shall be chaired by Safety Services to review the facts and reconcile safety deficiencies and recommend corrective action. A safety committee member designated by the Union and assigned to the work area in which the injury occurred, shall serve on the investigating committee. 26 Article No. 10 - Inclement Weather Practice 10.1 REGULAR EMPLOYEES: Regular employees who report for work on a scheduled work day and who, because of inclement weather or other similar cause, are unable to work in the field that day, shall receive pay for the full day. However, they may be held pending emergency calls and may be given first- aid, safety or other instruction, or they may be required to perform miscellaneous work in the yard, warehouse, or other sheltered locations. Through labor/management meetings, and in conjunction with safety services, each department shall establish policies which clarify safe work procedures during inclement weather. 10.2 PROBATIONARY AND TEMPORARY EMPLOYEES: These employees shall receive pay for time worked or time held on Company property or two (2) hours, which ever is greater. 10.3 RAIN GEAR: Employees who are required to work in the field will be assigned appropriate rain gear which will be maintained by the employees and replaced by the Company when such gear is worn out in the course of employment and returned to the Company by the employee. 10.4 ENERGIZED PANELS: Employees who are assigned to work in the field will not be required to work on exposed and energized metering panels during rainy weather but may be assigned related duties as necessary. 27 Article No. 11 - Holidays 11.1 ELIGIBLE EMPLOYEES: Regular employees and probationary employees who are eligible for benefits, shall be entitled to holidays off with pay. Employees on leaves of absence or disability leave are not entitled to holiday pay, except if the employee begins leave or returns from leave during the week of a holiday. 11.2 WORKED HOLIDAYS: Shift employees may be permitted to take holidays off which fall on their scheduled work days. Employees scheduled to work on a holiday shall be paid at the rate of time and one-half (1 1/2) for time worked during regular working hours in addition to holiday pay. Employees who are called out to work on a holiday shall be paid at the rate of double time for time worked in addition to holiday pay. Time worked in excess of the regular work day will be paid at the appropriate overtime premium. Except for shift employees, holidays listed below shall not be considered scheduled workdays. 11.3 COMPANY HOLIDAYS: When a holiday falls on a Saturday, the preceding Friday shall be observed, and when a holiday falls on a Sunday the following Monday shall be observed. Whenever an employee's regular days off are other than Saturday and Sunday, the first day off within the work week shall be considered as Saturday and the second day off within the work week shall be considered as Sunday for the purpose of this Article. A rotating shift employee working on a schedule which provides four (4) consecutive days off shall observe the day prior to the four (4) days if the holiday falls on the first of the four (4) days, and shall observe the day following the four (4) days if the holiday falls on any of the other three (3) days for the purpose of this Article. ----------------------------------------------------------- The following are to be considered holidays: ----------------------------------------------------------- COMPANY HOLIDAYS ----------------------------------------------------------- 2000 2001 ----------------------------------------------------------- New Year's Day Dec 31, 1999 Jan 1 ----------------------------------------------------------- Martin Luther King's Day Jan 17 Jan 15 ----------------------------------------------------------- President's Day Feb 21 Feb 19 ----------------------------------------------------------- Memorial Day (observed) May 29 May 28 ----------------------------------------------------------- Independence Day July 4 July 4 ----------------------------------------------------------- Labor Day Sept 4 Sept 3 ----------------------------------------------------------- Veteran's Day Nov 10 Nov 12 ----------------------------------------------------------- Thanksgiving Day Nov 23 Nov 22 ----------------------------------------------------------- Thanksgiving Friday Nov 24 Nov 23 ----------------------------------------------------------- Christmas Eve Day Dec 22 Dec 24 ----------------------------------------------------------- Christmas Day Dec 25 Dec 25 ----------------------------------------------------------- Floating Birthday/Holiday See Article 11.4 ----------------------------------------------------------- 28 11.4 FLOATING BIRTHDAY/HOLIDAY: An employee may observe the floating holiday on any work day of the year with mutual agreement by the employee and supervisor. Or, with seven (7) calendar days notice, an employee shall observe the floating holiday on any work day which falls in the same calendar week as the employee's birthday. For the purpose of this Article, the calendar week begins Sunday and ends Saturday. Should an employee be called in or required to work on a previously approved "holiday," the employee shall be paid the applicable overtime rate, except if both the employee and supervisor mutually agree to change the observance of the holiday. Employees who request to use their floating holiday for the purpose of recognizing a religious observance, will be accommodated whenever possible. Any difficulties in this regard should be forwarded to the Employee Relations area of Human Resources. 11.5 BANKED HOLIDAYS: If eligible employees are required to work on any day observed as a holiday and are authorized to work for the straight time hourly rate of pay, then an equal number of hours will be allocated to their banked holiday account. With written consent of the Company, employees may carry over up to sixteen (16) hours of banked holidays to the next year. 11.6 TEMPORARY AND BENEFIT INELIGIBLE EMPLOYEES: Temporary, and probationary employees who are not eligible for benefits will not receive pay for holidays not worked but shall be paid the appropriate overtime premium for all time worked on holidays. 11.7 SICK LEAVE IN CONJUNCTION WITH A HOLIDAY: An employee who does not report for work either the day before and/or the day after a paid holiday, and who has not been excused by his or her supervisor for either the day before and/or the day after a paid holiday shall receive no pay for the holiday. The Company may require satisfactory evidence of an employee's illness or injury before holiday pay will be granted. If the Company requires medical evidence, the Company must inform the employee of the requirement to provide evidence no later than two (2) hours after the employee's regular starting time on the day of the absence. If required and the employee does not comply with this request, the employee will not be paid for the holiday or the day of absence, and may be subject to disciplinary action. 11.8 ALTERNATIVE SCHEDULES: As a result of the implementation of alternative work schedules, any issues associated with the provisions of Article 11 will be resolved by memorandum of understanding between the Company and Union. 29 Article No. 12 - Vacations 12.1 CONSIDERATIONS: Vacation with pay may be granted at any time during the calendar year in which it is earned, subject to the following considerations. . Desirability of scheduling in such a manner as will cause a minimum of interference with service to the Company's customers, and; . The selection of all vacation periods based on the employee's Company seniority, provided the selection is made no later than March 31st. 12.2 FIRST TWO (2) CALENDAR YEARS OF EMPLOYMENT: Probationary and regular employees shall earn vacation during the first two (2) calendar years of their employment according to the month in which they are hired. Probationary and regular employees may request and be granted vacation anytime during this period. Month Hired Vacation Hours ----------- -------------- January......................................................... 80 hours February........................................................ 77 hours March........................................................... 73 hours April........................................................... 70 hours May............................................................. 67 hours June............................................................ 63 hours July............................................................ 60 hours August.......................................................... 57 hours September....................................................... 53 hours October......................................................... 50 hours November........................................................ 47 hours December........................................................ 43 hours 12.3 ACCRUED VACATION: Regular employees will be granted vacations, with straight time pay, according to the following schedule: After Continuous Service of Vacation Hours --------------------------- -------------- 2 years thru 5 years........................................... 80 hours 6 years thru 12 years.......................................... 120 hours 13 years thru 20 years......................................... 160 hours 21 years thru 30 years......................................... 200 hours 31 years and above............................................. 240 hours 30 12.4 VACATION ADJUSTMENTS: An employee's vacation accrual shall be adjusted for all periods of leave of absence including leaves for illness or injury as defined elsewhere in this agreement by reducing the number of vacation hours accrued in direct proportion to the number of hours of leave within the employee's anniversary year. Such reductions shall be applied to any accrued and unused vacation available in the calendar year the adjustment is made, or when such adjustment exceeds the employee's available vacation, the excess shall be applied against the employee's next vacation accrual or the employee's final paycheck, whichever occurs first. It is understood that no adjustment to vacation accrual will be made for sick leave or during the first sixty (60) calendar days of any disability leave. 12.5 VACATION BONUS: In addition to the vacation accrued in accordance with the above schedule, any employee who completes ten (10) years continuous service and each five (5) years of continuous service thereafter, shall be granted a vacation bonus of forty (40) hours in the year such term of employment is attained. The vacation bonus will accrue, and may be taken subject to the provisions of this Article. 12.6 UNUSED VACATION: All unused or carried over vacation time accumulated in the year of termination after an employee's first anniversary date, up to and including the employee's last day worked, shall be paid at termination of employment, at the employee's current base rate. This does not apply to the vacation bonus when the employee has not completed the minimum service specified. It is understood that employees may not carry vacation time over to the following year without the written consent of the Company. A regular employee who has been laid off for lack of work and is recalled within one (1) year, who has in excess of one (1) year Company seniority, shall accrue vacation in accordance with Article 12.4 (VACATION ADJUSTMENTS). 12.7 DEPARTMENTAL POLICIES: Each department will develop standards and procedures for scheduling vacations which, at a minimum comply with Article 12.1 (CONSIDERATIONS). 12.8 HOLIDAY WHILE ON VACATION: If a holiday occurs on a work day during an employee's vacation, it shall not be counted as hours of vacation. The employee shall receive straight time pay for the holiday. 12.9 HOSPITALIZED WHILE ON VACATION: Employees on vacation who become hospitalized for at least one day, shall not be required to use vacation time during the period of incapacitation. Employees who are capable of completing any light duty must choose to remain on vacation or report for light duty. 12.10 CALL-OUT WHILE ON VACATION: An employee shall not be expected to work on his regularly scheduled days off immediately preceding or following pre- scheduled vacation. However, if an employee is called out and accepts such an assignment on the regularly scheduled days off immediately preceding or following pre-scheduled vacation, the employee shall receive the appropriate overtime rate for this work. An employee called out during scheduled vacation will be paid double time for all hours worked and the employee may reschedule the unused portion of his vacation hours in accordance with Article 12.1 (CONSIDERATIONS) above, if the call-out was for work during the employee's normal work hours. Additionally, if the call-out creates rest time, the employee may reschedule vacation equal to the rest time earned from this assignment. 31 Article No. 13 - Sick Leave 13.1 ELIGIBILITY: A regular employee and a temporary employee with more than 1040 hours shall be entitled to accumulate sick leave with pay at the rate of eight (8) hours of sick leave for each month worked. 13.2 NOTIFICATION AND VALIDATION: The Company may require satisfactory evidence of an employee's illness or disability before sick leave will be granted. If an employee abuses the sick leave provisions of this Agreement by misrepresentation or falsification, the employee shall restore to the Company all sick leave payments received as a result of such abuse. An employee must notify their supervisor or a member of management, or see that their supervisor is notified, as soon as it is apparent that the employee will be unable to report for work. The employee must provide this notification before the beginning of the normal work day. The employee should notify the supervisor as far in advance as possible of the expected date of return. Lack of notification without a reasonable explanation will result in denial of sick pay benefits. 13.3 EXCLUSIONS AND EXCEPTIONS. Employees shall not be entitled to sick leave while on vacations (except as provided in Article 12.9 [HOSPITALIZED WHILE ON VACATION]), while temporarily laid off by the Company, during the period of notice of severance of employment, upon severance of employment, or while receiving disability payments or industrial compensation. Exhibit IV (SICK LEAVE AGREEMENT) of this Agreement establishes other rules and interpretations for the administration of these sick leave provisions. 13.4 SICK LEAVE BONUS: Employees who are eligible for sick leave in accordance with Article 13.1 (ELIGIBILITY), who use no more than two hundred twenty (220) hours of sick leave each five (5) years, shall be granted a bonus of five (5) days vacation in addition to that granted under the provisions of Article 12.3 (ACCRUED VACATION), each five (5) years based on the following considerations: . On January 1, 1987, and January 1, of each fifth year thereafter, the sick leave records of those employees with hire dates prior to August 1, 1981, will be audited. Those employees who have used no more than two hundred twenty (220) hours of sick leave during the five (5) year period immediately preceding the audit will be granted five (5) days vacation to be taken within the twelve (12) month period immediately following the audit date and in accordance with the provisions of Article 12 (VACATIONS). . For employees hired after July 31, 1981, their sick leave records will be audited as of the first day following the completion of five (5) years and six (6) months of service and each fifth year following the initial audit. Those employees who have used no more than two hundred twenty (220) hours of sick leave during the five (5) year period immediately preceding the audit will be granted five (5) days vacation to be taken within the next twelve (12) month period immediately following the audit in accordance with Article 12 (VACATIONS). . All unused vacation accumulated under the provisions of this sick leave bonus plan shall be paid at termination of employment as provided under Article 12.6 (UNUSED VACATION) except that no pro rata of vacation entitlements will be allowed for time periods of less than five (5) years. 32 13.5 LIGHT DUTY: Injured employees who are temporarily unable to perform the functions of their own jobs but are capable of performing light duty work shall be released for light duty assignments either within their own department or another area of the Company where work is available. In the interest of effective case management, the light duty work program shall be administered by the human resources department. Employees working in light duty assignments shall be eligible for a percentage of their base pay according to the following schedule: . 100% of base for the first fourteen (14) calendar days . 95% of base for the second fourteen (14) calendar days . 90% of base for the third fourteen (14) calendar days . 85% of base thereafter Employees who are injured on the job and are unable to perform their regular duties indefinitely due to partial disability, may be subject to the provisions outlined in Article 14.3 (JOB INCURRED INJURY/PARTIALLY DISABLED EMPLOYEES). 13.6 RE-OPENER: The Company and Union may reopen the issue of salary protection relative to sick leave and address common interests at a future date. The request to discuss these issues will be made in accordance with the provisions of Article 17 (TERM OF AGREEMENT). 33 Article No. 14 - Employee Benefit Plans 14.1 GENERAL: The Nevada Power Company Self-Funded Medical Benefit Plan shall be incorporated, by reference, into the Agreement for purposes of establishing the levels of benefits for each of these plan features: . loss of time . medical expense . vision expense . dental expense . life insurance and accidental death and dismemberment. The Company agrees to maintain all of these benefits for eligible employees and will provide medical expense, vision expense, and dental expense coverage for eligible dependents for the life of this Agreement. The Company reserves the right to select any insurance carrier or to self insure for all or any portion of these benefits. PRESCRIPTIVE DRUG BENEFIT: The Company will provide to all eligible ------------------------- employees and eligible dependents a discounted prescription drug service that allows participants to obtain prescription drugs through preferred pharmaceutical outlets. A service fee of ten dollars ($10.00) per trade name prescription or five dollars ($5.00) for generic prescription will be charged by the druggist. No claim forms need to be presented. The prescriptive drug benefit will continue to allow all eligible employees and dependents to obtain up to three (3) months of maintenance prescription drugs by mail. A service fee of $3.00 per prescription ($1.00 for generic) is charged, and claim forms need not be presented for these drugs. TERM LIFE INSURANCE: The Company will continue to provide a supplemental ------------------- life insurance program that allows employees desiring such coverage to purchase term life insurance for their dependents or additional life insurance for themselves at group rates. Such life insurance premiums will be paid for by the employees through payroll deduction. All administrative expenses, exclusive of carrier expense normally absorbed in the rates, will be paid by the Company. DENTAL BENEFIT: The Company will continue to provide a dental care -------------- benefit, expanded to include a dental PPO and an orthodontic benefit for all eligible employees and dependents. Coverage includes the following: . Maximum payable per year is $1,000 per person. . Preventative care is covered 100%, with the deductible waived. . All other treatments are covered at the rate of 80/20 and are subject to the dental exclusions noted in the Nevada Power Company Self-Funded Medical Benefit Plan. Covered treatments are also subject to a $25 per person deductible. VISION BENEFIT: A vision care program will continue to be available for -------------- eligible employees and eligible dependents. This plan covers professional services; examinations every twelve (12) months, lenses every twelve (12) months if needed, frames every twelve (12) months if needed, with a deductible amount of twenty-five dollars ($25.00) to be paid by the employee for each covered examination and fitting. The vision care program also provides one pair of prescription safety glasses to employees whose job duties require eye protection in accordance with the Company's established safety standards, once every twelve (12) months, if needed. 34 BENEFIT ELIGIBILITY: Eligible employees are all employees who have ------------------- satisfied the requirements defined in Article 5 (STATUS OF EMPLOYEES) of this agreement. Eligible dependents are those dependents of eligible employees which meet the definitions of dependents as contained in the Nevada Power Company Self-Funded Medical Benefit Plan referenced above. EMPLOYEE CONTRIBUTIONS: Employee contributions are defined below. These ---------------------- rates are the maximum rates which employees would be required to pay. They reflect a ninety/ten (90/10) cost sharing arrangement between the Company and its employees. The rates listed below define a maximum increase of ten percent (10%) from the previous year's contribution. If the actual experience of the medical plan reflects an increase of less than ten percent (10%), the monthly contributions will be reduced to reflect an accurate cost sharing arrangement. If the actual experience of the medical plan reflects an increase of greater than ten percent (10%), the Company will absorb that percentage increase. The Company will communicate the actual monthly contribution no later than December 1st for the following year. The monthly contributions may change on January 1st of each subsequent year.
------------------------------------------------------------------------------------------------- 1/1/2000 thru 1/1/2001 1/1/2001 thru 1/1/2002 ------------------------------------------------------------------------------------------------- HMO NPC Plan HMO NPC Plan (Option C) (Option A/B) (Option C) (Option A/B) ------------------------------------------------------------------------------------------------- Employee Only 22.00 34.00 24.00 37.50 ------------------------------------------------------------------------------------------------- Employee & Spouse 45.00 71.50 49.50 78.50 ------------------------------------------------------------------------------------------------- Employee & Children 41.00 61.00 45.00 67.00 ------------------------------------------------------------------------------------------------- Employee, Spouse & Children 69.50 98.50 76.50 108.50 ------------------------------------------------------------------------------------------------- Deductible/Co- Insurance Limit None 400/5500 None 400/5500 -------------------------------------------------------------------------------------------------
PRE-TAX Account: The Company will continue to provide a pre-tax health --------------- care contributions account for employees to reduce their taxable income by the amount of their health care contribution. OPTIONS A, B AND C: ------------------ The Company will continue to permit employees to select between the following health care plan options: Open enrollment period will take place as of August 1, 1998 and every 12 months thereafter. Option A: . 80/20 Co-insurance factor . 5500.00 Co-insurance limit . 400.00 Individual deductible . Family deductible (Employee & Spouse; Employee & Children; Employee, Spouse & Children) equal to two (2) times the individual deductible . Hospital deduction - $400.00 35 Option B: PREFERRED PROVIDER PROGRAM: The Company will continue its Hospital -------------------------- Preferred Provider Organization (HPPO) for voluntary employee participation, which includes a minimum of three hospitals in the Las Vegas, Nevada area. Employees who elect to utilize a PPO hospital will receive reimbursement of hospital expenses at the rate of 90/10 and the hospital deductible will be waived. The Company will continue its Physician Preferred Provider Organization (PPPO) for voluntary employee participation, which includes a minimum of 400 physicians in Southern Nevada. An employee who elects to utilize a PPO physician will pay a service fee in accordance with the PPO medical expense benefit schedule incorporated in the Nevada Power Company Self- Funded Medical Benefit Plan referenced above. No claim forms need to be filed and the PPO physician will bill the Company for the remainder of the office visit charge. HOSPITAL DEDUCTIBLE: The hospital deductible will be waived for those ------------------- employees who reside more than fifty (50) miles from a PPO hospital and use a local hospital which is not a PPO hospital. However, employees who elect to travel to Las Vegas and use a non-PPO hospital will pay the hospital deductible and receive reimbursement for hospital charges at the 80/20 rate. MENTAL HEALTH BENEFIT: The Company will include outpatient mental health --------------------- counseling in its comprehensive medical plans, subject to utilization review. Substance abuse rehabilitation will be limited to $50,000. Option C: HEALTH MAINTENANCE ORGANIZATION: The Company will continue to permit ------------------------------- eligible employees to enroll in a Health Maintenance Organization plan (HMO) for the purpose of providing comprehensive medical and prescription drug coverage. GENERAL BENEFIT PROVISIONS: -------------------------- . The lifetime maximum medical benefit is $1,000,000. . Mandatory utilization review will be instituted for a variety of in-patient and out-patient services. Employees who fail to receive the appropriate pre-authorization for these services will receive a fifty percent (50%) penalty, in lieu of the stated reimbursement. . All benefits are subject to the deductible and/or co-pay plus percentage, thereby eliminating any first dollar coverage. . The Nevada Power Company Self-Funded Medical Benefit Plan will pay benefits only to the percentage of coverage under its plan. It will not provide reimbursement beyond the stated coverage in this plan, if it is the secondary provider to another group health plan. . An orthodontic benefit of $1,500 is provided. . A dental PPO is established. . A hearing aid benefit of $500 every five (5) years is for the employee only. DEPENDENT CARE ACCOUNT: The Company will continue its flexible spending ---------------------- account program that allows pre-tax funding of dependent care and child care expenses. 36 14.2 JOB INCURRED INJURIES/SALARY PROTECTION: Any employee who suffers a job incurred injury during the term of this Agreement and who is awarded temporary total compensation benefits as defined in the Nevada Industrial Insurance Act shall receive supplemental disability payments in such amounts and under such conditions as described below: . The combined amount of disability compensation to which the employee is entitled under any federal, state, and local law, and from the Company shall not exceed the percent of the employee's weekly earnings, from the table listed below, where such earnings are computed at the employee's regular rate for a forty (40) hour, seven (7) day period. . Supplemental payments shall be made for the first day recognized by the State Industrial Insurance System (SIIS), and shall terminate with the date of the last day of disability recognized by the SIIS, as evidenced by the remittance portion of the disability check from the SIIS, which must be presented to the Company, for a maximum period of benefits as defined in the following schedule of benefits, for any one accident regardless of the various periods of disability which may be compensated for the one accident. MAXIMUM PERCENT OF LENGTH PERIOD BASE OF SERVICE OF BENEFITS EARNINGS ---------- ----------- -------- 6 months 13 weeks 55 5 years 26 weeks 60 10 years 52 weeks 65 15 years 60 weeks 70 20 years 65 weeks 75 . For a job incurred disability of less than five (5) days which does not qualify for SIIS compensation, employees must use any accrued sick leave, and upon exhaustion of such accrued sick leave shall receive disability benefits as defined above. . No supplemental disability payments shall be made for any disabling accident caused by the injured employee's violation of any safety rule. . Any employee who performs activities for which compensation is received or which exceed the scope of the prescribed physical limitation pertaining to such disability while receiving disability compensation described in this section, shall forfeit his entitlement to all disability benefits and his employment shall be terminated. 14.3 JOB INCURRED INJURY/PARTIALLY DISABLED EMPLOYEES: When, in the opinion of the Company's doctor after consultation with the employees' doctor, regular employees with at least one (1) year of Company service cannot perform their regular work because of partial disability, but can perform other work, the following plan shall be applicable: Each case shall be considered on its merits by a committee consisting of the Business Manager of the Union and an Employee Relations representative, and two (2) additional members, one (1) of whom shall be designated by the Union and the other by the Company. The committee shall have the authority to waive the seniority and bidding provisions of this Agreement in order to place the disabled employee, and it shall determine the seniority rights of such employee. This committee may call on anyone who may be able to furnish pertinent information. In no event will this Article apply if the employee's disability occurs while self-employed or working for others, for remuneration (except on Union business), or is involved in misconduct or an extreme violation of Company safety rules. 37 The panel shall complete an evaluation of the type of work the employee is able to perform or may be able to perform in the future. Evaluation of the employee's capabilities may include but shall not be limited to a physical examination and doctors reports, the employee's physical and mental ability, willingness to work, and trainability. Depending upon the evaluation of the employee and where necessary and practical, the Company shall provide job related education and training. The panel shall also conduct periodic review of these cases to determine if an employee's condition has changed; if the employee's condition has changed, the panel will reevaluate the employee's job assignment. The panel will determine the job classification which is appropriate for the work the employee is able to perform, as well as the proper pay rate, taking into account the new classification pay rate or the rate indicated on the following schedule, whichever is greater. Years Of Company Service A Pay Rate That Is Not Less Than ------------------------ -------------------------------- 1 to 4 years inclusive 70% base rate when injured 5 to 14 years inclusive 80% base rate when injured 15 to 24 years inclusive 85% base rate when injured 25 years and over 90% base rate when injured As long as such employee is paid more than the maximum rate for the job classification in which the employee is placed, the employee shall receive only fifty (50) percent of any base wage increase or lump sum payment in lieu of a base wage increase. Such fifty (50) percent shall be calculated on the employee's personal rate at the time of the increase. The placing of a disabled employee in a different job shall not constitute an increase in the Company's normal work force. However, the Company may temporarily increase the number of authorized positions to accommodate an individual when a future vacancy is clearly defined and recognizable. If the committee is unable to place an individual in accordance with these provisions they would be eligible for vocational rehabilitation training, and benefits through the State Industrial Insurance System. Upon this determination, the individual's employment with the Company will be terminated, and any accrued benefits will be paid at the time of termination. The parties agree that the provisions of this Article may be suspended with sixty (60) days written notice, documenting the reasons for this request and the interests which would need to be addressed for the continuance of this program. 14.4 SHORT TERM DISABILITY BENEFIT: A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours who shall suffer any disabling illness or injury while not in work status, shall be entitled to disability payments in such amounts and under such conditions as described herein: . An eligible employee shall be entitled to receive payments not to exceed the percent of the employee's weekly straight time earnings, such earnings to be computed on the employee's regular rate for a forty (40) hour, seven (7) day period, for a maximum period of benefits at the percent of earnings as defined in the following schedule of benefits. 38 MAXIMUM PERCENT OF LENGTH PERIOD BASE OF SERVICE OF BENEFITS EARNINGS ---------- ----------- -------- 6 months* 13 weeks 55 5 years 26 weeks 60 10 years 52 weeks 65 15 years 60 weeks 70 20 years 65 weeks 75 * Employees in this category may be granted up to thirteen (13) additional weeks of leave without pay for continued disability. . No disability payments for an illness shall be made until at least a three (3) days waiting period has been observed, however, an employee must use accrued sick leave to satisfy the waiting period or to extend the waiting period to the maximum of the amount of accrued sick leave. . Any female employee who becomes pregnant and is unable to work shall be entitled to disability benefits under this Article, as described above, subject to the following conditions. She must present a document from her attending physician saying that she is under the doctor's care because of the pregnancy and is unable to work. The period of the disability shall begin at least three (3) days after the attending physician declares the employee disabled and shall end when the employee is no longer disabled as determined by the attending physician. Pregnant employees must use all accumulated sick leave before disability payments will start. A female employee will not be eligible for pregnancy related disability benefits except for her own disability. An employee who is on maternity leave and recovering from disability may request to have her leave extended for up to three (3) months after termination of pregnancy for child care or other reasons. . Any employee who performs activities for which compensation is received or which exceed the scope of the prescribed physical limitation pertaining to such disability while receiving disability compensation described in this section, shall forfeit their entitlement to all disability benefits and their employment shall be terminated. . Any employee who returns to work in a light-duty status from short-term disability will not create a new benefit eligibility until they have had a full-duty release and worked for thirty (30) calendar days from the time of that release. If an employee returns to short-term disability without satisfying this requirement, their short-term disability benefit will reflect their prior usage and continue until expiration of such benefits. . Any employee who is unable to perform the duties of their position as a result of a non-job-incurred injury, would be considered for any vacancy for which they are qualified. If awarded a position in accordance with Article 7 (SENIORITY AND PROMOTIONS), the employee would receive the appropriate rate of pay for that position. . Any employee that exhausts their short-term disability benefit and is unable to return to work at that time, may request one unpaid leave of absence for up to ninety (90) days to allow time for further recuperation or possible vacancies for which they are qualified. Such employees will be allowed to continue their medical coverage at the appropriate COBRA rate for this period of time. If this individual is unable to return to work at the expiration of this unpaid leave, their employment with the Company will be terminated and all accrued benefits will be paid at the time of termination. 14.5 RETIREMENT BENEFIT: The Sierra Pacific Resources Retirement Plan, the successor to the Company Retirement Plan, a defined benefit pension plan shall be incorporated by reference into this Agreement. The Company has, since January 1, 1976, been paying the entire cost of this retirement plan. All participants in the pension plan which was in effect before January 1, 1976, have and are guaranteed all accrued benefits under that pension plan as computed on December 31, 1975. Effective February 1, 1990, the pension plan was amended to delete the provision that the 39 selection of a surviving spouse benefit will revert to a single life annuity if the spouse predeceases the retired employee. Effective February 1, 2002, the popup provision contained in the plan will be increased to a five-year window. The popup provision is currently one year where an employee who at designation of retirement, elects to only receive a portion of money available in order to provide for the surviving spouse at employees death. In some instances a spouse will pass away prior to the retired employee causing the employee to now continue with the reduced benefit. This popup will allow the retired employee to elect to return to 100% retirement pay in the instance a spouse passes away first. Effective February 1, 1994, the pension plan was improved to provide for early retirement benefit reductions of 5% per year from age sixty-two (62). Effective January 1, 1989, the pension plan was changed from a social security offset plan to a step rate plan. Effective February 1, 1998, the formula for calculating benefits will be 1.35% of final five-year average earnings up to Social Security Covered Compensation, plus 1.8% of final five-year average earnings exceeding covered compensation, times service up to 35 years, plus 1.35% of final five-year average earnings, times service over 35 years. For this purpose, final five-year average earnings is the average of the highest sixty (60) consecutive months of earnings. Effective February 1, 2001, the formula for calculating benefits will be 1.365% of final five-year average earnings up to Social Security Covered Compensation, plus 1.8% of final five-year average earnings exceeding covered compensation, times service up to 35 years, plus 1.65% of final five-year average earnings, times service over 35 years. For this purpose, final five-year average earnings is the average of the highest sixty (60) consecutive months of earnings. Effective February 1, 2002, the pension formula will be increased to 1.4325. Effective February 1, 1987, entry into the pension plan shall be on the first day of the month coincident with, or following completion of one year of service and attainment of age twenty-one. Participants in the plan prior to February 1, 1987, shall enter the plan on the first day of the month coincident with, or following completion of one (1) year of eligibility service and attainment of age twenty-one, unless those participants had declined enrollment under the eligibility rules in effect when they had first become eligible. Effective February 1, 1987, vesting service shall be measured from the employee's date of hire or age eighteen, whichever is later. The Company shall make such modifications in the plan as may be required by 1) the Internal Revenue Service in order to qualify said benefits under the applicable provisions of the Internal Revenue Code and/or related rules and regulations; or 2) any other governmental agency having jurisdiction. Other modifications may be made as needed but in no event shall any benefits be reduced during the term of this Agreement. Effective February 2, 1998, all sick leave accrued at time of retirement will be added to the years of service for fully vested participants only. EXAMPLE If an employee retires June 5, 1998 and has 400 hours of sick leave on the books, the calculation would be as follows: 1. They would still officially leave the company on June /5th/. 2. When the pension is calculated, it would be increased to read that the employee received income until August 14, 1998 (400 hours divided by 8 hours a day equals 50 days) 3. The employee would receive a pension calculated through August 14, 1998. 40 At close of transaction of a bundle, and thereafter any employee who is at least 55 and still employed with the Company with 80 total points (55 + years of service + bonus points = 80+), can retire with full benefits as if they were 62. Bonus points will be added to years of service for calculations of retirement benefits and are awarded according to the following scale: Years of Service* Bonus Points 0-9 0 10-14 3 15-19 4 20 plus 5 *Years of service will be calculated from actual hire date for purpose of bonus point calculation. However, the first year of actual service is not included in the retirement calculation. 14.6 401(K) CONTRIBUTION/COMPANY MATCH: In accordance with 401(k) documentation, effective July 1, 1998, the Company will provide a matching contribution of 55 cents of the employee's contribution, to a maximum of 7% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Effective on February 1, 1999, the Company will provide a matching contribution of 60 cents of the employee's contribution, to a maximum of 7% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Effective on January 31, 2000, the Company will provide a matching contribution of 60 cents of the employee's contribution, to a maximum of 8% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Effective on January 29, 2001, the Company will provide a matching contribution of 65 cents of the employee's contribution, to a maximum of 8% of gross income, to the Nevada Power Company 401(k) plan. Company contributions will be invested in Nevada Power Company stock. Effective at the expiration of the current contract, February 2002, the buyer will be required to provide a 401k or similar plan that is comparable to a 70% match up to 8% of gross income. Accrued benefits in each employee's account will be available for rollover at each employee's discretion to buyer's qualified plan, a qualified IRA, or may remain in the Sierra Pacific Resources 401k plan. All federal rules must be followed which includes not being able to add more money into the account once you are no longer with the company and being required to take the money beginning at the age of 70 1/2. 14.7 ACCIDENTAL LIFE INSURANCE: All employees covered by this Agreement will be covered by an accidental death and dismemberment policy in the amount of $50,000. This policy shall apply only when an employee is a passenger in an aircraft either fixed wing or helicopter, and while traveling on Company business. Benefits from this policy shall be in addition to any other insurance plan. 14.8 LONG-TERM DISABILITY INSURANCE: The Company will provide a long term disability (LTD) plan, to extend disability benefits at a reduced rate upon termination of benefits described in Article 14 .2 (JOB INCURRED INJURIES/SALARY PROTECTION) or 14.4 (SHORT TERM DISABILITY BENEFIT) above. Premiums for such coverage will be paid for by the employee, through payroll deduction. All administrative expenses, exclusive of carrier expense normally absorbed in the rates, will be borne by the Company. 41 Article No. 15 - Leaves of Absence 15.1 SHORT TERM LEAVES: Provided the needs of the Company will permit, time off without pay for any period of thirty (30) calendar days or less may be granted employees upon a written application to their department head showing good and sufficient reason for such request. This shall not be construed as a leave of absence without pay, as the term is used in this Agreement. A leave of absence without pay is defined as a period of authorized absence from service in excess of thirty (30) days. 15.2 JUSTIFICATION: Leaves of absence shall be granted to regular employees for urgent substantial personal reasons, provided adequate arrangements can be made to take care of the employee's duties without undue interference with the normal routine of work. Leave will not be granted if the purpose for which it is requested may lead to the employee's resignation. 15.3 DURATION: A leave shall commence on and include the first work day on which an employee is absent and terminate with and include the work day preceding the day the employee's leave expires. The conditions under which an employee shall be restored to employment on the termination of his leave of absence shall be clearly stated by the Company on the form on which application for leave is made. 15.4 SENIORITY: Except as otherwise provided herein, an employee's seniority shall not accrue while on leave without pay. However, an employee's status as a regular employee shall not be impaired by a leave of absence. Any period of authorized absence without pay for thirty (30) days or less shall not affect an employee's seniority status. Upon return from leave, an employee shall return to regular status. 15.5 UNION OFFICE: The Company shall, at the request of the Union, grant a leave of absence without pay for four (4) years or less to an employee who is appointed or elected to any office or position in the Union whose services are required by the Union. The seniority of an employee who is granted a leave of absence under the provisions of this Section shall accrue during the period of such leave. Upon mutual agreement with the Union, the Company may extend the leave of the incumbent for additional terms up to four (4) years per request. The Company will provide medical coverage for this individual at the single coverage rate. This individual must make the established monthly employee contribution for health coverage. 15.6 PUBLIC OFFICE: Employees elected or appointed to public office shall be granted a leave of absence for the duration of such appointment or election. Such absence shall not affect accrual rates for seniority purposes; however, sick leave and vacation shall not accrue during this period and group medical benefits shall be paid by the employee at the Company's current premium rate. 15.7 MILITARY LEAVE: A leave of absence shall be granted to employees who enter the armed forces of the United States, however, any such leave of absence and the reinstatement of any such employee shall be subject to the terms of the Selective Training and Service Act of 1940, as amended. Employees who are members of the armed services who are drafted and are called to active duty shall accrue Company seniority while they are absent on military duty. A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours, who is a member of the armed forces reserve units, or the National Guard, and who is required to attend annual training sessions, will be granted a leave of absence for the duration of such assignment. In addition, the Company will pay such employee the amount, if any, by which the remuneration received from the government is less than the base straight time earnings the employee would have received for the same period, not to exceed eighty (80) hours in a calendar year. Such items as subsistence, travel, uniform and other allowances will not be included in computing the remuneration received from the government. The Company will require satisfactory evidence of attendance and remuneration received. 42 15.8 FAILURE TO RETURN FROM LEAVE: If employees fail to return immediately on the expiration of their leave of absence, or if they accept other employment while on leave, they shall forfeit the leave of absence and terminate their employment with the Company. 15.9 FUNERAL LEAVE: A regular employee, or a temporary employee who has worked more than one thousand forty (1040) straight time hours, who is absent from duty due to a death in the employee's immediate family will be excused without loss of regular pay for the time required not to exceed thirty-six (36) hours for making funeral arrangements and attending the funeral, provided the employee attends the funeral, furnishes a death certificate to the payroll department within thirty (30) days. Additional time may be taken to insure four working days off; any hours in excess of 36 hours can be taken as vacation or personal time off without pay. Immediate family shall mean the employee's grandparents, mother, father, step-mother, step-father, brother, sister, spouse's grandparents, spouse's parents, spouse's children, spouse, son, daughter, or grandchildren. 15.10 JURY DUTY: When regular employees, or temporary employees who have worked more than one thousand forty (1040) straight time hours, are absent from work in order to serve as a juror or to report to the court in person in response to a jury duty summons or to report for jury examination, they shall be granted pay for those hours spent in such service during their regular work day or regular work week less the fee or other compensation paid them with respect to such jury duty. Employees shall furnish the Company with a statement from an officer of the court setting forth the time and days on which they reported for jury duty and their compensation due or received for jury duty. 15.11 SUBPOENA: If employees are absent from work, in order to serve as a witness in a case in a court of law to which they are not a party, either directly or as a member of a class action suit, and where such absence is in response to a legally valid subpoena or its equivalent, the employee shall be granted leave with pay for those hours for which the employee is absent from work during the employee's regularly scheduled working hours, provided the employee submits evidence of such service as a witness, detailing the time required to testify. 15.12 FAMILY LEAVE: Employees who are eligible for benefits but have less than one year of service with the Company are entitled to forty-five (45) calendar days of unpaid family leave to use for the birth or adoption of a child. Vacation pay may be used for a portion of this leave of absence but will not extend the leave to more than forty-five (45) days. 15.13 FAMILY AND MEDICAL LEAVE: Employees who are eligible for benefits and have one year or more of Company service may be entitled to twelve (12) weeks of unpaid leave in accordance with the Federal Family and Medical Leave Act of 1993. 43 Article No. 16 - Working Rules 16.1 SAFETY GEAR: Protective safety equipment such as rubber gloves, hose, hoods and blankets shall be used to make as safe as possible any work performed on any equipment having uninsulated energized parts, in addition, hot line tools may be used when applicable. The safety precautions taken by the crew are the direct responsibility of the foreman in charge. The Occupational Safety and Health Standards as contained in 1910.269 sub-part "R" of the Occupational Safety and Health Act (OSHA) shall be considered minimum standards for work performed on electrical transmission and distribution equipment. 16.2 TWO MAN CREW: two (2) competent electrical workers together on the same fixture shall be required when performing work on wires or equipment carrying voltages in excess of 600 volts. One (1) of them shall serve principally as a standby person to render assistance in case of an accident. In no case when working in pairs shall they work simultaneously on wires or parts of different phases or polarities. One qualified employee shall stand by and serve principally as a safety observer to the other person. 16.3 DELETE 16.4 APPRENTICE PROGRAM: The Nevada Power Company Apprenticeship Training Program, Revision I, dated December 20, 1982, shall be incorporated by reference into this Agreement and any modifications or amendments must be handled in accordance with Article 17 (TERM OF AGREEMENT). Joint apprenticeship programs shall be established by the Company and the Union. The programs which are to be included in the training programs require the recommendation of the applicable Joint Apprenticeship Committee(s) and approval and acceptance by the President of the Company, and the Business Manager of the Union. JOINT APPRENTICESHIP COMMITTEE: Each Joint Apprenticeship Committee shall ------------------------------- be composed of an equal number of members appointed by the Company and the Union, and an apprentice training supervisor appointed by the Company who will serve as Chairman of the Committees to develop, coordinate and administer the programs. The Joint Apprenticeship Committees shall have the responsibility for investigating problems of apprenticeship training such as standards of progress, methods of testing and scoring progress of apprentices and procedures for demotion or termination when apprentices fail to meet established standards or requirements. The Committee members appointed by the Union shall receive their regular straight time rate of pay for actual time spent in Joint Apprenticeship Committee meetings called by the Chairman, but limited to eight (8) straight time hours in one (1) day. APPRENTICE/JOURNEYMAN RATIO: The ratio of apprentices to journeymen shall ---------------------------- not exceed one to two (1:2) or a major fraction thereof. The work performed by apprentices shall be assigned and reviewed by the appropriate working foreman or designated journeyman, subject to the approval of the appropriate supervisor. FIRST YEAR APPRENTICE: An apprentice who has been in the apprenticeship ---------------------- for a period of less than twelve (12) months shall not be assigned any work which, in the opinion of the immediate supervisor, is hazardous. 44 . EIGHTEEN (18) MONTH APPRENTICE: Any apprentice who has been in ------------------------------- the apprenticeship for a period of less than eighteen (18) months, shall not work on conductors energized in excess of four hundred eighty volts (480). After that period, the apprentice may work under the direct supervision of a journeyman on all voltages which, in the opinion of the immediate supervisor, would not create an undue hazard at that stage of the training. 16.5 DELETE 16.6 TOOLS, EQUIPMENT AND WORK CLOTHES: An employee shall furnish initially all tools and equipment which are acceptable to the Company and necessary for the work to be performed. The Company will furnish a suitable standard pair of gloves and coveralls bearing Company identification to a regular employee, when required in the performance of the employee's work and Company will replace such gloves and coveralls worn out in the Company service. When a safety strap or hook strap is worn out in the Company service or is condemned by the Company, it shall be replaced at no cost to the employee. 16.7 WELDING REQUIREMENTS: When an employee does welding work above ground floor, there shall be another employee present. 16.8 DELETE 16.9 UPGRADE: When an employee relieves an employee of a higher classification for two (2) or more hours, the employee shall receive the rate of pay for the higher classification for the time worked in the higher classification. However, an employee will not be upgraded when employees of that classification who normally report for work at the same location are able and available to do the work for which the upgrade is intended. If a shift employee, for reasons other than a scheduled vacation, is unable to report to work, an employee (who is on the designated days off) from the same classification, including relief employees in that classification, who normally reports for work at the same location will be called by telephone to cover the vacant shift. If an employee, who is on the designated days off, holding the same classification who normally reports for work at the same location is not available, the employee of the same classification who normally reports for work at the same location on the previous shift will work half of the vacant shift and the employee of the same classification who normally reports for work at the same location on the shift following the vacant shift will work the remaining half of the vacant shift. If for any reason these arrangements cannot be made, the Company may upgrade to cover the vacant shift. The Company may upgrade a shift employee for scheduled vacations, provided that all overtime involved from such upgrade be worked by an employee holding the classification who normally reports for work at the same location from which the vacation was granted. If the relief operator is available, that operator may be used to relieve as described under "Exhibit I (CLASSIFICATION DESCRIPTIONS)". 45 16.10 SUPERVISORY RESPONSIBILITIES IN EMERGENCY CONDITIONS: It is the intention of the Company that supervisors shall generally confine their activities to the supervision of the work or operations being performed. In certain instances, should emergency conditions arise, it may be necessary for them to perform those tasks normally assigned to bargaining unit employees. Under ordinary circumstances, such instances will very rarely occur, but since the safety of personnel or Company property may be in jeopardy, it must remain management's prerogative to determine when conditions require the actions described above. In the same manner it is the intention of management that the "chain of command" be adhered to, by both supervisors and bargaining unit employees. However, in the case of emergencies, there will be occasions when it may be necessary for a senior supervisor to bypass normal chain of command in order to prevent difficulties. Common sense and good judgment must be exercised in applying these paragraphs. 16.11 NEW CLASSIFICATIONS/WAGES: Any new rate covering work normally performed by employees within the bargaining unit shall first be discussed with the Union and the rate established for such work shall be that mutually agreeable to both parties. 16.12 REMOVING LETTERS OF DISCIPLINE: Any employee who receives a written letter of reprimand which is a part of the personnel file maintained in the Company's Human Resources office may, after three (3) years from the date of such letter, request in writing to have the letter removed. Upon such written request, the Company shall remove the letter and return it to the employee. If the behavior that warranted the letter has changed or been corrected, the employee's current supervisor can remove the letter from the employee's personnel file by documenting this change in behavior and providing written authorization to Human Resource Partner or labor representative. 16.13 REQUIRED LICENSES, PERMITS, CDL's: Employees required to operate any motorized vehicle or equipment on public roadways in the normal course of employment shall be required to possess and maintain all licenses and permits required by state and/or federal laws. The Company will provide suitable training to all employees required to operate equipment or vehicles where a commercial drivers license (CDL) is required and shall issue a certificate upon satisfactory completion of the driver training and testing program. Employees who by their regular work assignments, may be required, as a condition of employment and Nevada Revised Statue, to maintain an active commercial drivers license (CDL), shall be provided reasonable time with pay during their regular working hours, to obtain or renew such licenses provided such activities are not a result of the employees violation of any state or federal law or public policy. 16.14 VESSEL CONDITIONS: No unprotected employee will be required to enter a vessel or compartment where the temperature inside exceeds one hundred fifty degrees (150o) Fahrenheit. 46 Article No. 17 - Term of Agreement 17.1 DURATION: This Agreement shall take effect on June 25, 1999, and shall continue in effect until February 1, 2002, and shall continue in full force and effect from year to year thereafter unless written notice of termination shall be given by either party to the other at least sixty (60) days prior to the end of the then current term. 17.2 AMENDMENTS: If either party desires to amend this agreement, it shall give notice thereof to the other party at least sixty (60) days but not more than seventy (70) days, prior to the end of the then current term, and the party desiring to amend or revise this Agreement shall submit to the party so notified a detailed outline of the Articles and Sections to be amended or revised at the time the notice is given, except and unless otherwise mutually agreed to by the parties during this period of notice defined herein. Negotiations on the amendments or revisions shall take place, so far as possible, in the sixty (60) day period prior to the end of the then current term. Failure of the parties to agree on such proposed amendment or revision shall not cause termination of this Agreement unless either party has given notice of termination as provided in Section 1 above. 17.3 PROVISIONS IN CONFLICT WITH THE LAW: In the event that any provision of this Agreement shall at any time be made invalid by applicable legislation, or be declared invalid by any court of competent jurisdiction, such action shall not invalidate the entire Agreement, it being the express intention of the parties that all other provisions not made invalid shall remain in full force and effect. 17.4 CHANGE IN COMPANY STATUS: This Agreement shall be binding upon the successors and assigns of the Company, and no provisions, terms or obligations herein contained shall be affected, modified, altered or changed in any respect whatsoever by the consolidation, merger, sale, transfer, reorganization or assignment of the Company, or by any change in the legal status, ownership or management thereof. JOB SECURITY: The buyer of a bundle will be required to retain all represented employees physically assigned to that bundle at the close of transaction. Employees are assured of continued employment with their original NPC hire date, and their benefits are carried over to economically similar plans of the buyer. Effective at the close of transaction of a bundle and effects the assigned employees at that bundle. PENSION: Prior to the close of transaction by the bundle, negotiations between the Company, IBEW #396, and the buyer of the bundle will be conducted to consider the treatment of pension funds. Options for review are the transfer all required pension money to the buyer, retain the funds by the seller, or other options agreed to by the parties above. VACATION: All unused vacation will be transferred to the new owner at close of transaction to be used per the existing Collective Bargaining Agreement. MEDICAL/DENTAL/VISION: At the close of transaction by the bundle, the buyer will be required to provide Medical/Dental/Vision coverage that is comparable in overall value of benefit to the coverage provided under the present Agreement as outlined in Article 14. All current employees and their currently covered dependents shall be covered immediately upon close of transaction. There will be a seamless transition and no interruption of service 17.5 EFFECTIVE DATE OF AGREEMENT: It is mutually agreed by and between the parties signatory hereto that the Agreement dated February 1, 1994, is superseded by this Agreement dated as of February 1, 1998. Except as otherwise expressly provided herein, the provisions of this Agreement shall be effective February 1, 1998. The agreement of February 1, 1998 is superceded by this Agreement dated as of June 25, 1999. Except as otherwise expressly provided herein, the provisions of this Agreement shall be effective June 25, 1999. 47 17.6 CONTRACT: a new generation contract will be created at ratification of these term and conditions to include the items contained in the supplemental agreement and exclude items which are not related to generation as agreed to by the Company and the Union. The contract will include an eighteen-month extension beyond the close of transaction by the bundle, or after the expiration of the existing contract which expires in February 2002. There will be no layoff for an eighteen-month period of time from close of transaction by facility or at least February 2002. The Company will facilitate communications and negotiations via meetings between the Union and the buyer to discuss labor issues and interests. The buyer will become signatory with Local 396 for this Generation Contract at close of transaction by facility. 17.7 RETENTION BONUS: Effective at the close of transaction, bundled employees who remain at the plants until close of transaction of their bundle will receive a lump sum retention check of $2500 (grossed up for taxes). In addition, if the contract is ratified by July 15, 1999, employees assigned to generation will receive a $500 net check (grossed up for taxes), within two pay periods of ratification. 17.8 INCENTIVE BASED PAY: The following incentive-based pay calculation will be implemented for the remainder of the contract beyond February 2002. . There will be 2% base wage increase for the eighteen month extension of the contract . There is an incentive increase bonus potential of up to 4% for the first twelve months . There is an incentive increase bonus potential of up to 2% for the remaining six months Topics to be evaluated for incentive based pay are lost time injuries, safety, equipment reworks, parts availability, heat rate (within control), capacity factor, and environmental compliance. Criteria will be created and incentive pay will be based on percentage of goals attained. Incentive based pay will be implemented January of 2000. The Company and Union agree to create a committee comprising of union stewards, union members and company representatives to define the details of the Incentive Based Pay program. The program details will include percentages, criteria, evaluation and as well as payout schedule. . There is an incentive increase bonus potential of up to 4% for each year 2000 and 2001. Implementation of this program in 2000 will not effect the existing agreement for 3% base wage increase in 2000 and 2001. 48 In witness whereof, the parties hereto have executed this Agreement on June 25, 1999. Local Union #396 of the International Brotherhood of Electrical Workers (AFL-CIO) ================================================================================ James C. Anzinger Business Manager and Financial Secretary, IBEW Local 396 - -------------------------------------------------------------------------------- Mary Jane Willier-Reed Vice President, Human Resources NEGOTIATING COMMITTEE --------------------- IBEW, Local No. 396 Nevada Power ------------------- ------------ Jim Anzinger Mary Jane Willier-Reed Dennis Banfill Trudy Haszlauer Dennis Crouse Gerry Mikesell Earl Evans Mark Sandoval Adam Morrison Ernie Moyes Randy Postma Michael Solis John Workman Paul Turner 49 Exhibit I - Classification Descriptions APPRENTICE EQUIPMENT MECHANIC Assists the equipment mechanic while undergoing training for the journeyman level. Does such work as tuning motors, adjusting valves and ignitions, cleaning fuel systems and radiators, adjusting clutches, brakes and carburetors, tests compression of oil and fuel pressure. APPRENTICE ELECTRICAL/INSTRUMENT TECHNICIAL Assists the generation plant electrical/instrument technician while in training for journeyman. Assists the journeyman in the installation, maintenance, repair and testing of electrical equipment in a generating station. Renews and calibrates gauges and control devices on control boards; repairs and calibrates transmitters, receivers, and control drives; and does other repair work as directed by journeyman instrument technicians while learning trouble shooting techniques for electronic, solid state and pneumatic instrument servicing. Will perform additional duties as required by the electrical/instrument technician. APPRENTICE MECHANICAL TECHNICIAN / MACHINIST Assists the machinist while in training for journeyman; assists the journeyman in precision work on any type of machine as well as work on the floor in tearing down, repairing and placing into operation any plant equipment and may be required to perform other duties as assigned. APPRENTICE MECHANICAL TECHNICIAN / MECHANIC Assists the mechanic while in training for journeyman; assists the journeyman in doing general mechanic work associated with installing or repairing any plant equipment, and will be required to work with other journeymen to learn basic rigging, machining and welding, and may be required to perform other duties as assigned. APPRENTICE MECHANICAL TECHNICIAN / WELDER Assists the welder while in training for journeyman; assists the journeyman in performing all types of gas or electrical welding, and may be required to perform other duties as assigned. ASSISTANT CONTROL OPERATOR Assists the control operator during operational emergencies, startups, shutdowns and fuel changes. The primary function will be the manual and control work involved in the light-off and shutdown of boilers, start-up and shutdown of turbines and operational procedures required in changing of fuels. May also be required to operate any or all plant mechanical or electrical equipment as directed. Must be familiar with the trip functions and testing of all equipment and keep records and logs as required. When necessary, will work as part of the maintenance crew during plant shutdowns, or any emergency when necessary, may be required to work in any position in the plant. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. AUXILIARY OPERATOR Assists control operator in all phases of operations. Inspects and operates plant auxiliary equipment and water treatment equipment at water treatment plant. Monitors and reads gauges, meters, and water treatment control panels to make adjustments that ensure equipment is operating properly. Does switching in and out of breakers. Performs good housekeeping as a matter of clean and safe operations. When necessary will work as part of the maintenance crew during shut downs. Leaves shift upon proper relief and performs other duties as required. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. 50 COAL YARD EQUIPMENT OPERATOR Operates and maintains all equipment assigned to the coal yard including railroad locomotives and cars, shakers, conveyors, separators, feeders and crushers and such other supplemental equipment as may be assigned to the coal yard. Will be required to work intermittently in any other classification when assigned. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. CONTROL OPERATOR Operates the controls of gas, oil or coal fired boilers and auxiliaries such as boiler feed water and other pumps, compressors, condensers, fan motors and all other equipment necessary for the operations of the plant. Clears boilers, generating units and auxiliaries during outages, cooperates with the system dispatcher's relative to load voltage changes, frequency and switch requirements, adjusting controls of generating equipment according to operating conditions and synchronizes the equipment with the system; maintains daily operating log, a record of all dispatcher and trouble calls, and visitors record; maintains in a clean and orderly manner control room, all equipment and panels; informs his relief fully on existing and preceding operating conditions of the plant and system; acts as part of overhaul crew during plant shutdown, or any emergency when necessary, may be required to work in any position in the plant. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. ELECTRICAL/INSTRUMENT TECHNICIAN Performs a wide variety of skilled electrical and instrumentation work in the installation, maintenance, repair and testing of electrical and electronic equipment in a generation facility. Performs a wide variety of precision tests, repairs, calibrations, modifications, maintenance and inputs on numerous electronics, pneumatic and hydraulic systems. Must have thorough knowledge of computer based process and electrical control systems and skill level to troubleshoot and repair these systems. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. GENERATION CUSTOMER REPRESENTATIVE Performs fairly sophisticated functions defined by regular application of office equipment and business software systems. Extensive customer interaction and a significant degree of decision making authority is required. Performs other related duties as required for which the employee is capable and qualified to perform as assigned. LABORATORY TECHNICIAN The laboratory technician is directly responsible for all phases of chemical analysis and the treatment of all waters in the plant vital to the production of steam. Must perform daily analysis on the plant's boiler water, feed water and cooling water systems and implement proper treatment to control corrosion or scale formation in all water pipe systems and to insure steam purity. The laboratory technician must have a thorough knowledge of Zeolite softeners, mixed bed demineralizers, chlorine room, and clarifier operation. Takes monthly inventory of all chemicals and chemical supplies throughout the plant and laboratory and makes analysis standards and plots graphs for control limits on all chemically treated water as directed. Unloads caustic, acid and chlorine and maintains a supply of chemicals inside the plant as necessary. The laboratory technician at gas fired plants will calibrate all conductivity meters and replace corrosion coupons and will perform additional duties as required. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. The laboratory technician at a coal fired plant will sample and perform analysis of coal at that plant. Sampling and analysis include collection of the sample, riffling, pulverizing, and actual burning of the sample in the bomb calorimeter. Analysis of the sample includes determination of the external moisture, internal moisture, percent of ash, BTU's per pound, percent of sulfur and ash fusion. Performs normal housekeeping duties to insure a clean laboratory and recommends chemical supplies and materials to insure an adequately supplied laboratory. 51 LEAD In the absence of appropriate supervision and when directed, leads, assists, and works with other departmental personnel to ensure the efficient operation of related activities. May be required to develop schedules, direct work assignments, prepare job related reports, complete other administrative duties, function in a journeyman capacity, and perform other work as needed. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. MAINTENANCE TECHNICIAN Performs a variety of skilled work including operating equipment, insulating, painting, lubricating and carpentry. Will be required to perform any of the above tasks if necessary. May be required to assist or perform work in any lower classification. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. MAINTENANCE UTILITY TECHNICIAN Does unskilled work as necessary; keeps journeyman or apprentice supplied with tools, materials, and supplies while assisting with a specific job; cleans working area and equipment. Operates other special equipment including jackhammer as required and drives truck or pickup in performance of duties. A maintenance utility technician shall not displace an apprentice or a journeyman. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. MATERIAL SPECIALIST Performs manual and clerical duties in connection with receiving, storing and issuing supplies, tools, and equipment; unloads and unpacks incoming materials; places, shelves and racks stock of machine, hand and construction tools; measures, counts, cuts, crates, marks and stencils materials, supplies, tools and equipment; keeps the premises clean; drives a car or pickup in local purchases of materials and equipment. MATERIAL UTILITY TECHNICIAN Performs unskilled and semi-skilled labor as necessary. Keeps warehouse and outside areas clean. May operate forklift for loading and unloading of materials for deliveries. Drives warehouse vehicles for material deliveries and local purchases of material and equipment. Two hours minimum upgrade if material is to be purchased during town run. Must be able to obtain a CDL within 90 days of hire date. May assist Material Specialist in putting away material and loading material for crews. The ratio should not exceed 1 Material Utility Technician for 7 Material Specialists (1:7). A Material Utility Technician shall not displace a Material Specialist. MECHANIC SPECIALIST Maintains all types of construction and transportation equipment and accessories. Diagnoses mechanical, hydraulic and electrical problems, makes and recommends repairs. Designs equipment modifications. Constructs and installs parts and similar apparatus, including booms and winches, to accommodate the required changes. Performs pressure and structural welding, operates metal lathes, and other precision machinery, and does other related mechanical work as required. Maintains work and vehicle records as required by the Company. Performs all the duties of an Equipment Mechanic or Equipment Mechanic B or other work as assigned. MECHANICAL TECHNICIAN / MACHINIST Must be able to do precision work on any type machine as well as actual work on the floor in tearing down, repairing and putting into operation any plant equipment. Will be required to work intermittently in any of the maintenance classifications if necessary. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. 52 MECHANICAL TECHNICIAN / MECHANIC Capable of doing general mechanical work attached to installing or repairing any plant equipment, be familiar with work on high pressure boilers and their auxiliaries. Will be required to work intermittently in any of the maintenance classifications if necessary. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. MECHANICAL TECHNICIAN / WELDER Performs all types of high pressure, gas and electrical welding and layout and must have satisfactorily completed welding tests as designed by, and in accordance with, state boiler safety requirements for high pressure vessels operated by the Company. Will be required to work intermittently in any of the maintenance classifications if necessary. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. RELIEF ASSISTANT CONTROL OPERATOR Performs the duties of an assistant control operator as described in this Exhibit I. The relief assistant control operator shall be assigned to any shift other than the usual schedule for purposes of providing relief to, or coverage for an absent assistant control operator. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. RELIEF AUXILIARY OPERATOR Performs the duties of an auxiliary operator as described in this Exhibit I. The relief auxiliary operator shall be assigned to any shift other than the usual schedule for purposes of providing relief to, or coverage for an absent auxiliary operator. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. RELIEF CONTROL OPERATOR Performs the duties of control operator as described in this Exhibit I. The relief control operator shall be assigned to any shift other than the usual schedule for purposes of providing relief to, or coverage for an absent control operator. Employees will perform any and all tasks for which they are properly trained and can competently and safely perform. TRAINER - POWER DELIVERY Responsible for development, administration and evaluation of Power Delivery's apprenticeship and Mechanical, Electrical and Instrumentation Journeyman classification cross-training and refresher training. Provides classroom and field training for existing mechanical and electrical and instrumentation employees within Power Delivery. Assists with testing as a pre-qualifier for prospective new hires and promotions. Accountable for testing, documenting and providing regular updates to Power Delivery Management and others as required on progress and qualifications of apprentices and Mechanical, Electrical and Instrumentation Journeymen. Will work in conjunction with Power Delivery apprenticeship committee. 53 Exhibit II - Schedule of Wage Rates GENERATION WAGE TABLE
CLASSIFICATION Eff 1/31/2000 Eff1/29/2001 Eff 1/29/2001 T1 T1 T2 Materials - --------- Lead Material Specialist 24.56 25.30 20.75 Material Specialist 1st six months 20.67 21.29 17.50 2nd six months 21.46 22.10 18.15 Thereafter 22.33 23.00 18.90 (Red Circle) 23.02 23.71 Warehouse Utility Technician 1st six months 15.33 15.79 12.95 2nd six months 15.92 16.40 13.45 Thereafter 16.51 17.00 13.95 Generation - ---------- Lead Coal Yard Operator 28.07 28.91 23.75 Lead Laboratory Technician 27.56 28.39 23.30 Maintenance Technician 1st six months 18.27 18.82 15.45 2nd six months 18.87 19.43 15.95 3rd six months 19.45 20.04 16.45 4th six months 20.05 20.65 16.95 5th six months 20.63 21.25 17.45 6th six months 21.23 21.87 17.95 Thereafter* 21.81 22.47 18.45 (Red Circle) 24.67 25.41 (Red Circle) 25.12 25.88 (Red Circle) 27.05 27.87 Lead 30.36 31.27 25.65 Mechanical 27.62 28.45 23.35 Technician/Machinist (Red Circle) 30.12 31.02
54 Mechanical 27.62 28.45 23.35 Technician/Mechanic (Red Circle) 30.12 31.02 Mechanical Technician/Welder 27.62 28.45 23.35 (Red Circle) 30.12 31.02 Electrical/Instrument 27.62 28.45 23.35 Technician (Red Circle) 30.12 31.02 (Red Circle) 30.73 31.65 Coal Yard Equipment Operator 25.53 26.30 21.60 Relief Control Operator 28.62 29.48 24.20 Control Operator 1st six months 27.16 27.98 22.95 Thereafter 27.95 28.79 23.65 Relief Assistant Control 25.75 26.52 21.75 Operator Assistant Control Operator 1st six months 24.37 25.10 20.60 Thereafter 25.09 25.84 21.20 Relief Auxiliary Operator 24.57 25.31 20.75 Auxiliary Operator 1st six months 23.39 24.00 19.70 Thereafter 23.93 24.65 20.25 Apprentice Mechanical Apprentice Electrical/Instrument Technician 1st six months 20.51 21.13 17.35 2nd six months 21.34 21.98 18.05 3rd six months 22.07 22.73 18.65 4th six months 22.83 23.51 19.30 5th six months 23.60 24.31 19.95 6th six months 24.35 25.08 20.60 7th six months 25.12 25.88 21.25 8th six months 25.88 26.66 21.90 Thereafter* 27.62 28.45 23.35
55 Generation Customer 16.99 17.49 Representative Laboratory Technician 1st six months 22.50 23.17 19.00 2nd six months 23.34 24.04 19.75 3rd six months 24.20 24.92 20.45 Thereafter 25.09 25.84 21.20 Maintenance Utility Technician 1st six months 11.20 11.53 NA 2nd six months 11.79 12.15 NA 3rd six months 12.38 12.75 NA 4th six months 12.98 13.36 NA 5th six months 13.56 13.97 NA 6th six months 14.14 14.57 NA Thereafter 14.74 15.18 NA Trainer - Power Delivery 30.36 31.27 25.65
56 EXHIBIT II SCHEDULE OF WAGE RATES (Cont.) NOTE: THIS LANGUAGE RELATIVE TO THE COST-OF-LIVING ADJUSTMENT REMAINS HEREIN, - ---- HOWEVER, IT IS INOPERABLE AND WILL NOT BE REFERENCED REGARDING ANY MATTERS DURING THE TERM OF THIS AGREEMENT EFFECTIVE FEBRUARY 1, 1994, BUT SHALL BE SUBJECT TO NEGOTIATION UPON TERMINATION OF THIS AGREEMENT. THE RATES SHOWN FOR FEBRUARY 1, 1991 ARE MINIMUM RATES. THESE RATES SHALL BE INCREASED IF THE CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS (CPI-W), OF DECEMBER 1990 HAS INCREASED BY MORE THAN FIVE PERCENT (5%) WHEN COMPARED TO THE CPI-W OF DECEMBER 1989. INCREASES WILL BE GRANTED ON FEBRUARY 1, 1991, AT THE RATE OF ONE ADDITIONAL CENT ($.01) PER HOUR, FOR EACH FULL.125% BY WHICH THE CPI-W HAS INCREASED MORE THAN FIVE PERCENT (5%). THE RATES SHOWN FOR FEBRUARY 1, 1992 ARE MINIMUM RATES. THESE RATES SHALL BE INCREASED IF THE CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS (CPI-V\I) OF DECEMBER 1991 HAS INCREASED BY MORE THAN FIVE PERCENT (5%) WHEN COMPARED TO THE CPI-W OF DECEMBER 1990. INCREASES WILL BE GRANTED ON FEBRUARY 1, 1992, AT THE RATE ON ONE ADDITIONAL CENT (S.01) PER HOUR, FOR EACH FULL.125% BY WHICH THE CPI-W HAS INCREASED MORE THAN FIVE PERCENT (5%). THE RATES SHOWN FOR FEBRUARY 1, 1993 ARE MINIMUM RATES. THESE RATES SHALL BE INCREASED IF THE CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS (CPI-V\I) OF DECEMBER 1992 HAS INCREASED BY MORE THAN FIVE PERCENT (5%) WHEN COMPARED TO THE CPI-W OF DECEMBER 1991. INCREASES WILL BE GRANTED ON FEBRUARY 1, 1993, AT THE RATE OF ONE ADDITIONAL CENT ($.01) PER HOUR, FOR EACH FULL.125% BY WHICH THE CPI-W HAS INCREASED MORE THAN FIVE PERCENT (5%). 57 EXHIBIT III International Brotherhood of Electrical Workers Local Union No. 396 CHECK OFF AUTHORIZATION I, _______________________________________________________, herewith authorize (print name) (employee no.) Nevada Power Company to deduct initiation and/or reinstatement fees and monthly dues owing to the Union, in accordance with the Constitution and By-Laws of the Union, and direct such amounts so deducted be sent to the Secretary-Treasurer of the Union for and on my behalf. When the full amount of the initiation or reinstatement fee has been withheld from my earnings, such authorization for deduction of initiation or reinstatement fee only shall be null and void, and shall thereafter have no further force or effect. This authorization shall be irrevocable for the period of the applicable agreement between the Union and the Company, or for one (1) year, whichever is lesser, and shall automatically renew itself for successive yearly or applicable agreement periods thereafter, whichever is lesser, unless I give written notice to the Union, registered, Return Receipt Requested, of my desire to revoke the same. The Union will notify the Company on a biweekly basis if necessary of those employees who wish to revoke this deduction; such deductions will cease in the pay period following receipt of such notice from the Union. It is recognized that neither the Company nor the Union shall be under any liability to me, the undersigned, with respect to the deductions provided herein. Signed ________________________________________________________________________________ Date ________________________________________________________________________________ 58 EXHIBIT IV SICK LEAVE AGREEMENT INTRODUCTION The Union agrees to share the responsibility in protecting the sick leave plan from abuses by any of its members, recognizing that the plan is intended to provide pay coverage under situations of actual need. MEDICAL ATTENTION Sick leave may be used for obtaining medical information or treatment including exams or treatments for care of the eyes or teeth of eligible employees. Such absences should be approved in advance where possible and limited to the time necessary for treatment or examination or recovery. ALCOHOL AND DRUG ABUSE An employee who seeks professional treatment to correct a problem of excessive use or dependence on a alcohol or other controlled substances will be placed on medical leave of absence for such treatment. Available unused sick leave may be used while under professional treatment. Arrangements for treatment must be made with the EAP Provider and the Company and such treatments will be kept as confidential as possible. Employees who receive such treatment will be expected to observe all conditions and attend all meetings which are required as part of the total rehabilitation program. Evidence of abstinence may be required as a follow-up and negative findings may result in termination. 59 EXHIBIT V TEMPORARY LAYOFF PROVISIONS The following provisions shall apply relative to a temporary layoff, as referenced in Article 5.4 (LAYOFF PROVISIONS): NOTIFICATION: Should the Company initiate a temporary layoff, affected employees shall be notified in writing as soon as possible, and will have three (3) days to indicate their interest for consideration in the layoff. ELIGIBILITY: Temporary layoffs, out of line of seniority, shall be strictly voluntary. If there are more volunteers than needed within a classification, selection shall be determined by highest Company seniority of the interested employees. If two (2) or more employees have the same Company seniority date, the highest score on the most recent performance appraisal will break the tie. If there are no volunteers, the Company shall explore other alternatives that may satisfy the temporary layoff situation. TIME FRAME: A temporary layoff shall be for the stated time period or less, as indicated in writing at the time of notification. If, during the temporary layoff, the Company recognizes that the layoff may extend beyond the original time frame, employees in layoff status shall be given the option to extend or return to work. If the temporary layoff ends before the stated time frame, employees will be notified immediately, and expected to return to work the next day unless other arrangements are approved by management. PAY: Employees shall be paid approximately 70% of their current income, which includes income received from unemployment compensation as a result of the layoff. The following formula shall be used to calculate an employee's gross wages while on temporary layoff: Base rate x 40 Hrs. x 70% - Unemployment Income = Weekly Gross Wages For the purpose of this calculation, the unemployment compensation amount will be subtracted to arrive at gross wages even if the employee does not receive this benefit. The exception to this provision will be for the first week of the temporary layoff, when employees will be required to serve a waiting week for unemployment compensation. For this initial week, employees will be paid 70% of their base rate. VACATION: No adjustment to vacation accrual shall be made during the first sixty (60) calendar days of a temporary layoff. However, once the sixty (60) day period has elapsed, an employee's vacation accrual shall be adjusted and treated as any other leave, as outlined in Article 12.4 (VACATION ADJUSTMENTS). If employees are in layoff status and unable to use their vacation allotment for that year, the unused vacation shall be automatically carried over to the next year. SICK LEAVE: Employees shall continue to accrue sick leave monthly, as if they were working. However, employees will not be eligible to use sick leave or short-term disability during the period for which they are on temporary layoff. 60 HOLIDAYS: Employees shall not be entitled to holiday pay while on temporary layoff. The only situation that would warrant holiday pay is if they began or were recalled from temporary layoff during the week of a holiday. EXAMPLE ------- If the temporary layoff begins on Tuesday of a week with a Monday holiday, the employee would receive holiday pay for that day. These provisions do not apply to the floating holiday, as the employee would be allowed to reschedule the day at a future time. If as a result of a temporary layoff, an employee is unable to schedule their floating holiday, they will be allowed to carry this holiday into the following year. SENIORITY: An employee's seniority shall continue to accrue during the period of layoff. BENEFITS: An employee's benefits shall remain the same during the period of layoff. Employees monthly contribution will be deducted from these bi-weekly checks. PROMOTIONAL OPPORTUNITIES: Employees shall be eligible to indicate their interest in promotional opportunities that may arise during the period of layoff. However, they must individually assume the responsibility of meeting appropriate deadlines for consideration. Any employee awarded a promotion or transfer while on temporary layoff, will be returned to work immediately. RECALL: Should the Company need to recall employees in a specific classification prior to the previously stated date, employees shall be recalled by Company seniority on a volunteer basis. If there are no volunteers to return, inverse seniority will be used to satisfy these requirements. Any issues delaying an employee's return to work will be addressed on an individual basis. However, the monetary benefits associated with a temporary layoff will end on the date of recall. 61 May 20, 1988 Mr. James Brimer International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING - ARTICLE 14.4 - -------------------------------------- Dear Mr. Brimer: Prior to January 1, 1976, employee participants in the Nevada Power Company Retirement Plan were required to contribute slightly less than 3% of their straight time earnings to defray the Company cost of retirement benefits. Effective January 1, 1976, the Company paid the full cost of the retirement benefits plan. On January 1, 1988, twenty-eight (28) employees covered by the Clerical Collective Bargaining Agreement were active employees and had made contributions toward their retirement benefits. Records have been maintained on the amount of each of the twenty-eight (28) employees showing the accumulation of the direct contributions made by these employees and the earnings, through investments on their contributions through December 31, 1975. The Company has, in accordance with IRS regulations, agreed to credit the 12/31/75 account balances with five percent (5%) interest per year until disposition of these funds was made individually with each of these employees. The Company has now agreed to standardize the retirement plans in the area of funding for retirement benefits. To standardize, the Company has agreed to return monies contributed prior to January 1, 1976, by the twenty-eight (28) employees to the employees plus earnings and interest at five percent (5%) per year if the employee requests return. The Company is permitting the selection of several options which are described in the following paragraphs: OPTION I: Participants in the Nevada Power Company Retirement and EMPLOYEE Thrift Plan actively employed on January 1, 1988, may elect - -------- CONTRIBUTION to receive their employee contribution to the Plan, along - ------------ -------- with earnings and interest, computed at 5% per annum from January 1, 1976 through April 30, 1988. If the employee's contributions are withdrawn, the monthly benefit that is calculated using final average earnings, credited service and social security benefit will not be reduced. 62 OPTION II: Participants in the Nevada Power Company Retirement and EMPLOYEE Thrift Plan actively employed on January 1, 1988, may - -------- CONTRIBUTION choose to leave their employee contributions in the Plan, - ------------ -------- along with earnings and interest computed at 5% per annum from January 1, 1976, until retirement or termination from Nevada Power Company and receive a lump sum payment of their employee account at that time. This withdrawal of the employee's contributions will not reduce his monthly benefit. OPTION III: At the time of termination or retirement, participants in EMPLOYER Nevada Power Company Retirement and Thrift Plan actively - -------- CONTRIBUTION employed on January 1, 1988, may elect to withdraw the - ------------ employee contribution to the Plan which will include -------- interest computed at 5% per annum from January 1, 1976, until the date of termination or retirement. This election will be available whether they have withdrawn the employee contribution in 1988 or at the time of termination. If the employer's contribution is withdrawn, the employee's annuity would be reduced by an equivalent amount calculated by accumulating the total employer account value with 5% interest to normal Retirement Date dividing by 120 and multiplying by the ratio of actual years of credited service to years of credited service at normal retirement. OPTION IV: Participants in the Nevada Power Company Retirement and EMPLOYER Thrift Plan actively employed on January 1, 1988, may - -------- CONTRIBUTION elect to leave the employer's contribution in the Plan, - ------------ along with earnings and interest computed at 5% per annum from January 1, 1976, until the date of termination or retirement. If the employer's contribution is not withdrawn, there will be no reduction of the employee's monthly benefit. Very truly Yours, /s/ Cynthia K. Gilliam Vice President, Human Resources ACCEPTED: /s/ James Brimer Business Manager and Financial Secretary, IBEW Local 396 63 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- DISCIPLINE RELATIVE TO TARDINESS AND ATTENDANCE Dear Mr. Anzinger: Both the Company and Union recognize that having reliable employees with good attendance is central to achieving the Company's goals and mission. Both parties also recognize that the majority of employees have good attendance records and display a true commitment to their occupation and work groups. However, in an effort to assist those employees who may have an attendance problem and minimize the burden placed on fellow employees, the Company and Union have agreed to waive the time off the job (i.e. one (1) day suspension, three (3) day suspension) and document those steps of progressive discipline on paper only. It is incumbent on both parties to communicate that although employees will not be subject to lost time, this should in no respect minimize the seriousness of this action. This agreement will remain in effect until February 1995, at which time the Company and Union will reconvene to discuss extending or discontinuing this agreement. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local 64 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING- - ------------------------ LABOR/MANAGEMENT MEETINGS Dear Mr. Anzinger: Both the Company and Union recognize the value in formally convening to discuss issues that affect departmental policies, procedures, and collective bargaining provisions. As such, during the negotiations of the Plant agreement, which expires in February 1994, the Company and Union agreed to continue holding departmental labor/management meetings as a forum to clarify, address interests, and problem solve solutions that mutually benefit all employees. Attendees shall include stewards, team leaders, and other employees reporting to that department or location, and meetings shall be held as needed, but not less than every sixty (60) days. The Company recognizes the value of participation and input from all its employees and the Union's facilitation of this process is critical to our mutual success. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local 396 65 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- ORGANIZATION STUDY Dear Mr. Anzinger: In May of 1993, the Board of Directors provided the necessary approval for the Company to begin on an Organization Study. This study has provided us with an opportunity to take a fresh look at Nevada Power Company, assess the way our work is organized to provide faster, more efficient service to our customers, and evaluate the way we communicate with each other to resolve problems more efficiently. During the negotiations of the Plant agreement, which expires in February 1994, the Company and Union agreed that as the Company streamlines work processes, there will be occasions which will require the Company and Union to reconvene to discuss issues of flexibility, changes in technology, and maximizing resources. Both parties recognize that changes promoting efficiencies in the work place benefit all employees, and the Company and Union will continue to promote and support ideas that meet those interests. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local 396 66 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers. Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- WORK/FAMILY ISSUES Dear Mr. Anzinger: During the negotiations of the Plant agreement, which expires in February 1994, the Company and Union recognize that work/family issues will continue to be at the forefront of workplace activities. As such, the Company and Union have agreed to address the issues of job sharing, telecommuting and other alternative work schedules or programs which allow both the Company and employee maximum flexibility without jeopardizing customer service. These issues will be addressed through labor/management meetings and may be initiated on a case by case basis. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local 396 67 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- WORKING FOREMAN CLASSIFICATION Dear Mr. Anzinger: Both the Company and Union agree that significant changes in the generation and warehousing departments have resulted in a redistribution of work originally assigned to working foremen. As a result, during negotiations of the Plant agreement, which expires in February 1994, the Company and Union agreed to discuss working foreman pay provisions commensurate to responsibilities and the possibility of a lump sum buyout in the form of Company stock in the employees' 401 K account. These issues and other remedies shall be discussed with the Union and affected employees by February 1995. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local 68 August 12, 1996 Mr. Jim Anzinger Intemational Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING - ----------------------- RED CIRCLE RATES Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company relative to compensation for employees paid at the red circle' rate who are reclassified to lower-level positions outside of the job posting system (i.e., voluntary transfers to lower-level positions, etc.). When employees, who are paid a 'red circle' rates are reclassified to a lower-level position, the 'thereafter" rate of the lower-level position will be assigned. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 69 December 4, 1996 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING ----------------------- Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company relative to the Maintenance Technician Classification at Reid Gardncr. Both the IBEW and the Company agree to expand the role of the Maintenance Technician to include lubricating coal conveying equipment such as conveyors, feeders, etc. This is specifically non-mobile coal yard equipment. In addition, the following is an attempt to clarify the equipment the Maintenance Technicians will be authorized to operate - vacuum truck, back hoe, water truck, dump truck, crane, anything other than dozers, shakers and trains (which are the responsibility of the Coal Yard Equipment Technicians). When the water truck is required to be used in the coal yard on the coal pile, Coal Yard Equipment Operators will perform this function. Very truly yours, /s/ Daniel S. Potter Director Employee Relations and Diversity Agreed: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 70 March 31, 1997 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING - ----------------------- Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company made regarding the movement and status of employees who were displaced during the organizational restructuring during NP2000 in 1993/94. The following list is an updated list to show who is still eligible for movement and under what conditions. (NOTE: Employees who have been removed off the original list are those who have received promotions into positions other than those they held during the original restructuring process.) Welders: Larry Eilers Wilbur Tarr Mechanics: Mike Solis Terry Dickson Dennis Banfill Auxiliary Operator: Clay Pulley Should any assignment, in the above identified classifications, last longer than 90 days, the people listed above in their respective classifications will receive the assignment based on company seniority date. Very truly yours, /s/ Daniel S. Potter Director, Employee Relations and Diversity AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 71 March 31, 1997 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING - ----------------------- Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company relative to the use of Operations working in Maintenance at Reid Gardner. Both the IBEW and the Company agree that it is mutually beneficial to agree to changes that allow operations to work in maintenance and go from 12's to 10's while assisting maintenance with required work. The following are the specifics: 1. The Company will provide seven (7) days calendar days notice. This will result in no monetary penalty to the company. If the seven (7) days is not followed, then penalties will be handled as identified in the CBA. 2. With regard to overtime equalization, operations will be placed in their own classification for the purposes of overtime. This includes control operators, auxiliary operators, and assistant control operators. Operations will also be included on their respective overtime list for weekend coverage as long as it doesn't interfere with the scheduled maintenance work. The hours that they have in their current OT pool will merely be moved over. This classification will be called after MUT's. 3. Individuals will first be asked to volunteer. If we receive no volunteers, then we will use reverse seniority. This will be done by seniority by classification by crew. 4. The time frame/period for pulling employees from operations to maintenance will be throughout the duration of an outage season. This will continue for 90 consecutive days or can be extended if a person volunteers to do so. (There are two outage seasons: January through June and July through December). This will occur for a maximum of 180 days within a twelve month period. 5. Upon completion of the assignment, the individual will go back to the original shift with no penalty to the employee and will fall right back into their normal rotation. 6. In emergency situation, operators could be called back to do operations work. 7. Operators assigned to Maintenance will be paid shift differential (78 cents). The above changes reflect the Company and Union's interest in working together to provide a future for our employees and the ultimate success of the Company. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 72 June 14, 1999 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union 9396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING Dear Mr. Anzinger: This letter is to document the agreement between the Company and the Union regarding the "Lead" classification. It is agreed that we will utilize this classification for the Operations department at Clark/Sunrise/Harry Allen and Reid Gardner work schedule for the position will be Monday through Thursday 0600 - 1630 with a corresponding rate of pay of $29.48. The position description as defined in the Collective Bargaining Agreement is as follows: "In the absence of appropriate supervision and when directed, leads, assists and works with other departmental personnel to ensure the efficient operation of related activities. May be required to develop schedules, direct work assignments, prepare job related reports, complete other administrative duties, function in a journeyman capacity, and perform other work as needed. Employees will perform any an all tasks for which they are properly trained and can competently and safely perform." Some of the duties will include maintenance of the red tag database, function as red tag operator, coordination of the outage schedule with maintenance, and issuing of clearances. In addition, this individual must be highly proficient at the Combined Cycle Control Operator position. This person will assist with unit operation and training. Functional requirements include unit monitoring and trending for optimum unit operational efficiencies. The need for this lead position will be jointly re-evaluated twelve months after its inception. Very truly yours, /s/ Mark Sandoval Director, Plant Operations AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW #396 73 July 26, 1999 Mr. James Anzinger: International Brotherhood of Electrical Workers Local Union 4396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING - ----------------------- Dear Mr. Anzinger: This letter is to document the agreement between Nevada Power Company and the International Brotherhood of Electrical Workers, Local Union #396, regarding training being conducted for operations and lab employees at the Reid Gardner and Clark Sunrise / Harry Allen generation facilities on an individuals day off. An individual or individuals that voluntarily come to the plant site for the specific intent of receiving formalized training shall receive such training, on straight time. This job specific training must be formally outlined and documented. This training may include application of an operating procedure, such as the startup of a unit or rolling a turbine, etc., where the trainee is receiving on the job training by assisting another with a specific assignment that has been formally outlined for the purpose of being documented. This does not apply to instances where an employee is called out to assist another with a specific assignment due to operational needs. Very truly yours, /s/ Mark Sandoval Director Power Delivery Operations AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW #396 74 August 23, 1999 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING - ----------------------- Dear Mr. Anzinger: This letter is to document the agreement between the Company and the Union regarding the Retail Customer Representative position currently located at Reid Gardner Station, which supports Clark Station as well. This position is currently held by Debbie Hardy. It is agreed that with the creation of the generation-specific contract, this position will become a part of the Generation Collective Bargaining Agreement, eliminating the need for the clerical agreement at the plants. The position title is Generation Customer Representative. The position job description is as follows- Performs fairly sophisticated functions defined by regular application of office equipment and business software systems. Extensive customer interaction and a significant degree of decision-making authority is required., Performs other related duties as required for which the employee is capable and qualified to perform as assigned. The type of work performed includes but is not limited to: . Administer blanket PO's by ordering and receiving . Verify billings and process payments . Input requisitions . Conduct research on issues . Assist Accounts Payable . Assist with drafting, including organizing and maintaining the prints library . Create indexes, file and organize areas as needed . Create and prepare various reports and spreadsheets as required The wage for the position will be: Remainder of 1999 = $16.50 per hour 1/31/2000 = $16.99 per hour 1/29/2001 = $17.49 per hour Very Truly Yours, /s/ Mark Sandoval Director, Power Delivery AGREED: /s/ James Anzinger Business Manager and Financial Secretary I BEW #396 75 September 9, 1999 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING - ----------------------- Dear Mr. Anzinger: This letter is to document the agreement between the Company and the Union regarding clarification of the rest period for the ten hour shift. Article 6.8 of the Collective Bargaining Agreement states, " Employees who are required to work overtime within the eight (8) hour period immediately preceding their scheduled starting time on a regular work day, shall be entitled to time off with straight time pay equal to time worked during this time frame." In the case of the Ten Hour Shift Agreement, it is agreed that the eight (8) hour rest period will be replaced with a ten (10) hour rest period. Very truly yours, /s/ Mark Sandoval Director, Power Delivery Operations AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW #396 76 January 6, 1994 Mr. James Anzinger International Brotherhood of Electrical Workers, Local 396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- VACATION/SICK LEAVE BONUS Dear Mr. Anzinger- During negotiations of the Plant agreement, which expires in February 1994, both the Company and Union recognize that our ability to succeed in a competitive environment is the result of effectively utilizing material and human resources. As such, in an effort to minimize increases in manpower resulting from scheduled time off, the Company and Union agreed to explore an additional option for consideration by employee's eligible for the vacation and sick leave bonus. Issues relative to a buy-out in the form of Company stock placed in the employee's 401K account, or cash, shall be discussed and addressed, including the possible tax ramifications. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local 396 77 September 13, 1999 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING - ----------------------- Dear Mr. Anzinger: This letter is to document the agreement between the Company and the Union regarding sick leave buyback. The cut off date for the sick leave balance that will be used is September 19th. The second vote for sick leave buy back indicated that employees unanimously wanted a sick leave buy back at 75 cents on the dollar. The amount will come in a separate check and be available by the end of the day September 20th. The amount will be subject to 401K match and appropriate withholding. Very truly yours, /s/ Trudy Haszlauer HR Business Partner, Generation AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW #396 78 June 25, 1999 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF UNDERSTANDING: - ----------------------- SEVERANCE ALLOWANCE PLAN The Company and Union agree that the sale of the generating facilities will not trigger the Severance Allowance Plan. The Severance Allowance Plan will no longer be included in the Generation Collective Bargaining Agreement. The Company will require the buyer to maintain the employment of bargaining unit employees assigned to the plants and require the additional terms and conditions indicated in this settlement. This Severance Allowance Plan agreement does not impact the Severance Plan outlined in Article 5.5. Very truly yours. /s/ Mark Sandoval Director, Southern Operations AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 79 November 25, 1997 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING - ----------------------- Dear Mr. Anzinger: This letter is to document the agreement between the Company and the Union regarding the classifications of Electrical and Instrument Technician. They are currently identified in the contract as two separate classifications. There is, however, a separate classification called Apprentice Electrical/Instrument Technician. These apprentices are within six months of journeying out. In order to accommodate their appropriate reclassification, we agree to create a new and separate classification called Journeyman, Electrical/Instrumentation. These apprentices, once journeyed out, will fall into this category. The description will be as follows: Performs a wide variety of skilled electrical and instrumentation work in the installation, maintenance and repair of a generation facility. Will perform any and all tasks for which they are properly trained and can competently and safely perform. This document will create a new classification to be added to the Plant Collective Bargaining Agreement called Electrician/Instrument Technician. The rate of pay will be $25.03 per hour until a new contract and new wages are negotiated. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW#396 80 February 1, 1999 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF UNDERSTANDING - ----------------------- Overtime Equalization Amendment Dear Mr. Anzinger: A) The updated overtime list will be made available every Tuesday afternoon B) There will be three equalization groups: 1) Instrument/Electrical 2) Mechanic/Machinist 3) Welder C) The lowest Mechanic, Machinist, Welder, Electrician and Instrument Technician will be notified. If accepted. they will be the first contacted for call outs, weekend call outs and/or Holiday coverage. D) Job continuity will apply to all weekend work. The same individuals will work the same job all three days of the weekend. F) If the individuals in paragraph C- cannot be contacted. the overtime list will be used to fill the vacancy as usual. G) Red hours will be charged for a missed call, a refused call and to all those wit- equal or less hours than the individual with the lowest hours that agreed to work, H) In the event of an error during a call out. the individual(s) "affected" will be offered work equal to the number of overtime hours missed within two weeks following notification of the mistake 1) Each January 1. the overtime list will be returned to zero in it's current order (to maintain the current order hundredths of an hour will be issued). Agreed: ___________________________________ /s/ Mark Sandoval Director, Power Delivery Operations ___________________________________ /s/ James Anzinger Business Manager and Financial Secretary IBEVV Local 396 81 May 4, 1998 Mr. James Anzinger Business Manager International Brotherhood of Electrical Workers, Local #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT - ------------------- STATUS OF MAINTENANCE UTILITY TECHNICIANS AND MAINTENANCE TECHNICIANS This letter is to document the agreement between the Company and the Union regarding the status of MT's and MUT's, effective February 1, 1998. If an MT or a MUT decide to go through an apprenticeship program, they will be able to decide which program based on the previous skills sets they have acquired. If they do not have any previous skill sets in the journeyman capacity, they will choose from the mechanical field. They will be evaluated where they are in the apprenticeship program. The program will be adjusted to the time required for the individual to complete their apprenticeship program not to exceed 4 (four) years. This will be based on the initial assessment completed by the trainer in conjunction with the power delivery apprenticeship committee. This apprenticeship program will be open only to MT's and MUT's in generation and will not be open to anyone else in the company. The majority of the apprenticeship program will be done on the individuals' own time. If they cannot complete the apprenticeship program for any reasons, they will revert back to their previous position (i.e. MUT will go back to MUT and MT will go back to MT). If a person has to revert back to their previous position, they will be returned to the rate of pay they had with their previous position. A written and skills assessment will be done on a one on one basis with the trainer and the power delivery apprenticeship committee. Very truly yours, /s/ Gloria Banks Weddle Vice President, Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 82 May 4, 1998 Mr. James Anzinger Business Manager Brotherhood of Electrical Workers Local #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT: - ------------------- OVERTIME EQUALIZATION This letter is to document the agreement between the Union and the Company regarding Overtime Equalization. The Company and the Union agree that the power delivery overtime equalization committee will gather to discuss and finalize overtime equalization within the second quarter of 1998. Very truly yours, /s/ Gloria Banks Weddle Vice President, Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 83 May 4, 1998 Mr. James Anzinger International Brotherhood of Electrical Workers, Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT - ------------------- FLEXIBILITY LANGUAGE This letter is to document the agreement between the Company and the Union regarding the intent of the flexibility language for positions as stated. "Employees will perform any and all tasks for which they are properly trained and can competently and safely perform." This language has been added to all generation classifications currently in the contract. * all training must be formally documented * employee must feel competent about doing the work requested * OSHA requires certain jobs and functions to be performed and certified every year -these will be defined at a later time * refresher courses may be required * must be able to perform job safely For example: Lab Technicians will work at the RCC and Water Treatment if needed (both at Clark and Reid). This clause allows the Company to offer training to the employees to expand their knowledge. The Company will ask for volunteers first. The interest is in placing training efforts into those individuals who have a desire to take advantage of this training and then put into action what they have learned. Documentation means book work in addition to practical and demonstrated application as well. Very truly yours, /s/ Gloria Banks Weddle Vice President, Corporate Services AGREED: /s/ James Anzinger IBEW Local #396 January 6, 1994 84 AMENDED June 25, 1999 May 4, 1998 Mr. James Anzinger International Brotherhood of Electrical Workers, Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT: - ------------------- NEWLY HIRED JOURNEYMEN IN GENERATION This letter is to document the agreement between the Company and the Union regarding all new hires into Maintenance and Operations classifications. This letter contains supplemental information to the job description contained in the Collective Bargaining Agreement. 1. The newly hired employees will be hired into the existing vacancy classifications. 2. At ratification of contract a two-tiered wage will be in effect. This will only effect any new hire. This will not effect any current employees and will not convert to newly hired wage rates in case of a transfer or promotion. The new language will require an 18% decrease in hourly wages with the last cent being rounded up to 0 or 5. 3. These individuals will be expected to successfully complete their three and five month evaluation. 4. All newly hired personnel in Operations and/or Maintenance will be required to transfer between plants provided there is 48 hours notice. There must be notice when transferring people. Otherwise, the Company will pay the penalty of movement, which will be two (2) hours of pay at straight time rate. Operations can work in Maintenance and Maintenance can work in Operations when the units are in outage. 5. These individuals can work any established shift recognized by the Company and Union (i.e., weekend coverage, 4-10's, 8's, rotating, etc. as assigned) provided 48 hours notice is met. They will receive the appropriate shift differential. 6. These individuals will be required to purchase and supply their own tools. 7. Maintenance Journeymen (existing or newly hired) shall not be authorized to do operation work and operations will not be authorized to do maintenance work while on shift. Operations will be allowed to perform some intermediate maintenance tasks on shift when properly trained (i.e., lubrication, packing adjustments, filter changes, painting, etc.). 8. Training will be offered to the existing employees first concerning the cross training of crafts. This will be done before any training is offered to the newly hired individuals concerning cross training. We will not force any existing employees to participate. 9. Any existing journeymen have the ability to volunteer for either the shift changes or plant transfers provided they accept the terms and conditions outlined in this document. No existing employees will be forced to participate in any of these duties as outlined in this document. Very truly yours. /s/ Mark Sandoval Director, Southern Operations AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 85 May 4, 1998 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT- - -------------------- STATUS OF UTILITY OPERATORS This letter is to document the agreement between the Company and the Union regarding the status of Utility Operators at Reid Gardner Station. The Company and the Union agree to promote the existing Utility Operators at Reid Gardner to the position of Auxiliary Operator effective the ratification of the contract. With this transfer, we agree to eliminate the positions of Coal Yard Technician and Utility Operator within Power Delivery. Very truly yours, /s/ Gloria Banks Weddle Vice President Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 86 May 4, 1998 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT: - ------------------- POWER DELIVERY APPRENTICESHIP COMMITTEE This letter is to document the agreement between the Company and the Union regarding the creation of a power delivery apprenticeship committee. A committee will be formed and convened before June 1998. The committee will define the rules, requirements, etc. and will create (revise existing) the apprenticeship handbook. Very truly yours, /s/ Gloria Banks Weddle Vice President, Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 87 May 4, 1998 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT: - ------------------- MOVEMENT OF EXISTING EMPLOYEES FROM ONE POSITION TO ANOTHER This letter of agreement is to document the agreement between the Company and the Union regarding the moving from one position to another on an involuntary basis within power delivery. If a person is involuntarily required to move from their existing position into another position in power delivery, the person will retain their existing salary, and when applicable, will be red circled. Very truly yours, /s/ Gloria Banks Weddle AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 88 May 4, 1998 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT: - ------------------- CONTRACT EDUCATION AND INTENT This letter is to document the agreement between the Company and the Union regarding the education of appropriate individuals of the intent, interpretation and administration of the new CBA. This education will take place within sixty (60) days of the signing of the contract. After the contract is voted and ratified, we agree to conduct labor/management joint meetings to discuss and define the intent of the newly voted contract as it applies to management and the Union. Minutes will be taken of these meetings and published upon joint approval. Very truly yours, /s/ Gloria Banks Weddle Vice President, Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 89 May 4, 1998 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT: - ------------------- E/I CLASSIFICATION This letter is to document the agreement between the Union and the Company regarding the E/I Classification. The Company and the Union agree to the following with regard to the joint classification: . Start with a fair review of E and I skills. . Refresher course will occur every three to five years in order to maintain current skill sets. . Employees will be rotated through schools. . Both crafts will work together on each others' jobs and provide cross training. . Advanced training should be the same for both classifications. . When employees are sent to school, every effort will be made to send E and I together. . There will be a semi-annual review to see where people are. A test will be administered by a training individual that will be used as a tool and not as a disciplinary measure. . Every current Electrician or Instrumentation technician will be merged into the E and I Classification. Each individual will then be identified by their specialty within this classification for the length of this contract. . There will be input from the E and I Department to make up the test for the Journeymen. . A list of schools that can be attended will be prepared. . Holiday coverage/weekend coverage for 1998/1999 will use electric and instrument separate classifications. It is understood that if someone needs to be called out, it will be in the vacancy which was originated, until we are certain that cross training has been provided and documented. The individual called out must be properly trained and can fulfill the work requirements. Very truly yours, /s/ Gloria Banks Weddle Vice President, Human Resources and Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 90 May 4, 1998 Mr. James Anzinger Business Manager International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT: - ------------------- CONTRACTORS FOR GENERATION Dear Mr. Anzinger: This letter is to document the agreement between the Company and the Union regarding the use of contractors within Generation. The following are the agreements that were reached: . time and material jobs, continuing service agreements, still need to remain at journeyman wage rate; other than during Yearly Scheduled Published Outages. . union will have buy-in into the list of capital projects every year - a committee will be established (These lists indicate far enough in advance the kind of work that might have to be contracted out) . if there are big jobs that we can absolutely not do; then they will be contracted out (prior union discussion and input) . wage rates for capital projects will be $20.50 for journeymen or $10.16 for MUT's (wages will increase with ratification of the contract) . 4.3 does not apply to air conditioning and air handling units; janitorial; statewide fire protection (subcontracting will be at appropriate contract rate); and ponds (cleaning and lining repair) * $100,000 triggers review by IBEW before it goes out to contractor. Will evaluate 396 first, utilize third party union agreements next and NPC lead with contractors last. * Union and Company to review list and agreement must be reached and decision must be lived with. Cannot agree to disagree. . System to be established to audit payroll records. . If contractor is found not to be paying prevailing wages: 1st offense make restitution 2nd offense make restitution and contractor will not be allowed top bid on NPC jobs for one year; including subcontractors 3rd offense make restitution and won't be able to bid for two years 4th offense make restitution and won't ever be able to bid again If contractor would be required to leave plant site, the Company would find an appropriate juncture to remove them from the plant site to ensure a smooth transition. 91 New plant construction is not work we normally do (i.e. Harry Allen Unit #2) Employee Relations in conjunction with Plant Directors will have the responsibility of auditing and ensuring full compliance with the requirements of contract development, interpretation and administration (with regards to actual contractors and also internal customers' issues with interpretation and administration). Contractors will not work overtime on jobs within our scope unless NPC regular employees are also at work. Yearly Published Scheduled Outages - ---------------------------------- . Using contractors for scheduled outages $20.50 set price for contractors -any schedule (wage rate will increase at ratification on the contract) . Use contractors for Yearly Published Scheduled Outages and with Union approval for emergencies . NPC journeymen do the higher skilled work or run the job . Overtime still applies . No shift restrictions . Suspend Article 6: with regards to wages, shifts (i.e. the contractor can work 2-12's and NPC will work 1-12 with the same number of Journeymen), shift differential, rest time, etc. other than what is required by law- power delivery only . Don't have contractors do regular work - out of scope of contract bid . Will continue and expand three party contract with other local unions . The outage rate is applicable to any work that is outage related (pre and post) like cleanup or warranty Contractors can have a 1 to 4 ratio of Journeymen to Maintenance Utility Technician's excluding plant cleanup. When a contractor comes on plant site, they need to know what their pay scale is and then publish it when they are on plant site. Very truly yours, /s/ Gloria Banks Weddle Vice President, Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 92 May 27, 1998 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF AGREEMENT: - ------------------- PERFORMANCE EVALUATIONS REGARDING SENIORITY Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company relative to performance evaluations scoring and rating as referenced in a couple of places in the contract. We have jointly agreed not to use performance evaluations that utilize a numbered rating system. Therefore, in the contract where is states that for a tie breaker we will use the most recent performance evaluation and the highest score will break the tie, shall be disregarded. Articles 5.4 and 7.1, both dealing with Seniority, are impacted. In the future, if two or more employees have the same Company seniority, the one with the best-documented evaluation shall break the tie. Very truly yours, /s/ Gloria Banks Weddle Vice President, Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 93 May 27, 1998 Mr. Jim Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, Nevada 89121 LETTER OF AGREEMENT- - -------------------- 1994 - THIRTY YEAR EMPLOYEES LOST VACATION Dear Mr. Anzinger: This letter will document the agreement between the International Brotherhood of Electrical Workers, Local #396, and Nevada Power Company relative to employees who achieved 30 years of employment in 1994. The following employees shall have returned to them the one week (40 hours) of vacation that they lost. Kent Aldrich Richard Leonard Elmer Miller Wilmon Morgan Jr. Bruce Ream Very truly yours, /s/ Gloria Banks Weddle Vice President, Corporate Services AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 94 January 8, 1999 Mr. James Anzinger International Brotherhood of Electrical Workers Local 1396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT: - ------------------- 36 for 40 Weekend Crew Holidays Dear Mr. Anzinger: This letter is to document the agreement between the Company and the Union regarding the holidays that will be observed by the 36 for 40 weekend crew for the next two years. This is an amendment to 11.2A contained in the original document. 11.2A COMPANY HOLIDAYS: The following are to be considered holidays for this schedule: 1999 2000 New Year's Day January 1 January 1 President's Day February 14 February 20 Easter Day April 4 April 23 Memorial Day May 30 May 28 Independence Day July 4 July 2 Labor Day September 5 September 3 Veteran's Day November 12 November 11 Christmas Day December 25 December 24 Note- It is understood that the holiday will be worked with the appropriate premium pay. Very truly yours, /s/ Daniel S. Potter Director, Employee Relations & Diversity AGREED: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local 396 95 January 20, 2000 Mr. James Anzinger International Brotherhood of Electrical Workers Local Union #396 3520 Boulder Highway Las Vegas, NV 89121 LETTER OF AGREEMENT - ------------------- Tier II Wages This letter is to document the agreement between the Company and the Union regarding the temporary postponement of the Tier II wage schedule for employees in the Generation Contract. The Tier II wage schedule is suspended until December 31, 2000 or when a facility is sold, which ever comes first. When a facility is sold, the Tier II language immediately goes into effect for that facility upon the close of that transaction. The Company and Union will meet and must mutually agree to renew this agreement in January 2001. Very Truly Yours, /s/ Mark Sandoval Director, Southern Operations Nevada Power Company Agreed: /s/ James Anzinger Business Manager and Financial Secretary IBEW Local #396 96 EXHIBIT XIV REID GARDNER MAINTENANCE Thirty-Six for Forty ARTICLE NO 6A WORKING HOURS AND RATES OF PAY 6.1A DEFINITIONS: SHIFT: Hours of work. FOR THE PURPOSE OF THIS AGREEMENT, THE HOURS OF WORK WILL BE 6:00 AM TO 6:00 PM. SCHEDULE: Days and hours of work. WORK DAY: TWELVE (12) hours in any one (1) day shall constitute the work day; WORK WEEK: Except as provided for part-time employees, the basic work week shall consist of THREE (3) consecutive work days regularly scheduled between the hours of 12:01 am Monday, and 12:00 midnight Sunday, shall constitute the basic work week. The basic workweek of THIS SHIFT SHALL BE FORM FRIDAY, SATURDAY AND SUNDAY AND REFLECTS A SCHEDULE OF FORTY (40) HOURS OF STRAIGHT-TIME WORK. REGULAR DAYS OFF: Days off shall be consecutive, however, they may not be within the basic workweek. 6.2A BREAK PERIODS: A fifteen-minute relief period shall be provided for all employees during each one-half (1/2) of the shift. Work conditions permitting, each break period shall be given as near the middle of each one-half (1/2) of the shift as possible. WHEN EMPLOYEES WHO ARE ASSIGNED TO THESE SCHEDULES ARE HELD BEYOND THEIR NORMAL QUITTING TIME, THEY WILL RECEIVE AN ADDITIONAL FIFTEEN (15) MINUTE BREAK, AS QUICKLY AS OPERATIONALLY POSSIBLE. 6.3A LUNCH PERIODS: THREE-TWELVE (3/12) EMPLOYEES: These employees will be considered to have a THIRTY (30) MINUTE paid lunch period as part of their regular shift. 6.4A OVERTIME: In computing overtime, intermission taken out for meals served other than on the job shall be deducted, and any holiday or vacation paid in that pay period will be considered as time worked. TIME AND A HALF: Except as otherwise provided in this Article, the following situations shall require payment as one and one-half (1-1/2) times the regular established wage rate: . Time worked in excess of TWELVE (12) hours per day. . Time worked in excess of any of the THREE (3) scheduled workdays. . Work scheduled in the three hours immediately preceding the normal starting time. . Employees who are scheduled to work an observed holiday. . Employees on THREE-TWELVE (3-1/2)'s who are scheduled or called out for overtime except as defined in "Double Time." . Employees who are scheduled for overtime and such is canceled per Article 6.9 (REQUIRED NOTICE FOR OVERTIME). DOUBLE TIME: Except as otherwise provided in this article, the following situations shall require payment at two (2) times the regular established wage rate: 97 . Employees, who are scheduled to work within the first five (5) hours of the eight (8) hour period immediately preceding the normal starting time regardless of the day of the week. . EMPLOYEES WHO ARE CALLED-OUT FOR WORK ON AN OBSERVED HOLIDAY AS DEFINED IN ARTICLE 11A OF THIS AGREEMENT. . EMPLOYEES WHO WORK ON THE FIRST DAY (MONDAY) OF A SCHEDULED FOUR (4) DAY OFF PERIOD. . Employees, who are called out for overtime work within the eight (8) hours period immediately preceding their normal starting time, regardless of the day of the week with an overtime minimum as provided in Article 6.7A (CALL-OUTS). . Employees who are called-out while on vacation per the provisions of Article 12.10A (CALL-OUT WHILE ON VACATION). 6.8 REST TIME: EMPLOYEES WHO ARE REQUIRED TO WORK OVERTIME WITHIN THE EIGHT (8) HOUR PERIOD IMMEDIATELY PRECEDING THEIR SCHEDULED STARTING TIME ON A REGULAR WORK DAY, SHALL BE ENTITLED TO TIME OFF AT THE RATE OF ONE AND ONE-HALF (1-1/2) TIMES THE ACTUAL HOURS WORKED. THIS WOULD CREATE THE POTENTIAL FOR 12 HOURS OF REST TIME. THIS IS NOT APPLICABLE TO A CALL OUT OR SCHEDULED OVERTIME OF THREE (3) HOURS OR LESS IMMEDIATELY PRECEDING THE EMPLOYEE'S NORMAL STARTING TIME. 6.9A REQUIRED NOTICE FOR OVERTIME: SCHEDULED OVERTIME: In scheduling overtime work, a minimum of TWELVE (12) hours notice is required, prior to the start of any overtime for a particular day, and before leaving the work site on a regular work day. Without this notice, such work will be considered as a call out. It is understood that overtime, when work as an extension of a regular shift, does not require such notification. EXAMPLE An employee assigned to a 6:00 am to 6:00 PM shift and is notified to work the next day (their day off) at 6:00 am. If notification is given by the end of shift (6:00 PM), this overtime is scheduled. 6.11A TRAINING EXCEPTIONS: The Company, may, for the purposes of training only, change schedules (REVERT BACK TO EIGHT (8) HOURS - MONDAY - FRIDAY) WHEN MUTUALLY AGREED UPON BETWEEN THE UNION AND THE COMPANY, WITHOUT INCURRING THE PREMIUM PENALTIES MENTIONED PREVIOUSLY. STAFFING FOR THE TWELVE (12) HOURS SCHEDULE: . VOLUNTEERS: THE COMPANY WILL SOLICIT VOLUNTEERS FOR ASSIGNMENT TO THIS SCHEDULE. . A WAITING LIST (IN ORDER FROM THE MOST SENIOR QUALIFIED TO THE LEAST SENIOR QUALIFIED) OF VOLUNTEERS WILL BE KEPT FOR THE TWELVE (12) HOURS SCHEDULE. THIS LIST WILL BE USED TO STAFF ANY CHANGES IN THE PERSONNEL ON THE THREE- TWELVE'S (3-12's). . VOLUNTEERS WILL BE ON A THREE (3) MONTH COMMITMENT TO THE 3-12 SCHEDULE IF ANOTHER VOLUNTEER EMPLOYEE CANNOT BE FOUND. . IF THERE ARE NO VOLUNTEERS FOUND IN THE CLASSIFICATION, THE TWO LOW SENIORITY IN THAT CLASSIFICATION WILL BE ASSIGNED TO A 4-10 SPLIT WEEKEND SCHEDULE. . HOLIDAY HOURS WILL BE TRACKED TO ENSURE EVERYONE HAS AN OPPORTUNITY TO USE THEIR 96 HOURS WHEN ROTATING BETWEEN 4-10'S AND 36 FOR 40 SCHEDULED. . SCHEDULE ADJUSTMENTS WILL BE MADE TO FACILITATE PAYROLL AS NEEDED. 98 6.15A MEALS: MEAL TIMES: When working overtime before or after the regular day, or shift, or when called out for overtime work, and such work is continuous for two 92) hours or more, the Company shall provide all meals unless employees are released before the meal time. The normal unpaid meal times shall be: . One and one-half (1-1/2) hours before the employee's normal starting time, . Eight (8) hours before the employee's normal starting time, . SIX (6) hours after the normal starting time, and . ONE (1) HOUR after the normal quitting time, Meals will be provided as close to these times as circumstances of the work will permit. Employees may elect to complete their assignment and take their meal period upon completion of their task. This meal period would be unpaid time unless directed by their supervision to work through their meal period. This paid lunch period will be limited to one-half (1/2) hour at the appropriate rate of pay. ARTICLE NO. 11A Holidays 11.2A COMPANY HOLIDAYS: FOLLOWING ARE TO BE CONSIDERED HOLIDAYS FOR THIS SCHEDULE: 2000-- 2001 NEW YEAR'S DAY - JAN. 1 1 PRESIDENT'S DAY- FEB. 20 18 EASTER - APRIL 23 15 MEMORIAL DAY - MAY 28 27 INDEPENDENCE DAY - JUL. 2 6 LABOR DAY - SEPT. 3 2 VETERAN'S DAY - NOV. 11 11 CHRISTMAS - DEC. 24 23 NOTE: IT IS UNDERSTOOD THAT THE HOLIDAYS WILL BE WORKED WITH THE APPROPRIATE PREMIUM PAY. 11.3A FLOATING BIRTHDAY/HOLIDAY: EMPLOYEES ASSIGNED TO THIS SCHEDULE DO NOT RECEIVE A FLOATING/BIRTHDAY HOLIDAY AS THE HAVE 96 HOURS OF HOLIDAY DESIGNATED AS DEFINED ABOVE. 11.4A BANKED HOLIDAYS: THE PROVISION TO BANK DOES NOT APPLY TO INDIVIDUALS WORKING THIS SCHEDULE. 99 ARTICLE NO. 12.A VACATIONS NOTE: VACATION HOURS WILL BE CHARGED AGAINST THE EMPLOYEE'S ACCRUED HOURS AS FOLLOWS: FRIDAY = THIRTEEN (13) HOURS OF VACATION TIME SATURDAY = THIRTEEN (13) HOURS OF VACATION LEAVE SUNDAY = FOURTEEN (14) HOURS OF VACATION LEAVE ARTICLE NO. 13A - --------------- SICK LEAVE NOTE: SICK LEAVE HOURS WILL BE CHARGED AGAINST THE EMPLOYEE'S ACCRUED HOURS AS FOLLOWS: FRIDAY = THIRTEEN (13) HOURS OF SICK LEAVE SATURDAY = THIRTEEN (13) HOURS OF SICK LEAVE SUNDAY = FOURTEEN (14) HOURS OF SICK LEAVE 100 Alternative Shift Agreements Four-Ten Hour Shift Schedule Agreement The following provisions shall supersede the corresponding articles of the Plant Collective Bargaining Agreement for the purpose of establishing working conditions applicable to those employees assigned to the four-ten hour shift (4/10) schedule. ARTICLE NO. 6A - -------------- WORKING HOURS AND RATES OF PAY - ------------------------------ 6.1A - DEFINITIONS: SHIFT: Days and hours of work. - ----- WORK DAY: Ten (10) hours in any one (1) day shall constitute the work day. - -------- WORK WEEK: Four (4) consecutive work days, regularly scheduled between the hours - --------- of 12:01 am, Monday, and 12:00 midnight, Sunday, shall constitute the basic work week. The basic work week of regular day-shift employees shall be from Monday through Friday and reflect a schedule of forty (40 hours of straight time work. REGULAR DAYS OFF: Days off shall be consecutive, however, they may not be within - ---------------- the basic work week. REGULAR DAY-SHIFT EMPLOYEES: Regular day shift employees are those employees who - --------------------------- are assigned to shifts which are established on a Monday through Friday schedule and work a shift which begins between the hours of 6:00 am and 11:59 am. When mutually agreed to by the Union and Company, the day shift starting time may be scheduled as early as 5:00am to take advantage of daylight hours. SHIFT EMPLOYEES: Shift employees are all employees not defined as regular day- - --------------- shift employees. SHIFT DESIGNATIONS: No shift periods shall start between the hours of 12:01am - ------------------ and 5:59am, unless mutually agreed to by memorandum of understanding between the Company and the Union. The following designations shall apply: . FIRST SHIFT: All ten (10) hour shift periods regularly scheduled to begin at 5:00am, or thereafter but before 12:00 noon shall be designated as first shifts. . SECOND SHIFT: All ten (10) hour shift periods regularly scheduled to begin at 12:00 noon or thereafter but before 8:00pm, shall be designated as second shifts. . THIRD SHIFT: All ten (10) hour shift periods regularly scheduled to begin at 8:00pm, or thereafter but before 12:01am, shall be designated as third shifts. SHIFT DIFFERENTIAL: An incremental increase for working on a second or third - ------------------ shift. SHIFT PREMIUM: An incremental increase for all hours worked outside of the - ------------- employee's previous schedule for the first four (4) working days of a newly established permanent, temporary or emergency schedule. SHORT CHANGE: A transfer from one established schedule to another with only one - ------------ shift off between schedules. COMPANY HEADQUARTERS: Any headquarters established for the purpose of engaging - -------------------- in work covered by this Agreement when such work will continue for an indeterminate period of time. 101 6.2A - BREAK PERIODS: A fifteen (15) minute relief period shall be provided for - -------------------- all employees not working seven day coverage during each one-half (1/2) of the shift. Work conditions permitting, each break period shall be given as near the middle of each one-half (1/2) of the shift as possible. 6.3A - LUNCH PERIODS: Supervisors will establish a meal period without pay, - -------------------- approximately five (5) hours after the start of a shift. Employees who are required to begin their lunch more than one (1) hour before or after the regular start of lunch time shall be paid during the lunch period at the straight time rate. REGULAR DAY-SHIFT AND SHIFT EMPLOYEES: The unpaid lunch period shall not exceed - ------------------------------------- one-half (1/2) hour unless mutually agreed to by the Company. 6.4A - OVERTIME: In computing overtime, intermission taken out for meals served - --------------- other than on the job shall be deducted, and any holiday or vacation paid in that pay period will be considered as time worked. TIME AND A HALF: Except as otherwise provided in this Article, the following - --------------- situations shall require payment at one and one-half (1 1/2) time the regular established wage rate: . Time worked in excess of ten (10) hours per day. . Time worked in excess of any four (4) scheduled work days in that work week. . Work scheduled in the three (3) hours immediately preceding the normal starting time. . Employees who are scheduled to work on an observed holiday. . Employees who are scheduled for overtime and such is canceled per Article 6.9 (REQUIRED NOTICE FOR OVERTIME). DOUBLE TIME: Except as otherwise provided in this Article, the following - ----------- situations shall require payment at two (2) times the regular established wage rate: . Employees, who are scheduled to work within the first five (5) hours of the eight (8) hour period immediately preceding the normal starting time regardless of the day of the week. . Employees who are called out for work on an observed holiday. . Employees who work on Sundays, with an overtime minimum as provided in Article 6.7 (CALLOUTS). . Employees, who are called out for overtime work within the eight (8) hour period immediately preceding their normal starting time, regardless of the day of the week with an overtime minimum as provided in Article 6.7 (CALLOUTS). . Employees who are called out for work to cover all or part of the thrid shift, with an overtime minimum as provided in Article 6.7 (CALLOUTS). . Employees called out while on vacation per the provision of Article 12.10 (CALLOUT WHILE ON VACATION). DOUBLE TIME AND A HALF: Except as otherwise provided in this Article, the - ---------------------- following situations shall require payment at two and one-half (2 1/2) times the regular established wage rate: . For all time worked in excess of sixteen (16) consecutive hours. BREAK PERIOD: Employees entitled to pay at this rate will continue at this rate - ------------ until they have been released for a period of at least six (6) continuous hours. Any break of six (6) hours will be considered an interruption of continuous work time. It is understood that any employee may be returned to work exactly six (6) hours from their most recent release, satisfying the required break. It is also understood that any employee released for such a break may be called back to work before six (6) hours have elapsed. EXAMPLE If an employee's normal quitting time is 4:30 P.M. and who is called back and including travel time, takes their time back before 10:00 P.M., will receive 2 1/2 for all time after 10:00 P.M. 102 MEAL PERIODS: Meal periods while working overtime will not be considered as part - ------------ of the six (6) hour break and will not be considered time worked, unless employees are directed to work through their meal period. Employee's unpaid meal period which occurs during regular work hours will be included in the computation of the six (6) hour break, when this break is calculated form the end of the employee's last regular shift. Accordingly, an employee may be called out five and one-half (5 1/2) hours from the end of their last regular shift without creating a requirement for this rate. STRAIGHT TIME PAY: Employees sent home for a six (6) hour break will not lose - ----------------- any straight time pay for normally scheduled hours, as a result of such a break. 6.5A - OVERTIME EQUALIZATION: The Company will endeavor to distribute overtime - ---------------------------- work as evenly as possible among those employees qualified to perform such work. For the purpose of distributing overtime, the Company will maintain and post overtime lists in each sub-department indicating time offered and time worked. Each department will create policies and procedures for overtime equalization through labor/management meetings. 6.6A - PAY PROVISIONS PAY DAYS: Paydays shall be at biweekly intervals. - -------- WAGES: The schedule of job classifications and wage rates as mutually agreed to, - ----- are made a part of this agreement, and are marked "Exhibits I and II" respectively. Wages shall be paid at biweekly intervals on the Thursday following the close of the two week pay period provided that if the regular payday falls on a holiday, payment shall be made on the preceding work day. SPECIAL PAY REQUESTS: The Company recognizes there will be circumstances such as - -------------------- weeks of vacation and vacation in association with holidays which will create special requests of the payroll department. Unless the situation is an emergency, all special checks will be limited to individuals who are absent for at least the Wednesday through Friday of a pay week. Exceptions to this practice will require written approval from the department manager and must be presented to payroll no later than forty-eight (48) hours in advance of the requested time for payment. RECOVERING OVERPAYMENTS: Deductions from an employee's wages, to recover - ----------------------- overpayments made in error, will not be made unless the employee is notified prior to the end of the month following the month in which the check in question was delivered to the employee. A schedule for repayment will be agreed upon by the Company and the employee. 6.7A - CALLOUTS TWO HOUR MINIMUM: Employees called out for overtime duty shall receive a least - ---------------- two (2) hours pay. Reasonable travel time (defined below) to and from home will be considered as time worked for the purpose of satisfying the two (2) hour minimum, and will be paid at the appropriate overtime rate.
EXAMPLE #1 EXAMPLE #2 EXAMPLE #3 Employees called out who Employees called out who Employees called out who work two (2) hours and travel work four (4) hours and travel work one (1) hour and travel one (1) hour (round trip) will be one (1) hour (round trip) will be one (1) hour (round trip) will be paid three (3) hours. paid five (5) hours. paid two (2) hours. EXAMPLE #4 EXAMPLE #5 Employees called out who Employees called out who work work fifteen (15) minutes and into their regular shift shall be paid travel one (1) hour (round trip) the appropriate overtime premium for will be paid two (2) hours. at least two (2) hours, which includes travel time to work only. This does not change the normal starting time for the purpose of extending the shift.
103 MULTIPLE CALLOUTS: Employees called out more than once in the twenty-four (24) - ----------------- hour period from midnight one day to midnight the following day shall be paid at least the two (2) hour minimum mentioned above for the first call. For subsequent calls, employees shall be paid for a one (1) hour minimum with the same travel time considerations mentioned above. For the purpose of this section, concurrent calls, or successive calls without a break in work time shall be considered as a single call. TRAVEL TIME: Employees are entitled to time according to the following chart: - ----------- travel ------------------------------------------------------------- WORK LOCATIONS ------------------------------------------------------------- Las Vegas Valley Reid Gardner ------------------------------------------------------------- Las Vegas Valley .5 hour 1 hour ------------------------------------------------------------- Moapa Valley 1 hour .5 hour ------------------------------------------------------------- Boulder City .75 hour 1.5 hours ------------------------------------------------------------- St. George/Alamo 2 hours 1.5 hours ------------------------------------------------------------- Mesquite 1.5 hours .75 hour ------------------------------------------------------------- Henderson .75 hour 1.5 hours ------------------------------------------------------------- 6.8A - REST TIME: Employees who are required to work overtime within the ten - ---------------- (10) hour period immediately preceding their scheduled starting time on a regular work day, shall be entitled to time off with straight time pay equal to time worked during this time frame. This is not applicable to a call out or scheduled overtime of three (3) hours or less immediately preceding the employee's normal starting time. If an employee is entitled to rest time off, such time off would normally begin at the start of the regular shift. By mutual agreement between the supervisor and the employee, rest time may be taken during the last part of the regular shift. An employee shall not be required to work during his rest period provided adequate relief is available, however, should an employee be required to work during this period, he shall receive straight time for all time worked during his rest period in addition to his rest period pay. 6.9A - REQUIRED NOTICE FOR OVERTIME: SCHEDULED OVERTIME: In scheduling overtime work, a minimum of fourteen (14) - ------------------ hours notice is required, prior to the start of any overtime for a particular day, and before leaving the worksite on a regular work day. Without this notice, such work will be considered as a call-out. It is understood that overtime, when worked as an extension of a regular shift, does not require such notification. CANCELING OVERTIME: A minimum of twelve (12) hours notice is required on - ------------------ canceling pre-scheduled overtime. When customer arrangements are involved, the Company must provide twelve (12) hours notice prior to the employee's next normal starting time. When such notice of cancellation of pre-scheduled overtime work is not given in accordance with the above, employees involved will be paid for two (2) hours at established overtime rates if they report and are retained for work. When such notice of cancellation is not given in accordance with the above, but employees are later notified of work cancellation, they will be paid for two (2) hours at time and on-half (1 1/2). 6.10A - SHIFT DIFFERENTIAL: Fixed shift employees will be paid their shift differential for all hours worked on that day. 104 EXAMPLE A second shift employee who works ten (10) hours on a particular day would be paid ten (10) hours of second shift differential. FIRST SHIFT: No shift differential shall be paid for the first shift. - ----------- SECOND SHIFT: A differential shall be paid for the second shift according to the - ------------ following schedule: February 1, 2000........... $1.30 per hour February 1, 2001........... $1.35 per hour THIRD SHIFT: A differential shall be paid for the third shift according to the - ----------- following schedule: February 1, 2000........... $1.45 per hour February 1, 2001........... $1.50 per hour The appropriate overtime rate will be applied to the shift differential. Shift differentials shall be payable only for hours actually worked and shall not be payable for non-work time such as holidays, sick leave, vacation and rest time. 6.11A - ESTABLISHING PERMANENT SCHEDULES: The right to establish working schedules and methods of shift rotation for employees, to assign individuals to schedules and to make changes in schedules, rests with the Company. Company may schedule employees to work for periods of ten (10) hours per day for a minimum period of four (4) days at other than their regular work hours when additional shifts are required for emergency conditions involving the maintenance of repair of plant or station equipment. Company shall pay overtime compensation for all work performed outside of the regular work hours for the first four () work days of any such situations. After the first four (4) day overtime requirement has 1 been fulfilled, the appropriate shift differential shall apply. On the fifth (5th) day and thereafter for the duration of any such situation, Company shall pay the straight time rate of pay for work performed on work days during the hours of work established under this section. If any such situation extends beyond four (4) work weeks, Company and the Union may agree to rotate the assignments of employees thereto, but in such event the overtime compensation herein provided for will not be paid to any employee for more than the first four (4) work day period worked outside of regular work hours. TRAINING EXCEPTIONS: The Company may, for the purposes of training only, change schedules without incurring the premium penalties mentioned above. The Company will notify all employees as far in advance as possible, but not later than the end of their last scheduled work day in the week prior to the training. If such notification is not given, and an employee is called at home and informed of a change in schedule for training purposes, this employee will be paid time and one-half (1 1/2) for the first two (2) days of the training for all hours worked outside of their normal schedule. TRAVEL TIME FOR OUT OF TOWN TRAINING: Any employee who is required to travel out - ------------------------------------ of town on a normal day off or after normal working hours for the purpose of Company training, will be paid actual driving time to and from the training site. When flying to such training, employees will be paid one (1) hour from their home to the airport, actual flying time to the destination, and one (1) hour from the airport to the hotel. All compensation for such travel time will be at a straight time rate and will not be considered time worked. SCHEDULE PREFERENCE AGREEMENTS: The Company recognizes that in departments where - ------------------------------ multiple schedules exist, there may be a desire to create a mechanism for movement between such schedules, while protecting the operational efficiencies of the organization. To satisfy these mutual interests, departments are encouraged to create shift preference agreements which will define the terms and conditions for the transfer from one schedule to another. Under no circumstances, would such transfers create premium pay liability in accordance with the provisions of this Article. Each schedule preference agreement will be created through labor/management meetings within the affected work group and will be acknowledged by memorandum of agreement between the Company and the Union. 105 6.13 - EMERGENCY OR TEMPORARY SCHEDULES: The Company may schedule employees to work for periods other than their regular work hours when additional schedules are required for emergency or temporary conditions. Such conditions are expected to last for less than ninety (90) days and, if they exceed this time frame they will be considered to be established schedules requiring compliance with the procedures for staffing and establishing schedules defined above, unless mutual agreement to extend such schedules is established by the Company and Union. NOTIFICATION: The Company shall communicate the hours of work, meal periods, - ------------ days off, location, nature of the work, estimated composition of the workforce, and expected duration of this schedule. STAFFING OF EMERGENCY OR TEMPORARY SCHEDULES: - -------------------------------------------- VOLUNTEERS: The Company may solicit volunteers for assignment to these - ---------- schedules. If employees volunteer for these assignments, they will receive a premium of time and one-quarter (1 1/4) for all straight time hours worked outside of their normal schedule or shift for the first five (5) days of this assignment. When there are more volunteers than required for the shift, the most senior, qualified employees will be assigned. LEAST SENIOR QUALIFIED: The least senior, qualified employee in the - ---------------------- classification affected, may be assigned. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. RIGHT OF ASSIGNMENT: The Company may assign employees to these shifts for - ------------------- operational efficiency 3 purposes. Any employee so assigned will receive a premium of time and one-half (1 1/2) for the first five (5) days of this assignment for all hours worked outside of their previous schedule. SHIFT DIFFERENTIAL: After the five (5) day premium requirement has been - ------------------ fulfilled, the appropriate shift differential shall apply. RATE OF PAY AND ROTATION: On the first day that there is no requirement for a - ------------------------ premium and each day thereafter, the appropriate rate of pay and shift differential, if applicable, will be provided for all hours worked. If any such schedule extends beyond forty-five (45) days, the Company and the Union may agree to rotate the assigned employees. Employees returned to their former schedule as a result of this rotation, will not be entitled to the premium mentioned above. RETURN TO ORIGINAL SCHEDULE: At the completion of this assignment, employees - --------------------------- will be returned to their original schedule without a requirement for any additional premium payment. Employees who are assigned to an emergency or temporary schedule and are returned to their original schedule before five (5) days have elapsed, will be entitled to the premium mentioned above for the five (5) day period. EXAMPLE Employees who are assigned a new schedule during their regular work schedule are entitled to premium pay as outlined in Article 6.0 for the next 40 regular straight time hours.. 6.14A - OUT OF TOWN WORK: BOARD AND LODGING: The Company will furnish adequate board and lodging for all - ----------------- employees sent on out-of-town work. This rule does not apply to noon day meals where employees start from and return to headquarters everyday, nor does it apply to employees hired for any particular job which may be outside the city or where employees travel to and from regularly assigned headquarters on Company time. 106 EQUALIZING ASSIGNMENTS: When making temporary out of town assignments, the - ---------------------- Company will endeavor to distribute such assignments equally among all employees qualified to perform such work. PER DIEM: Employees temporarily assigned to established headquarters located - -------- more than forty (40) miles from their regularly established headquarters who elect not to stay at the assigned work locations will be furnished transportation for the initial trip and final trip at Company expense, and shall receive forth-three dollars ($43.00) for each day they are assigned to and work at a temporary location. If work extends beyond the weekend, the Company may, at its' option, pay travel to home base Friday night and return to work location Monday morning. MILEAGE ALLOWANCE: Except as provided herein, employees electing to travel to - ----------------- and from their assigned work locations shall do so at their own expense. When an employee is authorized to drive his own car to conduct Company business, he will receive a mileage allowance equal to Inter Revenue Services (IRS) maximum allowable mileage expense. Requests for the allowance described herein shall be submitted to, and distributed by the Company every two (2) weeks and in accordance with procedures established by the Company. 6.15A - MEALS - ------------- MEAL TIMES: When working overtime before or after the regular day, or shift, or when called out for overtime work, and such work is continuous for two (2) hours or more, the Company shall provide all meals unless employees are released before the meal time. The normal unpaid meal times shall be: . one and one-half (1 1/2) hours before the employee's normal starting time, . eight (8) hours before the employee's normal starting time, . six (6) hours after the normal starting time, and . two (2) hours after the normal quitting time, Meals will be provided as close to these times as circumstances of the work will permit. Employees may elect to complete their assignment and take their meal period upon completion of their task. This meal period would be unpaid time unless directed by supervision to work through the meal period and such work continues more than one (1) hour from the stated meal time. This paid meal period will be limited to one-half (1/2) hour at the appropriate rate of pay. CALL OUT: When an employee is called out one and one-half (1 1/2) hours or more - -------- previous to his starting time, the Company shall provide breakfast and a reasonable time to eat same. MEAL RATES: When employees are released on or after a normal meal period, or - ---------- periods as outlined above, and do not elect to eat a Company provided meal, they shall be given a meal allowance of $9.00. These allowances will be paid through the payroll system in the employee's next paycheck. The meal allowance shall be increased to: . nine dollars and fifty cents ($9.50) effective February 1, 2000 . nine dollars and seventy-five cents ($9.75) effective February 1, 2001. ACTUAL COST: If an employee elects to consume a meal in lieu of the allowance, - ----------- the cost of any meal shall not exceed two (2) times the allowance as provided for above. If the cost of the meal exceeds this amount, the employee will be notified of the amount of the difference and the employee must reimburse the amount within thirty (30) calendar days after receipt of such notification. These limitations may be waived by the department's Vice President if such limitations place an undue hardship on the employee 6.16A - REPORTING LOCATION: Employees in the bargaining unit shall report for - -------------------------- work at regularly established Company headquarters, shall travel from job to job and between job and headquarters on Company time and shall return to the regularly established Company headquarters at the conclusion of the day's work. 107 6.17A - EARLY RELEASE: Employees relieved from duty, for reasons other than - --------------------- misconduct, during the first half of the regular day or regular shift shall be paid for not less than one-half (1/2) of the shift; if relieved after having been on duty more than one-half (1/2) of the regular day, they shall be paid for a full shift, except that if they are relieved at their own request they shall be paid only for time worked. These provisions do not apply to overtime assignments. ARTICLE NO. 11A Holidays ALL PARAGRAPHS NOT LISTED BELOW SHOULD BE CONSIDERED UNCHANGED FROM THE PLANT COLLECTIVE BARGAINING AGREEMENT. 11.7A - ALTERNATIVE SCHEDULES: As a result of the implementation of alternative - ----------------------------- work schedules, any issues associated with the provisions of Article 11 will be resolved by memorandum of understanding between the Company and Union. IT IS UNDERSTOOD THAT EMPLOYEES MAY, AT THEIR DISCRETION, USE TWO (2) HOURS OF VACATION TIME ON HOLIDAYS TO ENSURE A FULL EIGHTY (80) HOUR PAY PERIOD. When a Holiday falls on an employee's regularly scheduled day off, the last scheduled non-overtime work day immediately preceding the Holiday or the non-overtime work day immediately following the Holiday shall be observed as the Holiday for the purpose of this Article. Notice of the date that the Holiday will be observed shall be posted within the work group a minimum of one week prior to the Holiday itself. ARTICLE NO. 12A Vacations ALL PARAGRAPHS NOT LISTED BELOW SHOULD BE CONSIDERED UNCHANGED FROM THE PLANT COLLECTIVE BARGAINING AGREEMENT. 12.6A - UNUSED VACATION: All unused or carried over vacation time accumulated in - ----------------------- the year of termination after an employee's first anniversary date, up to and including the employee's last day worked, shall be paid at termination of employment, at the employee's current base rate. This does not apply to the vacation bonus when the employee has not completed the minimum service specified. It is understood that employees may not carry vacation time over to the following year without the written consent of the Company. ARTICLE 13A Sick Leave - ---------- ALL PARAGRAPHS NOT LISTED BELOW SHOULD BE CONSIDERED UNCHANGED FROM THE PLANT COLLECTIVE BARGAINING AGREEMENT. 13.4A - SICK LEAVE BONUS: Employees who are eligible for sick leave in - ------------------------ accordance with Article 15.1 who use no more than an average of two-hundred-twenty (220) hours of sick leave each five (5) years shall be granted a bonus of forty (40) hours vacation in addition to that granted under the provisions of Article 14.1, each five (5) years based on the following considerations: 108 a) On January 1, 1987, and January 1, of each fifth year thereafter, the sick leave records of those employees with hire dates prior to August 1, 1981, will be audited. Those hours of sick leave during the five (5) year period immediately preceding the audit will be granted forty (40) hours vacation to be taken within the twelve (12) month period immediately following the audit date and in accordance with the provisions of Article 14. b) For employees hired after July 31, 1981, their sick leave records will be audited as of the first day following the completion of five (5) years and six (6) months of service and each fifth year following the initial audit. Those employees who have used no more than two-hundred-twenty (220) hours of sick leave during the five (5) year period immediately preceding the audit will be granted forty (40) hours vacation to be taken within the next twelve (12) month period immediately following the audit. c) All unused vacation accumulated under the provisions of this sick leave bonus plan shall be paid at termination of employment as provided under Article 14.2 except that no pro rata of vacation entitlements will be allowed for time periods of less than five (5) years. ARTICLE NO. 14A - --------------- EMPLOYEE BENEFIT PLANS - ---------------------- ALL PARAGRAPHS NOT LISTED BELOW SHOULD BE CONSIDERED UNCHANGED FROM THE PLANT COLLECTIVE BARGAINING AGREEMENT. 14.2A - JOB INCURRED INJURIES/SALARY PROTECTION: For a job incurred disability - ----------------------------------------------- of less than forty (40 hours which does not qualify for SIIS compensation, employees must use any accrued sick leave, and upon exhaustion of such accrued sick leave shall receive disability benefits as defined earlier in Article 14.2. ARTICLE NO. 15A - --------------- LEAVES OF ABSENCE - ----------------- 15.9A - FUNERAL LEAVE: A regular employee, or a temporary employee who has - --------------------- worked more than one thousand forty (1040) straight time hours, who is absent from duty due to a death in the employee's immediate family will be excused without loss of regular pay for the time required not to exceed thirty-six (36) hours for making funeral arrangements and attending the funeral, provided the employee attends the funeral and furnishes a death certificate to the payroll department within thirty (30) days. Immediate family shall mean the employee's grandparents, mother, father, step-mother, step-father, brother, sister, spouse's grandparents, spouse's parents, spouse's children, spouse, son, daughter, or grandchildren. IF AN EMPLOYEE'S TIME OFF EXCEEDS THIRTY-SIX (36) HOURS, THE EMPLOYEE MAY USE VACATION OR TIME OFF WITHOUT PAY TO MAKEUP THE ADDITIONAL FOUR (4) HOURS. ARTICLE NO. 15A - --------------- WORKING RULES - ------------- ALL PARAGRAPHS NOT LISTED BELOW SHOULD BE CONSIDERED UNCHANGED FROM THE PLANT COLLECTIVE BARGAINING AGREEMENT. 109 16.4A - WORKING RULES: The Committee members, appointed by the Union, shall - --------------------- receive their regular straight time rate of pay for actual time spent in Joint Apprenticeship Committee meetings called by the Chairman, but limited to ten (10) straight time hours in one day and thirty (30) straight time hours in one (1) year. Ten Hour Shift Schedule Reid Gardner Maintenance M T W T F S S M T W T F S S M T W T F S S M T W T F S S Crew 1 D D D D - - - D D D D - - - D D D D - - - D D D D - - - Crew 2 - D D D D - - - D D D D - - - D D D D - - - D D D D- - 110 Alternative Shift Agreements Twelve Hour Shift Schedule The following provisions shall supersede the corresponding articles of the Plant Collective Bargaining Agreement for the purpose of establishing work conditions applicable to those employees assigned to the twelve hour shift (THS) schedule. ARTICLE NO. 7A - -------------- HOURS OF WORK - OVERTIME - ------------------------ Twelve Hour Shift (THS) Schedule 7.1A Twelve (12) consecutive hour days shall constitute the work shift. The day shift shall begin at 6:00am, the night shift shall begin at 6:00pm. 7.2A A meal period of no more than one-half hour without pay will be established approximately four hours after the start of a shift. The straight time rate shall be paid to employees who are required to start their meal period more than one (1) hour beyond the established starting time for such meal period. This meal provision will not apply to employees who are assigned to the THS schedule. 7.3A 6:01pm Sunday to 6:00pm on the next following Sunday shall constitute the regular workweek. 7.4A DELETE 7.5A Four (4) twelve (12) hour shifts (48 hours) and three (3) twelve (12) hour shifts (36 hours) as described in Exhibit V-A shall constitute the basic work schedule. 7.6A The right to establish the working schedule for employees and method of shift rotation, to assign individuals to shift schedules and to make changes as required by operations, rests with the Company. 7.7A Time worked in excess of forty (4) hours within a regular workweek shall be considered overtime and will be paid for at one and one-half (1 1/2) times the regular established wage rate except as otherwise provided in this article. DELETE Employees shall be paid at the double time and one-half (2 1/2) rate of pay for all time worked in excess of sixteen (16) hours. Employees who, under the provisions of this clause, would be entitled to pay at the double time and one-half (2 1/2) rate will not have such right nullified by an interruption of continuous work time of six (6) hours or less. (Any break in continuous work time of more than six (6) hours will be considered to be an interruption of continuous work time). Under the provisions of this article, the employees may be sent home for a specified break and shall not lose any normal time pay for the regular time which they are required to lose by reasons of such break. (It is understood that employees on any such break may be called back to work). Meal periods will not be considered as an interruption of continuous work time and will not be considered as work time except when paid for by the Company. The meal period which occurs during employees' regular work hours will be included in the computation of the break period. All employees included in special or rotating schedules will receive the following consideration: When an employee "DELETE" is transferred from one schedule of work days or work hours to another schedule provided the schedule is an established schedule or shift for the employee's work group, he shall not be entitled to overtime compensation for work performed during regular work hours of any day involved in the transfer, provided that (a) he has been notified of such transfer not less than twenty-four (24) hours in advance of the starting time of the new shift or work period; (b) he has had a minimum of twelve (12) hours off between shifts or work periods; (c) as a result of such transfer he has 111 not been required to work more than forty (40) hours at the straight rate in any regular pay period involved; and (d) he has not been required to work more than one (1) short change in the regular pay period involved, provided, however, that such short change was not the result of a voluntary action on the part of an employee, i.e., calling in sick, taking an unauthorized day off for personal reason, etc. (A short change is defined as a transfer from one schedule to another with but twelve (12) hours off between shifts or work periods). Employees who are called for work on an observed holiday or who work anytime during the oe (1) day off period, on the last day of the two (2), four (4) or five (5) day off period, the second day of the three day off period, or the fourth day of the seven (7) day off period, shall receive double time for all time worked with an overtime minimum as provided in 7.9. 7.8A In computing overtime, intermission taken out for meals served other than on the job shall be deducted. In computing overtime, any holiday not worked will be considered as twelve (12) hours worked, as defined in Article 13.5A. In scheduling overtime work, a minimum of twelve (12) hours notice, prior to the start of said overtime, but prior to leaving the last shift shall be required, otherwise such work will be considered as a callout. It is understood that this excludes overtime when worked as an extension of a regular shift. A minimum of twelve (12) hours notice is required on canceling prescheduled overtime, or where customer arrangements are involved, twelve (12) hours notice prior to the employee's next normal starting time. The foreman will be notified by telephone, or if unavailable, by message delivered to his residence. The crew assigned to the work are to check in with the foreman or with the Company switchboard between 8:30 pm and 9:00 pm the previous evening to determine whether the work has been canceled. Saturdays and Sundays shall be considered as normal workdays for interpreting the intent of this section. When such notice of cancellation of prescheduled overtime work is not given in accordance with the above, employees involved will be paid for two (2) hours at established overtime rates if they report and are retained for work. When such notice of cancellation is not given in accordance with the above, but they are later notified of work cancellation, they will be paid for two (2) hours at time and one-half (1 1/2). If they report and are not retained for work, they shall receive pay for two (2) hours at time and one-half (1 1/2). The Company will endeavor to distribute overtime work as evenly as possible among those employees qualified to perform such work. For the purpose of distributing overtime, the company will maintain and post overtime lists in each sub-department indicating time offered and time worked. 7.9A If an employee is called for emergency work more than once in the twenty-four (24) hour period from midnight one day to midnight the following day, minimum overtime compensation shall be paid for two (2) hours only for the first call outside of such employee's regular work hours on work days, or at any time on his on-work days. For subsequent calls, minimum overtime compensation shall be paid for one (1) hour and travel time as herein provided. For the purpose of this section, concurrent calls or successive calls without a break in work time shall be considered as a single call. If by reason of a call, an employee works less than the minimum time and into regular work hours, the minimum overtime provisions will apply into his regular work hours and thereby postpone starting time. DELETE Employees who are called for overtime duty shall receive at least two (2) hours pay, and reasonable travel time to and from home will be considered as time worked for the purpose of satisfying the two hour minimum cited herein. DELETE 112 Employees (DELETE) who are called out for overtime work within the eight (8) hour period immediately preceding normal starting time shall receive double time for all time worked during that period with an overtime minimum as provided above. 7.10A The Company will furnish board and lodging for all employees sent on out-of-town work, adequate meals and lodging to be provided. This rule is not to apply to noon day meals where employees start from and return to headquarters everyday, nor does it apply unless by special arrangement to employees hired for any particular job which may be outside the city or where employees travel to and from regularly assigned headquarters on Company time. 7.11A When working overtime before or after the regular shift, or when called out for work after the completion of their regular shift, or when called out on the employee's regularly scheduled days off, or holidays, and such work is continuous for one and one-half (1 1/2) hours or more, the company shall provide all meals unless the employee is released before meal time. The normal meal times shall be one and one-half (1 1/2) hours before the employee's normal starting time, six (6) hours after the normal starting time, fourteen (14) hours after the normal starting time, and eight (8) hours before the normal starting time; and meals will be provided as close to these times as circumstances of work will permit. When an employee is released on or after a normal meal period, or periods as outlined above, and does not elect to eat a company provided meal, he shall be given a meal allowance (DELETE) of $9.50. The Company will endeavor to pay the meal allowance within thirty (30) calendar days following receipt of the employee's meal voucher. The meal allowance shall be increased to: . nine dollars and fifty cents ($9.50) effective February 1, 2000 . nine dollars and seventy-five cents ($9.75) effective February 1, 2001. (DELETE) The cost of any meal consumed by employees in accordance with this provision shall not exceed two (2) time the meal allowance as provided for above. If the cost of the meal exceeds this amount, the employee will be notified of the amount of the difference and the employee must reimburse the amount within thirty (30 calendar days after receipt of such notification. These limitations may be waived by the department's Vice President if such limitation place an undue hardship on the employee. When an employee is called out one and one-half (1 1/2) hours or more previous to his starting time, the Company shall provide breakfast and a reasonable time to eat same. 7.12A Employees in the bargaining unit shall report for work at regularly established Company headquarters, shall travel from job to job and between job and headquarters on Company time, and shall return to the regularly established Company headquarters at the conclusion of the day's work. "The regularly established Company headquarters" is defined as any headquarters established for the purpose of engaging in work covered by this Agreement when such work will continue for an indeterminate period of time. 7.13A DELETE 7.14A Employees relieved from duty during the first half of the day or shift, shall be paid for not less than one-half (1/2) the day's time; if relieved after having been on duty more than on-half (1/2) day, they shall be paid for a full day's time, except that if they are relieved at their own request they shall be paid only for time worked. 7.15A All employees who are required to work emergency overtime within the eight (8) hour period immediately preceding their scheduled starting time shall, after the emergency, be entitled to time off 113 with straight time pay equal to time worked. This is not applicable to a callout or scheduled overtime of three (3) hours or less immediately preceding the employee's normal starting time. If an employee is entitled to time off under "A" above, such time off which would normally begin at the start of the regular shift maybe taken during the last part of the regular shift. An employee shall not be required to work during his rest period provided adequate relief is available, however, should an employee be required to work during this period, he shall receive straight time for all time worked during his rest period in addition to his rest period pay. 7.16A DELETE 7.17A A premium of fifty-eight and one third cents ($.5833) per hour shall be paid for all hours worked. Effective February 1, 1991, this provision shall be increased to sixty-one and two thirds cents ($.6166). Effective February 1, 1992, this provision shall be increased to sixty-five cents ($.65). Effective February 1, 1993, this provision shall be increased to sixty-eight and one third cents ($.6833). 7.18A DELETE 7.19A The appropriate overtime rate will be applied to the shift premium. 7.20A Shift premiums shall be payable only for hours actually worked and shall not be payable for non-work time such as holidays, sick leave and vacation. ARTICLE NO. 13A - --------------- Holidays 13.1A DELETE 13.2A Regular employees and temporary employees with more than six (6) months continuous service who are assigned to the THS schedule may be permitted to take holidays off which fall on their scheduled work days; however, if they are not permitted time off, they shall be paid at the rate of time and one-half (1 1/2 ) in addition to the holiday pay for the time worked on such day during regular working hours. Following are to be considered holidays: Martin Luther King's Day 3/rd/ Monday in January Good Friday Friday before Easter Sunday Memorial Day Last Monday in May Independence Day July 4/th/ Labor Day First Monday in September Veteran's Day November 11/th/ Thanksgiving Day fourth Thursday in November Christmas Day December 25/th/ If a regular employee or a temporary employee with more than six (6) months of continuous service is required to work on any day observed as a holiday and agrees in advance of that observed holiday to work for the straight time hour rate of pay rather than the premium rate of pay, then the holiday pay of twelve (12) hours may be traded for 12 hours to be added to that employee's vacation entitlement for that calendar year. No more than thirty-six (36) hours may be acquired in this manner. 13.3A Probationary employees and temporary employees with less than six (6) months of continuous service will not receive pay for holidays not worked, but shall be paid time and one-half (1 1/2) for all time worked on such days. 114 13.4A An employee who does not report for work either the day before and/or the day after a paid holiday, and who has not been excused by his supervisor for either the day before and/or the day after a paid holiday shall receive no pay for said holiday. Company may require satisfactory evidence of an employee's illness or injury before holiday pay will be granted. 13.5A When a holiday falls on an employee's regularly scheduled work day, or on an employee's regularly scheduled day off, the holiday may be observed on another work day within the same pay period which maybe in conjunction with the employee's regularly scheduled days off, or any other day within that pay period. This accommodation must be by mutual agreement between the employee and the Company and scheduled as far in advance as possible. It is understood that if any employee requests that they be excused on the fourth day of their four day work week, they will be compensated with twelve (12) hours of straight time pay. If the holiday falls on an employee's regularly scheduled day off, or the fourth day of the four-day work week, and no other accommodations are made, the last scheduled, non-overtime work day, immediately preceding the holiday, shall be observed as the holiday for the purpose of this article. ARTICLE NO. 14A - --------------- Vacations - --------- 14.1A All regular employees and temporary employees with more than twelve (12) months of continuous service covered by this Agreement will be granted vacations, with straight time pay as follows: After Continuous Service Of Working Hours of Vacation 1 year 40 hours 2 through 5 years 80 hours 6 years 88 hours 7 through 11 years 120 hours 12 through 15 years 128 hours 16 years 136 hours 17 years 152 hours 18 through 20 years 160 hours 21 through 25 years 200 hours 26 through 28 years 224 hours 29 years 240 hours 30 years 280 hours An employee's vacation accrual shall be adjusted for all periods of leave of absence without pay as defined elsewhere in this Agreement by reducing the number of vacation days accrued in direct proportion to the number of days of leave without pay within the employee's anniversary year. Such reductions shall be applied to any accrued and unused vacation available in the calendar year the adjustment is made, or when such adjustment exceeds the employee's available vacation, the excess shall be applied against the employee's next vacation accrual or the employee's final paycheck, whichever occurs first. It is understood that no adjustment to vacation accrual will be made due to use of paid sick leave. In addition to the vacation accrued in accordance with the above schedule, any employee who completes ten (10) years continuous service and each five (5) years of continuous service thereafter, shall be granted a vacation bonus of forth (40) hours in the year such term of employment is attained. (DELETE) The vacation bonus will accrue, and maybe taken subject to the provisions of Article 14.2. 115 14.2A All unused vacation time accumulated in any year after an employee's first anniversary date up to and including the employee's last day worked, shall be paid at termination of employment, at the employee's current base rate. This does not apply to the vacation bonus when the employee has not completed the minimum service specified. A THS employee may carry up to twelve (12) hours of vacation over to the following year with the written consent of the Company. A regular employee who has been laid off for lack of work and is recalled within one (1) year, that has in excess of one (1) year Company seniority, shall accrue vacation in accordance with above. 14.3A Vacation may be granted at any time during the calendar year in which it is earned, however, it may not be taken during the first 12 months of employment, and shall be subject to the following considerations. 14.4A Vacation periods shall normally commence on Monday except for employees whose work week starts on days of the week other than Monday, the vacation period shall commence with the starting days of their respective work weeks. However, by prior arrangement with the employee" supervisor, an employee shall be allowed vacation in increments of one shift or more on any day of the week, except where prohibited by operations needs or where necessary relief cannot be provided, or where payment of overtime to another employee would be required. 14.5A If a holiday occurs on a work day during an employee's vacation, it shall not be counted as one day of vacation. The employee shall receive straight time pay for the holiday as such. If an employee assigned to a THS requests, and is granted vacation on the first, second, or third day of their forty-eight hour work schedule, the employee will have those hours considered as time worked for the purpose of calculating their pay on the fourth day of that work schedule. It is understood that vacation granted for the entire week (i.e., forth-eight hours) or on the fourth day of the four-day workweek will be paid on a straight time basis. 14.6A An employee shall not be required to use vacation, if while on vacation, he or she becomes sick or disabled and has been hospitalized for at least one day, provided that unused sick leave has been accumulated. 14.7A An employee shall not be expected to work on his regularly scheduled days off immediately preceding or following prescheduled vacation. An employee called out during his scheduled vacation will be paid the same as a callout on a holiday and the employee may reschedule the unused portion of his vacation hours in accordance with Article 14.3 above. ARTICLE NO. 17A - --------------- Leave of Absence - ---------------- 17.1A Provided the needs of the service will permit, time off without pay for any period of thirty (30) days or less, including non-work days, may be granted any employee upon a written application to his department head showing good and sufficient reason for such request. This shall not be construed as a leave of absence without pay, as the term is used in the Agreement. A leave of absence without pay is defined as a period of authorized absence from service in excess of thirty (30) days. 17.2A Leave of absence shall be granted to regular employees for urgent substantial personal reasons, provided adequate arrangements can be made to take care of the employee's duties without undue interference with the normal routine of work. Leave will not be granted if the purpose for which it is requested may lead to the employee's resignation. 116 17.3A A leave shall commence on and include the first workday on which an employee is absent and terminate with and include the work day preceding the day his leave expires. The conditions under which an employee shall be restored to employment on the termination of his leave of absence shall be clearly stated by the Company on the form on which application for leave is made. 17.4A Except as otherwise provided herein, an employee's seniority shall not accrue while he is on leave without pay. However, an employee's status as a regular employee shall not be impaired by a leave of absence. 17.5A Company shall at request of Union grant a leave of absence without pay for four (4) years or less to an employee who is appointed or elected to any office or position in the Union whose services are required by the Union. The seniority of an employee who is granted a leave of absence under the provisions of this Section shall accrue during the period of such leave. 17.6A Employees elected or appointed to public office shall be granted a leave of absence for the duration of such appointment or election or six (6) months whichever is sooner. Such absence shall not affect accrual rates for seniority purposes; however, sick leave and vacation shall not accrue during this period and group insurance benefits shall be paid by the employee at the Company's current premium rate. 17.7A A leave of absence under the foregoing conditions shall be granted to employees who enter the armed forces of the United States, provided, however, that any such employee shall be subject to the terms of the Selective Training and Service Act o 1940, as amended. A regular employee or a temporary employee with more than six (6) months of continuous service who is a member of the armed forces reserve units, or the National Guard, and who is required to attend annual training sessions, will be granted a leave of absence for the duration of such assignment. In addition, the company will pay such employee the amount, if any, by which the remuneration received from the government is less than the base straight time earnings the employee would have received for the same period, not to exceed ten (10) working days in a calendar year. Such items as subsistence, travel, uniform and other allowances will not be included in computing the remuneration received from the government. The Company will require satisfactory evidence of attendance and remuneration received. 17.8A If an employee fails to return immediately on the expiration of his leave of absence, or if he accepts other employment while on leave, he shall thereby forfeit the leave of absence and terminate his employment with the Company. 17.9A Any period of authorized absence without pay for thirty (30) days or less shall not affect an employee's seniority status. 17.10A A regular employee or a temporary employee with more than six (6) months continuous service who is absent from duty due to a death in the employee's immediate family will be excused without loss of regular pay for the time required not to exceed thirty-six (36) hours for making funeral arrangements and attending the funeral, provided the employee attends the funeral and furnished a death certificate to the payroll department within thirty (30) days. Immediate family shall mean the employee's grandparents, mother, father, brother, sister, spouse's grandparents, spouse's parents, spouse's children, spouse, son, daughter, or grandchildren. 17.11A When a regular employee or a temporary employee with more than six (6) months of continuous service is absent from work in order to serve as a juror or to report for jury examination, he shall be granted pay for those hours spent in such services during his regular twelve (12) hour day less the fee or other compensation paid him with respect to such jury duty. Each employee shall furnish to the company with a statement from an officer of the court setting forth the time and days on which he reported for jury duty and his compensation due or received for jury duty. 117 ARTICLE NO. 18A - --------------- Working Rules - ------------- 18.1A DELETE 18.2A DELETE 18.3A DELETE 18.4A DELETE 18.5A DELETE 18.6A DELETE 18.7A DELETE 18.8A An employee shall furnish initially all tools and equipment, which are acceptable to the Company and necessary for the work to be performed. The company will furnish a suitable standard pair of gloves and coveralls bearing company identification to a regular employee, when required in the performance of the employee's work and Company will replace such gloves and coveralls worn out in the company service. When a safety strap or hook strap is worn out in the Company service or is condemned by the Company, it shall be replaced at no cost to the employee. 18.9A When a employee relieves an employee of a higher classification for two (2) or more hours, he shall receive the rate of pay for the higher classification for the time worked in the higher classification. However, an employee will not be upgraded when employees of that classification who normally report for work at the same location are able and available to do the work for which the upgrade is intended. The Company may upgrade a qualified employee or utilize a relief employee to provide coverage for a vacant shift due to a scheduled or an unscheduled absence provided such situation does not result in overtime for any employee in a lower classification, or may elect to not cover the shift when sufficient qualified personnel are available to perform the required functions safety. 1. If these arrangements cannot be made and it is necessary to work an employee overtime, either: 2. An employee who is on his or her day off who has and will have at least twelve (12) hours off between shifts, shall be called to fill the vacant shift; or 3. The shift may be split by working an employee in the same classification (first) or other qualified employee (second) from both the shifts immediately preceding and immediately following the vacant shift. It is the intent of the company not to work employees assigned to the THS schedule beyond their regularly scheduled work hours, however, all employees shall be expected to respond to overtime assignments as necessary. 118 EXHIBIT V-A REID GARDNER PLANT TWELVE HOUR SHIFT (THS) SCHEDULE M T W T F S S M T W T F S S M T W T F S S M T W T F S S Crew #1 D D D - - - N N N N - - - - - - - D D D D - - - N N N - Crew #2 N N N - - - - - - - - D D D - - - N N N - D D D - - - N Crew #3 - - - D D D D - - - N N N - D D D - - - N N N N - - - - Crew #4 - - - N N N - D D D - - - N N N N - - - - - - - D D D D D= Day Shift 6:00am (same day) - 6:00pm (same day) N= Night Shift 7:00pm (preceding day) - 6:00am (same day) 119 Index - ------------------------------------------------------------------------------- 4 - ------------------------------------------------------------------------------- 401K 41 - ------------------------------------------------------------------------------- A - ------------------------------------------------------------------------------- Accidental Life Insurance 41 Alcohol and Drug Abuse .See Sick Leave 8 Application Referral 44 Apprentice Program 25 Arbitration 32 Attendance & Sick Leave See Article 13 - ------------------------------------------------------------------------------- B - ------------------------------------------------------------------------------- Benefit Eligibility 35 Benefit Plans 35 Benefits Employee Contributions 35 Board and Lodging 19 Break Periods 12 Bulletin Boards 6 Business Management 5 - ------------------------------------------------------------------------------- C - ------------------------------------------------------------------------------- Call Out Rest Time 15 Call Out Travel Time 15 Call-Outs 14 CDL's 46 Change in Status 9 Classification Regular Employee 8 Classification Probationary Employees 7 Temporary Employees 7 Continuity of Service 3 Contract Education 89 Contracting Work 6 - ------------------------------------------------------------------------------- D - ------------------------------------------------------------------------------- Dental Benefit 34 Dependent Care Account 36 Disability Benefits 37, 38 Discipline 5, 46 Dues See Union Dues - ------------------------------------------------------------------------------- E - ------------------------------------------------------------------------------- E/I Classification 90 Emergency Staffing 18 Employees Lost Vacation See Vacation Employees, New 5 Evalutations Regarding Seniority See Exhibit V, Article 7.1, Article 5.4 Leaves of Absence 51 Licenses 59 Exhibit I Classification Descriptions 50 Exhibit II Wage Rates 54 Exhibit III Check Off Authorization 58 Exhibit IV Sick Leave Agreement 59 Exhibit V Temporary Layoff Provisions 60 See Sick Leave - ------------------------------------------------------------------------------- F - ------------------------------------------------------------------------------- Family & Medical Leave 4 Family Leave 43 Floating Birthday/Holiday 29 Funeral Leave 43 - ------------------------------------------------------------------------------- G - ------------------------------------------------------------------------------- Generation Apprenticeship Committee 87 Generations Contractors 91 Grievance 24 Definition 24 Time Limitations 24 Grievance Process 24 - ------------------------------------------------------------------------------- H - ------------------------------------------------------------------------------- Hearing Procedures 25 Holidays 28 Banked 29 Holidays Worked 28 - ------------------------------------------------------------------------------- I - ------------------------------------------------------------------------------- Inclement Weather Practice 32 Injuries 45 Insurance 41, 113 Accidental Life Insurance 51 Long-Term Disability Insurance 51 Investigation 30 Safety 32 Incentive Pay 48 - ------------------------------------------------------------------------------- J - ------------------------------------------------------------------------------- Job Descriptions 50 Job Incurred Injuries 45 Job Posting 25 Job Posting Selection Criteria 26 Jury Duty 43 Job Security 47 - ------------------------------------------------------------------------------- L - ------------------------------------------------------------------------------- Layoff, No 48 Layoff Eligibility See Article 5.4 Layoff Provisions 8 - ------------------------------------------------------------------------------- S - ------------------------------------------------------------------------------- Safety 26, 44
Life Insurance See Term Life Insurance Light Duty 33 Long Term Disability Insurance 41 Lunch Periods 14 Letters of Understanding 62 - 81 Letters of Agreement 82 - 96 - ------------------------------------------------------------------------------ M - ------------------------------------------------------------------------------ Maintenance Utility Technicians 82 Meal Rates 20 Meals 19 Medical Attention See Sick Leave Mileage Allowance 19 Military Leave 42 Moving Expenses 22 - ------------------------------------------------------------------------------ N - ------------------------------------------------------------------------------ New Classification/Wages 50 Newly Hired Journeymen/Generation 85 Non-Discrimination 4 - ------------------------------------------------------------------------------ O - ------------------------------------------------------------------------------ Out of Town Work 19 Overtime 12 Cancellation 16 Required Notice 16 Overtime Equalization 14 - ------------------------------------------------------------------------------ P - ------------------------------------------------------------------------------ Pay Provisions 14 Pension 47 Per Diem 19 Permanent Schedules 16 Permits 46 Prescriptive Drug Benefit 34 Probationary 7 - 9 See Classification 7 - 9 Promotion/Transfer Trial Period 23 - ------------------------------------------------------------------------------ R - ------------------------------------------------------------------------------ Rates of Pay 11 Recall Rights 6, 9 Removing Letters of Discipline 46 Reporting Location 20 Rest Time 15 Retention Bonus 48 Retirement Benefit 39 Retirement Plan See Article 14.4 62 Retirement, Magic 80 41 Work Location Change 20 Work Week 11 Working Hours 11 Working rules 44 Schedule Assignment 17 Schedule Staffing 18 Seniority 21 Seniority and Promotions 21 Seniority Postings 21 Severance 9 Shift 11 Shift Designations 11 Shift Differential 16 Shift Premium 11 Short Term Disability Benefit 42 Sick Leave 32 Sick Leave Bonus 32 Staffing Vacancies 21 Status of Employees 7 Steward Business 6 Sub-Departments 22 Subpoena 43 - ------------------------------------------------------------------------------ T - ------------------------------------------------------------------------------ Temporary Appointments 22 Temporary Employees 7 Term Life Insurance 34 Term of Agreement 47 Two Man Crew 44 Travel Time 15 - ------------------------------------------------------------------------------ U - ------------------------------------------------------------------------------ Union Activity 6 Union Business 6 Union Dues 5 Union Security 5 Union/Steward Business 6 Upgrade See Article 16.9 45 Utility Operators 86 - ------------------------------------------------------------------------------ V - ------------------------------------------------------------------------------ Vacancies 21 Vacation Bonus 31 Vacation Unused 31 Vacations 30 Vision Benefit 34 - ------------------------------------------------------------------------------ W - ------------------------------------------------------------------------------ Wages 12, 46, 48, 54, 69, 96 Work Day 11, 97, 101, 111
Emergency Conditions 46 Safety Gear 44 Tools, Equipment & Work Clothes 45 Vessel Conditions 46 Two Man Crew 44 Upgrade 45 Welding Requirements 45 Working Safety Committee 26
EX-10.T 29 0029.txt LOS ANGELES-NEVADA POWER NOB TO MCC500 50 MW Exhibit 10(T) LOS ANGELES - NEVADA POWER NOB to MCC500 50 MW FIRM TRANSMISSION SERVICE AGREEMENT (DWP No. BP 00-001) 1. PARTIES: The Parties to this Los Angeles - Nevada Power NOB to MCC500 50 MW -------- Transmission Service Agreement, DWP No. BP 00-001 (Agreement), are Nevada Power Company ("Nevada Power"), a Nevada corporation, and The Department of Water and Power of the City of Los Angeles ("Los Angeles"), a department organized and existing under the Charter of the City of Los Angeles, a municipal corporation of the State of California, hereinafter referred to individually as "Party" and collectively as "Parties". 2. RECITALS: This Agreement is made with reference to the following facts, --------- among others: 2.1 Nevada Power desires to purchase 50 MW of firm uni-directional transmission service from the Point of Receipt where Los Angeles' Control Area interconnects with Bonneville Power Administration's (BPA's) Control Area at the Nevada - Oregon Border, to the point of delivery at MCC500, for a period of 15 months, beginning October 12, 2000 through December 31, 2001. 2.2 Los Angeles is willing to provide such transmission service to Nevada Power under this Agreement. 3. AGREEMENT: In consideration of the mutual covenants and agreements ---------- contained herein, the Parties hereby agree as follows. 4. DEFINITIONS: The following terms, whether in the singular or in the ------------ plural, when used herein, and initially capitalized, shall have the following meanings specified: 4.1 Account: The internal record dedicated for the purpose of maintaining a statement of Schedules or corresponding transmission loss, and for determining Inadvertent Energy. 4.2 Agreement: This Los Angeles - Nevada Power NOB to MCC500 50 MW Firm Transmission Service Agreement. 4.3 Authorized Representative: The individual(s) named and appointed by each Party pursuant to this Agreement who are authorized to represent the interest of such appointing Party. 4.4 BPA: The Bonneville Power Administration, a federal Power Marketing Administration serving the states of Oregon, Washington, Idaho, and portions of Montana. 4.5 Control Area: All or part of an electric utility's, power pool's, or generating agency's electric generation, transmission, and distribution facilities, or combination thereof with those of Third Parties, to which a common automatic generation scheme is applied. 1 4.6 Control Area Services: Those tasks which a Control Area operator must perform to establish, execute, and maintain Schedules between Control Areas in accordance with WSCC minimum operating reliability criteria which include, but are not limited to: (i) Prescheduling energy interchange between interconnected Control Areas; (ii) verification of preschedules prior to execution of the next day' Schedules; (iii) hourly execution and verification of Schedules as necessary; (iv) making Schedule adjustments due to uncontrollable force or other curtailment events and notification of affected parties; (v) reconciliation of Inadvertent Energy; and (vi) all accounting activities associated with these tasks. 4.7 Dispatcher: An employee of a Party who has responsibility for the 7 day by 24-hour operation of such Party's electric system. 4.8 Inadvertent Energy: For any hour, the difference between the sum of net actual energy interchange and the sum of net scheduled energy interchange at a Point of Interconnection. 4.9 MCC500: The 500 kV bus at McCullough Switching Station in the state of Nevada. 4.10 NOB: The point of interconnection between Los Angeles and BPA at the Nevada - Oregon Border. 4.11 PDCI: The +/- 500 kV Pacific Direct Current Intertie between Sylmar Converter Station and BPA's Celilo Converter Station. 4.12 Point of Delivery: A Point of Interconnection where Los Angeles is empowered to cause Schedules to be made available to Nevada Power. 4.13 Point of Interconnection: The points where the electrical system of a Control Area interconnects with the electrical system of another Control Area. 4.14 Point of Receipt: A Point of Interconnection where Los Angeles is empowered to cause Schedules to be accepted from Nevada Power. 4.15 Preschedule Period: The day or group of days during which future Schedules have been arranged by the Parties' Schedulers. 4.16 Real-Time Schedule: Hourly Schedules accepted and included in Los Angeles' interchange schedule by Los Angeles' Dispatchers after expiration of the Preschedule Period. 4.17 Schedule: An intentional, prearranged interchange of energy transfers at a specified Point of Interconnection which has been agreed upon between the Control Areas involved. 4.18 Schedulers: An employee of a Party who has, among other duties, the responsibility for preparing preliminary interchange energy Schedules. 2 4.19 Scheduling Ability: A Party's maximum ability, expressed in megawatts per hour, to schedule transfers of energy over transmission facilities. 4.20 Third Party: An electric utility, power pool, or generating agency, power marketer, power broker, or other entity, not a party to this Agreement. 4.21 WSCC: The Western Systems Coordinating Council of the North American Reliability Council (NERC) or successor organization. 5. EFFECTIVE DATE and TERM: ------------------------ 5.1 Effective Date: This Agreement shall become effective when duly executed by the Parties. 5.2 Termination Date: This Agreement shall continue in full force and effect until the earlier of: (i) 23:59 hours on December 31, 2001; (ii) termination by mutual agreement of the Parties; or (iii) termination by Los Angeles under Section 11.7 or Section 11.10. 6. TRANSMISSION SERVICE: --------------------- 6.1 Commencing October 12, 2000, Los Angeles shall provide, and Nevada Power shall purchase, 50 MW of firm uni-directional transmission service (and associated transmission losses pursuant to Section 9) from the Point of Receipt at NOB to the Point of Delivery at MCC500 for the period between 00:00 hours on October 12, 2000 through 23:59 hours on December 31, 2001. 6.2 Nevada Power shall have to right to re-sell the firm transmission service explained in Section 6.1 to a Third Party on a short term basis when Nevada Power is not using the transmission service. Nevada Power shall submit schedules/preschedules to Los Angeles consistent with Section 8.8 hereunder. Nevada Power shall notify Los Angeles as soon as possible after the re-sale occurs and prior to the provision of service. Compensation to Nevada Power by a Third Party shall not exceed the monthly rate paid by Nevada Power to Los Angeles as pro-rated for the time period of the transmission re-sale. Nevada Power shall remain solely liable for the performance of obligations under this Agreement, regardless of the amount or duration of firm transmission service Nevada Power re-sells to Third Parties. 6.3 During any hour when Nevada Power is not scheduling energy on the transmission service provided hereunder, Los Angeles shall have the right to schedule energy on a nonfirm basis over such transmission service at no cost to Los Angeles. 6.4 Nevada Power shall have the right to request, during the Preschedule Period, a change of either the Point of Receipt or Point of Delivery on a nonfirm, as available basis during the term of this Agreement. However, Nevada Power shall not request a change of both the Point of Receipt and Point of Delivery at the same time nor shall 3 Nevada Power schedule more than one Point of Receipt/Point of Delivery combination (including NOB/MCC500, respectively) for any single day. 6.5 If at the end of the contract term, Los Angeles cannot accommodate all requests for transmission service on the PDCI, Nevada Power shall have the right of first refusal to continue taking the firm transmission service purchased under this Agreement by accepting a rate and contract term at least equal to those of competing requests. 7. TRANSMISSION CURTAILMENTS: -------------------------- 7.1 Los Angeles may curtail Nevada Power's Scheduling Ability hereunder in response to limitations on the facilities providing service hereunder due to: (i) uncontrollable force, as defined in Section 13; (ii) operational conditions such as unscheduled flow or transmission nomograms applicable to facilities providing service hereunder; or (iii) transmission limitations which are necessary or desirable in the sole judgment of Los Angeles for the purpose of maintenance, repairs, replacements, installation, investigations, and inspections of equipment and facilities which are operated by Los Angeles. 7.2 For the purposes of Section 7.1, the curtailment priority for Nevada Power shall be the same as the curtailment priority for Los Angeles. Curtailments shall be allocated proportionally among Los Angeles, Nevada Power, and all Third Parties for whom Los Angeles is providing firm transmission service between NOB and MCC500. 7.3 In the event continuity of service within Los Angeles' Control Area is being jeopardized or any element of Los Angeles' electrical system providing service hereunder is at risk of damage as determined by Los Angeles in its sole judgment, Los Angeles may curtail Nevada Power's Scheduling Ability to the extent necessary to avoid or eliminate such jeopardy or risk of damage while maintaining the curtailment priority described in Section 7.2. 7.4 No curtailment credit will be given for any curtailments occurred under conditions described under Section 7 herein. 8. SCHEDULING PROVISIONS: ---------------------- 8.1 Nevada Power shall endeavor to preschedule energy in the manner described hereunder. Nevada Power may modify existing preschedules or submit Real-Time schedules subject to provisions under Section 8.4, 8.5 and 8.6 hereunder. 8.2 Los Angeles shall establish one energy Account and one corresponding energy loss Account for Nevada Power's use for scheduling under this Agreement. 8.3 Schedules shall be submitted to Los Angeles' Schedulers for inclusion in the Los Angeles interchange preschedule by 1100 hours (Pacific Time) on the day prior to the effective date of the Schedule. Schedules for weekend, NERC holiday and national holidays shall be submitted in accordance with prevailing WSCC procedures, or as determined by Los Angeles' Schedulers, whichever calls for the earlier submittal. 4 Nevada Power shall submit NERC transaction tags corresponding to each Schedule as required by WSCC. 8.4 If Nevada Power desires to modify its Schedule after the Preschedule period or to submit Real-Time Schedules, Nevada Power shall notify Los Angeles' Dispatcher at least one hour in advance of the hour when such Schedules are to become effective, provided that an Account for such transmission path has been previously established. 8.5 At those times when Nevada Power requests that the Schedule be modified or submits a Real-Time Schedule due to an emergency on Nevada Power's electric system, Los Angeles will make best efforts to accommodate Nevada Power's request as soon as possible. 8.6 In the event Nevada Power's Scheduling Ability is curtailed in real time pursuant to Section 7 herein, Nevada Power shall, immediately after oral notification by Los Angeles' Dispatcher, reduce Nevada Power's Schedule in the amount determined by Los Angeles. 8.7 Whenever Nevada Power becomes aware of any condition, external to Los Angeles' Control Area, which requires that Nevada Power reduce its Schedules hereunder, Nevada Power shall orally notify Los Angeles' Dispatcher of such condition and Los Angeles' Dispatcher shall reduce Nevada Power's Schedules in the amount determined by Nevada Power. 8.8 Los Angeles shall not be obligated to perform any scheduling and or accounting for any Third Party. 8.9 Los Angeles reserves the right to curtail Schedules under this Agreement whenever Los Angeles determines, in its sole judgement, that such Schedules do not correspond precisely to other simultaneous Schedules at the Point of Receipt and the Point of Delivery, that such Schedules are part of an incomplete or insufficient transaction path, or that such Schedules violate WSCC scheduling policies. 8.10 As an inclusion in the transmission service rates pursuant to Section 10 hereunder, Nevada Power is entitled to submit one NERC transaction tag per day free of charge during the entire period of this Agreement. Los Angeles reserves the right to charge up to $87.36 per revision whenever Nevada Power desires to make a request to modify its existing Schedule during the day. For the purposes of this section, a single Schedule or revision, which prevailing WSCC procedures may require to be presented on multiple NERC tags, shall be counted as one tag. 8.11 The Authorized Representatives shall coordinate changes to the scheduling and dispatching procedures in this Section 8 to conform to Los Angeles' overall system operation as such may be changed from time to time. 9. TRANSMISSION LOSSES: -------------------- 5 9.1 Transmission losses associated with the energy scheduled pursuant to this Agreement shall be the responsibility of Nevada Power. The amount of such losses shall be deemed to be 6.36 percent of the energy transmitted between NOB and MCC500. 9.2 Transmission loss shall be settled financially unless it is mutually agreed to settle pursuant to Section 9.3 hereunder. Nevada Power shall pay Los Angeles, for each month, an amount equal to the hourly California Power Exchange Market Clearing Price in the "day of" market at Eldorado/MCC500 multiplied by the losses incurred hereunder during each hour of the month. 9.3 Nevada Power shall have the right to request that the transmission loss incurred hereunder during the month be returned to Los Angeles with the actual energy provided by Nevada Power in accordance with Los Angeles's schedule/accounting procedure. In that event, unless otherwise notified, Nevada Power is assumed to return the losses concurrent with the scheduled energy. Nevada Power may need to purchase additional transmission to cover such losses. 10. TRANSMISSION SERVICE AND ANCILLARY SERVICE RATES: ------------------------------------------------- 10.1 As payment for the transmission service provided hereunder, Nevada Power shall pay Los Angeles $150,000.00 each month. 10.2 The above-mentioned fee of $150,000 per month shall include only the following services: (i) 50 MW of firm uni-direction transmission service, from NOB to MCC500 (ii) VAR and Voltage support service for up to 12,000 MWh per month (an additional charge of $0.33 per MWh will be applied if 12,000 MWh is exceeded), and (iii) one Schedule per day, with additional revision charges applied pursuant to Section 8.10. 10.3 Other ancillary services, as defined by the Federal Energy Regulatory Commission (FERC) or the North America Electric Reliability Council (NERC) or WSCC, including, but not limited to, operating reserve-spinning, operating reserve-supplemental, replacement reserve, regulation and frequency response service, shall be the responsibility of Nevada Power, and as such they will be provided separately by Nevada Power as required. 11 BILLINGS, PAYMENTS: ------------------- 11.1 Commencing October 12, 2000, as soon as practicable after the last day of each month, Los Angeles shall render a monthly billing to Nevada Power for services provided hereunder during that month. Nevada Power shall pay such bill within twenty (20) calendar days after receipt thereof. 11.2 If all or portion of a bill is disputed, the entire amount of the bill shall be paid when due and Los Angeles' Authorized Representative shall be concurrently provided written notice of the disputed amount and the basis for the dispute. Los Angeles shall reimburse any amount determined to have been correctly disputed, with interest calculated in accordance with Section 11.3 hereof, within ten (10) calendar days after such determination. 6 11.3 Amounts which are not paid when due shall bear interest at a rate equal to one percent (1%) per month, prorated by the days from the date payment was due until the date payment is received. Payments received by mail shall be accepted without assessment of such interest provided the postmark indicates the payment was mailed on or before the due date. 11.4 Bills shall be submitted by Los Angeles to Nevada Power at the following address: Sierra Pacific Power / Nevada Power Director, Transmission Business Services P.O. Box 10100 Reno, Nevada 89520-0024 11.5 Nevada Power shall make remittance to Los Angeles at the following address: Department of Water and Power of the City of Los Angeles Accounting Business Unit - Invoice Collectible Section P.O. Box 51111, Room 445 Los Angeles, CA 90051-0100 11.6 Either Party may, at any time by written notice to the other Party, change their respective addresses as specified in Section 11.4 or Section 11.5. 11.7 Los Angeles shall have the right, upon not less than fifteen (15) calendar days' advance written notice, to suspend the transmission service provided hereunder for nonpayment of bills, and to refuse to resume such service so long as any part of the amount due remains unpaid. Such a suspension of service shall not relieve Nevada Power of liability for any other charges which accumulate during the time that service is suspended. The rights reserved by and to Los Angeles shall be in addition to all other remedies available to Los Angeles either by law or in equity for the breach of any of the terms hereof. 11.7.1 Nevada Power shall have thirty (30) calendar days from the notice of suspension of service to remit payment of the delinquent bill. 11.7.2 If Nevada Power does not remit payment within the allowed time, Los Angeles may unilaterally terminate this Agreement. 11.8 From time to time, for the purpose of determining the ability of Nevada Power to meet its obligations to make payments hereunder, Los Angeles may initiate a reasonable creditworthiness review, to be performed in accordance with standard commercial practices. 11.9 If Los Angeles has suspended service due to Nevada Power's nonpayment of bills or if a creditworthiness review reveals that Nevada Power is subject to, or operating under, bankruptcy laws, judgments, or any other conditions which could materially affect Nevada Power's ability to make payments hereunder, Los Angeles may require Nevada Power to 7 furnish a satisfactory payment bond or alternative security, acceptable to Los Angeles and consistent with commercial practices established under the Uniform Commercial Code. 11.10 Nevada Power shall have sixty (60) calendar days from the date of written notification to forward the required security to Los Angeles. If Nevada Power does not provide the required security by the allowed time, Los Angeles may unilaterally terminate this Agreement upon any nonpayment of bills by Nevada Power. 12 LIABILITY: ---------- 12.1 Los Angeles shall not be liable to Nevada Power and Nevada Power hereby releases Los Angeles from, and agrees to hold harmless Los Angeles against, any claim, demand, liability, loss or damage, whether direct, indirect, or consequential incurred by either Nevada Power or any customers of Nevada Power, which results from the provisions of service under this Agreement. 12.2 Nevada Power shall not be liable to Los Angeles and Los Angeles hereby releases Nevada Power from, and agrees to hold harmless Nevada Power against, any claim, demand, liability, loss or damage, whether direct, indirect, or consequential incurred by either Los Angeles or any customers of Los Angeles, which results from the provisions of service under this Agreement. 13 UNCONTROLABLE FORCE: -------------------- 13.1 Neither Party shall be considered to be in default in the performance of any of its obligations under this Agreement (other than obligations to make payment for bills rendered pursuant to this Agreement) when a failure of performance shall be due to an uncontrollable force. The term "uncontrollable force" shall mean any cause beyond the control of the Party unable to perform such obligations, including, but not limited to, failure of or threat of failure of facilities, flood, earthquake, storm, drought, fire, pestilence, lightning, and other natural catastrophes, epidemic, war, riot, civil disturbance, or disobedience, strike, labor dispute, labor or material shortage, sabotage, government priority, restraint by court order or public authority, and action or nonaction by, or inability to obtain the necessary authorizations or approvals from any governmental agency or authority which, by exercise of due diligence, such Party could not reasonably have been expected to avoid and which, by exercise of due diligence, it has been unable to overcome. Nothing contained in this Section 13 shall be construed as to require either Party to settle a strike or labor dispute in which it may be involved. 14 EFFECT OF SECTION HEADINGS: Section headings appearing in this Agreement --------------------------- are inserted for convenience only and shall not be construed as interpretations of text. 15 TRANSFER OF INTEREST: --------------------- 15.1 Except as provided in Section 6.2, neither Party shall voluntarily assign or transfer this Agreement, in whole or in part, or any of its interest hereunder to any other person or entity, without the prior written consent of the other Party; provided, however, such 8 consent shall not be unreasonably withheld. Any attempt to transfer or assign this Agreement, or any privilege hereunder without such prior written consent, except as provided herein, shall be void and confer no right to any party that is not a Party to this Agreement. 15.2 Any successor to or assignee of the rights of either Party, whether by voluntary transfer, judicial sale, foreclosure sale, or otherwise, shall be subject to all the provisions and conditions of this Agreement to the same extent as though such successor or assignee were an original Party to this Agreement. 16 NO DEDICATION OF FACILITIES: Any undertaking by one Party to the other ---------------------------- Party under any provisions of this Agreement shall not constitute the dedication of the system or any portion thereof of either Party to the public or to the other Party or any other person or entity, and it is understood and agreed that any such undertaking by either Party shall cease upon the termination of such Party's obligations under this Agreement. 17 WAIVERS: Any waiver at any time by either Party of its rights with respect -------- to a default under this Agreement, or with respect to any other matter arising in connection with this Agreement, shall not be deemed a waiver with respect to any subsequent default or other matter arising in connection therewith. Any delay, short of the statutory period of limitation in asserting or enforcing any right, shall not be deemed a waiver of such right. 18 RELATIONSHIP OF PARTIES: The covenants, obligations, and liabilities of the ------------------------ Parties are intended to be several and not joint or collective, and nothing contained in this Agreement shall ever be construed to create an association, joint venture, trust or partnership, or to impose a trust or partnership covenant, obligation, or liability, on or with regard to either Party. Each Party shall be individually responsible for its own covenants, obligations, and liabilities as provided in this Agreement. Neither Party shall be under the control of or shall deem to control the other Party. Neither Party shall be the agent of or have a right or power to bind the other Party without such other Party's written consent. 19 DISPUTES: Disputes on any matter relating to this Agreement shall be --------- discussed and resolved by the Authorized Representatives, who shall use their best efforts to amicably and promptly resolve such disputes. Should the Authorized Representatives be unable to resolve a dispute, the matter shall be referred to the individuals who are specified to receive written notices at such time pursuant to Section 23. 20 NO THIRD-PARTY RIGHTS: The Parties do not intend to create rights in, or to ---------------------- grant remedies to, any Third Party as a beneficiary of this Agreement or of any duty, covenant, obligation, or undertaking established herein. 21 AUTHORIZED REPRESENTATIVE: -------------------------- 21.1 Each Party, within thirty (30) calendar days after the effective date of this Agreement, shall appoint and designate a person to be its Authorized Representative. Such appointment and designation shall be in writing and shall be forwarded by each Party to the other. 9 21.2 Each Authorized Representative shall be authorized and empowered by the appointing Party to carry out the provisions of this Agreement on behalf of and for the benefit of such Party, and to provide liaison between the Parties. 21.3 The Authorized Representatives shall have no authority to alter, modify or delete any of the provisions of this Agreement. 22 GOVERNING LAW: This Agreement shall be interpreted, governed by, and -------------- construed under the laws of the State of California with venue in the City of Los Angeles. 23 NOTICES: Notifications under this Agreement, except written notices -------- required or authorized herein, shall be made by telephone or such other means as mutually agreed to between the Parties' Dispatchers or Schedulers. Any written notices required or authorized under this Agreement shall be delivered in person or sent by registered or certified mail, postage prepaid, to the persons specified below: If to Los Angeles, the notice shall be sent to: Department of Water and Power of the City of Los Angeles c/o Director of Bulk Power, (or any successor thereto) P.O. Box 51111, Room 1149 Los Angeles, California 90051-0100 If to Nevada Power: Director of Transmission Business (or any successor thereto) Sierra Pacific Power / Nevada Power( 6100 Neil Road P.O. Box 10100 Reno, Nevada 89520-0024 Either Party may, from time to time, by written notice to the other Party, change the designation or address of the person so specified as to the one to receive notices pursuant to this Agreement. 24 ENTIRE AGREEMENT: This Agreement contains the entire agreement and ----------------- understanding between the Parties, their agents, and employees as to the subject matter of this Agreement. This Agreement may be amended only by a written document signed by the Parties. It is understood by the Parties that the terms and conditions of this Agreement are unique to the transactions described herein and shall not, therefore, be considered as precedent for any future transactions between the Parties or between any of the Parties and a Third Party. Each Party acknowledges that each Party was represented by counsel in the negotiation and that it has been authorized to execute this Agreement. Nevada Power represents and warrants that it is free to enter into this Agreement and to perform each of the terms and covenants of it. Nevada Power represents and warrants that it is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that the execution and performance of this Agreement by Nevada Power will not constitute a violation or breach of any other Agreement between it and any other person or entity. 10 25 ATTORNEY FEES AND COSTS: Both Parties agree that in any action to enforce ------------------------ the terms of this Agreement that each Party shall be responsible for its own attorney fees and costs. / / / 26. SIGNATURE CLAUSE: The signatories hereto represent that they have been ----------------- appropriately authorized to enter in this Los Angeles - Nevada Power NOB to MCC500 50 MW Firm Transmission Service Agreement (DWP No. BP 00-001) on behalf of the Party for whom each signs. This Agreement is hereby executed as of the ______ day of _________________, 2000. DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES By BOARD OF WATER AND POWER COMMISSIONERS OF THE CITY OF LOS ANGELES Date:_________________ By:______________________________________________ And:_____________________________________________ Secretary NEVADA POWER By: _____________________________________________ Typed name: Gary L. Porter ------------------------------------- Title: Exectutive Director, Transmission ------------------------------------------ Date signed: ____________________________________ 11 EX-10.U 30 0030.txt RELIABILITY MANAGEMENT SYSTEMS AGREEMENT Exhibit 10(U) [Contract to be entered into between the WSCC and each FERC-jurisdictional Transmission Operator within the WSCC to implement the RMS] RELIABILITY MANAGEMENT SYSTEM AGREEMENT by and between WESTERN SYSTEMS COORDINATING COUNCIL and _______________________________ THIS RELIABILITY MANAGEMENT SYSTEM AGREEMENT (the "Agreement") is entered into this ____ day of _____________, 1999, by and between the Western Systems Coordinating Council, Inc. (the "WSCC"), and _______________________________________ (the "Transmission Operator"). The Transmission Operator enters into this Agreement (i) in its capacity as an operator of a Control Area and/or as an operator of transmission facilities and (ii) with respect to any generation which it Controls (as defined below). WHEREAS, there is a need to maintain the reliability of the interconnected electric systems encompassed by the WSCC in a restructured and competitive electric utility industry; WHEREAS, with the transition of the electric industry to a more competitive structure, it is desirable to have a uniform set of electric system operating rules within the Western Interconnection, applicable in a fair, comparable and non-discriminatory manner, with which all market participants comply; and WHEREAS, the members of the WSCC, including the Transmission Operator, have determined that a contractual Reliability Management System -1- based upon a set of mutual agreements between the WSCC and its Members provides a reasonable, currently available means of maintaining such reliability. NOW, THEREFORE, in consideration of the mutual agreements contained herein, the agreements between other transmission operators and the WSCC, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the WSCC and the Transmission Operator agree as follows: 1.PURPOSE OF AGREEMENT The purpose of this Agreement is to maintain the reliable operation of the Western Interconnection through the Transmission Operator's commitment to comply with certain reliability standards and, to the extent provided in this Agreement, to cause Generators to enter into commitments to comply with those standards. 2.DEFINITIONS In addition to terms defined in the beginning of this Agreement and in the Recitals and Appendices hereto, for purposes of this Agreement the following terms shall have the meanings set forth beside them below. Control or Controlled, when used in this Agreement to refer to generation facilities, means that a person has the right (whether through ownership, by contract, or otherwise) to cause the generation facilities to comply with the criteria applicable to generators contained in Annex A of the WSCC Reliability Criteria Agreement (other than as a result of entering into new or amended interconnection agreements in accordance with Section 5 of this Agreement); provided however, that a person shall not be deemed to Control a third party's generation facilities solely on the basis of providing control area services to the third party. Control Area means an electric system or systems, bounded by interconnection metering and telemetry, capable of controlling generation to maintain its interchange schedule with other Control Areas and contributing to frequency regulation of the Western Interconnection. FERC means the Federal Energy Regulatory Commission or a successor agency. Generator means any entity (i) that Controls generating facilities interconnected with the transmission system of a Participating Transmission Operator or located within the Control Area of a Participating Transmission Operator, and (ii) that is a party to an interconnection agreement or is -2- responsible for obtaining an interconnection agreement with a Participating Transmission Operator. Member means any party to the WSCC Agreement. NERC means the North American Electric Reliability Council or any successor entity. Other RMS Agreement means an agreement between the WSCC and an operator (other than the Transmission Operator) of a Control Area or transmission facilities requiring such operator to comply with the reliability criteria contained in the WSCC Reliability Criteria Agreement. Participating Transmission Operator means the Transmission Operator and any other transmission operator that has entered into an Other RMS Agreement. Party means either the WSCC or the Transmission Operator and Parties means both of the WSCC and the Transmission Operator. Reliability Management System or RMS means the contractual reliability management program implemented through this Agreement and through each of the Other RMS Agreements. Western Interconnection means the area comprising those states and provinces, or portions thereof, in Western Canada, Northern Mexico and the Western United States in which Members of the WSCC operate synchronously connected transmission systems. Working Day means Monday through Friday except for recognized legal holidays in the state or province in which any notice is received pursuant to Section 10. WSCC means the Western Systems Coordinating Council or a successor entity. WSCC Agreement means the Western Systems Coordinating Council Agreement dated March 20, 1967, as such may be amended from time to time. WSCC Reliability Criteria Agreement means the Western Systems Coordinating Council Reliability Criteria Agreement dated ___________, 1999 among the WSCC and certain of its member transmission operators, as such may be amended from time to time. -3- WSCC Staff means those employees of the WSCC, including personnel hired by the WSCC on a contract basis, designated as responsible for the administration of the RMS. WSCC Table 2 means the table maintained by the WSCC identifying those transfer paths monitored by the WSCC security coordinators. As of the date set out therein, the transmission paths identified in Table 2 are as listed in Attachment 1 of the WSCC Reliability Criteria Agreement. 3. TERM AND TERMINATION 3.1 Term. This Agreement shall become effective on the later of: (a) thirty (30) days after the date of issuance of a final FERC order accepting this Agreement for filing without requiring any changes to this Agreement unacceptable to either Party; or (b) thirty (30) days after the date of issuance of a final FERC order accepting the WSCC Reliability Criteria Agreement for filing without requiring any changes to the WSCC Reliability Criteria Agreement unacceptable to either Party. Changes required by FERC to this Agreement or to the WSCC Reliability Criteria Agreement shall be deemed unacceptable to a Party only if that Party provides notice to the other Party, within fifteen (15) days of issuance of the applicable FERC order, that such order is unacceptable, provided that if any other party to an Other RMS Agreement or the WSCC -------- ---- Reliability Criteria Agreement gives notice within the fifteen (15) day period to the WSCC that FERC-ordered changes to its Other RMS Agreement or to the WSCC Reliability Criteria Agreement are unacceptable, the WSCC shall promptly notify the Transmission Operator of such notice and in such case the Transmission Operator shall have until twenty-five (25) days after issuance of the applicable FERC order to give notice that such order is unacceptable. 3.2 Termination by the Transmission Operator. (a) The Transmission Operator may terminate this Agreement: (i) in the case of any amendment to the WSCC Reliability Criteria Agreement which would cause the Transmission Operator to comply with revised or new reliability criteria which would adversely affect the Transmission Operator, on fifteen (15) days' written notice to the WSCC, provided that -------- ---- the notice of -4- termination is given within forty-five (45) days of the date of issuance of a FERC order accepting such amendment for filing, provided further that the forty-five (45) day period ---------------- within which notice of termination is required may be extended by the Transmission Operator for an additional forty-five (45) days if the Transmission Operator gives written notice to WSCC of such requested extension within the initial forty-five (45) day period; or (ii) on thirty (30) days' written notice to the WSCC at such time that the Transmission Operator no longer operates a Control Area within the Western Interconnection or a transmission path in the WSCC Table 2; or (iii) on thirty (30) days' written notice to the WSCC if a transmission path operated by the Transmission Operator is added to WSCC Table 2 without the Transmission Operator's consent subsequent to the date of this Agreement, provided that such notice is given by the Transmission Operator to the WSCC within forty-five (45) days of notice to the Transmission Operator by the WSCC of the addition of such path to WSCC Table 2; or (iv) for any reason on one year's written notice to the WSCC. (b) For purposes of Section 3.2(a)(i), any change in the rating of a transmission path included in WSCC Table 2 shall not constitute an amendment to the WSCC Reliability Criteria Agreement or new or revise criteria. 3.3 Termination by the WSCC. The WSCC may terminate this Agreement for any reason on one year's written notice to the Transmission Operator. 3.4 Termination by Mutual Agreement. This Agreement may be terminated at any time by mutual agreement of the Parties. 3.5 Termination of the WSCC Reliability Criteria Agreement. This Agreement shall terminate upon termination of the WSCC Reliability Criteria Agreement. 3.6 Notice to FERC. A terminating Party shall notify FERC if this Agreement is to terminate pursuant to this Section 3. Such termination shall be effective in accordance with the terms of this Agreement without further action by FERC. -5- 3.7 Suspension. This Agreement and the obligations hereunder shall be suspended at any time that the WSCC Reliability Criteria Agreement is suspended; provided, however, that any such suspension shall be effective only for such period as the WSCC Reliability Criteria Agreement is suspended, and any such suspension shall terminate, and this Agreement and the obligations hereunder shall become effective, immediately upon notice to the Transmission Operator by the WSCC of the termination of suspension of such agreement. 4. COMPLIANCE WITH AND AMENDMENT OF WSCC RELIABILITY CRITERIA 4.1 Compliance with Reliability Criteria. The Transmission Operator agrees to comply with the requirements of the WSCC Reliability Criteria Agreement including the applicable WSCC reliability criteria contained in Section III and Section IV to Annex A thereof, and, in the event of failure to comply, agrees to be subject to the sanctions applicable to such failure. The Transmission Operator shall comply with such reliability criteria: (i) in its capacity as an operator of a Control Area and/or as an operator of transmission facilities; and (ii) with respect to generation which it Controls. 4.2 Amendment of WSCC Reliability Criteria Agreement. All amendments to the WSCC Reliability Criteria Agreement shall be pursuant to Section 13 of the WSCC Reliability Criteria Agreement. Until this Agreement is terminated pursuant to Section 3, the Transmission Operator shall be subject to the WSCC Reliability Criteria Agreement, as modified pursuant to Section 13 of the WSCC Reliability Criteria Agreement, regardless of Transmission Operator's support for or challenge to any such modification. 5. INTERCONNECTION AGREEMENTS 5.1 New Interconnection Agreements. The Transmission Operator agrees, except where precluded by law, to include in any new interconnection agreement that is executed by the Transmission Operator after the effective date of this Agreement with a Generator that Controls generating facilities located within the Transmission Operator's Control Area or interconnected directly with the Transmission Operator's transmission system provisions in the form of Appendix A or such other form as may be convenient provided that, except as permitted in Section 5.7, such form binds the Generator to all of the obligations and agreements set out in Section 2 of Appendix A. -6- 5.2 Existing Interconnection Agreements. (a) With respect to a Generator that has an interconnection agreement with the Transmission Operator that is in effect prior to the effective date of this Agreement, the Transmission Operator agrees, to the extent permitted under its existing interconnection agreement or where it otherwise has the legal right to do so, to enter into either: (i) an amendment to such existing interconnection agreement in the form set forth in Appendix A to this Agreement; (ii) a separate agreement with such Generator in the form set forth in Appendix B to this Agreement or (iii) such other amendment or agreement as may be convenient provided that such amendment or agreement, except as permitted in Section 5.7, binds the Generator to all of the obligations and agreements set out in Section 2 of Appendix A or in Sections 3, 4, 5 and 6 of Appendix B. If the Transmission Operator is unable to reach a negotiated agreement with the Generator pursuant to this subsection and if such interconnection agreement permits the Transmission Operator to file unilaterally an amendment to such agreement pursuant to the just and reasonable standard of Section 205 of the Federal Power Act, the Transmission Operator shall file with FERC an amendment to such agreement, except as permitted in Section 5.7, in the form of Appendix A to this Agreement (or such other amendment as may be convenient provided that such amendment, except as permitted in Section 5.7, binds the Generator to all of the obligations and agreements set out in Section 2 of Appendix A or in Sections 3, 4, 5 and 6 of Appendix B). (b) With respect to a Generator for which the Transmission Operator does not have contractual or legal authority to file unilaterally with FERC such an amendment or separate agreement, the Transmission Operator agrees to undertake a good faith effort to enter into an amendment or separate agreement in the respective forms set forth in Appendix A or B to this Agreement or such other form as may be convenient provided that such form, except as permitted in Section 5.7, binds the Generator to all of the obligations and agreements set out in Section 2 of Appendix A or in Sections 3, 4, 5 and 6 of Appendix B. Good faith may be demonstrated by a written request to the Generator and documentation of the Generator's response. 5.3 Generators Without Interconnection Agreements. With respect to a generator that Controls generating facilities located within the Transmission Operator's Control Area that: (i) does not have an interconnection agreement with the Transmission Operator (e.g., a generator having --- facilities directly connected to another transmission owner within the Transmission Operator's Control Area); and (ii) is not otherwise obligated to comply with the WSCC -7- Reliability Criteria Agreement, the Transmission Operator (if an operator of a Control Area) agrees to undertake a good faith effort to negotiate and execute a separate agreement with such generator in the form set forth in Appendix B to this Agreement or such other form as may be convenient provided that such form, except as permitted in Section 5.7, binds the generator to all of the obligations and agreements set out in Sections 3, 4, 5 and 6 of Appendix B. Good faith may be demonstrated by a written request to the generator and documentation of the generator's response. 5.4 Sale of Controlled Generation. In any sale or transfer of generation which it Controls, the Transmission Operator shall require the acquiring party to enter into an agreement requiring such transferee to comply with the requirements of the WSCC Reliability Criteria Agreement as a Generator with respect to the transferred generation. Such agreement shall be in the form set forth in Appendix B to this Agreement or such other form as may be convenient provided that such form, except as permitted by Section 5.7, binds the transferee to all of the obligations and agreements set out in Sections 3, 4, 5 and 6 of Appendix B. 5.5 Transfer of Control or Sale of Transmission Facilities. In any sale or transfer of control of any transmission facilities subject to this Agreement, the Transmission Operator shall as a condition of such sale or transfer require the acquiring party or transferee to either assume the obligations of the Transmission Operator pursuant to this Agreement or to enter into an Other RMS Agreement with respect to the transferred facilities. 5.6 Single Agreement. A Generator at its option may enter into a single agreement with any Participating Transmission Operator binding the Generator to comply with the requirements of the RMS with respect to all generation the Generator Controls within the Western Interconnection. Such agreement shall be in the form of Appendix B or such other form as may be convenient provided that such form binds the Generator to all of the obligations and agreements set out in Sections 3, 4, 5 and 6 of Appendix B. Written notice by the Generator to the Transmission Operator that the Generator has entered into and is bound by such agreement to comply with the requirements of the RMS shall suffice to discharge the Transmission Operator and the Generator from any obligation to enter into any separate agreement or amendment to any existing interconnection agreement pursuant to this Section 5. 5.7 Other Agreements. Nothing in this Agreement shall be construed as prohibiting a Transmission Operator from imposing in any interconnection agreement, including the agreements provided for in this Section 5, such other reliability conditions which the Transmission Operator deems appropriate including the requirement that the Generator comply with any -8- future reliability criteria adopted as part of the WSCC Reliability Criteria Agreement. 6. SANCTIONS 6.1 Payment of Monetary Sanctions. The Transmission Operator shall be responsible for payment to the WSCC of any monetary sanction assessed against the Transmission Operator pursuant to this Agreement and the WSCC Reliability Criteria Agreement. Any such payment shall be made pursuant to the procedures specified in the WSCC Reliability Criteria Agreement. 6.2 Responsibility for Sanctions. Sanctions shall be assessed against the Transmission Operator only for non-compliance by the Transmission Operator with the reliability criteria contained in the WSCC Reliability Criteria Agreement. The Transmission Operator will have the right to challenge such assessment as specified in the WSCC Reliability Criteria Agreement. Sanctions for non-compliance with the reliability criteria by a Generator with whom the Transmission Operator has entered into an agreement pursuant to Section 5 shall be assessed by the WSCC directly against the Generator, and the Transmission Operator shall have no liability with respect to such sanctions. 6.3 Publication. The Transmission Operator consents to the release by the WSCC of information related to the Transmission Operator's compliance with this Agreement only in accordance with the WSCC Reliability Criteria Agreement. 7. THIRD PARTIES This Agreement creates contractual rights and obligations solely between the Parties. Nothing in this Agreement shall create between the Parties: (1) any obligation or liability whatsoever (other than as expressly provided in this Agreement), or (2) any duty or standard of care whatsoever. In addition, nothing in this Agreement shall create any duty, liability, or standard of care whatsoever as to any third party. No third party shall have any rights whatsoever with respect to enforcement of any provision of this Agreement. 8. REMEDIES. Each Party shall be entitled to seek specific performance of this Agreement including the payment of sanctions determined in accordance with this Agreement -9- and the Reliability Criteria Agreement. Specific performance shall be the sole remedy available to either Party pursuant to this Agreement and the WSCC Reliability Criteria Agreement unless the WSCC Reliability Criteria Agreement specifically provides otherwise. In particular, neither Party shall be liable pursuant to this Agreement to the other Party for damages of any kind whatsoever (other than the payment of sanctions, if so construed) whether direct, compensatory, special, indirect, consequential, or punitive. No order for specific performance of this Agreement shall (i) require a Transmission Operator to construct or dedicate facilities for the benefit of any other person, or (ii) impair the ability of a Transmission Operator to take such action as it deems necessary to maintain reliable service to its customers or to fulfill its obligations to others. 9. REGULATORY APPROVALS This Agreement shall be filed with FERC by the Transmission Operator under Section 205 of the Federal Power Act. In such filing, the Transmission Operator shall request that FERC accept this Agreement for filing without modification to become effective as of the date provided for in Section 3.1 of this Agreement. 10. NOTICES Any notice, demand or request required or authorized by this Agreement to be given in writing to a Party shall be delivered by hand, courier or overnight delivery service, mailed by certified mail (return receipt requested) postage prepaid, faxed, or delivered by mutually agreed electronic means to such Party at the following address: -10- WSCC: Executive Director Western Systems Coordinating Council University of Utah Research Park 540 Arapeen Drive, Suite 203 Salt Lake City, Utah 84108-1288 Fax: 801-582-3918 _______: _____________________________ _____________________________ _____________________________ Fax: _____________ The designation of such person and/or address may be changed at any time by either Party upon receipt by the other of written notice. Such a notice served by mail shall be effective upon receipt. Notice transmitted by facsimile shall be effective upon receipt if received prior to 5:00 p.m. on a Working Day, and if not received prior to 5:00 p.m. on a Working Day, receipt shall be effective on the next Working Day. 11. APPLICABILITY This Agreement (including all appendices hereto and, by reference, the WSCC Reliability Criteria Agreement) constitutes the entire understanding between the Parties hereto with respect to the subject matter hereof, supersedes any and all previous understandings between the Parties with respect to the subject matter hereof, and binds and inures to the benefit of the Parties and their successors. 12. AMENDMENT No amendment of all or any part of this Agreement shall be valid unless it is reduced to writing and signed by both Parties hereto. The terms and conditions herein specified shall remain in effect throughout the term and shall not be subject to change through application to FERC or other governmental body or authority, absent the agreement of the Parties. -11- 13. INTERPRETATION Article and section headings are for convenience only and shall not affect the interpretation of this Agreement. References to articles, sections and appendices are, unless the context otherwise requires, references to articles, sections and appendices of this Agreement. 14. ASSIGNMENT This Agreement may not be assigned by either Party, except that the Transmission Operator, upon notice to the WSCC and subject to any necessary FERC approval, may assign: (i) this Agreement to any entity acquiring all or substantially all of the Transmission Operator's transmission assets (including an acquisition by merger or consolidation and whether to an affiliate or an unaffiliated party); (ii) the obligations of the Transmission Operator pursuant to this Agreement to a transferee with respect to any obligations assumed by the transferee by virtue of Section 5.5 of this Agreement; or (iii) to an independent system operator those obligations of the Transmission Operator pursuant to this Agreement which are assumed by the independent system operator. 15. COUNTERPARTS This Agreement may be executed in counterparts and each shall have the same force and effect as an original. -12- IN WITNESS WHEREOF, the WSCC and the Transmission Operator have each caused this Reliability Management System Agreement to be executed by their respective duly authorized officers as of the date first above written. WESTERN SYSTEMS COORDINATING COUNCIL By: _________________________________ Name: Title: ______________________________________________________ By: _________________________________ Name: Title: -13- APPENDIX A EXISTING INTERCONNECTION AGREEMENT AMENDMENT AND LANGUAGE FOR INCLUSION IN NEW INTERCONNECTION AGREEMENTS 1. Definitions: Add the following definitions to Section __: _.__ Member: Any party to the WSCC Agreement. _.__ Reliability Management System or RMS: The contractual reliability management program implemented through the WSCC Reliability Criteria Agreement, Section 2 of this Agreement, and any similar contractual arrangement. _.__ Western Interconnection: The area comprising those states and provinces, or portions thereof, in Western Canada, Northern Mexico and the Western United States in which Members of the WSCC operate synchronously connected transmission systems. _.__ WSCC: The Western Systems Coordinating Council or any successor entity. _.__ WSCC Agreement: The Western Systems Coordinating Council Agreement dated March 20, 1967, as such may be amended from time to time. _.__ WSCC Reliability Criteria Agreement: The Western Systems Coordinating Council Reliability Criteria Agreement dated ___________, 1999 among the WSCC and certain of its member transmission operators, as such may be amended from time to time. _.__ WSCC Staff: Those employees of the WSCC, including personnel hired by the WSCC on a contract basis, designated as responsible for the administration of the RMS. 2. Add new Section [2] to agreement: A-1 2 Reliability Management System 2.1 Purpose: In order to maintain the reliable operation of the transmission grid, the WSCC Reliability Criteria Agreement sets forth reliability criteria adopted by the WSCC to which [Generator] and [Transmission Operator] shall be required to comply. 2.2 Compliance: [Generator] shall comply with the requirements of the WSCC Reliability Criteria Agreement, including the applicable WSCC reliability criteria set forth in Section IV of Annex A thereof, and, in the event of failure to comply, agrees to be subject to the sanctions applicable to such failure. Such sanctions shall be assessed pursuant to the procedures contained in the WSCC Reliability Criteria Agreement. Each and all of the provisions of the WSCC Reliability Criteria Agreement are hereby incorporated by reference into this Section 2 as though set forth fully herein, and [Generator] shall for all purposes be considered a Participant, and shall be entitled to all of the rights and privileges and be subject to all of the obligations of a Participant, under and in connection with the WSCC Reliability Criteria Agreement, including but not limited to the rights, privileges and obligations set forth in Sections 5, 6 and 10 of the WSCC Reliability Criteria Agreement. 2.3 Payment of Sanctions: [Generator] shall be responsible for payment of any monetary sanction assessed against [Generator] by WSCC pursuant to the WSCC Reliability Criteria Agreement. Any such payment shall be made pursuant to the procedures specified in the WSCC Reliability Criteria Agreement. 2.4 Transfer of Control or Sale of Generation Facilities. In any sale or transfer of control of any generation facilities subject to this Agreement, [Generator] shall as a condition of such sale or transfer require the acquiring party or transferee with respect to the transferred facilities either to assume the obligations of the [Generator] with respect to this Agreement or to enter into an agreement with the Transmission Operator imposing on the acquiring party or transferee the same obligations applicable to [Generator] pursuant to this Section 2. 2.5 Publication: The [Generator] consents to the release by the WSCC of information related to the [Generator]'s compliance with this Agreement only in accordance with the WSCC Reliability Criteria Agreement.. 2.6 Third Parties. Except for the rights and obligations between the WSCC and [Generator] specified in this Section 2, this Agreement creates contractual rights and obligations solely between the Parties. Nothing in this Agreement shall create, as between the Parties or with respect to the WSCC: (1) any obligation or liability whatsoever (other than as expressly provided in this Agreement), or (2) any duty or standard of care whatsoever. In addition, nothing in this Agreement shall create any duty, liability, or standard of care whatsoever as to A-2 any other party. Except for the rights, as a third-party beneficiary under this Section 2, of the WSCC against [Generator], no third party shall have any rights whatsoever with respect to enforcement of any provision of this Agreement. [Transmission Operator] and [Generator] expressly intend that the WSCC is a third-party beneficiary to this Section 2, and the WSCC shall have the right to seek to enforce against [Generator] any provision of this Section 2, provided -------- that specific performance shall be the sole remedy available to the WSCC - ---- pursuant to Section 2 of this Agreement, and [Generator] shall not be liable to the WSCC pursuant to this Agreement for damages of any kind whatsoever (other than the payment of sanctions to the WSCC, if so construed), whether direct, compensatory, special, indirect, consequential, or punitive. 2.7 Reserved Rights. Nothing in the RMS or the WSCC Reliability Criteria Agreement shall affect the right of the Transmission Operator, subject to any necessary regulatory approval, to take such other measures to maintain reliability, including disconnection, which the Transmission Operator may otherwise be entitled to take. 2.8 Severability. If one or more provisions of this Section 2 shall be invalid, illegal or unenforceable in any respect, it shall be given effect to the extent permitted by applicable law, and such invalidity, illegality or unenforceability shall not affect the validity of the other provisions of this Agreement. 2.9 Termination. The [Generator] may terminate its obligations pursuant to this Section 2: (a) if after the effective date of this Section 2, the requirements of the WSCC Reliability Criteria Agreement applicable to [Generator] are amended so as to adversely affect the [Generator], provided that ------------- [Generator] gives fifteen (15) days' notice of such termination to the Transmission Operator and the WSCC within forty-five (45) days of the date of issuance of a FERC order accepting such amendment for filing, provided further that the forty-five (45) day period within which notice of termination is required may be extended by the [Generator] for an additional forty-five (45) days if the [Generator] gives written notice to the Transmission Operator of such requested extension within the initial forty-five (45) day period; or (b) for any reason on one year's written notice to the Transmission Operator and the WSCC. 2.10 Mutual Agreement. This Section 2 may be terminated at any time by mutual agreement of the Transmission Operator and [Generator]. A-3 APPENDIX B MODEL STAND-ALONE GENERATOR AGREEMENT [Contract to be entered into between the Transmission Operator and a Generator] RELIABILITY MANAGEMENT SYSTEM AGREEMENT by and between [TRANSMISSION OPERATOR] and [GENERATOR] THIS RELIABILITY MANAGEMENT SYSTEM AGREEMENT (the "Agreement"), is entered into this ____ day of _____________, 1999, by and between ________________________ (the "Transmission Operator") and ________________________ (the "Generator"). WHEREAS, there is a need to maintain the reliability of the interconnected electric systems encompassed by the WSCC in a restructured and competitive electric utility industry; WHEREAS, with the transition of the electric industry to a more competitive structure, it is desirable to have a uniform set of electric system operating rules within the Western Interconnection, applicable in a fair, comparable and non-discriminatory manner, with which all market participants comply; and B-1 WHEREAS, the members of the WSCC, including the Transmission Operator, have determined that a contractual Reliability Management System provides a reasonable, currently available means of maintaining such reliability. NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Transmission Operator and the Generator agree as follows: 1. PURPOSE OF AGREEMENT The purpose of this Agreement is to maintain the reliable operation of the Western Interconnection through the Generator's commitment to comply with certain reliability standards. 2. DEFINITIONS In addition to terms defined in the beginning of this Agreement and in the Recitals hereto, for purposes of this Agreement the following terms shall have the meanings set forth beside them below. Control Area means an electric system or systems, bounded by interconnection metering and telemetry, capable of controlling generation to maintain its interchange schedule with other Control Areas and contributing to frequency regulation of the Western Interconnection. FERC means the Federal Energy Regulatory Commission or a successor agency. Member means any party to the WSCC Agreement. Party means either the Generator or the Transmission Operator and Parties means both of the Generator and the Transmission Operator. Reliability Management System or RMS means the contractual reliability management program implemented through the WSCC Reliability Criteria Agreement, the WSCC RMS Agreement, this Agreement, and any similar contractual arrangement. Western Interconnection means the area comprising those states and provinces, or portions thereof, in Western Canada, Northern Mexico and the Western United States in which Members of the WSCC operate synchronously connected transmission systems. B-2 Working Day means Monday through Friday except for recognized legal holidays in the state in which any notice is received pursuant to Section 8. WSCC means the Western Systems Coordinating Council or a successor entity. WSCC Agreement means the Western Systems Coordinating Council Agreement dated March 20, 1967, as such may be amended from time to time. WSCC Reliability Criteria Agreement means the Western Systems Coordinating Council Reliability Criteria Agreement dated ___________, 1999 among the WSCC and certain of its member transmission operators, as such may be amended from time to time. WSCC RMS Agreement means an agreement between the WSCC and the Transmission Operator requiring the Transmission Operator to comply with the reliability criteria contained in the WSCC Reliability Criteria Agreement. WSCC Staff means those employees of the WSCC, including personnel hired by the WSCC on a contract basis, designated as responsible for the administration of the RMS. 3. TERM AND TERMINATION 3.1 Term. This Agreement shall become effective [thirty (30) days after the date of issuance of a final FERC order accepting this Agreement for filing without requiring any changes to this Agreement unacceptable to either Party. Required changes to this Agreement shall be deemed unacceptable to a Party only if that Party provides notice to the other Party within fifteen (15) days of issuance of the applicable FERC order that such order is unacceptable]. [Note: if the interconnection agreement is not FERC jurisdictional, replace bracketed language with: [on the later of: (a) the date of execution; or (b) the effective date of the WSCC RMS Agreement.]] 3.2 Notice of Termination of WSCC RMS Agreement. The Transmission Operator shall give the Generator notice of any notice of termination of the WSCC RMS Agreement by the WSCC or by the Transmission Operator within fifteen (15) days of receipt by the WSCC or the Transmission Operator of such notice of termination. 3.3 Termination by the Generator. The Generator may terminate this Agreement as follows: B-3 (a) following the termination of the WSCC RMS Agreement for any reason by the WSCC or by the Transmission Operator, provided such notice is provided within forty-five (45) days of the termination of the WSCC RMS Agreement; (b) following the effective date of an amendment to the requirements of the WSCC Reliability Criteria Agreement that adversely affects the Generator, provided notice of such termination is given within forty-five (45) days of the date of issuance of a FERC order accepting such amendment for filing, provided further that the forty-five (45) day period within which notice of termination is required may be extended by the Generator for an additional forty-five (45) days if the Generator gives written notice to the Transmission Operator of such requested extension within the initial forty-five (45) day period; or (c) for any reason on one year's written notice to the Transmission Operator and the WSCC. 3.4 Termination by the Transmission Operator. The Transmission Operator may terminate this Agreement on thirty (30) days' written notice following the termination of the WSCC RMS Agreement for any reason by the WSCC or by the Transmission Operator, provided such notice is provided within thirty (30) days of the termination of the WSCC RMS Agreement. 3.5 Mutual Agreement. This Agreement may be terminated at any time by the mutual agreement of the Transmission Operator and the Generator. 4. COMPLIANCE WITH AND AMENDMENT OF WSCC RELIABILITY CRITERIA 4.1 Compliance with Reliability Criteria. The Generator agrees to comply with the requirements of the WSCC Reliability Criteria Agreement, including the applicable WSCC reliability criteria contained in Section IV of Annex A thereof, and, in the event of failure to comply, agrees to be subject to the sanctions applicable to such failure. Each and all of the provisions of the WSCC Reliability Criteria Agreement are hereby incorporated by reference into this Agreement as though set forth fully herein, and the Generator shall for all purposes be considered a Participant, and shall be entitled to all of the rights and privileges and be subject to all of the obligations of a Participant, under and in connection with the WSCC Reliability Criteria Agreement, including but not limited to the rights, privileges and obligations set forth in Sections 5, 6 and 10 of the WSCC Reliability Criteria Agreement. B-4 4.2 Modifications to WSCC Reliability Criteria Agreement. The Transmission Operator shall notify the Generator within fifteen (15) days of the receipt of notice from the WSCC of the initiation of any WSCC process to modify the WSCC Reliability Criteria Agreement. The WSCC RMS Agreement specifies that such process shall comply with the procedures, rules, and regulations then applicable to the WSCC for modifications to reliability criteria. 4.3 Notice of Modifications to WSCC Reliability Criteria Agreement. If, following the process specified in Section 4.2, any modification to the WSCC Reliability Criteria Agreement is to take effect, the Transmission Operator shall provide notice to the Generator at least forty-five (45) days before such modification is scheduled to take effect. 4.4 Effective Date. Any modification to the WSCC Reliability Criteria Agreement shall take effect on the date specified by FERC in an order accepting such modification for filing. 4.5 Transfer of Control or Sale of Generation Facilities. In any sale or transfer of control of any generation facilities subject to this Agreement, the Generator shall as a condition of such sale or transfer require the acquiring party or transferee with respect to the transferred facilities either to assume the obligations of the Generator with respect to this Agreement or to enter into an agreement with the Control Area Operator in substantially the form of this Agreement. 5. SANCTIONS 5.1 Payment of Monetary Sanctions. The Generator shall be responsible for payment directly to the WSCC of any monetary sanction assessed against the Generator pursuant to this Agreement and the WSCC Reliability Criteria Agreement. Any such payment shall be made pursuant to the procedures specified in the WSCC Reliability Criteria Agreement. 5.2 Publication. The Generator consents to the release by the WSCC of information related to the Generator's compliance with this Agreement only in accordance with the WSCC Reliability Criteria Agreement. 5.3 Reserved Rights. Nothing in the RMS or the WSCC Reliability Criteria Agreement shall affect the right of the Transmission Operator, subject to any necessary regulatory approval, to take such other measures to maintain reliability, including disconnection, which the Transmission Operator may otherwise be entitled to take. B-5 6. THIRD PARTIES Except for the rights and obligations between the WSCC and Generator specified in Sections 4 and 5, this Agreement creates contractual rights and obligations solely between the Parties. Nothing in this Agreement shall create, as between the Parties or with respect to the WSCC: (1) any obligation or liability whatsoever (other than as expressly provided in this Agreement), or (2) any duty or standard of care whatsoever. In addition, nothing in this Agreement shall create any duty, liability, or standard of care whatsoever as to any other party. Except for the rights, as a third-party beneficiary with respect to Sections 4 and 5, of the WSCC against Generator, no third party shall have any rights whatsoever with respect to enforcement of any provision of this Agreement. Transmission Operator and Generator expressly intend that the WSCC is a third-party beneficiary to this Agreement, and the WSCC shall have the right to seek to enforce against Generator any provisions of Sections 4 and 5, provided that specific performance shall be the sole remedy available to the - ------------- WSCC pursuant to this Agreement, and Generator shall not be liable to the WSCC pursuant to this Agreement for damages of any kind whatsoever (other than the payment of sanctions to the WSCC, if so construed), whether direct, compensatory, special, indirect, consequential, or punitive. 7. REGULATORY APPROVALS This Agreement shall be filed with FERC by the Transmission Operator under Section 205 of the Federal Power Act. In such filing, the Transmission Operator shall request that FERC accept this Agreement for filing without modification to become effective on the day after the date of a FERC order accepting this Agreement for filing. [This section shall be omitted for agreements not subject to FERC jurisdiction.] B-6 8. NOTICES Any notice, demand or request required or authorized by this Agreement to be given in writing to a Party shall be delivered by hand, courier or overnight delivery service, mailed by certified mail (return receipt requested) postage prepaid, faxed, or delivered by mutually agreed electronic means to such Party at the following address: _______: _____________________________ _____________________________ _____________________________ _____________________________ Fax: ____________ _______: _____________________________ _____________________________ _____________________________ _____________________________ Fax: ____________ The designation of such person and/or address may be changed at any time by either Party upon receipt by the other of written notice. Such a notice served by mail shall be effective upon receipt. Notice transmitted by facsimile shall be effective upon receipt if received prior to 5:00 p.m. on a Working Day, and if not received prior to 5:00 p.m. on a Working Day, receipt shall be effective on the next Working Day. 9. APPLICABILITY This Agreement (including all appendices hereto and, by reference, the WSCC Reliability Criteria Agreement) constitutes the entire understanding between the Parties hereto with respect to the subject matter hereof, supersedes any and all previous understandings between the Parties with respect to the subject matter hereof, and binds and inures to the benefit of the Parties and their successors. 10. AMENDMENT No amendment of all or any part of this Agreement shall be valid unless it is reduced to writing and signed by both Parties hereto. The terms and conditions herein specified shall remain in effect throughout the term and shall not be subject B-7 to change through application to the FERC or other governmental body or authority, absent the agreement of the Parties. 11. INTERPRETATION Interpretation and performance of this Agreement shall be in accordance with, and shall be controlled by, the laws of the State of ______________ but without giving effect to the provisions thereof relating to conflicts of law. Article and section headings are for convenience only and shall not affect the interpretation of this Agreement. References to articles, sections and appendices are, unless the context otherwise requires, references to articles, sections and appendices of this Agreement. 12. PROHIBITION ON ASSIGNMENT This Agreement may not be assigned by either Party without the consent of the other Party, which consent shall not be unreasonably withheld; provided that the Generator may without the consent of the WSCC assign the obligations of the Generator pursuant to this Agreement to a transferee with respect to any obligations assumed by the transferee by virtue of Section 4.5 of this Agreement. 13. SEVERABILITY If one or more provisions herein shall be invalid, illegal or unenforceable in any respect, it shall be given effect to the extent permitted by applicable law, and such invalidity, illegality or unenforceability shall not affect the validity of the other provisions of this Agreement. 14. COUNTERPARTS This Agreement may be executed in counterparts and each shall have the same force and effect as an original. B-8 IN WITNESS WHEREOF, the Transmission Operator and the Generator have each caused this Reliability Management System Agreement to be executed by their respective duly authorized officers as of the date first above written. ____________________________________________ By: _____________________________ Name: Title: ____________________________________________ By: _____________________________ Name: Title: B-9 EX-10.V 31 0031.txt ASSET SALE AGREEMENT, NRG ENERGY Exhibit 10(V) - -------------------------------------------------------------------------------- ASSET SALE AGREEMENT BETWEEN SIERRA PACIFIC POWER COMPANY AND NRG ENERGY, INC. October 16, 2000 ASSET BUNDLE: NORTH VALMY - -------------------------------------------------------------------------------- ASSET SALE AGREEMENT ASSET SALE AGREEMENT, dated as of October 16, 2000 (the "Agreement"), between Sierra Pacific Power Company, a Nevada Corporation (the "Seller"), and NRG Energy, Inc., a Delaware corporation (the "Buyer"). WHEREAS, the Seller owns and operates the "Purchased Assets" (as defined herein); and WHEREAS, the Buyer desires to purchase and assume from the Seller, and the Seller desires to sell to the Buyer, the Purchased Assets and certain associated liabilities upon the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS ----------- 1.1 Definitions. As used in this Agreement, the following terms have ----------- the meanings specified or referred to in this Section 1.1: (1) "Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (2) "Adjustment Statement" shall have the meaning set forth in Section 3.2(a) hereof. (3) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (4) "Agreement" means the Asset Sale Agreement, dated October 16, 2000, together with the Schedules and Exhibits thereto. (5) "Ancillary Agreements" means the Interconnection Agreement, the Transition Power Purchase Agreement and the Operating Easement Agreements. (6) "Assignment of Leases" means the Assignment of Leases in the form of Exhibit A hereto. (7) "Assumed Liabilities" shall have the meaning set forth in Section 2.3 hereof. (8) "Benefit Plans" shall have the meaning set forth in Section 2.4(i) hereof. (9) "Benefit Plans of Buyer" shall have the meaning set forth in Section 7.11(d) hereof. (10) "Bill of Sale" means the Bill of Sale to be delivered at the Closing with respect to the Purchased Assets which constitute personal property and which are to be transferred at the Closing, substantially in the form of Exhibit B hereto. (11) "Business Day" means any day other than Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (12) "Buyer" shall have the meaning set forth in the preface hereto. (13) "Buyer Group" shall have the meaning set forth in Section 3.5 hereof. (14) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (15) "Buyer Required Regulatory Approvals" shall have the meaning set forth in Section 6.3(b) hereof. (16) "Buyer's Easements" shall have the meaning set forth in Section 4.3(g) hereof. (17) "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.(S).9601, et seq., as amended. ------- 2 (18) "Closing" shall have the meaning set forth in Section 4.1 hereof. (19) "Closing Date" shall have the meaning set forth in Section 4.1 hereof. (20) "COBRA" means the Consolidated Omnibus Reconciliation Act of 1985, as amended. (21) "Code" means the Internal Revenue Code of 1986, as amended. (22) "Collective Bargaining Agreements" shall have the meaning set forth in Section 7.11(a) hereof. (23) "Confidentiality Agreement" means the Confidentiality and Auction Protocols Agreement, dated March 14, 2000, between the Seller and the Buyer. (24) "CPUC" means the Public Utility Commission of California or any successor thereto. (25) "CSFB" shall have the meaning set forth in Section 7.7 hereof. (26) "Direct Claim" shall have the meaning set forth in Section 9.2(c) hereof. (27) "Dispute" shall have the meaning set forth in Section 11.6 hereof. (28) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, conservation easements, deed restrictions, encumbrances and charges of any kind. (29) "Environmental Laws" means all Federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances, laws relating 3 to record keeping, notification, disclosure and reporting requirements respecting Hazardous Substances, and laws relating to the management and use of natural resources. (30) "Environmental Permits" shall have the meaning set forth in Section 5.12(a) hereof. (31) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (32) "ERISA Affiliate" shall have the meaning set forth in Section 2.4(i) hereof. (33) "ERISA Affiliate Plans" shall have the meaning set forth in Section 2.4(i) hereof. (34) "Estimated Adjustment Amount" means (i) the Estimated Maintenance and Capital Expenditures Amount plus (ii) the Estimated Inventory Adjustment Amount plus (iii) the Estimated Materials and Supplies Adjustment Amount. (35) "Estimated Inventory Adjustment Amount" means the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer, which approval shall not be unreasonably withheld, of the fuel inventory priced as the Seller's weighted average fuel costs used at or in connection with the Purchased Assets as of the date that is ten (10) days before the Closing Date, which valuation shall be provided to the Buyer by the Seller no later than five (5) days before the Closing Date. (36) "Estimated Maintenance and Capital Expenditures Amount" means the Seller's estimate of the Maintenance and Capital Expenditures Amount, which estimate shall be the Seller's good faith reasonable estimate of the Maintenance and Capital Expenditures Amount actually incurred, as set forth in Schedule 1.1(36) attached hereto as of the date set forth in such Schedule. (37) "Estimated Materials and Supplies Adjustment Amount" means the Seller's good faith reasonable estimate of the book value of materials and supplies used at or in connection with the Purchased Assets on the Materials and Supplies Valuation Date. 4 (38) "Estimated Purchase Price" shall have the meaning set forth in Section 4.2 hereof. (39) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (40) "Excluded Assets" shall have the meaning set forth in Section 2.2 hereof. (41) "Excluded Liabilities" shall have the meaning set forth in Section 2.4 hereof. (42) "Extended Price" shall have the meaning set forth in Section 3.5 hereof. (43) "Federal Power Act" means the Federal Power Act of 1935, as amended. (44) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. (45) "Final Order" shall have the meaning set forth in Section 8.1(c) hereof. (46) "Governmental Authority" means any executive, legislative, judicial, regulatory or administrative agency, body, commission, department, board, court, tribunal, arbitrating body or authority of the United States or any foreign country, or any state, local or other governmental subdivision thereof. (47) "Hazardous Substances" means (i) any petrochemical or petroleum products, oil or coal ash, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (ii) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (iii) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law. 5 (48) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (49) "Hourly Employees" shall have the meaning set forth in Section 7.11(a) hereof. (50) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (51) "Income Tax" means any federal, state, local or foreign Tax (i) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains Taxes and minimum Taxes) or (ii) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such Tax may be based, measured by or calculated with respect to, is described in clause (i), in each case together with any interest, penalties, or additions to such Tax. (52) "Indemnifiable Losses" shall have the meaning set forth in Section 9.1(a) hereof. (53) "Indemnifying Party" shall have the meaning set forth in Section 9.1(c) hereof. (54) "Indemnitee" shall have the meaning set forth in Section 9.1(c) hereof. (55) "Indenture" means Indenture of Mortgage dated as of December 1, 1940, as supplemented from time to time, between Seller and State Street Bank and Trust Company, as trustee. (56) "Independent Accounting Firm" means Deloitte & Touche LLP or such other independent accounting firm of national reputation mutually appointed by the Seller and the Buyer. (57) "Independent Appraiser" shall have the meaning set forth in Section 3.3 hereof. (58) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit C attached hereto. 6 (59) "Interconnection Agreement" means the Interconnection Agreement, dated as of October 16, 2000, between the Seller and Valmy Power LLC. (60) "Inventory Adjustment Amount" will have the meaning set forth in Section 3.2(a) hereof. (61) "IPC" means Idaho Power Company, an Idaho corporation. (62) "IPC Ownership Interest" means IPC's fifty percent (50%) undivided interest, as tenants in common with Seller, in North Valmy Units No. 1 and 2. (63) "IPC Sale Agreement" shall have the meaning set forth in Section 3.6 hereof. (64) "Joint Ownership Obligation" means the right of first refusal and the expiration of any applicable notification period as set forth in Section 10.1.6 of the Ownership Agreement for North Valmy. (65) "Knowledge" means the actual knowledge of the directors and executive officers of the specified Person, which directors and executive officers are charged with the responsibility for the particular function as of the date of the Agreement, or with respect to any certificate delivered pursuant to the Agreement, the date of delivery of such certificate. In the case of Seller, "executive officer" includes (i) any person listed on Schedule 1.1(65), (ii) any person who replaces a person listed on Schedule 1.1(65) between the date of this Agreement and the Closing Date in a listed position or the successor to that position and (iii) any current employee of Seller who within the past twenty-four (24) months has served as a representative to the operating committee for the North Valmy Station. (66) "Leased Assets" shall have the meaning set forth in Section 7.4 hereof. (67) "Leases" shall have the meaning set forth in Section 5.9 hereof. (68) "Maintenance and Capital Expenditures Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (69) "Maintenance and Capital Expenditures Amount" means the aggregate amount of all funds actually expended on, or for which liabilities were accrued in accordance with generally accepted accounting principles applied on a 7 consistent basis with respect to any maintenance expenditures and capital expenditures beginning on the date of this Agreement and ending on the Closing Date, excluding any unscheduled maintenance expenditures or capital expenditures which are made by the Seller with the Buyer's consent, which shall not be unreasonably withheld, but including (i) any Scheduled Maintenance Expenditures or Scheduled Capital Expenditures, made with respect to the Purchased Assets by the Seller, and (ii) any maintenance expenditures and capital expenditures which were made by the Seller at the Buyer's request, beginning on the date of this Agreement and ending on the Closing Date. (70) "Management Employee" shall have the meaning set forth in Section 7.11(b) hereof. (71) "Management Transition Plan" means the Management Transition Plan, Generation Bundled Employees, as detailed in the Generation Divestiture Severance Packet of the Seller dated July, 2000. (72) "Material Adverse Effect" means any change or changes in or effect on the Purchased Assets that is materially adverse to the business, results of operations, financial condition or physical condition of the Purchased Assets, individually or in the aggregate, except for (i) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power, (ii) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used at the Purchased Assets, (iii) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems, (iv) any change in applicable laws, judgments, orders or decrees, (v) any conditions imposed by a Governmental Authority in connection with the consents or approvals required for the transactions contemplated hereby, and (vi) any materially adverse change in or effect on the Purchased Assets which is cured (including by the payment of money) by the Seller before the Termination Date. (73) "Materials and Supplies Adjustment Amount" shall have the meaning set forth in Section 3.2 hereof. (74) "Materials and Supplies Valuation Date" means the date that is ten (10) days prior to the Closing Date. (75) "Necessary Capital Expenditures" shall have the meaning set forth in Section 7.1(c) hereof. 8 (76) "Necessary Maintenance Expenditures" shall have the meaning set forth in Section 7.1(e) hereof. (77) "North Valmy Bundle" means the North Valmy Station and the Winnemucca Gas Turbine, located in Humboldt County, Nevada, and the Battle Mountain Diesels, located in Lander County, Nevada. (78) "Off-Site Location" means any real property other than the Real Property. (79) "Operating Easement Agreements" means the operating easements providing the right to continue operating and maintaining certain generation and transmission facilities at the Purchased Assets, each in substantially the form of Exhibit D or Exhibit E attached hereto. (80) "Operating Easements" means the Seller's Easements and/or Buyer's Easements granted pursuant to the Operating Easement Agreements. (81) "OPUC" means the Oregon Public Utility Commission or any successor thereto. (82) "Other Transactions Date" shall have the meaning set forth in Section 3.5 hereof. (83) "Ownership Agreement" means the Agreement for the Ownership of the North Valmy Power Plant Project dated December 12, 1978 between Seller and Idaho Power Company. (84) "Permits" shall have the meaning set forth in Section 5.19 hereof. (85) "Permitted Encumbrances" means (i) those exceptions to title to the Purchased Assets listed on Schedule 5.8; (ii) subject to ss.7.14, any state of facts that a current survey of the Real Property would disclose; (iii) with respect to any date before the Closing Date, Encumbrances under the Indenture or under the pollution control bond indentures of trust listed in Schedule 5.15; (iv) mortgages, liens, pledges, charges, Encumbrances and restrictions incurred in connection with the Seller's purchase of properties and assets after the date of the Seller Balance Sheet securing all or a portion of the purchase price therefor; (v) the Buyer's Easements and the Seller's Easements (in accordance with the Operating Easement Agreement applicable to such easements and the Interconnection Agreement); (vi) statutory liens 9 for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings and with respect to which Seller pays the Taxes, assessments or other government charges under protest; (vii) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings in which Seller has posted an appropriate bond to secure payment or placed sufficient Funds in escrow pending the outcome of such dispute; (viii) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities; and (ix) such other liens, imperfections in or failure of title, charges, easements, restrictions and Encumbrances which do not materially detract, individually or in the aggregate, from the value of or materially interfere with the present use of the Purchased Assets and do not, in the aggregate, have a Material Adverse Effect. (86) "Person" means any individual, partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof. (87) "PUCN" means the Public Utilities Commission of Nevada or any successor thereto. (88) "Purchase Price" shall have the meaning set forth in Section 3.1 hereof. (89) "Purchased Assets" means, subject to the Permitted Encumbrances, all of the right, title and interest in, to and under the real and personal property, tangible or intangible, of the Seller constituting the North Valmy Station, the Winnemucca Gas Turbine, and the Battle Mountain Diesels or used principally for generation purposes in connection with such sites including, without limitation, all of the Seller's right, title and interest in the following assets: (i) the Real Property described on Schedule 1.1(89)(i) as associated with North Valmy Station, the Winnemucca Gas Turbine, and the Battle Mountain Diesels (the "North Valmy Station Real Property"); (ii) all inventories of fuels, supplies, materials and critical spares located on or in transit to the North Valmy Station Real Property on the Closing Date; (iii) the machinery, equipment, vehicles, furniture and other personal property located on or in transit to the North Valmy Station Real Property on the Closing Date, including, without limitation, the items of personal property included in Schedule 1.1(89)(iii) as being associated with North Valmy Station, Winnemucca Gas Turbine, and the Battle Mountain Diesels, and all warranties against manufacturers or vendors relating thereto, to the extent that such warranties are transferable without 10 consent or with consent obtained through Seller's commercially reasonable efforts pursuant to Section 7.6(b); (iv) the contracts, agreements and personal property leases listed on Schedule 1.1(89)(iv) as being associated with the North Valmy Station, the Winnemucca Gas Turbine, and the Battle Mountain Diesels and which are assignable without consent or with consent obtained through Seller's commercially reasonable efforts pursuant to Section 7.6(b); (v) the Permits listed on Schedule 1.1(89)(v) as being associated with the North Valmy Station, the Winnemucca Gas Turbine and the Battle Mountain Diesels, to the extent transferable without consent or with consent obtained through Seller's commercially reasonable efforts pursuant to Section 7.6(b); (vi) all books, operating records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications, procedures and similar items of the Seller relating specifically to the aforementioned assets other than books of account associated with the North Valmy Station, the Winnemucca Gas Turbine and the Battle Mountain Diesels; (vii) the SO2 Allowances identified on Schedule 1.1(89)(vii) associated with the North Valmy Station, the Winnemucca Gas Turbine and the Battle Mountain Diesels; (viii) any assets purchased or to be purchased by the Seller pursuant to Section 7.4 associated with the North Valmy Station, the Winnemucca Gas Turbine and the Battle Mountain Diesels; (ix) all computer hardware, firmware, software and associated licenses located at and used in the operation of the North Valmy Station, the Winnemucca Gas Turbine or the Battle Mountain Diesels, including but not limited to the computer assets listed on Schedule 1.1(89)(iii) but excluding non-material licenses that cannot be transferred and other intangible assets to be licensed by the Buyer pursuant to Section 2.5 of this Agreement; and (x) all water rights specifically associated with the North Valmy Station, the Winnemucca Gas Turbine and the Battle Mountain Diesels, including but not limited to the water rights listed on Schedule 1.1(89)(x). (90) "Qualifying Offer of Employment" shall have the meaning set forth in Section 7.11(b) hereof. (91) "Real Property" means each parcel of real property owned by the Seller (or to which the Seller holds an interest therein), including, but not limited to, buildings, structures and improvements located thereon, fixtures contained therein and appurtenances thereto and easements and other rights relating thereto and as more fully described on Schedule 5.8. (92) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment. 11 (93) "Remediation" means an action of any kind to address a Release of Hazardous Substance or the presence of Hazardous Substances at the Purchased Assets or an Off-Site Location, including any or all of the following activities to the extent they relate to or arise from the presence of a Hazardous Substance at the Purchased Assets or an Off-Site Location: (i) monitoring, investigation, assessment, treatment, cleanup, containment, removal, mitigation, response or restoration work; (ii) obtaining any permits, consents, approvals or authorizations of any Governmental Authority necessary to conduct any such activity; (iii) preparing and implementing any plans or studies for any such activity; (iv) obtaining a written notice from a Governmental Authority with jurisdiction over the Purchased Assets or an Off-Site Location under Environmental Laws that no material additional work is required by such Governmental Authority; (v) the use, implementation, application, installation, operation or maintenance of removal actions on the Purchased Assets or an Off- Site Location, remedial technologies applied to the surface or subsurface soils, excavation and treatment or disposal of soils at an Off-Site Location, systems for long-term treatment of surface water or ground water, engineering controls or institutional controls; and (vi) any other activities reasonably determined by a party to be necessary or appropriate or required under Environmental Laws to address the presence or Release of Hazardous Substances at the Purchased Assets or an Off-Site Location. (94) "Scheduled Capital Expenditures" means those capital expenditures included on Schedule 1.1(94). (95) "Scheduled Maintenance Expenditures" means those maintenance expenditures included on Schedule 1.1(95). (96) "SEC" means the Securities and Exchange Commission or any successor thereto. (97) "Securities Act" means the Securities Act of 1933, as amended. (98) "Seller" shall have the meaning set forth in the preface hereto. (99) "Seller Agreements" means those agreements listed on Schedule 5.17(a), the Collective Bargaining Agreements and the Management Transition Plan. (100) "Seller Balance Sheet" shall have the meaning set forth in Section 5.5 hereof. 12 (101) "Seller Required Regulatory Approvals" shall have the meaning set forth in Section 5.3(b) hereof. (102) "Seller's Easements" shall have the meaning set forth in Section 4.3(f) hereof. (103) "Seller's Ownership Interest" means Seller's fifty percent (50%) undivided interest, as tenants in common with IPC, in North Valmy Units No. 1 and 2. (104) "Separation Schedule" means the schedule to be delivered to the Buyer by the Seller by the earlier of February 14, 2001 or 30 days prior to the Closing Date, which shall delineate the Purchased Assets from the Seller's other assets and which shall be consistent with the separation schedule summary attached hereto as Exhibit F. (105) "SO2 Allowance" means an authorization by the Administrator of the USEPA under the Clean Air Act, 42 U.S.C.(SS)7401, et seq., to emit one ton of sulfur dioxide during or after a specified calendar year. (106) "Subsidiary", when used in reference to any other person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other person. (107) "Tax" means any tax, charge, fee, levy, penalty or other assessment (other than any Income Tax) imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any excise, property, sales, transfer, franchise, payroll, withholding, social security or other tax, including any interest, penalties or additions attributable thereto. (108) "Tax Return" means any return, report, information return, declaration, claim for refund or other document (including any related or supporting information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. (109) "Termination Date" shall have the meaning set forth in Section 10.1(b) hereof. (110) "Third Party Claim" shall have the meaning set forth in Section 9.2(a) hereof. 13 (111) "Transition Power Purchase Agreement" means the Transitional Power Purchase Agreement, dated as of October 16, 2000, between Valmy Power LLC, a Delaware limited liability company and the Seller. (112) "TPPA Amount" shall have the meaning set forth in Section 3.1 hereof. (113) "USEPA" means the United States Environmental Protection Agency, or any successor agency thereto. (114) "WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988, as amended. ARTICLE II ---------- PURCHASE AND SALE ----------------- 2.1 The Sale. Upon the terms and subject to the satisfaction of the -------- conditions contained in this Agreement, at the Closing, the Seller shall sell, assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, free and clear of all Encumbrances (except for Permitted Encumbrances and the Operating Easement(s) granted in accordance with the Operating Easement Agreements and the Interconnection Agreement), the Purchased Assets. 2.2 Excluded Assets. Notwithstanding any provision herein to the --------------- contrary, the Purchased Assets shall not include the following (collectively, the "Excluded Assets"): (a) all cash, cash equivalents, bank deposits, accounts receivable, and any income, sales, payroll or other tax receivables; (b) the names "Sierra Pacific Resources," "Sierra Pacific Power Company," "Sierra Pacific," "Nevada Power Company" and "Nevada Power" or any related or similar trade names, trademarks, service marks or logos; (c) transmission, substation and communication facilities and related support equipment described in Schedule 2.2(c); (d) any refund, credit penalty payment, adjustment or reconciliation (i) related to Real Property, personal property or other Taxes paid prior to the 14 Closing Date in respect of the Purchased Assets, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable, or (ii) arising under the Seller Agreements and relating to a period before the Closing Date; (e) except to the extent specifically required by law and except such personnel records set forth on Schedule 2.2(e), the personnel records relating to any employees of the Seller; (f) the rights and assets described in the Separation Schedule as not part of the Purchased Assets; (g) the SO2 Allowances identified on Schedule 2.2(g); (h) any agreement between Seller and an Affiliate of Seller, except as disclosed on Schedule 2.2(h); and (i) any agreement for the purchase or sale of energy, capacity or ancillary services from the North Valmy Station, other than the Transition Power Purchase Agreement, Interconnection Agreement or as disclosed on Schedule 2.2(i). 2.3 Assumed Liabilities. Except as provided in Section 2.3(e), Buyer ------------------- is assuming all liabilities and obligations of the Seller with respect to the Purchased Assets other than the Excluded Liabilities. On the Closing Date, the Buyer shall deliver to the Seller the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the liabilities and obligations of the Seller, direct or indirect, known or unknown, absolute or contingent, which relate to the Purchased Assets, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective conditions thereof, including, without limitation, the following liabilities and obligations: (a) all liabilities and obligations of the Seller to be paid or performed after the Closing Date arising under (i) the Seller Agreements, the Environmental Permits, the Permits, the Leases, contracts and any other agreements assigned to the Buyer pursuant to this Agreement in accordance with the terms thereof, and (ii) the leases, contracts and other agreements entered into by the Seller with respect to the Purchased Assets after the date hereof consistent with the terms of this Agreement (including in the case of (i) and (ii), without limitation, agreements with respect to liabilities for real or personal property taxes or other Taxes on any of the Purchased Assets); except, in each case, to the extent such liabilities and obligations, but for a 15 breach or default by the Seller, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default; (b) all liabilities and obligations associated with the Purchased Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.9 hereof; (c) any liabilities and obligations for which the Buyer has indemnified the Seller pursuant to Section 9.1 hereof; (d) all liabilities to employees for which the Buyer is liable pursuant to Section 7.11 hereof, including the Collective Bargaining Agreements and the Management Transition Plan; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets, including, without limitation, any fines or penalties that arise in connection with the ownership or operation of the Purchased Assets prior to the Closing Date or the costs associated with correcting any such violations; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets prior to the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at the Purchased Assets; and (iii) the investigation and/or Remediation (whether or not such investigation or Remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to the Closing Date at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at the Purchased Assets; provided, as to all of the above, -------- that nothing set forth in this Section 2.3(e) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; 16 (f) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or operation of the Purchased Assets; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets on or after the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at the Purchased Assets; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets; (v) the investigation and/or Remediation of Hazardous Substances that are present or have been released on or after the Closing Date at, on, in, under, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at the Purchased Assets; and (vi) the investigation and/or Remediation of Hazardous Substances that are disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets, at any Off-Site Location; provided, that -------- nothing set forth in this Section 2.3(f) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (g) all liabilities and obligations of the Seller with respect to the Purchased Assets under the agreements or consent orders set forth on Schedule 5.12; (h) subject to Sections 7.1(c) and (e), all liabilities incurred by the Seller with respect to the Maintenance and Capital Expenditures Amount made with respect to the Purchased Assets by the Seller except for any liabilities that Buyer has already paid to Seller at Closing as an accrued liability included in the Estimated Adjustment Amount; 17 (i) all liabilities or obligations relating to leases for the Purchased Assets; and (j) all other liabilities or obligations exclusively relating to the Purchased Assets no matter when the events or occurrences giving rise to such liabilities or obligations took place. All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are collectively referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between the Seller and the Buyer. Nothing in this Section 2.3 shall be construed to require Buyer to assume any liability excluded by Section 2.4. 2.4 Excluded Liabilities. The Buyer shall not assume or be obligated -------------------- to pay, perform or otherwise discharge the following liabilities (collectively, the "Excluded Liabilities"): (a) any liabilities or obligations of the Seller in respect of any Excluded Assets or other assets of the Seller which are not Purchased Assets; (b) any liabilities or obligations in respect of Taxes attributable to the Purchased Assets for taxable periods ending on or prior to the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.9(a) hereof; (c) any liabilities, obligations or responsibilities relating to the disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, by the Seller, of Hazardous Substances that were generated at the Purchased Assets, at any Off-Site Location, where the disposal, storage, transportation, discharge, Release, recycling or the arrangement for such activities at such Off-Site Location occurred prior to the Closing Date, provided that for purposes of this Section 2.4(c), "Off-Site -------- Location" does not include any location to which Hazardous Substances disposed of, discharged from, emitted from or Released at the Purchased Assets have migrated from the Purchased Assets including, but not limited to, surface waters that have received waste water discharges from the Purchased Assets; (d) any liabilities, obligations or responsibilities relating to (i) the transmission facilities delineated in the Interconnection Agreement or Operating Easement Agreement or (ii) any Seller's operations on, or usage of, the operating easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (A) any violation or alleged violation of 18 Environmental Laws and (B) loss of life, injury to persons or property or damage to natural resources, except to the extent caused by the Buyer; (e) any liabilities or obligations required to be accrued by the Seller in accordance with generally accepted accounting principles and the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities related to the Purchased Assets other than any liability assumed by the Buyer under Sections 2.3(a), (e) or (f) hereof; (f) any liabilities or obligations relating to any personal injury to an employee or a third party (including, without limitation, workers' compensation claims), discrimination, wrongful discharge, unfair labor practice, property damage, breach of contract or tort filed with or pending before any court or administrative agency on the Closing Date, or any threatened claim of which Seller has Knowledge, as of the Closing Date, that it is reasonably foreseeable that such claim will be filed with any court or administrative agency and that arise out of actual events which occurred prior to the Closing Date, with respect to liabilities affecting the Purchased Assets, other than any liabilities or obligations assumed by the Buyer under Section 2.3(e) hereof; (g) any payment obligations of the Seller for goods delivered or services rendered prior to the Closing; (h) any liabilities or obligations imposed upon, assumed or retained by the Seller pursuant to the Interconnection Agreement, Operating Easement Agreement or any other Ancillary Agreement; (i) any liabilities, obligations or responsibilities relating to any "employee pension benefit plan" (as defined in Section 3(2) of ERISA) maintained by the Seller and any trade or business (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with the Seller under Sections 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") or to which the Seller and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by the Seller or any ERISA Affiliate (hereinafter referred to as "Benefit Plans"), including any liability (i) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (ii) with respect to non-compliance with the notice and benefit continuation requirements of COBRA; (iii) with respect to any non-compliance with ERISA or any other applicable laws; or (iv) with respect to any suit, proceeding or claim which is brought 19 against any Benefit Plan, ERISA Affiliate Plan, any fiduciary or former fiduciary of any such Benefit Plan or ERISA Affiliate Plan; (j) liabilities or obligations under Section 2.3(e) that are the subject of a claim filed with or pending before any court or administrative agency on or before October 16, 2000, to the extent that any such claim is not disclosed on Schedule 5.18; (k) liabilities arising under any material intercompany agreement between Seller and an Affiliate of Seller that is not disclosed on a Schedule to this Agreement; (l) liabilities arising under any agreement for the purchase or sale of energy, capacity or ancillary services from the Purchased Assets, other than the Transition Power Purchase Agreement, the Interconnection Agreement or as disclosed on a Schedule to this Agreement; (m) any accrued liability included in the Estimated Adjustment Amount for which Seller is paid at Closing; (n) any liabilities paid or incurred in connection with obtaining consents to assignment of Seller Agreements; (o) any liabilities for borrowed money or guarantees of third party obligations, except purchase money security interests; (p) liabilities with respect to the pollution control Bonds listed on Schedule 5.15, except for the obligations arising out of the covenants of Buyer set forth in Section 7.8; (q) liabilities with respect to any accrued payment obligations incurred by Seller prior to the Closing Date; and (r) any liability for which Seller is entitled to payment under any applicable insurance policy, to the extent of such payment. 2.5 License of Non-Transferred Intangible Assets. It is understood by -------------------------------------------- the parties that trade names of Seller are Excluded Assets, however, such names appear on certain of the Purchased Assets, such as certain fixtures and equipment, and on supplies, materials and similar consumable items that will be on hand at the Purchased Assets at Closing. Notwithstanding that such trade names are Excluded 20 Assets, Buyer shall be entitled to use such consumable items for a period of three (3) months following the Closing and shall have up to six (6) months following the Closing to remove such names from fixed Purchased Assets, provided -------- that Buyer shall not send correspondence or other materials to third parties on any stationery that contains a trade name or trademark of Seller or any Affiliate of Seller. Seller hereby grants to Buyer a license to use, solely in connection with the operation of the North Valmy Station on and after Closing, such proprietary computer software of Seller located at the North Valmy Station as is presently used at the North Valmy Station exclusively in connection with the operation of the North Valmy Station and that would otherwise be an Excluded Asset, except for such computer software that is designed to be part of a networked computer system providing data processing capabilities or services beyond the North Valmy Station and any licenses which are not transferable and provided that in no event shall Buyer or any successor have access under such - -------- license to Seller's own computer networks. The rights and obligations relating to the licenses contained in this Section 2.5 will be made the subject of a separate software and trademark licensing agreement between the parties which shall address the terms and conditions affecting the irrevocable, fully paid up, royalty-free, transferable, non-exclusive rights and licenses granted therein, in which case the parties shall negotiate such terms and conditions in good faith and deliver such agreement at Closing. ARTICLE III ----------- PURCHASE PRICE -------------- 3.1 Purchase Price. The purchase price for the Purchased Assets shall -------------- be an amount equal to the sum of (i) $295,282,000, (ii) the Adjustment Amount and (iii) any amounts paid by the Seller with respect to Leased Assets pursuant to Section 7.4 hereof (the "Purchase Price"). Notwithstanding any other provision of this Agreement, the Purchase Price includes all applicable sales and similar taxes. The amount to be paid by Seller to Buyer for the Transition Power Purchase Agreement being entered into by Buyer and Seller hereunder shall be Twenty-two million dollars ($22,000,000) (the "TPPA Amount"). 3.2 Purchase Price Adjustment. (a) Within sixty (60) days after the ------------------------- Closing, the Seller shall prepare and deliver to the Buyer a statement (the "Adjustment Statement") which reflects (i) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of all fuel inventory used at or in connection with the Purchased Assets and (B) the Estimated Inventory Adjustment Amount (such difference is referred to as the "Inventory Adjustment Amount"), (ii) the difference 21 between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of the materials and supplies used at or in connection with the Purchased Assets and (B) the Estimated Materials and Supplies Adjustment Amount (such difference is referred to as the "Materials and Supplies Adjustment Amount") and (iii) the difference between (A) the Maintenance and Capital Expenditures Amount and (B) the Estimated Maintenance and Capital Expenditures Amount (such difference is referred to as the "Maintenance and Capital Expenditures Adjustment Amount"). The Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount and the Maintenance and Capital Expenditures Adjustment Amount are referred to collectively as the "Adjustment Amount." The Adjustment Statement shall be prepared using the same generally accepted accounting principles, policies and methods as the Seller has historically used in connection with the calculation of the items reflected on the Adjustment Statement. The Buyer agrees to cooperate with the Seller in connection with the preparation of the Adjustment Statement and related information, and shall provide to the Seller such books, records and information as may be reasonably requested from time to time. (b) The Buyer may dispute the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount; provided, however, that the Buyer shall notify the Seller -------- ------- in writing of the disputed amount, and the basis of such dispute, within ten (10) Business Days of the Buyer's receipt of the Adjustment Statement. In the event of a dispute with respect to the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount, the Buyer and the Seller shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the Buyer and the Seller are unable to reach a resolution of such differences within thirty (30) days of receipt of the Buyer's written notice of dispute to the Seller, the Buyer and the Seller shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the parties, within thirty (30) days after such submission, upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. The fees and disbursements of the Independent Accounting Firm shall be allocated between the Buyer and the Seller so that the Buyer's share of such fees and disbursements shall be in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully disputed by the Buyer (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm. 22 (c) Within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Buyer shall pay all undisputed portions of the Adjustment Amount. If there is a dispute with respect to any amount on the Adjustment Statement, within five (5) Business Days after the final determination of such disputed amounts on the Adjustment Statement, the Buyer shall pay to the Seller an amount equal to the disputed portion of the Adjustment Amount as finally determined to be payable with respect to the Adjustment Statement; provided, however, that if such amount shall be less than -------- ------- zero, then the Seller shall pay to the Buyer the amount by which such amount is less than zero within five (5) Business Days of such final determination. All payments made pursuant to this Section 3.2(c) shall be paid, together with interest thereon for the period commencing on the Closing Date through the date of payment, calculated at the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in cash by federal or other wire transfer of immediately available funds. 3.3 Allocation of Purchase Price. The Buyer and the Seller shall use ---------------------------- their good faith best efforts to agree upon an allocation among the Purchased Assets of the sum of the Purchase Price consistent with Section 1060 of the Code and the Treasury Regulations thereunder within one-hundred twenty (120) days of the date of this Agreement but in no event less than thirty (30) days prior to the Closing. The Buyer and the Seller may jointly agree to obtain the services of an Independent Appraiser (the "Independent Appraiser") to assist the parties in determining fair value of the Purchased Assets for purposes of such allocation. If such an appraisal is made, both the Buyer and the Seller agree to accept the Independent Appraiser's determination of the fair value of the Purchased Assets. The parties shall jointly select the Independent Appraiser. The cost of the appraisal shall be borne equally by the Buyer and the Seller. Each of the Buyer and the Seller agrees to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns, in accordance with such agreed allocation. Each of the Buyer and the Seller shall report the transactions contemplated by this Agreement for federal Income Tax and all other tax purposes in a manner consistent with the allocation determined pursuant to this Section 3.3. Each of the Buyer and the Seller agrees to provide the other promptly with any other information required to complete Form 8594. Each of the Buyer and the Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. 3.4 Proration. (a) The Buyer and the Seller agree that all of the --------- items normally prorated, including those listed below, relating to the business and operation of the Purchased Assets shall be prorated as of the Closing Date, with the 23 Seller liable to the extent such items relate to any time period through the Closing Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date: (i) personal property, real estate, occupancy and any other Taxes, assessments and other charges, if any, on or with respect to the business and operation of the Purchased Assets. In addition, in the event that the Seller is subject to Taxes, assessments and other charges on property of which the Purchased Assets comprises only a portion, the portion of such Taxes, assessments and other charges allocated to the Purchased Assets and subject to proration by this Section 3.4 shall be determined by reference to the relative value of the Purchased Assets, as determined by the Purchase Price paid by the Buyer, compared with the value of the Seller's property subject to such Taxes, assessments and other charges, as assessed by the relevant taxing authority; (ii) rent, Taxes and other items payable by or to the Seller under any of the Seller Agreements to be assigned to and assumed by the Buyer hereunder; (iii) any permit, license or registration fees with respect to any Environmental Permit or other Permit; and (iv) sewer rents and charges for water, telephone, electricity and other utilities. (b) In connection with such proration, in the event that actual figures are not available at the Closing Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either the Seller or the Buyer made within sixty (60) days of the date that the actual amounts become available. The Seller and the Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 3.4. 3.5 Adjustments For Other Transactions. In the event that, prior ---------------------------------- to the third anniversary of the Closing Date (the "Other Transactions Date"), the Buyer, or any Affiliate of Buyer or any group of which Buyer or an Affiliate of Buyer is a member, or any successor or assign of the foregoing ("Buyer Group") enters into an agreement or consummates a transaction to acquire, directly or indirectly, any or all 24 of IPC's Ownership Interest and related assets from IPC, or any Affiliate or successor or assign thereof, at an Extended Price therefor that exceeds the Purchase Price that was paid, or that would be payable to Seller under this Agreement had the Closing occurred simultaneously with the consummation of the Buyer Group's transaction for any or all of IPC's Ownership Interest, then the Purchase Price shall be increased by the amount of such excess. The term "Extended Price" shall mean the amount derived by the following formula: Extended Price = C/OP X .50 Where: C = The aggregate value of all consideration directly or indirectly paid or payable by the purchaser to the seller (including all contingent payments at the maximum potential value thereof) for the assets sold, assigned, transferred or conveyed in such transaction, including cash, notes, securities, property, rights, and other things of value, plus the aggregate value of liabilities assumed by the purchaser in such transaction which are Excluded Liabilities hereunder, minus the aggregate value of liabilities not assumed by the purchaser in such transaction which are Assumed Liabilities hereunder, without giving effect to any consideration paid or received relating to power purchase or power sale agreements. OP = The portion of IPC's Ownership Interest acquired in such transaction expressed as a percentage of the sum of Seller's Ownership Interest and IPC's Ownership Interest the maximum such percentage being fifty percent (.50). Any adjustment of the Purchase Price under the foregoing provisions that occurs simultaneously with or prior to the Closing shall (subject to the occurrence of the Closing) be paid to Seller by wire transfer of funds at the Closing in accordance with the payment provisions hereof. Any adjustment of the Purchase Price under the foregoing provisions that occurs after the Closing shall be paid to Seller by wire transfer of funds upon consummation of the Buyer Group's transaction for any or all of IPC's Ownership Interest. In the event that any member of the Buyer Group gives any consideration to IPC, or any Affiliate or successor or assign thereof, pursuant to Section 3.6(e), such consideration shall not be considered to be part of the aggregate value of consideration, C, as defined above, and shall not be part of the calculation of the Extended Price. 25 3.6 Buyer Group Transaction With IPC. Until the Other -------------------------------- Transactions Date, Buyer agrees that it will not, and it will cause each member of the Buyer Group not to, directly or indirectly enter into any agreement, or otherwise consummate a transaction, with IPC, or any Affiliate or successor or assign thereof, to acquire, directly or indirectly, any or all of IPC's Ownership Interest and related assets (an "IPC Sale Agreement"), unless no later than the earlier of the execution of such agreement or consummation of such transaction, IPC and its successors and assigns shall have irrevocably and unconditionally: (a) Waived in writing any and all rights or privileges which such Person may have (whether such rights or privileges arise under Section 10.1.6 of the Ownership Agreement or otherwise) to exercise any consent, approval or similar right, or to enforce any notice or waiting period, in respect of the entry into or consummation of the transactions contemplated hereby as the same may be amended or modified from time-to-time; and (i) Agreed in writing (which agreements shall be made expressly for the benefit of Seller, its Affiliates, successors and assigns) that: (A) Notwithstanding any provision to the contrary in the Ownership Agreement or otherwise, following the date of their assumption hereunder by the Buyer or a Buyer Subsidiary, neither Seller, nor any of its Affiliates, successors or assigns, shall have any liability or obligation for, and IPC and its successors, assigns and Affiliates shall have no right of action or claim against, Seller or any of its Affiliates, successors or assigns, for any Assumed Liabilities; provided, however, nothing contained herein shall affect the respective obligations under the Ownership Agreement or the Project Agreement (as such term is defined in the Ownership Agreement for their proportionate share of any Excluded Liabilities; and (B) Prior to the entry into any IPC Sale Agreement, Seller shall have approved in form and substance such other IPC Sale Agreement, which approval shall not be unreasonably withheld. (b) With respect to any IPC Sale Agreement entered into in compliance with this Agreement prior to the Other Transactions Date between 26 a member of the Buyer Group and IPC, or any Affiliate or successor or assign thereof, Seller hereby irrevocably and unconditionally: (i) Waives any and all rights or privileges which Seller may have (whether such rights or privileges arise under Section 10.1.6 of the Ownership Agreement or otherwise) to exercise any consent, approval or similar right, or to enforce any notice or waiting period, in respect of the entry into or consummation of the transactions contemplated by such IPC Sale Agreement; and (A) Agrees (which agreements shall be made expressly for the benefit of IPC, its Affiliates, successors and assigns) that notwithstanding any provision to the contrary in the Project Agreement or otherwise, following the date of their assumption under the IPC Sale Agreement by the Buyer or a Buyer Subsidiary, neither such IPC, nor any of its Affiliates, successors or assigns, shall have any liability or obligation for, and Seller and its successors, assigns and Affiliates shall have no right of action or claim against IPC or any of its Affiliates, successors or assigns, for any obligations and liabilities which Buyer or a Buyer Subsidiary has agreed to assume under the terms of the IPC Sale Agreement; provided, however, nothing contained -------- ------- herein shall affect the obligations of the Seller and IPC under the Ownership Agreement or the Project Agreement (as such term is defined in the Ownership Agreement) for their proportionate share of any liabilities in the nature of Excluded Liabilities. (c) In order to protect Seller's legitimate interests arising under this Agreement, the Ownership Agreement and the Operating Agreement (as such term is defined in the Ownership Agreement), Buyer agrees that, prior to the Closing, no member of a Buyer Group will, and it will exercise its best efforts so that no representative or other Person purporting to act on behalf of any member of a Buyer Group will, directly or indirectly, solicit, encourage or engage in any substantive discussions with, or negotiate or otherwise deal with, or exchange any information with IPC or any Affiliate thereof or any Person purporting to act on IPC's behalf concerning any acquisition, transfer or other disposition of the IPC Ownership Interest and related assets of IPC, unless (i) Buyer provides Seller with at least one (1) Business Day's notice prior to any such discussions, negotiations, dealings or exchange, (ii) Buyer and its representatives remain free to, and do, consult 27 with and inform Seller on a regular and current basis about the substance, progress and material developments in respect of any such discussions, negotiations, dealings or exchange, (iii) Buyer and its representatives provide Seller, on a regular and current basis, with copies of all material correspondence, written proposals and draft and final agreements related to such discussions, negotiations, dealings or exchange, and (iv) Seller is not limited in its freedom to engage in discussions and communications with IPC or their respective representatives concerning such discussions, negotiations, dealings or exchange, subject to Seller advising Buyer, on a regular and current basis, of the substance of such discussions and communications. (d) The parties hereto agree that any breach of the foregoing provisions of this Section 3.6 by a member of the Buyer Group shall be a material breach of this Agreement. (e) Notwithstanding any other provision of this Section 3.6, if necessary or useful in the reasonable judgment of Buyer, any member of the Buyer Group may give valuable consideration to any third party to obtain such third party's consent to any aspect of this Agreement or the transactions contemplated hereby. In such event, and notwithstanding that the Buyer Group may subsequently, and not in connection with obtaining such consent, enter into a IPC Sales Agreement, any such consideration paid to IPC in accordance with the preceding sentence shall not be considered as part of the consideration for IPC's Ownership Interest and related assets. ARTICLE IV ---------- THE CLOSING ----------- 4.1 Time and Place of Closing. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York, at 10:00 a.m., local time, on the first Business Day following the date on which all of the conditions to each party's obligations hereunder have been satisfied or waived, or at such other place or time as the parties may agree. The date and time at which the Closing actually occurs is hereinafter referred to as the "Closing Date." 4.2 Payment of Purchase Price. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Assets, 28 the Buyer shall pay or cause to be paid to the Seller the Purchase Price. The Purchase Price shall be paid as follows: (i) an amount at Closing equal to the sum of $295,282,000 and any amounts with respect to Leased Assets to be paid pursuant to Section 7.4 hereof, (ii) the Estimated Adjustment Amount for the Closing pursuant to Section 3.2 hereof, and less the TPPA Amount (the "Estimated Purchase Price"), by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer. 4.3 Deliveries by Seller. At the Closing, the Seller shall deliver to -------------------- the Buyer the following: (a) The Bill of Sale, duly executed by the Seller for the personal property included in the Purchased Assets; (b) The executed consents to transfer the Seller Agreements, the Environmental Permits and the Permits, to the extent required hereunder or under applicable law; (c) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Seller; (d) The certificate and opinion of counsel as contemplated by Section 8.2 hereof; (e) One or more deeds of conveyance transferring the Seller's interest in the Real Property to the Buyer, without covenant or warranty of title other than as provided in the Form of Grant, Bargain, Sale Deed attached as Exhibit G hereto, duly executed and acknowledged by the Seller and in recordable form subject to Permitted Encumbrances and retaining to the extent necessary any existing easements in favor of the Seller with respect to Real Property conveyed to the Buyer, each substantially in the form of Exhibit G attached hereto; (f) One or more easements to the extent necessary to evidence the right of the Buyer to use the Real Property of the Seller (the "Buyer's Easements") associated with the Purchased Assets, duly executed and acknowledged by the Seller and in recordable form, each substantially in the form of Exhibit E attached hereto; (g) The Assignment of Leases, in the form of Exhibit A attached hereto, assigning to the Buyer all of the Seller's right, title and interest as lessor (or lessee, as the case may be) under the Leases; 29 (h) Copies of the resolutions adopted by the board of directors of the Seller, certified by the secretary of the Seller, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Seller of this Agreement, the Ancillary Agreements, the Bill of Sale and other closing documents described in this Agreement to which the Seller is a party, and the performance by the Seller of its obligations hereunder and thereunder; (i) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Assets in accordance with this Agreement and the Ancillary Agreements, and where necessary or desirable, in recordable form; and (j) Such other agreements, documents, instruments and writings as are required to be delivered by the Seller at or prior to the Closing Date pursuant to this Agreement and the Ancillary Agreements, or otherwise required in connection herewith or therewith. 4.4 Deliveries by Buyer. At the Closing, the Buyer shall deliver to ------------------- the Seller the following: (a) The Estimated Purchase Price by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer; (b) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Buyer; (c) The certificate and opinion of counsel as contemplated by Section 8.3 hereof; (d) One or more easements to the extent necessary to evidence the right of Seller to use the Real Property of Buyer (the "Seller's Easements"), to the extent necessary for the Seller to continue and maintain its transmission and distribution business, in favor of the Seller with respect to Real Property conveyed to the Buyer, duly executed and acknowledged by the Buyer, each substantially in the form of Exhibit D attached hereto, and the Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.9 hereof; (e) The Instrument of Assumption, duly executed by the Buyer providing for the assumption of all of the Seller's right, title and interest as lessor (or lessee as the case may be) under the Leases; 30 (f) All such other instruments of assumption as shall, in the reasonable opinion of the Seller and its counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (g) Copies of the resolutions adopted by the board of directors of the Buyer, certified by the secretary of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement, the Ancillary Agreements and other closing documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its obligations hereunder and thereunder; and (h) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement and the Ancillary Agreements or otherwise required in connection herewith or therewith. ARTICLE V --------- REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- The Seller represents and warrants to the Buyer as follows: 5.1 Organization; Qualification. The Seller is a corporation duly --------------------------- organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. The Seller is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and Bylaws as currently in effect. 5.2 Authority Relative to this Agreement. The Seller has full ------------------------------------ corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of the Seller and no other corporate proceedings on the part of the Seller are necessary to authorize this Agree- 31 ment or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by the Seller, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Buyer, subject to the receipt of the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitute valid and binding agreements of the Seller, enforceable against the Seller in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 5.3(a), and other than obtaining the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by the Seller nor the sale by the Seller of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws of the Seller, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to the Seller as a result of the specific regulatory status of the Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which the Seller is a party or by which the Seller, or any of the Purchased Assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Seller, or any of its assets, which violation would have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) approvals or other actions by the PUCN, the CPUC and/or the OPUC, (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by the Seller and the Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through 32 (iv) above are collectively referred to as the "Seller Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory authority is necessary for the consummation by the Seller of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect and other than the Permits and Environmental Permits. 5.4 Reports. Since January 1, 1996, the Seller, pursuant to the ------- Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act, has filed or caused to be filed with the SEC, the applicable state or local utility commissions or regulatory bodies, or the FERC, as the case may be, all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by them with respect to the business and operations of the Seller as it relates to the Purchased Assets under each of the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act and the respective rules and regulations thereunder, all of which complied in all material respects with all applicable requirements of the appropriate act and the rules and regulations thereunder in effect on the date each such report was filed. 5.5 Financial Statements. The Seller has previously furnished to the -------------------- Buyer (i) balance sheets of the Seller as of June 30, 2000, and (ii) the related statements of income and retained earnings and changes in financial position of the Seller for the fiscal year then ended. The balance sheet of the Seller as of June 30, 2000, is referred to herein as the "Seller Balance Sheet." Each of the balance sheets included in the financial statements referred to in this Section 5.5 (including the related notes thereto) presents fairly the financial position of the Seller as of their respective dates, and the other related statements included therein (including the related notes thereto) present fairly the results of operations and changes in financial position for the periods then ended, all in conformity with generally accepted accounting principles applied on a consistent basis, except as otherwise noted therein. 5.6 Undisclosed Liabilities. To Seller's Knowledge and except as set ----------------------- forth in Schedule 5.6, the Seller has no liability or obligation relating to the business or operations of the Purchased Assets, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or reserved against in the Seller Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were 33 incurred in the ordinary course of business, whether before or after the date of the Seller Balance Sheet, or those which in the aggregate are not material to the Purchased Assets. 5.7 Absence of Certain Changes or Events. To Seller's Knowledge and ------------------------------------ except as set forth in Schedule 5.7, or in the reports, schedules, registration statements and definitive proxy statements filed by the Seller with the SEC, and except as otherwise contemplated by this Agreement, since the date of the Seller Balance Sheet there has not been: (i) any Material Adverse Effect; (ii) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (iii) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing, capital expenditure or capital financing) by the Seller, which is material to the business or operations of the Purchased Assets, except for non-material agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (iv) any change by the Seller, with respect to the Purchased Assets, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.8 Title to Real Property. Set forth in Schedule 5.8 is a true and ---------------------- complete list of the Real Property of the Seller which is part of the Purchased Assets. The Seller has good and marketable title to all of the Real Property, subject only to Permitted Encumbrances. 5.9 Leasehold Interests. Schedule 5.9 lists, as of the date of this ------------------- Agreement, all Real Property leases (the "Leases") relating to the Purchased Assets under which the Seller is a lessee, lessor or under which Seller otherwise has any interest and which are to be assigned to, and assumed by, the Buyer on the Closing Date. Except as set forth in Schedule 5.9, to the Seller's Knowledge, all such Leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing material defaults by the Seller thereunder; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default thereunder. Subject only to Permitted Encumbrances, Seller has valid and effective leasehold rights in each Lease in which Seller is the lessee. 5.10 Improvements. Except as set forth in Schedule 5.10, the Seller ------------ has not received any written notices from any Governmental Authority stating or alleging that any improvements with respect to the Purchased Assets have not been constructed in compliance with applicable law. Except as set forth in Schedule 5.10, no written notice has been received by the Seller from any Governmental Authority 34 requiring or advising as to the need for any repair, alteration, restoration or improvement in connection with the Purchased Assets. 5.11 Insurance. Except as set forth in Schedule 5.11, all material --------- policies of fire, liability, workers' compensation and other forms of insurance purchased or held by and insuring the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.11, as of the date of this Agreement, the Seller has not been refused any insurance with respect to the Purchased Assets nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last twelve (12) months. 5.12 Environmental Matters. (a) Except as set forth in Schedule 5.12, --------------------- in any public filing by the Seller pursuant to the Securities Act or the Exchange Act, or in any environmental site assessment prepared by or for the Seller and made available to the Buyer, the Seller holds, and is in substantial compliance with, all material permits, licenses and governmental authorizations (the "Environmental Permits") required for the Seller to operate the Purchased Assets under applicable Environmental Laws, and to the Knowledge of the Seller, the Seller is otherwise in compliance with applicable Environmental Laws with respect to the Purchased Assets except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, which, in the aggregate, are not reasonably likely to have a Material Adverse Effect. The Seller's Environmental Permits are set forth on Schedule 5.12. (b) To Seller's Knowledge and except as set forth in Schedule 5.12, Seller has not received any request for information, or been notified in writing that it is a potentially responsible party, under CERCLA or any similar State law with respect to any of the Purchased Assets, except for such liability under such laws as would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. (c) Except as set forth in Schedule 5.12, with respect to the Purchased Assets, the Seller has not entered into or agreed to any consent decree or order, and is not subject to any judgment, decree, or judicial order relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Substances under any Environmental Law, except such consent decrees or orders, judgments, decrees or judicial orders that would not, individually or in the aggregate, 35 be reasonably likely to have a Material Adverse Effect and has no Knowledge of any pending investigation under any Environmental Law related to the Purchased Assets, other than as contemplated by the Environmental Audit Agreement dated as of December 2, 1998, between Sierra Pacific Power Company and the Nevada Division of Environmental Protection related to North Valmy Station except for such investigations that would not, individually or in the aggregate, be reasonably willing to have a Material Adverse Effect and further, Seller shall disclose to Buyer in writing any Remediation or investigation relating to the Purchased Assets that is commenced after the date of this Agreement and prior to the Closing Date. (d) To Seller's Knowledge, Seller has disclosed and made available to Buyer true, complete and correct copies of any material report, study, investigation, audit, analysis, test or monitoring in the possession of or initiated or prepared by Seller within the 5 years preceding the date of this Agreement pertaining to any environmental matter relating to the Purchased Assets, including without limitation compliance with Environmental Laws or employee safety. (e) The representations and warranties made in this Section 5.12 are the Seller's exclusive representations and warranties relating to environmental matters. 5.13 Labor Matters. The Seller has previously delivered to the Buyer ------------- copies of all labor union and Collective Bargaining Agreements relating to the Purchased Assets to which the Seller is a party or is subject. With respect to its employees at the Purchased Assets, except to the extent set forth in Schedule 5.13 and except for such matters as shall not have a Material Adverse Effect, to the Seller's Knowledge: (i) the Seller is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours; (ii) the Seller has not received written notice of any unfair labor practice complaint against the Seller pending before the National Labor Relations Board; (iii) there is no labor strike, slowdown or stoppage actually pending or threatened against or affecting the Seller; (iv) the Seller has not received notice that any representation petition respecting the employees of the Seller has been filed with the National Labor Relations Board; (v) no arbitration proceeding arising out of or under collective bargaining agreements is pending against the Seller; and (vi) the Seller has not experienced any primary work stoppage since at least December 31, 1995. 5.14 ERISA; Benefit Plans. (a) Except as set forth in Schedule -------------------- 5.14(a)(i), with respect to its employees at the Purchased Assets, the Seller has fulfilled its obligations under the minimum funding requirements of Section 302 of 36 ERISA, and Section 412 of the Code, with respect to each "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and the Code. The Seller has not incurred any liability under Section 4062(b) of ERISA to the Pension Benefit Guaranty Corporation in connection with any employee pension benefit plan relating to employees at the Purchased Assets which is subject to Title IV of ERISA. Except as set forth in Schedule 5.14(a)(ii), the Internal Revenue Service has issued a letter for each employee pension benefit plan determining that such plan is exempt from United States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and there has been no occurrence since the date of any such determination letter which has adversely affected such qualification, and no withdrawal liability has been incurred by or asserted against the Seller with respect to any employee pension benefit plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). (b) Schedule 5.14(b) lists, as of the date of this Agreement, all deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all material bonus and other employee benefit or fringe benefit plans maintained or with respect to which contributions are made by the Seller in respect of employees who are the employees of the Seller who work at the Purchased Assets. Accurate and complete copies of all such plans, other than multiemployer plans, have been made available to the Buyer. 5.15 Real Property Encumbrances. Schedule 5.15 describes the -------------------------- indentures of trust concerning the pollution control facilities at the North Valmy Station (the "Bond Indentures") and the Indenture. At or before Closing, Seller shall cause the Purchased Assets to be released from the liens of the Indenture and the Bond Indentures. Copies of any surveys in the Seller's possession or any policies of title insurance currently in force and in the possession of the Seller with respect to the Real Property will be delivered by the Seller to the Buyer pursuant to Section 7.14. 5.16 Condemnation. Neither the whole nor any part of the Real Property ------------ or any other real property or rights leased, used or occupied by the Seller in connection with the ownership or operation of the Purchased Assets is subject to any pending suit for condemnation or other taking by any public authority, and, to the Knowledge of the Seller, no such condemnation or other taking is threatened or contemplated. 5.17 Certain Contracts and Arrangements. (a) Except (i) for the Seller ---------------------------------- Agreements listed in Schedule 5.17(a) or any other Schedule hereto, (ii) for contracts, agreements, personal property leases, commitments, understandings or 37 instruments which shall expire prior to the Closing Date, (iii) for non-material agreements with suppliers, distributors and sales representatives entered into in the ordinary course of business, and (iv) for contracts, agreements, personal property leases, commitments, understandings or instruments with a value less than $250,000 or with annual payments less than $50,000 the Seller is not a party to any written contract, agreement, personal property lease, commitment, understanding or instrument which is material to the business or operations of the Purchased Assets. (b) Except as disclosed in Schedule 5.17(b), each material Seller Agreement constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to the Buyer pursuant to this Agreement and shall continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder. (c) Except as set forth in Schedule 5.17(c), there is not, under any of the Seller Agreements, any default or event which, with notice or lapse of time or both, would constitute a default on the part of the Seller, except, with respect to the Seller Agreements only, such events of default and other events as to which requisite waivers or consents have been obtained or which would not, in the aggregate, have a Material Adverse Effect. Except as set forth in Schedule 5.17(c), Seller has not received written or other notice of a default concerning a Seller Agreement, nor has Seller received any written or other notice that a party intends to cancel or terminate a Seller Agreement. 5.18 Legal Proceedings, etc. Except as set forth in Schedule 5.18 or ----------------------- in any filing made by the Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, or proceedings pending, and to Seller's Knowledge no investigation pending or threatened against the Seller relating to the Purchased Assets before any court, Governmental Authority or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect. Except as set forth in Schedule 5.18, the Seller is not subject to any outstanding judgment, rule, order, writ, injunction or decree of any court, Governmental Authority or regulatory authority relating to the Purchased Assets which has a Material Adverse Effect. 5.19 Permits. The Seller has all material permits, licenses, ------- franchises and other governmental authorizations, consents and approvals (other than with respect to the Environmental Permits addressed in Section 5.12) (collectively, "Permits"), as set forth in Schedule 5.19(a), necessary to operate the Purchased Assets as presently operated, except where the failure to have such Permits does not have a Material Adverse Effect. Except as set forth in Schedule 5.19(b), with respect to the 38 Purchased Assets, the Seller has not received any written notification, and does not otherwise have Knowledge, that it is in violation of any of such Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for notifications of violations which would not, in the aggregate, have a Material Adverse Effect. The Seller is in compliance with all Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for violations which, in the aggregate, do not have a Material Adverse Effect. 5.20 Regulation as a Utility. The Seller and certain of its affiliates ----------------------- are regulated as public utilities in the States of Nevada and California. Except as set forth on Schedule 5.20, the Seller is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 5.21 Taxes. The Seller has, in respect of the Purchased Assets, (i) ----- filed all Tax Returns required to be filed other than those Tax Returns the failure of which to file would not have a Material Adverse Effect, and (ii) paid in full or all material Taxes shown to be due on such Tax Returns. Except as set forth in Schedule 5.21, the Seller has not received any notice of deficiency or assessment from any taxing authority with respect to liabilities for Taxes of the Seller in respect of the Purchased Assets, which have not been fully paid or finally settled, and any such deficiency shown in such Schedule 5.21 is being contested in good faith through appropriate proceedings. Except as set forth in Schedule 5.21, there are no outstanding agreements or waivers extending the applicable statutory periods of limitation for Taxes associated with the Purchased Assets for any period. 5.22 Title to Personal Property. Schedule 1.1(89)(iii) sets forth a -------------------------- true and complete list of the material machinery, equipment, vehicles, furniture and other tangible personal property located on the Real Property and used in the operation of the North Valmy Station as of the date of this Agreement ("Personal Property"). The Seller has good and marketable title to the Personal Property (or valid and effective leasehold rights in the case of leased Personal Property). 5.23 Subchapter K Election. Seller and IPC properly and timely elected --------------------- pursuant to Treas Reg Section 1.761-2(b)(2)(ii) to be excluded from all of Subchapter K of the Internal Revenue Code for federal income tax purposes with respect to the North Valmy Station. Seller, and to Seller's Knowledge IPC, have not taken a position inconsistent with the exclusion election or applied to revoke the 39 election. To Seller's Knowledge, no taxing authority has at any time asserted that the North Valmy Station or the joint ownership of Seller and IPC was taxable as a partnership or other entity, and Seller has no Knowledge of any intent of any taxing authority to do so. ARTICLE VI ---------- REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- The Buyer represents and warrants to the Seller as follows: 6.1 Organization. The Buyer is a corporation duly organized, validly ------------ existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as is now being conducted. The Buyer is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Buyer has heretofore delivered to the Seller complete and correct copies of its Certificate of Incorporation and Bylaws (or other similar governing documents), as currently in effect. 6.2 Authority Relative to this Agreement. The Buyer has full ------------------------------------ corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of the Buyer and no other corporate proceedings on the part of the Buyer are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements have been duly and validly executed and delivered by the Buyer, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Seller, subject to the receipt of the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, constitute valid and binding agreements of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 40 6.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, neither the execution and delivery of this Agreement by the Buyer nor the purchase by the Buyer of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws (or other similar governing documents) of the Buyer, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to the Buyer as a result of the specific regulatory status of the Seller (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Seller (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which the Buyer or any of its subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. (b) Except as set forth in Schedule 6.3(b) and except for (i) filings and approvals required by Section 203 of the Federal Power Act, (ii) a specific determination by the appropriate state commission(s) that allowing the Purchased Assets to be an eligible facility (1) will benefit consumers, (2) is in the public interest, and (3) does not violate State law, as contemplated by Section 32(c) of the Holding Company Act, 15 USC section 79z-5a(c), (iii) an Exempt Wholesale Generator determination made by FERC under Section 32 of the Holding Company Act, 15 USC Section 79z-5a, and (iv) the filings by the Buyer and the Seller required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in Schedule 6.3(b) and clauses (i), (ii) and (iii) are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect. 41 6.4 Regulation as a Utility. The Buyer is controlled by a public ----------------------- utility holding company registered under the Holding Company Act. Except as set forth in Schedule 6.4, the Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.5 Availability of Funds. The Buyer has sufficient funds available --------------------- to it or has received binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. ARTICLE VII ----------- COVENANTS OF THE PARTIES ------------------------ 7.1 Conduct of Business of the Seller. Except as described in --------------------------------- Schedule 7.1, during the period from the date of this Agreement to the Closing Date, the Seller shall operate and maintain the Purchased Assets according to its ordinary and usual course of business consistent with good industry practice and with Schedules 1.1(94) (Scheduled Capital Expenditures) and 1.1(95) (Scheduled Maintenance Expenditures). Without limiting the generality of the foregoing, and, except as contemplated in this Agreement or as described in Schedule 7.1, prior to the Closing Date, without the prior written consent of the Buyer (unless such consent would be prohibited by law), the Seller shall not with respect to the Purchased Assets: (a) (i) create, incur or assume any material amount of indebtedness for money borrowed, other than in the ordinary course of business, including obligations in respect of capital leases but excluding purchase money mortgages granted in connection with the acquisition of property in the ordinary course of business; or (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person except in the ordinary course of business; (b) make any material change in the operations of the Purchased Assets including, without limitation, the levels of fuel inventory and materials and supplies customarily maintained by the Seller; (c) except as set forth in Schedule 1.1(36), make any capital expenditures with respect to the Purchased Assets or enter into any contract or commitment therefor, except that the Seller shall make any capital expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller -------- for such 42 capital expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Capital Expenditures"); provided, however, -------- ------- that if the Buyer requests that the Seller make enhancements with a cost in excess of the cost of any Necessary Capital Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancement to the extent that the cost of such enhancement exceeds the cost of the Necessary Capital Expenditures as part of the Adjustment Amount; (d) sell, lease (as lessor), transfer or otherwise dispose of, any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with good industry practice and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Assets other than Permitted Encumbrances; (e) except as set forth in Schedule 1.1(36), make any maintenance expenditures, except that the Seller shall make any maintenance expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such maintenance expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Maintenance Expenditures"); provided, -------- however, that if the Buyer requests that the Seller make enhancements/upgrades - ------- with a cost in excess of the cost of any Necessary Maintenance Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to the extent the cost of such enhancements/upgrades exceeds the cost of the Necessary Maintenance Expenditure as part of the Adjustment Amount; (f) amend any of the Seller Agreements; (g) enter into or amend any real or personal property Tax agreement, treaty or settlement; (h) execute, enter into or amend any agreement, order, decree or judgment relating to any Permit other than non-material renewals of Permits in the ordinary and usual course of business consistent with past practice; (i) enter into any commitment for the purchase or sale of fuel (whether commodity or transportation) that Seller intends to assign to Buyer having a term of greater than 365 days that extends beyond December 31, 2001 if the aggregate payment under such commitment is expected to exceed $1,000,000 or if the aggregate payments under such commitment and all other then outstanding 43 commitments not previously consented to by the Buyer would be expected to exceed $1,500,000; (j) except for the Transition Power Purchase Agreement, enter into any wholesale sales agreements having a term extending beyond the Closing Date, where the sales of energy is expected to be supplied via the Purchased Assets; (k) sell, lease or otherwise dispose of SO2 Allowances, except those listed in Schedule 2.2(g) or to the extent necessary to operate the Purchased Assets in accordance with this Section 7.1; or (l) enter into (i) any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (k) or (ii) otherwise enter into any material new contract, agreement, commitment or arrangement affecting the Purchased Assets that will survive Closing other than contracts, agreements, commitments or arrangements entered into in the ordinary and usual course of business consistent with Good Utility Practice (as defined in the Transition Power Purchase Agreement) and having a term of twelve (12) months or less and (iii) Seller shall provide Buyer with prompt notice with respect to any contract, agreement, commitment or arrangement entered into in accordance with the provisions of subsection (ii) of this paragraph. 7.2 Access to Information. (a) Between the date of this Agreement and --------------------- the Closing Date, the Seller shall, during ordinary business hours and upon reasonable notice (i) give the Buyer and the Buyer Representatives reasonable access to all books, records, plants, offices and other facilities and properties constituting the Purchased Assets to which access by Buyer is not prohibited by law excluding information relating to employee records other than the information described on Schedule 2.2(e), (ii) subject to Seller's approval of Buyer's selection (not to be unreasonably withheld) Buyer shall appoint a representative and beginning sixty (60) days prior to closing such representative shall be permitted to make reasonably frequent visits on reasonable notice to the Purchased Assets for the purpose of performing reasonable inspections thereof; (iii) cause those persons listed on Schedule 1.1(65) and its advisors to furnish the Buyer with such financial and operating data and other information with respect to the Purchased Assets as the Buyer may from time to time reasonably request; (iv) cause those persons listed on Schedule 1.1(65) and its advisors to furnish the Buyer a copy of each report, schedule or other document filed or received by them with the SEC, PUCN, CPUC or FERC with respect to the Purchased Assets; and (v) at Buyer's reasonable request, make those persons listed on Schedule 1.1(65) and its advisors available during regular business hours for reasonable time periods to answer Buyer's questions concerning the 44 Purchased Assets and their operation; provided, however, that (A) any such -------- ------- investigation shall be conducted in such a manner as not to interfere unreasonably with the operation of the Purchased Assets, (B) the Seller shall not be required to take any action which would constitute a waiver of the attorney-client privilege and (C) the Seller need not supply the Buyer with any information which the Seller is under a legal obligation not to supply. Notwithstanding anything in this Section 7.2 to the contrary, (i) the Seller shall only furnish or provide such access to medical records as is required by law and (ii) the Buyer shall not have the right to perform or conduct any environmental sampling or testing at, in, on or underneath the Purchased Assets. (b) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of the Confidentiality Agreement and shall be treated as "Evaluation Material" (as defined in the Confidentiality Agreement) except for items acquired by Buyer as part of the Purchased Assets including but not limited to any books, operation records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications and procedures. (c) Subject to Buyer's rights under the last sentence of this Section 7.2(c), for a period of ten (10) years after the Closing Date, the Seller and its representatives shall have reasonable access to all of the books and records of the Purchased Assets, as the case may be, transferred to the Buyer hereunder to the extent that such access may reasonably be required by the Seller in connection with matters relating to or affected by the operation of the Purchased Assets prior to the Closing Date. Such access shall be afforded by the Buyer upon receipt of reasonable advance notice and during normal business hours. The Seller shall be solely responsible for any costs or expenses incurred by them pursuant to this Section 7.2(c). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such ten-year period, the Buyer shall, prior to such disposition, give the Seller a reasonable opportunity at the Seller's expense, to segregate and remove such books and records as the Seller may select. 7.3 Expenses. Except to the extent specifically provided herein, -------- whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses except that the costs, expenses and premium incurred to obtain title insurance shall be shared equally by Buyer and Seller at Closing. 7.4 Further Assurances. Subject to the terms and conditions of this ------------------ Agreement, each of the parties hereto shall use all commercially reasonable efforts to 45 take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the sale of the Purchased Assets pursuant to this Agreement including, without limitation, the use of the Seller's and the Buyer's commercially reasonable efforts to obtain all Permits and Environmental Permits necessary for the Buyer to operate the Purchased Assets. From time to time after the date hereof, without further consideration, the Seller shall, at its own expense, execute and deliver such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Assets. From time to time after the date hereof, the Buyer shall, at its own expense, execute and deliver such documents to the Seller as the Seller may reasonably request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. To the extent that any personal property lease, relating to any assets (the "Leased Assets") which are principally used by the Seller for generation purposes at the Purchased Assets, cannot be assigned to the Buyer, the Seller shall, with Buyer's written consent (which consent shall not be unreasonably withheld), use its commercially reasonable efforts to acquire title to such Leased Assets and to include them in the Purchased Assets before the Closing Date. The Seller's reasonable costs associated with acquiring title to such Leased Assets shall be paid by the Buyer as part of the Purchase Price. The Leased Assets are identified as such on Schedule 1.1(89)(iii). 7.5 Public Statements. The parties shall consult with each other ----------------- prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and neither party may issue any such public announcement, statement or other disclosure without having first received the written consent of the other party, except as may be required by law and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent and under the circumstances in which the parties are expressly permitted by the Confidentiality Agreement to make disclosures of "Evaluation Material" (as defined in the Confidentiality Agreement). 7.6 Consents and Approvals. (a) The Seller and the Buyer shall each ---------------------- file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall consult with each other as to the appropriate time of filing such notifications and shall use their best efforts to make such filings at the agreed upon time, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. 46 (b) The Seller and the Buyer shall cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all commercially reasonable efforts to obtain the transfer or reissuance to the Buyer of all necessary Environmental Permits, Permits, consents, approvals and authorizations of all governmental bodies and (iv) use all commercially reasonable efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals and FERC approval of the Ancillary Agreements and the Generation Tariff applicable to the Purchased Assets) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which the Seller or the Buyer is a party or by which either of them is bound. The Seller shall have the right to review and approve in advance all characterizations of the information relating to Purchased Assets; and each of the Seller and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they shall consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such necessary Environmental Permits, Permits, consents, approvals and authorizations of all third parties and governmental bodies. The Seller and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on behalf of the Seller, on the one hand and the Buyer on the other hand, with all governmental bodies. To the extent that a consent to an assignment of any material Seller Agreement cannot be obtained before the Closing Date, the Seller shall enter into all such agreements with the Buyer as are necessary to give the Buyer the rights, obligations and burdens of such Seller Agreements. (c) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any Federal, State or local Governmental Authority or agency or any third party in connection with any Federal, State or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. 47 (d) Seller shall use commercially reasonable efforts to defend and support the form of Generation Tariff applicable to the Purchased Assets in the form on file with FERC as of October 16, 2000. Seller shall file with FERC and use commercially reasonable efforts to defend and support the Transition Power Purchase Agreement and Interconnection Agreement. Seller shall not propose or enter into any stipulation or agreement except for any stipulation pending as of the date of this Agreement modifying the form of such tariff or agreements without Buyer's consent, which Buyer shall not unreasonably withhold. Buyer and Seller shall cooperate in defending and supporting such tariff and agreements. 7.7 Fees and Commissions. The Seller and the Buyer each represent and -------------------- warrant to the other that, except for Credit Suisse First Boston ("CSFB"), which is acting for and at the expense of the Seller, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. The Seller and the Buyer shall pay to the other or otherwise discharge, and shall indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 7.8 Use of Pollution Control Facilities. (a) Prior to the maturity ----------------------------------- date for each of the Bonds listed on Schedule 5.15, the Buyer shall not use any of the Pollution Control Facilities associated with such Bonds in any manner which would cause (i) interest on any of the Bonds to become includible in the gross income of the owners of such Bonds for purposes of federal income taxation or (ii) the disallowance of any deductions for interest expense payable by the Seller to which the Seller would otherwise be entitled; provided, however, that -------- ------- no violation of this Section 7.8 shall be deemed to have occurred solely as a result of such facilities being (A) unused, (B) abandoned or (C) sent to a landfill. (b) The Buyer shall give the Seller reasonable access to any Pollution Control Facilities included in the Purchased Assets and the books and records with respect to such facilities. (c) The Buyer shall fully cooperate with the issuers of the Bonds and the Seller and its counsel in connection with any audit, investigation or proceeding with respect to the Bonds or the Seller's interest expense deduction with respect thereto by the Internal Revenue Service, the SEC or any other entity. 7.9 Tax and Withholding Matters. (a) Notwithstanding any other provision of this Agreement, the Purchase Price includes all applicable sales and 48 similar taxes (but not real property transfer taxes) imposed by the State of Nevada as the result of the transaction ("Included Taxes"). Buyer shall bear all real estate transfer taxes. At the Closing, Seller shall deliver to Buyer a receipt for Buyer's payment of Included Taxes, and a separate closing certificate setting forth Seller's calculation of the purchase price for that portion of the Purchased Assets with respect to which Included Taxes are anticipated by Seller to be due, as well as Seller's calculation, in the exercise of reasonable judgment of the amount of those Included Taxes. Seller shall also include in this certificate its unqualified representation, warranty and covenant, which shall survive Closing notwithstanding any other provision of this Agreement, that the amount of taxes so established is in fact the entire and correct amount of Included Taxes. Seller is aware that, because of Seller's familiarity with the Purchased Assets and their previous treatment for tax, accounting and other purposes, Buyer is relying on Seller's calculation of such Included Taxes. Seller shall, as provided by the laws of the State of Nevada, pay over to the Nevada Department of Taxation the Included Taxes. To the extent, if any, that the State of Nevada requires payment of Included Taxes in an amount higher than that certified by Seller, after all opportunity for challenge or rehearing or appeal has been exhausted (provided that Seller bears the costs thereof as incurred), Seller shall immediately adjust its books, nunc pro nunc, by decreasing the purchase price of the Purchased Assets by an amount equal to such additional Included Taxes, which amount shall constitute Included Taxes collected by Seller from Buyer. Seller shall then deliver to Buyer a corrected receipt for payment of Included Taxes and pay over to the Nevada Department of Taxation the additional Included Taxes due. The foregoing is in addition to Buyer's right to recover damages for breach of Seller's representation, warranty and covenant in an amount equal to any Included Taxes required to be paid by Buyer (after exhausting all opportunity for appeal or rehearing has been exhausted (provided that Seller bears the costs thereof as incurred). Seller represents and warrants that this Section 7.9(a) is enforceable (which representation and warranty shall survive Closing notwithstanding any contrary provision in this Agreement) and shall deliver a reasoned opinion at Closing confirming that this provision will be enforceable against Seller. The party responsible for paying a Tax, shall, at its own expense, file, to the extent required by law, all necessary Tax Returns, receipts and other documentation with respect to the Tax. If reasonably requested by the party responsible for paying a Tax the other party shall join in the execution of Tax Returns, receipts or other documentation. Notwithstanding the foregoing, the parties shall work together in good faith and each at its own expense to minimize all transfer, sales and similar taxes and shall not make any payment to the Nevada Department of Taxation if the amount of payment is being disputed by either party until all opportunity for challenge or rehearing or appeal has been exhausted (provided that Seller bears the costs thereof as incurred). 49 (b) With respect to Taxes to be prorated in accordance with Section 3.4 hereof only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to the Seller's approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for the Seller's review and approval no later than twenty (20) days prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, the Seller shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with Section 3.4 hereof. In addition to any amount of reimbursement due in accordance with Section 3.4 hereof, Buyer shall reimburse Seller for any Nevada property taxes incurred by Seller which relate to the Purchased Assets and have a lien date after the Closing Date. The amount of such reimbursement shall be determined based upon the proportion of (i) the "historical cost less depreciation" of the Purchased Assets to (ii) the total historical cost less depreciation of all the assets reported on Seller's Nevada Operating Property Appraisal Report. (c) Each of the Buyer and the Seller shall provide the other with such assistance as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each shall retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.9 or pursuant to any other section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. 7.10 Supplements to Schedules. Prior to the Closing Date, the Seller ------------------------ shall promptly supplement or amend the Schedules required by Article V with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section 7.10 shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.11 Employees. (a) Schedule 7.11(a) sets forth all collective --------- bargaining agreements to which the Seller is a party in connection with the Purchased Assets (the "Collective Bargaining Agreements"), as well any Letters of Agreement between Seller and IBEW Local 1245 ("Local 1245 LOA"), letters of intent, or other 50 such agreements or understandings related to the sale and transfer of certain plants. The Buyer shall offer employment to begin as of the Closing Date to the Seller's employees who work at the Purchased Assets and who are included in the bargaining units covered by the Collective Bargaining Agreements ("Hourly Employees"). The Buyer shall assume the Collective Bargaining Agreements, and all of the Seller's obligations under such agreements. (b) Continued Employment. The Buyer shall, as of the Closing Date, -------------------- make a Qualifying Offer of Employment (as defined herein) to each employee of Seller who (i) worked at or directly serviced the Purchased Assets and (ii) was an employee of the Seller immediately prior to the Closing Date, other than (x) Hourly Employees and (y) Directors and Plant Managers (each such employee who accepts a Qualifying Offer of Employment is a "Management Employee"). An offer of employment shall be deemed a "Qualifying Offer of Employment" if (A) the proposed base salary and level of incentive compensation is at least 90% of the employee's base salary and level of incentive compensation immediately prior to the Closing Date and (B) the proposed principal place of employment is within one hundred (100) miles of the employee's principal place of employment immediately prior to the Closing Date. (c) Benefit Continuation. Subject to applicable law, the Buyer shall -------------------- maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation, welfare and benefit plans, programs, policies and fringe benefits covering Management Employees that will be as economically similar, in the aggregate, as those provided pursuant to those employee compensation, welfare and benefit plans, programs, policies and fringe benefits of the Seller and their subsidiaries as in effect immediately prior to the Closing Date. To the extent permissible under the terms of the Benefit Plans of Buyer and required by applicable law, the Buyer shall waive all limitations as to preexisting conditions exclusions and waiting periods with respect to participation and coverage requirements applicable to the Management Employees under any Benefit Plans of Buyer that are welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Management Employees immediately prior to the Closing Date. (d) Service Credit. The Management Employees shall be given credit -------------- for all service with the Seller or its subsidiaries (and service credited by Seller or such subsidiary), to the same extent as such service was credited for such purpose by Seller or such subsidiary, under all employee benefit plans, programs and policies 51 of the Buyer in which they become participants (the "Benefit Plans of Buyer") for purposes of eligibility, vesting, benefit accrual and determination of level of benefits. Notwithstanding the foregoing, such service with the Seller shall be recognized for purposes of benefit accrual under a defined benefit pension plan or a retiree medical plan (a "plan") sponsored by the Buyer only if assets and liabilities are transferred to the Buyer's plan and trust from the Seller's plan and trust. (e) Assumptions. The Buyer shall assume only those obligations that ----------- are required to be assumed by the Buyer under the Collective Bargaining Agreement or obligations for which there was a transfer of assets and liabilities to the Buyer's plan and trust from the Seller's plan and trust. Absent such transfer of plan assets and liabilities, benefits accrued under such Benefits Plans of Seller and all benefits currently payable as of the Closing Date shall be and shall remain the obligation of the Seller. Any individual covered under any such Benefit Plan of Seller that is a Group Health Plan (as defined in Section 4980B(g)(2) of the Code and Section 607(l) of ERISA) and who is eligible for continued coverage under such Group Health Plan as of the Closing Date, shall continue to be covered under such Group Health Plan after Closing pursuant to the provisions of COBRA. (f) Severance Plan. The Buyer shall maintain the Management -------------- Transition Plan for a period of eighteen (18) months following the Closing Date and shall give all Management Employees service credit for purposes of determining the level of benefits thereunder in the same manner as set forth in Section 7.11(d) hereof. Each of the Buyer and the Seller shall be responsible for 50% of any payments required under the Management Transition Plan for any Management Employee terminated without Cause (as defined in the Management Transition Plan) within eighteen (18) months following the Closing Date. (g) WARN Act. The Seller shall perform timely and discharge all -------- requirements, if any, under the WARN Act and under applicable state and local laws and regulations for the notification of its employees arising from the sale of the Purchased Assets to the Buyer up to and including the Closing Date. The Buyer shall cooperate with the Seller to provide the Seller with such information as may be needed from the Buyer for inclusion in such notices, including providing the Seller at least ninety (90) days prior to the date on which the Closing is anticipated to occur or such date to which the Buyer and the Seller mutually agree) with a list of all of the Seller's employees to whom the Buyer shall make offers of employment. After the Closing Date, the Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees with respect to the Purchased Assets. 52 7.12 Risk of Loss. (a) From the date hereof through the Closing Date, ------------ all risk of loss or damage to the property included in the Purchased Assets shall be borne by the Seller. (b) If, before the Closing Date all or any portion of the Purchased Assets are taken by eminent domain, or is the subject of a pending or (to the Knowledge of the Seller) contemplated taking which has not been consummated, the Seller shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such taking, then the Buyer or the Seller may, if such taking relates to the Purchased Assets, terminate this Agreement pursuant to Section 10.1(f) hereof. (c) If, before the Closing Date all or any material portion of the Purchased Assets are damaged or destroyed by fire or other casualty, the Seller shall notify the Buyer promptly in writing of such fact. If such damage or destruction would have a Material Adverse Effect and the Seller has not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such casualty, then the Buyer or the Seller may terminate this Agreement pursuant to Section 10.1(f) hereof. 7.13 Additional Covenants of the Buyer. Notwithstanding any other --------------------------------- provision hereof, Buyer covenants and agrees that, for a period of five (5) years commencing on the Closing Date, Buyer shall not transfer the Purchased Assets, or any material portion of the Purchased Assets, to any entity or Affiliate of such entity who at that time is the owner of any bundle of generation assets previously owned by Seller within the northern regions of Nevada, as such regions are described in the Offering Memorandum dated as of March 2000, as supplemented from time to time. Buyer further covenants and agrees that, in the event that Buyer transfers the Purchased Assets or any material portion of the Purchased Assets during such five (5) year period, Buyer shall obtain from its transferee a covenant and agreement which restricts such transferee's ability to transfer the Purchased Assets that is substantially 53 similar to Buyer's covenant and agreement in the first sentence of this Section 7.13 and an additional covenant and agreement that is substantially similar to that of this sentence, and each such covenant and agreement shall survive and remain in effect until five (5) years from the Closing Date as defined in this Agreement. The covenants and agreements contained in this Section 7.13 shall survive Closing and shall continue in effect for a period of five (5) years commencing on the Closing Date. 7.14 Title Surveys. Within thirty (30) days after the date of this ------------- Agreement, Seller shall deliver to Buyer final surveys of the Real Property showing the location of all exceptions listed in the preliminary title reports described on Schedule 5.8. On or before the thirtieth (30th) day (the "Notice Date") after Buyer has received the final surveys of the Real Property, Buyer may notify Seller in writing that Buyer disapproves of any such exception to title that, individually or in the aggregate, materially interferes with the operation and maintenance of the North Valmy Station, the Winnemucca Gas Turbine, or the Battle Mountain Diesels or that, individually or in the aggregate, has a Material Adverse Effect. Buyer's failure to so notify Seller on or before the Notice Date shall be deemed an approval of such exceptions as located by the final surveys; likewise, any exceptions not disapproved in a notice from Buyer to Seller on or before the Notice Date shall be deemed approved by Buyer as located by the final surveys. Seller shall cooperate with the Title Insurer and Purchaser, to the extent necessary, to clear any defects of title. The exceptions shown in the preliminary title reports that are approved by the Buyer are listed in Schedule 5.8, subject to Buyer's review of final surveys. If Buyer and Seller disagree about whether Buyer has properly disapproved an exception under this Section 7.14, the parties shall meet within ten (10) Business Days of the Notice Date to negotiate in good faith to settle their disagreement. 7.15 Documentation. Within sixty (60) days after the date of this ------------- Agreement, Seller shall make available to Buyer copies of all material contracts, leases and permits including all amendments thereto (in either electronic or hard copy format) which to Seller's Knowledge are a complete set. ARTICLE VIII ------------ CLOSING CONDITIONS ------------------ 8.1 Conditions to Each Party's Obligations to Effect the ---------------------------------------------------- Transactions Contemplated Hereby. The respective obligations of each party to - -------------------------------- effect the transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: 54 (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated; (b) No preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the transactions contemplated hereby or by the Ancillary Agreements shall have been issued and remain in effect (each party agreeing to use its reasonable best efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted by any State or Federal government or Governmental Authority in the United States which prohibits the consummation of the transactions contemplated hereby or by the Ancillary Agreements; (c) All Federal, State and local government consents and approvals required for the consummation of the transactions contemplated hereby or by the Ancillary Agreements, including, without limitation, the Seller Required Regulatory Approvals, the Buyer Required Regulatory Approvals, and all required FERC approvals of the Ancillary Agreements shall have become Final Orders (a "Final Order" for purposes of this Agreement means a final order after all opportunities for rehearing are exhausted (whether or not any appeal thereof is pending) that has not been revised, stayed, enjoined, set aside, annulled or suspended, with respect to which any required waiting period has expired; and as to which all conditions to effectiveness prescribed therein or otherwise by law, regulation or order have been satisfied) with such terms and conditions as shall have been imposed by the Governmental Authority issuing such Final Order and such Final Orders shall not have imposed terms and conditions which would have a material adverse effect on the business, results of operations or financial condition of the Purchased Assets; and (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which the Seller or the Buyer, or any of their subsidiaries, is a party for the consummation of the transactions contemplated hereby shall have been obtained, including without limitation, the expiration without exercise of the right of first refusal or the waiver by such party having such right of first refusal and the expiration of any applicable notification period or the waiver by such party entitled to such notification period, relating to the Joint Ownership Obligation, as set forth in Section 10.1.6 of the Ownership Agreement, other than those (i) which if not obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii) for which an agreement which is described in the last sentence of Section 7.6(b) hereof has been entered into. 55 8.2 Conditions to Obligations of Buyer. The obligation of the Buyer ---------------------------------- to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) There shall not have occurred and be continuing, a Material Adverse Effect; (b) The Seller shall have performed and complied with in all material respects the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of the Seller set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of the Seller; (c) The Buyer shall have received a certificate from an authorized officer of the Seller, dated the Closing Date, to the effect that to the best of such officer's knowledge, the conditions set forth in Sections 8.2(a) and (b) hereof have been satisfied; (d) The Buyer shall have received an opinion from Woodburn & Wedge, P.C., dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) The Seller is a corporation organized, existing and in good standing under the laws of the State of Nevada and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by requisite corporate action taken on the part of the Seller; (2) This Agreement and the Ancillary Agreements have been executed and delivered by the Seller and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Seller, enforceable against the Seller in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and except to 56 the extent that the right to indemnification and contribution contained therein may be limited by state or federal securities laws or the public policy underlying such laws; (3) The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Seller shall not constitute a violation of the Certificate of Incorporation or Bylaws of the Seller; and (4) No declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Seller of the Closing other than (i) the Seller Required Regulatory Approvals, (ii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of Nevada, such counsel may rely upon opinions of counsel admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials; (e) The Seller shall have executed and delivered, as of the Closing, each of the Ancillary Agreements to be executed by the Seller and all required approvals and conditions relating to the Ancillary Agreements shall have been obtained or satisfied; (f) Neither the PUCN nor the Nevada legislature shall have issued any order or enacted any law the effect of which would be to cause the Buyer, as the owner of the Purchased Assets or the seller of electric power, energy or capacity therefrom, to be regulated as to the wholesale pricing of such electric power, energy or capacity, or to be regulated for any purposes as a public utility under Nevada law; and (g) First American Title Company (or an Affiliate thereof) or another Title Insurer acceptable to Buyer (the "Title Insurer") shall be willing to issue at regular rates ALTA owner's, or lessee's, as the case may be, extended coverage policies of title insurance (1990 Form B) (the "Title Policies"), with the general survey and creditors' rights exceptions removed, in amounts equal to the portion of 57 the Purchase Price allocated to such interests, showing title to the Real Property vested in Buyer, subject to transfer of the Real Property to Buyer. The Title Policies shall show title vested in Buyer subject only to Permitted Encumbrances (not including the lien of the Indenture and the Bond Indentures, from which the Purchased Assets are to be released at or before Closing). Seller shall cooperate with the Title Insurer and Buyer, to the extent necessary, to clear any defects of title. The first sentence of this paragraph shall be deemed to be satisfied either by (i) the issuance of the Title Policies at Closing, or (ii) by the Title Insurer's delivery at the Closing of written commitments or binders (dated as of the Closing but insuring title as of the date title conveyance documents are recorded), to issue the Title Policies within a reasonable time after the Closing Date, subject to actual transfer of the Real Property. If the Title Insurer is unwilling to issue any such Title Policy, it shall be required to provide Buyer and Seller, in writing, with notice setting forth the reason(s) for such unwillingness as soon as practicable. Seller shall have the right to seek to cure any defect which is the reason for such unwillingness, and to extend the Closing and the Termination Date, if necessary, for a period of up to thirty (30) Business Days to provide to Seller the opportunity to cure. (h) Seller has not breached its obligations under Section 7.6(d) of this Agreement. 8.3 Conditions to Obligations of Seller. The obligation of the Seller ----------------------------------- to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed in all material respects its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; (c) The Seller shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b) hereof have been satisfied; (d) The Seller shall have received an opinion from Stoel Rives LLP and/or Lionel Sawyer & Collins, counsel for the Buyer, dated the Closing Date 58 and satisfactory in form and substance to the Seller and its counsel, substantially to the effect that: (1) The Buyer is a corporation organized, existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action taken on the part of the Buyer; (2) This Agreement and the Ancillary Agreements have been executed and delivered by the Buyer and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (B) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought; (3) The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Buyer shall not constitute a violation of the Certificate of Incorporation or Bylaws (or other similar governing documents), as currently in effect, of the Buyer; and (4) No declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Buyer of the Closing other than the Buyer Required Regulatory Approvals, all of such Buyer Required Regulatory Approvals having been obtained and being in full force and effect with such terms and conditions as shall have been imposed by any applicable Governmental Authority. As to any matter contained in such opinion or opinions which involve the laws of any jurisdiction other than the federal laws of the United States and the States of Oregon or Nevada, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by 59 appropriate officers and directors of the Buyer and its subsidiaries and by public officials; and (e) The Buyer shall have executed and delivered, as of the Closing, each of the Ancillary Agreements to be executed by the Buyer and all required approvals and conditions relating to the Ancillary Agreements have been obtained or satisfied. ARTICLE IX ---------- INDEMNIFICATION --------------- 9.1 Indemnification. (a) The Seller shall indemnify, defend and hold --------------- harmless the Buyer from and against any and all claims, demands or suits (by any Person), losses, liabilities, damages (including consequential or special damages), obligations, payments, costs, Taxes and expenses (including, without limitation, the costs and expenses of any and all actions, suits, proceedings, assessments, judgments, settlements and compromises relating thereto and reasonable attorneys' fees and reasonable disbursements in connection therewith) to the extent the foregoing are not paid by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by the Buyer relating to, resulting from or arising out of (i) any breach by the Seller of any covenant or agreement of the Seller contained in this Agreement or (ii) the Excluded Liabilities. (b) The Buyer shall indemnify, defend and hold harmless the Seller from and against any and all Indemnifiable Losses asserted against or suffered by the Seller relating to, resulting from or arising out of (i) any breach by the Buyer of any covenant or agreement of the Buyer contained in this Agreement or the Ancillary Agreements or (ii) the Assumed Liabilities. (c) Either the person required to provide indemnification under this Agreement (the "Indemnifying Party") or the person entitled to receive indemnification under this Agreement (the "Indemnitee") may assert any offset or similar right in respect of its obligations under this Section 9.1 based upon any actual or alleged breach of any covenant or agreement contained in this Agreement or the Ancillary Agreements. (d) Any Indemnitee having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any 60 Indemnifiable Loss shall be reduced (i) to the extent that the Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take into account any Tax or Income Tax benefit recognized by the Indemnitee arising from the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment, and any payment actually received with respect to an Indemnifiable Loss. (e) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the Indemnifying Party with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (f) The rights and remedies of the Seller and the Buyer under this Article IX are exclusive and in lieu of any and all other rights and remedies which the Seller and the Buyer may have under this Agreement or otherwise for monetary relief with respect to (i) any breach or failure to perform any covenant or agreement set forth in this Agreement or (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be. Without limiting the foregoing, with respect to the Purchased Assets, the Buyer, for itself and its Affiliates, does hereby irrevocably release, hold harmless and forever discharge the Seller from any and all claims of any kind or character, whether known or unknown, hidden or concealed, resulting from or arising out of or in connection with Hazardous Substances or any Environmental Law, other than those liabilities and obligations set forth in Section 2.4(c) hereof. In furtherance of the foregoing, the Buyer, for itself and on behalf of its Affiliates, hereby irrevocably waives any and all rights and benefits with respect to such claims that it now has, or in the future may have conferred upon it by virtue of any statute, regulation or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party's settlement with the obligor. In this connection, the Buyer hereby acknowledges that it is aware that factual matters now unknown to it may have given, or hereafter may give, rise to claims that are presently unknown, unanticipated and unsuspected, and it further agrees that this release has been negotiated and agreed upon in light of that awareness, and the Buyer, for itself and on behalf of its Affiliates, nevertheless hereby intends irrevocably to release the Seller from the claims described in this Section 9.1(f). 9.2 Defense of Claims. (a) If any Indemnitee receives notice of the ----------------- assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any Affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnifi- 61 cation is to be sought from an Indemnifying Party, the Indemnitee shall give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than ten (10) calendar days after the Indemnitee's receipt of notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and shall indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party shall have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, and the Indemnitee shall cooperate in good faith in such defense at such Indemnitee's own expense. (b) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a) hereof, the Indemnifying Party shall not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying -------- ------- Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party shall be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party shall not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, 62 stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than ten (10) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party shall have a period of thirty (30) calendar days within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party shall be deemed to have accepted such claim. If the Indemnifying Party rejects such claim, the Indemnitee shall be free to seek enforcement of its rights to indemnification under this Agreement. (d) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of The Chase Manhattan Bank), shall promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party shall, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party shall then -------- ------- be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of such indemnity payment are hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party shall duly execute upon request all instruments reasonably necessary to evidence and perfect the foregoing subrogation and subordination rights. Nothing in this Section 9.2(d) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (e) A failure to give timely notice as provided in this Section 9.2 shall not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. 63 ARTICLE X --------- TERMINATION AND ABANDONMENT --------------------------- 10.1 Termination. (a) This Agreement may be terminated at any time ----------- prior to the Closing Date, by mutual written consent of the Buyer and the Seller. (b) This Agreement may be terminated by the Seller or the Buyer if (i) the transactions contemplated hereby shall not have been consummated on or before eighteen (18) months from the date of this Agreement (the "Termination Date"); provided, however, that the right to terminate this Agreement under this -------- ------- Section 10.1(b) shall not be available to either Seller or Buyer if its failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date; provided, further, that if on the Termination Date the conditions to the Closing - -------- ------- set forth in Section 8.1(c) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Termination Date shall be the date which is twenty-four (24) months from the date of this Agreement. (c) This Agreement may be terminated by either the Seller or the Buyer if (i) any Governmental Authority or regulatory body, the consent of which is a condition to the obligations of the Seller and the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent and all appeals of such determination shall have been taken and have been unsuccessful, or (ii) any court of competent jurisdiction in the United States or any State shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, judgment or decree shall have become final and nonappealable. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by the Seller of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer. (e) This Agreement may be terminated by the Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Seller impossible and such violation or breach has not been waived by the Seller. 64 (f) This Agreement may be terminated by either the Seller or the Buyer (i) in accordance with the provisions of Sections 7.12(b) or (c) hereof or (ii) if IPC shall have properly exercised its right of first refusal as to the Purchased Assets and confirmed its commitment to purchase the Purchased Assets in accordance with Section 10.1.6 of the Ownership Agreement. 10.2 Procedure and Effect of Termination. In the event of termination ----------------------------------- of this Agreement and abandonment of the transactions contemplated hereby by either or both of the parties pursuant to Section 10.1 hereof, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto, except for the payment of a breakup fee in accordance with Section 10.3. If this Agreement is terminated as provided herein: (a) except for the payment of the breakup fee in accordance with Section 10.3, such termination shall be the sole remedy of the parties hereto with respect to breaches of any agreement, representation or warranty contained in this Agreement and none of the parties hereto nor any of their respective trustees, directors, officers or Affiliates, as the case may be, shall have any liability or further obligation to the other party or any of their respective trustees, directors, officers or Affiliates, as the case may be, pursuant to this Agreement, except in each case as stated in this Section 10.2 and in Sections 7.2(b), 7.3 and 7.7 hereof; and (b) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. 10.3 Breakup Fee. In the event this Agreement is terminated by either ----------- Buyer or Seller in accordance with the provisions of Section 10.1(f)(ii) as a result of the proper exercise of the right of first refusal as to the Purchased Assets and the confirmation by IPC of its commitment to purchase the Purchased Assets in accordance with Section 10.1.6 of the Ownership Agreement, then within thirty (30) days following such termination, Seller shall pay to Buyer a cash amount equal to two (2) percent of the amount shown in Section 3.1(i). Upon Seller's payment to Buyer, this Agreement shall be terminated in accordance with Section 10.2. 65 ARTICLE XI ---------- MISCELLANEOUS PROVISIONS ------------------------ 11.1 Amendment and Modification. Subject to applicable law, this -------------------------- Agreement may be amended, modified or supplemented only by written agreement of the Seller and the Buyer. 11.2 Waiver of Compliance; Consents. Except as otherwise provided in ------------------------------ this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.3 No Survival of Representations and Warranties. Each and every --------------------------------------------- representation and warranty contained in this Agreement and each and every covenant contained in this Agreement (other than the covenants in Sections 2.5, 3.2, 3.3, 3.4, 3.5, 3.6, 7.1(f), 7.1(g), 7.1(h), 7.1(i), 7.1(j), 7.1(k), 7.1(l)(i) and 7.1(l)(ii), 7.2(b), 7.2(c), 7.3, 7.4, 7.5, 7.6(d), 7.7, 7.8, 7.9, 7.11, 7.13, 9.1 and 9.2 hereof (which covenants shall survive in accordance with their terms)) shall expire with, and be terminated and extinguished by, (i) the consummation of the sale of the Purchased Assets and the transfer of the Assumed Liabilities pursuant to this Agreement and shall not survive the Closing Date, or (ii) the termination of this Agreement pursuant to Section 10.1 hereof or otherwise; and none of the Seller, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation or warranty. 11.4 Notices. All notices and other communications hereunder shall be ------- in writing and shall be deemed given if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, provided that notices of a change of address shall be effective -------- only upon receipt thereof): 66 (a) If to the Seller, to: Sierra Pacific Resources 6100 Neil Road Reno, Nevada 89511 Attention: William E. Peterson Telecopy: (775) 834-5959 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York 10036-6522 Attention: Sheldon S. Adler, Esq. Telecopy: (212) 735-2000 (b) if to the Buyer, to: NRG Energy, Inc. Symphony Towers Suite 2740 750 "B" Street San Diego, CA 92101-8129 Attention: David Lloyd Telecopy: (619) 615-7663 with copies to: Stoel Rives LLP 900 SW Fifth Ave. Suite 2300 Portland, OR 97204-1268 Attention: William H. Holmes, Esq. Telecopy: 503-220-2480 11.5 Assignment. This Agreement and all of the provisions hereof shall ---------- be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but, except as provided in this Section 11.5, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written 67 consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. For purposes of this Agreement, subject to Section 7.13, the term "Affiliate Assignee" shall refer to any direct or indirect subsidiary of Buyer and any constituent partner or participant in Buyer (if Buyer is a partnership, joint venture, consortium or other association or organization) to whom any of Buyer's rights and obligations under this Agreement are assigned in compliance with the requirements of this Section. For purposes of this Agreement, "Financing Entity" shall mean any Person designated by Buyer to Seller as a lessor in connection with any Off-Balance Sheet Lease Facility, and "Permitted Assignee" shall mean any Affiliate Assignee or Financing Entity, as the case may be. For purposes of this Agreement, "Off-Balance Sheet Lease Facility" shall mean any long-term lease of the Purchased Assets, where the lease is accounted for by Buyer on its financial statements, prepared in accordance with GAAP, as an operating lease, whether or not such transaction is a leveraged lease (in which the Financing Entity is the owner of the Purchased Assets for U.S. federal income tax purposes), or a synthetic lease, tax ownership operating lease, tax retention Operating lease or similar lease transaction where Buyer is treated as owner of the leased property for U.S. federal income tax purposes. Notwithstanding any contrary provisions contained in this Agreement, the parties agree that, before and after the Closing, Buyer, in its sole discretion, may assign any or all of its rights and obligations arising under this Agreement or any Ancillary Agreement to one or more Permitted Assignees, provided that, -------- ---- unless Seller shall agree to alternative arrangements in writing, no such assignment shall relieve Buyer of any obligation or liability to Seller under this Agreement or under any Ancillary Agreement, and provided further that, -------- ------- unless Seller shall agree to alternative arrangements in writing, the following shall apply: (a) Buyer shall provide Seller with prompt written notice of any such assignment. (b) No such assignment shall be effected if the making of the assignment will result in Seller's or Buyer's inability to obtain any consent or authorization reasonably required to consummate the transactions contemplated by this Agreement or to avoid economic detriment to the Seller arising from the consummation of such transactions. (c) Irrespective of any such assignment or the identity of the party or parties executing any Ancillary Agreements: 68 (i) Buyer shall remain jointly and severally liable to Seller and to third parties with respect to any Assumed Liabilities transferred to or undertaken by a Permitted Assignee, and shall remain jointly and severally liable to Seller with respect to any other covenant, obligation or liability to Seller under this Agreement or under an Ancillary Agreement that is. transferred to, or undertaken by, a Permitted Assignee, including without limitation, the payment of all sums due to Seller hereunder or under an Ancillary Agreement, it being understood that all such covenants, obligations and liabilities shall constitute the direct and primary obligation of Buyer to Seller (and to third parties in the case of the Assumed Liabilities); and (ii) Without limiting the generality of the foregoing, if and to the extent that the application of any principle of law or of common law would construe the retention by Buyer of the direct and primary obligation to perform any and all obligations, liabilities or covenants assigned to or assumed or undertaken by a Permitted Assignee to be a guaranty by the Buyer of the Permitted Assignee's performance, then the Buyer hereby irrevocably, absolutely and unconditionally guarantees to Seller the hill, prompt and faithful performance by such Permitted Assignee of all covenants and obligations to be performed by such Permitted Assignee under this Agreement and any Ancillary Agreement assigned to such Permitted Assignee. (d) Buyer further hereby agrees that a separate action or actions may be brought and prosecuted against Buyer for any such covenant, obligation or liability assigned to a Permitted Assignee, whether action is brought against the pertinent Permitted Assignee or whether such Permitted Assignee is joined in any such action or actions (Buyer hereby waiving any right to require Seller to proceed against a Permitted Assignee). (e) Buyer hereby authorizes Seller, without notice and without affecting Buyer's liability hereunder, from time to time to (i) renew, compromise, extend, accelerate, or otherwise change the terms of any obligation of a Permitted Assignee hereunder or under any Ancillary Agreement with the agreement of such Permitted Assignee, (ii) take and hold security for the obligations of any such Permitted Assignee and exchange, enforce, waive and release any such security, and (iii) apply such security and direct the order or manner of sale thereof as Seller in its discretion may determine. 69 (f) Buyer hereby further waives: (i) Any defense that may arise by reason of the incapacity or lack of authority of any Permitted Assignee; (ii) Any defense based upon a statute or rule of law which provides that the obligations of a surety must be neither larger in amount nor in other respects more burdensome than those of the principal; (iii) Any duty on the part of Seller to disclose to Buyer any facts that Seller may now or hereafter know about a Permitted Assignee; and (g) So long as Buyer has any obligation to Seller under this Agreement or the Ancillary Agreements, as to any Affiliate Assignee (but not any Financing Entity), any right to subrogation, reimbursement, exoneration or contribution or any other rights that would result in Buyer being deemed a creditor of a Permitted Assignee under the federal Bankruptcy Code or any other law, in each case siting from the existence or performance of obligations of a Permitted Assignee hereunder or under any Ancillary Agreement. 11.6 Arbitration. Any dispute, controversy or claim arising out of or ----------- relating to this agreement, or the breach, termination or validity hereof (a "Dispute"), shall be finally settled by arbitration in accordance with the then-prevailing Commercial Arbitration Rules of the American Arbitration Association, as modified herein (the "Rules"). The place of arbitration shall be Nevada. There shall be three arbitrators, of whom the Seller shall appoint one and of whom the Buyer shall appoint one. The two arbitrators so appointed shall select a third arbitrator who shall act as the chairman of the tribunal. If any arbitrator is not appointed within the time limits provided herein or in the Rules, such arbitrator shall be appointed by the American Arbitration Association. The arbitral tribunal is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover punitive, exemplary or similar damages with respect to any dispute. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act, 9 U.S.C. (s)(s) 1-16, and judgment upon any award may be entered in any court of competent jurisdiction. 11.7 Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Nevada (regardless of the laws that might otherwise govern under applicable Nevada principles of conflicts of law) 70 as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. 11.8 Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.9 Interpretation. The article and section headings contained in -------------- this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.10 Entire Agreement. This Agreement, including the documents, ---------------- exhibits, schedules, certificates and instruments referred to herein, and the Confidentiality Agreement embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of the Seller contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Offering Memorandum, dated March, 2000) as supplemented, or the correspondence relating to the divestiture of Seller's generation assets previously made available to the Buyer by the Seller and CSFB. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement; (i) provided, however, that the paragraph in the -------- ------- Confidentiality Agreement entitled "Non-Disclosure of Interest in Power Generation Assets" is, only with respect to the Purchased Assets, superceded by Section 7.5 of this Agreement, and (ii) in the event of any conflict between Section 7.2(b) of this Agreement and the Confidentiality Agreement, Section 7.2 (b) shall control. 11.11 Bulk Sales or Transfer Laws. The Buyer acknowledges that the --------------------------- Seller shall not comply with the provision of any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by the Seller with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. 71 IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. SIERRA PACIFIC POWER COMPANY By: -------------------------------------------- Name: William E. Peterson ------------------------------------------ Title: Sr. Vice President, General Counsel ----------------------------------------- & Corporate Secretary ----------------------------------------- NRG ENERGY, INC. By: -------------------------------------------- Name: Craig A. Mataczynski ------------------------------------------ Title: Senior Vice President ----------------------------------------- 72 TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS.......................................................................1 1.1 Definitions.......................................................................1 ARTICLE II PURCHASE AND SALE................................................................14 2.1 The Sale.........................................................................14 2.2 Excluded Assets..................................................................14 2.3 Assumed Liabilities..............................................................15 2.4 Excluded Liabilities.............................................................18 2.5 License of Non-Transferred Intangible Assets.....................................20 ARTICLE III PURCHASE PRICE...................................................................21 3.1 Purchase Price...................................................................21 3.2 Purchase Price Adjustment........................................................21 3.3 Allocation of Purchase Price.....................................................23 3.4 Proration........................................................................23 3.5 Adjustments For Other Transactions...............................................24 3.6 Buyer Group Transaction With IPC.................................................26 ARTICLE IV THE CLOSING......................................................................28 4.1 Time and Place of Closing........................................................28 4.2 Payment of Purchase Price........................................................28 4.3 Deliveries by Seller.............................................................29 4.4 Deliveries by Buyer..............................................................30 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER.........................................31 5.1 Organization; Qualification......................................................31 5.2 Authority Relative to this Agreement.............................................31 5.3 Consents and Approvals; No Violation.............................................32 5.4 Reports..........................................................................33 5.5 Financial Statements.............................................................33 5.6 Undisclosed Liabilities..........................................................33 5.7 Absence of Certain Changes or Events.............................................34 5.8 Title to Real Property...........................................................34 5.9 Leasehold Interests..............................................................34 5.10 Improvements.....................................................................34 5.11 Insurance........................................................................35 5.12 Environmental Matters............................................................35 5.13 Labor Matters....................................................................36 5.14 ERISA; Benefit Plans.............................................................36
Page ---- 5.15 Real Property Encumbrances.......................................................37 5.16 Condemnation.....................................................................37 5.17 Certain Contracts and Arrangements...............................................37 5.18 Legal Proceedings, etc...........................................................38 5.19 Permits..........................................................................38 5.20 Regulation as a Utility..........................................................39 5.21 Taxes............................................................................39 5.22 Title to Personal Property.......................................................39 5.23 Subchapter K Election............................................................39 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER..........................................40 6.1 Organization.....................................................................40 6.2 Authority Relative to this Agreement.............................................40 6.3 Consents and Approvals; No Violation.............................................41 6.4 Regulation as a Utility..........................................................42 6.5 Availability of Funds............................................................42 ARTICLE VII COVENANTS OF THE PARTIES.........................................................42 7.1 Conduct of Business of the Seller................................................42 7.2 Access to Information............................................................44 7.3 Expenses.........................................................................45 7.4 Further Assurances...............................................................45 7.5 Public Statements................................................................46 7.6 Consents and Approvals...........................................................46 7.7 Fees and Commissions.............................................................48 7.8 Use of Pollution Control Facilities..............................................48 7.9 Tax and Withholding Matters......................................................48 7.10 Supplements to Schedules.........................................................50 7.11 Employees........................................................................50 7.12 Risk of Loss.....................................................................53 7.13 Additional Covenants of the Buyer................................................53 7.14 Title Surveys....................................................................54 7.15 Documentation....................................................................54 ARTICLE VIII CLOSING CONDITIONS...............................................................54 8.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby.............................................54 8.2 Conditions to Obligations of Buyer...............................................56 8.3 Conditions to Obligations of Seller..............................................58 ARTICLE IX INDEMNIFICATION..................................................................60 9.1 Indemnification..................................................................60 9.2 Defense of Claims................................................................61
ii
Page ---- ARTICLE X TERMINATION AND ABANDONMENT......................................................64 10.1 Termination......................................................................64 10.2 Procedure and Effect of Termination..............................................65 10.3 Breakup Fee......................................................................65 ARTICLE XI MISCELLANEOUS PROVISIONS.........................................................66 11.1 Amendment and Modification.......................................................66 11.2 Waiver of Compliance; Consents...................................................66 11.3 No Survival of Representations and Warranties....................................66 11.4 Notices..........................................................................66 11.5 Assignment.......................................................................67 11.6 Arbitration......................................................................70 11.7 Governing Law....................................................................70 11.8 Counterparts.....................................................................71 11.9 Interpretation...................................................................71 11.10 Entire Agreement.................................................................71 11.11 Bulk Sales or Transfer Laws......................................................71
iii EX-10.W 32 0032.txt TRANSITIONAL POWER PURCHASE AGREEMENT, VALMY POWER Exhibit 10(W) TRANSITIONAL POWER PURCHASE AGREEMENT BY AND BETWEEN SIERRA PACIFIC POWER COMPANY AND VALMY POWER LLC DATED: OCTOBER 16, 2000 ASSET BUNDLE: NORTH VALMY TABLE OF CONTENTS
Section Page - ------- ---- 1. DEFINITIONS..............................................................................................1 2. TERM.....................................................................................................8 3. SECURITY................................................................................................10 4. SUPPLY SERVICE..........................................................................................11 5. NOTIFICATION............................................................................................14 6. PRICING OF ENERGY AND ANCILLARY SERVICES................................................................15 7. INVOICING AND PAYMENTS..................................................................................16 8. REGULATORY APPROVALS....................................................................................20 9. COMPLIANCE..............................................................................................20 10. INDEMNIFICATION.........................................................................................21 11. LIMITATION OF LIABILITY.................................................................................22 12. FORCE MAJEURE...........................................................................................23 13. DISPUTES................................................................................................24 14. NATURE OF OBLIGATIONS...................................................................................27 15. SUCCESSORS AND ASSIGNS..................................................................................27 16. REPRESENTATIONS.........................................................................................29 17. DEFAULT AND REMEDIES....................................................................................29 18 FACILITY ADDITIONS AND MODIFICATIONS....................................................................30 19. COORDINATION............................................................................................31 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE...........................................................31 21. OUTAGE SCHEDULING.......................................................................................31 22. REPORTS.................................................................................................32 23. COMMUNICATIONS..........................................................................................32 24. NOTICES.................................................................................................33 25. MERGER..................................................................................................34 26. HEADINGS................................................................................................34 27. COUNTERPARTS AND INTERPRETATION.........................................................................34 28. SEVERABILITY............................................................................................34 29. WAIVERS.................................................................................................35 30. AMENDMENTS..............................................................................................35 31. TIME IS OF THE ESSENCE..................................................................................35 32. APPROVALS...............................................................................................36 33. PLR SERVICE.............................................................................................36 34. CONFIDENTIALITY.........................................................................................36 35. CHOICE OF LAW...........................................................................................38
Exhibits Page - -------- ---- EXHIBIT A ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS..............................................A-1 EXHIBIT B PRICE FLOOR OF ENERGY, PRICE CEILING OF ENERGY, AND PRICE OF ANCILLARY SERVICES ....................................................................B-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE....................................................................C-1 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS...................................................D-1 EXHIBIT E YEAR END TRUE-UP INVOICE......................................................................E-1 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS.....................................................F-1 EXHIBIT G FORM OF AVAILABILITY NOTICE...................................................................G-1 EXHIBIT H FORM OF GUARANTEE.............................................................................H-1 EXHIBIT I COMPANY OBSERVED HOLIDAYS.....................................................................I-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT....................................................................J-1 EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE............................................................K-1 EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE......................................................L-1 EXHIBIT M ASSET BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS..........................................M-1
TRANSITIONAL POWER PURCHASE AGREEMENT This Agreement is made and entered into as of October 16, 2000 by and between Sierra Pacific Power Company, a Nevada corporation ("Buyer"), and Valmy Power LLC, a Delaware limited liability company (the "Supplier"). Buyer and Supplier are referred to individually as a "Party" and collectively as the "Parties." WITNESSETH: WHEREAS, Buyer is selling its North Valmy generating station and other assets associated therewith to NRG Energy, Inc., an affiliate of Supplier (the "Asset Sale"); WHEREAS, notwithstanding the Asset Sale, Buyer expects that it has been designated as the Provider of Last Resort ("PLR") for its Nevada retail electric customers who are unable to obtain electric service from an alternative seller or who fail to select an alternative seller. The load required to serve such customers, plus the customers under those wholesale sales agreements existing at the Effective Date, is referred to herein as Buyer's Transitional Resource Requirement; and WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest in the North Valmy generating station as a source of supply for its Transitional Resource Requirement; and WHEREAS, Supplier has or is willing to secure the necessary resources to provide a portion of Buyer's Transitional Resource Requirement; and WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell Energy and Ancillary Services under contract to Buyer; and NOW, THEREFORE, in consideration of the mutual covenants, representations and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows: 1. DEFINITIONS 1.1 Format. 1.1.1 References to Articles and Sections herein are cross-references to Articles and Sections, respectively, in this Agreement, unless otherwise stated. 1.1.2 Any parts of this Agreement which are incorporated by reference shall have the same meaning as if set forth in full text herein. 2 1.2 Definitions. As used in this Agreement, the following terms ----------- shall have the meanings set forth below: 1.2.1 "Agreement" means this Agreement together with the --------- Exhibits attached hereto, as such may be amended from time to time. 1.2.2 "Adjusted Replacement Cost of Energy" means the ----------------------------------- Replacement Cost of Energy that will be due from Supplier after True-up in accordance with the provisions of Section 7.5. Example determinations of the Adjusted Replacement Cost of Energy are shown on Exhibit E. 1.2.3 "Ancillary Services" means those capacity-related ------------------ services as listed in Exhibit B as well as the Energy component of such services. These services are defined in Buyer's OATT. 1.2.4 "Asset Bundle" means the North Valmy generating ------------ station and other assets associated therewith pursuant to the terms of the Asset Sale Agreement. 1.2.5 "Asset Bundle Capacity" means, with respect to each --------------------- unit listed in Exhibit A, the net generating capacity (in megawatts ("MW")) of such unit, as modified from time to time in accordance with Section 5.2, Section 20, and Section 21, and not to exceed at any time the net capacity for each unit listed in Exhibit A. Asset Bundle Capacity shall also mean, as the context requires, the Energy (in megawatt-hours ("MWh")) and the Ancillary Services which the units would be capable of producing if they operated at the capacity level described in the first sentence of this Section 1.2.5. 1.2.6 "Asset Sale" has the meaning set forth in the ---------- Recitals. 1.2.7 "Asset Sale Agreement" means the Agreement between -------------------- Buyer and Supplier's affiliate, NRG Energy, Inc., dated as of October 16, 2000, to purchase Buyer's Asset Bundle. 1.2.8 "Asset Sale Closing" means the transfer of Buyer's ------------------ ownership of the Asset Bundle through the consummation of the Asset Sale pursuant to the terms of the Asset Sale Agreement. 1.2.9 "Average Cost of Delivered Energy" means the total -------------------------------- cost of Delivered Energy for the Contract Year after the application of the Annual True-up Mechanism from Section 7.5 divided by the total Delivered Energy for the Contract Year. Example determinations of Average Cost of Delivered Energy are shown on Exhibit E. 3 1.2.10 "Availability Notice" means a notice delivered from ------------------- time to time by Supplier to Buyer pursuant to Section 5.2 notifying Buyer of changes in the availability of the Asset Bundle. 1.2.11 "Business Day" means any day other than Saturday, ------------ Sunday, and any day that is an observed holiday by Buyer as shown on Exhibit I. 1.2.12 "Buyer's OATT" means Buyer's then-effective Open ------------ Access Transmission Tariff, as it may be amended, which as been accepted for filing by the FERC. 1.2.13 "CALPX" means the California Power Exchange and any ----- successor entity thereto. 1.2.14 "Confidential Information" has the meaning set forth ------------------------ in Section 34. 1.2.15 "Contract Year" means, with respect to the first ------------- Contract Year, the period beginning on the Effective Date and, with respect to each subsequent Contract Year, the period immediately following the end of the preceding Contract Year, and in each case ending on the earlier of the date which is twelve (12) months thereafter or the termination date of this Agreement. 1.2.16 "Control Area" has the meaning set forth in Buyer's ------------ OATT. 1.2.17 "Control Area Operator" means an entity or --------------------- organization, and its representatives, which is responsible for operating and maintaining the reliability of the electric power system(s) within the Buyer's Control Area. The Control Area Operator is also referred to as the transmission operator. 1.2.18 "Credit Amount" shall mean an amount equal to the ------------- TPPA Amount, plus an additional amount equal to $40/MWh multiplied by 286 megawatts, multiplied by the number of hours remaining in this Agreement until March 1, 2003. 1.2.19 "Delivered Amount" means, with respect to any ---------------- Dispatch Hour, the Energy delivered by Supplier to Buyer at the designated Point(s) of Delivery during such Dispatch Hour, whether or not such Energy was generated by the Asset Bundle, plus any additional amounts pursuant to Section 4.1.2, Section 4.1.3 and the Ancillary Services provided by Supplier for Buyer during any Dispatch Hour pursuant to the terms of this Agreement. 1.2.20 "Derating" means a reduction to the Asset Bundle -------- Capacity. 4 1.2.21 "Dispatch Hour" means the prescribed hour(s) when ------------- Energy is to be delivered by Supplier to Buyer at the designated Point(s) of Delivery and the prescribed hour(s) when Ancillary Services are to be provided to the ISA by Supplier on behalf of Buyer. 1.2.22 "EDU" means electric distribution utility, the --- organization with the responsibility for the distribution of energy over Buyer's distribution system to retail end-users. 1.2.23 "Effective Date" means the date that this Agreement -------------- becomes effective which shall be the date on which the Closing Date, as defined in the Asset Sale Agreement, actually occurs; provided, however, that the Effective Date shall not occur until the FERC has accepted this Agreement without condition or the Parties have modified this Agreement as provided in Section 2.2.2 and the FERC has accepted the modified Agreement for filing. 1.2.24 "Emergency Condition" shall mean a public declaration ------------------- by the ISA or Control Area Operator that the Control Area is in danger of imminent voltage collapse or uncontrollable cascading outages. 1.2.25 "Energy" means electricity (measured in MWh) and ------ associated power-producing capacity to be provided by Supplier to Buyer pursuant to this Agreement. Also known as "firm energy and associated firm capacity". 1.2.26 "Event of Default" has the meaning set forth in ---------------- Section 17 hereof. 1.2.27 "FERC" means the Federal Energy Regulatory Commission ---- and any successor agency thereto. 1.2.28 "Force Majeure" has the meaning set forth in Section ------------- 12 hereof. 1.2.29 "GAAP" means Generally Accepted Accounting Principles ---- for the United States. 1.2.30 "Good Utility Practice" means the applicable --------------------- practices, methods, and act: (i) required by applicable Laws, permits and reliability criteria, whether or not the Party whose conduct at issue is a member thereof, and (ii) otherwise engaged in or approved by a significant portion of the United States electric utility industry during the relevant time period, which, in the exercise of reasonable judgement in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, safety, environmental 5 protection, economy and expediency. Good Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to practices, methods or acts generally accepted in the United States electric utility industry. 1.2.31 "Governmental Authority" means any foreign, federal, ---------------------- state, local, tribal or other governmental, regulatory or administrative agency, court, commission, department, board, or other governmental subdivision, legislature, rulemaking board, tribunal, arbitrating body, or other governmental authority. 1.2.32 "Gross Replacement Costs of Energy" means Buyer's --------------------------------- Replacement Cost of Energy prior to adjustment for the amount that Buyer would have paid for the Energy if Supplier had delivered the Energy to Buyer. Example determinations of Gross Replacement Costs of Energy are shown on Exhibit D. 1.2.33 "Guarantee" has the meaning set forth in Section --------- 3.1.2 hereof. 1.2.34 "Guarantor" has the meaning set forth in Section --------- 3.1.2 hereof. 1.2.35 "Invoiced Replacement Costs" means the Replacement -------------------------- Costs which have been billed to Supplier or subtracted from payments to Supplier in accordance with the provisions of Section 4.2 and Section 7.4. 1.2.36 "ISA" means the Mountain West Independent System --- Administrator, or the regional transmission organization authorized with the responsibility for the scheduling and administration of Energy and Ancillary Services over, through and within the Transmission System in coordination with other interconnected entities to provide transmission services. The ISA is also referred to herein as transmission administrator. 1.2.37 "ISA's OATT" means the ISA's then-effective Open ---------- Access Transmission Tariff, as it may be amended, which as been accepted for filing by the FERC. 1.2.38 "Law" means any law, treaty, code, rule, regulation, --- order, determination, permit, certificate, authorization, or approval of an arbitrator, court or other Governmental Authority which is binding on a Party or any of its property. 1.2.39 "Limit on Excused Energy" means the amount of energy ----------------------- that can be excused under the provisions of Section 12.4 as shown on Exhibit A. 1.2.40 "Market Price of Energy" has the meaning set forth in ---------------------- Section 6.2.1. 6 1.2.41 "Minimum Annual Energy Take" has the meaning set -------------------------- forth in Section 4.1.2. 1.2.42 "Minimum Hourly Energy Take" has the meaning set -------------------------- forth in Section 4.1.3. 1.2.43 "Minimum Investment Grade Rating" of a Person means ------------------------------- that such Person has a minimum credit rating on its senior unsecured debt securities of at least two of the following ratings: (i) BBB as determined by Standard & Poor's Corporation, (ii) Baa2 as determined by Moody's Investors Service, Inc., or (iii) a comparable rating by another nationally recognized rating service reasonably acceptable to Buyer. 1.2.44 "Minimum Tangible Net Worth" means the total book -------------------------- value of shareholder's equity less the balance of goodwill, as reported on the latest quarterly balance sheet prepared in accordance with Generally Accepted Accounting Principles (GAAP). 1.2.45 "Negotiated Service" has the meaning set forth in the ------------------ wholesale generation tariff filed in FERC Docket No. ER00-2018-000. 1.2.46 "NERC" means the North American Electric Reliability ---- Council and any successor entity thereto. 1.2.47 "Nonemergency Condition" shall mean the ---------------------- determination, direction or order by the ISA, or Control Area Operator to Supplier and/or Buyer to change the Supply Amount which is not a result of or due to an Emergency Condition. A Nonemergency Condition includes an insufficiency of Ancillary Services to securely operate the Control Area. 1.2.48 "Operating Representatives" means the persons ------------------------- designated to transmit and receive routine operating and emergency communications required under this Agreement. 1.2.49 "Party" has the meaning set forth in the preamble of ----- this Agreement. 1.2.50 "Permitted Deratings" means those reductions to the ------------------- Asset Bundle Capacity of which Supplier may notify Buyer from time to time in an Availability Notice pursuant to Section 5.2. 1.2.51 "Person" means any natural person, partnership, ------ limited liability company, joint venture, corporation, trust, unincorporated organization, or governmental entity or any department or agency thereof. 1.2.52 "Point of Delivery" means the point (s) which has ----------------- (have) been specified as the Interconnection Point(s) in the Interconnection Agreement 7 between Buyer and Supplier, dated October 16, 2000, as it may be amended from time to time, as well as any alternative locations agreed upon pursuant to Section 4.1.6. 1.2.53 "Price Ceiling of Energy" means the ceiling price of ----------------------- Energy as stated in Exhibit B. 1.2.54 "Price Floor of Energy" means the floor price of --------------------- Energy as stated in Exhibit B. 1.2.55 "Provider of Last Resort (PLR)" has the meaning set ----------------------------- forth in the Recitals. 1.2.56 "PUCN" means the Public Utilities Commission of ---- Nevada and any successor entity thereto. 1.2.57 "Recourse Service" has the meaning set forth in the ---------------- wholesale generation tariff filed in FERC Docket No. ER00-2018-000. 1.2.58 "Replacement Costs" means with respect to a period of ----------------- time, the difference between (a) the actual costs, including without limitation related penalties and transmission costs, incurred by Buyer to replace any shortfall between (1) the Supply Amount and (2) the Delivered Amounts of Energy, (or in the case of Ancillary Services the Supplier's schedule of Ancillary Services) during such period and (b) the payments the Supplier would have been entitled to in respect of such shortfall in delivery; provided that Replacement Costs shall also be subject to the annual true-up mechanism set forth in Section 7.5. 1.2.59 "Supply Amount" means, with respect to each Dispatch ------------- Hour, the amount of Energy and Ancillary Services, not to exceed the Asset Bundle Capacity for such Dispatch Hour, requested by Buyer to be delivered by Supplier during any Dispatch Hour. The Supply Amount for any Dispatch Hour shall be determined pursuant to Section 5.1. 1.2.60 "Total Amount of Energy Replaced" means the summation ------------------------------- of Replacement Energy as shown on Exhibit E. 1.2.61 "TPPA Amount" means the amount paid by Buyer to ----------- Supplier in consideration of this Agreement. 1.2.62 "Transitional Resource Requirement" or "TRR" means --------------------------------- the Energy and loss compensation necessary for Buyer to meet its obligations as a Provider of Last Resort (PLR) for Nevada and under those wholesale sales agreements existing at the Effective Date. 8 1.2.63 "Transmission System" means the facilities used to ------------------- provide transmission service within Buyer's Control Area in accordance with Buyer's OATT or the ISA's OATT, as may be applicable. 1.2.64 "WSCC" means the Western Systems Coordinating Council ---- and any successor entity thereto. 2. TERM 2.1 Term. Unless terminated earlier pursuant to the terms of this ---- Agreement, the term of this Agreement shall commence on the Effective Date and continue until the earlier of the effective date of an order by a Governmental Authority terminating Buyer's PLR responsibility, or March 1, 2003. Supplier shall provide service under this Agreement commencing on the first hour on the day after the Effective Date. 2.2 Termination. ----------- 2.2.1 Except pursuant to Sections 2.2.2 or 17.4, this Agreement may not be terminated without the explicit prior written approval of Buyer. 2.2.2 If, prior to the Asset Sale Closing, the FERC or any other Governmental Authority places conditions on or requires revisions of this Agreement which have a material adverse effect on Supplier or Buyer, the Parties agree to negotiate in good faith those amendments to the Agreement reasonably needed to preserve the bargain between the Parties. If the Parties fail to negotiate mutually acceptable amendments to this Agreement within sixty (60) days of such action by the FERC or other Governmental Authority, either Party may terminate the Agreement after first notifying the other Party in writing at least ten (10) Business Days prior to the termination date; provided that neither Party may exercise a right of termination pursuant to this Section 2.2.2 after the Asset Sale Closing. 2.2.3 This Agreement may be terminated with the mutual agreement of the Parties. 2.2.4 This Agreement also may be terminated at Buyer's unilateral discretion after the Effective Date subject to Section 2.3 provided FERC has accepted the wholesale generation tariff filed in FERC Docket No. ER00-2018-000 on terms and conditions that do not have a material adverse effect on the business, operations or financial condition of the Purchased Assets, as defined in the Asset Sale Agreement. If within seven (7) days from the date of receipt by Supplier from Buyer of the FERC's order in Docket No. ER00-2018-000, Supplier does not provide to Buyer its written, reasonable determination and rationale that such FERC order has resulted in a material adverse effect, as stated in the first paragraph of this Section 2.2.4, such FERC order 9 shall be deemed automatically acceptable to Supplier. If Supplier timely submits its determination but Buyer disagrees with Supplier's determination regarding the effect of such FERC order, the disagreement shall be subject to resolution pursuant to Section 13 of this Agreement, in which case this Agreement shall remain in effect until a final determination to the contrary is made pursuant to Section 13. 2.2.5 Any termination of this Agreement pursuant to this Section 2 shall not take effect until FERC either authorizes the termination or accepts a written notice of termination. 2.3 Effect of Termination. --------------------- 2.3.1 Adjustment of TPPA Amount. If the Effective Date of ------------------------- this Agreement is before June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% plus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between the Effective Date and June 1, 2001. An example calculation is shown on Exhibit J. If the Effective Date of this Agreement is after June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% minus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between June 1, 2001 and the Effective Date. An example calculation is shown on Exhibit J. If this Agreement is terminated before March 1, 2003, Supplier shall pay to Buyer an amount, in accordance with the provisions of Section 7, equal to the TPPA Amount which existed before any adjustment in accordance with the first or second paragraph of this Section 2.3.1, multiplied by the sum of the monthly adjustments for each month or portion thereof between the date on which this Agreement is terminated and March 1, 2003. An example calculation is shown on Exhibit J. 2.3.2 Any default or termination of this Agreement shall not release either Party from any applicable provisions of this Agreement with respect to: 2.3.2.1 The payment of liquidated damages pursuant to Sections 4.2, 12, 17, 18, or 21. 2.3.2.2 Indemnity obligations contained in Section 10, to the extent of the statute of limitations period applicable to any third party claim. 2.3.2.3 Limitation of liability provisions contained in Section 11. 10 2.3.2.4 Payment of any unpaid amounts in respect of obligations arising prior to or resulting from termination. 2.3.2.5 For a period of one (1) year after the termination date, the right to raise a payment dispute and the resolution thereof pursuant to Section 13. 2.3.2.6 The resolution of any dispute submitted pursuant to Section 13 prior to, or resulting from, termination. 3. SECURITY 3.1 Supplier Certification; Guarantee. As a condition of Buyer's --------------------------------- execution of, and continuing compliance with, this Agreement, Supplier shall at Supplier's option comply with the provisions of either Section 3.1.1 or Section 3.1.2. 3.1.1 Supplier Certification. Supplier shall (a) provide a ---------------------- certificate from a duly authorized corporate officer of Supplier certifying that, as of the Effective Date, Supplier has a credit rating equal to or higher than the Minimum Investment Grade Rating; or (b) post a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.1.2 Guarantee. In the alternative to the provisions of --------- Section 3.1.1, the Supplier may provide a corporate guarantee, in form and substance as set forth in Exhibit H, made by an entity (the "Guarantor") that: 3.1.2.1 has a credit rating equal to or higher than the Minimum Investment Grade Rating, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a credit rating equal to or higher than the Minimum Investment Grade Rating; or 3.1.2.2 has a MTNW of no less than one (1) billion dollars, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a MTNW of no less than one (1) billion dollars; or 3.1.2.3 posts a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 11 3.2 Compliance. ---------- 3.2.1 Reporting. If at any time during the term of this --------- Agreement, Standard & Poor's Corporation, Moody's Investors Service, Inc. or another nationally recognized firm downgrades the credit rating of Supplier, the Guarantor, or the financial institution that issued the letter of credit, as applicable, then Supplier shall provide Buyer with written notice of such change of circumstance within two (2) Business Days of any such change. In the event such a downgrade also constitutes an Event of Default pursuant to Section 17, the requirements of this Section 3.2.1 are in addition to, and not in lieu of, the requirements of Section 17. 4. SUPPLY SERVICE 4.1 Obligations of the Parties. -------------------------- 4.1.1 Supply Amount. Supplier shall be required to provide the ------------- Supply Amount in any Dispatch Hour. As provided in Section 5.1, Buyer shall make reasonable efforts to ensure that the Supply Amount is no greater than necessary to satisfy Buyer's TRR. 4.1.1.1 With the Buyer's prior consent, not to be unreasonably withheld or delayed, Supplier shall be entitled to generate or otherwise procure the Supply Amount from sources other than the Asset Bundle. 4.1.1.2 Supplier shall deliver the Supply Amount to Buyer during the Dispatch Hour on a continuous basis at the Point(s) of Delivery and shall schedule the Supply Amount in accordance with the Buyer's OATT or the ISA's OATT, as applicable. 4.1.1.3 The Buyer at its sole discretion shall designate the allocation of the Supply Amount between Energy and Ancillary Services in accordance with the notification provisions of Section 5. 4.1.1.3.1 The Parties recognize that operation of the Asset Bundle is subject to, and thus the Supply Amount at times may be limited by, the operational parameters of the Asset Bundle. The Parties further recognize that the consolidation of two or more generating units into an Asset Bundle precludes contractual provisions addressing such operational parameters in a matter normally applied to Energy purchases from specified generating units. Consequently, Supplier will have the 12 right to raise concerns regarding the effect of such operational parameters upon Buyer's day-ahead requests, and Buyer will make good faith efforts to alleviate Supplier's concerns. 4.1.1.3.2 The Parties further recognize that the Asset Bundle also is subject to the contractual and operating constraints set forth in Exhibit M. 4.1.2 Minimum Annual Energy Take. The Buyer shall accept a -------------------------- minimum annual energy take during each Contract Year. The Minimum Annual Energy Take shall be set forth on Exhibit A. 4.1.2.1 Buyer's Obligation to Take. If Buyer is -------------------------- unwilling to accept the Minimum Annual Energy Take for any Contract Year, as may be adjusted pursuant to Section 4.1.2.2, the difference (in MWh) between the Supply Amount of Energy (including consideration for Energy that would have been taken but was unavailable due to Permitted Deratings or Force Majeure, as well as the Total Amount of Energy Replaced) and the Minimum Annual Energy Take shall be billed at the Price Ceiling of Energy less the Price Floor of Energy. An example of the monthly determination of the amount of Energy to be credited against the Minimum Annual Energy Take is shown on Exhibit L. 4.1.2.2 Adjustments to Minimum Annual Energy Take. ----------------------------------------- Buyer shall have the right to reduce the Minimum Annual Energy Take if the number of customers taking electric service from Buyer falls below the number of customers on December 31, 2000./1/ Adjustments will be applicable, on a pro rata basis, on the first (1st) day of the month immediately following Supplier's receipt of Buyer's notice of adjustment. Buyer shall provide supporting data in reasonable detail to support its calculations. An example of the calculation of a revised Minimum Annual Energy Take is shown on Exhibit K. 4.1.3 Minimum Hourly Energy Take. The Buyer shall accept a -------------------------- Minimum Hourly Energy Take for any Dispatch Hour if the Supply Amount, or a portion thereof, is provided to Buyer from the Asset Bundle. The Minimum Hourly Energy Take is stated in Exhibit A. 4.1.3.1 Buyer's Obligation to Take. If Buyer is -------------------------- unwilling to accept the Minimum Hourly Energy Take, the difference (in MWh) - -------------------------------- /1/ If the retail markets are opened to competition prior to December 31, 2000, the date immediately preceding the date on which the markets are opened will be substituted for December 31, 2000. 13 between the Supply Amount of Energy (including consideration for Energy that would have been taken but was unavailable due to Permitted Deratings or Force Majeure, as well as the Total Amount of Energy Replaced) and Minimum Hourly Energy Take shall be billed at the Price Ceiling of Energy less the Price Floor of Energy. 4.1.4 Supplier Rights to Output. Supplier may sell to ------------------------- others any portion of the Asset Bundle Capacity in excess of the Supply Amount. 4.1.5 Point(s) of Delivery. Supplier shall deliver, and -------------------- Buyer shall take delivery of, the Supply Amount of Energy at the Point(s) of Delivery. Subject to Section 4.1.6.2, Supplier shall be responsible for all costs associated with delivery of the Supply Amount of Energy to the Point(s) of Delivery. 4.1.6 Alternative Points of Delivery. For any Dispatch ------------------------------ Hour, either Party may designate one or more alternative Points of Delivery, subject to the other Party's prior approval and consistent with Buyer's OATT or the ISA's OATT, as applicable, such approval not to be unreasonably withheld or delayed. 4.1.6.1 If Supplier has designated an alternative Point of Delivery, Supplier shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.6.2 If Buyer has designated an alternative Point of Delivery, Buyer shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.7 Fuel. Buyer shall have no responsibility for any fuel ---- procurement or fuel transportation costs or activities associated with the Asset Bundle during the term of this Agreement. 4.1.8 Resale. Except as provided in the next sentence, the ------ Supply Amount may be resold by Buyer only as necessary to satisfy Buyer's TRR. If, after submitting the day-ahead request of the Supply Amount pursuant to Section 5.1, the Buyer determines the Supply Amount requested exceeds Buyer's actual TRR, then the Buyer also shall resell at wholesale that amount of Energy in excess of Buyer's actual TRR as necessary to balance its load and resources. 4.1.9 Right to Review. Buyer and Supplier each shall have --------------- the right to review during normal business hours the relevant books and records of the other Party to confirm the accuracy of such as it pertains to transactions under this Agreement. The review shall be consistent with standard business practices and shall follow reasonable notice to the other Party. Reasonable notice for a review of the previous month's records shall be at least a twenty-four (24) hour period from a Business 14 Day to a subsequent Business Day. If a review is requested of other than the previous month's records, then notice of that request shall be provided with a minimum of seven (7) calendar days written notice by the requesting Party. The notice shall specify the period to be covered by the review. The Party providing records can make reasonable requests that the receiving Party keep the records confidential, and the receiving Party shall take reasonable steps to accommodate such requests. 4.2 Liquidated Damages. ------------------ 4.2.1 If the Delivered Amount of Energy is less than the Supply Amount of Energy in any Dispatch Hour during a month, and Replacement Costs computed in respect of such month are greater than zero, then Supplier shall reimburse Buyer for such Replacement Costs. If Supplier's schedule of Ancillary Services is less than the Supply Amount of Ancillary Services in any Dispatch Hour during a month, Supplier shall reimburse Buyer for such Replacement Costs for the difference between Supplier's schedule and the Supply Amount of Ancillary Services. An example of the methodology used to calculate Replacement Costs is provided in Exhibit D. 4.2.2 Supplier also shall be responsible for any costs incurred by Buyer associated with a violation of reliability criteria (including but not limited to imbalance costs or penalties) due to a deviation between the Supply Amount and Delivered Amount. 4.2.3 The Parties recognize and agree that the payment of such amounts by Supplier pursuant to this Section 4.2 is an appropriate remedy in the event of such a failure and that any such payment does not constitute a forfeiture or penalty of any kind, but rather constitutes actual costs to Buyer under the terms of this Agreement. 4.3 Supplier Operating Representative. Supplier shall provide and --------------------------------- maintain a twenty-four (24) hour seven (7) day per week communication link with Buyer's control center and with Buyer's schedulers. Supplier's operating representatives shall be available to address and make decisions on all operational matters under this Agreement on a twenty-four (24) hour seven (7) day per week basis. 5. NOTIFICATION 5.1 Scheduling Notification. Buyer shall provide Supplier with a ----------------------- day-ahead request of the Supply Amount one (1) hour prior to when day-ahead bids are due to the CALPX. Buyer shall make reasonable efforts to ensure that the day-ahead request of the Supply Amount is no greater than that amount then projected to be necessary to satisfy Buyer's TRR. In addition, for each day-ahead request, the change in the Supply Amount from one (1) hour to the next hour shall be no greater than the ramping capability of the units within the Asset Bundle as shown 15 in Exhibit A. 5.2 Availability Notification. ------------------------- 5.2.1 No later than 5:00 a.m. (Pacific Time) of each day, Supplier shall deliver to Buyer an Availability Notice in the form set forth in Exhibit G. 5.2.2 Availability Notices shall provide, for the ninety-six (96) hour period starting at 6:00 a.m. (Pacific Time) that day, Supplier's hourly projection of the unavailability or derating ("Derating") of the Asset Bundle compared to the Asset Bundle Capacity figures stated for each unit in Exhibit A. Each Availability Notice also shall contain, as applicable: (a) the units which are subject to a Derating; (b) the magnitude of the Derating; (c) the hours during which the Derating is expected to apply; (d) the cause of the Derating; (e) the extent, if any, to which the Derating is attributable to a Permitted Derating; and (f) the projected Asset Bundle Capacity for each unit during the period covered by the Availability Notice, pursuant to Section 5.2.4 below. 5.2.3 If and to the extent a Derating is the result of one or more of the following causes, it shall be a Permitted Derating: (a) approved planned outages pursuant to Section 21; (b) response to an Emergency Condition as described in Section 20; or (c) subject to the limitations expressed in Section 12.5, a Force Majeure event. 5.2.4 In respect of any Dispatch Hour, the Asset Bundle Capacity of each unit shall be the Asset Bundle Capacity figure stated in Exhibit A minus any Permitted Derating applicable during such hour. 5.2.5 Neither the Asset Bundle Capacity nor the Supply Amount shall be reduced by Deratings which are not Permitted Deratings. Supplier shall be responsible for all Replacement Costs, pursuant to Section 4.2.1, caused by Deratings that are not Permitted Deratings. 16 6. PRICING OF ENERGY AND ANCILLARY SERVICES 6.1 Overview. The price of Energy paid by Buyer to Supplier shall -------- be based upon a designated hourly market price, subject to monthly floor, monthly ceiling, and annual true-up provisions. The Price Floor of Energy will ensure that Supplier will receive an average price for Energy for each month which is not less than the price stated in Exhibit B. The Price Ceiling of Energy provision provides that the average price of Energy paid to Supplier each month and for each year shall not exceed the price stated in Exhibit B. 6.2 Price of Energy. --------------- 6.2.1 Market Price of Energy. In respect of any Dispatch ---------------------- Hour, the designated Market Price of Energy shall be the North of Path 15 ("NP 15") hourly market-clearing price in the day-ahead market from the CALPX as published at the following Web Site (or its successor web site) http://www.calpx.com/prices/index_prices_dayahead_ -------------------------------------------------- trading.html. Should this hourly market in the day- ------------ ahead market not exist for the entire term, the Parties shall agree upon a similar market price index. 6.2.2 Price Floor of Energy. The Price Floor of Energy is --------------------- stated in Exhibit B and shall not change during the term of this Agreement. 6.2.3 Price Ceiling of Energy. The Price Ceiling of Energy ----------------------- is stated in Exhibit B and shall not change during the term of this Agreement. 6.3 Pricing of Ancillary Services. The price of the capacity ----------------------------- component of Ancillary Services is stated in Exhibit B. The price of Ancillary Services shall not change during the term of the Agreement. Supplier shall make available to Buyer and Buyer shall offer to pass through the Energy portion of Ancillary Services with respect to the Supply Amount to the ISA, or Control Area Operator, at the Price Ceiling of Energy (plus expected direct transaction costs). The net proceeds shall be credited to the Supplier pursuant to Section 7. 6.4 Price Revisions. The Parties waive any and all rights to seek --------------- to revise the provisions of this Agreement, including the prices stated, pursuant to Sections 205 and/or 206 of the Federal Power Act. 6.5 Recourse Service. Buyer agrees not to purchase Recourse ---------------- Service during the term of the Agreement. However, Buyer is permitted to purchase Negotiated Service during the term of the Agreement. 17 7. INVOICING AND PAYMENTS 7.1 Invoicing and Payment. On or before the tenth (10th) day of --------------------- each month, Supplier shall send to Buyer an invoice setting forth the Supply Amount, Delivered Amount, the Market Price of Energy pursuant to Section 6.2.1 for each Dispatch Hour in the previous month, any amount due in accordance with Section 7.13 and the total due from Buyer. The invoice shall be calculated based upon data available to Supplier and shall be in accordance with this Section 7 and Exhibit C. Buyer shall promptly notify Supplier if Buyer in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. 7.2 Monthly Invoice Calculation. On each monthly invoice, Supplier --------------------------- shall calculate the following amounts: 7.2.1 The Delivered Amount in respect of each Dispatch Hour multiplied by the corresponding Market Price of Energy pursuant to Section 6.2.1, summed over the billing period; 7.2.2 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Ceiling of Energy; 1.1.1 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Floor of Energy; 7.2.3 For each Dispatch Hour of the billing period, the shortfall, if any, between the Supply Amount and the Delivered Amount (and in the case of Ancillary Services the shortfall between the Supply Amount of Ancillary Services and Supplier's schedule of Ancillary Services); 7.2.4 The Supply Amount of Ancillary Service for each dispatch hour multiplied by the price of Ancillary Services as stated in Exhibit B; and 7.2.5 The Delivered Amount of Energy related to Ancillary Services for each dispatch hour multiplied by the Price Ceiling of Energy as stated in Exhibit B. 7.2.6 If applicable, any amount to be calculated in accordance with Section 7.13. 7.3 Supplier's Invoice. Supplier will invoice the lesser of the ------------------ amounts calculated in Sections 7.2.1 and 7.2.2, provided that if the amount calculated in Section 7.2.1 is less than the amount calculated in Section 7.2.3, Supplier shall invoice Buyer the amount calculated in Section 7.2.3. Supplier shall also include in its invoice the amounts calculated in Sections 7.2.5, 7.2.6 and 7.2.7. If the Delivered Amount exceeds the Supply Amount, Buyer shall not be obligated to pay for the excess amount. Buyer shall pay Supplier for the amounts invoiced pursuant to Section 7.2.6 upon Buyer's receipt of payment from ISA or Control Area Operator. Examples of this monthly invoice calculation (and annual true-up process) are 18 contained in Exhibit C. 7.4 Buyer's Invoice. In the event any shortfall occurs pursuant to --------------- Section 7.2.4 or payment is due to Buyer pursuant to Section 7.13, Buyer shall within ten (10) Business Days of receipt of Supplier's invoice deliver to Supplier a Buyer's invoice detailing any Replacement Costs or other payment due. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. Buyer shall have the right to adjust the invoices issued in accordance with this Section 7.4 if Buyer incurs Replacement Costs that were not known when earlier invoices were issued. Adjusted invoices shall be issued within thirty (30) days of the date on which the additional Replacement Costs become known. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's adjusted invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. 7.5 Annual True-Up Mechanism for Energy. ----------------------------------- 7.5.1 The annual true-up mechanism will provide adjustments among the Parties with respect to each Contract Year in the following scenarios: (a) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is less than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. (b) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is greater than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall 19 subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Market Price of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. (c) If Buyer incurred Replacement Costs for energy during the Contract year, Supplier shall multiply the Total Amount of Energy Replaced during the Contract Year by the Average Cost of Delivered Energy after true-up as determined in accordance with Section 7.5.1 (a) or 7.5.1 (b). If the amount so obtained is greater than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be zero. If the amount so obtained is less than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be the sum of the monthly Gross Replacement Costs of Energy less the amount obtained in accordance with the first sentence of this Section 7.5.1(c). If the Adjusted Replacement Cost of Energy is greater than the sum of the monthly Invoiced Replacement Costs of Energy from Buyer's Invoices for the Contract Year, Supplier shall pay the difference to Buyer. If the sum of the monthly Invoiced Replacement costs of Energy is greater than the Adjusted Replacement Cost of Energy, Buyer shall pay the difference to Seller. 7.5.2 True-up adjustments will be calculated by Supplier within twenty (20) days after each Contract Year. Examples of the true-up calculations and invoice form are set forth in Exhibit E. Interest shall be calculated pursuant to 18 CFR Section 35.19a and shall be included in the true-up invoice. Invoices for true-up adjustments shall be submitted by Supplier within thirty (30) days after the end of the Contract Year. Payments for such invoices shall be due from Buyer thirty (30) days from receipt of the true-up invoice. 7.6 Invoice Disagreements. Should there be a good faith dispute --------------------- over any invoice, the Parties shall promptly seek resolution pursuant to Section 13. Pending resolution of the invoice dispute, payment shall be made or offsets or credits taken, as applicable, based upon the undisputed portion of the invoice. 20 7.7 Adjustments. Upon resolution of the dispute, the prevailing ----------- Party shall be entitled to receive the disputed amount, as finally determined to be payable along with interest (calculated pursuant to 18 C.F.R. (S)35.19a through the date of payment. No invoice (or payment covered thereby) shall be subject to adjustment unless notice or request for adjustment is given within one (1) year of the date payment thereunder was due. 7.8 Method of Payment. Subject to Sections 7.3, 7.6 and 7.7, Buyer ----------------- shall remit all amounts due by wire or electronic fund transfer, pursuant to Supplier's invoice instructions, no later than thirty (30) days after receipt of the invoice. 7.9 Overdue Payments. Overdue payments shall bear interest from ---------------- and including, the due date to the date of payment on the unpaid portion calculated pursuant to 18 C.F.R.(S)35.19a. 7.10 Buyer Right to Offset. Buyer shall have the right to offset --------------------- any amounts Supplier owes to Buyer, including Replacement Costs (except for such amounts disputed in good faith by Supplier), against the amounts owed by Buyer to Supplier. 7.11 Taxes. Each Party shall pay ad valorem and other taxes ----- attributed to its facilities and services provided. Supplier shall not include any taxes of any kind in its invoices to Buyer. The prices of Energy and Ancillary Services shall not change during the term of this Agreement as a result of any changes in local, state or federal taxes, fees or levies. 7.12 Late Invoices. If either Party submits an invoice outside of ------------- the time deadlines set forth herein, that Party shall not forfeit its rights to collect the amounts due thereunder, provided that such invoice is no more than six (6) months late, and provided that changes to invoices remain subject to the deadline in Section 7.7. 7.13 Termination Prior to March 1, 2003. Notwithstanding any other ---------------------------------- provision herein, in the event that this Agreement is terminated before March 1, 2003 and as a result of such termination Buyer is entitled to a payment in accordance with Section 2.3.1, Supplier shall include an amount calculated in accordance with Section 2.3.1 and Exhibit J, to be paid by Supplier to Buyer in the next monthly invoice submitted to Buyer following such termination. 8. REGULATORY APPROVALS 8.1 This Agreement will be filed with the FERC and any other appropriate regulatory agencies by the appropriate Party as may be required. 9. COMPLIANCE 9.1 Each Party shall comply with all relevant Laws and shall, at its sole expense, maintain in full force and effect all relevant permits, authorizations, licenses, and other authorizations material to the maintenance of facilities and the performance of obligations under this Agreement. 21 9.2 Each Party and its representatives shall comply with all relevant requirements of any authorized Control Area Operator, ISA, and/or EDU to ensure the safety of its employees and the public, and to ensure electric system reliability and integrity, material to the performance of this Agreement. 9.3 Buyer and Supplier shall perform or cause to be performed, their obligations under this Agreement in all material respects in accordance with Good Utility Practices. Supplier covenants and agrees that as of the Effective Date it shall (a) have the right to control the operation of the Asset Bundle (b) be willing and able to perform its obligations under this Agreement. 10. INDEMNIFICATION 10.1 To the fullest extent permitted by law, a Party to this Agreement ("the Indemnifying Party") shall indemnify, defend and hold harmless the other Party, its parent, affiliates, and successors and agents (each an "Indemnified Party") from and against any and all claims, demands, suits, obligations, payments, liabilities, costs, judgments, damages, losses or expenses asserted by third parties against an Indemnified Party and arising out of, relating to, or resulting from the Indemnifying Party's breach of, or the negligent performance of its obligations under this Agreement. 10.1.1 Such indemnity shall also extend to actual courts costs, attorneys' fees, expenses and other liabilities incurred in the defense of any claim, action or proceeding, including negotiation, settlement, defense and appeals, to which this indemnification obligation applies. In furtherance of the foregoing indemnification and not by way of limitation thereof, the Indemnifying Party hereby waives any defense it otherwise might have against the Indemnified Party under applicable workers' compensation laws. 10.1.2 In claims against any Indemnified Party by an agent of the Indemnifying Party, or anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Section 10 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Indemnifying Party or a subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts. 10.1.3 Such indemnity shall also extend to all costs and expenses incurred by the Indemnified Party in any action or proceeding to enforce the provisions of this Agreement, but only if and to the extent the Indemnified Party prevails in such action or proceeding. 10.2 No Negation of Existing Indemnities; Survival. Each Party's --------------------------------------------- indemnity 22 obligations hereunder shall not be construed to negate, abridge or reduce other rights or obligations or indemnity which would otherwise exist at law or equity. The obligations contained herein shall survive any termination, cancellation, or suspension of this Agreement to the extent that any third party claim is commenced during the applicable statute of limitations period. 10.3 Indemnification Procedures. -------------------------- 10.3.1 Any Party seeking indemnification under this Agreement shall give the other Party notice of such claim promptly but in any event on or before thirty (30) days after the Party's actual knowledge of such claim or action. Such notice shall describe the claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the claim that has been, or may be sustained by, said Party. To the extent that the other Party will have been actually and materially prejudiced as a result of the failure to provide such notice, such notice will be a condition precedent to any liability of the other Party under the provisions for indemnification contained in this Agreement. 10.3.2 In any action or proceeding brought against an Indemnified Party by reason of any claim indemnifiable hereunder, the Indemnifying Party may, at its sole option, elect to assume the defense at the Indemnifying Party's expense, and shall have the right to control the defense thereof and to determine the settlement or compromise of any such action or proceeding. Notwithstanding the foregoing, an Indemnified Party shall in all cases be entitled to control its defense in any action if it: (i) may result in injunctions or other equitable remedies in respect of the Indemnified Party which would affect its business or operations in any materially adverse manner; (ii) may result in material liabilities which may not be fully indemnified hereunder; or (iii) may have a significant adverse impact on the business or the financial condition of the Indemnified Party (including a material adverse effect on the tax liabilities, earnings or ongoing business relationships of the Indemnified Party) even if the Indemnified Party pays all indemnification amounts in full. 10.3.3 Subject to Section 10.3.2, neither Party may settle or compromise any claim for which indemnification is sought under this Agreement without the prior consent of the other Party; provided, however, said consent shall not be unreasonably withheld or delayed. 11. LIMITATION OF LIABILITY 11.1 Responsibility for Damages: Except as otherwise provided -------------------------- herein or to the extent 23 of the other Party's negligence or willful misconduct, each Party shall be responsible for all physical damage to or destruction of the property, equipment and/or facilities owned by it and its affiliates and any physical injury or death to natural Persons resulting therefrom, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party for such damage; provided, that in any such case the Parties will exercise Due Diligence to remove the cause of any disability at the earliest practicable time. 11.2 No Consequential Damages: To the fullest extent permitted by ------------------------ law and notwithstanding other provisions of this Agreement, in no event shall a Party, or any of its Agents, be liable to the other Party, whether in contract, warranty, tort, negligence, strict liability, or otherwise, for special, indirect, incidental, multiple, consequential (including but not limited to lost profits or revenues and lost business opportunities), or punitive damages related to or resulting from performance or nonperformance of this Agreement or any activity associated with or arising out of this Agreement. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 11.2. In addition, this limitation on liability shall not apply with respect to claims pursuant to Section 10 hereof. 11.3 Survival: The provisions of this Section 11 shall survive any -------- termination, cancellation, or suspension of this Agreement. 12. FORCE MAJEURE 12.1 An event of "Force Majeure" shall be defined as any interruption or failure of service or deficiency in the quality or quantity of service or any other failure to perform any of its obligations hereunder to the extent such failure occurs without fault or negligence on the part of that Party and is caused by factors beyond that Party's reasonable control, which by the exercise of reasonable diligence that Party is unable to prevent, avoid, mitigate or overcome, including: (i) acts of God or the public enemy, such as storms, flood, lightning, and earthquakes, (ii) failure, threat of failure, or unscheduled withdrawal of facilities from operation for maintenance or repair, and including unscheduled transmission and distribution outages, (iii) sabotage of facilities and equipment, (iv) civil disturbance, (v) strike or labor dispute, (vi) action or inaction of a court or public authority, or 24 (vii) any other cause of similar nature beyond the reasonable control of that Party. 12.2 Economic hardship of either Party shall not constitute Force Majeure under this Agreement. Notwithstanding this, if Buyer suffers an event of Force Majeure it shall be relieved of its obligation to take delivery of, or otherwise pay for, Energy and Ancillary Services under this Agreement for the duration of the event of Force Majeure. In addition, if Buyer is unable to have Energy and Ancillary Services delivered from the Point(s) of Delivery to its service territory due to an outage on the Transmission System, that shall be considered a Force Majeure event and shall relieve Buyer of performance for the extent of the event. 12.3 In the event of a Force Majeure, neither Party shall be considered in default under this Agreement or responsible to the other Party in tort, strict liability, contract or other legal theory for damages of any description, and affected performance obligations shall be extended by a period equal to the term of the resultant delay, but in no event shall exceed the term of the Agreement, provided that the Party relying on a claim of Force Majeure: (i) provides prompt written notice of such Force Majeure event to the other Party, giving an estimate of its expected duration and the probable impact on the performance of its obligations hereunder; (ii) exercises all reasonable efforts to continue to perform its obligations under this Agreement; (iii) expeditiously takes action to correct or cure the event or condition excusing performance so that the suspension of performance is no greater in scope and no longer in duration than is dictated by the problem; provided, however, that settlement of strikes or other labor disputes will be completely within the sole discretion of the Party affected by such strike or labor dispute; (iv) exercises all reasonable efforts to mitigate or limit damages to the other Party; and (v) provides prompt notice to the other Party of the cessation of the event or condition giving rise to its excuse from performance. 12.4 Notwithstanding the above provisions, a Force Majeure event shall excuse Supplier from its obligation to deliver the Supply Amount pursuant to Section 4 of this Agreement only for the first forty-eight (48) hours of the Force Majeure event; provided that such forty-eight (48) hour limit shall not apply to the extent the Force Majeure event is an outage on the Transmission System. After such twenty-four (24) hour period, Supplier must either deliver the Supply Amount at the Point(s) of Delivery or pay liquidated damages pursuant to Section 4.2 of this Agreement. 25 12.5 If Supplier has notified Buyer of an event of Force Majeure, and if Supplier so requests, Buyer will attempt to replace the Supply Amount that is not excused in accordance with Section 12.4 with Energy or Ancillary Services from another Asset Bundle. However, Buyer's inability to acquire such replacement Energy or Ancillary Services shall not excuse Supplier from Supplier's obligation to deliver the Supply Amount not otherwise excused in accordance with Section 12.4 13. DISPUTES 13.1 Any action, claim or dispute which either Party may have against the other arising out of or relating to this Agreement or the transactions contemplated hereunder, or the breach, termination or validity thereof (any such claim or dispute, a "Dispute") shall be submitted in writing to the other Party. The written submission of any Dispute shall include a concise statement of the question or issue in dispute together with a statement listing the relevant facts and documentation that support the claim. 13.2 The Parties agree to cooperate in good faith to expedite the resolution of any Dispute. Pending resolution of a Dispute, the Parties shall proceed diligently with the performance of their obligations under this Agreement. 13.3 The Parties shall first attempt in good faith to resolve any Dispute through informal negotiations by the Contract Representatives. In the event that the Contract Representatives are unable to satisfactorily resolve the Dispute within thirty (30) days from the receipt of notice of the Dispute, either Party may by written notice to the other Party refer the Dispute to its respective senior management for resolution as promptly as practicable. If the Parties' senior management are unable to resolve the Dispute within forty-five (45) days from the date of such referral, thereafter the Parties may agree in writing to extend the time period of such senior management negotiations. In the event the Parties' senior management do not resolve the dispute within the prescribed or extended time period, either Party may initiate arbitration through the serving and filing of a demand for arbitration and the Parties expressly agree that arbitration in accordance with this Section 13 shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time: 13.3.1 A request made by a Party for provisional remedies requesting preservation of the Parties' respective rights and obligations under the Agreement may be resolved by a court of law located in the County of the principal place of business of Buyer. 13.3.2 Nothing in this Agreement shall preclude, or be construed to preclude, any Party from filing a petition or complaint with the FERC or PUCN with respect to any arbitrable Dispute over which said agency has jurisdiction. In such case, the other Party may request the FERC or PUCN, as applicable, to reject or to waive jurisdiction. If jurisdiction is 26 rejected or waived with respect to all or a portion of the Dispute, the portion of the Dispute not so accepted by the FERC or PUCN, as applicable, shall be resolved through arbitration in accordance with this Agreement. To the extent that the FERC or PUCN, as applicable, asserts or accepts jurisdiction over the Dispute, the decision, finding of fact or order of FERC shall be final and binding, subject to judicial review under the Federal Power Act or Nevada Revised Statutes and subject to the provisions of Section 2.2.2. Any arbitration proceedings that may have commenced with respect to the Dispute prior to the assertion or acceptance of jurisdiction by the FERC or PUCN, as applicable, shall be terminated to the extent the FERC or PUCN accepts or asserts jurisdiction over such Dispute. 13.4 Unless otherwise agreed by the Parties, any arbitration initiated under this Agreement shall be conducted in accordance with the following: 13.4.1 Arbitrations shall be held within the County of the principal place of business of Buyer. 13.4.2 Except as otherwise modified herein, the arbitration shall be conducted in accordance with the "Commercial Arbitration Rules" of the American Arbitration Association ("AAA") then in effect. 13.4.3 Arbitration shall be conducted by one neutral arbitrator who shall be selected pursuant to the AAA rules and the following: 13.4.3.1 The Parties agree that the list of potential arbitrators provided by the AAA shall, if available, contain twenty (20) candidates, and at least fifty percent (50%) of the candidates shall be members of the AAA National Energy Panel. 13.4.3.2 The Parties also agree that each shall be allowed to strike the names of five candidates before ranking the remaining candidates and returning the list to the AAA in accordance with the Commercial Arbitration Rules. If the Parties are unable to agree on an arbitrator, such arbitrator shall be appointed by the AAA. 13.4.3.3 The arbitrator shall not have any current or past substantial business, financial, or personal relationships with either Party (or their Affiliates) and shall not be a vendor, supplier, customer, employee, consultant, or competitor to either of the Parties or their Affiliates. 13.4.3.4 The arbitrator shall be authorized only to interpret and apply the provisions of this Agreement or any related agreements entered into under this Agreement and shall have no power to modify or change any provision of this Agreement. The arbitrator shall have no authority to award punitive or multiple damages or 27 any damages inconsistent with this Agreement. The arbitrator shall within thirty (30) days of the conclusion of the hearing, unless such time is extended by agreement of the Parties, notify the Parties in writing of his or her decision, stating his or her reasons for such decision and separately listing his or her findings of fact and conclusions of law. Judgment on the award may be entered in any court having jurisdiction. 13.5 The Parties shall proceed with the arbitration expeditiously, and the arbitration shall be concluded within five (5) months of the filing of the demand for arbitration pursuant to this Section 13 in order that the decision may be rendered within six (6) months of such filing, unless the arbitrator extends such time at the request of a Party upon a showing of good cause or upon agreement of the Parties. 13.6 Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of any arbitration agreement shall be governed by the Federal Arbitration Act of the United States, 9 U.S.C. (S)(S)1 et seq. 13.7 The decision of the arbitrator shall be final and binding on both Parties and may be enforced in any court having jurisdiction over the Party against which enforcement is sought. 13.8 The fees and expenses of the arbitrator shall be shared by the Parties equally, unless the decision of the arbitrator shall specify some other apportionment of such fees and expenses. All other expenses and costs of the arbitration shall be borne by the Party incurring the same. 14. NATURE OF OBLIGATIONS 14.1 Except where specifically stated in this Agreement to be otherwise, the duties, obligations, and liabilities of the Parties shall be several, not joint or collective. The provisions of this Agreement shall not be construed to create an association, trust, partnership, or joint venture; to impose a trust or partnership duty, obligation, or liability or agency relationship on or with regard to either Party. 14.2 Nothing in this Agreement nor any action taken hereunder shall be construed to create any duty, liability, or standard of care to any person not a Party to this Agreement. Each Party shall be individually and severally liable for its own obligations under this Agreement. 14.3 By this Agreement, neither Party dedicates any part of its facilities or the service provided under this Agreement to the public. 15. SUCCESSORS AND ASSIGNS 15.1 This Agreement may be assigned, without express written consent of the other Party, as follows: 28 15.1.1 Buyer may assign this Agreement or assign or delegate its rights and obligations under this Agreement, in whole or in part, if such assignment is made to an affiliate, parent, subsidiary, successor or any party, provided that such assignee operates all or a portion of the PLR or if such assignment is required by Law or applicable regulations. 15.1.2 Buyer also may assign this Agreement as provided in Section 11.5 of the Asset Sale Agreement; provided that such assignment is to an entity that (a) has the right to control the operation of the Asset Bundle; and (b) is willing and able to perform its obligations under this Agreement. 15.2 Supplier may, without the consent of Buyer, assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee, lending institution, or any Person for the purposes of financing or refinancing the Asset Bundle, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, conveyances of dispositions in lieu thereof; provided, however, that no such assignment or disposition shall relieve or in any way discharge Supplier or such permitted assignee from the performance of its duties and obligations under this Agreement. Buyer agrees to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, conveyance, pledge or disposition of rights hereunder for purposes of the financing or refinancing of the Asset Bundle, so long as Buyer's rights under this Agreement are not thereby materially altered, amended, diminished or otherwise impaired. 15.3 Either Party may, without the consent of the other Party, assign this Agreement to a successor to all or substantially all of the assets of such Party by way of merger, consolidation, sale or otherwise, provided such successor assumes and becomes liable for all of such Party's duties and obligations hereunder including Section 3 hereof. 15.4 Except as stated above, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by either Party, including by operation of law, without the prior written consent of the other Party, said consent not to be unreasonably withheld. Any assignment of this Agreement in violation of the foregoing shall be, at the option of the non-assigning Party, void. 15.5 Except as set forth above, no assignment or transfer of rights or obligations under this Agreement by a Party shall relieve said Party from full liability and financial responsibility for the performance thereof after any such transfer or assignment unless and until the transferee or assignee shall agree in writing to assume the obligations and duties of said Party under this Agreement and the other Party has consented in writing to such assumption; said consent not to be unreasonably withheld. 15.6 This Agreement and all of the provisions hereof are binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns. 29 16. REPRESENTATIONS 16.1 Representations of the Parties. The Parties represent and ------------------------------ warrant each to the other as follows: 16.1.1 Incorporation. Buyer is a corporation duly ------------- incorporated, validly existing and in good standing under the laws of the State of Nevada. Supplier is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Both Buyer and Supplier have all requisite corporate power and authority to own, lease and operate their material assets and properties and to carry on their business as now being conducted. 16.1.2 Authority. The Party has full corporate power and --------- authority to execute and deliver this Agreement and, subject to the procurement of applicable regulatory approvals, to carry out the actions required of it by this Agreement. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action required on the part of the Party. The Agreement has been duly and validly executed and delivered by the Party and, assuming that it is duly and validly executed and delivered by the other Party, constitutes a legal, valid and binding agreement of the Party. 16.1.3 Compliance With Law. The Party represents and ------------------- warrants that it is not in violation of any applicable Law, or applicable regulation, which violation could reasonably be expected to materially adversely affect the other Party's performance of its obligations under this Agreement. The Party represents and warrants that it will comply with all Laws, and regulations applicable to its compliance with this Agreement, non-compliance with which would reasonably be expected to materially adversely affect either Party's performance of its obligations under this Agreement. 16.1.4 Representations of Both Parties. The representations ------------------------------- in this Section 16 shall continue in full force and effect for the term of this Agreement. 17. DEFAULT AND REMEDIES 17.1 An Event of Default hereunder shall be deemed to have occurred upon a Party's (Defaulting Party) failure to comply with any material obligation imposed upon it by this Agreement. Examples of an Event of Default include, but are not limited to the following: (i) Failure to make any payments due under this Agreement; (ii) Failure to deliver the Supply Amount for a period of five (5) consecutive days; 30 (iii) Failure to follow the directions of a Control Area Operator, ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto where following such directions is required hereunder; (iv) Supplier not being in compliance with Section 3; and (v) Failure of the Guarantor to be in compliance with the terms of the Guarantee delivered under Section 3.1.2. 17.2 An Event of Default shall be excused: 17.2.1 In the event such Event of Default was caused by Force Majeure provided that the Party claiming a Force Majeure complies with the requirements of Section 12; and 17.2.2 In the event such Event of Default was caused by transmission and distribution outages or disruptions. 17.3 Unless excused, in an Event of Default the Non-Defaulting Party shall be entitled to provide written notice (or verbal notice in case of emergency followed by written notice) of the Event of Default to the Defaulting Party and to specify a cure period, which cure period shall be a minimum of thirty (30) days. 17.4 If an Event of Default is not cured by the Defaulting Party during the cure period specified by the Non-Defaulting Party, the Non-Defaulting Party shall be entitled to those remedies which are not inconsistent with the terms of this Agreement, including termination and the payment of liquidated damages. A Defaulting Party shall not be liable to the Non-Defaulting Party for any punitive, consequential or incidental damages. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 17.4. 17.5 Notwithstanding this Section 17, liquidated damages shall be paid to Buyer pursuant to Sections 4.2, 12, 18, and 21. 18. FACILITY ADDITIONS AND MODIFICATIONS 18.1 Supplier shall be entitled to make additions and modifications to the Asset Bundle subject to the following: 18.1.1 To the extent additions and modifications interfere with the operation of the Asset Bundle in providing the Supply Amount to Buyer beyond the limits for planned outages set forth in Section 21, liquidated damages shall be paid to Buyer pursuant to Section 4.2. 18.1.2 Supplier shall use reasonable efforts to minimize any adverse impact on Buyer during the course of making such additions and modifications. 31 18.1.3 Such additions and modifications shall be conducted in accordance with Good Utility Practice, and all applicable Laws, regulations, reliability criteria and the Interconnection Agreement between Buyer and Supplier, dated October 16, 2000, as it may be amended from time to time. 18.2 Supplier shall seek Buyer's prior written approval for all Supplier's additions or modifications to the Asset Bundle which might reasonably be expected to have an adverse effect upon Buyer with respect to operations or performance under this Agreement. 19. COORDINATION 19.1 Upon knowledge thereof, each Party shall promptly give notice to the other Party of any labor dispute which is delaying or threatens to delay the timely performance of this Agreement, which shall include a description of the general nature of the dispute. 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE 20.1 Buyer and Supplier shall comply with any applicable requirement of any Governmental Authority, NERC, WSCC, ISA, Control Area Operator, transmission operator, EDU or any successor of any of them, regarding the reduced or increased generation of the Asset Bundle in the event of an Emergency Condition or Nonemergency Condition. 20.2 Supplier shall not be obligated to deliver the Supply Amount and no liquidated damages shall become due, if the Supply Amount is reduced in the event of an Emergency Condition or a Nonemergency Condition. 20.3 Each Party shall provide prompt verbal notice to the other Party of any Emergency Condition or Nonemergency Condition. 20.4 Either Party may take reasonable and necessary action to prevent, avoid or mitigate injury, danger, damage or loss to its own equipment and facilities, or to expedite restoration of service; provided, however, that the Party taking such action shall give the other Party prior notice if at all possible before taking any action. However, this Section 20.4 shall not be construed to supersede Sections 20.2 and 20.3. 21. OUTAGE SCHEDULING 21.1 Supplier shall request Buyer's approval prior to any inspections, proposed planned outages or other non-forced outages (all hereinafter referred to as "planned outages") of the Asset Bundle so as to minimize the impact on the availability of the Asset Bundle. Under no circumstances shall Supplier conduct a planned outage without the express prior consent of Buyer pursuant to this Section 21. 32 21.2 Planned Outages. --------------- 21.2.1 Within sixty (60) days following the Effective Date of this Agreement and on or before October 1 of each Contract Year, Supplier shall provide Buyer with a schedule of proposed planned outages for the period beginning on the date of such proposed schedule for the following twelve (12) months. The proposed planned outage schedule will designate days for each unit in which the Asset Bundle Capacity will be reduced in part or total for each such unit. Each proposed schedule shall include all applicable information, including but not limited to the following: Month, day and time of requested outage; facilities impacted (such as Unit and description); duration of outage; purpose of outage; amount of capacity (in MWs) which is derated; other conditions and remarks; and name of contact and phone number. 21.2.2 Buyer shall promptly review Supplier's proposed schedule and shall either require modifications or approve the proposed schedule. Supplier shall use its best efforts to accomplish all planned outages in accordance with the approved schedule. Supplier shall be responsible to Buyer for Replacement Costs (i) if any outage period exceeds its approved schedule, provided that changes to the approved schedule may be requested by either Party and each Party shall make reasonable efforts to accommodate such changes, provided further the Buyer shall have no obligation to agree to Supplier's revisions to the approved planned outage schedule; and (ii) if Supplier conducts a planned outage without the consent of Buyer as provided herein. 22. REPORTS 22.1 Supplier shall promptly provide Buyer with copies of any orders, decrees, letters or other written communications to or from any Governmental Authority asserting or indicating that Supplier and/or its Asset Bundle is in violation of Laws which relate to Supplier, or operations or maintenance of the Asset Bundle and which may have an adverse effect on Buyer. Supplier shall use reasonable efforts to keep Buyer appraised of the status of any such matters. 23. COMMUNICATIONS 23.1 Supplier's Operating Representatives shall be available twenty-four (24) hours per day for communications with the Control Area Operator and/or the ISA and Buyer to facilitate the operations contained in this Agreement. 23.2 Supplier shall, at its expense, maintain and install real-time communications equipment at the Asset Bundle to maintain communications between personnel on site at the Asset Bundle, Buyer and the Control Area Operator at all times. Supplier shall provide at its expense: 33 (i) Ringdown voice telephone lines, and (ii) Equipment to transmit to and receive telecopies from Buyer and the Control Area Operator. 23.3 Supplier shall immediately report to Buyer any "Abnormal Condition" that has or may occur, and provide all pertinent information, including but not limited to the following: (i) A description of the "Abnormal Condition" and the actions to be taken to alleviate the "Abnormal Condition"; (ii) The expected duration including the beginning and ending time of the "Abnormal Condition"; and (iii) The amount of any adjustment to the current (real time) level of Energy and Ancillary Services. 23.4 Cause of the Condition. ---------------------- 23.4.1 An "Abnormal Condition" shall include without limitation any conditions that, to Supplier's knowledge, have or are reasonably likely to: (i) Adversely affect Supplier's ability to provide Energy and Ancillary Services to Buyer; (ii) Cause an unplanned reduction in the amount of delivery of Energy and Ancillary Services to Buyer; or (iii) Cause an unplanned isolation of the Asset Bundle from the transmission system. 23.5 Supplier shall immediately notify Buyer after such "Abnormal Condition" has been alleviated. 24. NOTICES 24.1 All notices hereunder shall, unless specified otherwise, be in writing and shall be addressed, except as otherwise stated herein, to the Parties as set forth in Exhibit F. 24.2 All written notices or submittals required by this Agreement shall be sent either by hand-delivery, regular first class U.S. mail, registered or certified U.S. mail postage paid return receipt requested, overnight courier delivery, electronic mail or facsimile transmission and will be effective and deemed to have been received on the date of receipt personally, on the date and time as documented by method of delivery if during normal business hours or on the next succeeding Business Day, or on the third (3rd) Business Day following deposit with the U.S. mail if sent regular first class U.S. mail. 34 sent regular first class U.S. mail. 24.3 Notices of an Event of Default pursuant to Section 17 and or Force Majeure pursuant to Section 12 may not be sent by regular first class U.S. mail. 24.4 Any payments required to be made under this Agreement shall be made to the Party as set forth in Exhibit F. 24.5 Each Party shall have the right to change, at any time upon written notice to the other Party, the name, address and telephone numbers of its representatives under this Agreement for purposes of notices and payments. 25. MERGER 25.1 The Agreement contains the entire agreement and understanding between the Parties with respect to all of the subject matter contained herein, thereby merging and superseding all prior agreements and representations by the Parties with respect to such subject matter. 25.2 In the event of any conflict between this Agreement and the Asset Sale Agreement, the terms of the Asset Sale Agreement shall govern. 26. HEADINGS 26.1 The headings or section titles contained in this Agreement are inserted solely for convenience and do not constitute a part of this Agreement between the Parties, nor should they be used to aid in any manner in the construction of this Agreement. 27. COUNTERPARTS AND INTERPRETATION 27.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 27.2 In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of authorship of any of the provisions of this Agreement. 27.3 Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. 27.4 The word "including" in this Agreement shall mean "including without limitation". 28. SEVERABILITY 35 28.1 If any term, provision or condition of this Agreement is held to be invalid, void or unenforceable by a court or Governmental Authority of competent jurisdiction and such holding is subject to no further appeal or judicial review, then such invalid, void, or unenforceable term, provision or condition shall be deemed severed from this Agreement and all remaining terms, provisions and conditions of this Agreement shall continue in full force and effect, unless, however, the effect of the severance would vitiate the intent of the Parties hereto, as determined by either Party in its reasonable discretion. 28.2 The Parties shall endeavor in good faith to replace such invalid, void, or unenforceable provisions with a valid and enforceable provision which achieves the purposes intended by the Parties to the greatest extent permitted by law. 29. WAIVERS 29.1 No failure or delay on the part of a Party in exercising any of its rights under this Agreement or in insisting upon strict performance of provisions of this Agreement, no partial exercise by either Party of any of its rights under this Agreement, and no course of dealing between the Parties shall constitute a waiver of the rights of either Party under this Agreement. Any waiver shall be effective only by a written instrument signed by the Party granting such waiver, and such shall not operate as a waiver of, or estoppel with respect to, any subsequent failure to comply therewith. 30. AMENDMENTS 30.1 The Parties shall negotiate in good faith to determine necessary amendments, if any, to this Agreement, provided that in negotiating such amendments the Parties shall attempt, in good faith, to reasonably preserve the bargain initially struck in this Agreement if any Governmental Authority, FERC, any state or the PUCN, implements a change in any Law or applicable regulation that materially affects or is reasonably expected to materially affect Buyer's PLR service under this Agreement. 30.2 The Parties shall meet to discuss the impact of any changes in Buyer's OATT or the ISA's OATT, as applicable, or any rule or practice of NERC, WSCC, or any other Governmental Authority on the terms of this Agreement upon request by either Party during the term of this Agreement. 30.3 In the event that it is deemed necessary to amend this Agreement, the Parties will attempt to agree upon such amendment and will submit such mutually agreed upon amendment(s) to the FERC for filing and acceptance. 30.4 Amendments to this Agreement shall be in writing and shall be executed by an authorized representative of each Party. 31. TIME IS OF THE ESSENCE 36 31.1 Time is of the essence of this Agreement and in the performance of all of the covenants and conditions hereof. 32. APPROVALS 32.1 Each Party's performance under this Agreement is subject to the condition that all requisite governmental and regulatory approvals for such performance are obtained in form and substance satisfactory to the other Party in its reasonable discretion. Each Party shall use best efforts to obtain all required approvals and shall exercise due diligence and shall act in good faith to cooperate and assist each other in acquiring any regulatory approval necessary to effectuate this Agreement. Further, the Parties agree to reasonably support the other Party in any associated regulatory proceedings, including by being a witness on behalf of the other Party. 32.2 Notwithstanding Section 30.1, prior to the submission of this Agreement to the FERC, Buyer shall provide Supplier final versions of Exhibits B, C, D, E, F, J, K, and L, which shall be substantially in the form of Exhibits B, C, D, E, F, J, K, and L attached hereto as of the date of execution of this Agreement, if such exhibits are modified as required to be consistent with orders of the FERC in Docket No. ER00-2018-000 with regard to pricing of the Asset Bundle Capacity. Upon acceptance by Supplier, such acceptance not to be unreasonably withheld, such final versions of Exhibits B, C, D, E, F, J, K, and L shall replace the initial versions of such exhibits and shall be incorporated as a part of this Agreement. 32.3 This Agreement is made subject to present or future state or federal laws, regulations, or orders properly issued by state or federal bodies having jurisdiction. 32.4 The Parties hereto agree to execute and deliver promptly, at the expense of the Party requesting such action, any and all other and further instruments, documents and information which may reasonably be necessary or appropriate to give full force and effect to the terms and intent of this Agreement. 33. PLR SERVICE 33.1 The Agreement is premised on Buyer providing PLR service. Notwithstanding anything to the contrary contained herein, if Nevada retail electricity restructuring (including implementation of retail customer choice of electricity suppliers) is delayed beyond the Effective Date of this Agreement, the Parties shall continue to perform this Agreement in all respects pursuant to the terms and conditions hereof as if Buyer was the PLR and Buyer's retail and wholesale customers shall be considered as the TRR. 34. CONFIDENTIALITY 34.1 Confidential Information. Certain information provided by a ------------------------ Party (the "Disclosing Party") to the other Party (the "Receiving Party") in connection with the negotiation or performance of this Agreement may be considered confidential and/or proprietary (hereinafter referred to as "Confidential Information") by the 37 Disclosing Party. To be considered Confidential Information hereunder, such information must be clearly labeled or designated by the Disclosing Party as "confidential" or "proprietary" or with words of like meaning. If disclosed orally, such information shall be clearly identified as confidential and such status shall be confirmed promptly thereafter in writing. 34.2 Treatment of Confidential Information. The Receiving Party ------------------------------------- shall treat any Confidential Information with at least the same degree of care regarding its secrecy and confidentiality as the Receiving Party's similar information is treated within the Receiving Party's organization. The Receiving Party shall not disclose the Confidential Information of the Disclosing Party to third parties (except as stated hereinafter) nor use it for any purpose other than the negotiation or performance of this Agreement, without the express prior written consent of the Disclosing Party. The Receiving Party further agrees that it shall restrict disclosure of Confidential Information as follows: 34.2.1 Disclosure shall be restricted solely to its agents as may be necessary to enforce the terms of this Agreement after advising those agents of their obligations under this Section 34.2. 34.2.2 In the event that the Receiving Party is requested, pursuant to or as required by applicable Law or by legal process, to disclose any Confidential Information, the Receiving Party shall provide the Disclosing Party with prompt notice of such request or requirement in order to enable Disclosing Party to seek an appropriate protective order or other remedy and to consult with Disclosing Party with respect to Disclosing Party taking steps to resist or narrow the scope of such request or legal process. The Receiving Party agrees not to oppose any action by the Disclosing Party to obtain a protective order or other appropriate remedy. In the absence of such protective order, and provided that the Receiving Party is advised by its counsel that it is compelled to disclose the Confidential Information, the Receiving Party shall: (i) furnish only that portion of the Confidential Information which the Receiving Party is advised by counsel is legally required; and (ii) use its commercially reasonable best efforts, at the expense of the Disclosing Party, to ensure that all Confidential Information so disclosed will be accorded confidential treatment. 34.3 Excluded Information. Confidential Information shall not be -------------------- deemed to include the following: 34.3.1 information which is or becomes generally available to the public other than as a result of a disclosure by the Receiving Party; 34.3.2 information which was available to the Receiving Party on a non- 38 confidential basis prior to its disclosures by the Disclosing Party; and 34.3.3 information which becomes available to the Receiving Party on a non-confidential basis from a person other than the Disclosing Party or its representative who is not otherwise bound by a confidentiality agreement with Disclosing Party or its agent or is otherwise not under any obligation to Disclosing party or its agent not to disclose the information to the Receiving Party. 34.4 Injunctive Relief Due to Breach. The Parties agree that ------------------------------- remedies at law may be inadequate to protect each other in the event of a breach of this Section 34, and the Receiving Party hereby in advance agrees that the Disclosing Party shall be entitled to seek and obtain, without proof of actual damages, temporary, preliminary and permanent injunctive relief from any court or Governmental Authority of competent jurisdiction restraining the Receiving Party from committing or continuing any breach of this Section 34. 35. CHOICE OF LAW 35.1 This Agreement and the rights and obligations of the Parties shall be construed and governed by the Laws of: (i) the State of Nevada as if executed and performed wholly within that state; and (ii) the Federal Power Act, to the extent the rights and obligations of the Parties are covered by such act. 39 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representative on the date set forth below. SIERRA PACIFIC POWER COMPANY VALMY POWER LLC By: By: ----------------------- -------------------- William E. Peterson Craig A. Mataczynski Title: Senior Vice President, General Title: President Counsel, and Corporate Secretary Date: October 16, 2000 Date: October 16, 2000 40 EXHIBIT A VALMY BUNDLE ASSET BUNDLE CAPACITY AND OPERATING PARAMETERS
ASSET BUNDLE: VALMY =================================================================================================== UNIT NET SUMMER NET RAMP RATE MINIMUM HOURLY CAPABILITY (MW) WINTER CAPABILITY(MW) (MW)/HOUR ENERGY TAKE (MW) - --------------------------------------------------------------------------------------------------- Valmy Unit 1 127 127 100 45 Valmy Unit 2 134 134 80 55 Winnemucca 14 17 17 Battle Mt. 1-4 7 8 8 - --------------------------------------------------------------------------------------------------- Total 282 286 205 100 ===================================================================================================
Minimum Annual Energy Take: 2,130,000 MWh For purposes of this Exhibit A, the summer months shall consist of June through September, and the winter months shall consist of the months of January through May and the months of October through December. A-1 EXHIBIT B VALMY BUNDLE ENERGY AND ANCILLARY SERVICES PRICES Energy Prices* - ------------- Price Floor of Energy: $ 19.63 per MWh Price Ceiling of Energy: $ 36.77 per MWh Ancillary Service Prices* - ------------------------ Regulation and Frequency Response: On-Peak: $31.08 per MW-reserved per hour Off-Peak: $17.76 per MW-reserved per hour Operating Reserve - Spinning Reserve: On-Peak: $31.08 per MW-reserved per hour Off-Peak: $17.76 per MW-reserved per hour Operating Reserve - Supplemental Reserve: On-Peak: $5.50 per MW-reserved per hour Off-Peak: $3.14 per MW-reserved per hour The On-Peak periods shall consist of Hour Ending (HE) 0700 through HE 2200 PPT, Monday through Saturday. The Off-Peak periods shall consist of HE 0100 through HE 0600, HE 2300 and HE 2400 PPT, Monday through Saturday; HE 0100 through HE 2400 PPT Sunday and additional Off-Peak days (holidays) as designated annually by WSCC. *SUBJECT TO FERC APPROVAL ------------------------ B-1 EXHIBIT C VALMY BUNDLE SUPPLIER'S MONTHLY INVOICE A Price Ceiling of Energy $ 36.77 /MWh B Price Floor of Energy $ 19.63 /MWh
MONTH 1 - ENERGY - ---------------- C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Capacity ---- -------------- ------------ --------------- ----------------- ---------------- --------------------- (C - D) (D x F) (C x F) 1 282 282 - 40.00 $ 11,280.00 $ 11,280.00 2 282 282 - 40.00 11,280.00 11,280.00 3 282 222 60 40.00 8,880.00 11,280.00 4 282 222 60 40.00 8,880.00 11,280.00 5 152 142 10 30.00 4,260.00 4,560.00 6 182 182 - 30.00 5,460.00 5,460.00 7 272 252 20 20.00 5,040.00 5,440.00 8 282 282 - 20.00 5,640.00 5,640.00 9 282 282 - 20.00 5,640.00 5,640.00 10 282 282 - 25.00 7,050.00 7,050.00 - ----------------------------------------------------------------------------------------------------------------------------------- 2,580 2,430 150 $ 73,410.00 $ 78,910.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 73,410.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 78,910.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $ 89,351.10 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 94,866.60 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $ 47,700.90 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 50,645.40 L. Invoiced Amount Energy Sec 7.3 (K less than I less than J) $ 73,410.00 M. Theoretical Amount for Expected Performance (KT less than IT less than JT) $ 78,910.00
MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE - ------------------------------------------------------------------------
N O P Q R S Dispatch Schedule of Ancillary Supplier Capacity Price of Price x Ancillary Price x Schedule Ancillary Capacity Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- ----------------- --------------------- (N - O) (O x Q) (N x Q) 1 - - - 17.76 $ - $ - 2 - - - 17.76 - - 3 - - - 31.08 - - 4 - - - 31.08 - -
C-1 EXHIBIT C VALMY BUNDLE SUPPLIER'S MONTHLY INVOICE 5 30 30 - 31.08 932.40 932.40 6 - - - 31.08 - - 7 - - - 31.08 - - 8 - - - 31.08 - - 9 - - - 31.08 - - 10 - - - 31.08 - - - ----------------------------------------------------------------------------------------------------------------------------------- 30 30 - $ 932.40 $ 932.40 T. Invoiced Amount - Ancillary Service Capacity - Regulation and Frequency Response Sec 7.2.5 $ 932.40 U. Theoretical Amount for Expected Performance $ 932.40
MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - -------------------------------------------------------
V W X Y Z AA Dispatch Schedule of Ancillary Supplier Capacity Price of Price x Ancillary Price x Schedule Ancillary Capacity Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- ----------------- --------------------- (V - W) (W x Y) (V x Y) 1 - - - 17.76 $ - $ - 2 - - - 17.76 - - 3 - - - 31.08 - - 4 - - - 31.08 - - 5 80 80 - 31.08 2,486.40 2,486.40 6 80 60 20 31.08 1,864.80 2,486.40 7 - - - 31.08 - - 8 - - - 31.08 - - 9 - - - 31.08 - - 10 - - - 31.08 - - - ----------------------------------------------------------------------------------------------------------------------------------- 160 140 20 $ 4,351.20 $ 4,972.80 AB. Invoiced Amount Ancillary Service Capacity Spinning Reserve Sec 7.2.5 $ 4,351.20 AC. Theoretical Amount for Expected Performance $ 4,972.80
MONTH 1 - ANCILLARY SERVICE CAPACITY - SUPPLEMENTAL RESERVE - -----------------------------------------------------------
AD AE AF AG AH AI Dispatch Schedule of Ancillary Capacity Price of Price x Ancillary Price x Schedule Ancillary Capacity Supplier Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- ----------------- --------------------- (AE x AG) (AD x AG) 1 - - - 3.14 $ - $ - 2 - - - 3.14 - - 3 - - - 5.50 - - 4 - - - 5.50 - - 5 10 10 - 5.50 55.00 55.00 6 10 10 - 5.50 55.00 55.00 7 10 10 - 5.50 55.00 55.00
C-2 EXHIBIT C VALMY BUNDLE SUPPLIER'S MONTHLY INVOICE 8 - - - 5.50 - - 9 - - - 5.50 - - 10 - - - 5.50 - - - ----------------------------------------------------------------------------------------------------------------------------------- 30 30 - $ 165.00 $ 165.00 AJ. Invoiced Amount - Ancillary Service Capacity - Supplemental Reserve Sec 7.2.5 $ 165.00 AK. Theoretical Amount for Expected Performance $ 165.00
MONTH 1 - ANCILLARY SERVICE ENERGY - ----------------------------------
AL AM AN AO AP AQ Schedule of Ancillary Price x Dispatch Ancillary Energy Supplier Price Ceiling of Ancillary Price x Schedule Hour Energy (MWh) Supplied (MWh) Shortfall (MWh) Energy ($/MWh) Energy Supplied of Ancillary Energy ---- ----------- -------------- --------------- -------------- --------------- ------------------- (AL AM) (AM x AO) (AL x AO) 1 - - - 36.77 $ - $ - 2 - - - 36.77 - - 3 - - - 36.77 - - 4 - - - 36.77 - - 5 40 40 - 36.77 1,470.80 1,470.80 6 30 10 20 36.77 367.70 1,103.10 7 10 10 - 36.77 367.70 367.70 8 - - - 36.77 - - 9 - - - 36.77 - - 10 - - - 36.77 - - - ----------------------------------------------------------------------------------------------------------------------------------- 80 60 20 $ 367.70 $ 2,206.20 $ 2,941.60 AR. Invoiced Amount - Ancillary Services Energy Sec 7.2.6 $ 2,206.20 AS. Theoretical Amount for Expected Performance $ 2,941.60 MONTH 1 - TOTAL INVOICE AMOUNT Sec 7.3 (L + T + AB + AJ + AR) $ 81,064.80 ====================================================================================================================================
MONTH 2 - ENERGY - ----------------
C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 282 282 - 40.00 $ 11,280.00 $ 11,280.00 2 282 282 - 40.00 11,280.00 11,280.00 3 282 222 60 40.00 8,880.00 11,280.00 4 282 222 60 50.00 11,100.00 14,100.00
C-3 EXHIBIT C VALMY BUNDLE SUPPLIER'S MONTHLY INVOICE 5 152 142 10 50.00 7,100.00 7,600.00 6 182 182 - 50.00 9,100.00 9,100.00 7 272 252 20 30.00 7,560.00 8,160.00 8 282 282 - 30.00 8,460.00 8,460.00 9 282 282 - 30.00 8,460.00 8,460.00 10 282 282 - 35.00 9,870.00 9,870.00 - ----------------------------------------------------------------------------------------------------------------------------------- 2,580 2,430 150 $ 93,090.00 $ 99,590.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 93,090.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 99,590.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $ 89,351.10 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 94,866.60 K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $ 47,700.90 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 50,645.40 L. Invoiced Amount Energy Sec 7.3 (I greater than J) $ 89,351.10 M. Theoretical Amount for Expected Performance (IT greater than JT) $ 94,866.60
MONTH 3 - ENERGY - ----------------
C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 282 282 - 30.00 $ 8,460.00 $ 8,460.00 2 282 282 - 20.00 5,640.00 5,640.00 3 282 222 60 20.00 4,440.00 5,640.00 4 282 222 60 20.00 4,440.00 5,640.00 5 152 142 10 15.00 2,130.00 2,280.00 6 182 182 - 15.00 2,730.00 2,730.00 7 272 252 20 15.00 3,780.00 4,080.00 8 282 282 15.00 4,230.00 4,230.00 9 282 282 15.00 4,230.00 4,230.00 10 282 282 15.00 4,230.00 4,230.00 - ----------------------------------------------------------------------------------------------------------------------------------- 2,580 2,430 150 $ 44,310.00 $ 47,160.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 44,310.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 47,160.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $ 89,351.10 JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 94,866.60
C-4 EXHIBIT C VALMY BUNDLE SUPPLIER'S MONTHLY INVOICE K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $ 47,700.90 KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 50,645.40 L. Invoiced Amount - Energy Sec 7.3 (I less than K) $ 47,700.90 M. Theoretical Amount for Expected Performance (IT less than KT) $ 50,645.40
For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. C-5 EXHIBIT D VALMY BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ENERGY - ----------------
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 60 35.00 100.00 2,200.00 4 60 30.00 50.00 1,850.00 5 10 30.00 50.00 350.00 6 0 na 0.00 0.00 7 20 25.00 0.00 500.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------------------- 150 $ 4,900.00 E. Gross Replacement Cost of Energy $ 4,900.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 78,910.00 G. Actual Supplier's Invoice Amount 73,410.00 --------------- H. Avoided Payment to Supplier (F - G) $ 5,500.00 I. Invoiced Replacement Cost - Energy (E less than H) $ 0.00
MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE - ------------------------------------------------------------------------
J K * L * M Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (J x K) + L 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - -------------------------------------------------------------------------------------------------------------- 0 $ 0.00 N. Gross Replacement Cost of Ancillary Capacity - $ 0.00 Regulation & Frequency Response O. Theoretical Supplier's Invoice Amount for Expected Performance $ 932.40 P. Actual Supplier's Invoice Amount 932.40 Q. Avoided Payment to Supplier (O - P) $ 0.00 R. Invoiced Replacement Cost - Ancillary Capacity (N = Q) $ 0.00
D-1 EXHIBIT D VALMY BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS
MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - ------------------------------------------------------- S T * U * V Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (S x T) + U 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 40.00 100.00 900.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------------------ 20 $ 900.00 W. Gross Replacement Cost of Ancillary Capacity - Spinning Reserve $ 900.00 X. Theoretical Supplier's Invoice Amount for Expected Performance $4,972.80 Y. Actual Supplier's Invoice Amount 4,351.20 Z. Avoided Payment to Supplier (X - Y) $ 621.60 AA. Invoiced Replacement Cost - Ancillary Capacity (W greater than Z) $ 278.40 MONTH 1 - ANCILLARY CAPACITY - SUPPLEMENTAL RESERVE - --------------------------------------------------- AB AC * AD * AE Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (AB x AC) + AD 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------------------ 0 $ 0.00 AF. Gross Replacement Cost of Ancillary Capacity - Supplemental Reserve $ 0.00 AG. Theoretical Supplier's Invoice Amount for Expected Performance $165.00 AH. Actual Supplier's Invoice Amount 165.00 ---------------- AI. Avoided Payment to Supplier (AG - AH) $ 0.00
D-2 EXHIBIT D VALMY BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS AJ. Invoiced Replacement Cost - Ancillary Capacity (AF = AI) $ 0.00
MONTH 1 - ANCILLARY SERVICE ENERGY - ---------------------------------- AK AL * AM * AN Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy ** Cost of Energy ---- ------------ ----------------- ------------ -------------- (AK x AL) + AM 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 40.00 20.00 820.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------------------ 20 $ 820.00 AO. Gross Replacement Cost of Ancillary Energy $ 820.00 AP. Theoretical Supplier's Invoice Amount for Expected Performance $2,941.60 AQ. Actual Supplier's Invoice Amount 2,206.20 AR. Avoided Payment to Supplier (AP - AQ) $ 735.40 AS. Invoiced Replacement Cost - Ancillary Energy (AO greater than AR) $ 84.60 MONTH 1 - TOTAL INVOICE AMOUNT (I + R + AA + AJ + AS) $ 363.00 ============================================================================================================ MONTH 2 - ENERGY - ---------------- A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 40.00 200.00 2,600.00 4 60 55.00 100.00 3,400.00 5 10 48.00 200.00 680.00 6 0 na 0.00 0.00 7 20 35.00 300.00 1,000.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------------------ 150 $7,680.00
D-3 EXHIBIT D VALMY BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS E. Gross Replacement Cost of Energy $ 7,680.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 94,866.60 G. Actual Supplier's Invoice Amount 89,351.10 H. Avoided Payment to Supplier (F - G) $ 5,515.50 I. Invoiced Replacement Cost - Energy (E greater than H) $ 2,164.50
MONTH 3 - ENERGY A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 22.00 100.00 1,420.00 4 60 18.00 50.00 1,130.00 5 10 18.00 0.00 180.00 6 0 na 0.00 0.00 7 20 18.00 50.00 410.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------- 150 $ 3,140.00 E. Gross Replacement Cost of Energy $ 3,140.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 50,645.40 G. Actual Supplier's Invoice Amount 47,700.90 -------------------- H. Avoided Payment to Supplier (F - G) $ 2,944.50 I. Invoiced Replacement Cost - Energy (E greater than H) $ 195.50
For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. EXHIBIT E VALMY BUNDLE YEAR END TRUE-UP INVOICE A Price Ceiling of Energy $ 36.77 /MWh B Price Floor of Energy $ 19.63 /MWh EXAMPLE 1 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 2,430 $ 73,410.00 $ 89,351.10 $ 47,700.90 $ 73,410.00 2 2,430 93,090.00 89,351.10 47,700.90 89,351.10 3 2,430 44,310.00 89,351.10 47,700.90 47,700.90
D-4 EXHIBIT E VALMY BUNDLE YEAR END TRUE-UP INVOICE 4 2,820 118,440.00 103,691.40 55,356.60 103,691.40 5 2,820 107,160.00 103,691.40 55,356.60 103,691.40 6 2,620 99,560.00 96,337.40 51,430.60 96,337.40 7 2,820 112,800.00 103,691.40 55,356.60 103,691.40 8 2,820 107,160.00 103,691.40 55,356.60 103,691.40 9 2,280 88,920.00 83,835.60 44,756.40 83,835.60 10 2,820 101,520.00 103,691.40 55,356.60 101,520.00 11 2,820 126,900.00 103,691.40 55,356.60 103,691.40 12 2,520 100,800.00 92,660.40 49,467.60 92,660.40 - ------------------------------------------------------------------------------------------------------------------------------------ Total 31,630 $ 1,174,070.00 $ 1,163,035.10 $620,896.90 $ 1,103,272.40
(Total of Column D) greater than (Total of Column E) therefore Annual True-up - ----------------------------------------------------------------------------- calculated under Section 7.5.1(a) - --------------------------------- H. Annual True-up - Delivered Energy (Total E - Total G) $59,762.70 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total E / Total C) $36.77
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ $ 0.00 2 150 7,680.00 2,164.50 3 150 3,140.00 195.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ Total 450 $ 16,546.50 $ 15,720.00 $ 0.00 $ 2,360.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ 2,360.00 Total Annual True-up * (H + O) $62,122.70 ====================================================================================================================================
EXAMPLE 2 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 2,430 $ 73,410.00 $ 89,351.10 $ 47,700.90 $ 73,410.00 2 2,430 93,090.00 89,351.10 47,700.90 89,351.10 3 2,430 44,310.00 89,351.10 47,700.90 47,700.90
E-2 EXHIBIT E VALMY BUNDLE YEAR END TRUE-UP INVOICE
4 2,820 107,160.00 103,691.40 55,356.60 103,691.40 5 2,820 95,880.00 103,691.40 55,356.60 95,880.00 6 2,620 89,080.00 96,337.40 51,430.60 89,080.00 7 2,820 101,520.00 103,691.40 55,356.60 101,520.00 8 2,820 95,880.00 103,691.40 55,356.60 95,880.00 9 2,280 79,800.00 83,835.60 44,756.40 79,800.00 10 2,820 90,240.00 103,691.40 55,356.60 90,240.00 11 2,820 115,620.00 103,691.40 55,356.60 103,691.40 12 2,520 90,720.00 92,660.40 49,467.60 90,720.00 - ----------------------------------------------------------------------------------------------------------------------------- Total 31,630 $ 1,076,710.00 $ 1,163,035.10 $ 620,896.90 $ 1,060,964.80 (Total of Column E) (greater than) (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) H. Annual True-up - Delivered Energy (Total D - Total G) $ 15,745.20 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $34.04 J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 2,164.50 3 150 3,140.00 195.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ Total 450 $ 15,318.35 $ 15,720.00 $ 401.65 $ 2,360.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ 1,958.35 Total Annual True-up * (H + O) $ 17,703.55 ==================================================================================================================================== EXAMPLE 3 - --------- C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 2,430 $ 73,410.00 $ 89,351.10 $ 47,700.90 $ 73,410.00
E-3 EXHIBIT E VALMY BUNDLE YEAR END TRUE-UP INVOICE 2 2,430 93,090.00 89,351.10 47,700.90 89,351.10 3 2,430 44,310.00 89,351.10 47,700.90 47,700.90 4 2,820 90,240.00 103,691.40 55,356.60 90,240.00 5 2,820 84,600.00 103,691.40 55,356.60 84,600.00 6 2,620 73,360.00 96,337.40 51,430.60 73,360.00 7 2,820 73,320.00 103,691.40 55,356.60 73,320.00 8 2,820 67,680.00 103,691.40 55,356.60 67,680.00 9 2,280 50,160.00 83,835.60 44,756.40 50,160.00 10 2,820 56,400.00 103,691.40 55,356.60 56,400.00 11 2,820 50,760.00 103,691.40 55,356.60 55,356.60 12 2,520 40,320.00 92,660.40 49,467.60 49,467.60 - ----------------------------------------------------------------------------------------------------------------------------------- Total 31,630 $ 797,650.00 $ 1,163,035.10 $ 620,896.90 $ 811,046.20
(Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) - ------------------------------------------------------------------------------------------------------ H. Annual True-up - Delivered Energy (Total D - Total G) $ (13,396.20) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $25.22
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 2,164.50 3 150 3,140.00 195.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ Total 450 $ 11,348.17 $ 15,720.00 $ 4,371.83 $ 2,360.00 O. Annual True-up - Replacement Costs (Total N - Total M) $ (2,011.83) Total Annual True-up * (H + O) $ (15,408.03) ====================================================================================================================================
EXAMPLE 4 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- ---------------
E-4 EXHIBIT E VALMY BUNDLE YEAR END TRUE-UP INVOICE
(A x C) (B x C) 1 2,430 $ 73,410.00 $ 89,351.10 $ 47,700.90 $ 73,410.00 2 2,430 93,090.00 89,351.10 47,700.90 89,351.10 3 2,430 44,310.00 89,351.10 47,700.90 47,700.90 4 2,820 50,760.00 103,691.40 55,356.60 55,356.60 5 2,820 47,940.00 103,691.40 55,356.60 55,356.60 6 2,620 41,920.00 96,337.40 51,430.60 51,430.60 7 2,820 42,300.00 103,691.40 55,356.60 55,356.60 8 2,820 39,480.00 103,691.40 55,356.60 55,356.60 9 2,280 29,640.00 83,835.60 44,756.40 44,756.40 10 2,820 33,840.00 103,691.40 55,356.60 55,356.60 11 2,820 33,840.00 103,691.40 55,356.60 55,356.60 12 2,520 30,240.00 92,660.40 49,467.60 49,467.60 - ------------------------------------------------------------------------------------------------------------------------------------ Total 31,630 $560,770.00 $1,163,035.10 $620,896.90 $ 688,256.20
(Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b)
H. Annual True-up - Delivered Energy (Total F - Total G) $ (67,359.30) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total F / Total C) $19.63
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 2,164.50 3 150 3,140.00 195.50 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ Total 450 $ 8,833.50 $15,720.00 $ 6,886.50 $ 2,360.00
O. Annual True-up - Replacement Costs (Total N - Total M) $ (4,526.50) Total Annual True-up * (H + O) $ (71,885.80) ====================================================================================================================================
* Positive Total Annual True-up is indicative of a payment from Buyer to Supplier; Negative Total Annual True-up is indicative of a payment from Supplier to Buyer. EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS Supplier: - -------- a) Agreement Notices: Name and Address ----------------- ------------------- Phone: ------------------------------------- Fax: --------------------------------------- b) Payment Check: Name and Address ------------- ------------------- c) Payment Wire Transfer: Bank: --------------------- ------------------------------ ABA #: ------------------------------------- For: Supplier's Name -------------------- Account No: -------------------------------- For: --------------------------------------- d) Invoices: Name and Address -------- ------------------- Phone: ------------------------------------- Fax: --------------------------------------- e) Operating Notifications: ----------------------- i) (Management, if required) ii) Pre-Schedule: Phone: ----------------------------- Fax: --------------------------------------- iii) Real Time: Phone: ----------------------------- Fax: --------------------------------------- iv) Monthly Checkout Phone: ------------------------------------- Person: Fax: ------------------------------- F-6 Buyer: - ----- a) Agreement Notices: ----------------- Address: Gary Craythorn Manager, Resource Contracts Nevada Power Company 6226 West Sahara Avenue, M/S 26A Las Vegas, Nevada 89146 Phone: 702/367-5425 Fax: 702/227-2455 E-mail: gcraythorn@nevp.com b) Invoices: -------- US Post Office: (Via Certified Mail) Overnight Delivery --------------- ------------------ Address: Nevada Power Company Attn: Kathy Crews Attn: Kathy Crews P.O. Box 230, M/S 20 6226 West Sahara Ave., M/S 20 Las Vegas, Nevada 89151 Las Vegas, Nevada 89146 Telephone: 702/227-2476 Fax: 702/367-5096 E-mail: kcrews@nevp.com
c) Schedules: --------- i) Pre-Schedule: Primary Name: Rick Engebretson Phone: 702/862-7195 E-mail: rengebretson@nevp.com Alternate Name: Tim Schuster Phone: 702/862-7194 E-mail: tschuster@nevp.com Fax: 702/227-2404 ii) Real Time: Phone: 702/862-7106 Fax: 702/227-2404 iii) Monthly Checkout: Kathy Crews Phone: 702/227-2476 Fax: 702/367-5096 E-mail: kcrews@nevp.com
d) Control Area/Transmission: ------------------------- i) Reliability Dispatch: Phone: (702) 451-2026 Fax: (702) 862-7113 ii) Transmission Dispatch: Phone: (702) 451-8346 Fax: (702) 862-7113
F-7 EXHIBIT G FORM OF AVAILABILITY NOTICE* Date of Notice: Time of Notice: Supplier: Name of Supplier's Representative: Buyer: Asset Bundle: Availability Dates (96 hours total):
A B C D E F G Available from Permitted Asset Bundle Available Total Derating Permitted Availability Hour Valmy Unit Total Derating of Derating of Capacity of from Valmy of Valmy Derating of Date Ending 1 (MW) Valmy Unit 1 (MW) Unit 1 (MW) Unit 1 (MW) Unit 2 (MW) Unit 2 (MW) Unit 2 (MW) ---- ------ ------ ----------------- ----------- ----------- ----------- ----------- ------------ (A (greater (___ - A) (C) (greater (A - C) (E (greater (___ - E) (B (greater than) or = __) than) or = B) than) or = ___) than) or = F) 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500
H I** J Asset Bundle Alternative Cause and Expected Duration of Capacity of Point(s) of Deratings and Identification Unit 2 (MW) Delivery of Permitted Deratings ----------- -------- ---------------------- (G - E) * The Parties' operational personnel shall develop a similar form for the other generating units in the bundle. ** The Parties' operational personnel shall develop the necessary procedure to document requests and responses to utilize Alternative Point(s) of Delivery. G-1 EXHIBIT H FORM OF GUARANTEE This Guaranty is entered into as of October 16, 2000 by NRG Energy, Inc., a Delaware corporation ("Guarantor"), on behalf of Valmy Power LLC, a Delaware limited liability company ("Supplier"), in favor of and for the benefit of Sierra Pacific Power, a Nevada corporation ("SPPC"). SPPC is sometimes referred to herein as "Beneficiary". WHEREAS, Supplier and SPPC are entering into a Transitional Power Purchase Agreement dated as of October 16, 2000 2000 (the "TPPA") by which Supplier has agreed to sell and SPPC has agreed to buy Energy and Ancillary Services (as defined in the TPPA) produced by the North Valmy generating station being sold by SPPC; and WHEREAS, it is a condition to the obligation of SPPC to enter into the TPPA for Guarantor to guaranty the Supplier's obligations under the TPPA in an amount not to exceed the Credit Amount (as defined in the TPPA) (the "Guarantied Obligations"). 1. Guaranty. Guarantor irrevocably and unconditionally guaranties, as primary obligor and not merely as surety, the due and punctual payment in full of all Guarantied Obligations (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.(SS) 362(a)). In the event that all or any portion of the Guarantied Obligations is paid by Supplier, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) is rescinded or recovered directly or indirectly from the Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments that are so rescinded or recovered shall constitute Guarantied Obligations (to the extent such payments, in the aggregate, do not exceed the Credit Amount). Subject to the other provisions of this Section 1, upon failure of Supplier to pay any of the Guarantied Obligations when and as the same shall become due, Guarantor will upon demand pay, or cause to be paid, in cash, to SPPC, an amount equal to the aggregate of the unpaid Guarantied Obligations to the extent due. In the event Guarantor fails to pay the Guarantied Obligations, each and every default in the payment shall give rise to a separate cause of action and separate causes of action may be brought hereunder as each such cause of action arises. 2. Expenses. The Guarantor agrees to reimburse SPPC for all reasonable costs and expenses (including, without limitation, the reasonable fees and expenses of legal counsel) in connection with (i) any default by Guarantor hereunder and any enforcement or collection proceeding resulting therefrom, including, without limitation, all manner of participation in or other involvement with bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings of or involving the Guarantor, judicial or regulatory proceedings of or involving the Guarantor and workout, restructuring or other negotiations or proceedings of or involving the Guarantor (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (ii) the enforcement of this Section 2. 3. Guaranty Absolute; Continuing Guaranty. The obligations of Guarantor hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the H-3 Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, Guarantor agrees that: (a) this Guaranty is a guaranty of payment when due and not of collectibility; (b) the obligations of Guarantor hereunder are independent of the obligations of Supplier under the TPPA and a separate action or actions may be brought and prosecuted against Guarantor whether or not any action is brought against the Supplier and whether or not the Supplier is joined in any such action or actions; and (c) Guarantor's payment of a portion, but not all, of the Guarantied Obligations shall in no way limit, affect, modify or abridge Guarantor's liability for any portion of the Guarantied Obligations that has not been paid. This Guaranty is a continuing guaranty and shall be binding upon Guarantor and its successors and assigns. 4. Actions by Beneficiary. The Beneficiary may from time to time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation, impairment or discharge of Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security hereafter held by or for the benefit of the Beneficiary in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Beneficiary may have against any such security, and (f) exercise any other rights available to SPPC under the TPPA. 5. No Discharge. This Guaranty and the obligations of Guarantor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Guarantied Obligations), including without limitation the occurrence of any of the following, whether or not Guarantor shall have had notice or knowledge of any of them: (a) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guarantied Obligations, (b) any waiver or modification of, or any consent to departure from, any of the terms or provisions of any other guaranty or security for the Guarantied Obligations, (c) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (d) the application of payments received from any source to the payment of indebtedness other than the Guarantied Obligations, even if the Beneficiary might have elected to apply such payment to any part or all of the Guarantied Obligations, (e) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations, (f) any defenses, set-offs or counterclaims which the Supplier may assert against the Beneficiary in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction (other than the right to set off or recoup overdue undisputed payments due from Beneficiary under the TPPA), and (g) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of Guarantor as an obligor in respect of the Guarantied Obligations. 6. Waivers for the Benefit of Beneficiary. Guarantor waives, for the benefit of Beneficiary, until the Guarantied Obligations are paid in full: (a) any right to require the Beneficiary, as a H-4 condition of payment or performance by Guarantor, to (i) proceed against the Supplier, any other guarantor of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from the Supplier, any other guarantor of the Guarantied Obligations or any other Person, or (iii) pursue any other remedy in the power of the Beneficiary; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Supplier including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Supplier from any cause other than payment in full of the Guarantied Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) (i) any principles or provisions of law, statutory or otherwise, that are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that the Beneficiary protect, secure, perfect or insure any lien on any property subject thereto; (e) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guaranty; and (f) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty. 7. Waiver of Rights Against Supplier. Guarantor waives any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against the Supplier or any of its assets in connection with this Guaranty or the performance by Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against the Supplier, (b) any right to enforce, or to participate in, any claim, right or remedy that the Beneficiary now has or may hereafter have against the Supplier, and (c) any benefit of, and any right to participate in, any collateral or security hereafter held by the Beneficiary. Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement and indemnification as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Guarantor may have against the Supplier or against any collateral or security shall be junior and subordinate to any rights the Beneficiary may have against Supplier, to all right, title and interest the Beneficiary may have in any such collateral or security, and to any right the Beneficiary may have against such other guarantor. 8. Representations and Warranties of Guarantor. Guarantor represents and warrants to SPPC as follows: (a) Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Guarantor has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (b) Guarantor has the corporate power and authority to execute and deliver this Guaranty and to consummate the transactions contemplated hereby. The execution and delivery of this Guaranty and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Guarantor, and no other corporate proceedings on the part of Guarantor, including the approval of its shareholders, are necessary to authorize this Guaranty or to consummate the transactions so contemplated. This Guaranty has been duly and validly executed and delivered by Guarantor and H-5 constitutes a valid and binding agreement of Guarantor, enforceable against Guarantor in accordance with its terms. (c) There are no legal or arbitral proceedings by or before any governmental or regulatory authority or agency, now pending or (to Guarantor's knowledge) threatened against Guarantor or its subsidiaries that could reasonably be expected to have a material adverse effect on the consolidated financial condition, operations or business taken as a whole of it and its subsidiaries. (d) The representations and warranties made herein will remain true until Guarantor has fulfilled all obligations to pay in full the Guaranteed Obligations. 9. Set Off. In addition to any other rights the Beneficiary may have under law or in equity, if any amount shall at any time be due and owing by Guarantor to the Beneficiary under this Guaranty, the Beneficiary is authorized at any time or from time to time, without notice (any such notice being expressly waived), to set off and to appropriate and to apply any indebtedness of the Beneficiary owing to Guarantor and any other property of Guarantor held by the Beneficiary to or for the credit or the account of Guarantor against and on account of the Guarantied Obligations and liabilities of Guarantor to the Beneficiary under this Guaranty. 10. Disputes. Any action, claim or dispute arising out of or relating to this Guaranty (any such action, claim or dispute, a "Dispute") shall be submitted in writing to the other Party. In the event Guarantor and SPPC are unable to resolve the Dispute satisfactorily within thirty (30) days from the receipt of notice of the Dispute, either Guarantor or SPPC may initiate arbitration through the serving and filing of a demand for arbitration. Guarantor and SPPC expressly agree that such arbitration shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time a request made for provisional remedies requesting preservation of respective rights and obligations under the Guaranty may be resolved by a court of law located in the County of the principal place of business of SPPC. Arbitration shall be conducted in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the TPPA. 11. Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall in any event be effective without the written concurrence of SPPC and, in the case of any such amendment or modification, Guarantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. 12. Miscellaneous. It is not necessary for Beneficiary to inquire into the capacity or powers of Guarantor or Supplier or the officers, directors or any agents acting or purporting to act on behalf of any of them. The rights, powers and remedies given to Beneficiary by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to Beneficiary by virtue of any statute or rule of law or in the TPPA. Any forbearance or failure to exercise, and any delay by Beneficiary in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. In case any provision in or obligation under this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or H-6 obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Guaranty shall inure to the benefit of Beneficiary and its respective successors and assigns. 13. Notices. All notices, requests, demands, waivers, consents and other communications hereunder shall be in writing, shall be delivered either in person, by telegraphic, facsimile or other electronic means, by overnight air courier or by mail, and shall be deemed to have been duly given and to have become effective (a) upon receipt if delivered in person or by telegraphic, facsimile or other electronic means, (b) one (1) business day after having been delivered to an air courier for overnight delivery or (c) three (3) business days after having been deposited in the U.S. mails as certified or registered mail, return receipt requested, all fees prepaid, directed to the parties at the following addresses: If to Guarantor, addressed to: Brian B. Bird, Treasurer NRG Energy, Inc. 901 Marquette Avenue, Suite 2300 Minneapolis, MN 55402 Facsimile: --------------- If to SPPC, addressed to: William E. Peterson Nevada Power Company 6100 Neil Road Reno, Nevada 89511 Facsimile: (775) 834-5959 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officers thereunto duly authorized as of the date first written above. NRG ENERGY, INC. By: ---------------------- Craig A. Mataczynski Title: President Address: 901 Marquette Ave., Suite 2300 Minneapolis, MN 55402 H-7 EXHIBIT I COMPANY OBSERVED HOLIDAYS New Year's Day January 1st President's Day Third Monday in February Memorial Day (observed) Last Monday in May Independence Day July 4th Labor Day First Monday in September Nevada Day Last Friday in October Thanksgiving Day Fourth Thursday in November Thanksgiving Friday Friday after Thanksgiving Christmas Day December 25th Holidays falling on Saturday will be observed on the preceding Friday and those falling on Sunday will be observed on the following Monday. I-1 EXHIBIT J VALMY BUNDLE ADJUSTMENTS TO TPPA AMOUNT
Monthly Monthly Month Adjustment Month Adjustment - ----------------------------------------- -------------------------------------------------- Mar-01 3.4% Mar-02 3.4% Apr-01 4.4% Apr-02 4.4% May-01 4.0% May-02 4.0% Jun-01 4.3% Jun-02 4.3% Jul-01 5.0% Jul-02 5.0% Aug-01 5.0% Aug-02 5.0% Sep-01 4.9% Sep-02 4.9% Oct-01 5.1% Oct-02 5.1% Nov-01 5.0% Nov-02 5.0% Dec-01 5.1% Dec-02 5.1% Jan-02 5.1% Jan-03 5.1% Feb-02 4.6% Feb-03 4.6%
Example 1 - Effective Date of Agreement is April 15, 2001 A. TPPA Amount: $ 15,000,000
B C D Monthly Applicable Applicable Month Adjustment Portion * Adjustment - ------------------------------------------------------------------------------------ (B x C) Apr-01 4.4% 50.0% 2.2% May-01 4.0% 100.0% 4.0% - ------------------------------------------------------------------------------------ Total 6.2%
E. Total of Monthly Applicable Adjustments 6.2% F Adjusted TPPA Amount (A x (1+D)) $ 0 =====================================================================================================================
Example 2 - Effective Date of Agreement is September 15, 2001 G. TPPA Amount: $ 15,000,000 H I J Monthly Applicable Applicable Month Adjustment Portion * Adjustment - -------------------------------------------------------------------------------- J-1 EXHIBIT J VALMY BUNDLE ADJUSTMENTS TO TPPA AMOUNT (H x I) Jun-01 4.3% 100.0% 4.3% Jul-01 5.0% 100.0% 5.0% Aug-01 5.0% 100.0% 5.0% Sep-01 4.9% 50.0% 2.5% - ------------------------------------------------------------- Total 16.8% K. Total of Monthly Applicable Adjustments 16.8% L Adjusted TPPA Amount (G x (1-K)) $ 12,480,000 ================================================================================ Example 3 - Termination Date of December 31, 2002 M. TPPA Amount: $ 15,000,000 N O P Monthly Applicable Applicable Month Adjustment Portion ** Adjustment - ------------------------------------------------------------- (N x O) Jan-03 5.1% 100.0% 5.1% Feb-03 4.6% 100.0% 4.6% - ------------------------------------------------------------- Total 9.7% Q. Total of Monthly Applicable Adjustments 9.7% R Payment Amount (M x Q) $ 1,455,000 ================================================================================ * The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer were made divided by the number of days in the month. ** The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer would have been made divided by the number of days in the month. J-2 EXHIBIT K VALMY BUNDLE ADJUSTMENTS TO MINIMUM ANNUAL TAKE
A B C D E F Base Number Base Energy Sales per Current Number Adjusted Energy Class * of Customers Sales (MWh) Customer (MWh) of Customers Sales (MWh) - ------------------------------------------------------------------------------------------------------------------------------------ (C / B) (D x E) ** Residential 475,000 5,800,000 12 470,000 5,738,947 Commercial 65,000 2,800,000 43 60,000 2,584,615 Industrial 1,000 4,900,000 800 3,600,000 Street Lighting 5 130,000 5 130,000 Other Retail 50 600,000 50 600,000 Wholesale 5 850,000 5 850,000 - ------------------------------------------------------------------------------------------------------------------------------------ 541,060 15,080,000 530,860 13,503,563
G. Adjustment to Minimum Annual Take (F / C) 89.55% H. Minimum Annual Take from Exhibit A (MWh) 2,130,000 I. Revised Minimum Annual Take (MWh) (G x H) 1,907,415
J K Month During Applicable Min. Contract Year Annual Take (MWh) - -------------------------------------------------- 1 2,130,000 2 2,130,000 3 2,130,000 4 2,130,000 5 1,907,415 6 1,907,415 7 1,907,415 8 1,810,500 9 1,810,500 10 1,704,000 11 1,704,000 12 1,704,000 - -------------------------------------------------- Total 22,975,245
L. Minimum Take for Contract Year (MWh) (Total of K / 12) 1,914,604
* As reported on Buyer's FERC Form 1 K-2 EXHIBIT K VALMY BUNDLE ADJUSTMENTS TO MINIMUM ANNUAL TAKE ** Adjusted Energy Sales for the remaining Industrial, Street Lighting, Other Retail, and Wholesale customers will be based upon actual sales during the base period. K-3 EXHIBIT L VALMY BUNDLE ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE
A B C D E * F G ** Dispatch Supply Delivered Permitted Force Replacement Applicable Hour Amount (MWh) Energy (MWh) Derating(MWh) Majeure(MWh) Energy(MWh) Energy (MWh) - ---------------------------------------------------------------------------------------------------------------------- (C+D+E+F) 1 282 282 282 2 282 282 0 3 282 282 282 4 282 282 282 5 282 282 282 6 282 262 20 282 7 282 262 20 282 8 282 262 20 282 9 282 282 282 10 282 282 282 11 282 282 282 12 282 282 282 13 282 0 282 282 14 282 0 282 282 15 282 0 282 282 16 282 0 282 282 17 282 232 30 262 18 282 282 282 19 282 282 282 20 282 282 282 21 282 282 282 22 282 282 282 23 282 282 282 24 252 252 252 25 232 232 232 26 202 202 202 27 232 202 30 232 28 252 252 252 29 282 282 282 30 282 282 282 31 282 282 282 32 282 282 282 33 282 282 282 34 282 282 282 35 282 282 282 36 282 282 282 - ---------------------------------------------------------------------------------------------------------------------- total 9,912 8,644 70 1,128 50 9,892
L-1 EXHIBIT L VALMY BUNDLE ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE * Includes energy excused because of Supplier's and Buyer's events of Force Majeure ** G cannot be greater than B L-2 EXHIBIT M ASSET BUNDLE CONTRACTUAL AND OPERATING CONSTRAINTS 1. For the purposes of this Exhibit M, "Constrained Capacity" shall mean that portion of the Asset Bundle Capacity that has been designated as being subject to contractual and operational constraints in accordance with the provisions of this Exhibit M. 2. Section 4.1.4 of the Agreement, which addresses Supplier's right to Asset Bundle Capacity in excess of the Supply Amount, shall not be applicable to Constrained Capacity. 3. Asset Bundle Capacity scheduled in accordance with Section 5.1 of the Agreement, which addresses Buyer's notifications to Supplier, shall not be deemed to include Constrained Capacity unless Buyer's schedules specifically designate Constrained Capacity as being applicable to the schedules. 4. The Asset Bundle Capacity described in the following table shall be deemed Constrained Capacity for the designated Asset Bundles.
---------------------------------------------------------------------------------------------------- Source of Capacity Annual Limit Monthly Limit Daily Limit ---------------------------------------------------------------------------------------------------- Winnemucca and 100 hours at max. Battle Mt. 1-4 capacity for each (25 MW) unit* None None ---------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------
* Buyer is attempting to raise the operating limits on these generating units. If Buyer is successful, the higher limits will be applicable to this Exhibit M. M-2 EX-10.X 33 0033.txt ASSET SALE AGREEMENT, WPS NORTHERN NEVADA, LLC Exhibit 10(X) - -------------------------------------------------------------------------------- ASSET SALE AGREEMENT BETWEEN SIERRA PACIFIC POWER COMPANY AND WPS NORTHERN NEVADA, LLC FOR THE TRACY/PINON ASSET BUNDLE October 25, 2000 - -------------------------------------------------------------------------------- ASSET SALE AGREEMENT ASSET SALE AGREEMENT, dated as of October 25, 2000, between Sierra Pacific Power Company, a Nevada corporation (the "Seller"), and WPS Northern Nevada, LLC, a Nevada limited liability company (the "Buyer"). WHEREAS, the Seller owns and operates (directly or indirectly through wholly-owned subsidiaries) the "Purchased Assets" (as defined herein); and WHEREAS, the Buyer, WPS Resources Corporation, a Wisconsin corporation ("WPSR"), WPS Power Development, Inc., a Wisconsin corporation ("PDI") and an indirect wholly-owned subsidiary of WPSR, and Seller entered into that certain Equity Contribution Agreement, dated as of the date hereof (the "Equity Contribution Agreement"), pursuant to which PDI has agreed to make certain capital contributions into Buyer on or prior to the Closing Date and WPSR has agreed to unconditionally guarantee the performance by Buyer of all of Buyer's obligations under this Agreement due to be performed by Buyer at or prior to the Closing and any Adjustment Amount due thereafter; and WHEREAS, the Buyer desires to purchase and assume from the Seller, and the Seller desires to sell to the Buyer, the Purchased Assets and certain associated liabilities upon the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS ----------- 1.1 Definitions. As used in this Agreement, the following terms have ----------- the meanings specified or referred to in this Section 1.1: (1) "Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (2) "Adjustment Statement" shall have the meaning set forth in Section 3.2(a) hereof. (3) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (4) "Agreement" means this Asset Sale Agreement for the Tracy/Pinon Bundle, dated October 25, 2000, between Seller and Buyer, together with the Schedules and Exhibits thereto. (5) "Ancillary Agreements" means the Interconnection Agreement, the Transitional Power Purchase Agreement, the Operating Easement Agreements, the Equity Contribution Agreement, the Bills of Sale, the Assignment of Leases, the Deeds and the Instrument of Assumption. (6) "Assignment of Leases" means the Assignment of Leases in the form of Exhibit A hereto. (7) "Assumed Liabilities" shall have the meaning set forth in Section 2.3 hereof. (8) "Benefit Plans" shall have the meaning set forth in Section 2.4(i) hereof. (9) "Benefit Plans of Buyer" shall have the meaning set forth in Section 7.10(d) hereof. (10) "Bill of Sale" means the Bills of Sale to be delivered at the Closing with respect to the Purchased Assets which constitute personal property and which are to be transferred at the Closing, substantially in the form of Exhibit B hereto. (11) "Brunswick Diesel" means the Brunswick diesel generating facility and related assets located in Carson City County, Nevada. (12) "Business Day" means any day other than Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (13) "Buyer" shall have the meaning set forth in the preface hereto. (14) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (15) "Buyer Required Regulatory Approvals" shall have the meaning set forth in Section 6.3(b) hereof. 2 (16) "Buyer's Easements" shall have the meaning set forth in Section 4.3(f) hereof. (17) "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.(S)9601, et seq., as amended. ------- (18) "Closing" shall have the meaning set forth in Section 4.1 hereof. (19) "Closing Date" shall have the meaning set forth in Section 4.1 hereof. (20) "COBRA" means the Consolidated Omnibus Reconciliation Act of 1985, as amended. (21) "Code" means the Internal Revenue Code of 1986, as amended. (22) "Collective Bargaining Agreements" shall have the meaning set forth in Section 7.10(a) hereof. (23) "Confidentiality Agreement" means the Confidentiality and Auction Protocols Agreement, dated March 17, 2000, between the Seller and the Buyer. (24) "CPUC" means the California Public Utility Commission or any successor thereto. (25) "CSFB" shall have the meaning set forth in Section 7.7 hereof. (26) "Direct Claim" shall have the meaning set forth in Section 9.2(c) hereof. (27) "Dispute" shall have the meaning set forth in Section 11.6 hereof. (28) "Emission Allowance Account" means the system account used by USEPA to track the number of SO2 Allowances held by the Seller or any of the Seller Subsidiaries in respect of the Purchased Assets. (29) "Emission Reduction Credit" means a permanent, enforceable, quantifiable and surplus emissions reduction which can be considered as a reduction 3 for the purpose of offsetting requirements under the federal Clean Air Act or any state counterpart thereto. (30) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, conservation easements, deed restrictions, encumbrances and charges of any kind. (31) "Environmental Laws" means all Federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances, laws relating to record keeping, notification, disclosure and reporting requirements respecting Hazardous Substances, and laws relating to the management and use of natural resources. (32) "Environmental Permits" shall have the meaning set forth in Section 5.13(a) hereof. (33) "Environmental Site Assessments" means, collectively (i) the Tracy Station Phase I Environmental Site Assessment, dated October 1998; (ii) the Tracy Station Phase II Environmental Site Assessment, dated March 1999; (iii) the Tracy Station Phase II Environmental Assessment Closure Report, issued November 1999; (iv) the Brunswick Diesel Phase I Environmental Site Assessment, dated October 1998; (v) the Gabbs Diesel Phase I Environmental Site Assessment, dated October 1998 and (vi) the Valley Road Diesel Phase I Environmental Site Assessment, dated October 1998. (34) "Equity Contribution Agreement" shall have the meaning set forth in the Recitals. (35) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (36) "ERISA Affiliate" shall have the meaning set forth in Section 2.4(i) hereof. (37) "ERISA Affiliate Plans" shall have the meaning set forth in Section 2.4(i) hereof. 4 (38) "Estimated Adjustment Amount" means (i) the Estimated Maintenance and Capital Expenditures Amount plus (ii) the Estimated Inventory Adjustment Amount plus (iii) the Estimated Materials and Supplies Adjustment Amount. (39) "Estimated Closing Payment" shall have the meaning set forth in Section 4.2 hereof. (40) "Estimated Inventory Adjustment Amount" means the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer, which approval shall not be unreasonably withheld, of the Fuel Inventory priced at the Seller's weighted average fuel costs used at or in connection with the Purchased Assets as of the date that is ten (10) days before the Closing Date, which valuation shall be provided to the Buyer by the Seller no later than five (5) days before the Closing Date. (41) "Estimated Maintenance and Capital Expenditures Amount" means the Seller's estimate of the Maintenance and Capital Expenditures Amount, which estimate shall be the Seller's good faith reasonable estimate of the Maintenance and Capital Expenditures Amount actually incurred, as set forth in Schedule 1.1(41) attached hereto as of the date set forth in such Schedule 1.1(41). (42) "Estimated Materials and Supplies Adjustment Amount" means the Seller's good faith reasonable estimate of the book value of materials and supplies used at or in connection with the Purchased Assets on the Materials and Supplies Valuation Date. (43) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (44) "Excluded Assets" shall have the meaning set forth in Section 2.2 hereof. (45) "Excluded Liabilities" shall have the meaning set forth in Section 2.4 hereof. (46) "Federal Power Act" means the Federal Power Act of 1935, as amended. (47) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. 5 (48) "Final Order" shall have the meaning set forth in Section 8.1(c) hereof. (49) "Fuel Inventory" means coal, fuel oil and alternative fuel inventories that are located at, or are in transit to, the sites included within the Tracy/Pinon Bundle on the Closing Date. (50) "Gabbs Diesel" means the Gabbs diesel generating facility and related assets located in Nye County, Nevada. (51) "Good Utility Practices" mean the applicable practices, methods and acts: (i) required by applicable Laws, Permits and Environmental Permits or Applicable Reliability Criteria (as defined in the Interconnection Agreement), whether or not the party whose conduct is at issue is a member thereof; and (ii) otherwise engaged in or approved by a significant portion of the United States electric utility industry during the relevant time period, which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with applicable Laws, applicable Permits and Environmental Permits, Applicable Reliability Criteria (as defined in the Interconnection Agreement), good business practices, safety, environmental protection, economy and expediency. Good Utility Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to practices, methods or acts generally accepted in the United States electric utility industry. (52) "Governmental Authority" means any executive, legislative, judicial, regulatory or administrative agency, body, commission, department, board, court, tribunal, arbitrating body or authority of the United States or any foreign country, or any state, local or other governmental subdivision thereof. (53) "Hazardous Substances" means (i) any petrochemical or petroleum products, oil, coal ash, radioactive materials, radon gas, natural gas, synthetic gas, and mixtures thereof, asbestos and asbestos-containing materials in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment which may contain polychlorinated biphenyls; (ii) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted 6 hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (iii) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Laws. (54) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (55) "Hourly Employees" shall have the meaning set forth in Section 7.10(a) hereof. (56) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (57) "Income Tax" means any federal, state, local or foreign Tax (i) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains Taxes and minimum Taxes) or (ii) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such Tax may be based, measured by or calculated with respect to, is described in clause (i), in each case together with any interest, penalties or additions to such Tax. (58) "Indemnifiable Losses" shall have the meaning set forth in Section 9.1(a) hereof. (59) "Indemnifying Party" shall have the meaning set forth in Section 9.1(d) hereof. (60) "Indemnitee" shall have the meaning set forth in Section 9.1(c) hereof. (61) "Indenture" means Indenture of Mortgage dated as of December 1, 1940, as supplemented from time to time, between Seller and State Street Bank and Trust Company, as Trustee. (62) "Independent Accounting Firm" means an independent accounting firm of national reputation mutually appointed by the Seller and the Buyer. (63) "Independent Appraiser" shall have the meaning set forth in Section 3.3 hereof. 7 (64) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit C attached hereto. (65) "Intellectual Property" means patents and patent rights, trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, brand names, inventions, copyrights and copyright rights, computer programs and pending applications for and registrations of patents, trademarks, service marks and copyrights. (66) "Interconnection Agreement" means the Interconnection Agreement, dated as of October 25, 2000, between the Seller and the Buyer. (67) "Inventory Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (68) "Knowledge" means the actual knowledge of the directors and executive officers of the specified Person, which directors and executive officers are charged with the responsibility for the particular function as of the date of the Agreement, or with respect to any certificate delivered pursuant to the Agreement, the date of delivery of such certificate, after reasonable inquiry by them of selected employees of the specified Person whom they believe, in good faith, to be the persons generally responsible for the subject matters to which the knowledge is pertinent. (69) "Laws" means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental Authority. (70) "Leased Assets" shall have the meaning set forth in Section 7.4 hereof. (71) "Leases" shall have the meaning set forth in Section 5.10 hereof. (72) "Maintenance and Capital Expenditures Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (73) "Maintenance and Capital Expenditures Amount" means the aggregate amount of actual funds reasonably expended on, or for which liabilities were reasonably accrued in accordance with generally accepted accounting principles applied on a consistent basis with respect to (i) any Scheduled 8 Maintenance Expenditures or Scheduled Capital Expenditures, made with respect to the Purchased Assets by the Seller beginning on January 1, 2001 and ending on the Closing Date; provided, however, that the portion of the Maintenance and Capital Expenditures Amount attributable to Scheduled Maintenance Expenditures shall be the lesser of (x) the actual amounts expended plus the accrued liabilities related thereto for the period beginning on January 1, 2001 and ending on the earlier of June 30, 2001 and the Closing Date and (y) Two Million Eight Hundred Thirty Thousand Dollars ($2,830,000), and (ii) any maintenance expenditures and capital expenditures which were made by the Seller at the Buyer's request, beginning on the date of this Agreement and ending on the Closing Date. (74) "Management Employee" shall have the meaning set forth in Section 7.10(b) hereof. (75) "Management Transition Plan" means the Management Transition Plan, Generation Bundled Employees, as detailed in the Generation Divestiture Severance Packet, dated July, 2000, of the Seller. (76) "Material Adverse Effect" means any change or changes in or effect on the Purchased Assets that is materially adverse to the business, results of operations, financial condition or physical condition of the Purchased Assets, individually or in the aggregate, except for (i) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power; (ii) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used at the Purchased Assets; (iii) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems; (iv) any change in applicable laws, judgments, orders or decrees; (v) any conditions imposed by a Governmental Authority in connection with the consents or approvals required for the transactions contemplated hereby; and (vi) any materially adverse change in or effect on the Purchased Assets which is cured (including by the payment of money) by the Seller to the reasonable satisfaction of Buyer before the Termination Date. (77) "Materials and Supplies Adjustment Amount" shall have the meaning set forth in Section 3.2(a) hereof. (78) "Materials and Supplies Valuation Date" means the date that is ten (10) days prior to the Closing Date. (79) "Necessary Capital Expenditures" shall have the meaning set forth in Section 7.1(c) hereof. 9 (80) "Necessary Maintenance Expenditures" shall have the meaning set forth in Section 7.1(e) hereof. (81) "Offering Memorandum" means the Offering Memorandum of Sierra Pacific Resources, dated March, 2000 as supplemented from time to time. (82) "Off-Site Location" means any real property other than the Real Property. (83) "Operating Easement Agreements" means the operating easements providing the right to continue operating and maintaining certain generation and transmission facilities at the Purchased Assets, each in substantially the form of Exhibit D or Exhibit E attached hereto. (84) "Operating Easements" means the Seller's Easements and/or Buyer's Easements granted pursuant to the Operating Easement Agreements. (85) "OPUC" means the Oregon Public Utility Commission or any successor thereto. (86) "Permits" shall have the meaning set forth in Section 5.20 hereof. (87) "Permitted Encumbrances" means (i) all exceptions, restrictions, easements, covenants, charges, rights of way and monetary and non-monetary Encumbrances of record, except for such Encumbrances which have a Material Adverse Effect or secure indebtedness; (ii) any state of facts that a current survey of the Real Property would disclose, except for such facts which have a Material Adverse Effect; (iii) with respect to any date before the Closing Date, Encumbrances under the Indenture; (iv) mortgages, liens, pledges, charges, Encumbrances and restrictions incurred in connection with the Seller's purchase of personal property after the date of this Agreement, in accordance with Section 7.1, securing all or a portion of the purchase price therefor; (v) the Buyer's Easements and the Seller's Easements (in accordance with the Operating Easement Agreements applicable to such easements and the Interconnection Agreement); (vi) statutory liens for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings provided that such contested sums are paid or dismissed prior to Closing or with respect to which Seller pays the Taxes, assessments or other government charges under protest; (vii) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings provided that such contested 10 sums are paid or dismissed prior to Closing or for which Seller has posted an appropriate bond to secure payment; (viii) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities which do not have a Material Adverse Effect; and (ix) such other liens, imperfections in or failure of title, charges, easements, restrictions and Encumbrances which do not materially detract from the value of or materially interfere with the present use of the Purchased Assets and do not, in the aggregate, have a Material Adverse Effect. (88) "Person" means any individual, partnership, joint venture, corporation, limited liability company, limited liability partnership, trust, unincorporated organization or Governmental Authority or any department or agency thereof. (89) "Pinon Facility" means the Pinon Pine Integrated Coal Gasification Combined Cycle power plant and related assets located in Storey County, Nevada. (90) "PUCN" means the Public Utilities Commission of Nevada or any successor thereto. (91) "Purchase Price" shall have the meaning set forth in Section 3.1 hereof. (92) "Purchased Assets" means, subject to the Permitted Encumbrances, all of the right, title and interest, in, to and under the real and personal property, tangible or intangible, of the Seller and the Seller Subsidiaries constituting the Tracy/Pinon Bundle or used principally for generation purposes in connection with the Tracy/Pinon Bundle including, without limitation, the following assets owned by the Seller or the Seller Subsidiaries: (i) the Real Property described on Schedule 1.1(92)(i) as associated with the Tracy/Pinon Bundle (the "Tracy/Pinon Bundle Real Property"); (ii) all inventories of fuels, supplies, materials and spares located on or in transit to the Tracy/Pinon Bundle Real Property on the Closing Date; (iii) the machinery, equipment, vehicles, furniture and other personal property located on the Tracy/Pinon Bundle Real Property on the Closing Date, including, without limitation, the items of personal property included in Schedule 1.1(92)(iii) as being associated with the Tracy/Pinon Bundle, and all warranties against manufacturers or vendors relating thereto, to the extent that such warranties are freely transferable; (iv) the contracts, agreements and personal property leases listed on Schedules 1.1(92)(iv) as being associated with the Tracy/Pinon Bundle and which are assignable; (v) the Permits listed on Schedule 1.1(92)(v) as being associated with the Tracy/Pinon Bundle, to the extent transferable; (vi) the Environmental Permits listed on Schedule 5.12 as being associated with the Tracy/Pinon Bundle; (vii) all 11 books, operating records, operating, safety and maintenance manuals, engineering design plans, blueprints and as-built plans, specifications, procedures and similar items of the Seller or any of the Seller Subsidiaries relating specifically to the aforementioned assets other than books of account associated with the Tracy/Pinon Bundle; (viii) the SO2 Allowances identified on Schedule 1.1(92)(viii) associated with the Tracy/Pinon Bundle; (ix) any assets purchased or to be purchased by the Seller pursuant to Section 7.4 associated with the Tracy/Pinon Bundle; (x) the names "Tracy and Clark Mountain Station", "Pinon Pine", "Gabbs", "Valley Road" and "Brunswick" or any other trade names, trademarks, service marks or logos associated with the Tracy/Pinon Bundle or any part, derivative or combination thereof; (xi) the Intellectual Property used solely in connection with the sites included within the Tracy/Pinon Bundle; and (xii) the Water Rights, including without limitation those Water Rights listed on Schedule 1.1(123). (93) "Qualifying Offer of Employment" shall have the meaning set forth in Section 7.10(b) hereof. (94) "Real Property" means each parcel of real property owned by the Seller (or to which the Seller holds an interest therein), including, but not limited to, buildings, structures and improvements located thereon, fixtures contained therein and appurtenances thereto and easements and other rights relating thereto and as more fully described on Schedule 5.8. (95) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment, including without limitation the abandonment or discarding of barrels, containers and other receptacles containing any Hazardous Substance. (96) "Remediation" means an action of any kind to address a Release or threatened Release of Hazardous Substance or the presence of Hazardous Substances at, under, on or from the Purchased Assets or an Off-Site Location, including, without limitation, any or all of the following activities to the extent they relate to or arise from the presence, Release or threatened Release of a Hazardous Substance at the Purchased Assets or an Off-Site Location: (i) monitoring, investigation, assessment, treatment, cleanup, containment, removal, mitigation, response or restoration work; (ii) obtaining any permits, consents, approvals or authorizations of any Governmental Authority necessary to conduct any such activity; (iii) preparing and implementing any plans or studies for any such activity; (iv) obtaining a written notice from a Governmental Authority with jurisdiction over the Purchased Assets or an Off-Site Location under Environmental Laws that no material additional investigation or work is required by such Governmental Authority; (v) the use, implementation, application, installation, operation or maintenance of removal or remedial actions on the Purchased Assets or an Off-Site 12 Location, remedial technologies applied to the surface or subsurface soils or ground or surface water, excavation and treatment or disposal of soils or waters at an Off-Site Location, systems for treatment of surface water or ground water, engineering controls or institutional controls; and (vi) any other activities reasonably determined by a party to be necessary or appropriate or required under Environmental Laws to address the presence, Release or threatened Release of Hazardous Substances at the Purchased Assets or an Off-Site Location. (97) "Scheduled Capital Expenditures" means those capital expenditures included on Schedule 1.1(97). (98) "Scheduled Maintenance Expenditures" means those maintenance expenditures included on Schedule 1.1(98). (99) "SEC" means the Securities and Exchange Commission or any successor thereto. (100) "Securities Act" means the Securities Act of 1933, as amended. (101) "Seller" shall have the meaning set forth in the preface hereto. (102) "Seller Agreements" means those agreements listed on Schedule 5.18, the Collective Bargaining Agreements and the Management Transition Plan. (103) "Seller Balance Sheet" shall have the meaning set forth in Section 5.5 hereof. (104) "Seller Required Regulatory Approvals" shall have the meaning set forth in Section 5.3(b) hereof. (105) "Seller Subsidiaries" shall mean the following wholly-owned Subsidiaries of Seller: Pinon Pine Company, L.L.C., a Delaware limited liability company, Pinon Pine Corp., a Nevada corporation, Pinon Pine Investment Co., a Nevada corporation, and GPSF-B, Inc., a Delaware corporation. (106) "Seller's Easements" shall have the meaning set forth in Section 4.4(f) hereof. (107) "Separation Schedule" means the schedule to be delivered to the Buyer by the Seller by the earlier of February 21, 2001 or 60 days prior to the Closing Date, which shall delineate the Purchased Assets from the Seller's other 13 assets and which shall be consistent with the separation schedule summary attached hereto as Exhibit F and otherwise reasonably acceptable to Buyer. (108) "SO2 Allowance" means an authorization by the Administrator of the USEPA under the Clean Air Act, 42 U.S.C.(S).7401, et seq., to emit one ton ------ of sulfur dioxide during or after a specified calendar year. (109) "Subsidiary", when used in reference to any other Person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other Person. (110) "Sustained Run Test" shall have the meaning set forth in Section 7.15 hereof. (111) "Tax" means any tax, charge, fee, levy, penalty or other assessment (other than any Income Tax) imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any excise, property, sales, transfer, franchise, payroll, withholding, social security or other tax, including any interest, penalties or additions attributable thereto. (112) "Tax Return" means any return, report, information return, declaration, claim for refund or other document (including any related or supporting information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. (113) "Termination Date" shall have the meaning set forth in Section 10.1(b) hereof. (114) "Third Party Claim" shall have the meaning set forth in Section 9.2(a) hereof. (115) "Tracy/Pinon Bundle" means the Tracy and Clark Mountain Station, the Pinon Facility, the Gabbs Diesel, the Valley Road Diesel and the Brunswick Diesel. (116) "Tracy and Clark Mountain Station" means the Tracy and Clark Mountain Station generating facility and related assets located in Storey and Washoe Counties, Nevada. (117) "Transitional Power Purchase Agreement" or ("TPPA") means the Transitional Power Purchase Agreement, dated as of October 25, 2000, between the Buyer and the Seller. 14 (118) "TPPA Amount" shall have the meaning set forth in Section 3.1 hereof. (119) "Tuscarora Transportation Agreement" means the Transportation Service Agreement dated January 11, 1995 (as amended on November 1, 1998) between Tuscarora Gas Transmission Company and Seller. (120) "USEPA" means the United States Environmental Protection Agency, or any successor agency thereto. (121) "Valley Road Diesel" means the Valley Road diesel generating facility and related assets located in Washoe County, Nevada. (122) "WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988, as amended. (123) "Water Rights" means all rights and interests in and to all permits, certificates and/or decrees for the use of waters of the State of Nevada, including the surface waters of the Truckee River, that are owned, held or otherwise enjoyed by the Seller or any Seller Subsidiary with respect to Tracy/Pinon Station; Water Rights includes, without limitation, those Water Rights listed in Schedule 1.1(123), as well as any pending application(s) for Water Rights for any use associated with Tracy/Pinon Station. ARTICLE II ---------- PURCHASE AND SALE ----------------- 2.1 The Sale. Upon the terms and subject to the satisfaction of the -------- conditions contained in this Agreement, at the Closing, the Seller shall, and shall cause the Seller Subsidiaries to, sell, assign, convey, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller and the Seller Subsidiaries, free and clear of all Encumbrances (except for Permitted Encumbrances and the operating easement(s) granted in accordance with the Operating Easement Agreements and the Interconnection Agreement), all of the Seller's and the Seller Subsidiaries' right, title and interest in, to and under the real and personal property, tangible or intangible, owned by the Seller and the Seller Subsidiaries and constituting the Purchased Assets. 2.2 Excluded Assets. Notwithstanding any provision herein to the --------------- contrary, the Purchased Assets shall not include the following (collectively, the "Excluded Assets"): 15 (a) all cash, cash equivalents, bank deposits, accounts receivable, and any income, sales, payroll or other tax receivables; (b) the names "Sierra Pacific Resources," "Sierra Pacific Power Company," "Sierra Pacific," "Nevada Power Company" and "Nevada Power" or any related or similar trade names, trademarks, service marks or logos; (c) transmission, substation and communication facilities and related support equipment described in Schedule 2.2(c); (d) any refund, credit penalty payment, adjustment or reconciliation (i) related to Real Property, personal property or other Taxes paid prior to the Closing Date in respect of the Purchased Assets, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable, or (ii) arising under the Seller Agreements and relating to a period before the Closing Date; (e) except to the extent specifically required by law and except such personnel records set forth on Schedule 2.2(e), the personnel records relating to any employees of the Seller; (f) the rights and assets described in the Separation Schedule as not part of the Purchased Assets; and (g) the SO2 Allowances identified on Schedule 2.2(g). 2.3 Assumed Liabilities. On the Closing Date, the Buyer shall deliver ------------------- to the Seller the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the liabilities and obligations of the Seller and the Seller Subsidiaries, direct or indirect, known or unknown, absolute or contingent, which relate to the Purchased Assets, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective conditions thereof, including, without limitation, the following liabilities and obligations: (a) all liabilities and obligations of the Seller and the Seller Subsidiaries to be paid or performed after the Closing Date arising under (i) the Seller Agreements, the Environmental Permits, the Permits, the Leases, contracts and any other agreements or leases in each case assigned to the Buyer pursuant to this Agreement in accordance with the terms thereof, and (ii) the leases, contracts and other agreements entered into by the Seller with respect to the Purchased Assets after the date hereof consistent with the terms of this Agreement (including in the case of 16 (i) and (ii), without limitation, agreements with respect to liabilities for real or personal property taxes or other Taxes on any of the Purchased Assets); except, in each case, to the extent such liabilities and obligations, but for a breach or default by the Seller or any Seller Subsidiary, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default; (b) all liabilities and obligations associated with the Purchased Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.8 hereof; (c) any liabilities and obligations for which the Buyer has indemnified the Seller pursuant to Section 9.1 hereof; (d) all liabilities to employees for which the Buyer is liable pursuant to Section 7.10 hereof, including the Collective Bargaining Agreements and the Management Transition Plan; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets, including, without limitation, any fines or penalties that arise in connection with the ownership or operation of the Purchased Assets prior to the Closing Date or the costs associated with correcting any such violations; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets prior to the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; and (iii) the investigation and/or Remediation (whether or not such investigation or Remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; provided, as to all of the above, that nothing set forth in this Section 2.3(e) shall 17 require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (f) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or operation of the Purchased Assets; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets on or after the Closing Date, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets; (v) the investigation and/or Remediation of Hazardous Substances that are present or have been released on or after the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, without limitation, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at or adjacent to the Purchased Assets; and (vi) the investigation and/or Remediation of Hazardous Substances that are disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets, at any Off-Site Location; provided, that nothing set forth in this Section 2.3(f) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4 hereof; (g) all liabilities incurred by the Seller with respect to the Maintenance and Capital Expenditures Amount made with respect to the Purchased Assets; (h) all liabilities or obligations associated with the Purchased Assets in respect of the continued operation of the Pinon Facility and the continued provision of information to the United States Department of Energy ("DOE") pursuant to Section 7.12(b) and (c); and 18 (i) all other liabilities or obligations exclusively relating to the Purchased Assets no matter when the events or occurrences giving rise to such liabilities or obligations took place. All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are collectively referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between the Seller and the Buyer. 2.4 Excluded Liabilities. The Buyer shall not assume or be obligated -------------------- to pay, perform or otherwise discharge the following liabilities (collectively, the "Excluded Liabilities"): (a) any liabilities or obligations of the Seller or any Seller Subsidiary in respect of any Excluded Assets or other assets of the Seller or any Seller Subsidiary which are not Purchased Assets; (b) any liabilities or obligations in respect of Taxes attributable to the Purchased Assets for taxable periods ending on or prior to the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.8(a) hereof; (c) any liabilities, obligations or responsibilities relating to the disposal, storage, treatment, transportation, discharge, Release, threatened Release, recycling, or the arrangement for such activities, by the Seller or any Seller Subsidiary, of Hazardous Substances that were generated, used or stored at the Purchased Assets, at any Off-Site Location, where the disposal, storage, treatment, transportation, discharge, Release, threatened Release, recycling or the arrangement for such activities at such Off-Site Location occurred prior to the Closing Date, provided that for purposes of this Section 2.4(c), "Off-Site Location" does not include any location to which Hazardous Substances disposed of, discharged from, emitted from or Released at the Purchased Assets have migrated including, but not limited to, surface waters that have received waste water discharges from the Purchased Assets; (d) any liabilities, obligations or responsibilities relating to (i) the transmission facilities delineated in the Interconnection Agreement or Operating Easement Agreements or (ii) any operations of Seller or any Seller Subsidiary on, or usage of, the operating easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (A) any violation or alleged violation of Environmental Laws and (B) loss of life, injury to persons or property or damage to natural resources, except to the extent caused by the Buyer; 19 (e) any liabilities or obligations required to be accrued by the Seller in accordance with generally accepted accounting principles and the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities related to the Purchased Assets other than any liability assumed by the Buyer under Section 2.3(a), (e) or (f) hereof; (f) any liabilities or obligations relating to any personal injury (including, without limitation, workers' compensation claims), discrimination, wrongful discharge, or unfair labor practice filed with or pending before any court or administrative agency, or any threatened claim of which Seller has Knowledge on the Closing Date, with respect to liabilities principally relating to the Purchased Assets, other than any liabilities or obligations assumed by the Buyer under Section 2.3(e) hereof; (g) any payment obligations of the Seller or any Seller Subsidiary for goods delivered or services rendered prior to the Closing; (h) any liabilities or obligations imposed upon, assumed or retained by the Seller or any Seller Subsidiary pursuant to the Interconnection Agreement, Operating Easement Agreements or any other Ancillary Agreement; (i) any liabilities, obligations or responsibilities relating to any "employee benefit plan" (as defined in Section 3(3) of ERISA) maintained by the Seller or any Seller Subsidiary and any trade or business (whether or not incorporated) that are or have ever been under common control, or that are or have ever been treated as a single employer, with the Seller or any Seller Subsidiary under Section 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") or to which the Seller or any Seller Subsidiary and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by the Seller, any Seller Subsidiary or any ERISA Affiliate (hereinafter referred to as "Benefit Plans"), including any liability (i) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (ii) with respect to non-compliance with the notice and benefit continuation requirements of COBRA; (iii) with respect to any non-compliance with ERISA or any other applicable Laws; or (iv) with respect to any suit, proceeding or claim that is brought against any Benefit Plan, ERISA Affiliate Plan, any fiduciary or former fiduciary of any such Benefit Plan or ERISA Affiliate Plan; (j) liabilities with respect to any accrued payment obligations incurred by Seller or any Seller Subsidiary prior to the Closing Date; and 20 (k) any liabilities, obligations, or responsibilities relating to the (i) disposal, storage, treatment, transportation, discharge, Release, threatened Release, recycling, or the arrangement for such activities, by the Seller or any Seller Subsidiary, of Hazardous Substances that were generated, used or stored at Valley Road Diesel, Gabbs Diesel and Brunswick Diesel prior to the Closing Date, or (ii) the failure of the Seller or any Seller Subsidiary to comply with any Environmental Laws applicable to Valley Road Diesel, Gabbs Diesel and Brunswick Diesel prior to the Closing Date. ARTICLE III ----------- PURCHASE PRICE -------------- 3.1 Purchase Price. The purchase price for the Purchased Assets shall -------------- be an amount equal to the sum of (i) Two Hundred Forty-Nine Million Eight Hundred Thousand Dollars ($249,800,000), (ii) the Estimated Adjustment Amount, (iii) the Adjustment Amount and (iv) any amounts paid by the Seller with respect to Leased Assets pursuant to Section 7.4 hereof (the "Purchase Price"). The amount to be paid by Seller to Buyer for the Transitional Power Purchase Agreement being entered into by Buyer and Seller hereunder shall be One Hundred Fifteen Million Dollars ($115,000,000) (the "TPPA Amount"), which shall be comprised of (x) $103,500,000 related to the original term of the TPPA and (y) $11,500,000 related to Seller's unilateral right to take service under the terms and conditions of the TPPA for the period from January 1, 2003 through February 28, 2003. 3.2 Purchase Price Adjustment. (a) Within sixty (60) days after the ------------------------- Closing, the Seller shall prepare and deliver to the Buyer a statement (the "Adjustment Statement") which reflects (i) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of all Fuel Inventory used at or in connection with the Purchased Assets and (B) the Estimated Inventory Adjustment Amount (such difference is referred to as the "Inventory Adjustment Amount"), (ii) the difference between (A) the book value, as determined by an independent evaluator designated by the Seller and approved by the Buyer as of the Closing Date, of the materials and supplies used at or in connection with the Purchased Assets and (B) the Estimated Materials and Supplies Adjustment Amount (such difference is referred to as the "Materials and Supplies Adjustment Amount") and (iii) the difference between (A) the Maintenance and Capital Expenditures Amount and (B) the Estimated Maintenance and Capital Expenditures Amount (such difference is referred to as the "Maintenance and Capital Expenditures Adjustment Amount"). The Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount and the Maintenance and Capital Expenditures Adjustment Amount are referred to collectively as the "Adjustment Amount." The Adjustment Statement shall be 21 prepared using the same generally accepted accounting principles, policies and methods as the Seller has historically used in connection with the calculation of the items reflected on the Adjustment Statement. The Buyer agrees to cooperate with the Seller in connection with the preparation of the Adjustment Statement and related information, and shall provide to the Seller such books, records and information as may be reasonably requested from time to time. (b) The Buyer may dispute the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount; provided, however, that the Buyer shall notify the Seller -------- ------- in writing of the disputed amount, and the basis of such dispute, within ten (10) Business Days of the Buyer's receipt of the Adjustment Statement. In the event of a dispute with respect to the Inventory Adjustment Amount, the Materials and Supplies Adjustment Amount or the Maintenance and Capital Expenditures Amount, the Buyer and the Seller shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the Buyer and the Seller are unable to reach a resolution of such differences within thirty (30) days of receipt of the Buyer's written notice of dispute to the Seller, the Buyer and the Seller shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the parties, within thirty (30) days after such submission, upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. The fees and disbursements of the Independent Accounting Firm shall be allocated between the Buyer and the Seller so that the Buyer's share of such fees and disbursements shall be in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully disputed by the Buyer (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm. (c) Within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Buyer shall pay all undisputed portions of the Adjustment Amount. If there is a dispute with respect to any amount on the Adjustment Statement, within five (5) Business Days after the final determination of such disputed amounts on the Adjustment Statement, the Buyer shall pay to the Seller an amount equal to the disputed portion of the Adjustment Amount as finally determined to be payable with respect to the Adjustment Statement; provided, however, that if such amount shall be less than -------- ------- zero, then the Seller shall pay to the Buyer the amount by which such amount is less than zero. All payments made pursuant to this Section 3.2(c) shall be paid together, with interest thereon for the period commencing on the Closing Date through the date of payment, calculated at 22 the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in cash by federal or other wire transfer of immediately available funds. 3.3 Allocation of Purchase Price. The Buyer and the Seller shall use ---------------------------- their good faith best efforts to agree upon an allocation among the Purchased Assets of the sum of the Purchase Price consistent with Section 1060 of the Code and the Treasury Regulations thereunder within one-hundred twenty (120) days of the date of this Agreement but in no event less than thirty (30) days prior to the Closing. The Buyer and the Seller may jointly agree to obtain the services of an independent appraiser (the "Independent Appraiser") to assist the parties in determining fair value of the Purchased Assets for purposes of such allocation. If such an appraisal is made, both the Buyer and the Seller agree to accept the Independent Appraiser's determination of the fair value of the Purchased Assets. The parties shall jointly select the Independent Appraiser. The cost of the appraisal shall be borne equally by the Buyer and the Seller. Each of the Buyer and the Seller agrees to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns, in accordance with such agreed allocation. Each of the Buyer and the Seller shall report the transactions contemplated by this Agreement for federal Income Tax and all other tax purposes in a manner consistent with the allocation determined pursuant to this Section 3.3. Each of the Buyer and the Seller agrees to provide the other promptly with any other information required to complete Form 8594. Each of the Buyer and the Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. 3.4 Proration. (a) The Buyer and the Seller agree that all of the --------- items normally prorated, including those listed below, relating to the business and operation of the Purchased Assets shall be prorated as of the Closing Date, with the Seller liable to the extent such items relate to any time period through the Closing Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date: (i) personal property, real estate, occupancy and any other Taxes, assessments and other charges, if any, on or with respect to the business and operation of the Purchased Assets; (ii) rent, Taxes and other items payable by or to the Seller or any of the Seller Subsidiaries under any of the Seller Agreements to be assigned to and assumed by the Buyer hereunder; (iii) any permit, license or registration fees with respect to any Environmental Permit or other Permit; and 23 (iv) sewer rents and charges for water, telephone, electricity and other utilities. (b) In connection with such proration, in the event that actual figures are not available at the Closing Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either the Seller or the Buyer made within sixty (60) days of the date that the actual amounts become available. The Seller and the Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 3.4. (c) In connection with any proration of property taxes, in the event that the Purchased Assets are not separately valued and assessed, the proration of such property taxes shall be determined based upon the proportion of (i) the "historic cost less depreciation" of the Purchased Assets to (ii) the total historic cost less depreciation of all the assets reported on the applicable Nevada Operating Property Appraisal Report. ARTICLE IV ---------- THE CLOSING ----------- 4.1 Time and Place of Closing. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York, at 10:00 a.m., local time, on the first Business Day following the date on which all of the conditions to each party's obligations hereunder have been satisfied or waived, or at such other place or time as the parties may agree. The date on which the Closing actually occurs is hereinafter referred to as the "Closing Date." The Closing shall be deemed effective for all purposes as of 12:00:01 a.m. on the Closing Date. 4.2 Payment of Purchase Price. Upon the terms and subject to the ------------------------- satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Assets, the Buyer shall pay or cause to be paid to the Seller the Purchase Price. The Purchase Price shall be paid as follows: (i) an amount at Closing equal to the sum of $249,800,000 and any amounts with respect to Leased Assets to be paid pursuant to Section 7.4 hereof, plus (ii) the Estimated Adjustment Amount for the Closing pursuant to Section 3.2 hereof, less (iii) the TPPA Amount (the "Estimated Closing 24 Payment"), by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer. 4.3 Deliveries by Seller. At the Closing, the Seller shall deliver to -------------------- the Buyer the following: (a) Bills of Sale, duly executed by each of the Seller and the Seller Subsidiaries for the personal property included in the Purchased Assets; (b) The executed consents to transfer the Seller Agreements, the Environmental Permits and the Permits, to the extent specifically required hereunder; (c) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Seller; (d) The certificate and opinion of counsel as contemplated by Section 8.2 hereof; (e) One or more deeds of conveyance transferring the Seller's interest in the Real Property to the Buyer, duly executed and acknowledged by the Seller and in recordable form subject to Permitted Encumbrances and retaining to the extent necessary any existing easements in favor of the Seller with respect to Real Property conveyed to the Buyer, each substantially in the form of Exhibit G attached hereto; (f) One or more easements to the extent necessary to evidence the right of the Buyer to use the Real Property of the Seller (the "Buyer's Easements") associated with the Purchased Assets, duly executed and acknowledged by the Seller and in recordable form, each substantially in the form of Exhibit E attached hereto; (g) The Assignment of Leases, in the form of Exhibit A attached hereto, assigning to the Buyer all of the Seller's right, title and interest as lessor (or lessee, as the case may be) under the Leases; (h) Copies of the resolutions adopted by the board of directors of each of the Seller and the Seller Subsidiaries, certified by the secretary of such party, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by such party of this Agreement, the Ancillary Agreements, the Bill of Sale and other closing documents described in this Agreement to which it is a party, and the performance by such party of its obligations hereunder and thereunder; 25 (i) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Assets in accordance with this Agreement, the Ancillary Agreements and where necessary or desirable, in recordable form; (j) Such other agreements, documents, instruments and writings as are required to be delivered by the Seller or any Seller Subsidiary at or prior to the Closing Date pursuant to this Agreement, the Ancillary Agreements or otherwise required in connection herewith or therewith; and 4.4 Deliveries by Buyer. At the Closing, the Buyer shall deliver to ------------------- the Seller the following: (a) The Estimated Closing Payment by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer; (b) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Buyer; (c) The certificate and opinion of counsel as contemplated by Section 8.3 hereof; (d) One or more easements to the extent necessary to evidence the right of the Seller to use the Real Property of the Buyer (the "Seller's Easements"), to the extent necessary for the Seller to continue and maintain its transmission and distribution business, in favor of the Seller with respect to Real Property conveyed to the Buyer, duly executed and acknowledged by the Buyer, each substantially in the form of Exhibit D attached hereto, and the Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.8 hereof; (e) The Instrument of Assumption, duly executed by the Buyer providing for the assumption of all of the Seller's right, title and interest as lessor (or lessee as the case may be) under the Leases; (f) All such other instruments of assumption as shall, in the reasonable opinion of the Seller and its counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (g) Copies of the resolutions adopted by the board of directors of the Buyer, certified by the secretary of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement, the Ancillary Agreements and other closing 26 documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its obligations hereunder and thereunder; and (h) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement the Ancillary Agreements or otherwise required in connection herewith or therewith. ARTICLE V --------- REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- The Seller represents and warrants to the Buyer as follows: 5.1 Organization; Qualification. --------------------------- (a) The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. The Seller is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and Bylaws as currently in effect. (b) Each of the Seller Subsidiaries is duly organized, validly existing and in good standing under the laws of the State of Nevada or the State of Delaware, as applicable, and has all requisite corporate or limited liability company power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. Each of the Seller Subsidiaries is duly qualified or licensed to do business as a foreign corporation or limited liability company and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. 5.2 Authority Relative to this Agreement. Each of the Seller and the ------------------------------------ Seller Subsidiaries has full corporate or limited liability company, as applicable, power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary 27 Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors of each of the Seller and the Seller Subsidiaries and no other corporate or limited liability company, as applicable, proceedings on the part of the Seller or any of the Seller Subsidiaries are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements to which it is a party have been duly and validly executed and delivered by each of the Seller and the Seller Subsidiaries, and assuming that this Agreement and the Ancillary Agreements constitute valid and binding agreements of the Buyer, subject to the receipt of the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitute valid and binding agreements of each such party, enforceable against such party in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 5.3(a), and other than obtaining the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements by the Seller and the Seller Subsidiaries, as applicable, nor the sale by the Seller and the Seller Subsidiaries of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall in each case (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws (or other similar governing documents) of such party, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to such party as a result of the specific regulatory status of the Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which it is a party or by which it, or any of the Purchased Assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to such party, or any of its assets, which violation would have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) approvals or other actions by 28 the PUCN, the CPUC and/or the OPUC (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by the Seller and the Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through (iv) above are collectively referred to as the "Seller Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory authority is necessary for the consummation by the Seller or any of the Seller Subsidiaries of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect and other than the Permits and Environmental Permits. 5.4 Reports. Since January 1, 1996, each of the Seller and the Seller ------- Subsidiaries, pursuant to the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act, has filed or caused to be filed with the SEC, the applicable state or local utility commissions or regulatory bodies, or the FERC, as the case may be, all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by them with respect to the business and operations of such party as it relates to the Purchased Assets under each of the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act and the respective rules and regulations thereunder, all of which complied in all material respects with all applicable requirements of the appropriate act and the rules and regulations thereunder in effect on the date each such report was filed. 5.5 Financial Statements. The Seller has previously furnished to the -------------------- Buyer (i) consolidated balance sheets of the Seller as of June 30, 2000, and (ii) the related statements of income and retained earnings and changes in financial position of the Seller for the fiscal year then ended. The balance sheet of the Seller as of June 30, 2000 is referred to herein as the "Seller Balance Sheet." Each of the balance sheets included in the financial statements referred to in this Section 5.5 (including the related notes thereto) presents fairly the financial position of the Seller and the Seller Subsidiaries as of their respective dates, and the other related statements included therein (including the related notes thereto) present fairly the results of operations and changes in financial position for the periods then ended, all in conformity with generally accepted accounting principles applied on a consistent basis, except as otherwise noted therein. 5.6 Undisclosed Liabilities. To Seller's Knowledge and except as set ----------------------- forth in Schedule 5.6, neither the Seller nor any Seller Subsidiary has any liability or obligation relating to the business or operations of the Purchased Assets, secured or 29 unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or reserved against in the Seller Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were incurred in the ordinary course of business, whether before or after the date of the Seller Balance Sheet, or those which in the aggregate are not material to the Purchased Assets. 5.7 Absence of Certain Changes or Events. To Seller's Knowledge and ------------------------------------ except as set forth in Schedule 5.7, or in the reports, schedules, registration statements and definitive proxy statements filed by the Seller with the SEC, and except as otherwise contemplated by this Agreement, since the date of the Seller Balance Sheet there has not been: (i) any Material Adverse Effect; (ii) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (iii) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing, capital expenditure or capital financing) by the Seller or any Seller Subsidiary, which is material to the business or operations of the Purchased Assets, except agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (iv) any change by the Seller or any Seller Subsidiary, with respect to the Purchased Assets, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.8 Real Property. Schedule 5.8 sets forth all real property owned, ------------- used or occupied by Seller and/or the Seller Subsidiaries (the "Real Property"); including a description of all land, and all encumbrances, easements or rights of way of record (or, if not of record, of which Seller has Knowledge) granted on or appurtenant to or otherwise affecting such Real Property, and all plants, buildings or other structures located thereon. To Seller's Knowledge, encumbrances, easements or rights of way which are not of record, if any, would not have a Material Adverse Effect. There are now in full force and effect duly issued certificates of occupancy permitting the Real Property and improvements located thereon to be legally used and occupied as the same are now constituted. No fact or condition exists which would prohibit or adversely affect the ordinary rights of access to and from the Real Property from and to the existing highways and roads and there is no pending or, to the Knowledge of Seller, threatened restriction or denial, governmental or otherwise, upon such ingress and egress. To Seller's Knowledge, there is not (i) any claim of adverse possession or prescriptive rights involving any of the Real Property, (ii) any structure located on any Real Property which encroaches on or over the boundaries of neighboring or adjacent properties or (iii) any structure of any other party which encroaches on or over the boundaries of any such Real Property. To Seller's Knowledge no public improvements have been commenced and none are planned 30 which in either case may result in special assessments or otherwise would have a Material Adverse Effect. 5.9 No Certified Survey Map Required. To Seller's Knowledge, other -------------------------------- than those governmental approvals previously obtained by the Seller, no certified survey map or other state, municipal, or other governmental approval regarding the division, platting, or mapping of real estate is required as a prerequisite to the conveyance by Seller to Buyer (or as a prerequisite to the recording of any conveyance document) of any Real Property or Leases. 5.10 Leasehold Interests. Schedule 5.10 lists, as of the date of this ------------------- Agreement, all material Real Property leases (the "Leases") relating to the Purchased Assets under which the Seller or any Seller Subsidiary is a lessee, lessor or under which Seller or any Seller Subsidiary otherwise has any interest and which are to be assigned to, and assumed by, the Buyer on the Closing Date. Except as set forth in Schedule 5.10, to the Seller's Knowledge, all such Leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing material defaults by the Seller or any Seller Subsidiary thereunder; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default thereunder. 5.11 Improvements. Except as set forth in Schedule 5.11, neither the ------------ Seller nor any Seller Subsidiary has received any written notices from any Governmental Authority stating or alleging that any improvements with respect to the Purchased Assets have not been constructed in compliance with applicable Laws. Except as set forth in Schedule 5.11, no written notice has been received by the Seller or any Seller Subsidiary from any Governmental Authority requiring or advising as to the need for any repair, alteration, restoration or improvement in connection with the Purchased Assets. 5.12 Insurance. Except as set forth in Schedule 5.12, all material --------- policies of fire, liability, workers' compensation and other forms of insurance purchased or held by and insuring the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.12, as of the date of this Agreement, neither the Seller nor any Seller Subsidiary has been refused any insurance with respect to the Purchased Assets nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last twelve (12) months. 31 5.13 Environmental Matters. (a) Except as set forth in Schedule 5.13, --------------------- in any public filing by the Seller pursuant to the Securities Act or the Exchange Act, or in the Environmental Site Assessments, the Seller holds, and is in compliance with, all permits, licenses and governmental authorizations (the "Environmental Permits") required for the Seller or any Seller Subsidiary to operate the Purchased Assets under applicable Environmental Laws, and to the Knowledge of the Seller each of the Seller and the Seller Subsidiaries is otherwise in compliance with applicable Environmental Laws with respect to the Purchased Assets, except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. The Seller's Environmental Permits are set forth on Schedule 5.13. (b) To Seller's Knowledge and, except as set forth in Schedule 5.13, in any public filing by the Seller pursuant to the Securities Act or the Exchange Act, or in any Environmental Site Assessment, (i) neither the Seller nor any Seller Subsidiary has received any written request for information under any Environmental Law, or been notified in writing that it is a potentially responsible party under CERCLA or any similar State law with respect to any of the Purchased Assets, and (ii) there have been no activities associated with the Purchased Assets prior to the Closing Date for which Buyer will be required to hold, obtain or surrender to any Governmental Authority any emission reduction credits on or after the Closing Date, except for such liability under such laws or activities as would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. (c) Except as set forth in Schedule 5.13, in any public filing by the Seller pursuant to the Securities Act or the Exchange Act, or in any Environmental Site Assessment, with respect to the Purchased Assets, neither the Seller nor any Seller Subsidiaries has entered into or agreed to any consent decree or order, or is subject to any judgment, decree, or judicial order relating to compliance with any Environmental Law or to investigation or Remediation of Hazardous Substances under any Environmental Law, except such consent decrees or orders, judgments, decrees or judicial orders that would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect. (d) To the Seller's Knowledge, except as set forth in Schedule 5.13(d), in any public filing by the Seller pursuant to the Securities Act or the Exchange Act or in the Environmental Site Assessments, no Releases of Hazardous Substances have occurred at, on, in, from or under the Purchased Assets with respect to which any Remediation is required under any Environmental Law except for such Releases which, individually or in the aggregate are not reasonably likely to have a Materially Adverse Effect. 32 (e) Except as set forth in Schedule 5.13(e), in any public filing by the Seller pursuant to the Securities Act or the Exchange Act, or in the Environmental Site Assessments, to the Seller's Knowledge no underground storage tanks are currently or have historically been located at, on or under the Purchased Assets except for such underground storage tanks which, individually or in the aggregate are not reasonably likely to have a Materially Adverse Effect. (f) The representations and warranties made in this Section 5.13 are the Seller's exclusive representations and warranties relating to environmental matters. 5.14 Labor Matters. With respect to its employees at the Purchased ------------- Assets, except to the extent set forth in Schedule 5.14 and except for such matters as shall not have a Material Adverse Effect: (i) the Seller is in compliance with all applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours; (ii) neither the Seller nor any Seller Subsidiary has received notice of any unfair labor practice, charge or complaint against the Seller pending before the National Labor Relations Board; (iii) there is no labor strike, slowdown or stoppage actually pending or, to Seller's Knowledge threatened against or affecting the Seller; (iv) neither the Seller nor any Seller Subsidiary has received notice that any representation petition respecting the employees of the Seller has been filed with the National Labor Relations Board; (v) no arbitration proceeding arising out of or under collective bargaining agreements is pending against the Seller; (vi) no grievance arising out of or under collective bargaining agreements is pending against Seller; and (vii) the Seller has not experienced any primary work stoppage since at least December 31, 1995. The Seller Subsidiaries do not have, nor at any time have the Seller Subsidiaries had, any employees. 5.15 ERISA; Benefit Plans. (a) Except as set forth in Schedule -------------------- 5.15(a)(i), with respect to its employees at the Purchased Assets, the Seller has fulfilled its obligations under the minimum funding requirements of Section 302 of ERISA, and Section 412 of the Code, with respect to each "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and the Code. The Seller has not incurred any liability under Section 4062(b) of ERISA to the Pension Benefit Guaranty Corporation in connection with any employee pension benefit plan relating to employees at the Purchased Assets which is subject to Title IV of ERISA. Except as set forth in Schedule 5.15(a)(ii), the Internal Revenue Service has issued a letter for each employee pension benefit plan determining that such plan is exempt from United States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and there has been no occurrence since the date of any such 33 determination letter which has adversely affected such qualification, and no withdrawal liability has been incurred by or asserted against the Seller with respect to any employee pension benefit plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). (b) Schedule 5.15(b) lists, as of the date of this Agreement, all deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all material bonus and other employee benefit or fringe benefit plans maintained or with respect to which contributions are made by the Seller in respect of employees who are the employees of the Seller who work at the Purchased Assets. Accurate and complete copies of all such plans, other than multiemployer plans, have been made available to the Buyer. 5.16 Real Property Encumbrances. Schedule 5.16 describes any Permitted -------------------------- Encumbrances on the Real Property. Copies of any surveys in the Seller's possession or any policies of title insurance currently in force and in the possession of the Seller with respect to such Real Property have been delivered by the Seller to the Buyer. 5.17 Condemnation. Neither the whole nor any part of the Real Property ------------ or any other real property or rights leased, used or occupied by the Seller or any Seller Subsidiary in connection with the ownership or operation of the Purchased Assets is subject to any pending suit for condemnation or other taking by any public authority, and, to the Knowledge of the Seller, no such condemnation or other taking is threatened or contemplated. 5.18 Certain Contracts and Arrangements. (a) Except (i) the Seller ---------------------------------- Agreements listed in Schedule 5.18 or any other Schedule hereto, (ii) for contracts, agreements, personal property leases, commitments, understandings or instruments which shall expire prior to the Closing Date, (iii) for agreements with suppliers, distributors and sales representatives entered into in the ordinary course of business, and (iv) for contracts, agreements, personal property leases, commitments, understandings or instruments with a value less than $250,000, in the aggregate, or with annual payments less than $50,000, in the aggregate, neither the Seller nor any Seller Subsidiary is a party to any written contract, agreement, personal property lease, commitment, understanding or instrument which is material to the business or operations of the Purchased Assets. (b) Except as disclosed in Schedule 5.18, each material Seller Agreement listed on Schedule 5.18 constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to the Buyer pursuant to this Agreement and shall continue in full force and effect thereafter, in 34 each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder. (c) Except as set forth in Schedule 5.18, there is not, under any of the Seller Agreements listed on Schedule 5.18, any default or event which, with notice or lapse of time or both, would constitute a default on the part of the Seller or any Seller Subsidiary, except, with respect to the Seller Agreements only, such events of default and other events as to which requisite waivers or consents have been obtained or which would not, in the aggregate, have a Material Adverse Effect. 5.19 Legal Proceedings, etc. Except as set forth in Schedule 5.19 or ---------------------- in any filing made by the Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, or proceedings pending, and to Seller's Knowledge no investigation pending or threatened against the Seller or any Seller Subsidiary relating to the Purchased Assets before any court, Governmental Authority or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect. Except as set forth in Schedule 5.19, neither the Seller nor any Seller Subsidiary is subject to any outstanding judgment, rule, order, writ, injunction or decree of any court, Governmental Authority or regulatory authority relating to the Purchased Assets which has a Material Adverse Effect. 5.20 Permits. The Seller holds all permits, licenses, franchises and ------- other governmental authorizations, consents and approvals, other than with respect to Environmental Laws (collectively, "Permits"), as set forth in Schedule 5.20(a), necessary to operate the Purchased Assets as presently operated, except where the failure to have such Permits does not have a Material Adverse Effect. Except as set forth in Schedule 5.20(b), with respect to the Purchased Assets, neither the Seller nor any Seller Subsidiary has received any written notification, and neither the Seller nor any Seller Subsidiary otherwise has Knowledge, that it is in violation of any of such Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for notifications of violations which would not, in the aggregate, have a Material Adverse Effect. The Seller and the Seller Subsidiaries are in compliance with all Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of any Governmental Authority or regulatory body or authority applicable to the Purchased Assets, except for violations which, in the aggregate, do not have a Material Adverse Effect. 5.21 Regulation as a Utility. The Seller and certain of its affiliates ----------------------- are regulated as public utilities in the States of Nevada and California. Except as set forth on Schedule 5.21, neither the Seller nor any Seller Subsidiary is subject to regulation as a public utility or public service company (or similar designation) by 35 the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 5.22 Taxes. Each of the Seller and the Seller Subsidiaries has, in ----- respect of the Purchased Assets and the operation thereof, (i) filed all Tax Returns required to be filed other than those Tax Returns the failure of which to file would not have a Material Adverse Effect which Tax Returns are true, complete and correct in all material respects, and (ii) paid in full all material Taxes shown to be due on such Tax Returns. Except as set forth in Schedule 5.22, neither the Seller nor any Seller Subsidiary has received any notice of deficiency or assessment from any taxing authority with respect to liabilities for Taxes of the Seller or any Seller Subsidiary in respect of the Purchased Assets, which have not been fully paid or finally settled, and any such deficiency shown in such Schedule 5.22 is being contested in good faith through appropriate proceedings. Except as set forth in Schedule 5.22, there are no outstanding agreements or waivers extending the applicable statutory periods of limitation for Taxes associated with the Purchased Assets for any period. 5.23 Intellectual Property. Except as set forth on Schedule 5.23, --------------------- Seller has, or will as of the Closing have, such ownership of or such rights by license or other agreement to use all Intellectual Property necessary to permit Seller and the Seller Subsidiaries to conduct their business as currently conducted, except where the failure to have such ownership, license or right to use would not, individually or in the aggregate, have a Material Adverse Effect. Except as disclosed in Schedule 5.23, (i) to Seller's Knowledge, Seller is not, nor has Seller or any Seller Subsidiary received any notice that Seller is, in default (or with the giving of notice or lapse of time or both, would be in default), under any contract or license to use such Intellectual Property, (ii) there are no material restrictions on the transfer of any material contract or license, or any interest therein, held by Seller in respect of such Intellectual Property, (iii) to Seller's Knowledge, such Intellectual Property is not being infringed by any other Person, and (iv) such Intellectual Property is used solely in connection with the sites included within the Tracy/Pinon Bundle. Neither the Seller nor any Seller Subsidiary has received notice that it is infringing any Intellectual Property of any other Person in connection with the operation of business of the Purchased Assets and neither the Seller nor any Seller Subsidiary, to Seller's Knowledge, is infringing on any Intellectual Property of any other Person the effect of which, individually or in the aggregate, would have a Material Adverse Effect. 5.24 Compliance with Laws. Except as disclosed in Schedule 5.24, each -------------------- of Seller and the Seller Subsidiaries is in compliance with all applicable Laws with respect to the ownership or operation of the Purchased Assets except where the failure to be in compliance would not, individually or in the aggregate, create a Material Adverse Effect. 36 5.25 Sufficiency of Purchased Assets. As of the Closing Date, the ------------------------------- Communication Facilities, Metering Facilities, and Protective Facilities (each as defined in the Interconnection Agreement) included in the Purchased Assets shall be capable of being operated in conformance with, and shall include all facilities and other equipment required in order for Buyer to perform, the terms and conditions of Exhibit E to the Interconnection Agreement. 5.26 Emission Allowances and Emission Reduction Credits. (a) The -------------------------------------------------- Emission Allowance Account contains the SO2 Allowances identified on Schedule 1.1(92)(vii), free and clear of all Encumbrances other than Permitted Encumbrances. (b) The SO2 emissions from the Purchased Assets from January 1, 2001 through and including the Closing Date (the "Period of Seller's Operation") shall not exceed an average of 1.03 tons per day (the "Authorized Emissions"). (c) If the average daily SO2 emissions of the Purchased Assets during the Period of Seller's Operation exceed the Authorized Emissions, then, not less than thirty (30) days prior to the date on which Buyer must surrender SO2 Allowances to USEPA in respect of the Purchased Assets for the Period of Seller's Operation, Seller shall transfer to the Emission Allowance Account sufficient SO2 Allowances of vintage year 2001 or earlier to cover the amount of SO2 emissions in excess of the Authorized Emissions. Seller shall be solely responsible for, and shall indemnify, defend and hold Buyer harmless from and against, any fines, penalties, claims or actions relating to deficiencies in the total number of SO2 Allowances surrendered to USEPA for calendar year 2001, to the extent such deficiency was caused by Seller's failure to transfer to the Emission Allowance Account sufficient SO2 Allowances of vintage year 2001 or earlier to cover the amount of SO2 emissions during the Period of Seller's Operation in excess of the Authorized Emissions. 5.27 Condition of Assets. Except as disclosed in Schedule 5.27, the ------------------- tangible assets (real and personal) at, related to, or used in connection with each of the Tracy and Clark Mountain Station, Gabbs Diesel, Brunswick Diesel, Valley Road Diesel and the Pinon Facility in each case taken as a whole, (i) are in good operating and usable condition and repair, free from any material defects (except for ordinary wear and tear, in light of their respective ages and historical usages, and except for such defects as do not materially interfere with the use thereof in the conduct of the normal operation and maintenance of the Purchased Assets taken as a whole) and (ii) have been maintained consistent with Good Utility Practices. 37 5.28 Title to Purchased Assets. (a) Subject to Permitted Encumbrances, ------------------------- Seller owns and has good and marketable title to the Real Property free and clear of all Encumbrances and (b) Sellers owns, directly or indirectly (by and through the Seller Subsidiaries), and has good and marketable title to the Personal Property. Schedule 5.28 identifies the purchased Assets owned by the Seller Subsidiaries. 5.29 Water Rights. Seller has diligently pursued the certification of ------------ all permitted Water Rights and properly extended the deadline for certification of all permitted Water Rights not yet perfected, and each of Seller and the Seller Subsidiaries has complied with the terms and conditions of all Water Right permits, certificates and decrees, and has not taken or failed to take steps that have resulted or will result in any Water Right being considered abandoned or lost pursuant any applicable Law except where such failure would not have a Material Adverse Effect. 5.30 Information. The information provided by Seller in Schedule 5.30 ----------- is accurate except for such inaccuracies which, individually or in the aggregate, would not have a Material Adverse Effect. ARTICLE VI ---------- REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- The Buyer represents and warrants to the Seller as follows: 6.1 Organization. The Buyer is a limited liability company organized, ------------ validly existing and in good standing under the laws of the State of Nevada and has all requisite limited liability company power and authority to own, lease and operate its properties and to carry on its business as is now being conducted. The Buyer is duly qualified or licensed to do business as a foreign limited liability company and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. The Buyer has heretofore delivered to the Seller complete and correct copies of its articles of organization (or other similar governing documents), as currently in effect. 6.2 Authority Relative to this Agreement. The Buyer has full limited ------------------------------------ liability company power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized 38 by the sole member of the Buyer and no other limited liability company proceedings on the part of the Buyer are necessary to authorize this Agreement or the Ancillary Agreements to which it is a party or to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements to which it is a party have been duly and validly executed and delivered by the Buyer, and assuming that this Agreement and the Ancillary Agreements to which it is a party constitute valid and binding agreements of the Seller, subject to the receipt of the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, constitute valid and binding agreements of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 6.3 Consents and Approvals; No Violation. (a) Except as set forth in ------------------------------------ Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, neither the execution and delivery of this Agreement or the Ancillary Agreements to which it is a party by the Buyer nor the purchase by the Buyer of the Purchased Assets pursuant to this Agreement or the Ancillary Agreements shall (i) conflict with or result in any breach of any provision of the articles of organization (or other similar governing documents) of the Buyer, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or (y) for those requirements which become applicable to the Buyer as a result of the specific regulatory status of the Seller (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Seller (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which the Buyer or any of its subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. (b) Except as set forth in Schedule 6.3(b) and (i) the filings by the Buyer and the Seller required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in Schedule 6.3(b) and clause (i) are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby, other than such declarations, filings, registrations, 39 notices, authorizations, consents or approvals which, if not obtained or made, shall not, in the aggregate, have a Material Adverse Effect. 6.4 Regulation as a Utility. Except as set forth in Schedule 6.4, the ----------------------- Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.5 Availability of Funds. The Buyer has sufficient funds available --------------------- to it or has received binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. 6.6 Equity Contribution Agreement. A true and correct copy of the ----------------------------- Equity Contribution Agreement has been provided to Seller. The execution and delivery of the Equity Contribution Agreement by WPSR and WPS Power Development, Inc. ("PDI") and the consummation of the transactions contemplated thereby has been duly and validly authorized by all necessary corporate or other action required on the part of each of WPSR and PDI. The Equity Contribution Agreement has been duly and validly executed and delivered by each of WPSR and PDI and constitutes the legal, valid and binding obligations of each of WPSR and PDI enforceable against each of WPSR and PDI in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). ARTICLE VII ----------- COVENANTS OF THE PARTIES ------------------------ 7.1 Conduct of Business of the Seller. Except as described in --------------------------------- Schedule 7.1, during the period from the date of this Agreement to the Closing Date, the Seller shall, and shall cause the Seller Subsidiaries to, operate and maintain the Purchased Assets according to Seller's ordinary and usual course of business consistent with Good Utility Practices. Without limiting the generality of the foregoing, and, except as contemplated in this Agreement or as described in Schedule 7.1, prior to the Closing Date, without the prior written consent of the Buyer (unless such consent would be prohibited by Law), the Seller shall not, and shall not permit any of the Seller Subsidiaries to, with respect to the Purchased Assets: 40 (a) (i) create, incur or assume any material amount of indebtedness for money borrowed other than in the ordinary course of business including obligations in respect of capital leases but excluding purchase money mortgages granted in connection with the acquisition of property; or (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person; (b) make any material change in the operations of the Purchased Assets including, without limitation, the quality or levels of Fuel Inventory and materials and supplies customarily maintained by the Seller; (c) except as set forth in Schedule 1.1(41), make any capital expenditures with respect to the Purchased Assets or enter into any contract or commitment therefor, except that the Seller shall make any capital expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such capital expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Capital Expenditures"); provided, however, -------- ------- that if the Buyer requests that the Seller make enhancements with a cost in excess of the cost of any Necessary Capital Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancement to the extent that the cost of such enhancement exceeds the cost of the Necessary Capital Expenditures as part of the Adjustment Amount; (d) sell, lease (as lessor), transfer or otherwise dispose of, any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with Good Utility Practices and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Assets other than Permitted Encumbrances; (e) except as set forth in Schedule 1.1(41), make any maintenance expenditures, except that the Seller shall make any maintenance expenditures (i) requested by the Buyer, provided that the Buyer shall reimburse the Seller for such maintenance expenditures as part of the Adjustment Amount and (ii) deemed necessary by the Seller and consented to by the Buyer, whose consent shall not be unreasonably withheld ("Necessary Maintenance Expenditures"); provided, -------- however, that if the Buyer requests that the Seller make enhancements/upgrades - ------- with a cost in excess of the cost of any Necessary Maintenance Expenditure, the Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to the extent the cost of such enhancements/upgrades exceeds the cost of the Necessary Maintenance Expenditure as part of the Adjustment Amount; (f) amend, terminate or grant any waiver in respect of any of the Seller Agreements or Leases; 41 (g) enter into or amend any real or personal property Tax agreement, treaty or settlement; (h) execute, enter into or amend any agreement, order, decree or judgment relating to any Permit or Environmental Permit; (i) enter into any commitment for the purchase or sale of fuel (whether commodity or transportation) that Seller intends to assign to Buyer having a term of greater than ninety (90) days that extends beyond December 31, 2001 if the aggregate payment under such commitment is expected to exceed $500,000 or if the aggregate payments under such commitment and all other then outstanding commitments not previously consented to by the Buyer would be expected to exceed $1,000,000; (j) except for the Transitional Power Purchase Agreement, enter into any wholesale sales agreement having a term extending beyond the Closing Date, where the sales of energy are expected to be supplied via the Purchased Assets; (k) sell, lease or otherwise dispose of SO2 Allowances, except those listed in Schedule 2.2(g); or (l) enter into any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (k). 7.2 Access to Information. (a) Between the date of this Agreement and --------------------- the Closing Date, Seller shall (and shall cause the Seller Subsidiaries to) (i) during ordinary business hours and upon reasonable notice, give Buyer and the Buyer Representatives reasonable access to all books, records, plants, offices and other facilities and properties constituting the Purchased Assets or the Assumed Liabilities; (ii) permit the Buyer and the Buyer representatives to make such reasonable inspections thereof as the Buyer may reasonably request; (iii) cause its officers and advisors to furnish Buyer with such financial and operating data and other information with respect to the Purchased Assets or the Assumed Liabilities as Buyer may from time to time reasonably request; and (iv) furnish Buyer with a copy of each report, schedule, or other document filed or received by Seller between the date of this Agreement and the Closing Date with the SEC, FERC, PUCN, or other Governmental Authority with respect to the Purchased Assets or the Assumed Liabilities; (v) furnish Buyer with all such other information as shall be reasonably necessary to enable Buyer to verify the accuracy of the representations and warranties of Seller contained in this Agreement; and (vi) at Buyer's reasonable request make available to Buyer and the Buyer Representatives, to answer questions 42 concerning the Purchased Assets, the operation of the Purchased Assets, or the Assumed Liabilities, personnel of the Seller during ordinary business hours for reasonable time periods at locations reasonably selected by Seller (such personnel shall be reasonably suited to answer questions based on the scope of their responsibilities); provided, however, that (A) any such inspections and investigations shall be conducted in such a manner as not to interfere unreasonably with the operation of the Purchased Assets, (B) Seller shall not be required to take any action which would constitute a waiver of the attorney-client or other privilege, (C) Seller need not supply Buyer with any information which Seller is under a legal or contractual obligation not to supply and (D) the number of individuals representing Buyer in such inspections at any given time, shall not exceed seven (7) unless Seller consents to a number larger than seven (7) and such consent shall not be unreasonably withheld. Notwithstanding anything in this Section 7.2(a) to the contrary, prior to the Closing Date, Buyer shall not have the right to perform or conduct any environmental sampling or testing at, in, on, or underneath the Purchased Assets (except for such environmental sampling or testing as Buyer may reasonably deem necessary to investigate (i) the validity of any claims, actions, proceedings or investigations instigated by any Governmental Authority on or after the date hereof with respect to any alleged violation of Environmental Laws or (ii) any other environmental condition arising or occurring on or after the date hereof which Buyer reasonably believes may constitute a violation of Environmental Laws. (b) The Parties agree that between the date hereof and the Closing Date, at the sole responsibility and expense of Buyer, Seller shall, and shall cause the Seller Subsidiaries to, permit designated representatives ("Observers") of Buyer to regularly observe, in the presence of personnel of Seller and at Buyer's reasonable discretion, all operations of Seller and the Seller Subsidiaries that relate specifically to the Purchased Assets, and the operation thereof, and to observe material discussions with third parties relating specifically to the Purchased Assets or the Assumed Liabilities; provided, however, that (A) any such observations shall be conducted in such a manner as not to interfere unreasonably with the operation of the Purchased Assets, (B) Buyer shall not be entitled to observe any discussions between Seller and its legal counsel or accountants and shall not otherwise be entitled to observe any activities or discussions which may constitute a waiver of the attorney-client or other privilege, and (C) Seller need not permit the Observers to observe or participate in discussions concerning any information which Seller are under a legal or contractual obligation not to disclose. The Observers may recommend or suggest that actions be taken or not be taken by Seller; provided, however, that Seller will be under no obligation to follow any such recommendations or suggestions and that Seller shall be entitled, subject to the terms of this Agreement, to conduct their business in accordance with their own judgment and discretion. The Observers shall have no authority to bind or make agreements on behalf of Seller or any Seller Subsidiaries, to conduct discussions with or make representations to third parties on 43 behalf of Seller or any Seller Subsidiaries or to issue instructions to or direct or exercise authority over Seller or any Seller Subsidiaries or any of their respective officers, employees, advisors or agents. (c) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of the Confidentiality Agreement and shall be treated as "Evaluation Material" (as defined in the Confidentiality Agreement). (d) For a period of ten (10) years after the Closing Date, the Seller and its representatives shall have reasonable access to all of the books and records of the Purchased Assets, as the case may be, transferred to the Buyer hereunder to the extent that such access may reasonably be required by the Seller in connection with matters relating to or affected by the operation of the Purchased Assets prior to the Closing Date. Such access shall be afforded by the Buyer upon receipt of reasonable advance notice and during normal business hours. The Seller shall be solely responsible for any costs or expenses incurred by them pursuant to this Section 7.2(d). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such ten-year period, the Buyer shall, prior to such disposition, give the Seller a reasonable opportunity at the Seller's expense, to segregate and remove such books and records as the Seller may select. 7.3 Expenses. Except to the extent specifically provided herein, -------- whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses. 7.4 Further Assurances. Subject to the terms and conditions of this ------------------ Agreement, each of the parties hereto shall use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws and regulations to consummate and make effective the sale of the Purchased Assets pursuant to this Agreement including, without limitation, the use of the Seller's and the Buyer's commercially reasonable efforts to obtain all Permits and Environmental Permits necessary for the Buyer to operate the Purchased Assets. From time to time after the date hereof, without further consideration, the Seller shall, at its own expense, execute and deliver (or cause the Seller Subsidiaries to execute and deliver, if applicable) such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Assets. From time to time after the date hereof, the Buyer shall, at its own expense, execute and deliver such documents to the Seller as the Seller may reasonably request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. To the extent that any of the Purchased Assets are contained in an electronic format, 44 Seller shall cooperate with Buyer to transfer such items to Buyer in a format that is reasonably acceptable to Buyer. To the extent that any personal property lease, relating to any assets (the "Leased Assets") which are principally used by the Seller for generation purposes at the Purchased Assets, cannot be assigned to the Buyer, the Seller shall use its commercially reasonable efforts to acquire title to such Leased Assets and to include them in the Purchased Assets before the Closing Date. The Seller's costs associated with acquiring title to such Leased Assets shall be paid by the Buyer as part of the Purchase Price. 7.5 Public Statements. The parties shall consult with each other ----------------- prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and the Buyer shall not issue any such public announcement, statement or other disclosure without having first received the written consent of the Seller, except as may be required by law and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent and under the circumstances in which the parties are expressly permitted by the Confidentiality Agreement to make disclosures of "Evaluation Material" (as defined in the Confidentiality Agreement). 7.6 Consents and Approvals. (a) As promptly as practicable, the ---------------------- Seller and the Buyer shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall use their respective best efforts to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. (b) As promptly as practicable, the Seller and the Buyer shall cooperate with each other and (i) prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all commercially reasonable efforts to obtain the transfer or reissuance to the Buyer of all necessary Environmental Permits, Permits, consents, approvals and authorizations of all governmental bodies and (iv) use all commercially reasonable efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which the Seller, any Seller Subsidiary, or the Buyer is a party or by which any of them is bound. The Seller 45 shall have the right to review and approve in advance all characterizations of the information relating to Purchased Assets; and each of the Seller and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they shall consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such necessary Environmental Permits, Permits, consents, approvals and authorizations of all third parties and governmental bodies. The Seller and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on behalf of the Seller, on the one hand and the Buyer on the other hand, with all governmental bodies. To the extent that a consent to an assignment of any material Seller Agreement cannot be obtained before the Closing Date, the Seller shall enter into all such agreements with the Buyer as are necessary to give the Buyer the rights, obligations and burdens of such Seller Agreements. (c) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any federal, state or local Governmental Authority or agency or any third party in connection with any federal, state or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. (d) Seller shall use commercially reasonable efforts to defend and support the form of Generation Tariff applicable to the Purchased Assets in the form filed with FERC in Docket No. ER00-2018. 7.7 Fees and Commissions. The Seller and the Buyer each represent and -------------------- warrant to the other that, except for Credit Suisse First Boston ("CSFB"), which is acting for and at the expense of the Seller, and PricewaterhouseCoopers Securities LLC, which is acting for and at the expense of the Buyer, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. The Seller and the Buyer shall pay to the other or otherwise discharge, and shall indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 7.8 Tax Matters. (a) Seller shall pay all applicable sales taxes ----------- incurred in connection with this Agreement and the transactions contemplated 46 hereby. Notwithstanding any other provision of this Agreement, all transfer and similar Taxes (other than sales tax) incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Buyer, and the Buyer shall, at its own expense, file, to the extent required by law, all necessary Tax Returns and other documentation with respect to all such Taxes, and, if required by applicable Law, the Seller shall join in the execution of any such Tax Returns or other documentation, provided, however, Seller shall work with Buyer in good faith to minimize all transfer and similar taxes and Buyer shall indemnify Seller for any reasonable out-of-pocket expenses incurred by Seller in minimizing such taxes. Seller and Buyer agree, upon request, to use their reasonable best efforts to provide or obtain any certificate or other document from or requested by any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed by reason of this Section 7.8(a). (b) With respect to Taxes to be prorated in accordance with Section 3.4 hereof only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to the Seller's approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for the Seller's review and approval no later than twenty (20) days prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, the Seller shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with Section 3.4 hereof. In addition to any amount of reimbursement due in accordance with Section 3.4 hereof, Buyer shall reimburse Seller for any Nevada property taxes previously paid by Seller which relate to the Purchased Assets and have a lien date after the Closing Date. If the Purchased Assets have not been separately valued and assessed, the amount of such reimbursement shall be determined based upon the proportion of (i) the "historical cost less depreciation" of the Purchased Assets to (ii) the total historical cost less depreciation of all the assets reported on Seller's Nevada Operating Property Appraisal Report. (c) Each of the Buyer and the Seller shall provide the other with such assistance as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each shall retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.8 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. 47 7.9 Supplements to Schedules. Prior to the Closing Date, the Seller ------------------------ shall supplement or amend the Schedules required by Article V with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section 7.9 shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.10 Employees. (a) Schedule 7.10(a) sets forth all collective --------- bargaining agreements to which the Seller is a party in connection with the Purchased Assets (the "Collective Bargaining Agreements"), as well any Letters of Agreement between Seller and IBEW Local 1245 ("Local 1245 LOA"), letters of intent, or other such agreements or understandings related to the sale and transfer of certain plants. The Buyer shall offer employment to begin as of the Closing Date to the Seller's employees who work at the Purchased Assets and who are included in the bargaining units covered by the Collective Bargaining Agreements ("Hourly Employees"). The Buyer shall assume the Collective Bargaining Agreements and Seller's obligations under such agreements, except that Seller shall be responsible for any transition or retention bonuses payable to the union employees. (b) Continued Employment. The Buyer shall, as of the Closing Date, -------------------- make a Qualifying Offer of Employment (as defined herein) to each employee of Seller identified on Schedule 7.10(b) who is actively employed by Seller immediately prior to the Closing Date (each such employee who accepts a Qualifying Offer of Employment, a "Management Employee"). An offer of employment shall be deemed a "Qualifying Offer of Employment" if (A) the proposed base salary and level of incentive compensation is at least 90% of the employee's base salary and level of incentive compensation immediately prior to the Closing Date and (B) the proposed principal place of employment is within one hundred (100) miles of the employee's principal place of employment immediately prior to the Closing Date. Seller shall be responsible for any transition or retention bonuses payable to Management Employees. (c) Benefit Continuation. Subject to applicable Law, the Buyer shall -------------------- maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation, welfare and benefit plans, programs, policies and fringe benefits covering Management Employees that will be as economically similar, in the aggregate, as those provided pursuant to those employee compensation, welfare and benefit plans, programs, policies and fringe benefits of the Seller and their subsidiaries as in effect immediately prior to the Closing Date. To the extent permissible under the terms of the Benefit Plans of Buyer and required by applicable Law, the Buyer shall waive all limitations as to preexisting conditions 48 exclusions and waiting periods with respect to participation and coverage requirements applicable to the Management Employees under any Benefit Plans of Buyer that are welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Management Employees immediately prior to the Closing Date. (d) Service Credit. The Management Employees shall be given credit -------------- for all service with the Seller or its subsidiaries (and service credited by Seller or such subsidiary), to the same extent as such service was credited for such purpose by Seller or such subsidiary, under all employee benefit plans, programs and policies of the Buyer in which they become participants (the "Benefit Plans of Buyer") for purposes of eligibility, vesting, benefit accrual and determination of level of benefits. Notwithstanding the foregoing, such service with the Seller shall be recognized for purposes of benefit accrual under a defined benefit pension plan or a retiree medical plan (a "plan") sponsored by the Buyer only if assets and liabilities are transferred to the Buyer's plan and trust from the Seller's plan and trust. (e) Assumptions. The Buyer shall assume only those obligations that ----------- are required to be assumed by the Buyer under the Collective Bargaining Agreement or obligations for which there was a transfer of assets and liabilities to the Buyer's plan and trust from the Seller's plan and trust. Absent such transfer of plan assets and liabilities, benefits accrued under such Benefits Plans of Seller and all benefits currently payable as of the Closing Date shall be and shall remain the obligation of the Seller. Any individual covered under any such Benefit Plan of Seller that is a Group Health Plan (as defined in Section 4980B(g)(2) of the Code and Section 607(l) of ERISA) and who is eligible for continued coverage under such Group Health Plan as of the Closing Date, shall continue to be covered under such Group Health Plan after Closing pursuant to the provisions of COBRA. (f) Severance Plan. The Buyer shall maintain the Management -------------- Transition Plan for a period of eighteen (18) months following the Closing Date and shall give all Management Employees service credit for purposes of determining the level of benefits thereunder in the same manner as set forth in Section 7.10(d) hereof. Each of the Buyer and the Seller shall be responsible for 50% of any payments required under the Management Transition Plan for any Management Employee terminated without Cause (as defined in the Management Transition Plan) within eighteen (18) months following the Closing Date. (g) WARN Act. The Seller shall perform timely and discharge all -------- requirements, if any, under the WARN Act and under applicable state and local laws and regulations for the notification of its employees arising from the sale of the 49 Purchased Assets to the Buyer up to and including the Closing Date. The Buyer shall cooperate with the Seller to provide the Seller with such information as may be needed from the Buyer for inclusion in such notices, including providing the Seller at least 90 days prior to the date on which the Closing is anticipated to occur or such date to which the Buyer and the Seller mutually agree) with a list of all of the Seller's employees to whom the Buyer shall make offers of employment. After the Closing Date, the Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees with respect to the Purchased Assets. 7.11 Risk of Loss. (a) From the date hereof through the Closing Date, ------------ all risk of loss or damage to the property included in the Purchased Assets shall be borne by the Seller. (b) If, before the Closing Date all or any portion of the Purchased Assets are taken by eminent domain, or is the subject of a pending or to the Knowledge of the Seller, contemplated taking which has not been consummated, the Seller shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such taking, then the Buyer or the Seller may, if such taking relates to the Purchased Assets, terminate this Agreement pursuant to Section 10.1(f) hereof. (c) If, before the Closing Date all or any material portion of the Purchased Assets are damaged or destroyed by fire or other casualty, the Seller shall notify the Buyer promptly in writing of such fact. If such damage or destruction would have a Material Adverse Effect and the Seller has not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such casualty, then the Buyer or the Seller may terminate this Agreement pursuant to Section 10.1(f) hereof. 7.12 Additional Covenants of the Buyer. (a) Notwithstanding any other --------------------------------- provision hereof, Buyer covenants and agrees that, for a period of five (5) years commencing on the Closing Date, Buyer shall not transfer the Purchased Assets, or 50 any material portion of the Purchased Assets, to any entity or Affiliate of such entity who at that time is the owner of any bundle of generation assets previously owned by Seller within the northern regions of Nevada, as such regions are described in the Offering Memorandum. Buyer further covenants and agrees that, in the event that Buyer transfers the Purchased Assets or any material portion of the Purchased Assets during such five (5) year period, Buyer shall obtain from its transferee a covenant and agreement which restricts such transferee's ability to transfer the Purchased Assets that is substantially similar to Buyer's covenant and agreement in the first sentence of this Section 7.12(a) and an additional covenant and agreement that is substantially similar to that of this sentence, and each such covenant and agreement shall survive and remain in effect until five (5) years from the Closing Date as defined in this Agreement. The covenants and agreements contained in this Section 7.12(a) shall survive Closing and shall continue in effect for a period of five (5) years commencing on the Closing Date; (b) Buyer hereby covenants and agrees that, for a period of twenty-four (24) months following the earlier of the Closing Date or January 1, 2001, Buyer shall use reasonable efforts to operate the Pinon Facility and provide such information, reports and data required to be provided to DOE pursuant to the terms of the Cooperative Agreement by and between the Seller and DOE dated as of July 31, 1992, as amended; and (c) Buyer hereby covenants and agrees that, if at any time during the 24-month period described in section 7.12(b) of this Agreement Buyer elects to abandon all further efforts to make the Pinon Facility operational, Buyer shall comply with the requirements of Section 4(b) of Amendment M010 to the Cooperative Agreement dated as of November 2, 1999 and shall deliver to DOE, within 60 days of cessation of efforts, a complete and final report explaining, substantiating and documenting why such efforts were abandoned. The documentation provided to DOE shall address both the technical and economic factors which influenced Buyer's decision. The covenants and agreements contained in this Section 7.12(c) and Section 7.12(b) shall survive Closing and shall continue in effect for a period of twenty-four (24) months following the earlier of the Closing Date or January 1, 2001. 7.13 Title Insurance. Within 30 days after the effective date of this --------------- Agreement, Seller shall provide to Buyer title insurance commitments, issued by a title insurance company or companies reasonably satisfactory to Buyer, agreeing to issue to Buyer standard form owner's (or lessee's, as the case may be) policies of title insurance with respect to all owned Real Property and Leases, together with a copy of each document to which reference is made in such commitments. In the case of owned Real Property, such policies shall be standard ALTA Form 1992 owner's policies in the full amount of that portion of the Purchase Price allocated respectively 51 to each subject parcel of owned Real Property under Section 7.13 hereof, insuring good and marketable title thereto (expressly including all easements and other appurtenances) subject to Permitted Encumbrances. In the case of Leases, such policies shall be upon standard ALTA Form 1992 leasehold owner's policies and in such amounts as such shall be reasonably acceptable to Buyer. In either case, all policies shall insure fee simple or leasehold title, as the case may be, to the Real Property each in form and substance reasonably acceptable to Buyer, and shall contain such endorsements as Buyer shall reasonably request (including, but not limited to, an endorsement over rights of creditors, if requested by Buyer or Buyer's lender). 7.14 Surveys. Within 30 days after the effective date of this ------- Agreement, Seller shall provide to Buyer surveys of all owned Real Property and all leased Real Property prepared in accordance with ALTA/ASCM standards, each dated no more than 120 days prior to the effective date of this Agreement, and each detailing the legal description, the perimeter boundaries, all improvements located thereon, all easements and encroachments affecting each such parcel of owned Real Property and such other matters as may be reasonably requested by Buyer or the title insurance companies, each containing a surveyor certificate reasonably acceptable to Buyer and the title insurance companies, and each prepared by a registered land surveyor satisfactory to Buyer. 7.15 Pinon Facility. Seller shall, at Seller's expense, make the -------------- repairs to the hot gas filter system necessary to restore the Pinon Facility to a condition such that a sustained run performance test (the "Sustained Run Test") may be performed in accordance with the protocols outlined in Schedule 7.15. The Buyer and Seller shall jointly retain and equally share the cost of the services of an engineering firm, mutually acceptable to the parties, to (i) assist in the development of the scope of work necessary to perform the Sustained Run Test, (ii) review the maintenance and repairs performed prior to the Sustained Run Test and (iii) develop a list of steps, design changes, and upgrades, if any, necessary for the Pinon Facility to reach commercial viability, and such scope of work and the repairs made to the hot gas filter system in accordance therewith shall be consistent with the protocols outlined in Schedule 7.15. The Seller shall use its commercially reasonable efforts in cooperation with Buyer to perform the Sustained Run Test, on or prior to April 30, 2001. Notwithstanding any other provision of this Agreement, Seller shall not be responsible for any costs and expenses related to design modifications or upgrading the technical, physical or operational characteristics of the Pinon Facility, including any costs and expenses relating to implementing any design modifications or technical, physical or operational upgrades recommended by the engineering firm retained by the parties relating to the commercial viability of the Pinon Facility. Seller shall cooperate with the Buyer if, at Buyer's expense, Buyer requests that design modifications or upgrades to the technical, physical or operational 52 characteristics of the Pinon Facility be performed prior to the Closing Date, and further Seller agrees to use its commercially reasonable efforts to assist the Buyer in obtaining additional funding for the Pinon Facility from DOE. 7.16 Additional Gas Supply. Within 30 days of the date hereof Buyer --------------------- shall determine whether it desires additional natural gas transportation capacity on the Tuscarora gas pipeline pursuant to the Tuscarora Transportation Agreement in excess of the 29,720 decatherms per day to be assigned to Buyer by Seller in accordance with the terms hereof, up to a maximum of an additional 15,000 decatherms per day for the duration of the TPPA, and shall provide notice to Seller of such additional amount if the Buyer so desires. Within 30 days of such notice, the parties shall negotiate an agreement in good faith in which Seller shall agree to assign, on an interruptible basis, with such interruption allowable only as necessary to serve Seller's local distribution company customers, the additional amount of decatherms per day on the Tuscarora gas pipeline pursuant to the Tuscarora Transportation Agreement as requested in Buyer's notice to Seller for the duration of the TPPA, and if such interruption occurs Seller shall agree to pay to Buyer the delivered cost differential between the cost of delivered natural gas and the average inventory cost of No. 6 fuel oil at the Tracy and Clark Mountain Station. 7.17 Seller Subsidiaries. Within thirty (30) days after the date ------------------- hereof, Buyer may elect, in lieu of the asset transfers by the Seller Subsidiaries contemplated hereunder, to acquire the membership or other ownership interests of Seller Subsidiaries. Such election may be made by written notice thereof to Seller within such thirty-day period. If Buyer makes such election hereunder, Seller shall take, or cause to be taken, all action (including, without limitation, executing and delivering documents and instruments) and shall do, or cause to be done, all things necessary, proper or advisable under applicable Laws and regulations and as reasonably requested by Buyer to consummate and make effective the transfer of such ownership interests in the Seller Subsidiaries on the Closing Date. Further, the parties hereby agree to cooperate with each other to achieve a mutually beneficial transfer. ARTICLE VIII ------------ CLOSING CONDITIONS ------------------ 8.1 Conditions to Each Party's Obligations to Effect the Transactions ----------------------------------------------------------------- Contemplated Hereby. The respective obligations of each party to effect the - ------------------- transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: 53 (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated; (b) No preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the transactions contemplated hereby or by the Ancillary Agreements shall have been issued and remain in effect (each party agreeing to use its reasonable best efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted by any state or federal government or Governmental Authority in the United States which prohibits the consummation of the transactions contemplated hereby or by the Ancillary Agreements; (c) All federal, state and local government consents and approvals required for the consummation of the transactions contemplated hereby or by the Ancillary Agreements, including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, shall have become Final Orders (a "Final Order" for purposes of this Agreement means a final order after all opportunities for rehearing are exhausted (whether or not any appeal thereof is pending) that has not been revised, stayed, enjoined, set aside, annulled or suspended, with respect to which any required waiting period has expired; and as to which all conditions to effectiveness prescribed therein or otherwise by law, regulation or order have been satisfied) with such terms and conditions as shall have been imposed by the Governmental Authority issuing such Final Order; provided that such Final Orders shall not have imposed terms and conditions which would reasonably be expected to have a material adverse effect on the business, results of operations, financial condition or physical condition of the Purchased Assets; (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which the Seller or the Buyer, or any of their subsidiaries, is a party for the consummation of the transactions contemplated hereby shall have been obtained, other than those (i) which if not obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii) for which an agreement which is described in the last sentence of Section 7.6(b) hereof has been entered into; and (e) There shall have been no changes in applicable Laws, judgements, orders or decrees which would, in the aggregate, have a material adverse effect on the business, results of operations, financial condition or physical condition of the Purchased Assets. 54 8.2 Conditions to Obligations of Buyer. The obligation of the Buyer ---------------------------------- to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) There shall not have occurred and be continuing, a Material Adverse Effect; (b) The Seller shall have performed and complied with in all material respects the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of the Seller set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of the Seller; (c) The Buyer shall have received a certificate from an authorized officer of the Seller, dated the Closing Date, to the effect that to the best of such officer's knowledge, the conditions set forth in Sections 8.2(a) and (b) hereof have been satisfied; (d) The Buyer shall have received an opinion from Woodburn & Wedge, P.C., dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that, with respect to Seller and each of the Seller Subsidiaries: (1) Such party is a corporation, or limited liability company, as applicable, organized, existing and in good standing under the laws of the State of its formation and has the corporate or limited liability company, as applicable, power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by requisite corporate or limited liability company, as applicable, action taken on the part of such party; (2) This Agreement and the Ancillary Agreements to which it is a party have been executed and delivered by such party and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of such party, enforceable against such party in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of 55 equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and except to the extent that the right to indemnification and contribution contained therein may be limited by state or federal securities laws or the public policy underlying such laws; (3) The execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party by such party shall not constitute a violation of the Certificate of Incorporation or Bylaws (or similar governing documents) of such party; and (4) No declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Seller and the Seller Subsidiaries of the Closing other than (i) the Seller Required Regulatory Approvals, all of such Seller Required Regulatory Approvals having been obtained and being in full force and effect with such terms and conditions as shall have been imposed by any applicable Governmental Authority (ii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings or registrations with, or notices to, or authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the federal laws of the United States or the laws of the State of Nevada, such counsel may rely upon opinions of counsel admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials; and (e) Each of the Seller and the Seller Subsidiaries shall have executed and delivered, as of the Closing, each of the Ancillary Agreements to be executed by such party and all required approvals and conditions relating to the Ancillary Agreements shall have been obtained or satisfied. (f) Title Insurance. Buyer shall have received title insurance --------------- policies with respect to all owned Real Property and Leases meeting the requirements of Section 7.13. (g) Permits. Buyer shall have obtained (by transfer from Seller ------- hereunder or otherwise) all material Permits and Environmental Permits necessary to own, operate and maintain the Purchased Assets substantially consistent with Seller's historical ownership, operation, and maintenance of the Purchased Assets, and to 56 perform its covenants and agreements hereunder and under the Ancillary Agreements. (h) Surveys. Buyer shall have received surveys with respect to all ------- owned Real Property and Leases meeting the requirements of Section 7.14. (i) Reliance Letter. Buyer shall have received a letter report --------------- addressed to Buyer from the applicable environmental consultant, dated within ten (10) Business Days prior to the Closing Date, (a) updating the Environmental Site Assessments concerning the Purchased Assets and (b) permitting Buyer to rely on the Environmental Site Assessments, as updated, as though such assessment(s) had originally been performed on behalf of, addressed and delivered to Buyer. Seller makes no representations or warranties regarding the accuracy of any information or the conclusions in any such update and the provision of the updated Environmental Site Assessment shall not, by itself, create any rights or remedies of the Buyer against the Seller after the Closing Date under or pursuant to Environmental Laws or this Agreement. 8.3 Conditions to Obligations of Seller. The obligation of the Seller ----------------------------------- to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed in all material respects its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; (c) The Seller shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b) hereof have been satisfied; (d) The Seller shall have received an opinion from Foley & Lardner, counsel for the Buyer, dated the Closing Date and satisfactory in form and substance to the Seller and its counsel, substantially to the effect that: (1) The Buyer is a limited liability company organized, existing and in good standing under the laws of the State of Nevada and has the limited liability company power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated 57 hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby have been duly authorized by all requisite limited liability company action taken on the part of the Buyer; (2) this Agreement and the Ancillary Agreements have been executed and delivered by the Buyer and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (B) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought; (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Buyer shall not constitute a violation of the articles of organization (or other similar governing documents), as currently in effect, of the Buyer; and (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for the consummation by the Buyer of the Closing other than the Buyer Required Regulatory Approvals, all of such Buyer Required Regulatory Approvals having been obtained and being in full force and effect with such terms and conditions as shall have been imposed by any applicable Governmental Authority. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the federal laws of the United States and the State of Wisconsin, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by appropriate officers and directors of the Buyer and its subsidiaries and by public officials; and (e) The Buyer shall have executed and delivered, as of the Closing, each of the Ancillary Agreements to be executed by the Buyer and all required approvals and conditions relating to the Ancillary Agreements have been obtained or satisfied. 58 ARTICLE IX ---------- INDEMNIFICATION --------------- 9.1 Indemnification. (a) The Seller shall indemnify, defend and hold --------------- harmless the Buyer its officers, directors, employees, members, Affiliates and agents (each, a "Buyer Indemnitee") from and against any and all claims, demands or suits (by any Person), losses, liabilities, damages (including consequential or special damages), obligations, payments, costs, Taxes and expenses (including, without limitation, the costs and expenses of any and all actions, suits, proceedings, assessments, judgments, settlements and compromises relating thereto and reasonable attorneys' fees and reasonable disbursements in connection therewith) to the extent the foregoing are not covered by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by any Buyer Indemnitee relating to, resulting from or arising out of (i) any breach by the Seller of any representation, warranty, covenant or agreement of the Seller contained in this Agreement, (ii) the Excluded Liabilities, (iii) any claim against a Buyer Indemnitee arising out of Seller's ownership or operation of the Excluded Assets, or (vi) any noncompliance with any bulk sales or transfer laws as provided in Section 11.11. (b) The Buyer shall indemnify, defend and hold harmless the Seller from and against any and all Indemnifiable Losses asserted against or suffered by the Seller relating to, resulting from or arising out of (i) any breach by the Buyer of any representation, warranty, covenant or agreement of the Buyer contained in this Agreement or the Ancillary Agreements or (ii) the Assumed Liabilities. (c) Any person entitled to receive indemnification under this Agreement (the "Indemnitee") having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any Indemnifiable Loss shall be reduced (i) to the extent that the Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss, less any costs, expenses, or premium incurred in connection therewith, and (ii) to take into account any Tax or Income Tax benefit recognized by the Indemnitee arising from the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment (but only to the extent that the Parties, following good faith negotiations for a period of thirty (30) days, jointly agree that such Tax benefit would be realized by the Indemnitee), and (iii) by the amount of any payment actually received by the Indemnitee with respect to an Indemnifiable Loss. (d) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the person required to 59 provide indemnification under this Agreement (the "Indemnifying Party") with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (e) The rights and remedies of the Seller and the Buyer under this Article IX are exclusive and in lieu of any and all other rights and remedies which the Seller and the Buyer may have under this Agreement or otherwise for declaratory, injunctive or monetary relief with respect to (i) any breach or failure to perform any representation, warranty, covenant or agreement set forth in this Agreement or (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be. Without limiting the foregoing, with respect to the Purchased Assets, the Buyer shall, as of the Closing Date, for itself and its Affiliates, irrevocably release, hold harmless and forever discharge the Seller from any and all claims of any kind or character, whether known or unknown, hidden or concealed, resulting from or arising out of or in connection with Hazardous Substances or any Environmental Law, other than those liabilities and obligations set forth in Section 2.4(c), Section 2.4(d) and Section 2.4(k) hereof. In furtherance of the foregoing, the Buyer shall, as of the Closing Date, for itself and on behalf of its Affiliates, irrevocably waive any and all rights and benefits with respect to such claims that it then has, or in the future, may have conferred upon it by virtue of any statute, regulation or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party's settlement with the obligor. In this connection, the Buyer shall acknowledge, as of the Closing Date, that it is aware that factual matters unknown to it on the Closing Date may give, or thereafter may give, rise to claims that are then unknown, unanticipated and unsuspected, and Buyer further agrees that such release shall be negotiated and agreed upon in light of that awareness, and the Buyer, for itself and on behalf of its Affiliates, nevertheless intends irrevocably to release the Seller from the claims described in this Section 9.1(e). (f) Each party to this Agreement waives any provision of law to the extent that it would limit or restrict the agreements contained in this Section 9.1. Nothing herein shall prevent either party to this Agreement from terminating this Agreement in accordance with Article X. Notwithstanding any provisions in this Agreement to the contrary, all parties to this Agreement shall retain their remedies at law or in equity with respect to willful, knowing or intentional misrepresentations or breaches of this Agreement, including a failure to consummate the Closing hereunder when and if required to do so. (g) The rights and obligations of indemnification under this Section 9.1 shall not be limited or subject to set-off based on any violation or alleged violation of any obligation under this Agreement or otherwise, including but not 60 limited to breach or alleged breach by the Indemnitee of any representation, warranty, covenant or agreement contained in this Agreement. 9.2 Defense of Claims. (a) If any Indemnitee receives notice of the ----------------- assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any Affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee shall give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than ten (10) calendar days after the Indemnitee's receipt of notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and shall indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party shall have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, and the Indemnitee shall cooperate in good faith in such defense at such Indemnitee's own expense. (b) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a) hereof, the Indemnifying Party shall not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying -------- ------- Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party shall be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party shall not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim shall be 61 the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than ten (10) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party shall have a period of thirty (30) calendar days within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party shall be deemed to have accepted such claim. If the Indemnifying Party rejects such claim, the Indemnitee shall be free to seek enforcement of its rights to indemnification under this Agreement. (d) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of The Chase Manhattan Bank), shall promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party shall, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party shall then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of such indemnity payment are hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party shall duly execute upon request all instruments reasonably necessary to evidence and perfect the foregoing subrogation and subordination rights. Nothing in this Section 9.2(d) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (e) A failure to give timely notice as provided in this Section 9.2 shall not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. 62 ARTICLE X --------- TERMINATION AND ABANDONMENT --------------------------- 10.1 Termination. (a) This Agreement may be terminated at any time ----------- prior to the Closing Date, by mutual written consent of the Buyer and the Seller. (b) This Agreement may be terminated by the Seller or the Buyer if (i) the transactions contemplated hereby shall not have been consummated on or before eighteen (18) months from the date of this Agreement (the "Termination Date"); provided, however, that the right to terminate this Agreement under this -------- ------- Section 10.1(b) shall not be available to either Seller or Buyer if its failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date; provided, further, that if on the Termination Date the conditions to the Closing - -------- ------- set forth in Section 8.1(c) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be reasonably capable of being fulfilled, then the Termination Date shall be the date which is twenty-four (24) months from the date of this Agreement. (c) This Agreement may be terminated by either the Seller or the Buyer if (i) any Governmental Authority or regulatory body, the consent of which is a condition to the obligations of the Seller or the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent and all appeals of such determination shall have been taken and have been unsuccessful, or (ii) any court of competent jurisdiction in the United States or any State shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, judgment or decree shall have become final and nonappealable. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by the Seller of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer. (e) This Agreement may be terminated by the Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Seller impossible and such violation or breach has not been waived by the Seller. (f) This Agreement may be terminated by either the Seller or the Buyer in accordance with the provisions of Section 7.11(b) or (c) hereof. 63 (g) This Agreement may be terminated by Seller if there shall have occurred any event or events which materially adversely affect Buyer's ability to satisfy its obligations pursuant to this Agreement or Buyer's, WPSR's or PDI's ability to satisfy their respective obligations pursuant to the Equity Contribution Agreement. (h) This Agreement may be terminated by Seller if the Equity Contribution Agreement ceases to be in effect. 10.2 Procedure and Effect of Termination. In the event of termination ----------------------------------- of this Agreement and abandonment of the transactions contemplated hereby by either or both of the parties pursuant to Section 10.1 hereof, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein: (a) such termination shall be the sole remedy of the parties hereto with respect to breaches of any agreement, representation or warranty contained in this Agreement and none of the parties hereto nor any of their respective trustees, directors, officers or Affiliates, as the case may be, shall have any liability or further obligation to the other party or any of their respective trustees, directors, officers or Affiliates, as the case may be, pursuant to this Agreement, except in each case as stated in this Section 10.2 and in Sections 7.2(c), 7.3 and 7.7 hereof; and (b) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. ARTICLE XI ---------- MISCELLANEOUS PROVISIONS ------------------------ 11.1 Amendment and Modification. Subject to applicable Law, this -------------------------- Agreement may be amended, modified or supplemented only by written agreement of the Seller and the Buyer. 11.2 Waiver of Compliance; Consents. Except as otherwise provided in ------------------------------ this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with 64 such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.3 Survival of Representations and Warranties. Each and every ------------------------------------------ representation and warranty contained in this Agreement and each and every covenant contained in this Agreement (other than the representations and warranties in Sections 5.1, 5.2, 5.3 and 5.26(c) (which representations and warranties shall survive for one (1) year following the Closing Date) and the covenants in Sections 3.2, 3.3, 3.4, 5.28(a), 7.2(c), 7.2(d), 7.3, 7.7, 7.10, 7.12, 9.1 and 9.2 hereof (which covenants shall survive in accordance with their terms)) shall expire with, and be terminated and extinguished by, (i) the consummation of the sale of the Purchased Assets and the transfer of the Assumed Liabilities pursuant to this Agreement and shall not survive the Closing Date, or (ii) the termination of this Agreement pursuant to Section 10.1 hereof or otherwise; and none of the Seller, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation, warranty or covenant. 11.4 Notices. All notices and other communications hereunder shall be ------- in writing and shall be deemed given if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof): (a) If to the Seller, to: Sierra Pacific Resources 6100 Neil Road Reno, Nevada 89511 Attention: William E. Peterson, Esq. Telecopy: (775) 834-5959 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, New York 10036-6522 Attention: Sheldon S. Adler, Esq. Telecopy: (212) 735-2000 65 (b) if to the Buyer, to: WPS Northern Nevada, LLC c/o WPS Power Development, Inc. 1088 Springhurst Drive Green Bay, Wisconsin 54304 Attention: B. Frank Moon Telecopy: (920) 617-6140 with copies to: Foley & Lardner 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: Mary Ann C. Halloin, Esq. Telecopy: (414) 297-4900 11.5 Assignment. This Agreement and all of the provisions hereof shall ---------- be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. Notwithstanding the foregoing, Buyer may assign or otherwise transfer its rights hereunder and under any Ancillary Agreement to any bank, financial institution or other lender providing financing to Buyer as collateral security for such financing; provided, however, that no such assignment shall (x) impair or materially delay the consummation of the transactions contemplated hereby or (y) relieve or discharge Buyer, as the case may be, from any of its obligations hereunder and thereunder. 11.6 Arbitration. Any dispute, controversy or claim arising out of or ----------- relating to this agreement, or the breach, termination or validity hereof (a "Dispute"), shall be finally settled by arbitration in accordance with the then-prevailing Commercial Arbitration Rules of the American Arbitration Association, as modified herein (the "Rules"). The place of arbitration shall be Nevada. There shall be three arbitrators, of whom the Seller shall appoint one and of whom the Buyer shall appoint one. The two arbitrators so appointed shall select a third arbitrator who shall act as the chairman of the tribunal. If any arbitrator is not appointed within the time limits provided herein or in the Rules, such arbitrator shall be appointed by the American Arbitration Association. The arbitral tribunal is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover punitive, exemplary or similar damages with respect to 66 any dispute. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act, 9 U.S.C. (S)(S) 1-16, and judgment upon any award may be entered in any court of competent jurisdiction. 11.7 Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Nevada (regardless of the laws that might otherwise govern under applicable Nevada principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. 11.8 Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.9 Interpretation. The article and section headings contained in -------------- this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.10 Entire Agreement. This Agreement, including the documents, ---------------- exhibits, schedules, certificates and instruments referred to herein, and the Confidentiality Agreement embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of the Seller contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Offering Memorandum) as supplemented, or the correspondence relating to the divestiture of Seller's generation assets previously made available to the Buyer by the Seller and CSFB. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement. 11.11 Bulk Sales or Transfer Laws. The Buyer acknowledges that the --------------------------- Seller shall not comply with the provision of any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by the Seller with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. 67 IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. SIERRA PACIFIC POWER COMPANY By: ---------------------------------------------- Name: William E. Peterson Title: Sr. Vice President, General Counsel and Corporate Secretary WPS NORTHERN NEVADA, LLC By: WPS POWER DEVELOPMENT, INC. (Its Sole Member) By: ---------------------------------------------- Name: Gerald L. Mroczkowski Title: Vice President 68 TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS....................................................................1 1.1 Definitions................................................1 ARTICLE II PURCHASE AND SALE.............................................................15 2.1 The Sale..................................................15 2.2 Excluded Assets...........................................15 2.3 Assumed Liabilities.......................................16 2.4 Excluded Liabilities......................................19 ARTICLE III PURCHASE PRICE................................................................21 3.1 Purchase Price............................................21 3.2 Purchase Price Adjustment.................................21 3.3 Allocation of Purchase Price..............................23 3.4 Proration.................................................23 ARTICLE IV THE CLOSING...................................................................24 4.1 Time and Place of Closing.................................24 4.2 Payment of Purchase Price.................................24 4.3 Deliveries by Seller......................................25 4.4 Deliveries by Buyer.......................................26 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER......................................27 5.1 Organization; Qualification...............................27 5.2 Authority Relative to this Agreement......................27 5.3 Consents and Approvals; No Violation......................28 5.4 Reports...................................................29 5.5 Financial Statements......................................29 5.6 Undisclosed Liabilities...................................29 5.7 Absence of Certain Changes or Events......................30 5.8 Real Property.............................................30 5.9 No Certified Survey Map Required..........................31 5.10 Leasehold Interests.......................................31 5.11 Improvements..............................................31 5.12 Insurance.................................................31 i Page ---- 5.13 Environmental Matters.....................................32 5.14 Labor Matters.............................................33 5.15 ERISA; Benefit Plans......................................33 5.16 Real Property Encumbrances................................34 5.17 Condemnation..............................................34 5.18 Certain Contracts and Arrangements........................34 5.19 Legal Proceedings, etc....................................35 5.20 Permits...................................................35 5.21 Regulation as a Utility...................................35 5.22 Taxes.....................................................36 5.23 Intellectual Property.....................................36 5.24 Compliance with Laws......................................36 5.25 Sufficiency of Purchased Assets...........................37 5.26 Emission Allowances and Emission Reduction Credits........37 5.27 Condition of Assets.......................................37 5.28 Title to Purchased Assets.................................38 5.29 Water Rights..............................................38 5.30 Information...............................................38 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER.......................................38 6.1 Organization..............................................38 6.2 Authority Relative to this Agreement......................38 6.3 Consents and Approvals; No Violation......................39 6.4 Regulation as a Utility...................................40 6.5 Availability of Funds.....................................40 6.6 Equity Contribution Agreement.............................40 ARTICLE VII COVENANTS OF THE PARTIES......................................................40 7.1 Conduct of Business of the Seller.........................40 7.2 Access to Information.....................................42 7.3 Expenses..................................................44 7.4 Further Assurances........................................44 7.5 Public Statements.........................................45 7.6 Consents and Approvals....................................45 7.7 Fees and Commissions......................................46 7.8 Tax Matters...............................................46 7.9 Supplements to Schedules..................................48 7.10 Employees.................................................48 7.11 Risk of Loss..............................................50 7.12 Additional Covenants of the Buyer.........................50 ii Page ---- 7.13 Title Insurance...........................................51 7.14 Surveys...................................................52 7.15 Pinon Facility............................................52 7.16 Additional Gas Supply.....................................53 7.17 Seller Subsidiaries.......................................53 ARTICLE VIII CLOSING CONDITIONS............................................................53 8.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby...............53 8.2 Conditions to Obligations of Buyer........................55 8.3 Conditions to Obligations of Seller.......................57 ARTICLE IX INDEMNIFICATION...............................................................59 9.1 Indemnification...........................................59 9.2 Defense of Claims.........................................61 ARTICLE X TERMINATION AND ABANDONMENT...................................................63 10.1 Termination...............................................63 10.2 Procedure and Effect of Termination.......................64 ARTICLE XI MISCELLANEOUS PROVISIONS......................................................64 11.1 Amendment and Modification................................64 11.2 Waiver of Compliance; Consents............................64 11.3 Survival of Representations and Warranties................65 11.4 Notices...................................................65 11.5 Assignment................................................66 11.6 Arbitration...............................................66 11.7 Governing Law.............................................67 11.8 Counterparts..............................................67 11.9 Interpretation............................................67 11.10 Entire Agreement..........................................67 11.11 Bulk Sales or Transfer Laws...............................67 iii EX-10.Y 34 0034.txt TRANSITIONAL POWER PURCHASE AGREEMENT, WPS Exhibit 10(Y) TRANSITIONAL POWER PURCHASE AGREEMENT BY AND BETWEEN SIERRA PACIFIC POWER COMPANY AND WPS NORTHERN NEVADA, LLC DATED: OCTOBER 25, 2000 ASSET BUNDLE: TRACY/PINON TABLE OF CONTENTS Section Page - ------- ---- 1. DEFINITIONS..............................................................1 2. TERM.....................................................................8 3. SECURITY.................................................................9 4. SUPPLY SERVICE..........................................................10 5. NOTIFICATION............................................................14 6. PRICING OF ENERGY AND ANCILLARY SERVICES................................15 7. INVOICING AND PAYMENTS..................................................16 8. REGULATORY APPROVALS....................................................19 9. COMPLIANCE..............................................................20 10. INDEMNIFICATION.........................................................20 11. LIMITATION OF LIABILITY.................................................22 12. FORCE MAJEURE...........................................................22 13. DISPUTES................................................................24 14. NATURE OF OBLIGATIONS...................................................27 15. SUCCESSORS AND ASSIGNS..................................................27 16. REPRESENTATIONS.........................................................28 17. DEFAULT AND REMEDIES....................................................29 18. FACILITY ADDITIONS AND MODIFICATIONS....................................30 19. COORDINATION............................................................30 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE...........................30 21. OUTAGE SCHEDULING.......................................................31 22. REPORTS.................................................................32 23. COMMUNICATIONS..........................................................32 24. NOTICES.................................................................33 25. MERGER..................................................................33 26. HEADINGS................................................................34 27. COUNTERPARTS AND INTERPRETATION.........................................34 28. SEVERABILITY............................................................34 29. WAIVERS.................................................................34 30. AMENDMENTS..............................................................35 31. TIME IS OF THE ESSENCE..................................................35 32. APPROVALS...............................................................35 33. PLR SERVICE.............................................................36 34. CONFIDENTIALITY.........................................................36 35. CHOICE OF LAW...........................................................37
Exhibits Page - -------- ---- EXHIBIT A ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS.....................A-1 EXHIBIT B PRICE FLOOR OF ENERGY, PRICE CEILING OF ENERGY, AND PRICE OF ANCILLARY SERVICES...................................................B-1 EXHIBIT C SUPPLIER'S MONTHLY INVOICE...........................................C-1 EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS..........................D-1 EXHIBIT E YEAR END TRUE-UP INVOICE.............................................E-1 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS............................F-1 EXHIBIT G FORM OF AVAILABILITY NOTICE..........................................G-1 EXHIBIT H FORM OF GUARANTEE....................................................H-1 EXHIBIT I COMPANY OBSERVED HOLIDAYS............................................I-1 EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT...........................................J-1 EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE...................................K-1 EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE.............................L-1 EXHIBIT M ASSET BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS.................M-1
TRANSITIONAL POWER PURCHASE AGREEMENT This Agreement is made and entered into as of October 25, 2000 by and between Sierra Pacific Power Company, a Nevada corporation ("Buyer"), and WPS Northern Nevada, LLC, a Nevada limited liability company (the "Supplier"). Buyer and Supplier are referred to individually as a "Party" and collectively as the "Parties." WITNESSETH: WHEREAS, Buyer is selling its Tracy/Pinon generating station and other assets associated therewith to Supplier (the "Asset Sale"); WHEREAS, notwithstanding the Asset Sale, Buyer expects that it has been designated as the Provider of Last Resort ("PLR") for its Nevada retail electric customers who are unable to obtain electric service from an alternative seller or who fail to select an alternative seller. The load required to serve such customers, plus the customers under those wholesale sales agreements existing at the Effective Date, is referred to herein as Buyer's Transitional Resource Requirement; and WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest in the Tracy/Pinon generating station as a source of supply for its Transitional Resource Requirement; and WHEREAS, Supplier has or is willing to secure the necessary resources to provide a portion of Buyer's Transitional Resource Requirement; and WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell Energy and Ancillary Services under contract to Buyer; and NOW, THEREFORE, in consideration of the mutual covenants, representations and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows: 1. DEFINITIONS 1.1 Format. 1.1.1 References to Articles and Sections herein are cross-references to Articles and Sections, respectively, in this Agreement, unless otherwise stated. 1.1.2 Any parts of this Agreement which are incorporated by reference shall have the same meaning as if set forth in full text herein. 2 1.2 Definitions. As used in this Agreement, the following terms shall have ----------- the meanings set forth below: 1.2.1 "Agreement" means this Agreement together with the Exhibits --------- attached hereto, as such may be amended from time to time. 1.2.2 "Adjusted Replacement Cost of Energy" means the Replacement ----------------------------------- Cost of Energy that will be due from Supplier after true-up in accordance with the provisions of Section 7.5. Example determinations of the Adjusted Replacement Cost of Energy are shown on Exhibit E. 1.2.3 "Ancillary Services" means those capacity-related services as ------------------ listed in Exhibit B as well as the Energy component of such services. These services are defined in Buyer's OATT. 1.2.4 "Asset Bundle" means the Tracy/Pinon generating station(s) and ------------ other assets associated therewith pursuant to the terms of the Asset Sale Agreement. 1.2.5 "Asset Bundle Capacity" means, with respect to each unit listed --------------------- in Exhibit A, the net generating capacity (in megawatts ("MW")) of such unit, as modified from time to time in accordance with Section 5.2, Section 20, and Section 21, and not to exceed at any time the net capacity for each unit listed in Exhibit A. Asset Bundle Capacity shall also mean, as the context requires, the Energy (in megawatt-hours ("MWh")) and the Ancillary Services which the units would be capable of producing if they operated at the capacity level described in the first sentence of this Section 1.2.6. 1.2.6 "Asset Sale" has the meaning set forth in the Recitals. ---------- 1.2.7 "Asset Sale Agreement" means the Asset Sale Agreement between -------------------- Buyer and Supplier, dated as of October 25, 2000, to purchase Buyer's Asset Bundle. 1.2.8 "Asset Sale Closing" means the transfer of Buyer's ownership of ------------------ the Asset Bundle through the consummation of the Asset Sale pursuant to the terms of the Asset Sale Agreement. 1.2.9 "Average Cost of Delivered Energy" means the total cost of -------------------------------- Delivered Energy for the Contract Year after the application of the annual true-up mechanism from Section 7.5 divided by the total Delivered Energy for the Contract Year. Example determinations of Average Cost of Delivered Energy are shown on Exhibit E. 1.2.10 "Availability Notice" means a notice delivered from time to ------------------- time by Supplier to Buyer pursuant to Section 5.2 notifying Buyer of changes in the availability of the Asset Bundle. 3 1.2.11 "Business Day" means any day other than Saturday, Sunday, and ------------ any day that is an observed holiday by Buyer as shown on Exhibit I. 1.2.12 "Buyer's OATT" means Buyer's then-effective Open Access ------------ Transmission Tariff, as it may be amended, which has been accepted for filing by the FERC. 1.2.13 "CALPX" means the California Power Exchange and any successor ----- entity thereto. 1.2.14 "Confidential Information" has the meaning set forth in Section ------------------------ 34. 1.2.15 "Contract Year" means, with respect to the first Contract Year, ------------- the period beginning on the Effective Date and, with respect to each subsequent Contract Year, the period immediately following the end of the preceding Contract Year, and in each case ending on the earlier of the date which is twelve (12) months thereafter or the termination date of this Agreement, as provided in Section 2.1. 1.2.16 "Control Area" has the meaning set forth in Buyer's OATT. ------------ 1.2.17 "Control Area Operator" means an entity or organization, and --------------------- its representatives, which is responsible for operating and maintaining the reliability of the electric power system(s) within the Buyer's Control Area. The Control Area Operator is also referred to as the transmission operator. 1.2.18 "Credit Amount" shall mean an amount initially equal to $200 ------------- million, as decreased on a periodic basis in accordance with Exhibit J. 1.2.19 "Delivered Amount" means, with respect to any Dispatch Hour, ---------------- the Energy delivered by Supplier to Buyer at the designated Point(s) of Delivery during such Dispatch Hour, whether or not such Energy was generated by the Asset Bundle, plus any additional amounts pursuant to Section 4.1.2, Section 4.1.3 and the Ancillary Services provided by Supplier for Buyer during any Dispatch Hour pursuant to the terms of this Agreement. 1.2.20 "Derating" means a reduction to the Asset Bundle Capacity. -------- 1.2.21 "Dispatch Hour" means the prescribed hour(s) when Energy is to ------------- be delivered by Supplier to Buyer at the designated Point(s) of Delivery and the prescribed hour(s) when Ancillary Services are to be provided to the ISA by Supplier on behalf of Buyer. 4 1.2.22 "EDU" means electric distribution utility, the organization --- with the responsibility for the distribution of energy over Buyer's distribution system to retail end-users. 1.2.23 "Effective Date" means the date that this Agreement becomes -------------- effective, which shall be the date on which the Closing Date, as defined in the Asset Sale Agreement, actually occurs; provided, however, that the Effective Date shall not occur until the FERC has accepted this Agreement or, if modifications to this Agreement are required pursuant to Section 2.2.2, the FERC has accepted the modified Agreement for filing. 1.2.24 "Emergency Condition" shall mean a public declaration by the ------------------- ISA or Control Area Operator that the Control Area is in danger of imminent voltage collapse or uncontrollable cascading outages. 1.2.25 "Energy" means electricity (measured in MWh) and associated ------ power-producing capacity to be provided by Supplier to Buyer pursuant to this Agreement. Also known as "firm energy and associated firm capacity". 1.2.26 "Event of Default" has the meaning set forth in Section 17 ---------------- hereof. 1.2.27 "FERC" means the Federal Energy Regulatory Commission and any ---- successor agency thereto. 1.2.28 "Force Majeure" has the meaning set forth in Section 12 hereof. ------------- 1.2.29 "GAAP" means Generally Accepted Accounting Principles for the ---- United States. 1.2.30 "Good Utility Practice" means the applicable practices, --------------------- methods, and acts: (i) required by applicable Laws, applicable permits, applicable reliability criteria, whether or not the Party whose conduct at issue is a member thereof, and (ii) otherwise engaged in or approved by a significant portion of the United States electric utility industry during the relevant time period, which, in the exercise of reasonable judgement in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with applicable Laws, applicable permits, applicable reliability criteria, good business practices, safety, environmental protection, economy and expediency. Good Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to practices, methods or acts generally accepted by the United States electric utility industry. 5 1.2.31 "Governmental Authority" means any foreign, federal, state, ---------------------- local, tribal or other governmental, regulatory or administrative agency, court, commission, department, board, or other governmental subdivision, legislature, rulemaking board, tribunal, arbitrating body, or other governmental authority. 1.2.32 "Gross Replacement Costs of Energy" means Buyer's Replacement --------------------------------- Cost of Energy prior to adjustment for the amount that Buyer would have paid for the Energy if Supplier had delivered the Energy to Buyer. Example determinations of Gross Replacement Costs of Energy are shown on Exhibit D. 1.2.33 "Guarantee" has the meaning set forth in Section 3.1.2 hereof. --------- 1.2.34 "Guarantor" has the meaning set forth in Section 3.1.2 hereof. --------- 1.2.35 "Invoiced Replacement Costs" means the Replacement Costs which -------------------------- have been billed to Supplier or subtracted from payments to Supplier in accordance with the provisions of Section 4.2 and Section 7.4. 1.2.36 "ISA" means the Mountain West Independent System Administrator, --- or the regional transmission organization authorized with the responsibility for the scheduling and administration of Energy and Ancillary Services over, through and within the Transmission System in coordination with other interconnected entities to provide transmission services. 1.2.37 "ISA's OATT" means the ISA's then-effective Open Access ---------- Transmission Tariff, as it may be amended, which has been accepted for filing by the FERC. 1.2.38 "Law" means any law, treaty, code, rule, regulation, order, --- determination, permit, certificate, authorization, or approval of an arbitrator, court or other Governmental Authority which is binding on a Party or any of its property. 1.2.39 "Limit on Excused Energy" means the amount of energy that can ----------------------- be excused under the provisions of Section 12.4 as shown on Exhibit A. 1.2.40 "Market Price of Energy" has the meaning set forth in Section ---------------------- 6.2.1. 1.2.41 "Minimum Annual Energy Take" has the meaning set forth in -------------------------- Section 4.1.2. 1.2.42 "Minimum Hourly Energy Take" has the meaning set forth in -------------------------- Section 4.1.3. 6 1.2.43 "Minimum Investment Grade Rating" of a Person means that such ------------------------------- Person has a minimum credit rating on its senior unsecured debt securities of at least two of the following ratings: (i) BBB as determined by Standard & Poor's Corporation, (ii) Baa2 as determined by Moody's Investors Service, Inc., or (iii) a comparable rating by another nationally recognized rating service reasonably acceptable to Buyer. 1.2.44 "Minimum Tangible Net Worth" means the total book value of -------------------------- shareholder's equity less the balance of goodwill, as reported on the latest quarterly balance sheet prepared in accordance with Generally Accepted Accounting Principles (GAAP). 1.2.45 "Negotiated Service" has the meaning set forth in the wholesale ------------------ generation tariff filed in FERC Docket No. ER00-2018. 1.2.46 "NERC" means the North American Electric Reliability Council ---- and any successor entity thereto. 1.2.47 "Nonemergency Condition" shall mean the determination, ---------------------- direction or order by the ISA, or Control Area Operator to Supplier and/or Buyer to change the Supply Amount which is not a result of or due to an Emergency Condition. A Nonemergency Condition includes an insufficiency of Ancillary Services to securely operate the Control Area. 1.2.48 "Operating Representatives" means the persons designated by ------------------------- each Party to transmit and receive routine operating and emergency communications required under this Agreement. 1.2.49 "Party" has the meaning set forth in the preamble of this ----- Agreement. 1.2.50 "Permitted Deratings" means those reductions to the Asset ------------------- Bundle Capacity of which Supplier may notify Buyer from time to time in an Availability Notice pursuant to Section 5.2. 1.2.51 "Person" means any natural person, partnership, limited ------ liability company, joint venture, corporation, trust, unincorporated organization, or governmental entity or any department or agency thereof. 1.2.52 "Point of Delivery" means the point (s) which has (have) been ----------------- specified as the Interconnection Point(s) in the Interconnection Agreement between Buyer and Supplier, dated October 25, 2000, as it may be amended from time to time, as well as any alternative locations agreed upon pursuant to Section 4.1.6. 1.2.53 "Price Ceiling of Energy" means the ceiling price of Energy as ----------------------- stated in Exhibit B. 7 1.2.54 "Price Floor of Energy" means the floor price of Energy as --------------------- stated in Exhibit B. 1.2.55 "Provider of Last Resort (PLR)" has the meaning set forth in ----------------------------- the Recitals. 1.2.56 "PUCN" means the Public Utilities Commission of Nevada and any ---- successor entity thereto. 1.2.57 "Recourse Service" has the meaning set forth in the wholesale ---------------- generation tariff filed in FERC Docket No. ER00-2018. 1.2.58 "Replacement Costs" means with respect to a period of time, the ----------------- difference between (a) the actual costs, including without limitation related penalties and transmission costs, incurred by Buyer to replace any shortfall between (1) the Supply Amount and (2) the Delivered Amounts of Energy (or in the case of Ancillary Services the Supplier's schedule of Ancillary Services) during such period and (b) the payments the Supplier would have been entitled to in respect of such shortfall in delivery; provided that Replacement Costs shall also be subject to the annual true-up mechanism set forth in Section 7.5. 1.2.59 "Supply Amount" means, with respect to each Dispatch Hour, the ------------- amount of Energy and Ancillary Services, not to exceed the Asset Bundle Capacity for such Dispatch Hour, requested by Buyer to be delivered by Supplier during any Dispatch Hour. The Supply Amount for any Dispatch Hour shall be determined pursuant to Section 5.1. 1.2.60 "Total Amount of Energy Replaced" means the summation of ------------------------------- Replacement Energy as shown on Exhibit E. 1.2.61 "TPPA Amount" means the amount paid by Buyer to Supplier in ----------- consideration of this Agreement as provided in Sections 3.1 and 4.2 of the Asset Sale Agreement. 1.2.62 "Transitional Resource Requirement" or "TRR" means the Energy --------------------------------- and loss compensation necessary for Buyer to meet its obligations as a Provider of Last Resort (PLR) for Nevada and under those wholesale sales agreements existing at the Effective Date. 1.2.63 "Transmission System" means the facilities that are used to ------------------- provide transmission service within Buyer's Control Area in accordance with Buyer's OATT or the ISA's OATT. 1.2.64 "WSCC" means the Western Systems Coordinating Council and any ---- successor entity thereto. 8 2. TERM 2.1 Term. ---- 2.1.1 Subject to the provisions of Section 2.1.2, unless terminated earlier pursuant to the terms of this Agreement, the term of this Agreement shall commence on the Effective Date and continue until the earlier of the effective date of an order by a Governmental Authority terminating Buyer's PLR responsibility or at 11:59 p.m. (Pacific Time) on December 31, 2002. Supplier shall provide service under this Agreement commencing on the first hour on the day after the Effective Date. 2.1.2 Provided that this Agreement has not otherwise terminated as a result of an order by a Governmental Authority terminating Buyer's PLR responsibility, Buyer in its sole discretion may provide written notification to Supplier, at any point during October 2002, that it is exercising its unilateral right to take service under the terms and conditions of this Agreement for the period from January 1, 2003 until 11:59 p.m. (Pacific Time) February 28, 2003. 2.2 Termination. ----------- 2.2.1 Except pursuant to Sections 2.2.2 or 17.4, this Agreement may not be terminated without the explicit prior written approval of Buyer. 2.2.2 If, prior to the Asset Sale Closing, the FERC or any other Governmental Authority places conditions on or requires revisions of this Agreement which have a material adverse effect on Supplier or Buyer, the Parties agree to negotiate in good faith those amendments to the Agreement reasonably necessary to preserve the bargain between the Parties. If the Parties fail to negotiate mutually acceptable amendments to this Agreement within sixty (60) days of such action by the FERC or other Governmental Authority, either Party may terminate the Agreement after first notifying the other Party in writing at least ten (10) Business Days prior to the termination date; provided that neither Party may exercise a right of termination pursuant to this Section 2.2.2 after the Asset Sale Closing. 2.2.3 This Agreement may be terminated with the mutual agreement of the Parties. 2.2.4 Any termination of this Agreement pursuant to this Section 2 shall not take effect until FERC either authorizes the termination or accepts a written notice of termination. 9 2.3 Effect of Termination. --------------------- 2.3.1 Adjustment of TPPA Amount. If the Effective Date of this ------------------------- Agreement is before June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% plus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between the Effective Date and June 1, 2001. An example calculation is shown on Exhibit J. If the Effective Date of this Agreement is after June 1, 2001, the TPPA Amount shall be adjusted to equal (1) the TPPA Amount multiplied by (2) 100% minus the sum of the monthly adjustments from Exhibit J for each month or portion thereof between June 1, 2001 and the Effective Date. An example calculation is shown on Exhibit J. If this Agreement is terminated on or before December 31, 2002 (or March 1, 2003, if Buyer exercises its rights under Section 2.1.2 of this Agreement), Supplier shall pay to Buyer an amount, in accordance with the provisions of Section 7, equal to the TPPA Amount which existed before any adjustment in accordance with the first or second paragraph of this Section 2.3.1, multiplied by the sum of: (x) the total monthly adjustments for every month or portion thereof between the date on which this Agreement is terminated and December 31, 2002; and, (y) the total monthly adjustments for every month or portion thereof between either (i) January 1, 2003 and March 1, 2003, or (ii) if this Agreement is terminated after January 1, 2003, the termination date of this Agreement and March 1, 2003. An example calculation is shown on Exhibit J. 2.3.2 Any default or termination of this Agreement shall not release either Party from any applicable provisions of this Agreement with respect to: 2.3.2.1 The payment of liquidated damages pursuant to Sections 4.2, 12, 17, 18, or 21. 2.3.2.2 Indemnity obligations contained in Section 10, to the extent of the statute of limitations period applicable to any third party claim. 2.3.2.3 Limitation of liability provisions contained in Section 11. 2.3.2.4 Payment of any unpaid amounts in respect of obligations arising prior to or resulting from termination. 2.3.2.5 For a period of one (1) year after the termination date, the right to raise a payment dispute and the resolution thereof pursuant to Section 13. 10 2.3.2.6 The resolution of any dispute submitted pursuant to Section 13 prior to, or resulting from, termination. 3. SECURITY 3.1 Supplier Certification; Guarantee. As a condition of Buyer's execution --------------------------------- of, and continuing compliance with, this Agreement, Supplier shall at Supplier's option comply with the provisions of either Section 3.1.1 or Section 3.1.2. 3.1.1 Supplier Certification. Supplier shall (a) provide a ---------------------- certificate from a duly authorized corporate officer of Supplier certifying that, as of the Effective Date, Supplier has a credit rating equal to or higher than the Minimum Investment Grade Rating; or (b) post a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.1.2 Guarantee. In the alternative to the provisions of Section --------- 3.1.1, the Supplier may provide a corporate guarantee, in form and substance as set forth in Exhibit H, made by an entity (the "Guarantor") that: 3.1.2.1 has a credit rating equal to or higher than the Minimum Investment Grade Rating, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a credit rating equal to or higher than the Minimum Investment Grade Rating; or 3.1.2.2 has a MTNW of no less than one (1) billion dollars, together with a certificate from a duly authorized corporate officer of such Guarantor certifying that, as of the Effective Date, such Guarantor has a MTNW of no less than one (1) billion dollars; or 3.1.2.3 posts a letter of credit in a form reasonably acceptable to Buyer in the amount of the Credit Amount from a financial institution with each of: (i) a credit rating of A2 or better from Moody's Investors Service, Inc., (ii) a credit rating of A or better from Standard & Poor's Corporation, and (iii) a Minimum Tangible Net Worth ("MTNW") of one (1) billion dollars. 3.2 Compliance. ---------- 3.2.1 Reporting. If at any time during the term of this Agreement, --------- Standard & Poor's Corporation, Moody's Investors Service, Inc. or another nationally recognized firm downgrades the credit rating of Supplier, the Guarantor, or the financial institution that issued the letter of credit, as applicable, then Supplier shall provide Buyer with written notice of 11 such change of circumstance within two (2) Business Days of any such change. In the event such a downgrade also constitutes an Event of Default pursuant to Section 17, the requirements of this Section 3.2.1 are in addition to, and not in lieu of, the requirements of Section 17. 4. SUPPLY SERVICE 4.1 Obligations of the Parties. -------------------------- 4.1.1 Supply Amount. Supplier shall be required to provide the ------------- Supply Amount in any Dispatch Hour. As provided in Section 5.1, Buyer shall make reasonable efforts to ensure that the Supply Amount is no greater than necessary to satisfy Buyer's TRR. 4.1.1.1 With the Buyer's prior consent, not to be unreasonably withheld or delayed, Supplier shall be entitled to generate or otherwise procure the Supply Amount from sources other than the Asset Bundle. 4.1.1.2 Supplier shall deliver the Supply Amount to Buyer during the Dispatch Hour on a continuous basis at the Point(s) of Delivery and shall schedule the Supply Amount in accordance with the Buyer's OATT or the ISA's OATT, as applicable. 4.1.1.3 The Buyer at its sole discretion shall designate the allocation of the Supply Amount between Energy and Ancillary Services in accordance with the notification provisions of Section 5. 4.1.1.3.1 The Parties recognize that operation of the Asset Bundle is subject to, and thus the Supply Amount at times may be limited by, the operational parameters of the Asset Bundle. The Parties further recognize that the consolidation of two or more generating units into an Asset Bundle precludes contractual provisions addressing such operational parameters in a matter normally applied to Energy purchases from specified generating units. Consequently, Supplier will have the right to raise concerns regarding the effect of such operational parameters upon Buyer's day-ahead requests, and Buyer will make good faith efforts to alleviate Supplier's concerns. 4.1.1.3.2 The Parties further recognize that the Asset Bundle also is subject to the contractual and operating constraints set forth in Exhibit M. 12 4.1.2 Minimum Annual Energy Take. The Buyer shall accept a minimum -------------------------- annual energy take during each Contract Year. The Minimum Annual Energy Take shall be set forth on Exhibit A. 4.1.2.1 Buyer's Obligation to Take. If Buyer is unwilling to -------------------------- accept the Minimum Annual Energy Take for any Contract Year, as may be adjusted pursuant to Section 4.1.2.2, the difference (in MWh) between the Supply Amount of Energy (including consideration for Energy that would have been taken but was unavailable due to Permitted Deratings or Force Majeure, as well as the Total Amount of Energy Replaced) and the Minimum Annual Energy Take shall be billed at the Price Ceiling of Energy less the Price Floor of Energy. An example of the monthly determination of the amount of Energy to be credited against the Minimum Annual Energy Take is shown on Exhibit L. 4.1.2.2 Adjustments to Minimum Annual Energy Take. Buyer shall ----------------------------------------- have the right to reduce the Minimum Annual Energy Take if the number of customers taking electric service from Buyer falls below the number of customers on December 31, 2000. Adjustments will be applicable, on a pro rata basis, on the first (1st) day of the month immediately following Supplier's receipt of Buyer's notice of adjustment. Buyer shall provide supporting data in reasonable detail to support its calculations. An example of the calculation of a revised Minimum Annual Energy Take is shown on Exhibit K. 4.1.3 Minimum Hourly Energy Take. The Buyer shall accept a Minimum -------------------------- Hourly Energy Take for any Dispatch Hour if the Supply Amount, or a portion thereof, is provided to Buyer from the Asset Bundle. The Minimum Hourly Energy Take is stated in Exhibit A. 4.1.3.1 Buyer's Obligation to Take. If Buyer is unwilling to -------------------------- accept the Minimum Hourly Energy Take, the difference (in Mwh) between the Supply Amount of Energy (including consideration for Energy that would have been taken but was unavailable due to Permitted Deratings or Force Majeure, as well as the Total Amount of Energy Replaced) and Minimum Hourly Energy Take shall be billed at the Price Ceiling of Energy less the Price Floor of Energy. 4.1.4 Supplier Rights to Output. Supplier may sell to others any ------------------------- portion of the Asset Bundle Capacity in excess of the Supply Amount. 13 4.1.5 Point(s) of Delivery. Supplier shall deliver, and Buyer shall -------------------- take delivery of, the Supply Amount of Energy at the Point(s) of Delivery. Subject to Section 4.1.6.2, Supplier shall be responsible for all costs associated with delivery of the Supply Amount of Energy to the Point(s) of Delivery. 4.1.6 Alternative Points of Delivery. For any Dispatch Hour, either ------------------------------ Party may designate one or more alternative Points of Delivery, subject to the other Party's prior approval and consistent with Buyer's OATT or the ISA's OATT, as applicable, such approval not to be unreasonably withheld or delayed. 4.1.6.1 If Supplier has designated an alternative Point of Delivery, Supplier shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.6.2 If Buyer has designated an alternative Point of Delivery, Buyer shall be responsible for all costs of delivery to such alternative Point of Delivery. 4.1.7 Fuel. Buyer shall have no responsibility for any fuel ---- procurement or fuel transportation costs or activities associated with the Asset Bundle during the term of this Agreement. 4.1.8 Resale. Except as provided in the next sentence, the Supply ------ Amount may be resold by Buyer only as necessary to satisfy Buyer's TRR. If, after submitting the day-ahead request of the Supply Amount pursuant to Section 5.1, the Buyer determines that the scheduled Supply Amount, together with purchases scheduled on a day-ahead basis under Buyer's other Transitional Power Purchase Agreements, exceeds Buyer's most current projected TRR, then the Buyer also shall resell at wholesale that amount of Energy in excess of Buyer's actual TRR as necessary to balance its load and resources. 4.1.9 Right to Review. Buyer and Supplier each shall have the right to --------------- review during normal business hours the relevant books and records of the other Party to confirm the accuracy of such as it pertains to transactions under this Agreement. The review shall be consistent with standard business practices and shall follow reasonable notice to the other Party. Reasonable notice for a review of the previous month's records shall be at least a twenty-four (24) hour period from a Business Day to a subsequent Business Day. If a review is requested of other than the previous month's records, then notice of that request shall be provided with a minimum of seven (7) calendar days written notice by the requesting Party. The notice shall specify the period to be covered by the review. The Party providing records can make reasonable requests that the receiving Party keep the records confidential, and the 14 receiving Party shall take reasonable steps to accommodate such requests. 4.2 Liquidated Damages. ------------------ 4.2.1 If the Delivered Amount of Energy is less than the Supply Amount of Energy in any Dispatch Hour during a month, and Replacement Costs computed in respect of such month are greater than zero, then Supplier shall reimburse Buyer for such Replacement Costs. If Supplier's schedule of Ancillary Services is less than the Supply Amount of Ancillary Services in any Dispatch Hour during a month, Supplier shall reimburse Buyer for such Replacement Costs for the difference between Supplier's schedule and the Supply Amount of Ancillary Services. An example of the methodology used to calculate Replacement Costs is provided in Exhibit D. 4.2.2 Supplier also shall be responsible for any costs incurred by Buyer associated with a violation of reliability criteria (including but not limited to imbalance costs or penalties) due to a deviation between the Supply Amount and Delivered Amount. 4.2.3 The Parties recognize and agree that the payment of such amounts by Supplier pursuant to this Section 4.2 is an appropriate remedy in the event of such a failure and that any such payment does not constitute a forfeiture or penalty of any kind, but rather constitutes actual costs to Buyer under the terms of this Agreement. 4.3 Supplier Operating Representative. Supplier shall provide and --------------------------------- maintain a twenty-four (24) hour seven (7) day per week communication link with Buyer's control center and with Buyer's schedulers. Supplier's Operating Representatives shall be available to address and make decisions on all operational matters under this Agreement on a twenty-four (24) hour seven (7) day per week basis. 5. NOTIFICATION 5.1 Scheduling Notification. Buyer shall provide Supplier with a ----------------------- day-ahead request of the Supply Amount one (1) hour prior to when day-ahead bids are due to the CALPX. Buyer shall make reasonable efforts to ensure that the day-ahead request of the Supply Amount is no greater than that amount then projected to be necessary to satisfy Buyer's TRR. In addition, for each day-ahead request, the change in the Supply Amount from one (1) hour to the next hour shall be no greater than the ramping capability of the units within the Asset Bundle as shown in Exhibit A. 15 5.2 Availability Notification. ------------------------- 5.2.1 No later than 5:00 a.m. (Pacific Time) of each day, Supplier shall deliver to Buyer an Availability Notice in the form set forth in Exhibit G. 5.2.2 Availability Notices shall provide, for the ninety-six (96) hour period starting at 6:00 a.m. (Pacific Time) that day, Supplier's hourly projection of the unavailability or derating ("Derating") of the Asset Bundle compared to the Asset Bundle Capacity figures stated for each unit in Exhibit A. Each Availability Notice also shall contain, as applicable: (a) the units which are subject to a Derating; (b) the magnitude of the Derating; (c) the hours during which the Derating is expected to apply; (d) the cause of the Derating; (e) the extent, if any, to which the Derating is attributable to a Permitted Derating; and (f) the projected Asset Bundle Capacity for each unit during the period covered by the Availability Notice, pursuant to Section 5.2.4 below. 5.2.3 If and to the extent a Derating is the result of one or more of the following causes, it shall be a Permitted Derating: (a) approved planned outages pursuant to Section 21; (b) response to an Emergency Condition as described in Section 20; or (c) subject to the limitations expressed in Section 12.5, a Force Majeure event. 5.2.4 In respect of any Dispatch Hour, the Asset Bundle Capacity of each unit shall be the Asset Bundle Capacity figure stated in Exhibit A minus any Permitted Derating applicable during such hour. 5.2.5 Neither the Asset Bundle Capacity nor the Supply Amount shall be reduced by Deratings which are not Permitted Deratings. Supplier shall be responsible for all Replacement Costs, pursuant to Section 4.2.1, caused by Deratings that are not Permitted Deratings. 6. PRICING OF ENERGY AND ANCILLARY SERVICES 6.1 Overview. The price of Energy paid by Buyer to Supplier shall be -------- based upon a designated hourly market price, subject to monthly floor, monthly ceiling, and annual true-up provisions. The Price Floor of Energy will ensure that Supplier will receive an average price for Energy for each month which is not less than the price stated in Exhibit B. The Price Ceiling of Energy provision provides that the average price of Energy paid to Supplier each month and for each year shall not 16 exceed the price stated in Exhibit B. 6.2 Price of Energy. --------------- 6.2.1 Market Price of Energy. In respect of any Dispatch Hour, ---------------------- the designated Market Price of Energy shall be the North of Path 15 ("NP 15") hourly market-clearing price in the day-ahead market from the CALPX as published at the following Web Site (or its successor web site) http://www.calpx.com/prices/index_prices_dayahead_ --------------------------------------------------- trading.html. Should this hourly market in the day-ahead ------------ market not exist for the entire term, the Parties shall agree upon a similar market price index. 6.2.2 Price Floor of Energy. The Price Floor of Energy is --------------------- stated in Exhibit B and shall not change during the term of this Agreement. 6.2.3 Price Ceiling of Energy. The Price Ceiling of Energy is ----------------------- stated in Exhibit B and shall not change during the term of this Agreement. 6.3 Pricing of Ancillary Services. The price of the capacity ----------------------------- component of Ancillary Services is stated in Exhibit B. The price of Ancillary Services shall not change during the term of the Agreement. Supplier shall make available to Buyer and Buyer shall offer to pass through the Energy portion of Ancillary Services with respect to the Supply Amount to the ISA, or Control Area Operator, at the Price Ceiling of Energy (plus expected direct transaction costs). The net proceeds shall be credited to the Supplier pursuant to Section 7. 6.4 Price Revisions. The Parties waive any and all rights to seek to --------------- revise the provisions of this Agreement, including the prices stated, pursuant to Sections 205 and/or 206 of the Federal Power Act. 6.5 Recourse Service. Buyer agrees not to purchase Recourse Service ---------------- during the term of the Agreement. However, Buyer is permitted to purchase Negotiated Service during the term of the Agreement. 7. INVOICING AND PAYMENTS 7.1 Invoicing and Payment. On or before the tenth (10th) day of each --------------------- month, Supplier shall send to Buyer an invoice setting forth the Supply Amount, Delivered Amount, the Market Price of Energy pursuant to Section 6.2.1 for each Dispatch Hour in the previous month, any amount due in accordance with Section 7.13 and the total due from Buyer. The invoice shall be calculated based upon data available to Supplier and shall be in accordance with this Section 7 and Exhibit C. Buyer shall promptly notify Supplier if Buyer in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. 7.2 Monthly Invoice Calculation. On each monthly invoice, Supplier --------------------------- shall calculate the following amounts: 17 7.2.1 The Delivered Amount in respect of each Dispatch Hour multiplied by the corresponding Market Price of Energy pursuant to Section 6.2.1, summed over the billing period; 7.2.2 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Ceiling of Energy; 7.2.3 Sum of the Delivered Amounts in respect of all Dispatch Hours of the billing period multiplied by the Price Floor of Energy; 7.2.4 For each Dispatch Hour of the billing period, the shortfall, if any, between the Supply Amount and the Delivered Amount (and in the case of Ancillary Services the shortfall between the Supply Amount of Ancillary Services and Supplier's schedule of Ancillary Services); 7.2.5 The Supply Amount of Ancillary Services for each dispatch hour multiplied by the price of Ancillary Services as stated in Exhibit B; and 7.2.6 The Delivered Amount of Energy related to Ancillary Services for each dispatch hour multiplied by the Price Ceiling of Energy as stated in Exhibit B. 7.2.7 If applicable, any amount to be calculated in accordance with Section 7.13. 7.3 Supplier's Invoice. Supplier will invoice the lesser of the ------------------ amounts calculated in Sections 7.2.1 and 7.2.2, provided that if the amount calculated in Section 7.2.1 is less than the amount calculated in Section 7.2.3, Supplier shall invoice Buyer the amount calculated in Section 7.2.3. Supplier shall also include in its invoice the amounts calculated in Sections 7.2.5, 7.2.6 and 7.2.7. If the Delivered Amount exceeds the Supply Amount, Buyer shall not be obligated to pay for the excess amount. Buyer shall pay Supplier for the amounts invoiced pursuant to Section 7.2.6 upon Buyer's receipt of payment from ISA or Control Area Operator. Examples of this monthly invoice calculation (and annual true-up process) are contained in Exhibit C. 7.4 Buyer's Invoice. In the event any shortfall occurs pursuant to --------------- Section 7.2.4 or payment is due to Buyer pursuant to Section 7.13, Buyer shall within ten (10) Business Days of receipt of Supplier's invoice deliver to Supplier a Buyer's invoice detailing any Replacement Costs or other payment due. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. 18 Buyer shall have the right to adjust the invoices issued in accordance with this Section 7.4 if Buyer incurs Replacement Costs that were not known when earlier invoices were issued. Adjusted invoices shall be issued within thirty (30) days of the date on which the additional Replacement Costs become known. Buyer shall provide supporting data in reasonable detail to support its calculations of Replacement Costs. Supplier shall promptly notify Buyer if Supplier in good faith disputes any portion of the invoice, stating in reasonable detail the reason for the dispute. If the Buyer's adjusted invoice results in an amount due from Supplier to Buyer, Buyer may offset such amount from its payment of Supplier's corresponding invoice. 7.5 Annual True-Up Mechanism for Energy. ----------------------------------- 7.5.1 The annual true-up mechanism will provide adjustments among the Parties with respect to each Contract Year in the following scenarios: (a) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is less than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. (b) If (i) the Price Ceiling of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year is greater than or equal to (ii) the Market Price of Energy for each hour pursuant to Section 6.2.1 multiplied by the Delivered Amount of Energy for each hour during the Contract Year, Supplier shall subtract (x) the amount invoiced by Supplier for Energy pursuant to Section 7.3 summed of over the Contract Year from (y) the Market Price of Energy multiplied by the hourly Delivered Amount of Energy summed over the Contract Year. If the difference calculated in accordance with the preceding sentence is greater than or equal to zero, Buyer shall pay the difference to Supplier. If the difference is less than zero, Supplier shall refund the difference to Buyer. (c) If Buyer incurred Replacement Costs for energy during the Contract Year, Supplier shall multiply the Total Amount of Energy Replaced during the Contract Year by the Average Cost of Delivered Energy after true-up as determined in accordance with 19 Section 7.5.1 (a) or 7.5.1 (b). If the amount so obtained is greater than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be zero. If the amount so obtained is less than the sum of the monthly Gross Replacement Costs of Energy from Buyer's Invoices for the Contract Year, the Adjusted Replacement Cost of Energy for the Contract Year shall be the sum of the monthly Gross Replacement Costs of Energy less the amount obtained in accordance with the first sentence of this Section 7.5.1(c). If the Adjusted Replacement Cost of Energy is greater than the sum of the monthly Invoiced Replacement Costs of Energy from Buyer's Invoices for the Contract Year, Supplier shall pay the difference to Buyer. If the sum of the monthly Invoiced Replacement costs of Energy is greater than the Adjusted Replacement Cost of Energy, Buyer shall pay the difference to Seller. 7.5.2 True-up adjustments will be calculated by Supplier within twenty (20) days after each Contract Year. Examples of the true-up calculations and invoice form are set forth in Exhibit E. Interest shall be calculated pursuant to 18 CFR Section 35.19a and shall be included in the true-up invoice. Invoices for true-up adjustments shall be submitted by Supplier within thirty (30) days after the end of the Contract Year. Payments for such invoices shall be due from Buyer thirty (30) days from receipt of the true-up invoice. 7.6 Invoice Disagreements. Should there be a good faith dispute over --------------------- any invoice, the Parties shall promptly seek resolution pursuant to Section 13. Pending resolution of the invoice dispute, payment shall be made or offsets or credits taken, as applicable, based upon the undisputed portion of the invoice. 7.7 Adjustments. Upon resolution of the dispute, the prevailing ----------- Party shall be entitled to receive the disputed amount, as finally determined to be payable along with interest (calculated pursuant to 18 C.F.R. (s) 35.19a through the date of payment. No invoice (or payment covered thereby) shall be subject to adjustment unless notice or request for adjustment is given within one (1) year of the date payment thereunder was due. 7.8 Method of Payment. Subject to Sections 7.3, 7.6 and 7.7, Buyer ----------------- shall remit all amounts due by wire or electronic fund transfer, pursuant to Supplier's invoice instructions, no later than thirty (30) days after receipt of the invoice. 7.9 Overdue Payments. Overdue payments shall bear interest from and ---------------- including, the due date to the date of payment on the unpaid portion calculated pursuant to 18 C.F.R.(s)35.19a. 7.10 Buyer Right to Offset. Buyer shall have the right to offset any --------------------- amounts Supplier 20 owes to Buyer, including Replacement Costs (except for such amounts disputed in good faith by Supplier), against the amounts owed by Buyer to Supplier. 7.11 Taxes. Each Party shall pay ad valorem and other taxes ----- attributed to its facilities and services provided. Supplier shall not include any taxes of any kind in its invoices to Buyer. The prices of Energy and Ancillary Services shall not change during the term of this Agreement as a result of any changes in local, state or federal taxes, fees or levies. 7.12 Late Invoices. If either Party submits an invoice outside of the ------------- time deadlines set forth herein, that Party shall not forfeit its rights to collect the amounts due thereunder, provided that such invoice is no more than six (6) months late, and provided that changes to invoices remain subject to the deadline in Section 7.7. 7.13 Early Termination. Notwithstanding any other provision herein, ----------------- in the event that this Agreement is terminated before December 31, 2002 (or March 1, 2003 if Buyer exercises its rights under Section 2.1.2), and as a result of such termination Buyer is entitled to a payment in accordance with Section 2.3.1, Supplier shall include an amount calculated in accordance with Section 2.3.1 and Exhibit J, to be paid by Supplier to Buyer in the next monthly invoice submitted to Buyer following such termination. 8. REGULATORY APPROVALS 8.1 This Agreement will be filed with the FERC and any other appropriate regulatory agencies by the appropriate Party as may be required. 9. COMPLIANCE 9.1 Each Party shall comply with all relevant Laws and shall, at its sole expense, maintain in full force and effect all relevant permits, authorizations, licenses, and other authorizations material to the maintenance of facilities and the performance of obligations under this Agreement. 9.2 Each Party and its representatives shall comply with all relevant requirements of any authorized Control Area Operator, ISA, and/or EDU to ensure the safety of its employees and the public, and to ensure electric system reliability and integrity, material to the performance of this Agreement. 9.3 Buyer and Supplier shall perform or cause to be performed, their obligations under this Agreement in all material respects in accordance with Good Utility Practices. 21 10. INDEMNIFICATION 10.1 To the fullest extent permitted by law, a Party to this Agreement ("the Indemnifying Party") shall indemnify, defend and hold harmless the other Party, its parent, affiliates, and successors and agents (each an "Indemnified Party") from and against any and all claims, demands, suits, obligations, payments, liabilities, costs, judgments, damages, losses or expenses asserted by third parties against an Indemnified Party and arising out of, relating to, or resulting from the Indemnifying Party's breach of, or the negligent performance of its obligations under this Agreement. 10.1.1 Such indemnity shall also extend to actual courts costs, attorneys' fees, expenses and other liabilities incurred in the defense of any claim, action or proceeding, including negotiation, settlement, defense and appeals, to which this indemnification obligation applies. In furtherance of the foregoing indemnification and not by way of limitation thereof, the Indemnifying Party hereby waives any defense it otherwise might have against the Indemnified Party under applicable workers' compensation laws. 10.1.2 In claims against any Indemnified Party by an agent of the Indemnifying Party, or anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Section 10 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Indemnifying Party or a subcontractor under workers' or workmen's compensation acts, disability benefit acts or other employee benefit acts. 10.1.3 Such indemnity shall also extend to all costs and expenses incurred by the Indemnified Party in any action or proceeding to enforce the provisions of this Agreement, but only if and to the extent the Indemnified Party prevails in such action or proceeding. 10.2 No Negation of Existing Indemnities; Survival. Each Party's --------------------------------------------- indemnity obligations hereunder shall not be construed to negate, abridge or reduce other rights or obligations or indemnity which would otherwise exist at law or equity. The obligations contained herein shall survive any termination, cancellation, or suspension of this Agreement to the extent that any third party claim is commenced during the applicable statute of limitations period. 10.3 Indemnification Procedures. -------------------------- 10.3.1 Any Party seeking indemnification under this Agreement shall give the other Party notice of such claim promptly but in any event on or before thirty (30) days after the Party's actual knowledge of such claim or action. Such notice shall describe the claim in reasonable detail, and 22 shall indicate the amount (estimated if necessary) of the claim that has been, or may be sustained by, said Party. To the extent that the other Party will have been actually and materially prejudiced as a result of the failure to provide such notice, such notice will be a condition precedent to any liability of the other Party under the provisions for indemnification contained in this Agreement. 10.3.2 In any action or proceeding brought against an Indemnified Party by reason of any claim indemnifiable hereunder, the Indemnifying Party may, at its sole option, elect to assume the defense at the Indemnifying Party's expense, and shall have the right to control the defense thereof and to determine the settlement or compromise of any such action or proceeding. Notwithstanding the foregoing, an Indemnified Party shall in all cases be entitled to control its defense in any action if it: (i) may result in injunctions or other equitable remedies in respect of the Indemnified Party which would affect its business or operations in any materially adverse manner; (ii) may result in material liabilities which may not be fully indemnified hereunder; or (iii) may have a significant adverse impact on the business or the financial condition of the Indemnified Party (including a material adverse effect on the tax liabilities, earnings or ongoing business relationships of the Indemnified Party) even if the Indemnifying Party pays all indemnification amounts in full. 10.3.3 Subject to Section 10.3.2, neither Party may settle or compromise any claim for which indemnification is sought under this Agreement without the prior consent of the other Party; provided, however, said consent shall not be unreasonably withheld or delayed. 11. LIMITATION OF LIABILITY 11.1 Responsibility for Damages: Except as otherwise provided herein -------------------------- or to the extent of the other Party's negligence or willful misconduct, each Party shall be responsible for all physical damage to or destruction of the property, equipment and/or facilities owned by it and its affiliates and any physical injury or death to natural Persons resulting therefrom, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party for such damage; provided, that in any such case the Parties will exercise Due Diligence to remove the cause of any disability at the earliest practicable time. 23 11.2 No Consequential Damages: To the fullest extent permitted by law ------------------------ and notwithstanding other provisions of this Agreement, in no event shall a Party, or any of its Agents, be liable to the other Party, whether in contract, warranty, tort, negligence, strict liability, or otherwise, for special, indirect, incidental, multiple, consequential (including but not limited to lost profits or revenues and lost business opportunities), or punitive damages related to or resulting from performance or nonperformance of this Agreement or any activity associated with or arising out of this Agreement. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 11.2. In addition, this limitation on liability shall not apply with respect to claims pursuant to Section 10 hereof. 11.3 Survival: The provisions of this Section 11 shall survive any -------- termination, cancellation, or suspension of this Agreement. 12. FORCE MAJEURE 12.1 An event of "Force Majeure" shall be defined as any interruption or failure of service or deficiency in the quality or quantity of service or any other failure by a Party to perform any of its obligations hereunder to the extent such failure occurs without fault or negligence on the part of that Party and is caused by factors beyond that Party's reasonable control, which by the exercise of reasonable diligence that Party is unable to prevent, avoid, mitigate or overcome, including: (i) acts of God or the public enemy, such as storms, flood, lightning, and earthquakes, (ii) failure, threat of failure, or unscheduled withdrawal of facilities from operation for maintenance or repair, and including unscheduled transmission and distribution outages, (iii) sabotage of facilities and equipment, (iv) civil disturbance, (v) strike or labor dispute, (vi) action or inaction of a court or public authority, or (vii) any other cause of similar nature beyond the reasonable control of that Party. 12.2 Economic hardship of either Party shall not constitute Force Majeure under this Agreement. Notwithstanding this, if Buyer suffers an event of Force Majeure it shall be relieved of its obligation to take delivery of, or otherwise pay for, Energy and Ancillary Services under this Agreement for the duration of the event of Force Majeure; provided, however, that Buyer shall not be relieved of its obligation to pay for any Energy or Ancillary Services provided by Supplier under 24 this Agreement prior to the event of Force Majeure. In addition, if Buyer is unable to have Energy and Ancillary Services delivered from the Point(s) of Delivery to its service territory due to an outage on the Transmission System, that shall be considered a Force Majeure event and shall relieve Buyer of performance for the extent of the event. 12.3 In the event of a Force Majeure, neither Party shall be considered in default under this Agreement or responsible to the other Party in tort, strict liability, contract or other legal theory for damages of any description, and affected performance obligations shall be extended by a period equal to the term of the resultant delay, but in no event shall exceed the term of the Agreement, provided that the Party relying on a claim of Force Majeure: (i) provides prompt written notice of such Force Majeure event to the other Party, giving an estimate of its expected duration and the probable impact on the performance of its obligations hereunder; (ii) exercises all reasonable efforts to continue to perform its obligations under this Agreement; (iii) expeditiously takes action to correct or cure the event or condition excusing performance so that the suspension of performance is no greater in scope and no longer in duration than is dictated by the problem; provided, however, that settlement of strikes or other labor disputes will be completely within the sole discretion of the Party affected by such strike or labor dispute; (iv) exercises all reasonable efforts to mitigate or limit damages to the other Party; and (v) provides prompt notice to the other Party of the cessation of the event or condition giving rise to its excuse from performance. 12.4 Notwithstanding the above provisions, a Force Majeure event shall excuse Supplier from its obligation to deliver the Supply Amount pursuant to Section 4 of this Agreement only for the first twenty-four (24) hours of the Force Majeure event, provided that the total amount of energy excused in accordance with this Section 12.4 during any Contract Year shall not exceed the Limit on Excused Energy set forth in Exhibit A. After such twenty-four (24) hour period, Supplier must either deliver the Supply Amount at the Point(s) of Delivery or pay liquidated damages pursuant to Section 4.2 of this Agreement. 12.5 If Supplier has notified Buyer of an event of Force Majeure, and if Supplier so requests, Buyer will attempt to replace the Supply Amount that is not excused in accordance with Section 12.4 with Energy or Ancillary Services from another Asset Bundle. However, Buyer's inability to acquire such replacement Energy or Ancillary Services shall not excuse Supplier from Supplier's obligation to deliver 25 the Supply Amount not otherwise excused in accordance with Section 12.4 13. DISPUTES 13.1 Any action, claim or dispute which either Party may have against the other arising out of or relating to this Agreement or the transactions contemplated hereunder, or the breach, termination or validity thereof (any such claim or dispute, a "Dispute") shall be submitted in writing to the other Party. The written submission of any Dispute shall include a concise statement of the question or issue in dispute together with a statement listing the relevant facts and documentation that support the claim. 13.2 The Parties agree to cooperate in good faith to expedite the resolution of any Dispute. Pending resolution of a Dispute, the Parties shall proceed diligently with the performance of their obligations under this Agreement. 13.3 The Parties shall first attempt in good faith to resolve any Dispute through informal negotiations by the Contract Representatives. In the event that the Contract Representatives are unable to satisfactorily resolve the Dispute within thirty (30) days from the receipt of notice of the Dispute, either Party may by written notice to the other Party refer the Dispute to its respective senior management for resolution as promptly as practicable. If the Parties' senior management are unable to resolve the Dispute within forty-five (45) days from the date of such referral, thereafter the Parties may agree in writing to extend the time period of such senior management negotiations. In the event the Parties' senior management do not resolve the dispute within the prescribed or extended time period, either Party may initiate arbitration through the serving and filing of a demand for arbitration and the Parties expressly agree that arbitration in accordance with this Section 13 shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time: 13.3.1 A request made by a Party for provisional remedies requesting preservation of the Parties' respective rights and obligations under the Agreement may be resolved by a court of law located in the County of the principal place of business of Buyer. 13.3.2 Nothing in this Agreement shall preclude, or be construed to preclude, any Party from filing a petition or complaint with the FERC or PUCN with respect to any arbitrable Dispute over which said agency has jurisdiction. In such case, the other Party may request the FERC or PUCN, as applicable, to reject or to waive jurisdiction. If jurisdiction is rejected or waived with respect to all or a portion of the Dispute, the portion of the Dispute not so accepted by the FERC or PUCN, as applicable, shall be resolved through arbitration in accordance with this Agreement. To the extent that the FERC or PUCN, as applicable, asserts or accepts jurisdiction over the Dispute, the decision, finding of fact or order of FERC shall be final and binding, subject to judicial 26 review under the Federal Power Act or Nevada Revised Statutes and subject to the provisions of Section 2.2.2. Any arbitration proceedings that may have commenced with respect to the Dispute prior to the assertion or acceptance of jurisdiction by the FERC or PUCN, as applicable, shall be terminated to the extent the FERC or PUCN accepts or asserts jurisdiction over such Dispute. 13.4 Unless otherwise agreed by the Parties, any arbitration initiated under this Agreement shall be conducted in accordance with the following: 13.4.1 Arbitrations shall be held within the County of the principal place of business of Buyer. 13.4.2 Except as otherwise modified herein, the arbitration shall be conducted in accordance with the "Commercial Arbitration Rules" of the American Arbitration Association ("AAA") then in effect. 13.4.3 Arbitration shall be conducted by one neutral arbitrator who shall be selected pursuant to the AAA rules and the following: 13.4.3.1 The Parties agree that the list of potential arbitrators provided by the AAA shall, if available, contain twenty (20) candidates, and at least fifty percent (50%) of the candidates shall be members of the AAA National Energy Panel. 13.4.3.2 The Parties also agree that each shall be allowed to strike the names of five candidates before ranking the remaining candidates and returning the list to the AAA in accordance with the Commercial Arbitration Rules. If the Parties are unable to agree on an arbitrator, such arbitrator shall be appointed by the AAA. 13.4.3.3 The arbitrator shall not have any current or past substantial business, financial, or personal relationships with either Party (or their Affiliates) and shall not be a vendor, supplier, customer, employee, consultant, or competitor to either of the Parties or their Affiliates. 13.4.3.4 The arbitrator shall be authorized only to interpret and apply the provisions of this Agreement or any related agreements entered into under this Agreement and shall have no power to modify or change any provision of this Agreement. The arbitrator shall have no authority to award punitive or multiple damages or any damages inconsistent with this Agreement. The arbitrator shall within thirty (30) days of the conclusion of the hearing, unless such time is extended by agreement of the Parties, notify the Parties in writing of his or her decision, stating his or her reasons for such decision and separately listing his or her findings of fact and conclusions of law. Judgment on the award may be entered in 27 any court having jurisdiction. 13.5 The Parties shall proceed with the arbitration expeditiously, and the arbitration shall be concluded within five (5) months of the filing of the demand for arbitration pursuant to this Section 13 in order that the decision may be rendered within six (6) months of such filing, unless the arbitrator extends such time at the request of a Party upon a showing of good cause or upon agreement of the Parties. 13.6 Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of any arbitration agreement shall be governed by the Federal Arbitration Act of the United States, 9 U.S.C. (S)(S)1 et seq. 13.7 The decision of the arbitrator shall be final and binding on both Parties and may be enforced in any court having jurisdiction over the Party against which enforcement is sought. 13.8 The fees and expenses of the arbitrator shall be shared by the Parties equally, unless the decision of the arbitrator shall specify some other apportionment of such fees and expenses. All other expenses and costs of the arbitration shall be borne by the Party incurring the same. 14. NATURE OF OBLIGATIONS 14.1 Except where specifically stated in this Agreement to be otherwise, the duties, obligations, and liabilities of the Parties shall be several, not joint or collective. The provisions of this Agreement shall not be construed to create an association, trust, partnership, or joint venture; to impose a trust or partnership duty, obligation, or liability or agency relationship on or with regard to either Party. 14.2 Nothing in this Agreement nor any action taken hereunder shall be construed to create any duty, liability, or standard of care to any person not a Party to this Agreement. Each Party shall be individually and severally liable for its own obligations under this Agreement. 14.3 By this Agreement, neither Party dedicates any part of its facilities or the service provided under this Agreement to the public. 15. SUCCESSORS AND ASSIGNS 15.1 This Agreement may be assigned, without express written consent of the other Party, as follows: 15.1.1 Buyer may assign this Agreement or assign or delegate its rights and obligations under this Agreement, in whole or in part, if such assignment is made to an affiliate, parent, subsidiary, successor or any party, provided that such assignee operates all or a portion of the PLR or if such assignment is required by Law or applicable regulations. 28 15.2 Supplier may, without the consent of Buyer, assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee, lending institution, or any Person for the purposes of financing or refinancing the Asset Bundle, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, conveyances of dispositions in lieu thereof; provided, however, that no such assignment or disposition shall relieve or in any way discharge Supplier or such permitted assignee from the performance of its duties and obligations under this Agreement. Buyer agrees to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, conveyance, pledge or disposition of rights hereunder for purposes of the financing or refinancing of the Asset Bundle, so long as Buyer's rights under this Agreement are not thereby materially altered, amended, diminished or otherwise impaired. 15.3 Either Party may, without the consent of the other Party, assign this Agreement to a successor to all or substantially all of the assets of such Party by way of merger, consolidation, sale or otherwise, provided such successor assumes and becomes liable for all of such Party's duties and obligations hereunder including Section 3 hereof. 15.4 Except as stated above, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by either Party, including by operation of law, without the prior written consent of the other Party, said consent not to be unreasonably withheld. Any assignment of this Agreement in violation of the foregoing shall be, at the option of the non-assigning Party, void. 15.5 Except as set forth above, no assignment or transfer of rights or obligations under this Agreement by a Party shall relieve said Party from full liability and financial responsibility for the performance thereof after any such transfer or assignment unless and until the transferee or assignee shall agree in writing to assume the obligations and duties of said Party under this Agreement and the other Party has consented in writing to such assumption; said consent not to be unreasonably withheld. 15.6 This Agreement and all of the provisions hereof are binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns. 29 16. REPRESENTATIONS 16.1 Representations of the Parties. The Parties represent and ------------------------------ warrant each to the other as follows: 16.1.1 Incorporation. Buyer is a corporation duly incorporated, ------------- validly existing and in good standing under the laws of the State of Nevada. Supplier is a Nevada limited liability company duly organized, validly existing and in good standing under the laws of the State of Nevada. Both Buyer and Supplier have all requisite corporate or limited liability company power and authority to own, lease and operate their material assets and properties and to carry on their business as now being conducted. 16.1.2 Authority. The Party has full corporate or limited --------- liability company power and authority to execute and deliver this Agreement and, subject to the procurement of applicable regulatory approvals, to carry out the actions required of it by this Agreement. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate or limited liability company action required on the part of the Party. The Agreement has been duly and validly executed and delivered by the Party and, assuming that it is duly and validly executed and delivered by the other Party, constitutes a legal, valid and binding agreement of the Party. 16.1.3 Compliance With Law. The Party represents and warrants ------------------- that it is not in violation of any applicable Law, or applicable regulation, which violation could reasonably be expected to materially adversely affect the other Party's performance of its obligations under this Agreement. The Party represents and warrants that it will comply with all Laws, and regulations applicable to its compliance with this Agreement, non-compliance with which would reasonably be expected to materially adversely affect either Party's performance of its obligations under this Agreement. 16.1.4 Representations of Both Parties. The representations in ------------------------------- this Section 16 shall continue in full force and effect for the term of this Agreement. 17. DEFAULT AND REMEDIES 17.1 An Event of Default hereunder shall be deemed to have occurred upon a Party's (Defaulting Party) failure to comply with any material obligation imposed upon it by this Agreement. Examples of an Event of Default include, but are not limited to the following: (i) Failure to make any payments due under this Agreement; 30 (ii) Failure to deliver the Supply Amount for a period of five (5) consecutive days; (iii) Failure to follow the directions of a Control Area Operator, ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto where following such directions is required hereunder; (iv) Supplier not being in compliance with Section 3; and (v) Failure of the Guarantor to be in compliance with the terms of the Guarantee delivered under Section 3.1.2. 17.2 An Event of Default shall be excused: 17.2.1 In the event such Event of Default was caused by Force Majeure provided that the Party claiming a Force Majeure complies with the requirements of Section 12; and 17.2.2 In the event such Event of Default was caused by transmission and distribution outages or disruptions. 17.3 Unless excused, in an Event of Default the Non-Defaulting Party shall be entitled to provide written notice (or oral notice in case of emergency followed by written notice) of the Event of Default to the Defaulting Party and to specify a cure period, which cure period shall be a minimum of thirty (30) days. 17.4 If an Event of Default is not cured by the Defaulting Party during the cure period specified by the Non-Defaulting Party, the Non-Defaulting Party shall be entitled to those remedies which are not inconsistent with the terms of this Agreement, including termination and the payment of liquidated damages. A Defaulting Party shall not be liable to the Non-Defaulting Party for any punitive, consequential or incidental damages. For purposes of clarification, Replacement Costs shall not be considered consequential or incidental damages under this Section 17.4. 17.5 Notwithstanding this Section 17, liquidated damages shall be paid to Buyer pursuant to Sections 4.2, 12, 18, and 21. 18. FACILITY ADDITIONS AND MODIFICATIONS 18.1 Supplier shall be entitled to make additions and modifications to the Asset Bundle subject to the following: 18.1.1 To the extent additions and modifications interfere with the operation of the Asset Bundle in providing the Supply Amount to Buyer beyond the limits for planned outages set forth in Section 21, liquidated damages shall be paid to Buyer pursuant to Section 4.2. 18.1.2 Supplier shall use reasonable efforts to minimize any adverse impact on 31 Buyer during the course of making such additions and modifications. 18.1.3 Such additions and modifications shall be conducted in accordance with Good Utility Practice, and all applicable Laws, regulations, reliability criteria and the Interconnection Agreement between Buyer and Supplier, dated October 25, 2000, as it may be amended from time to time. 18.2 Supplier shall seek Buyer's prior written approval for all Supplier's additions or modifications to the Asset Bundle which might reasonably be expected to have an adverse effect upon Buyer with respect to operations or performance under this Agreement. 19. COORDINATION 19.1 Upon knowledge thereof, each Party shall promptly give notice to the other Party of any labor dispute which is delaying or threatens to delay the timely performance of this Agreement, which shall include a description of the general nature of the dispute. 20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE 20.1 Buyer and Supplier shall comply with any applicable requirement of any Governmental Authority, NERC, WSCC, ISA, Control Area Operator, transmission operator, EDU or any successor of any of them, regarding the reduced or increased generation of the Asset Bundle in the event of an Emergency Condition or Nonemergency Condition. 20.2 Supplier shall not be obligated to deliver the Supply Amount and no liquidated damages shall become due, if the Supply Amount is reduced in the event of an Emergency Condition or a Nonemergency Condition. 20.3 Each Party shall provide prompt oral notice to the other Party of any Emergency Condition or Nonemergency Condition. 20.4 Either Party may take reasonable and necessary action to prevent, avoid or mitigate injury, danger, damage or loss to its own equipment and facilities, or to expedite restoration of service; provided, however, that the Party taking such action shall give the other Party prior notice if at all possible before taking any action. However, this Section 20.4 shall not be construed to supersede Sections 20.2 and 20.3. 21. OUTAGE SCHEDULING 21.1 Supplier shall request Buyer's approval prior to any inspections, proposed planned outages or other non-forced outages (all hereinafter referred to as "planned outages") of the Asset Bundle so as to minimize the impact on the 32 availability of the Asset Bundle. Under no circumstances shall Supplier conduct a planned outage without the express prior consent of Buyer pursuant to this Section 21. 21.2 Planned Outages. --------------- 21.2.1 Within sixty (60) days following the Effective Date of this Agreement and on or before October 1 of each Contract Year, Supplier shall provide Buyer with a schedule of proposed planned outages for the period beginning on the date of such proposed schedule for the following twelve (12) months. The proposed planned outage schedule will designate days for each unit in which the Asset Bundle Capacity will be reduced in part or total for each such unit. Each proposed schedule shall include all applicable information, including but not limited to the following: Month, day and time of requested outage; facilities impacted (such as Unit and description); duration of outage; purpose of outage; amount of capacity (in MWs) which is derated; other conditions and remarks; and name of contact and phone number. 21.2.2 Buyer shall promptly review Supplier's proposed schedule and shall, at Buyer's discretion, not to be unreasonably exercised, either require modifications or approve the proposed schedule. Supplier shall use its best efforts to accomplish all planned outages in accordance with the approved schedule. Supplier shall be responsible to Buyer for Replacement Costs (i) if any outage period exceeds its approved schedule, provided that changes to the approved schedule may be requested by either Party and each Party shall make reasonable efforts to accommodate such changes, provided further the Buyer shall have no obligation to agree to Supplier's revisions to the approved planned outage schedule; and (ii) if Supplier conducts a planned outage without the consent of Buyer as provided herein. 22. REPORTS 22.1 Supplier shall promptly provide Buyer with copies of any orders, decrees, letters or other written communications to or from any Governmental Authority asserting or indicating that Supplier and/or its Asset Bundle is in violation of Laws which relate to Supplier, or operations or maintenance of the Asset Bundle and which may have an adverse effect on Buyer. Supplier shall use reasonable efforts to keep Buyer appraised of the status of any such matters. 23. COMMUNICATIONS 23.1 Supplier's Operating Representatives shall be available twenty-four (24) hours per day for communications with the Control Area Operator and/or the ISA and Buyer to facilitate the operations contained in this Agreement. 23.2 Supplier shall, at its expense, maintain and install real-time communications 33 equipment at the Asset Bundle to maintain communications between personnel on site at the Asset Bundle, Buyer and the Control Area Operator at all times. Supplier shall provide at its expense: (i) Ringdown voice telephone lines, and (ii) Equipment to transmit to and receive telecopies from Buyer and the Control Area Operator. 23.3 Supplier shall immediately report to Buyer any "Abnormal Condition" that has or may occur, and provide all pertinent information, including but not limited to the following: (i) A description of the "Abnormal Condition" and the actions to be taken to alleviate the "Abnormal Condition"; (ii) The expected duration including the beginning and ending time of the "Abnormal Condition"; and (iii) The amount of any adjustment to the current (real time) level of Energy and Ancillary Services. 23.4 Cause of the Condition. ---------------------- 23.4.1 An "Abnormal Condition" shall include without limitation any conditions that, to Supplier's knowledge, have or are reasonably likely to: (i) Adversely affect Supplier's ability to provide Energy and Ancillary Services to Buyer; (ii) Cause an unplanned reduction in the amount of delivery of Energy and Ancillary Services to Buyer; or (iii) Cause an unplanned isolation of the Asset Bundle from the transmission system. 23.5 Supplier shall immediately notify Buyer after such "Abnormal Condition" has been alleviated. 24. NOTICES 24.1 All notices hereunder shall, unless specified otherwise, be in writing and shall be addressed, except as otherwise stated herein, to the Parties as set forth in Exhibit F. 24.2 All written notices or submittals required by this Agreement shall be sent either by hand-delivery, regular first class U.S. mail, registered or certified U.S. mail 34 postage paid return receipt requested, overnight courier delivery, electronic mail or facsimile transmission and will be effective and deemed to have been received on the date of receipt personally, on the date and time as documented by method of delivery if during normal business hours or on the next succeeding Business Day, or on the third (3rd) Business Day following deposit with the U.S. mail if sent regular first class U.S. mail. 24.3 Notices of an Event of Default pursuant to Section 17 and or Force Majeure pursuant to Section 12 may not be sent by regular first class U.S. mail. 24.4 Any payments required to be made under this Agreement shall be made to the Party as set forth in Exhibit F. 24.5 Each Party shall have the right to change, at any time upon written notice to the other Party, the name, address and telephone numbers of its representatives under this Agreement for purposes of notices and payments. 25. MERGER 25.1 The Agreement contains the entire agreement and understanding between the Parties with respect to all of the subject matter contained herein, thereby merging and superseding all prior agreements and representations by the Parties with respect to such subject matter. 25.2 In the event of any conflict between this Agreement and the Asset Sale Agreement, the terms of the Asset Sale Agreement shall govern. 26. HEADINGS 26.1 The headings or section titles contained in this Agreement are inserted solely for convenience and do not constitute a part of this Agreement between the Parties, nor should they be used to aid in any manner in the construction of this Agreement. 27. COUNTERPARTS AND INTERPRETATION 27.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 27.2 In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of authorship of any of the provisions of this Agreement. 27.3 Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. 35 27.4 The word "including" in this Agreement shall mean "including without limitation". 28. SEVERABILITY 28.1 If any term, provision or condition of this Agreement is held to be invalid, void or unenforceable by a court or Governmental Authority of competent jurisdiction and such holding is subject to no further appeal or judicial review, then such invalid, void, or unenforceable term, provision or condition shall be deemed severed from this Agreement and all remaining terms, provisions and conditions of this Agreement shall continue in full force and effect, unless, however, the effect of the severance would vitiate the intent of the Parties hereto, as determined by either Party in its reasonable discretion. 28.2 The Parties shall endeavor in good faith to replace such invalid, void, or unenforceable provisions with a valid and enforceable provision which achieves the purposes intended by the Parties to the greatest extent permitted by law. 29. WAIVERS 29.1 No failure or delay on the part of a Party in exercising any of its rights under this Agreement or in insisting upon strict performance of provisions of this Agreement, no partial exercise by either Party of any of its rights under this Agreement, and no course of dealing between the Parties shall constitute a waiver of the rights of either Party under this Agreement. Any waiver shall be effective only by a written instrument signed by the Party granting such waiver, and such shall not operate as a waiver of, or estoppel with respect to, any subsequent failure to comply therewith. 30. AMENDMENTS 30.1 The Parties shall negotiate in good faith to determine necessary amendments, if any, to this Agreement, provided that in negotiating such amendments the Parties shall attempt, in good faith, to reasonably preserve the bargain initially struck in this Agreement if any Governmental Authority, FERC, any state or the PUCN, implements a change in any Law or applicable regulation that materially affects or is reasonably expected to materially affect Buyer's PLR service under this Agreement. 30.2 The Parties shall meet to discuss the impact of any changes in Buyer's OATT or the ISA's OATT, as applicable, or any rule or practice of NERC, WSCC, or any other Governmental Authority on the terms of this Agreement upon request by either Party during the term of this Agreement. 30.3 In the event that it is deemed necessary to amend this Agreement, the Parties will attempt to agree upon such amendment and will submit such mutually agreed upon amendment(s) to the FERC for filing and acceptance. 36 30.4 Amendments to this Agreement shall be in writing and shall be executed by an authorized representative of each Party. 31. TIME IS OF THE ESSENCE 31.1 Time is of the essence of this Agreement and in the performance of all of the covenants and conditions hereof. 32. APPROVALS 32.1 Each Party's performance under this Agreement is subject to the condition that all requisite governmental and regulatory approvals for such performance are obtained in form and substance satisfactory to the other Party in its reasonable discretion. Each Party shall use best efforts to obtain all required approvals and shall exercise due diligence and shall act in good faith to cooperate and assist each other in acquiring any regulatory approval necessary to effectuate this Agreement. Further, the Parties agree to reasonably support the other Party in any associated regulatory proceedings, including by being a witness on behalf of the other Party. 32.2 Notwithstanding the provisions of Section 2.2.2 of this Agreement, if any Governmental Authority in its review of the Agreement places conditions on or requires revisions of the Agreement which do not have a material adverse effect on Supplier or Buyer, the Parties agree to execute an amendment to the Agreement reasonably acceptable to each Party incorporating such conditions or revisions. 32.3 This Agreement is made subject to present or future state or federal laws, regulations, or orders properly issued by state or federal bodies having jurisdiction. 32.4 The Parties hereto agree to execute and deliver promptly, at the expense of the Party requesting such action, any and all other and further instruments, documents and information which may reasonably be necessary or appropriate to give full force and effect to the terms and intent of this Agreement. 33. PLR SERVICE 33.1 The Agreement is premised on Buyer providing PLR service. Notwithstanding anything to the contrary contained herein, if Nevada retail electricity restructuring (including implementation of retail customer choice of electricity suppliers) is delayed beyond the Effective Date of this Agreement, the Parties shall continue to perform this Agreement in all respects pursuant to the terms and conditions hereof as if Buyer was the PLR and Buyer's retail and wholesale customers shall be considered as the TRR. 34. CONFIDENTIALITY 34.1 Confidential Information. Certain information provided by a ------------------------ Party (the 37 "Disclosing Party") to the other Party (the "Receiving Party") in connection with the negotiation or performance of this Agreement may be considered confidential and/or proprietary (hereinafter referred to as "Confidential Information") by the Disclosing Party. To be considered Confidential Information hereunder, such information must be clearly labeled or designated by the Disclosing Party as "confidential" or "proprietary" or with words of like meaning. If disclosed orally, such information shall be clearly identified as confidential and such status shall be confirmed promptly thereafter in writing. 34.2 Treatment of Confidential Information. The Receiving Party shall ------------------------------------- treat any Confidential Information with at least the same degree of care regarding its secrecy and confidentiality as the Receiving Party's similar information is treated within the Receiving Party's organization. The Receiving Party shall not disclose the Confidential Information of the Disclosing Party to third parties (except as stated hereinafter) nor use it for any purpose other than the negotiation or performance of this Agreement, without the express prior written consent of the Disclosing Party. The Receiving Party further agrees that it shall restrict disclosure of Confidential Information as follows: 34.2.1 Disclosure shall be restricted solely to its agents as may be necessary to enforce the terms of this Agreement after advising those agents of their obligations under this Section 34.2. 34.2.2 In the event that the Receiving Party is requested, pursuant to or as required by applicable Law or by legal process, to disclose any Confidential Information, the Receiving Party shall provide the Disclosing Party with prompt notice of such request or requirement in order to enable Disclosing Party to seek an appropriate protective order or other remedy and to consult with Disclosing Party with respect to Disclosing Party taking steps to resist or narrow the scope of such request or legal process. The Receiving Party agrees not to oppose any action by the Disclosing Party to obtain a protective order or other appropriate remedy. In the absence of such protective order, and provided that the Receiving Party is advised by its counsel that it is compelled to disclose the Confidential Information, the Receiving Party shall: (i) furnish only that portion of the Confidential Information which the Receiving Party is advised by counsel is legally required; and (ii) use its commercially reasonable best efforts, at the expense of the Disclosing Party, to ensure that all Confidential Information so disclosed will be accorded confidential treatment. 34.3 Excluded Information. Confidential Information shall not be -------------------- deemed to include the following: 34.3.1 information which is or becomes generally available to the public other 38 than as a result of a disclosure by the Receiving Party; 34.3.2 information which was available to the Receiving Party on a non-confidential basis prior to its disclosures by the Disclosing Party; and 34.3.3 information which becomes available to the Receiving Party on a non-confidential basis from a person other than the Disclosing Party or its representative who is not otherwise bound by a confidentiality agreement with Disclosing Party or its agent or is otherwise not under any obligation to Disclosing party or its agent not to disclose the information to the Receiving Party. 34.4 Injunctive Relief Due to Breach. The Parties agree that remedies ------------------------------- at law may be inadequate to protect each other in the event of a breach of this Section 34, and the Receiving Party hereby in advance agrees that the Disclosing Party shall be entitled to seek and obtain, without proof of actual damages, temporary, preliminary and permanent injunctive relief from any court or Governmental Authority of competent jurisdiction restraining the Receiving Party from committing or continuing any breach of this Section 34. 35. CHOICE OF LAW 35.1 This Agreement and the rights and obligations of the Parties shall be construed and governed by the Laws of: (i) the State of Nevada as if executed and performed wholly within that state; and (ii) the Federal Power Act, to the extent the rights and obligations of the Parties are covered by such act. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representative on the date set forth below. SIERRA PACIFIC POWER COMPANY WPS NORTHERN NEVADA, LLC By: WPS POWER DEVELOPMENT, INC. (Its Sole Member) By: By: ------------------------------ ----------------------- William E. Peterson Gerald L. Mroczkowski Title: Senior Vice President, General Title: Vice President Counsel, and Corporate Secretary Date: October 25, 2000 Date: October 25, 2000 39 EXHIBIT A TRACY BUNDLE ASSET BUNDLE CAPACITY AND OPERATING PARAMETERS
NET MINIMUM HOURLY NET SUMMER WINTER RAMP ENERGY TAKE CAPABILITY CAPABILITY RATE UNIT (MW) (MW) (MW/hr) (MWh) - ----------------------------------------------------------------------------------------------- Tracy Unit 1 53 53 40 21 Tracy Unit 2 83 83 40 25 Tracy Unit 3 108 108 40 20 Tracy Unit 4 & 5 89 93 40 Clark Mt.. 1 10 11 11 Clark Mt.. 2 10 11 11 Clark Mt.. 3 69 84 40 Clark Mt.. 4 69 84 40 Valley Road 1 2 2 2 Valley Road 2 2 2 2 Valley Road 3 2 2 2 Brunswick 1 2 2 2 Brunswick 2 2 2 2 Brunswick 3 2 2 2 Gabbs 1 2 3 3 Gabbs 2 2 3 3 - ----------------------------------------------------------------------------------------------- Total 507 545 280 66 ===============================================================================================
Minimum Annual Energy Take: 2,200,000 MWh Limit on Excused Energy:* 12,000 MWh The summer months shall consist of the months of June through September. The winter months shall consist of the months of January through May and the months of October through December. * The Limit on Excused Energy is an annual figure, to be prorated in any Contract Year that is less than a twelve month period. A-1 EXHIBIT B TRACY BUNDLE ENERGY AND ANCILLARY SERVICE PRICES Energy Prices* - -------------- Price Floor of Energy: $ 25.42 per MWh Price Ceiling of Energy: $ 42.92 per MWh Ancillary Service Prices* - ------------------------- Regulation and Frequency Response: On-Peak: $ 12.40 per MW-reserved per hour Off-Peak: $ 7.09 per MW-reserved per hour Operating Reserve- Spinning Reserve: On-Peak: $ 16.15 per MW-reserved per hour Off-Peak: $ 9.23 per MW-reserved per hour Operating Reserve- Supplemental Reserve: On-Peak: $ 10.75 per MW-reserved per hour Off-Peak: $ 6.14 per MW-reserved per hour The On-Peak periods shall consist of Hour Ending (HE) 0700 through HE 2200 PPT, Monday through Saturday. The Off-Peak periods shall consist of HE 0100 through HE 0600, HE 2300 and HE 2400 PPT, Monday through Saturday; HE 0100 through HE 2400 PPT Sunday and additional Off-Peak days (holidays) as designated annually by the WSCC. * SUBJECT TO FERC APPROVAL --------------------------- B-1 EXHIBIT C TRACY BUNDLE SUPPLIER'S MONTHLY INVOICE A Price Ceiling of Energy $ 42.92 /MWh B Price Floor of Energy $ 25.42 /Mwh MONTH 1 - ENERGY - ----------------
C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Capacity ---- -------------- ------------ --------------- ----------------- ---------------- --------------------- 1 507 507 0 40.00 $ 20,280.00 $ 20,280.00 2 507 507 0 40.00 20,280.00 20,280.00 3 507 447 60 40.00 17,880.00 20,280.00 4 507 447 60 40.00 17,880.00 20,280.00 5 377 367 10 30.00 11,010.00 11,310.00 6 407 407 0 30.00 12,210.00 12,210.00 7 497 477 20 20.00 9,540.00 9,940.00 8 507 507 0 20.00 10,140.00 10,140.00 9 507 507 0 20.00 10,140.00 10,140.00 10 507 507 0 25.00 12,675.00 12,675.00 - ------------------------------------------------------------------------------------------------------------------------- 4,830 4,680 150 $ 142,035.00 $ 147,535.00 I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 142,035.00 IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 147,535.00 J. Sum of hourly Delivered Energy multiplied by the Price Ceiling Sec 7.2.2 $ 200,865.60 of Energy JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 207,303.60 K. Sum of hourly Delivered Energy multiplied by the Price Floor Sec 7.2.3 $ 118,965.60 of Energy KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 122,778.60 L. Invoiced Amount - Energy Sec 7.3 (K less than I less than J) $ 142,035.00 M. Theoretical Amount for Expected Performance (KT less than IT less than JT) $ 147,535.00 MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE - ------------------------------------------------------------------------ N O P Q R S Schedule of Ancillary Price x Dispatch Ancillary Capacity Supplier Capacity Price of Ancillary Price x Schedule Capacity Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- -------- --------------------- (N - O) (O x Q) (N x Q) 1 0 0 0 7.09 $ 0.00 $ 0.00 2 0 0 0 7.09 0.00 0.00 3 0 0 0 12.40 0.00 0.00 4 0 0 0 12.40 0.00 0.00 5 30 30 0 12.40 372.00 372.00 6 0 0 0 12.40 0.00 0.00 7 0 0 0 12.40 0.00 0.00 8 0 0 0 12.40 0.00 0.00 9 0 0 0 12.40 0.00 0.00 10 0 0 0 12.40 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------- 30 30 0 $ 372.00 $ 372.00 T. Invoiced Amount - Ancillary Service Capacity - Sec 7.2.5 $ 372.00 Regulation and Frequency Response U. Theoretical Amount for Expected Performance $ 372.00
C-1 EXHIBIT C TRACY BUNDLE SUPPLIER'S MONTHLY INVOICE MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - -------------------------------------------------------
V W X Y Z AA Schedule of Ancillary Price x Dispatch Ancillary Capacity Supplier Capacity Price of Ancillary Price x Schedule Capacity Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- -------- --------------------- (V - W) (W x Y) (V x Y) 1 0 0 0 9.23 $ 0.00 $ 0.00 2 0 0 0 9.23 0.00 0.00 3 0 0 0 16.15 0.00 0.00 4 0 0 0 16.15 0.00 0.00 5 80 80 0 16.15 1,292.00 1,292.00 6 80 60 20 16.15 969.00 1,292.00 7 0 0 0 16.15 0.00 0.00 8 0 0 0 16.15 0.00 0.00 9 0 0 0 16.15 0.00 0.00 10 0 0 0 16.15 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ 160 140 20 $ 2,261.00 $ 2,584.00 AB. Invoiced Amount - Ancillary Service Capacity - Spinning Sec 7.2.5 $ 2,261.00 Reserve AC. Theoretical Amount for Expected Performance $ 2,584.00 MONTH 1 - ANCILLARY SERVICE CAPACITY - SUPPLEMENTAL RESERVE - ----------------------------------------------------------- AD AE AF AG AH AI Schedule of Ancillary Price x Dispatch Ancillary Capacity Supplier Capacity Price of Ancillary Price x Schedule Capacity Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Supplied of Ancillary Services ---- ------------- ------------- -------------- --------------- -------- --------------------- (AD - AE) (AE x AG) (AD x AG) 1 0 0 0 6.14 $ 0.00 $ 0.00 2 0 0 0 6.14 0.00 0.00 3 0 0 0 10.75 0.00 0.00 4 0 0 0 10.75 0.00 0.00 5 10 10 0 10.75 107.50 107.50 6 10 10 0 10.75 107.50 107.50 7 10 10 0 10.75 107.50 107.50 8 0 0 0 10.75 0.00 0.00 9 0 0 0 10.75 0.00 0.00 10 0 0 0 10.75 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------------- 30 30 0 $ 322.50 $ 322.50 AJ. Invoiced Amount - Ancillary Service Capacity - Supplemental Sec 7.2.5 $ 322.50 Reserve AK. Theoretical Amount for Expected Performance $ 322.50 MONTH 1 - ANCILLARY SERVICE ENERGY - ---------------------------------- AL AM AN AO AP AQ Schedule of Ancillary Price x Dispatch Ancillary Energy Supplier Price Ceiling of Ancillary Price x Schedule Hour Energy (MWh Supplied (MWh) Shortfall(MWh) Energy ($/MWh) Energy Supplied of Ancillary Energy ---- ----------- -------------- -------------- -------------- --------------- ------------------- (AL - AM) (AM x AO) (AL x AO) 1 0 0 0 42.92 $ 0.00 $ 0.00 2 0 0 0 42.92 0.00 0.00 3 0 0 0 42.92 0.00 0.00
C-2 EXHIBIT C TRACY BUNDLE SUPPLIER'S MONTHLY INVOICE
4 0 0 0 42.92 0.00 0.00 5 40 40 0 42.92 1,716.80 1,716.80 6 30 10 20 42.92 429.20 1,287.60 7 10 10 0 42.92 429.20 429.20 8 0 0 0 42.92 0.00 0.00 9 0 0 0 42.92 0.00 0.00 10 0 0 0 42.92 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------ 80 60 20 $ 429.20 $ 2,575.20 $ 3,433.60 AR. Invoiced Amount - Ancillary Services Energy Sec 7.2.6 $ 2,575.20 AS. Theoretical Amount for Expected Performance $ 3,433.60 MONTH 1 - TOTAL INVOICE AMOUNT Sec 7.3 (L + T + AB + AJ $ 147,565.70 + AR) =============================================================================================================================== MONTH 2 - ENERGY - ---------------- C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 507 507 0 45.00 $ 22,815.00 $ 22,815.00 2 507 507 0 45.00 22,815.00 22,815.00 3 507 447 60 45.00 20,115.00 22,815.00 4 507 447 60 55.00 24,585.00 27,885.00 5 377 367 10 55.00 20,185.00 20,735.00 6 407 407 0 55.00 22,385.00 22,385.00 7 497 477 20 35.00 16,695.00 17,395.00 8 507 507 0 35.00 17,745.00 17,745.00 9 507 507 0 35.00 17,745.00 17,745.00 10 507 507 0 40.00 20,280.00 20,280.00 - ------------------------------------------------------------------------------------------------------------------------- 4,830 4,680 150 $ 205,365.00 $ 212,615.00 I. Sum of (Delivered Energy times corresponding hourly Market Sec 7.2.1 $ 205,365.00 Price) IT. Sum of (Asset Bundle Capacity times corresponding $ 212,615.00 hourly Market Price) J. Sum of hourly Delivered Energy multiplied by the Price Sec 7.2.2 $ 200,865.60 Ceiling of Energy JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of $ 207,303.60 Energy K. Sum of hourly Delivered Energy multiplied by the Price Sec 7.2.3 $ 118,965.60 Floor of Energy KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of $ 122,778.60 Energy L. Invoiced Amount - Energy Sec 7.3 (I greater than J) $ 200,865.60 M. Theoretical Amount for Expected Performance (IT greater than JT) $ 207,303.60 MONTH 3 - ENERGY - ---------------- C D E F G H Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap. ---- -------------- ------------ --------------- ----------------- ---------------- ----------------- (C - D) (D x F) (C x F) 1 507 507 0 30.00 $ 15,210.00 $ 15,210.00 2 507 507 0 20.00 10,140.00 10,140.00 3 507 447 60 20.00 8,940.00 10,140.00
C-3 EXHIBIT C TRACY BUNDLE SUPPLIER'S MONTHLY INVOICE 4 507 447 60 20.00 8,940.00 10,140.00 5 377 367 10 15.00 5,505.00 5,655.00 6 407 407 0 15.00 6,105.00 6,105.00 7 497 477 20 15.00 7,155.00 7,455.00 8 507 507 0 15.00 7,605.00 7,605.00 9 507 507 0 15.00 7,605.00 7,605.00 10 507 507 0 15.00 7,605.00 7,605.00 - ------------------------------------------------------------------------------------------------------------------------- 4,830 4,680 150 $ 84,810.00 $ 87,660.00
I. Sum of (Delivered Energy times corresponding hourly Market Sec 7.2.1 $ 84,810.00 Price) IT. Sum of (Asset Bundle Capacity times corresponding hourly Market $ 87,660.00 Price) J. Sum of hourly Delivered Energy multiplied by the Price Sec 7.2.2 $ 200,865.60 Ceiling of Energy JT. Sum of hourly Asset Bundle Capacity multiplied by the Price $ 207,303.60 Ceiling of Energy K. Sum of hourly Delivered Energy multiplied by the Price Sec 7.2.3 $ 118,965.60 Floor of Energy KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor $ 122,778.60 of Energy L. Invoiced Amount - Energy Sec 7.3 (I less than K) $ 118,965.60 M. Theoretical Amount for Expected Performance (IT less than KT) $ 122,778.60
For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. C-4 EXHIBIT D TRACEY BUNDLE BUYER'S MONTHLY INVOICE-REPLACEMENT COSTS
MONTH 1 - ENERGY - ---------------- A B* C* D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $0.00 $0.00 2 0 na 0.00 2,200.00 3 60 35.00 100.00 1,850.00 4 60 30.00 50.00 350.00 5 10 30.00 50.00 0.00 6 0 na 0.00 500.00 7 20 25.00 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------- 150 $ 4,900.00 E. Gross Replacement Cost of Energy $ 4,900.00 F. Theoretical Supplier's Invoice for Expected Performance $147,535.00 G. Actual Supplier's Invoice Amount 142,035.00 ----------- H. Avoided Payment to Supplier (F-G) $ 5,500.00 I. Invoiced Replacement Cost - Energy (E is less than H) $ 0.00 MONTH 1 - ANCILLARY SERVICES CAPACITY-REGULATION AND FREQUENCY RESPONSE - ----------------------------------------------------------------------- J K* L* M Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MWh) of Capacity ($/MWh) of Capacity Cost of Capacity ---- ------------ ----------------- --------- -------------- (J x K) + L 1 0 na $0.00 $0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------- 0 $ 0.00 N. Gross Replacement Cost of Ancillary Capacity- Regulation and Frequency Response $ 0.00 O. Theoretical Supplier's Invoice Amount for Expected Performance $ 372.00 P. Actual Supplier's Invoice Amount 372.00 ----------- Q. Avoided Payment to Supplier (O-P) $ 0.00
D-1 EXHIBIT D TRACY BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS MONTH 1 - ANCILLARY SERVICE CAPACITY - SPINNING RESERVE - -------------------------------------------------------
R S * T * U Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 40.00 100.00 900.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - --------------------------------------------------------------------------------------------------- 20 $ 900.00 V. Gross Replacement Cost of Ancillary Capacity - Spinning Reserve $ 900.00 W. Theoretical Supplier's Invoice Amount for Expected Performance $ 2,584.00 X. Actual Supplier's Invoice Amount 2,261.00 Y. Avoided Payment to Supplier (W - X) $ 323.00 MONTH 1 - ANCILLARY CAPACITY - SUPPLEMENTAL RESERVE - --------------------------------------------------- Z AA * AB * AC Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity ---- ------------- ------------------ ----------- ---------------- (Z x AA) + AB 1 0 na $ 0.00 $ 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 0 na 0.00 0.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ------------------------------------------------------------------------------------------------- 0 $ 0.00 AD. Gross Replacement Cost of Ancillary Capacity - Supplemental Reserve $ 0.00 AE. Theoretical Supplier's Invoice Amount for Expected Performance $ 322.50 AF. Actual Supplier's Invoice Amount 322.50 --------------- AG. Avoided Payment to Supplier (AE - AF) $ 0.00 MONTH 1 - ANCILLARY SERVICE ENERGY - ---------------------------------- AH AI * AJ * AK Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement
D-2 EXHIBIT D TRACY BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS
Hour Energy (MWh) of Energy ($/MWh) of Energy ** Cost of Energy ---- ------------ ----------------- ------------ -------------- (AH x AI) + AJ 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 0 na 0.00 0.00 4 0 na 0.00 0.00 5 0 na 0.00 0.00 6 20 45.00 20.00 920.00 7 0 na 0.00 0.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - --------------------------------------------------------------------------------------------------- 20 $ 920.00 $ 920.00 AL. Gross Replacement Cost of Ancillary Energy AM. Theoretical Supplier's Invoice Amount for Expected Performance $ 3,433.60 AN. Actual Supplier's Invoice Amount 2,575.20 AO. Avoided Payment to Supplier (AM - AN) $ 858.40 AP. Total of Gross Replacement Costs - Ancillary Services (N + V + AD + AL) $ 1,820.00 AQ. Total of Avoided Payments to Supplier - Ancillary Services (Q + Y + AG + AO) $ 1,181.40 AR. Invoiced Replacement Cost - Ancillary Services *** (AP (more than) AQ) $ 638.60 MONTH 1 - TOTAL INVOICE AMOUNT (I + AR) $ 638.60 =========================================================================================================== MONTH 2 - ENERGY - ---------------- A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 40.00 200.00 2,600.00 4 60 55.00 100.00 3,400.00 5 10 48.00 200.00 680.00 6 0 na 0.00 0.00 7 20 35.00 300.00 1,000.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - ---------------------------------------------------------------------------------------------------- 150 $ 7,680.00 E. Gross Replacement Cost of Energy $ 7,680.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 207,303.60 G. Actual Supplier's Invoice Amount 200,865.60 --------------- H. Avoided Payment to Supplier (F - G) $ 6,438.00 I. Invoiced Replacement Cost - Energy (E (more than) H) $ 1,242.00 MONTH 3 - ENERGY - ----------------
D-3 EXHIBIT D TRACY BUNDLE BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS
A B * C * D Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy ---- ------------ ----------------- --------- -------------- (A x B) + C 1 0 na $ 0.00 0.00 2 0 na 0.00 0.00 3 60 28.00 100.00 1,780.00 4 60 24.00 50.00 1,490.00 5 10 24.00 0.00 240.00 6 0 na 0.00 0.00 7 20 24.00 50.00 530.00 8 0 na 0.00 0.00 9 0 na 0.00 0.00 10 0 na 0.00 0.00 - -------------------------------------------------------------------------------------------------- 150 $ 4,040.00 E. Gross Replacement Cost of Energy $ 4,040.00 F. Theoretical Supplier's Invoice Amount for Expected Performance $ 122,778.60 G. Actual Supplier's Invoice Amount 118,965.60 --------------- H. Avoided Payment to Supplier (F - G) $ 3,813.00 I. Invoiced Replacement Cost - Energy (E (more than) H) $ 227.00
For the purposes of this example, the portions of the monthly invoices attributable to Ancillary Services for the second and third months were assumed to be the same as the corresponding portions for the first month. * Replacement Costs will be directly assigned whenever causal relationships can be established; otherwise allocations will be based upon the average of costs that have not been directly assigned. ** Net of Transaction Costs that Buyer would have incurred if Supplier had performed. *** If AQ is equal to AP, the invoiced replacement cost for Ancillary Services for the month will be zero. If AQ is greater than AP, a credit, which is equal to AQ minus AP, will be carried forward to subsequent months during the Contract Year and applied against any Replacement Costs for Ancillary Services that would otherwise have been billed to Supplier. The total of all Replacements Costs for Ancillary Services billed to Supplier during each Contract Year shall not be less than zero. D-4 EXHIBIT E TRACY BUNDLE YEAR END TRUE-UP INVOICE A Price Ceiling of Energy $ 42.92 /MWh B Price Floor of Energy $ 25.42 /MWh EXAMPLE 1 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 4,680 $ 142,035.00 $ 200,865.60 $ 118,965.60 $ 142,035.00 2 4,680 205,365.00 200,865.60 118,965.60 200,865.60 3 4,680 84,810.00 200,865.60 118,965.60 118,965.60 4 5,070 253,500.00 217,604.40 128,879.40 217,604.40 5 5,070 233,220.00 217,604.40 128,879.40 217,604.40 6 4,870 224,020.00 209,020.40 123,795.40 209,020.40 7 5,070 243,360.00 217,604.40 128,879.40 217,604.40 8 5,070 233,220.00 217,604.40 128,879.40 217,604.40 9 4,530 212,910.00 194,427.60 115,152.60 194,427.60 10 5,070 223,080.00 217,604.40 128,879.40 217,604.40 11 5,070 268,710.00 217,604.40 128,879.40 217,604.40 12 4,770 228,960.00 204,728.40 121,253.40 204,728.40 - ----------------------------------------------------------------------------------------------------------------- Total 58,630 $ 2,553,190.00 $ 2,516,399.60 $ 1,490,374.60 $ 2,375,669.00
(Total of Column D) (more than) (Total of Column E) therefore Annual True-up calculated under Section 7.5.1(a) H. Annual True-up - Delivered Energy (Total E - Total G) $140,730.60 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total E / Total C) $42.92
J K L M N Invoiced Replacement Replacement Energy Gross Replacement Adjusted Replacement Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,242.00 3 150 4,040.00 227.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ----------------------------------------------------------------------------------------------------------------- Total 450 $ 19,314.00 $ 16,620.00 $ 0.00 $ 1,469.00
O. Annual True-up - Replacement Costs (Total N - Total M) $ 1,469.00
E-1 EXHIBIT E TRACY BUNDLE YEAR END TRUE-UP INVOICE Total Annual True-up * (H + O) $142,199.60 ================================================================================================================== EXAMPLE 2 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 4,680 $ 142,035.00 $ 200,865.60 $ 118,965.60 $ 142,035.00 2 4,680 205,365.00 200,865.60 118,965.60 200,865.60 3 4,680 84,810.00 200,865.60 118,965.60 118,965.60 4 5,070 192,660.00 217,604.40 128,879.40 192,660.00 5 5,070 172,380.00 217,604.40 128,879.40 172,380.00 6 4,870 165,580.00 209,020.40 123,795.40 165,580.00 7 5,070 182,520.00 217,604.40 128,879.40 182,520.00 8 5,070 212,940.00 217,604.40 128,879.40 212,940.00 9 4,530 194,790.00 194,427.60 115,152.60 194,427.60 10 5,070 202,800.00 217,604.40 128,879.40 202,800.00 11 5,070 248,430.00 217,604.40 128,879.40 217,604.40 12 4,770 228,960.00 204,728.40 121,253.40 204,728.40 - ----------------------------------------------------------------------------------------------------------------- Total 58,630 $ 2,233,270.00 $ 2,516,399.60 $ 1,490,374.60 $ 2,207,506.60
(Total of Column E) (more than) (Total of Column D) therefore Annual True-up - ---------------------------------------------------------------------------- calculated under Section 7.5.1(b) - --------------------------------- H. Annual True-up - Delivered Energy (Total D - Total G) $ 25,763.40 I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $38.09
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,242.00 3 150 4,040.00 227.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------- Total 450 $ 17,140.91 $ 16,620.00 $ 0.00 $ 1,469.00
O. Annual True-up - Replacement Costs (Total N - Total M) $ 1,469.00 ===================================================================================================================
E-2 EXHIBIT E TRACY BUNDLE YEAR END TRUE-UP INVOICE Total Annual True-up * (H + O) $ 27,232.40 ================================================================================================================== EXAMPLE 3 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 4,680 $ 142,035.00 $ 200,865.60 $ 118,965.60 $ 142,035.00 2 4,680 205,365.00 200,865.60 118,965.60 200,865.60 3 4,680 84,810.00 200,865.60 118,965.60 118,965.60 4 5,070 162,240.00 217,604.40 128,879.40 162,240.00 5 5,070 152,100.00 217,604.40 128,879.40 152,100.00 6 4,870 136,360.00 209,020.40 123,795.40 136,360.00 7 5,070 141,960.00 217,604.40 128,879.40 141,960.00 8 5,070 141,960.00 217,604.40 128,879.40 141,960.00 9 4,530 117,780.00 194,427.60 115,152.60 117,780.00 10 5,070 121,680.00 217,604.40 128,879.40 128,879.40 11 5,070 121,680.00 217,604.40 128,879.40 128,879.40 12 4,770 114,480.00 204,728.40 121,253.40 121,253.40 - ----------------------------------------------------------------------------------------------------------------- Total 58,630 $ 1,642,450.00 $ 2,516,399.60 $ 1,490,374.60 $ 1,693,278.40
(Total of Column E) (more than) (Total of Column D) therefore Annual True-up - ---------------------------------------------------------------------------- calculated under Section 7.5.1(b) - --------------------------------- H. Annual True-up - Delivered Energy (Total D - Total G) $ (50,828.40) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $28.01
J K L M N Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,242.00 3 150 4,040.00 227.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------- Total 450 $ 12,606.22 $ 16,620.00 $ 4,013.78 $ 1,469.00
O. Annual True-up - Replacement Costs (Total N - Total M) $ (2,544.78) Total Annual True-up * (H + O) $ (53,373.18) ===================================================================================================================
E-3 EXHIBIT E TRACY BUNDLE YEAR END TRUE-UP INVOICE EXAMPLE 4 - ---------
C D E F G Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy ----- ------------ ---------------- ---------------- ---------------- --------------- (A x C) (B x C) 1 4,680 $ 142,035.00 $ 200,865.60 $ 118,965.60 $ 142,035.00 2 4,680 205,365.00 200,865.60 118,965.60 200,865.60 3 4,680 84,810.00 200,865.60 118,965.60 118,965.60 4 5,070 91,260.00 217,604.40 128,879.40 128,879.40 5 5,070 86,190.00 217,604.40 128,879.40 128,879.40 6 4,870 77,920.00 209,020.40 123,795.40 123,795.40 7 5,070 76,050.00 217,604.40 128,879.40 128,879.40 8 5,070 70,980.00 217,604.40 128,879.40 128,879.40 9 4,530 58,890.00 194,427.60 115,152.60 115,152.60 10 5,070 60,840.00 217,604.40 128,879.40 128,879.40 11 5,070 60,840.00 217,604.40 128,879.40 128,879.40 12 4,770 57,240.00 204,728.40 121,253.40 121,253.40 - ----------------------------------------------------------------------------------------------------------------- Total 58,630 $ 1,072,420.00 $ 2,516,399.60 $ 1,490,374.60 $ 1,595,344.00
(Total of Column E) (more than) (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b) H. Annual True-up - Delivered Energy (Total F - Total G) $ (104,969.40) I. Average Cost of Delivered Energy after True-up ($/MWh) (Total F / Total C) $25.42
J K L M N Invoiced Replacement Replacement Energy Gross Replacement Adjusted Replacement Replacement Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy ----- ------------ -------------- -------------- -------------- -------------- (I x J) 1 150 $ 4,900.00 $ 0.00 2 150 7,680.00 1,242.00 3 150 4,040.00 227.00 4 0 0.00 0.00 5 0 0.00 0.00 6 0 0.00 0.00 7 0 0.00 0.00 8 0 0.00 0.00 9 0 0.00 0.00 10 0 0.00 0.00 11 0 0.00 0.00 12 0 0.00 0.00 - -------------------------------------------------------------------------------------------------------------- Total 450 $ 11,439.00 $ 16,620.00 $ 5,181.00 $ 1,469.00
O. Annual True-up - Replacement Costs (Total N - Total M) $ (3,712.00) Total Annual True-up * (H + O) $ (108,681.40) ================================================================================================================
E-4 * Positive Total Annual True-up is indicative of a payment from Buyer to Supplier; Negative Total Annual True-up is indicative of a payment from Supplier to Buyer. E-5 EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS Supplier: - -------- a) Agreement Notices: ------------------ Address: B. Frank Moon WPS Northern Nevada, LLC c/o WPS Power Development, Inc. 1088 Springhurst Drive Green Bay, WI 54304 Phone: 920//617-6017 Fax: 920/617-5999 b) Payment Check: -------------- Name: WPS Northern Nevada, LLC Address: c/o WPS Power Development, Inc. 1088 Springhurst Drive Green Bay, WI 54304 c) Payment Wire Transfer: ---------------------- Bank: Firstar Bank, Milwaukee, N.A. ABA#: 075000022 For: WPS Northern Nevada, LLC, c/o WPS Power Development, Inc. Account No.: 121740515 d) Invoices: -------- Name: WPS Northern Nevada, LLC Address: c/o WPS Power Development, Inc. 1088 Springhurst Drive Green Bay, WI 54304 Phone: 920/617-6040 Fax: 920/617-6140 e) Operating Notifications: ----------------------- i) Pre-Schedule Thomas G. Balzola Phone: 920/617-6059 Fax: 920/617-5999 ii) Real Time Thomas G. Balzola Phone: 920/617-6059 Fax: 920/617-5999 iii) Monthly Checkout Thomas G. Balzola Phone: 920/617-6059 Fax: 920/617-5999 F-6 Buyer: - ----- a) Agreement Notices: ----------------- Address: Gary Craythorn Manager, Resource Contracts Nevada Power Company 6226 West Sahara Avenue, M/S 26A Las Vegas, Nevada 89146 Phone: 702/367-5425 Fax: 702/227-2455 E-mail: gcraythorn@nevp.com b) Invoices: -------- US Post Office: (Via Certified Mail) Overnight Delivery --------------- ------------------ Address: Nevada Power Company Address: Nevada Power Company Attn: Kathy Crews Attn: Kathy Crews P.O. Box 230, M/S 20 6226 West Sahara Ave., Las Vegas, Nevada 89151 M/S 20 Telephone: 702/227-2476 Las Vegas, Nevada 89146 Fax: 702/367-5096 E-mail: kcrews@nevp.com c) Schedules: --------- i) Pre-Schedule: Primary Phone: 702/862-7195 Name: Rick Engebretson E-mail: rengebretson@nevp.com Alternate Phone: 702/862-7194 Name: Tim Schuster E-mail: tschuster@nevp.com Fax: 702/227-2404 ii) Real Time: Phone: 702/862-7106 Fax: 702/227-2404 iii) Monthly Checkout: Kathy Crews Phone: 702/227-2476 Fax: 702/367-5096 E-mail: kcrews@nevp.com d) Control Area/Transmission: ------------------------- i) Reliability Dispatch: Phone: (702) 451-2026 Fax: (702) 862-7113 ii) Transmission Dispatch: Phone: (702) 451-8346 Fax: (702) 862-7113 F-7 EXHIBIT G FORM OF AVAILABILITY NOTICE* Date of Notice: Time of Notice: Supplier: Name of Supplier's Representative: Buyer: Asset Bundle: Availability Dates (96 hours total):
A B C D E F G H Asset Permitted Bundle Available Permitted Asset Bundle Available Total Derating Derating Capacity Availability Hour from Unit 1 Total Derating Derating of Capacity of from Unit 2 of Unit 2 of Unit 2 of Unit 2 Date Ending (MW) of Unit 1 (MW) Unit 1 (MW) Unit 1 (MW) (MW) (MW) (MW) (MW) ---- ------ ---- -------------- ----------- ----------- ---- ---- ---- ---- (A (less (___ - A) (C (less (A - C) (E (less (___ - E) (B (less (G - E) than) or than) or than) or than) or = ___) = B) = ___) = 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 0100 0200 0300 0400 0500 0600 0700 : (96 hours total) : 300 400 500
I** J Cause and Expected Alternative Duration of Deratings and Point(s) of Identification of Delivery Permitted Deratings -------- ------------------- * The Parties' operational personnel will develop a similar form for the other generating units in the bundle. ** The Parties' operational personnel shall develop the necessary procedure to document requests and responses to utilize Alternative Point(s) of Delivery. EXHIBIT H FORM OF GUARANTY This Guaranty is entered into as of October 25, 2000, by WPS Resources Corporation, a Wisconsin corporation ("Guarantor"), on behalf of WPS Northern Nevada, LLC, a Nevada limited liability company ("Supplier"), in favor of and for the benefit of Sierra Pacific Power Company, a Nevada corporation ("SPPC"). SPPC is sometimes referred to herein as "Beneficiary". WHEREAS, Supplier and SPPC are entering into a Transitional Power Purchase Agreement dated as of October 25, 2000 (the "TPPA") by which Supplier has agreed to sell and SPPC has agreed to buy Energy and Ancillary Services (as defined in the TPPA) produced by the Tracy/Pinon generating station being sold by SPPC; and WHEREAS, it is a condition to the obligation of SPPC to enter into the TPPA for Guarantor to guaranty the Supplier's obligations under the TPPA on and after the Effective Date (as defined in the TPPA), subject to the limitations herein (the "Guarantied Obligations"). 1. Guaranty. Subject to the terms and conditions herein, Guarantor irrevocably and unconditionally guaranties, as primary obligor and not merely as surety, the due and punctual payment in full of all Guarantied Obligations (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.(S)362(a)). Subject to the other provisions of this Section 1, upon failure of Supplier to pay any of the Guarantied Obligations when and as the same shall become due, Guarantor will upon demand pay, or cause to be paid, in cash, to SPPC, an amount equal to the lesser of: (i) the aggregate of the unpaid Guarantied Obligations and (ii) the Credit Amount (as defined in the TPPA) as of the date of such failure of Supplier to pay such Guarantied Obligations. In the event Guarantor fails to pay the Guarantied Obligations, each and every default in the payment shall give rise to a separate cause of action and separate causes of action may be brought hereunder as each such cause of action arises. In the event that all or any portion of the Guarantied Obligations is paid by Supplier, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) is rescinded or recovered directly or indirectly from the Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments that are so rescinded or recovered shall constitute Guarantied Obligations, subject to the terms and conditions herein. 2. Expenses. The Guarantor agrees to reimburse SPPC for all reasonable costs and expenses (including, without limitation, the reasonable fees and expenses of legal counsel) in connection with (i) any default by Guarantor hereunder and any enforcement or collection proceeding resulting therefrom, including, without limitation, all manner of participation in or other involvement with bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings of or involving the Guarantor, judicial or regulatory proceedings of or involving the Guarantor and workout, restructuring or other negotiations or proceedings of or involving the Guarantor (whether or not the workout, restructuring or transaction contemplated H-3 thereby is consummated) and (ii) the enforcement of this Section 2. 3. Guaranty Absolute; Continuing Guaranty. The obligations of Guarantor hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, Guarantor agrees that: (a) this Guaranty is a guaranty of payment when due and not of collectibility; (b) the obligations of Guarantor hereunder are independent of the obligations of Supplier under the TPPA and a separate action or actions may be brought and prosecuted against Guarantor whether or not any action is brought against the Supplier and whether or not the Supplier is joined in any such action or actions; and (c) Guarantor's payment of a portion, but not all, of the Guarantied Obligations shall in no way limit, affect, modify or abridge Guarantor's liability for any portion of the Guarantied Obligations that has not been paid. This Guaranty is a continuing guaranty and shall be binding upon Guarantor and its successors and assigns. 4. Actions by Beneficiary. The Beneficiary may from time to time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation, impairment or discharge of Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security hereafter held by or for the benefit of the Beneficiary in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Beneficiary may have against any such security, and (f) exercise any other rights available to SPPC under the TPPA. 5. No Discharge. This Guaranty and the obligations of Guarantor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Guarantied Obligations), including without limitation the occurrence of any of the following, whether or not Guarantor shall have had notice or knowledge of any of them: (a) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guarantied Obligations, (b) any waiver or modification of, or any consent to departure from, any of the terms or provisions of any other guaranty or security for the Guarantied Obligations, (c) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (d) the application of payments received from any source to the payment of indebtedness other than the Guarantied Obligations, even if the Beneficiary might have elected to apply such payment to any part or all of the Guarantied Obligations, (e) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations, (f) any defenses, set-offs or H-4 counterclaims which the Supplier may assert against the Beneficiary in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction, and (g) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of Guarantor as an obligor in respect of the Guarantied Obligations. 6. Waivers for the Benefit of Beneficiary. Guarantor waives, for the benefit of Beneficiary: (a) any right to require the Beneficiary, as a condition of payment or performance by Guarantor, to (i) proceed against the Supplier, any other guarantor of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from the Supplier, any other guarantor of the Guarantied Obligations or any other Person, or (iii) pursue any other remedy in the power of the Beneficiary; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Supplier including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Supplier from any cause other than payment in full of the Guarantied Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) (i) any principles or provisions of law, statutory or otherwise, that are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that the Beneficiary protect, secure, perfect or insure any lien on any property subject thereto; (e) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guaranty; and (f) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty. 7. Waiver of Rights Against Supplier. Guarantor waives any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against the Supplier or any of its assets in connection with this Guaranty or the performance by Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against the Supplier, (b) any right to enforce, or to participate in, any claim, right or remedy that the Beneficiary now has or may hereafter have against the Supplier, and (c) any benefit of, and any right to participate in, any collateral or security hereafter held by the Beneficiary. Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement and indemnification as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Guarantor may have against the Supplier or against any collateral or security shall be junior and subordinate to any rights the Beneficiary may have against Supplier, to all right, title and interest the Beneficiary may have in any such collateral or security, and to any right the Beneficiary may have against such other guarantor. 8. Representations and Warranties of Guarantor. Guarantor represents and warrants to SPPC as follows: H-5 (a) Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Guarantor has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. (b) Guarantor has the corporate power and authority to execute and deliver this Guaranty and to consummate the transactions contemplated hereby. The execution and delivery of this Guaranty and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Guarantor, and no other corporate proceedings on the part of Guarantor, including the approval of its shareholders, are necessary to authorize this Guaranty or to consummate the transactions so contemplated. This Guaranty has been duly and validly executed and delivered by Guarantor and constitutes a valid and binding agreement of Guarantor, enforceable against Guarantor in accordance with its terms. (c) There are no legal or arbitral proceedings by or before any governmental or regulatory authority or agency, now pending or (to Guarantor's knowledge) threatened against Guarantor or its subsidiaries that could reasonably be expected to have a material adverse effect on the consolidated financial condition, operations or business taken as a whole of it and its subsidiaries. (d) The representations and warranties made herein will remain true until Guarantor has fulfilled all obligations to pay in full the Guarantied Obligations. 9. Set Off. In addition to any other rights the Beneficiary may have under law or in equity, if any amount shall at any time be due and owing by Guarantor to the Beneficiary under this Guaranty, the Beneficiary is authorized at any time or from time to time, without notice (any such notice being expressly waived), to set off and to appropriate and to apply any indebtedness of the Beneficiary owing to Guarantor and any other property of Guarantor held by the Beneficiary to or for the credit or the account of Guarantor against and on account of the Guarantied Obligations and liabilities of Guarantor to the Beneficiary under this Guaranty. 10. Disputes. Any action, claim or dispute arising out of or relating to this Guaranty (any such action, claim or dispute, a "Dispute") shall be submitted in writing to the other Party. In the event Guarantor and SPPC are unable to resolve the Dispute satisfactorily within thirty (30) days from the receipt of notice of the Dispute, either Guarantor or SPPC may initiate arbitration through the serving and filing of a demand for arbitration. Guarantor and SPPC expressly agree that such arbitration shall be the exclusive means to further resolve any Dispute and hereby irrevocably waive their right to a jury trial with respect to any Dispute, provided that at any time a request made for provisional remedies requesting preservation of respective rights and obligations under the Guaranty may be resolved by a court of law located in the County of the principal place of business of SPPC. Arbitration shall be conducted in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the TPPA. 11. Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall in any event be effective without the written concurrence of SPPC and, in the case of any such amendment or modification, Guarantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. H-6 12. Miscellaneous. It is not necessary for Beneficiary to inquire into the capacity or powers of Guarantor or Supplier or the officers, directors or any agents acting or purporting to act on behalf of any of them. The rights, powers and remedies given to Beneficiary by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to Beneficiary by virtue of any statute or rule of law or in the TPPA. Any forbearance or failure to exercise, and any delay by Beneficiary in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. In case any provision in or obligation under this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. This Guaranty shall inure to the benefit of Beneficiary and its respective successors and assigns. 13. Notices. All notices, requests, demands, waivers, consents and other communications hereunder shall be in writing, shall be delivered either in person, by telegraphic, facsimile or other electronic means, by overnight air courier or by mail, and shall be deemed to have been duly given and to have become effective (a) upon receipt if delivered in person or by telegraphic, facsimile or other electronic means, (b) one (1) business day after having been delivered to an air courier for overnight delivery or (c) three (3) business days after having been deposited in the U.S. mails as certified or registered mail, return receipt requested, all fees prepaid, directed to the parties at the following addresses: If to Guarantor, addressed to: Ralph G. Baeten WPS Resources Corporation 700 North Adams Street Green Bay, WI 54307 Facsimile: (920) 433-7653 If to SPPC, addressed to: William E. Peterson Sierra Pacific Power Company 6100 Neil Road Reno, Nevada 89511 Facsimile: (775) 834-5959 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officers thereunto duly authorized as of the date first written above. By: --------------------------- Ralph G. Baeten Title: Treasurer Address: WPS Resources Corporation 700 North Adams Street Green Bay, WI 54307 H-7 EXHIBIT I COMPANY OBSERVED HOLIDAYS New Year's Day January 1st President's Day Third Monday in February Memorial Day (observed) Last Monday in May Independence Day July 4th Labor Day First Monday in September Nevada Day Last Friday in October Thanksgiving Day Fourth Thursday in November Thanksgiving Friday Friday after Thanksgiving Christmas Day December 25th Holidays falling on Saturday will be observed on the preceding Friday and those falling on Sunday will be observed on the following Monday. I-1 EXHIBIT J TRACY BUNDLE ADJUSTMENTS TO TPPA AMOUNT AND CREDIT AMOUNT
Monthly Monthly Month Adjustment Month Adjustment -------------------------------- ------------------------------- Mar-01 4.6% Mar-02 3.7% Apr-01 3.0% Apr-02 2.5% May-01 3.3% May-02 2.6% Jun-01 5.6% Jun-02 4.3% Jul-01 5.7% Jul-02 4.5% Aug-01 5.6% Aug-02 4.4% Sep-01 4.3% Sep-02 3.4% Oct-01 5.3% Oct-02 4.2% Nov-01 5.3% Nov-02 4.2% Dec-01 6.5% Dec-02 5.2% Jan-02 7.0% Jan-03 5.5% Feb-02 5.7% Feb-03 4.5%
ADJUSTMENTS TO TPPA AMOUNT Example 1 - Effective Date of Agreement is April 15, 2001 -------------------------------------------------------------------- A. TPPA Amount: $ 15,000,000 B C D Monthly Applicable Applicable Month Adjustment Portion * Adjustment -------------------------------------------------------------------- (B x C) Apr-01 3.0% 50.0% 1.5% May-01 3.3% 100.0% 3.3% -------------------------------------------------------------------- Total 4.8%
E. Total of Monthly Applicable Adjustments 4.8% F. Adjusted TPPA Amount (A x (1+D)) $ 15,720,000 ================================================================================= Example 2 - Effective Date of Agreement is September 15, 2001 ---------------------------------------------------------------------------------
G. TPPA Amount: $ 15,000,000 H I J Monthly Applicable Applicable Month Adjustment Portion * Adjustment --------------------------------------------------------------------- (H x I) Jun-01 5.6% 100.0% 5.6% Jul-01 5.7% 100.0% 5.7% Aug-01 5.6% 100.0% 5.6% J-1 EXHIBIT J TRACY BUNDLE ADJUSTMENTS TO TPPA AMOUNT AND CREDIT AMOUNT Sep-01 4.3% 50.0% 2.2% - ---------------------------------------------------------------- Total 19.1% K. Total of Monthly Applicable Adjustments 19.1% L Adjusted TPPA Amount (G x (1-K)) $ 12,135,000 ================================================================================ Example 3 - Termination Date of October 31, 2002 - -------------------------------------------------------------------------------- M. TPPA Amount: $ 15,000,000 N O P Monthly Applicable Applicable Month Adjustment Portion ** Adjustment - ---------------------------------------------------------------- (N x O) Nov-02 4.2% 100.0% 4.2% Dec-02 5.2% 100.0% 5.2% Jan-03*** 5.5% 100.0% 5.5% Feb-03*** 4.5% 100.0% 4.5% - ---------------------------------------------------------------- Total 19.4% Q. Total of Monthly Applicable Adjustments 19.4% R Payment Amount (M x Q) $ 2,910,000 ================================================================================ * The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer were made divided by the number of days in the month. ** The applicable portion of the month is the number of days in the month during which deliveries of energy from Supplier to Buyer would have been made divided by the number of days in the month. *** In the event the Agreement is terminated on or before December 31, 2002, the refund of the TPPA Amount shall be calculated as if Buyer had not exercised its rights pursuant to Section 2.1.2. That is, the monthly adjustments of the TPPA Amount for the months of January 2003 and February 2003 shall be payable to Buyer in the event of termination prior to December 31, 2002. ADJUSTMENTS TO CREDIT AMOUNT *** A. Credit Amount*: $ 200,000,000 B C D Beginning Adjusted Month Credit Amount Adjustment Credit Amount - --------------------------------------------------------------- ( ** ) (B - C) Mar-01 $ 200,000,000 0 $ 200,000,000 J-2 EXHIBIT J TRACY BUNDLE ADJUSTMENTS TO TPPA AMOUNT AND CREDIT AMOUNT Apr-01 $ 200,000,000 0 $ 200,000,000 May-01 $ 200,000,000 0 $ 200,000,000 Jun-01 $ 200,000,000 0 $ 200,000,000 Jul-01 $ 200,000,000 11,200,000 $ 188,800,000 Aug-01 $ 188,800,000 11,400,000 $ 177,400,000 Sep-01 $ 177,400,000 11,200,000 $ 166,200,000 Oct-01 $ 166,200,000 8,600,000 $ 157,600,000 Nov-01 $ 157,600,000 10,600,000 $ 147,000,000 Dec-01 $ 147,000,000 10,600,000 $ 136,400,000 Jan-02 $ 136,400,000 13,000,000 $ 123,400,000 Feb-02 $ 123,400,000 14,000,000 $ 109,400,000 Mar-02 $ 109,400,000 11,400,000 $ 98,000,000 Apr-02 $ 98,000,000 7,400,000 $ 90,600,000 May-02 $ 90,600,000 5,000,000 $ 85,600,000 Jun-02 $ 85,600,000 5,200,000 $ 80,400,000 Jul-02 $ 80,400,000 8,600,000 $ 71,800,000 Aug-02 $ 71,800,000 9,000,000 $ 62,800,000 Sep-02 $ 62,800,000 8,800,000 $ 54,000,000 Oct-02 $ 54,000,000 6,800,000 $ 47,200,000 Nov-02 $ 47,200,000 8,400,000 $ 38,800,000 Dec-02 $ 38,800,000 8,400,000 $ 30,400,000 Jan-03**** $ 30,400,000 10,400,000 $ 20,000,000 Feb-03**** $ 20,000,000 11,000,000 $ 9,000,000 * As defined in Section 1.2.18 of the Agreement. ** Monthly Adjustment for prior month times Credit Amount. *** The adjusted Credit Amounts, as shown above, are the amounts applicable to the first day of each month. A prorata share of the monthly adjustments will be subtracted from the previous daily adjusted Credit Amount to establish the daily adjusted Credit Amount for the current day. For example: the adjusted Credit Amount for June 2, 2001 will be $200,000,000 less one thirtieth of the monthly adjustment for July 2001 ($11,200,000 / 30) or $199,626,666.67. Thus, the Credit Amount at February 28, 2003, will equal zero. **** Provided the Buyer exercises its rights pursuant to Section 2.1.2. J-3 EXHIBIT K TRACY BUNDLE ADJUSTMENTS TO MINIMUM ANNUAL TAKE
A B C D E F Base Number Base Energy Sales per Current Number Adjusted Energy Class * of Customers Sales (MWh) Customer (MWh) of Customers Sales (MWh) - --------------------------------------------------------------------------------------------------------------------- (C / B) (D x E) ** Residential 475,000 5,800,000 12 470,000 5,738,947 Commercial 65,000 2,800,000 43 60,000 2,584,615 Industrial 1,000 4,900,000 800 3,600,000 Street Lighting 5 130,000 5 130,000 Other Retail 50 600,000 50 600,000 Wholesale 5 850,000 5 850,000 - --------------------------------------------------------------------------------------------------------------------- 541,060 15,080,000 530,860 13,503,563 G. Adjustment to Minimum Annual Take (F / C) 89.55% H. Minimum Annual Take from Exhibit A (MWh) 2,200,000 I. Revised Minimum Annual Take (MWh) (G x H) 1,970,100
J K Month During Applicable Min. Contract Year Annual Take (MWh) - ------------------------------------------- 1 2,200,000 2 2,200,000 3 2,200,000 4 2,200,000 5 1,970,100 6 1,970,100 7 1,970,100 8 1,870,000 9 1,870,000 10 1,760,000 11 1,760,000 12 1,760,000 - ------------------------------------------- Total 23,730,300 L. Minimum Take for Contract Year (MWh) (Total of K / 12) 1,977,525 * As reported on Buyer's FERC Form 1 ** Adjusted Energy Sales for the remaining Industrial, Street Lighting, Other Retail, and Wholesale customers will be based upon actual sales during the base period. K-1 EXHIBIT L TRACY BUNDLE ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE
A B C D E * F G ** Dispatch Supply Delivered Permitted Force Replacement Applicable Hour Amount (MWh) Energy (MWh) Derating(MWh) Majeure(MWh) Energy(MWh) Energy (MWh) - --------------------------------------------------------------------------------------------------------------------- (C+D+E+F) 1 507 507 507 2 507 507 0 3 507 507 507 4 507 507 507 5 507 507 507 6 507 487 20 507 7 507 487 20 507 8 507 487 20 507 9 507 507 507 10 507 507 507 11 507 507 507 12 507 507 507 13 507 0 507 507 14 507 0 507 507 15 507 0 507 507 16 507 0 507 507 17 507 457 30 487 18 507 507 507 19 507 507 507 20 507 507 507 21 507 507 507 22 507 507 507 23 507 507 507 24 477 477 477 25 457 457 457 26 427 427 427 27 457 427 30 457 28 477 477 477 29 507 507 507 30 507 507 507 31 507 507 507 32 507 507 507 33 507 507 507 34 507 507 507 35 507 507 507 36 507 507 507 - --------------------------------------------------------------------------------------------------------------------- total 18,012 15,844 70 2,028 50 17,992
L-1 EXHIBIT L TRACY BUNDLE ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE * Includes energy excused because of Supplier's and Buyer's events of Force Majeure ** G cannot be greater than B EXHIBIT M ASSET BUNDLE CONTRACTUAL AND OPERATING CONSTRAINTS 1. For the purposes of this Exhibit M, "Constrained Capacity" shall mean that portion of the Asset Bundle Capacity that has been designated as being subject to contractual and operational constraints in accordance with the provisions of this Exhibit M. 2. Section 4.1.4 of the Agreement, which addresses Supplier's right to Asset Bundle Capacity in excess of the Supply Amount, shall not be applicable to Constrained Capacity. 3. Asset Bundle Capacity scheduled in accordance with Section 5.1 of the Agreement, which addresses Buyer's notifications to Supplier, shall not be deemed to include Constrained Capacity unless Buyer's schedules specifically designate Constrained Capacity as being applicable to the schedules. 4. The Asset Bundle Capacity described in the following table shall be deemed Constrained Capacity.
- --------------------------------------------------------------------------------------------------------- Asset Bundle Source of Capacity Annual Limit Monthly Limit Daily Limit - --------------------------------------------------------------------------------------------------------- 72 hours at max. Clark Mt. 3-4 capacity for Tracy (7 MW per unit summer) each unit* None None - --------------------------------------------------------------------------------------------------------- Tracy Valley Rd 1-3 200 hours at (6 MW summer) max. capacity for each unit* None None - --------------------------------------------------------------------------------------------------------- Tracy Clark Mt. 1-2, Brunswick 1-3, 100 hours at and Gabbs 1-2 max. capacity (30 MW summer) for each unit* None None - ---------------------------------------------------------------------------------------------------------
* Buyer is attempting to raise the operating limits on these generating units. If Buyer is successful, the higher limits will be applicable to this Exhibit M. EX-10.Z 35 0035.txt ASSET PURCHASE AGREEMENT, TRUCKEE MEADOWS WATER Exhibit 10(Z) [EXECUTION COPY] ASSET PURCHASE AGREEMENT between SIERRA PACIFIC POWER COMPANY, as Seller and TRUCKEE MEADOWS WATER AUTHORITY as Purchaser Dated as of January 15, 2001 TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION.................................................. 1 1.1 Definitions and Rules of Construction.......................................... 1 ARTICLE II SALE OF ASSETS AND ASSUMPTION OF LIABILITIES.......................................... 1 2.1 Asset Purchase................................................................. 1 2.2 Assumption of Liabilities; Excluded Liabilities................................ 2 2.3 Transfer of Purchased Assets and Assumed Liabilities........................... 3 2.4 Governmental Approvals and Consents............................................ 3 2.5 Farad Insurance Claim.......................................................... 5 2.6 Novation....................................................................... 5 ARTICLE III PURCHASE PRICE AND ADJUSTMENTS....................................................... 6 3.1 Purchase Price................................................................. 6 3.2 Payment of Purchase Price...................................................... 6 3.3 Allocation of Purchase Price................................................... 6 3.4 Purchase Price Adjustments..................................................... 6 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER.............................................. 8 4.1 Corporate Existence............................................................ 8 4.2 Corporate Authority............................................................ 8 4.3 Conflicts; Required Consents................................................... 8 4.4 Financial Statements........................................................... 9 4.5 Absence of Certain Changes..................................................... 9 4.6 Properties..................................................................... 9 4.7 Contracts...................................................................... 11 4.8 Litigation..................................................................... 12 4.9 Intellectual Property Rights................................................... 12 4.10 Insurance...................................................................... 12 4.11 Tax Matters.................................................................... 13 4.12 Employment and Benefits........................................................ 13 4.13 Compliance with Laws........................................................... 13 4.14 Environmental Matters.......................................................... 14 4.15 Undisclosed Liabilities........................................................ 15 4.16 Finders; Brokers............................................................... 15 ARTICLE V REPRESENTATIONS OF PURCHASER........................................................... 16 5.1 Corporate Existence............................................................ 16 5.2 Corporate Authority............................................................ 16 5.3 Governmental Approvals and Consents............................................ 17 5.4 Funding of Expenses Prior to Closing and Break-Up Fee.......................... 17 5.5 Financial Capacity............................................................. 17 5.6 Finders; Brokers............................................................... 17
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Page ---- ARTICLE VI AGREEMENTS OF PURCHASER AND SELLER..................................................... 18 6.1 Operation of the Water Business................................................. 18 6.2 Investigation of Business....................................................... 19 6.3 Commercially Reasonable Efforts; Cooperation; No Inconsistent Action............ 20 6.4 Public Disclosures.............................................................. 21 6.5 Access to Records and Personnel................................................. 21 6.6 Employee Relations and Benefits................................................. 22 6.7 Post-Closing Arrangements....................................................... 24 6.8 Non-Competition................................................................. 24 6.9 Jointly Developed Intellectual Property......................................... 24 6.10 No Other Representations or Warranties.......................................... 24 6.11 Insurance Matters............................................................... 25 6.12 Use of Seller's Names........................................................... 25 6.13 Purchaser Financings............................................................ 25 6.14 Post-Closing Cooperation........................................................ 26 6.15 Risk of Loss.................................................................... 27 6.16 Condemnation.................................................................... 27 6.17 Real Property Investigation..................................................... 27 6.18 Approval of Fees and Expenses................................................... 28 6.19 Tax-Exempt Bonds................................................................ 28 6.20 Environmental Insurance......................................................... 29 ARTICLE VII PRELIMINARY SETTLEMENT AGREEMENT and DRAFT TRUCKEE RIVER OPERATING AGREEMENT.......... 29 7.1 Assumption of Obligations....................................................... 29 7.2 Seller's Responsibility Until Closing........................................... 29 ARTICLE VIII CONDITIONS TO CLOSING................................................................ 29 8.1 Conditions Precedent to Obligations of Purchaser and Seller..................... 29 8.2 Conditions Precedent to Obligation of Seller.................................... 30 8.3 Conditions Precedent to Obligation of Purchaser................................. 30 ARTICLE IX CLOSING................................................................................ 31 9.1 Closing Dates................................................................... 31 9.2 Purchaser Obligations........................................................... 31 9.3 Seller Obligations.............................................................. 32 ARTICLE X INDEMNIFICATION......................................................................... 32 10.1 Indemnification................................................................. 32 10.2 Certain Limitations............................................................. 33 10.3 Procedures for Third-Party Claims............................................... 34 10.4 Certain Claims Procedures....................................................... 35 10.5 Remedies Exclusive.............................................................. 35 10.6 Mitigation...................................................................... 35 ARTICLE XI TERMINATION............................................................................ 36 11.1 Termination Events.............................................................. 36 11.2 Effect of Termination........................................................... 37
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Page ---- ARTICLE XII MISCELLANEOUS AGREEMENTS OF THE PARTIES........................................ 37 12.1 Notices.................................................................. 37 12.2 Bulk Transfers........................................................... 38 12.3 Severability............................................................. 38 12.4 Further Assurances; Further Cooperation.................................. 38 12.5 Counterparts............................................................. 38 12.6 Expenses................................................................. 39 12.7 Non-Assignability........................................................ 39 12.8 Amendment; Waiver........................................................ 39 12.9 Specific Performance..................................................... 39 12.10 Third Parties............................................................ 39 12.11 Governing Law............................................................ 40 12.12 Consent to Jurisdiction; Waiver of Jury Trial............................ 40 12.13 Interpretation; Absence of Presumption................................... 40 12.14 Entire Agreement......................................................... 40 12.15 Section Headings; Table of Contents...................................... 41 12.16 Schedules................................................................ 41 WATER COMPANY VEHICLES..................................................................... 1 Annex A Definitions Schedule 3.3 Allocation of Purchase Price Schedule 4.3 Conflicts; Required Consents Schedule 4.4 Financial Statements Schedule 4.5 Absence of Certain Changes Schedule 4.6(b) Owned and Leased Properties Schedule 4.6(c) Water Rights Schedule 4.7 Contracts Schedule 4.8 Litigation Schedule 4.9 Intellectual Property Rights Schedule 4.12(a) Employment & Benefits Schedule 4.12(c) Employment & Benefits Schedule 4.13 Compliance with Laws Schedule 4.14 Environmental Matters Schedule 4.15 Undisclosed Liabilities Schedule 6.1 Operation of Water Business Schedule 6.7 Post Closing Arrangements Schedule 7.1 TROA Agreement Draft Schedule 8.1 Regulatory Authorizations Schedule 9.3 Instruments of Conveyance Exhibit A Purchased Assets Exhibit B Knowledge Persons Exhibit C Certain Excluded Assets
-iii- ASSET PURCHASE AGREEMENT This Asset Purchase Agreement, dated as of January 15, 2001 (hereinafter, this "Agreement"), between Sierra Pacific Power Company, a Nevada --------- corporation ("Seller"), and TRUCKEE MEADOWS WATER AUTHORITY, a joint powers ------ authority ("Purchaser"). --------- W I T N E S S E T H: WHEREAS, Seller owns the Purchased Assets (as defined herein) and uses the Purchased Assets in the operation of a water sale and delivery business in the Reno-Sparks, Nevada area (the "Water Business"); and -------------- WHEREAS, Purchaser desires to purchase, and Seller desires to sell and transfer to Purchaser, the Purchased Assets, and Purchaser agrees to assume certain liabilities as specified herein; NOW, THEREFORE, upon the terms and subject to the conditions set forth herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION ------------------------------------- 1.1 Definitions and Rules of Construction ---------------------------------------------- (a) Defined terms used in this Agreement have the meanings ascribed to them by definition in this Agreement, including in Annex A. (b) This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. (c) Whenever the words "include", "including", or "includes" appear in this Agreement, they shall be read to be followed by the words "without limitation" or words having similar import. ARTICLE II SALE OF ASSETS AND ASSUMPTION OF LIABILITIES -------------------------------------------- 2.1 Asset Purchase ----------------------- Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing (subject to Sections 2.4(e) and 2.5), Seller shall sell, assign, transfer, convey and deliver to Purchaser and Purchaser shall purchase, acquire and accept from Seller all of Seller's right, title and interest in and to the Purchased Assets. Purchaser and Seller acknowledge and agree that Seller is not transferring to Purchaser, and Purchaser is not acquiring, any of the Excluded Assets. 2 2.2 Assumption of Liabilities; Excluded Liabilities ---------------------------------------------------- Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing from and after the Closing Date, Purchaser shall assume and faithfully pay, perform, fulfill and discharge when due all Assumed Liabilities. The parties acknowledge and agree that Purchaser is not assuming any of the Excluded Liabilities, nor is Purchaser assuming liability for obligations to the extent Seller is obligated to indemnify Purchaser pursuant to Article X. "Assumed Liabilities" mean the ------------------- following: (a) Except as provided below and for those liabilities set forth in the definition of Excluded Liabilities, any past, existing and future liability arising from the pre-Closing or post-Closing ownership or operation of the Purchased Assets; (b) all liabilities and obligations under the Contracts assigned pursuant to Section 2.1 to the extent such Contracts are assigned, and including to the extent such liabilities and obligations are unpaid, undelivered or unperformed on the Closing Date, and any leases, contracts and other agreements entered into by Seller in respect of the Purchased Assets after the date hereof consistent with the terms of this Agreement including, without limitation, agreements with respect to liabilities for real or personal property Taxes, other than Excluded Liabilities, in accordance with their terms; (c) all liabilities for obligations in respect of which Purchaser has indemnified Seller pursuant to Section 10.1 of this Agreement; (d) all liabilities in respect of employees of Seller that Purchaser agrees to assume pursuant to Section 6.6 hereof, including, without limitation, the liabilities described in the New IBEW Contract, and the Guide to the Water Business Divestiture Severance Program for MPAT Employees; provided, however, -------- ------- that the parties acknowledge and agree that Purchaser is not assuming any compensation expenses related to stay bonuses or any pre-closing employee- related liabilities except as set forth in Section 6.6. (e) all prorated real estate Taxes incurred in connection with the transactions contemplated by this Agreement that Purchaser has agreed to pay pursuant to Section 2.3; (f) any past, existing and future liability arising from the pre- Closing or post-Closing ownership or operation of the Purchased Assets including, without limitation, all liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, or arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets, including, without limitation, any fines or penalties that arise in connection with the ownership or operation of the Purchased Assets prior to the Closing Date or the costs associated with correcting such violations; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Materials at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased 3 Assets prior to the Closing Date, including, without limitation, Hazardous Materials contained in building materials or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; and (iii) the investigation and/or Remediation (whether or not such investigation or Remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Materials that are present or have been Released prior to the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets; provided as to all of the above that nothing set forth in this Section 2.2(e) shall require the Purchaser to assume any Excluded Liabilities; (g) all liabilities incurred after the date of this Agreement and prior to the Closing in the normal course of operation of the Water Business pursuant to Section 6.1 (except Excluded Liabilities); and (h) any liabilities specified on Schedule 4.15. ------------- 2.3 Transfer of Purchased Assets and Assumed Liabilities --------------------------------------------------------- The Purchased Assets shall be sold, conveyed, transferred, assigned and delivered, and the Assumed Liabilities shall be assumed, pursuant to transfer and assumption agreements or other instruments in such form as is necessary and appropriate to effect a conveyance of the Purchased Assets and an assumption of the Assumed Liabilities in the jurisdictions in which such transfers are to be made. Such transfer and assumption agreements or other instruments shall be in a form reasonably satisfactory to Seller and Purchaser, and shall be executed no later than on the Closing Date by Seller and/or one or more of its Subsidiaries, as appropriate, and Purchaser. Purchaser and Seller will agree to identify the required transfer and assumption documents in each jurisdiction as promptly as practicable. Any transfer, filing, recordation or similar fees or Taxes shall be borne by Seller. Real estate Taxes and assessments (both general and special) shall be prorated to the Closing Date using the most recent assessment and levy, and such Taxes and assessments shall be reflected on the Closing Date Statement. Such prorations will be deemed to be final absent manifest error. Security deposits given by Seller as tenant with respect to leases for Leased Real Property and not refunded to Seller should be assigned to Purchaser and Seller given credit on the Closing Date Statement. 2.4 Governmental Approvals and Consents ---------------------------------------- (a) Seller and Purchaser shall cooperate with each other and promptly (but in any event not later than ten days after the date of this Agreement with respect to filings with the Public Utility Commission of Nevada) prepare and file all necessary documentation and use commercially reasonable efforts to obtain all necessary permits, consents approvals and authorizations of all Governmental Authorities and all other parties necessary or advisable to consummate the transactions contemplated by this Agreement or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which Seller or Purchaser or any of their respective subsidiaries is a party or by which any of them or their assets is bound. (b) Purchaser shall, no later than ten Business Days after the effective date of this Agreement, in cooperation with Seller, file an application with the United States 4 Government seeking assignment of Seller's Interim Storage Agreement, and shall thereafter use commercially reasonable efforts to secure such assignment of the Interim Storage Agreement at the earliest practicable date. (c) Seller and Purchaser each shall have the right to review, and to the extent not inconsistent with any legal obligation, approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement made to, and which appear in any filings with, any Governmental Authority made in connection with the transactions contemplated hereby. The parties hereto agree that they shall consult with each other with respect to the transferring to Purchaser or the obtaining by Purchaser of all such necessary permits, consents, approvals and authorizations of all third parties and Governmental Authorities. Seller and Purchaser shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on the behalf of Seller on the one hand and Purchaser on the other hand, with all Governmental Authorities. (d) If each condition to closing set forth in Article VIII has been satisfied other than the receipt of any authorization in respect of the Hydro Assets, the Closing shall occur notwithstanding the foregoing with the adjustment to the Purchase Price set forth in Section 3.2. Following the Closing, the parties shall use their commercially reasonable efforts, and shall cooperate with each other, to effect the prompt issuance of any authorizations, approvals, consents or waivers related thereto. Pending or in the absence of such authorization, approval, consent or waiver, subject to applicable law Purchaser and its employees (including any employees of Seller who are transferred to the Purchaser along with the Water Business) shall, and Seller shall permit Purchaser and such employees to, operate the Hydro Assets and Seller shall hold such Hydro Assets for the use and benefit, insofar as reasonably practicable, of Purchaser and its Designees (at the expense of Purchaser). In addition, Seller shall and shall cause its Subsidiaries to, take such other actions as may be reasonably requested by Purchaser in order to place Purchaser and its Designees, insofar as reasonably practicable, in the same position as if title to such Hydro Assets had been transferred at the Closing and so that all the benefits and burdens relating to such Hydro Assets, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Hydro Assets, is to inure from and after the Closing Date to Purchaser and its Designees. From the Closing Date, Purchaser agrees to assume all liabilities in connection with the ownership or operation of the Hydro Assets as if such Hydro Assets had been transferred at the Closing, including, without limitation, liability for any diminution in the value of the Hydro Assets, any other Purchased Assets or any assets or interests of Seller. If and when any required authorization, approval, consent or waiver, the absence of which caused the deferral of transfer of any Hydro Assets pursuant to this Section 2.4, is obtained, Seller shall provide Purchaser with documentation of such approval and the transfer of such Hydro Assets shall be promptly effected in accordance with the terms of this Agreement in respect of the Closing, the payment contemplated in Section 3.2 shall be made and such Hydro Assets shall thenceforth be Purchased Assets for all purposes under this Agreement. (e) Notwithstanding anything to the contrary contained in this Agreement: (i) To the extent that the sale, conveyance, transfer, assignment or delivery or attempted sale, conveyance, transfer, assignment or delivery to Purchaser of 5 any Purchased Asset (including any Contract) would be a violation of any applicable law or would require any authorizations, approvals, consents or waivers of Governmental Authorities or other third parties and such authorizations, approvals, consents or waivers shall not have been obtained prior to the Closing, this Agreement shall not constitute a sale, conveyance, transfer, assignment or delivery, or an attempted sale, conveyance, transfer, assignment or delivery thereof if any of the foregoing would constitute a breach of applicable law or the rights of any third party until such authorization, approval, consent or waiver is obtained. To Seller's knowledge, there are no restrictions or requirements such as are described in this Section 2.4(e)(i) except as disclosed herein. (ii) In the event the Federal Trade Commission, the Department of Justice or any other government or Governmental Authority shall (x) seek an injunction or the enactment, entry, enforcement or promulgation of any statute, rule, order or decree restraining or prohibiting the transactions contemplated by this Agreement or (y) withhold or threaten to withhold any consent, certification or other approval required to complete the transactions contemplated by this Agreement, Purchaser and Seller shall use commercially reasonable efforts to effect the Purchase notwithstanding any such action by such government or Governmental Authority. 2.5 Farad Insurance Claim --------------------------- With respect to Seller's insurance claim relating to the loss, reconstruction and replacement of the Farad dam and its associated appurtenances, the Farad hydroelectric facility together with Hydro Water Rights established in Claim #5 of the Orr Ditch Decree (the "Farad Facility") -------------- identified on Exhibit A shall not be transferred, and the portion of the --------- Purchase Price in the amount of $2,000,000 attributable to the Farad Facility shall not be payable, until either (x) Seller has reconstructed the Farad Facility in a manner reasonably acceptable to Purchaser or (y) Seller's insurer in respect of such claim has consented to the assignment of such claim by Seller to Purchaser and Purchaser is reasonably satisfied regarding the rights relating to such claim, at which time the transfer of the Farad Facility and assignment of such claim to Purchaser shall be promptly effected. 2.6 Novation ------------- Each party hereto, at the request of the other, shall, and shall cause their respective Subsidiaries to use commercially reasonable efforts to obtain, or to cause to be obtained, any consent, substitution, approval or amendment required to novate (including with respect to any federal governmental contract) or assign all rights and obligations under agreements, leases, licenses and other obligations or liabilities of any nature whatsoever that constitute Assumed Liabilities or to obtain in writing the unconditional release of all parties to such arrangements, so that, in any case, Purchaser will be solely responsible for such Assumed Liabilities, provided, however, that neither party -------- ------- nor their respective Subsidiaries shall be obligated to pay any consideration therefor to any third party from whom such consents, approvals, substitutions and amendments are requested. 6 ARTICLE III PURCHASE PRICE AND ADJUSTMENTS ------------------------------ 3.1 Purchase Price ------------------- The purchase price for the Purchased Assets shall be an amount in cash equal to the sum of (i) $350,000,000 (subject to the provisions of Section 2.5) and (ii) the Purchase Price Adjustment Amount (subject to reduction by the amount of the Hydro Assets Purchase Price (as defined below)) (the "Purchase ------- Price"). - ----- 3.2 Payment of Purchase Price ------------------------------ On the Closing Date, Purchaser shall pay to Seller the Purchase Price. Such amount shall be payable in United States dollars in immediately available federal funds to such bank account or accounts as shall be designated by Seller no later than the second Business Day prior to the Closing. If, however, Seller is unable to deliver the Hydro Assets to Purchaser on the Closing Date because any authorization has not been received, the Purchase Price shall be $342,000,000. The remaining $8,000,000 (subject to the provisions of Section 2.5) (the "Hydro Assets Purchase Price") shall be paid at the earliest --------------------------- practicable date upon which the Hydro Assets can be transferred following the receipt of such authorization but in no event later than five Business Days after the receipt of the authorization. 3.3 Allocation of Purchase Price --------------------------------- Seller shall reasonably allocate the Purchase Price (and all other capitalizable costs) for all Tax purposes as shown on an allocation schedule attached hereto as Schedule 3.3 and as prepared in accordance with Section 1060 ------------ of the Code and the Treasury Regulations promulgated thereunder. Seller and Purchaser shall file Internal Revenue Service Form 8594 and any comparable state, local or foreign forms (including any successor forms) (collectively the "1060 Forms") and any required attachments thereto required to be filed pursuant ---------- to Section 1060 of the Code, the Treasury Regulations promulgated thereunder or any provisions of state, local or foreign law, together with all Federal, state and local Tax returns, in accordance with the allocation schedule. Seller and Purchaser shall cooperate in the preparation of any 1060 Forms and in the filing of such 1060 Forms in the manner required by law. Each of Seller and Purchaser shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. Any Purchase Price Adjustment pursuant to Section 3.4 shall also be allocated in accordance with the allocation schedule. 3.4 Purchase Price Adjustments ------------------------------- (a) No later than 60 days after the Closing Date, Seller shall deliver to Purchaser the Closing Date Statement setting forth the Net Worth Amount as of the Closing Date. The Closing Date Statement shall be prepared using the same accounting principles, policies and methods as Seller used in preparing the September 30, 2000 financial statements referred to in Section 4.4(a). Purchaser shall cooperate with Seller in connection with the 7 preparation of the Closing Date Statement. Purchaser shall have 30 days from its receipt of such statement to notify Seller of any objections to any item or items on the Closing Date Statement. Any such notice shall specify the item or items in dispute (a "Disputed Item" or "Disputed Items"). Any Disputed Item ------------- -------------- shall be resolved in the manner set forth in Section 3.4(b) below. If (A) Purchaser does not deliver to Seller its objections to the Closing Date Statement in writing within 30 days of its receipt of such statement, (B) Purchaser acknowledges in writing that the Closing Date Statement is accurate or (C) Purchaser and Seller resolve all Disputed Items in accordance with Section 3.4(b) below, then the Closing Date Statement shall be final, binding and conclusive on all parties. (b) If Purchaser and Seller shall be unable to resolve any Disputed Items within 30 days after notice from Seller to Purchaser that a dispute exists, then Seller's independent accounting representative, Deloitte & Touche LLC ("D&T") and Purchaser's independent accounting representative ("PR") (which --- -- shall be a "big five" accounting firm other than D&T) shall endeavor in good faith to resolve any Disputed Item(s). In the event that D&T and PR are unable to resolve the Disputed Item(s) within 30 days, D&T and PR shall together, within ten days thereafter, appoint a representative from a "big five" accounting firm (other than D&T or PR) to arbitrate the dispute (the "Arbitrator"). Seller and Purchaser shall, within the next 20 days thereafter, ---------- present their positions with respect to the Disputed Item(s) to the Arbitrator together with such other materials as the Arbitrator deems appropriate. The Arbitrator shall, after the submission of evidentiary materials, submit its written decision on each Disputed Item to Seller and Purchaser. Any determination by the Arbitrator with respect to any Disputed Item shall be final, binding and conclusive on each party to this Agreement. Except as specifically set forth to the contrary in this Section 3.4(b) or specifically agreed to by the parties in writing, the Arbitrator shall comply with, and the arbitration shall be conducted in Nevada in accordance with, the commercial arbitration rules of the American Arbitration Association ("AAA") as in effect --- for commercial arbitrations conducted in Nevada by the AAA. Seller and Purchaser agree that the cost of the Arbitrator shall be borne by the parties in proportion to the outcome of the arbitration in respect of the amount at issue. (c) If it is finally determined pursuant to the provisions of this Section 3.4 that there is a Deficiency, then within ten days after all Disputed Items with respect thereto have been resolved, Seller shall pay to Purchaser the amount of the Deficiency, and if it is finally determined pursuant to the provisions of this Section 3.4 that there is an Excess, then within ten days after all Disputed Items with respect thereto have been resolved, Purchaser shall pay to Seller the amount of the Excess (any such Deficiency or Excess, the "Purchase Price Adjustment Amount"); provided, however, that no adjustment shall -------------------------------- -------- ------- be made to the Purchase Price unless the amount of such Deficiency or Excess exceeds $250,000. (d) In addition to the adjustment to the Purchase Price for any Deficiency or Excess described in paragraph (c) above, the Purchase Price shall be reduced by $1,000,000 if Purchaser purchases insurance in respect of environmental exposures for events occurring prior to Closing on terms reasonably acceptable to Seller. 8 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- Seller represents and warrants to Purchaser as follows: 4.1 Corporate Existence ------------------------ Seller is duly organized and validly existing and in good standing under the laws of the State of Nevada. Seller has the requisite corporate power and authority to own, lease and operate its properties and assets, including the properties and assets included in the Purchased Assets, and to carry on the Water Business as the same is now being conducted, and is duly authorized, qualified or licensed to do business in every jurisdiction wherein, by reason of the nature of the Water Business, the same is required. 4.2 Corporate Authority ------------------------ This Agreement and the other agreements, instruments and documents to be executed, delivered and/or filed in connection herewith (collectively with this Agreement, the "Transaction Documents") to which Seller is a party and the --------------------- consummation of the transactions contemplated hereby and thereby involving such persons have been or, in the case of the other Transaction Documents will be prior to the Closing, duly authorized by the Board of Directors (or a duly authorized committee or representative thereof) of Seller by all requisite corporate, shareholder, partnership or other action prior to the Closing, and Seller has full power and authority to execute, deliver and/or file the Transaction Documents to which it is a party and to perform its obligations hereunder or thereunder. This Agreement has been duly executed and delivered by Seller, and the other Transaction Documents will be duly executed, delivered and/or filed by Seller, and this Agreement constitutes, and the other Transaction Documents when so executed, delivered and/or filed will constitute, valid and legally binding obligations of Seller, enforceable against it or them, as the case may be, in accordance with its terms except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 4.3 Conflicts; Required Consents --------------------------------- Except (a) for any applicable laws or regulations relating to antitrust or competition (collectively, "Antitrust Regulations"), (b) Laws, --------------------- practices and Orders of any state public utility control or public service commissions or similar state regulatory bodies ("PUCs"), each of which is ---- identified in Schedule 4.3, (c) Laws, practices and Orders of any state ------------ departments of public health or departments of health or similar state regulatory bodies or of any federal or state regulatory body having jurisdiction over environmental protection or environmental conservation or similar matters ("Health Agencies"), each of which is identified in Schedule 4.3, (d) as --------------- ------------ otherwise set forth in Schedule 4.3 and (e) any approvals or consents of ------------ Purchaser or its Affiliates required pursuant to its Joint Powers Agreement, the execution, delivery and/or filing of this Agreement and the other Transaction Documents by Seller and the 9 consummation by Seller of the transactions contemplated hereby and thereby will not (A) violate or conflict with any provision of the respective certificate of incorporation or by-laws or similar organizational documents of Seller or any of its Subsidiaries, (B) result in any breach or constitute any material default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or a loss of a material benefit under, or result in the creation of any Lien (including any Lien for unpaid Taxes) under, any Contract or any license or permit to which Seller is subject or is a party and which is a part of the Purchased Assets or necessary or useful in the operation of the Water Business, (C) violate, conflict with or result in any breach under any provision of any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Seller, the Purchased Assets or the Water Business, or (D) require any consent, approval, order or authorization of, license or permit from, notice to or registration, declaration or filing with, (each of the foregoing, a "Consent") ------- any United States or foreign, federal, state, provincial, county, municipal or local government agency, board, bureau, department, court of competent jurisdiction, administrative agency or commission or other governmental or regulatory authority or instrumentality (other than Purchaser or its Affiliates) ("Governmental Authority") or any third party. ---------------------- 4.4 Financial Statements ------------------------- (a) Schedule 4.4 presents an accounting of the Purchased Assets and Assumed Liabilities as of December 31, 1999 and September 30, 2000 (the "Balance ------- Sheet Date"), and the related pro forma and pretax consolidated statements of - ---------- income for the fiscal year and the nine-month period, respectively, ended on such respective date (collectively, the "Financial Statements"). The Financial -------------------- Statements present fairly in all material respects the financial condition and the results of operations of Seller or the Water Business, as the case may be, as of such date and for such period in accordance with GAAP, except that the statements do not include all of the information required to be included in the footnotes required by GAAP and, in the case of the financial statements as at and for the period ended September 30, 2000, are subject to year-end adjustments which adjustments to the knowledge of the Seller will not be material. (b) Seller makes no representation with respect to any financial information delivered to Purchaser other than as contained in or pursuant to this Agreement. 4.5 Absence of Certain Changes ------------------------------- Since September 30, 2000, the Water Business has been conducted in all material respects in the ordinary course and in substantially the same manner as previously conducted, except as set forth on Schedule 4.5. 4.6 Properties --------------- (a) Seller has, or at the Closing will have, good title to the personal property owned by Seller in respect of the Water Business, free and clear of all Liens, except Permitted Liens. 10 (b) Schedule 4.6(b) contains a list of all fee interests in real --------------- property owned by Seller and used in connection with the Water Business ("Owned ----- Real Property") and all material easements, rights-of-way and other interests in - ------------- real property owned or held by Seller and used or held for use in connection with the Water Business other than Water Rights ("Other Real Property ------------------- Interests") or leased by Seller in respect of the Water Business as lessee or - --------- lessor ("Leased Real Property" and, together with Owned Real Property and Other -------------------- Real Property Interests, the "Real Property"), including all buildings, ------------- structures and other improvements situated thereon. Except as set forth in Schedule 4.6(b), Seller holds good and marketable title to the Owned Real - --------------- Property free and clear of all Liens except (i) Permitted Liens, and (ii) Liens described on Schedule 4.6(b), all of which will be terminated or released, at or --------------- prior to Closing. Except as disclosed on Schedule 4.6(b) and Schedule 4.7, --------------- ------------ Seller has valid and enforceable leasehold interests in all Leased Real Property and, with respect to Other Real Property Interests, has valid and enforceable rights to use such Other Real Property Interests, subject only to Permitted Liens. Except as disclosed on Schedule 4.6(b), Seller has a valid and enforceable right to assign each Leased Real Property and Other Real Property Interest to Purchaser without obtaining the approval or consent of any third party, including any Governmental Authority. Each parcel of Owned Real Property and each parcel of Leased Real Property and any improvements thereon (x) has access to and over public streets or private streets for which Seller has a valid right of ingress and egress, (y) conforms in its current use and occupancy to all material zoning requirements, and (z) conforms in its current use to all restrictive covenants, if any, or other Liens affecting all or part of such parcel. There are no pending condemnation, expropriation, eminent domain or similar proceedings of which Seller has received notice, or, to Seller's knowledge, affecting all or any portion of the Real Property. Except as disclosed on Schedule 4.6(b), each parcel of Owned Real Property and Leased Real --------------- Property, including any improvements located thereon, complies in all material respects with all building codes, fire codes and other Laws concerning the use, occupancy and physical condition of the Real Property, including the Americans with Disabilities Act. The Real Property represents all interests in real property necessary to operate the Water Business as it is currently being operated. Seller has not disposed of, or taken any steps to dispose of, the Real Property and is not under any commitment to dispose of it in whole or in part. There are no pending actions, suits or proceedings of which Seller has received written notice, or, to Seller's knowledge, affecting or relating to the Owned Real Property, Leased Real Property or material Other Real Property Interests, in any court or before any federal, state, county or municipal department, commission, board, bureau or agency or other Governmental Authority. (c) Schedule 4.6(c) contains a list of all material interests in water --------------- owned by Seller in respect of the Water Business including those Water Rights associated with the Hydro Assets (the "Owned Water Rights") or material water ------------------ rights leased, licensed or otherwise available to Seller in respect of the Water Business (the "Leased Water Rights" and, together with the Owned Water Rights, ------------------- the "Water Rights"). Seller will deliver to Purchaser on the Closing Date in the ------------ form of a quitclaim deed all of its right, title and interest in the Owned Water Rights (other than the Water Rights associated with the Hydro Assets which shall be transferred in accordance with the provisions of Section 2.5) and as soon as practicable thereafter all of its right, title and interest in the Leased Water Rights by means of assignment of the Water Sale Agreements and Treatment and Distribution Agreements in respect of such Leased Water Rights as set forth on Schedule 4.7. Seller warrants that the Water Rights listed in Schedule 4.6(c), - ------------ --------------- 11 together with the Leased Water Rights and the Hydro Assets Water Rights, all of which are to be conveyed as is pursuant to this Agreement, are adequate to support the current operation of the Water Business. Seller agrees to indemnify Purchaser for 50% of the entire amount, up to a maximum of $2,500,000, of Purchaser Losses resulting from any defect in title with respect to the 1700 acre feet of Water Rights referred to in Schedule 4.8, and such indemnification shall not be subject to the Deductible or the Minimum Claim Threshold. (d) Seller shall deliver to Purchaser a deed by which Seller conveys to Purchaser the dam, outlet channel, spillway channel, flashboard structure and controlling works at Independence Lake and related easements (the "Conveyed -------- Property") which shall include a covenant, for the benefit of the Conveyed - -------- Property and which burdens the Independence Lake Real Property listed on Exhibit C, providing that (i) neither Seller, as owner of the Independence Lake Real Property, nor its successors in ownership may use such property in any manner that unreasonably causes harm to the operation of the Water Business and (ii) Seller as the owner of the Independence Lake Real Property for itself and its successors in ownership waives all present and future rights to object to Purchaser's operation of the Conveyed Property pursuant to the Independence Lake appropriative water rights that are conveyed to Purchaser and any resulting water levels of Independence Lake, including, without limitation, any drawdown of the lake level below the sill of the dam. 4.7 Contracts -------------- (a) Except as otherwise disclosed in Schedule 4.6(b) (Owned and Leased --------------- Real Properties), Schedule 4.9 (Intellectual Property Rights) and Schedule ------------ -------- 4.12(a) (Employment & Benefits) (collectively, the "Covered Schedules") and - ------- ----------------- Schedule 4.7, and except for Liens that will be released prior to Closing, as of - ------------- the date hereof there are, no commitments, contracts or groups of related contracts, indentures and agreements, or any notes, bonds, mortgages, indentures, deeds of trust, licenses, franchises, permits, concessions, leases or other instruments evidenced in writing, to which Seller is a party or by which Seller is bound that relates to the Water Business (hereinafter "Contracts") that (i) involve commitments by Seller for terms of one year or --------- longer and that involve or are reasonably likely to involve payment by Seller or to Seller in each case of more than $100,000 in the aggregate, (ii) involve obligations of Seller for borrowed money or to maintain deposits or advances of any kind as evidenced by bonds, debentures, notes or similar instruments or guarantees or capital lease obligations or any other obligations upon which interest charges are customarily paid, other than those entered into in the ordinary course of business, (iii) involve any non-compete agreement that will be applicable to the Purchased Assets or Purchaser following the Closing or (iv) constitute joint venture or partnership agreements. Contracts disclosed or required to be disclosed in the Covered Schedules or in Schedule 4.7 are ------------ hereafter referred to as the "Disclosed Contracts". ------------------- (b) Seller has furnished or made available to Purchaser a copy or summary of the material terms of each Disclosed Contract. Each Disclosed Contract is valid and in full force and effect according to its terms and Seller is not in default or breach under any such Disclosed Contract, except as set forth on Schedule 4.7. ------------ 12 4.8 Litigation --------------- As of the date of this Agreement, Seller is not subject to any Order relating to the Purchased Assets except as set forth on Schedule 4.8. Except as set forth in Schedule 4.8, no claim, legal action, suit, arbitration, ------------ governmental investigation, action or other legal or administrative proceeding is pending or, to the knowledge of Seller, threatened in law or in equity, or before any Governmental Authority, against Seller or any of its Subsidiaries (a) which is reasonably expected to enjoin or materially delay the consummation of the Purchase, (b) involving alleged violations of laws or regulations for the health or safety of employees or others, (c) involving equal employment opportunity, discrimination, ADA or similar claim or litigation, (d) involving antitrust claims or litigation, (e) involving claims or litigation seeking injunctive relief, or (f) involving the Water Business, Purchased Assets, or employees involved in the Water Business or which could otherwise materially affect the transactions contemplated by this Agreement. 4.9 Intellectual Property Rights --------------------------------- All of the registrations and applications for patents, trademarks and copyrights owned by Seller and necessary for the operation of the Water Business and/or all licenses or other agreements concerning Intellectual Property (as defined below) material to the operation of the Water Business to which Seller is a party are set forth on Schedule 4.9. Except as set forth on Schedule 4.9, ------------ ------------ (i) Seller owns or has the right to use all patents, inventions, discoveries, technology, copyrights, software, trademarks, service marks, trade names, corporate names, trade dress, trade secrets and all other intellectual property rights ("Intellectual Property") material to the operation of the Water Business --------------------- as currently conducted (such Intellectual Property, the "Water Business -------------- Intellectual Property"); (ii) Seller has taken all reasonably necessary actions - --------------------- to preserve and maintain its Water Business Intellectual Property; (iii) Seller has not received any written notices nor does Seller have other knowledge of any claim of infringement, misappropriation, challenge, violation, or conflict ("Infringement") with respect to the Water Business Intellectual Property; (iv) ------------ to Seller's knowledge, the Water Business Intellectual Property does not infringe the Intellectual Property of any third parties; and (v) Seller has the right, subject to any consents and approvals in respect thereof, to transfer to Purchaser all of the Water Business Intellectual Property included as Purchased Assets under this Agreement. 4.10 Insurance -------------- Seller is, and at all times during the past two years has been, insured with reputable insurers (or self-insured) against all risks normally insured against by companies in similar lines of business, and all material policies of fire, liability, workers' compensation and other forms of insurance purchased or held by and insuring the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. 13 4.11 Tax Matters ---------------- There is no liability for Taxes in respect of the Purchased Assets except as provided for in Section 2.3. 4.12 Employment and Benefits ---------------------------- (a) Seller has previously delivered to the Purchaser copies of all labor union and collective bargaining agreements relating to the Purchased Assets to which the Seller is a party or is subject. With respect to its employees associated with the Purchased Assets, Schedule 4.12(a) sets forth a ---------------- list of each material "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), ----- and all severance, change in control or employment plans, programs or agreements, and vacation, incentive, bonus, stock option, stock purchase, and restricted stock plans, programs or policies under which any employee or former employee of the Water Business has any present or future right to benefits and under which Seller has had or has any present or future liability (collectively, the "Seller Plans"), to Seller's knowledge: (i) Seller is in compliance, in all ------------ material respects, with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours; (ii) Seller has not received written notice of any unfair labor practice complaint against Seller pending before the National Labor Relations Board; (iii) there is no labor strike, slowdown or stoppage actually pending or threatened against or affecting Seller; (iv) Seller has not received notice that any representation petition respecting the employees of Seller has been filed with the National Labor Relations Board; (v) no arbitration proceeding arising out of or under collective bargaining agreements is pending against Seller; and (vi) Seller has never experienced any primary work stoppage. (b) With respect to each Seller Plan, Seller has made available to Purchaser a current, accurate and complete copy thereof and, to the extent applicable: (i) the most recent determination letter, if applicable; (ii) any summary plan description; and (iii) for the two most recent years (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports, if applicable. (c) Except as set forth in Schedule 4.12(c), with respect to its ---------------- employees associated with the Purchased Assets, the Seller Plans are in compliance in all material respects with all applicable requirements of ERISA, the Code, and other applicable laws and have been administered in accordance with their terms and such laws. Each Seller Plan which is intended to be qualified within the meaning of Section 401 of the Code has received a favorable determination letter as to its qualification, and, to the knowledge of Seller, nothing has occurred that could reasonably be expected to affect such qualification. 4.13 Compliance with Laws -------------------- Except as set forth on Schedule 4.13, (a) the Water Business is ------------- conducted by Seller in compliance in all material respects with all statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto, and (b) all filings required to be made by Seller in respect of the Water Business under any applicable Laws or Orders relating to the regulation of public utilities, have been filed with the appropriate PUC or Health Agency or any other 14 appropriate Governmental Authority, as the case may be, including all forms, statements, reports, agreements (oral or written) and all documents, exhibits, amendments and supplements appertaining thereto, including but not limited to all rates, tariffs franchises, service agreements and related documents and all such filings complied, as of their respective dates, in all material respects with all applicable requirements of the appropriate Laws or Orders. 4.14 Environmental Matters ------------------------------ Seller has made available to Purchaser (and Purchaser may provide to its environmental insurance provider(s)) copies of Phase I environmental site assessments in Seller's possession or control for certain of the real property included in the Purchased Assets. Except as provided therein or in Schedule -------- 4.14, to the knowledge of Seller: - ---- (a) Seller holds and is in compliance in all material respects with all permits, licenses and governmental authorizations required for Seller to construct and to operate the Purchased Assets under Environmental Laws, and all such permits, licenses and governmental authorizations are in good standing or, where applicable, a renewal application has been timely filed and is pending agency approval, and Seller is otherwise in compliance with all Environmental Laws with respect to the Purchased Assets, including, without limitation, the possession of and compliance with all permits required under Environmental Laws; (b) Seller has not received any written request for information, or been notified in writing that it is a potentially responsible party under CERCLA or any similar state law with respect to any of the Purchased Assets, and Seller has not received any written communication that alleges that Seller, solely with respect to the Purchased Assets, is not in compliance with applicable Environmental Laws; (c) Seller has no knowledge of any Environmental Claim pending (i) against Seller in respect to the Purchased Assets, or (ii) against any of the Purchased Assets that the Seller owns or operates. (d) There are no Releases of any Hazardous Material that would reasonably be expected to form the basis of any Environmental Claims against the Seller in respect to the Purchased Assets; (e) with respect to the Purchased Assets, Seller has not entered into or agreed to any consent decree or order, and is not subject to any judgment, decree or judicial order relating to compliance with any Environmental Law or to the investigation or cleanup of Hazardous Materials under any Environmental Law; and (f) the representations and warranties made in this Section are Seller's exclusive representations and warranties relating to environmental matters. "Environmental Claims" means any and all written -------------------- administrative, regulatory or judicial actions, suits, demand, demand letters, claims, liens, proceedings or notices of noncompliance or violation by any person or entity (including any Governmental Authority) alleging potential liability (including, without limitation, potential liability for enforcement, 15 damages, contribution, indemnification, cost recovery, compensation, injunctive relief, cleanup costs, governmental resource costs, removal costs, remedial costs, natural resources damages, property damages, personal injuries or penalties) arising out of, based on or resulting from (A) the presence, or Release or threatened Release into the environment, of any Hazardous Materials relating to ownership or operation of the Purchased Assets; or (B) any violation of any Environmental Law related to the ownership or operation of the Purchased Assets; or (C) any and all claims by any third party resulting from the presence or release of any Hazardous Materials related to the Purchased Assets. "Environmental Law" means any currently applicable federal, state ----------------- or local laws, statutes, regulations, codes, or ordinances relating to, or imposing standards regarding, pollution or the protection of human health (as relating to the environment) or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws and regulations relating to Releases or threatened Releases of Hazardous Materials, or otherwise relating to the treatment, storage or disposal of Hazardous Materials. "Hazardous Materials" means any hazardous or toxic substance, ------------------- material or waste defined, listed, or classified as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect, by any Environmental Laws, including, without limitation, friable asbestos, petroleum or petroleum products, and transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls, and including any other chemical material, substances or waste, exposure to which is now prohibited, limited or regulated under Environmental Law. "Release" shall be defined as that term is defined in 42 ------- U.S.C. (S) 9601 (22). 4.15 Undisclosed Liabilities -------------------------------- Seller has no liabilities or obligations relating to the Water Business or operation of the Purchased Assets (whether absolute, accrued, contingent or otherwise) of a nature required by GAAP to be reflected in a balance sheet or disclosed in the notes thereto, except (i) as are set forth or reflected in the Financial Statements (or described in the notes thereto), (ii) liabilities incurred in the ordinary course of business since the Balance Sheet Date, (iii) liabilities disclosed in Schedule 4.15 or any other Schedule hereto, (iv) liabilities under Contracts disclosed in the Schedules to this Agreement and (v) liabilities under Contracts not required to be disclosed in the Schedules to this Agreement. 4.16 Finders; Brokers ------------------------- With the exception of fees and expenses payable to Lehman Brothers Inc., which shall be Seller's sole responsibility and with respect to which Seller will indemnify and hold Purchaser harmless, Seller has not employed any finder or broker in connection with the Purchase who would have a valid claim for a fee or commission from Purchaser in connection with the Purchase. 16 ARTICLE V REPRESENTATIONS OF PURCHASER ---------------------------- Purchaser represents and warrants to Seller as follows: 5.1 Corporate Existence ------------------------ Purchaser is a duly organized political subdivision of the State of Nevada and is validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder. Other than as would not reasonably be expected to have a Purchaser Material Adverse Effect (as defined in Section 5.3), as of the Closing Date and, with respect to the Hydro Assets, as of the actual date of transfer of such Hydro Assets, Purchaser will have the requisite corporate, partnership or similar power and authority to own, lease and operate the Purchased Assets, and to carry on the Water Business in substantially the same manner as the same is now being conducted by Seller and its Subsidiaries. 5.2 Corporate Authority ------------------------ This Agreement and the other Transaction Documents to which Purchaser is a party and the consummation of the transactions contemplated hereby and thereby involving such persons have been or, in the case of the other Transaction Documents, will be prior to the Closing, duly authorized by Purchaser, and Purchaser, will have at or prior to the Closing full power and authority to execute, deliver and/or file the Transaction Documents to which it is a party and to perform its obligations hereunder or thereunder. This Agreement has been duly executed and delivered by Purchaser, and the other Transaction Documents will be duly executed, delivered and/or filed by Purchaser, and this Agreement constitutes, and the other Transaction Documents when so executed, delivered and/or filed will constitute, a valid and legally binding obligation of Purchaser, enforceable against it or them, as the case may be, in accordance with its terms except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. The execution, delivery and/or filing of this Agreement and the other Transaction Documents by Purchaser and the consummation by Purchaser of the transactions contemplated hereby and thereby will not (A) violate or conflict with any provision of the respective certificate of incorporation or by-laws or similar organizational documents of Purchaser, (B) result in any breach or constitute any material default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a material benefit under, or result in the creation of any Lien under any contract, indenture, mortgage, lease, note or other agreement or instrument to which Purchaser is subject or is a party, or (C) violate, conflict with or result in any breach under any provision of any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Purchaser or any of its respective properties or assets. 17 5.3 Governmental Approvals and Consents ---------------------------------------- Purchaser is not subject to any order, judgment or decree which would prevent the consummation of the Purchase. No claim, legal action, suit, arbitration, governmental investigation, action or other legal or administrative proceeding is pending or, to the knowledge of Purchaser, threatened against Purchaser which would enjoin or delay the consummation of the Purchase or prevent Purchaser from entering into the TROA. Except for any consents required under any applicable Antitrust Regulations, any consents required for Seller to transfer the assets, and approval of the issuance of bonds and filings associated with the issuance of those bonds of Purchaser's Board of Directors, no consent, approval, order or authorization of, license or permit from, notice to or registration, declaration or filing with, any Governmental Authority, is required on the part of Purchaser in connection with the execution, delivery and/or filing of this Agreement or any of the other Transaction Documents or the consummation of the transactions contemplated hereby and thereby except for such consents, approvals, orders or authorizations of, licenses or permits, filings or notices which have been obtained and remain in full force and effect, and those with respect to which the failure to have obtained or to remain in full force and effect would not, individually or in the aggregate, have a material adverse effect on the ability of Purchaser to consummate the transactions contemplated hereby and thereby (a "Purchaser Material Adverse Effect"). --------------------------------- 5.4 Funding of Expenses Prior to Closing and Break-Up Fee ---------------------------------------------------------- Purchaser has made arrangements to pay for the expenses of its financial, tax, accounting, legal, environmental, engineering and any other advisors necessary to consummate this transaction (collectively, "Purchaser --------- Expenses") with respect to the period from the date of execution hereof through - -------- February 15, 2002, and Purchaser agrees to recommend to its members ("Members") ------- to approve, within the three day period referred to in Section 6.18(a), arrangements for the payment of all Purchaser Expenses incurred through and including the Closing Date and the fee referred to in Section 11.1(b). 5.5 Financial Capacity ----------------------- Subject to the provisions of Section 6.13, Purchaser will have available on the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby. The City of Reno has delivered a resolution to the effect that it will act as a conduit financing vehicle. Purchaser has the authority to issue revenue bonds for the purpose of purchasing the Purchased Assets and such bonds could be structured as bonds whose interest is excluded from gross income for federal income tax purposes. 5.6 Finders; Brokers --------------------- Purchaser has not employed any finder or broker in connection with the Purchase who would have a valid claim for a fee or commission from Seller in connection with the Purchase. 18 ARTICLE VI AGREEMENTS OF PURCHASER AND SELLER ---------------------------------- 6.1 Operation of the Water Business ------------------------------------ Except as otherwise contemplated by this Agreement or as disclosed in Schedule 6.1, Seller covenants that, in respect of the Water Business, until the Closing and, with respect to the Hydro Assets, until the date of transfer thereof, it shall use commercially reasonable efforts to operate and maintain the Purchased Assets according to the ordinary and usual course of business consistent with past practice, including, without limitation, continuing its efforts to complete the TROA, the most recent draft of which is contained in Schedule 7.1. Seller shall not, without the prior written approval of Purchaser - ------------ (which approval shall not be unreasonably withheld) or as otherwise contemplated by this Agreement and the Schedules hereto, take any of the following actions with regard to the Purchased Assets or the Water Business: (a) sell, lease (as lessor or lessee) transfer or otherwise dispose of any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with good industry practice or mortgage or pledge, impose or suffer to be imposed any encumbrance on any Purchased Assets; (b) except in the ordinary course of business consistent with past practice or as required by law or contractual obligations (i) create, incur or assume any material long-term indebtedness for borrowed money (including obligations in respect of capital leases), (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for any obligations of any person other than Seller or (iii) make any loans, advances or capital contributions to or investments in any person (except for customary loans or advances to employees not exceeding $500,000 in the aggregate), in each case that would be a liability or asset of the Water Business and reflected on the Closing Date Statement; provided, however, that no -------- ------- obligations described in clauses (i) or (ii) shall become Assumed Liabilities. (c) (i) grant any increase in the compensation of employees of the Water Business in excess of $500,000 in the aggregate, except for increases in the compensation of employees (A) scheduled as of the date hereof that are consistent with past practice, (B) as a result of existing collective bargaining agreements or collective bargaining or (C) as required by applicable law from time to time in effect or by any Benefit Plan as in effect on the date hereof, (ii) increase the number of employment positions, (iii) enter into any new material employment, severance or other compensation agreement with any existing employee or (iv) commit to any additional pension, profit-sharing, deferred compensation, group insurance, severance pay, retirement or other employee benefit plan, fund or similar arrangement or amend, or commit itself to amend any of such plans, funds or similar arrangements; (d) cancel any material third party indebtedness owed to Seller in respect of the Water Business; (e) acquire any assets (other than inventory) of the type used in the Water Business which are material, individually or in the aggregate, to the Water Business taken as a 19 whole; provided, however, that the foregoing shall not prohibit any merger, acquisition or other business combination by or involving Seller which combination would not affect the obligations of Seller under this Agreement or the ability of Seller (or any successor entity) to perform such obligations; (f) enter into any contract, agreement or other commitment relating exclusively to the Water Business which is not terminable by the parties upon 30 days' notice or less or which involves aggregate consideration in excess of $25,000 except as set forth on Schedule 6.1; ------------ (g) make, agree to or arrange for any individual capital expenditure in respect of the Water Business in excess of $500,000 in the aggregate, except that Seller shall make any capital expenditures (i) that it has agreed to or arranged for prior to the date of this Agreement and set forth on Schedule 6.1, ------------ (ii) pursuant to any customer annexation agreements or for line extensions set forth on Schedule 6.1, or contributions in aid of construction of new facilities ------------ consented to by Purchaser, whose consent shall not be unreasonably withheld; (iii) requested by Purchaser that Purchaser agrees to reimburse or (iv) deemed necessary by Seller and consented to in writing by Purchaser, whose consent shall not be unreasonably withheld; provided however, that if Purchaser requests that Seller make enhancements with a cost in excess of the cost of any necessary capital expenditure, Purchaser shall reimburse Seller for the cost of such enhancement; (h) make any change in its accounting standards or methods; or (i) agree, whether in writing or otherwise, to do any of the above. 6.2 Investigation of Business ------------------------------ (a) Seller shall, and shall cause its Subsidiaries to, permit Purchaser and its authorized agents or representatives, including its independent accountants, to have reasonable access to the properties, books and records of the Water Business at reasonable hours to review information and documentation relative to the properties, books, contracts, commitments and other records of the Water Business; provided that such investigation shall only -------- be upon reasonable notice and shall not unreasonably disrupt personnel and operations of Seller and its Subsidiaries; and provided, further, that Seller -------- ------- and Purchaser shall each designate a single contact person to manage the transition from Seller to Purchaser, and Purchaser shall be allowed to contact such designated contact person without providing any notice. All notices and requests for access to the offices, properties, books and records of Seller and its Subsidiaries shall be made to the designated contact person or such other representatives of Seller as Seller shall designate in writing after the date of this Agreement, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. It is further agreed that neither Purchaser nor its Affiliates or representatives shall contact any of the employees, customers, suppliers, joint venture partners or other Subsidiaries or Affiliates of Seller in connection with the transactions contemplated hereby, whether in person or by telephone, mail or other means of communication, without the specific prior authorization of such representatives of Seller, which authorization will not be unreasonably withheld. 20 (b) Within seven days following the date of this Agreement and throughout the due diligence period (which shall last from the date hereof through the Closing and shall be referred to herein as the "Due Diligence ------------- Period"), Seller shall use commercially reasonable efforts to make available to - ------ Purchaser and Purchaser's agents and consultants for inspection at Seller's Virtual Data Room (or at such other location mutually agreed to by the parties) the following documents and information to the extent they are in the possession and control of Seller or Seller's agents and representatives: all Contracts pertaining to Real Property including leases; all insurance policies pertaining to the Real Property; all records pertaining to maintenance and repair of the Real Property; any tax protests, notices of assessment or levy of Taxes, and tax bills, concerning Real Property, prepared or received since January 1997; any appraisals of Real Property; any architectural, construction, engineering, "as- built" or other plans and specifications concerning improvements on Real Property; any notices of condemnation proceedings or exercise of eminent domain power; any architectural, engineering, soils, environmental or other professional reports concerning Real Property; documents concerning any potential zoning, building or fire code or other violation of Law pertaining to any improvements on Real Property; any title commitments, title reports, title policies and surveys concerning any Real Property; a legal description and, if available, address, for each parcel of Owned Real Property and Leased Real Property. Seller agrees to provide Purchaser with copies of any of the documents or information identified in this Section at Purchaser's request, within five business days following Seller's receipt of a request for copies from Purchaser. (c) Purchaser and its representatives will hold in confidence all confidential information obtained from Seller and its Subsidiaries or their respective officers, agents, representatives or employees whether or not relating to the Water Business, in accordance with the provisions of the non- disclosure letters between the Members and Seller (the "Confidentiality --------------- Agreements"); provided however that Purchaser may reasonably disclose such - ---------- -------- ------- information as is required in order to comply with applicable law or to finance the transaction as required by Section 6.13. Purchaser shall consult with Seller prior to any such disclosure. The Confidentiality Agreement and all its provisions shall remain in full force and effect following the execution of this Agreement. The parties hereto agree to negotiate the extent to which the Confidentiality Agreements shall stay in effect after the Closing Date. 6.3 Commercially Reasonable Efforts; Cooperation; No Inconsistent Action ------------------------------------------------------------------------- Subject to the terms and conditions hereof, Seller and Purchaser agree to use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement and the Transaction Documents and to cause the conditions to each party's obligation to close the transactions contemplated hereby as set forth in Article VIII to be satisfied, including, without limitation, obtaining all Consents, including licenses, certificates, permits, approvals, clearances, expirations or terminations of applicable waiting periods, authorizations, qualifications and orders, and compliance with any Law or Order of any PUC, Health Agency or other Governmental Authority listed on Schedule 8.1 and to ------------ obtain all other Consents described and defined in Section 4.3 or listed on Schedule 4.3 (it being understood that the failure to obtain any such Consents - ------------ shall not cause the condition set forth in Section 8.3(b) to be deemed not to be satisfied but may form the basis for indemnification rights 21 under this Agreement). From time to time after the date hereof, without further consideration, Seller shall, at its own expense, execute and deliver such documents to Purchaser as Purchaser may reasonably request in order more effectively to vest in Purchaser good title to the Purchased Assets. From time to time after the date hereof, Purchaser shall, at its own expense, execute and deliver such documents to Seller as Seller may reasonably request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. 6.4 Public Disclosures ----------------------- Except to the extent otherwise required by applicable law and except as permitted under Section 6.2, regulation or legal process or by obligations pursuant to any listing agreement with or rules of any securities exchange, prior to the Closing Date and, with respect to the Hydro Assets, the date of transfer thereof, neither party to this Agreement nor any of their respective Affiliates will issue any press release or make any other public disclosures concerning the transactions contemplated hereby or the contents of this Agreement without consulting with the other party. 6.5 Access to Records and Personnel ------------------------------------ (a) The parties shall retain the books, records, documents, instruments, accounts, correspondence, writings, evidences of title and other papers relating to the Water Business and the Purchased Assets in their possession (the "Books and Records") for at least seven years following the ----------------- Closing Date or for such longer period as may be required by law or any applicable court order or until the expiration of the relevant representation or warranty under any of the Transaction Documents. (b) The parties will allow each other reasonable access to such Books and Records, or copies thereof, and to personnel having knowledge of the whereabouts and/or contents of such Books and Records and other relevant information, for legitimate business reasons, such as the preparation of Tax Returns or the defense of litigation. The disclosing party shall be entitled to recover from the requesting party its out-of-pocket costs (including copying costs) incurred in providing such Books and Records and/or personnel to the other party. The requesting party will hold in confidence all confidential information identified as such by, and obtained from, the disclosing party, any of its officers, agents, representatives or employees, provided, however, that -------- ------- information of the type which would be excluded from the confidentiality provisions of the Confidentiality Agreement in accordance with such agreement shall not be deemed to be confidential information for purposes of this Section 6.5. (c) Nothing in this Section 6.5 shall require either party to violate any agreement with any third parties regarding the confidentiality of confidential and proprietary information; provided, however, that in the event -------- ------ that either party is required under this Section 6.5 to disclose any such information, that party shall use all commercially reasonable efforts to seek to obtain such third party's consent to the disclosure of such information. 22 6.6 Employee Relations and Benefits ------------------------------------ (a) Seller has made available to Purchaser a summary of all employees related to the Water Business, including data on salaries and years of service, organized according to MPAT and bargaining unit. (b) Purchaser shall make a Qualifying Offer of Employment (as defined herein) commencing on the Closing Date to all Assigned MPAT Employees, including those on personal time off, or leave of absence who were employed by Seller on the day immediately preceding such Closing Date. Purchaser shall make a Qualifying Offer of Employment (as defined herein) commencing on the date of recovery from disability to any Assigned MPAT Employee on disability on the Closing Date provided such Employee recovers from disability and is medically determined to be fit to return to work within 18 months after the Closing Date. Those Assigned MPAT Employees who accept such offer of employment from Purchaser and who commence working with Purchaser on such Closing Date shall be referred to herein as "Transferred Management Employees." An offer of employment shall be -------------------------------- deemed a "Qualifying Offer of Employment" if (A) the proposed salary ------------------------------ compensation is at least 90% of the employee's base salary plus incentive compensation immediately prior to the Closing Date and (B) the proposed principal place of employment is within one hundred (100) miles of the employee's principal place of employment immediately prior to the Closing Date. (c) Purchaser shall maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation, welfare and benefit plans, programs, policies and fringe benefits covering Transferred Management Employees that will be of substantially similar value, in the aggregate, as those provided pursuant to those employee compensation, welfare and benefit plans, programs, policies and fringe benefits of the Seller for employees related to the Water Business as in effect immediately prior to the Closing Date. To the extent permissible under the terms of the Benefit Plans of Purchaser and as required by applicable law, the Purchaser shall waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Transferred Management Employees under any Benefit Plans of Purchaser that are welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Transferred Management Employees immediately prior to the Closing Date. (d) Purchaser and Seller agree to negotiate benefits plans for Transferred Management Employees that, to the extent permitted under Nevada law given Purchaser's status as a public employer and its participation in the Public Employees Retirement System in Nevada, provide in the aggregate for benefits, vesting, service credits, and eligibility that recognizes those Transferred Management Employees' past service with Seller; provided, however that such service with Seller shall not be recognized for purposes of benefit accrual in any Purchaser defined benefit pension plan or of any retiree medical plan. Purchaser shall maintain for a period of at least eighteen (18) months following the Closing Date, the Program Benefits of the Guide to the Water Business Divestiture Severance Program for MPAT Employees. 23 (e) Purchaser shall offer employment to begin as of the Closing Date to the Seller's employees ("IBEW 1245 Employees") who are covered by Seller's ------------------- new collective bargaining agreement with Local Union 1245 of the International Brotherhood of Electrical Workers (the "New IBEW Contract"). Purchaser shall ----------------- assume (as co-signator) Seller's obligations under the New IBEW Contract to the extent permitted under Nevada law given Purchaser's status as a public employer and its participation in the Public Employees Retirement System in Nevada, and in any event shall provide IBEW 1245 employees with compensation, welfare and benefit plans, programs, policies and fringe benefits that will be of substantially similar value in the aggregate to those provided by Seller under the New IBEW Contract. Benefits accrued under such Benefits Plans of Seller and all benefits currently payable as of the Closing Date shall be and shall remain the obligation of the Seller. Any individual covered under any such Benefit Plan of Seller that is a Group Health Plan (as defined in Section 49080B(g)(2) of the Code and Section 607(1) of ERISA) and who is eligible for continued coverage under such Group health Plan as of the Closing Date, shall continue to be covered under Seller's Group Health Plan after Closing pursuant to the provisions of COBRA. (f) Purchaser shall not, at any time prior to 60 days after the Closing Date, effectuate a "Plant Closing" or "mass layoff", as those terms are defined in the Worker Adjustment and Retraining Notification Act of 1988 ("WARN"), affecting in whole or in part any site of employment, facility, ---- operating unit or employee of Seller, without notifying Seller in advance and without complying with the notice requirements and other provisions of WARN. In addition, Purchaser shall provide a full defense to, and indemnify Seller for any loss, liability, claim, damage or expense (including attorney's fees and other costs of defense) which Seller may incur in connection with, any suit or claim of violation brought against Seller under WARN for any actions taken by Purchaser with regard to any site of employment, facility, operating unit or employee affected by this Agreement. (g) Purchaser agrees to provide any required notice under the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended, ("COBRA") ----- and any other applicable law on or after Closing. Purchaser shall indemnify and hold harmless Seller and its affiliates with respect to any liability under COBRA or other applicable law arising from the actions (or inactions) of Purchaser or its affiliates on or after the Closing Date and arising as a result of the transactions contemplated hereby. (h) Seller and all of its relevant Subsidiaries will comply with all duties to inform, consult and notify labor organizations prior to Closing and shall indemnify and keep indemnified Purchaser and its Affiliates from and against any costs, claims, charges, liabilities, demands, fines, penalties, compensation awards or expenses incurred by Purchaser or any of its Affiliates which are directly or indirectly attributable to any failure by Seller or any of its Subsidiaries to comply with such duties. (i) Purchaser shall indemnify, defend and hold Seller harmless from and against any and all claims, actions, suits, demands, proceedings, losses, expenses, damages, obligations and liabilities (including costs of collection, attorney's fees and other costs of defense) ("Damages") arising out of or ------- otherwise in respect of the failure of Purchaser to comply with its obligations under this Section 6.6, including any statutory obligations directly related to Purchaser's obligations under this Section 6.6; any suit or claim of violation brought against 24 Seller under WARN with regard to any site of employment, facility, operating unit or employee affected by this Agreement. 6.7 Post-Closing Arrangements ------------------------- On the Closing Date, Purchaser shall execute and deliver, and Seller or one or more Affiliates of Seller shall execute and deliver, transition services and shared service agreements (the "Interim Services Agreements") --------------------------- pursuant to which Seller or such Affiliates of Seller shall make available to Purchaser the support and administrative services set forth on Schedule 6.7. 6.8 Non-Competition --------------------- In order that Purchaser may have and enjoy the full benefit of the Water Business, Seller agrees that for a period of five years from the date hereof, Seller and its Subsidiaries will not, without the express written approval of Purchaser, engage in or otherwise have a material direct or indirect interest in any Competing Business (other than the Retained Businesses). For purposes of this Section 6.8, a business shall be deemed to be a "Competing --------- Business" if it is principally engaged in supplying or distributing water in the - -------- Reno-Sparks metropolitan area. Notwithstanding the foregoing, neither Seller nor its Subsidiaries shall be precluded from (i) having a passive investment representing less than 25% of the equity of any entity that is engaged in a Competing Business or (ii) acquiring, merging with or entering into any other business combination with a company the primary business of which is not a Competing Business. 6.9 Jointly Developed Intellectual Property --------------------------------------- It is understood that with respect to Intellectual Property based on inventions, discoveries, designs or writings made jointly by an employee or employees of the Water Business and an employee or employees of another business owned by Seller, Seller has determined, in the ordinary course of business, whether or not such Intellectual Property relates primarily to the Water Business or to another business owned by Seller. Schedule 4.9 includes all such ------------ jointly developed Intellectual Property relating primarily to the Water Business. It is agreed that such determinations are final and binding on Purchaser, and that Purchaser shall have no rights to any other jointly developed Intellectual Property. 6.10 No Other Representations or Warranties -------------------------------------------- Except for the representations and warranties contained in this Agreement or any document delivered pursuant to this Agreement, Purchaser acknowledges that neither Seller, the other Subsidiaries and Affiliates of Seller nor any other person makes any other express or implied representation or warranty with respect to the Purchased Assets, the Assumed Liabilities or otherwise or with respect to any other information provided to Purchaser, whether on behalf of Seller or such other persons, including as to (a) merchantability or fitness for any particular use or purpose, (b) the use of the Purchased Assets and the operation of the Water Business by Purchaser after the Closing in any manner other than as used and operated by Seller or (c) the probable success or profitability of the ownership, use or operation of the Water Business by 25 Purchaser after such Closing. Except for the representations and warranties contained in this Agreement or any document delivered pursuant to this Agreement, neither Seller nor any other person will have or be subject to any liability or indemnification obligation to Purchaser or any other person resulting from the distribution to Purchaser, or Purchaser's use of, any such information, including the Information Memorandum prepared by Lehman Brothers Inc. related to the Water Business and any information, document, or material made available to Purchaser in certain "data rooms," management presentations or in any other form in expectation of the transactions contemplated by this Agreement. 6.11 Insurance Matters ----------------- Purchaser acknowledges that the policies and insurance coverage maintained on behalf of the entities comprising the Water Business are part of the corporate insurance program maintained by Seller (the "Seller Corporate ---------------- Policies"), and such coverage will not be available or transferred to Purchaser. - -------- In furtherance and not in limitation of the foregoing, Purchaser agrees not to bring any claim for recovery under any of the Seller Corporate Policies, whether or not such person may be so entitled in accordance with the terms of such Seller Corporate Policies. Notwithstanding the foregoing, to the extent practicable Seller will cooperate with Purchaser to enforce any rights against environmental consultants and assist in obtaining any insurance recoveries under insurance policies of Purchaser relating to Environmental Claims. 6.12 Use of Seller's Names --------------------- After the Closing, neither Purchaser nor any of its Affiliates shall use "Sierra Pacific" or "Sierra" or any name or term confusingly similar to "Sierra Pacific" or "Sierra" in any corporate name or in connection with the operation of any business. Notwithstanding the foregoing, Purchaser shall have a period of time (which in no event is to exceed 60 days following the Closing Date) in which to remove or cover names including the words "Sierra Pacific" or "Sierra" and any trademarks, trade names, servicemarks, trade dress or logos relating to such names from all signs, billboards, advertising materials, telephone listings, labels, stationery, office forms and mastheads acquired in the Purchase; provided, however, that during such period of time such names, -------- ------- trademarks, trade names, servicemarks, trade dress and logos shall be used (i) only to the extent necessary to avoid financial hardship and (ii) only to the extent and in the manner that such names, trademarks, trade names, servicemarks, trade dress and logos were used by Seller as of immediately prior to the Closing Date. This Section 6.12 shall not be construed to prohibit Purchaser from using the words "Sierra Pacific" or "Sierra" in connection with the filing of any documents required by any Governmental Authority or to require Purchaser to remove "Sierra", "Sierra Pacific", "SPCo" or any similar name from any manhole cover, meter box or similar metal or plastic piece of property used in the Water Business, except for any transferred inventory of such items. Purchaser shall not install any new items with such a name. 6.13 Purchaser Financings -------------------- (a) Seller will provide such assistance as Purchaser may reasonably require in connection with the sale by Purchaser of any debt, whether public or private ("Purchaser Debt"), including, without limitation, at the request of -------------- Purchaser's managing underwriters, making 26 available in connection with any sale of Purchaser Debt at least one of its senior personnel who is familiar with the operations, finance and legal affairs of Seller and Seller's systems and at least one of its senior personnel who is familiar with the facilities and other property comprising the Water Business to assist Purchaser and its underwriters (i) in their preparation of any official statements, (ii) at the due diligence meetings with the underwriters or their representatives and (iii) at information meetings with potential investors. Such assistance shall be provided at such time and from time to time, and at such places, as shall be reasonably requested by Purchaser's managing underwriters and Purchaser. Purchaser shall use commercially reasonable efforts to market such Purchaser Debt. (b) Purchaser shall reimburse Seller for (i) the reasonable out-of pocket expenses of Seller's representatives, in the event the attendance of Seller's representatives at meetings pursuant to this Article shall become extensive, (ii) the reasonable out-of pocket expenses and fees of certified public accountants and experts employed pursuant to paragraph (a) above, which would not otherwise be incurred by Seller and (iii) any other out-of pocket expenses incurred by Seller in performing the duties set forth in paragraph (a) above. (c) Seller shall have the right to nominate three potential co- managers, all of whom shall be investment banks with national reputations, and if Seller nominates a slate of co-managers, Purchaser will hire one of such nominees as a co-manager to participate in the financing related to the Purchase and will provide such co-manager with an appropriate level of access to information and a market level of compensation. (d) Purchaser shall make every reasonable commercial effort to obtain financing through the issuance of tax-exempt bonds such that Purchaser shall have sufficient funds to pay the Purchase Price in full on and as of the Closing Date, including by approving the financing as and when procedurally required pursuant to the JPA Agreement after the execution of this Agreement and by making every commercially reasonable effort to market such bonds. Purchaser agrees to use the City of Reno as a conduit financing vehicle if Purchaser is unable to finance the transactions contemplated hereby without such support. In the event that Purchaser (or the City of Reno as a financing conduit) has not obtained financing at a weighted average rate not to exceed 7.2% (after giving effect to the cost of any bond insurance) on and as of the Closing Date, Purchaser shall have the right to terminate this Agreement by written notice to Seller and, upon such termination, shall have no further obligations or liabilities hereunder, except those set forth in Section 11.1(b). (e) Purchaser shall not permit its Members to exercise their options to become Purveyor Members (as defined in the JPA Agreement) as part of the financing of this transaction. 6.14 Post-Closing Cooperation ------------------------ (a) After the Closing, Purchaser will use commercially reasonable efforts to perform or effect all filings, notices or other documentary submissions of any kind required by any Governmental Authority in respect of the transactions contemplated by this Agreement, and Seller will provide Purchaser with any assistance reasonably requested by Purchaser in connection therewith. 27 (b) At or after the Closing, each of Purchaser and Seller shall grant such easements and rights of way to the other as requested by the other and are reasonably necessary for the operation in a manner consistent with such operations on the date hereof of (i) in the case of Purchaser, the Water Business and (ii) in the case of Seller, Seller's and its Affiliates' businesses other than the Water Business as of the date of this Agreement; provided -------- however, in the case of Purchaser, such easements and rights of way shall be - ------- limited to easements and rights of way across the Purchased Assets. 6.15 Risk of Loss. Seller shall bear the risk of loss to the Purchased ------------------ Assets until the Closing. After the Closing Purchaser shall bear the risk of loss. If any material casualty or damage occurs prior to the Closing to the Chalk Bluff or Glendale water treatment plants which renders either of them inoperable for a period in excess of seven (7) days, Purchaser shall have a right to terminate this Agreement. If (i) other damage occurs to the Purchased Assets as a result of a casualty occurring prior to Closing or (ii) a casualty resulting in either of such treatment plants being inoperable as stated above occurs but Purchaser elects not to exercise its right to terminate this Agreement, then Purchaser shall be entitled to a credit against the Purchase Price in the amount of the damage if the amount of the damage is not used to reduce the Net Worth calculation under Section 3.4. 6.16 Condemnation. If, subsequent to the date of this Agreement but prior ------------------ to Closing, Seller is served with a summons or other evidence of an action by a Governmental Authority (other than Purchaser or any of its Affiliates) to condemn any of the Real Property, if such condemnation results in a Seller Material Adverse Effect, Seller shall notify Purchaser immediately and Purchaser shall have the right, at its option, to terminate this Agreement by written notice to Seller. If Purchaser does not elect to terminate this Agreement, then (i) Purchaser shall have the right to defend such action or negotiate for, claim, contest and receive all damages with respect to the condemnation or taking, and (ii) at Closing, Purchaser shall be assigned all of Seller's rights to any damages or awards payable with respect to the condemnation or taking. 6.17 Real Property Investigation. --------------------------------- (a) At least 45 days prior to the Closing, Seller shall deliver to Purchaser an ALTA owner's title insurance policy (1992 form) for the Chalk Bluff and Glendale Water Treatment Plants, and at the closing with respect to the Hydro Assets Seller shall deliver to Purchaser an ALTA owner's title insurance policy (1992 form) for the Owned Real Property included in the Hydro Assets with respect to the Farad, Fleish, Verdi and Washoe Hydro Facilities and (ii) at the Closing with respect to each other parcel of Owned Real Property, a CLTA owner's title insurance policy (1992 form) (collectively, the "Title Commitments") by ----------------- First American Title of Nevada or its local agent or such other national title insurance company which is mutually acceptable to the parties (the "Title ----- Company"), together with legible copies of the vesting deed and all documents - ------- identified on the schedules of exceptions. Seller shall pay the cost of the premiums at Closing for ALTA or CLTA, as the case may be, extended coverage title insurance policies insuring Purchaser, or its designee, as owner of each parcel of Owned Real Property, in an amount equal to the fair market value of such parcel. As soon as practicable following the date of this Agreement Seller, at its expense, shall deliver to Purchaser, for each of the Chalk Bluff and Glendale Water Treatment Plants and the Farad, Fleish, Verdi and Washoe 28 Hydro Facilities a current ALTA survey sufficient to delete the standard survey exceptions in the Title Commitments. For those properties requiring specific easements pursuant to Section 6.14, Seller shall, at Seller's expense, provide additional surveys to describe such easements. The Surveys shall be certified to Purchaser and, if applicable, its designee. (b) Throughout the Due Diligence Period, Purchaser and Purchaser's agents and consultants shall have the right to enter into the Real Property to conduct any environmental, soils, mechanical, structural, and other tests, inspections and evaluations of the Real Property, including asbestos sampling, as Purchaser deems necessary to investigate the physical condition of the Real Property, provided that no Phase II or other invasive studies may be done without the prior written consent of Seller. Purchaser agrees to indemnify Seller and to hold Seller and Seller's agents and employees harmless from an against any and all losses, costs, damages, claims, or liabilities, including mechanic's and materialmen's liens and attorneys' fees, to the extent arising out of or in connection with Purchaser's inspection and investigation of the Real Property. Pursuant to this Section 6.17(b) and Section 6.2, Purchaser shall give Seller at least 24 hours' notice by telephone prior to each entry upon Real Property and Seller shall have a right to have a representative present during such entry. (c) If Purchaser notifies Seller at any time during the Due Diligence Period of any Lien (other than a Permitted Lien or a Lien set forth in Schedule 4.6(b)) or other matter affecting title to Owned Real Property which prevents access to or which could prevent or materially impede in any way the use or operation of any parcel of Owned Real Property for the purposes for which it currently is used or operated (each a "Title Defect"), Seller will use ------------ commercially reasonable efforts to (i) remove such Title Defect or (ii) with the consent of Purchaser in its reasonable discretion, cause the Title Company to irrevocably commit to insure over such Title Defect prior to Closing. If Seller is unable to remove a Title Defect that materially and adversely affects the operation of the Water Business, Purchaser and Seller shall enter into a written agreement at Closing obligating Seller to use commercially reasonable efforts to remedy the Title Defect following Closing, on terms satisfactory to Purchaser in its reasonable discretion, and obligating Seller to indemnify Purchaser for such Title Defect subject to the limitations set forth in Sections 10.1(a) and 10.2. The foregoing provisions shall not affect Purchaser's rights under this Agreement if such Title Defect constitutes a Seller Material Adverse Effect. 6.18 Approval of Fees and Expenses ----------------------------------- Purchaser agrees to use its best efforts to obtain from its Members, within three days after execution of this Agreement, (i) approval of the fees described in Section 11.1(b) and (ii) approval of and agreement to implement reasonable arrangements, including assessments against the Members of Purchaser if necessary, for payment of the Purchaser Expenses incurred through and including the Closing. 6.19 Tax-Exempt Bonds. ---------------------- Purchaser shall not substantially alter the use of the Purchased Assets so as to cause (a) interest on any of Seller's existing tax-exempt bonds to become includible in the gross income of the Seller for purposes of federal income taxation or (b) the disallowance of any 29 deductions for interest expense payable by Seller to which to which the Seller would otherwise be entitled. Purchaser shall fully cooperate with issuers of Seller's tax-exempt bonds and Seller and its counsel in connection with any audit, investigation or proceeding with respect to the tax-exempt bonds by the Internal Revenue Service or the SEC. 6.20 Environmental Insurance. ----------------------------- Purchaser shall obtain prior to the Closing, and shall maintain for a period of three years following the Closing, insurance coverage with respect to the Purchased Assets for exposures in respect of Environmental Claims arising from conditions existing or events occurring prior to the Closing, on terms reasonably satisfactory to Seller. ARTICLE VII PRELIMINARY SETTLEMENT AGREEMENT and DRAFT TRUCKEE RIVER OPERATING AGREEMENT --------------------------------------- 7.1 Assumption of Obligations ------------------------------- Purchaser shall assume, perform, fulfill and discharge all obligations of Seller under the Preliminary Settlement Agreement, including, without limitation, to enter into negotiations with respect to, and to become a party to, an operating agreement provided for in Section 205 of the Settlement Act which is in substantial conformity with the draft contained in Schedule 7.1. ------------ If such an operating agreement is executed by at least the United States, California, Nevada, the Pyramid Lake Paiute Tribe of Indians and Purchaser, Purchaser shall use its commercially reasonable efforts to satisfy or cause to be satisfied all conditions to the effectiveness of such an operating agreement. 7.2 Seller's Responsibility Until Closing ------------------------------------- Until the Closing, Seller shall use commercially reasonable efforts to complete a draft operating agreement which is consistent in all material respects with the TROA, shall inform Purchaser of all material developments with respect to negotiation of such agreement and such other information relating thereto as Purchaser may request from time to time, and shall not approve or execute any agreements relating thereto without the prior written consent of Purchaser, which shall not be unreasonably withheld. ARTICLE VIII CONDITIONS TO CLOSING --------------------- 8.1 Conditions Precedent to Obligations of Purchaser and Seller ----------------------------------------------------------------- The respective obligations of Purchaser and Seller to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by the party for whose benefit such condition exists) at or prior to the Closing Date of each of the following conditions: 30 (a) No Injunction, etc. No court or governmental authority in the ------------------ United States or any state of the United States shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, non-appealable judgment, decree, injunction or other order which is in effect on the Closing Date which has the effect of prohibiting the Purchase or making the Purchase illegal. (b) Regulatory Authorizations and Third Party Consents. All consents -------------------------------------------------- or statutorily required indications of no objection of any Governmental Authorities set forth on Schedule 8.1 shall have been obtained on terms reasonably acceptable to Seller or Purchaser, as the case may be. 8.2 Conditions Precedent to Obligation of Seller -------------------------------------------------- The obligation of Seller to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by Seller) at or prior to the Closing Date of each of the following conditions: (a) Accuracy of Purchaser's Representations and Warranties. The ------------------------------------------------------ representations and warranties of Purchaser contained in this Agreement shall be true and correct on the date of this Agreement and on the Closing Date as though made on such Closing Date, except to the extent such representations and warranties by their terms speak as of an earlier date, in which case they shall be true and correct as of such date, except to the extent that the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, have a Purchaser Material Adverse Effect; and Seller shall have received a certificate signed by an officer of Purchaser to such effect. (b) Covenants of Purchaser. Purchaser shall have complied in all ---------------------- material respects with all covenants contained in this Agreement to be performed by it prior to the Closing; and Seller shall have received a certificate signed by an officer of Purchaser to such effect. 8.3 Conditions Precedent to Obligation of Purchaser ---------------------------------------------------- The obligation of Purchaser to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by Purchaser) at or prior to the Closing Date of each of the following conditions: (a) Accuracy of Seller's Representations and Warranties. The --------------------------------------------------- representations and warranties of Seller contained in this Agreement shall be true and correct on the date of this Agreement and on the Closing Date as though made on such Closing Date, except to the extent such representations and warranties by their terms speak as of an earlier date, in which case they shall be true and correct as of such date, except to the extent that the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, have a Seller Material Adverse Effect; and Purchaser shall have received a certificate signed by an officer of Seller to such effect. 31 (b) Covenants of Seller. Seller shall have complied in all material ------------------- respects with all covenants contained in this Agreement to be performed by it prior to the Closing including, without limitation, transferring to Purchaser its rights under the Truckee River Agreement; and Purchaser shall have received a certificate signed by an officer of Seller to such effect. ARTICLE IX CLOSING 9.1 Closing Dates ------------------- Unless this Agreement shall have been terminated and the transactions herein shall have been abandoned pursuant to Article XI hereof, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place ------- at the offices of Simpson Thacher & Bartlett in New York at 10:00 a.m., New York City time, and in such other places as are necessary to effect the transactions to be consummated at the Closing, on the third Business Day after all of the conditions to the Closing set forth in Article VIII hereof are satisfied or waived, provided that the Closing will be delayed, if necessary to provide Purchaser the opportunity to finalize its financing; provided, that the Closing shall not be delayed for more than 45 days after the conditions set forth in Section 8.1(b), with respect to the approval of Governmental Authorities, are satisfied, or such other date, time and place as shall be agreed upon by Seller and Purchaser (the actual date and time being herein called the "Closing Date"). ------------ Notwithstanding the foregoing, the duty of each party to close the transactions contemplated hereby shall be unconditional upon satisfaction of all the conditions set forth in Article VIII, even if the Closing is postponed as set forth above. In the event that the conditions set forth in Section 8.1(b) have been satisfied except for the consent or approvals in respect of the Hydro Assets, the Closing shall occur with respect to the Non-Hydro Assets only and Seller shall transfer the Hydro Assets on the third Business Day after such consent or approval shall have been obtained. Notwithstanding the foregoing, each Closing shall for all purposes be deemed to occur at the close of business in New York City on the Closing Date. 9.2 Purchaser Obligations --------------------------- At the Closing, Purchaser shall execute, deliver to Seller and/or file the following in such form and substance (except for clause (a)) as may be indicated in any applicable schedule hereto, or as are reasonably acceptable to Seller: (a) the Purchase Price as provided in Section 3.2 hereof; (b) the certificate described in Section 8.2(b) hereof; (c) the assignment and conveyance instruments referred to Section 2.3 and such other assignment and conveyance documents as shall be necessary to convey the Purchased Assets and consummate the other transactions contemplated hereby in each jurisdiction; and 32 (d) such other documents and instruments as counsel for Purchaser and Seller mutually agree to be reasonably necessary to consummate the transactions described herein. 9.3 Seller Obligations ------------------------ At the Closing, Seller shall execute, deliver to Purchaser and/or file the following in such form and substance as may be indicated in any applicable schedule hereto, or as are reasonably acceptable to Purchaser: (a) the certificate described in Section 8.3(b) hereof; (b) such instruments of conveyance with respect to the Purchased Assets and Assumed Liabilities referred to Section 2.3 or as are set forth in Schedule 9.3 hereto and such other assignment and conveyance documents as shall - ------------ be necessary to convey the Purchased Assets and consummate the other transactions contemplated hereby in each jurisdiction; and (c) such other documents and instruments as counsel for Purchaser and Seller mutually agree to be reasonably necessary to consummate the transactions described herein. ARTICLE X INDEMNIFICATION --------------- 10.1 Indemnification --------------------- (a) Following the Closing and subject to the terms and conditions of this Article X, Seller shall indemnify, defend and hold harmless Purchaser and its Affiliates and their respective officers, directors, employees, stockholders, assigns and successors (each, a "Purchaser Indemnified Party") --------------------------- from and against, and shall reimburse each Purchaser Indemnified Party for, all actual losses (but not lost profits or consequential, punitive, special or indirect damages, except to the extent awarded by a court of competent jurisdiction in respect of a third party claim), damages, liabilities, costs and expenses, including interest, penalties, court costs and reasonable attorneys' fees and expenses, imposed upon or incurred by such Purchaser Indemnified Party ("Purchaser Losses"), with respect to (i) any misrepresentation or breach of ---------------- warranty by Seller, (ii) any breach by Seller of any covenant or agreement made by Seller herein, (iii) any Excluded Liabilities or (iv) any failure of Seller to obtain third party consents related to the transfer of the Purchased Assets, it being understood that such Purchaser Losses shall be calculated net of (x) any Tax benefit realized by such Purchaser Indemnified Party as set forth more fully in Section 10.3(b), and (y) any recovery available from any third party, including insurance proceeds (including proceeds from the insurance policy related to environmental exposures that Purchaser has agreed to purchase and maintain pursuant to Section 6.20), and shall not include, (z) any liability reflected on the Closing Date Statement (as adjusted for any Disputed Item(s)). Notwithstanding the inclusion of any liability in the definition of Assumed Liabilities, the Purchaser shall be entitled to enforce its indemnification rights hereunder in respect of any misrepresentation or breach of warranty by Seller regarding such liability, subject to the provisions set forth in this Article X. 33 (b) Following the Closing and subject to the terms and conditions provided in this Article X, Purchaser shall indemnify, defend and hold harmless Seller and its Affiliates and their respective officers, directors, employees, stockholders, assigns and successors (each, a "Seller Indemnified Party") from ------------------------ and against, and shall reimburse each Seller Indemnified Party for, all actual losses (but not lost profits or consequential, punitive, special or indirect damages, except to the extent awarded by a court of competent jurisdiction in respect of a third party claim), damages, liabilities, costs and expenses, including interest, penalties, court costs and reasonable attorneys' fees and expenses, imposed upon or incurred by such Seller Indemnified Party ("Seller ------ Losses"), with respect to (i) any misrepresentation or breach of warranty by - ------ Purchaser, (ii) any breach of any covenant or agreement made by Purchaser herein, (iii) any of the Assumed Liabilities or (iv) the operation of the Water Business following the Closing, it being understood that such Seller Losses shall be calculated net of (x) any Tax benefit realized by any Seller Indemnified Party and (y) any recovery available from any third party, including insurance proceeds. 10.2 Certain Limitations ------------------------- (a) Notwithstanding anything contained herein to the contrary, the maximum aggregate liability of Seller to all Purchaser Indemnified Parties taken together for all Purchaser Losses under Section 10.1(a) by Purchaser Indemnified Parties shall be limited to a maximum of 33?% of the Purchase Price. (b) Notwithstanding anything contained herein to the contrary, Seller shall not be obligated to make any indemnification payment under Sections 10.1(a)(i) or 10.1(a)(iv) unless and until the aggregate Purchaser Losses sustained by Purchaser Indemnified Parties (calculated as specified in Section 10.2(a)) for all claims that meet or exceed $100,000 (the "Minimum Claim ------------- Threshold") exceed $5,000,000 (the "Deductible"), and then any indemnification - --------- ---------- with respect to Purchaser Losses shall be made by Seller only to the extent that such Purchaser Losses meeting the Minimum Claim Threshold exceed the Deductible; provided that once the Deductible is satisfied, indemnification claims meeting the Minimum Claim Threshold shall be made by Seller for the full amount of each such claim. (c) Notwithstanding anything contained herein to the contrary, Purchaser shall not be obligated to make any indemnification payment under Section 10.1(b)(i) unless and until the aggregate Seller Losses sustained by Seller Indemnified Parties (calculated as specified in Section 10.2(a)) for all claims that meet or exceed $100,000 (the "Minimum Claim Threshold") exceed ----------------------- $5,000,000 (the "Deductible"), and then any indemnification with respect to ---------- Seller Losses shall be made by Purchaser only to the extent that such Seller Losses meeting the Minimum Claim Threshold exceed the Deductible; provided that once the Deductible is satisfied, indemnification claims meeting the Minimum Claim Threshold shall be made by Purchaser for the full amount of each such claim. (d) The representations and warranties of Seller contained in this Agreement shall survive for 18 months following the Closing Date or, in the case of the Hydro Assets, for 18 months following the date of transfer of such Hydro Assets; provided, however, that the representations and warranties set forth in Sections 4.6(a), 4.6(c) and 4.11 and the representations and warranties with respect to title contained in 4.6(b) shall survive until the 34 expiration of the statute of limitations relating to the subject matter of such representations and warranties and that the representations and warranties set forth in Section 4.14 shall survive until the third anniversary of the Closing Date. (e) The remedies provided for in this Article X constitute the sole and exclusive remedy for claims for Purchaser Losses or Seller Losses caused by or arising out of breach of warranty or inaccurate or erroneous representation. Such claims may be made only pursuant to Article X and only by written notice within the survival period of such representation and warranty provided for in Section 10.2(d). (f) The obligations to indemnify and hold harmless a party hereto pursuant to this Article X shall terminate when the applicable representation and warranty terminates pursuant to Section 10.2(d); provided, however, that -------- ------- such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the person to be indemnified shall have, before the expiration of the applicable period, previously made a claim by delivering a notice (stating in reasonable detail the basis of such claim) to the indemnifying person. 10.3 Procedures for Third-Party Claims --------------------------------------- (a) Promptly after the receipt by any Indemnified Party of a notice of any claim, action, suit or proceeding by any third party that may be subject to indemnification hereunder, such Indemnified Party shall give written notice of such claim to the indemnifying party hereunder (the "Indemnifying Party"), ------------------ stating the nature and basis of the claim and the amount thereof, to the extent known, along with copies of the relevant documents evidencing the claim and the basis for indemnification sought. Failure of the Indemnified Party to give such notice shall not relieve the Indemnifying Party from liability on account of this indemnification, except if and to the extent that the Indemnifying Party is actually prejudiced thereby. The Indemnifying Party shall have the right to assume the defense of the Indemnified Party against the third party claim. So long as the Indemnifying Party has assumed the defense of the third party claim in accordance herewith and notified the Indemnified Party in writing thereof, (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the third party claim, it being understood the Indemnifying Party shall pay all costs and expenses of counsel for the Indemnified Party for all periods prior to such time as the Indemnifying Party has notified the Indemnified Party that it has assumed the defense of such third party claim, (ii) the Indemnified Party shall not file any papers or consent to the entry of any judgment or enter into any settlement with respect to the third party claim without prior written consent of the Indemnifying Party (not to be unreasonably withheld or delayed) and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the third party claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld or delayed). The parties shall use commercially reasonable efforts to minimize Losses from claims by third parties and shall act in good faith in responding to, defending against, settling or otherwise dealing with such claims. The parties shall also cooperate in any such defense and give each other reasonable access to all information relevant thereto. Whether or not the Indemnifying Party shall have assumed the defense, such party shall not be obligated to indemnify the Indemnified Party hereunder for any settlement entered into without the Indemnifying Party's prior written consent, which consent shall not be unreasonably withheld or delayed. 35 (b) Treatment of Indemnification Payments. Any payment made pursuant to the indemnification obligations arising under this Agreement shall be treated as an adjustment to the Purchase Price. Any indemnity payment under this Agreement shall be decreased by any amounts actually recovered by the Indemnified Party under insurance policies with respect to such Loss. If the amount of any Loss for which indemnification is provided under this Agreement (an "Indemnity Claim") gives rise to a currently realizable Tax Benefit (as --------------- defined below) to the party making the claim, the indemnity payment shall be reduced by the amount of the Tax Benefit available to the party making the claim. To the extent such Indemnity Claim does not give rise to a currently realizable Tax Benefit to the party making the claim, if the amount with respect to which any Indemnity Claim is made gives rise to a subsequently realized Tax Benefit to the party that made the claim, such party shall refund to the Indemnifying Party the amount of such Tax Benefit when, as and if realized. For purposes of this Section 10.3(b), a "Tax Benefit" means an amount by which the ----------- Tax liability of the party (or group of corporations including the party) is reduced (including, without limitation, by deduction, reduction of income by virtue of increased tax basis or otherwise, entitlement to refund, credit or otherwise) plus any related interest received from the relevant taxing authority. Where a party has other losses, deductions, credits or items available to it ("Other Tax Items"), the determination of any Tax Benefit shall --------------- be calculated by utilizing proportionately the Tax Benefits arising from an Indemnity Claim and any Other Tax Items. In the event that there should be a determination disallowing the Tax Benefit, the indemnifying party shall be liable to refund to the Indemnified Party the amount of any related reduction previously allowed or payments previously made to the Indemnifying Party pursuant to this Section 10.3(b). 10.4 Certain Claims Procedures ------------------------------- The Indemnified Party shall notify the Indemnifying Party promptly of its discovery of any matter giving rise to a claim of indemnity pursuant hereto. The Indemnified Party shall cooperate and assist the Indemnifying Party in determining the validity of any claim for indemnity by the Indemnified Party and in otherwise resolving such matters. Such assistance and cooperation will include providing access to and copies of information, records and documents relating to such matters, furnishing employees to assist in the investigation, defense and resolution of such matters and providing legal and business assistance with respect to such matters. 10.5 Remedies Exclusive ------------------------ The remedies set forth in this Article X shall be exclusive and in lieu of any other remedies that may be available to the Indemnified Parties under any other agreement or pursuant to any statutory or common law with respect to any Losses of any kind or nature incurred directly or indirectly resulting from or arising out of any of this Agreement, the transactions contemplated hereby, the Water Business, the Purchased Assets, or the Assumed Liabilities. 10.6 Mitigation ---------------- Purchaser and Seller shall cooperate with each other with respect to resolving any claim or liability with respect to which one party is obligated to indemnify the other party hereunder, including by making commercially reasonable efforts to mitigate or resolve any such 36 claim or liability. In the event that Purchaser and Seller shall fail to make such commercially reasonable efforts to mitigate or resolve any claim or liability, then notwithstanding anything else to the contrary contained herein, the other party shall not be required to indemnify any person for any loss, liability, claim, damage or expense that could reasonably be expected to have been avoided if Purchaser or Seller, as the case may be, had made such efforts. ARTICLE XI TERMINATION ----------- 11.1 Termination Events ------------------------ (a) Without prejudice to other remedies which may be available to the parties by law or under this Agreement, this Agreement may be terminated and the transactions contemplated herein may be abandoned: (i) by mutual consent of the parties hereto; (ii) by any party by notice to the other party if the Closing shall not have been consummated by June 30, 2001 (or such later date in order to provide the 45 day financing period referred to in Section 9.1), provided (A) that if all conditions to the Closing other than those set forth in Section 8.1(b) shall have been satisfied, such termination date shall be automatically extended until December 31, 2001 (or such later date in order to provide the 45 day financing period referred to in Section 9.1) and (B) that the right to terminate this Agreement under this clause (ii) shall not be available (x) to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date or (y) in the event that the Closing shall not have occurred as a result of a failure of any representation to be true and correct, the terminating party shall not have the right to terminate this Agreement if such party knew of such breach prior to the date of this Agreement; and (iii) by either party, if a final order, decree or ruling enjoining or otherwise prohibiting any of the transactions contemplated by this Agreement has been issued by any federal or state court in the United States (unless such order, decree or ruling has been withdrawn, reversed or otherwise made inapplicable) if the failure to consummate such prohibited transaction (i) could not be remedied in accordance with Section 2.4 and (ii) would have a material adverse effect on the business, operations, assets or financial condition of the Water Business taken as a whole, following the Closing Date, provided that the party seeking to terminate this Agreement under this clause (iii) is not then in material breach of this Agreement and provided, further, that the right to terminate this Agreement under this clause (iii) shall not be available to any party who shall not have used commercially reasonable efforts (including in connection with the obligations specified in Section 6.3) to avoid the issuance of such order, decree or ruling. 37 (b) If the Closing does not occur due to Purchaser's failure to satisfy the conditions set forth in Sections 8.2(a) or 8.2(b), Purchaser shall pay Seller $7,500,000. (c) If the approvals set forth in Section 6.18 is not received within the period set forth in Section 6.18, Seller shall have the right to terminate this Agreement. 11.2 Effect of Termination --------------------------- In the event of any termination of this Agreement as provided in Section 6.13(d) or Section 11.1 above, this Agreement shall forthwith become wholly void and of no further force and effect and there shall be no liability on the part of Purchaser or Seller, except that (a) the obligations of Purchaser and Seller under Sections 6.2(c) (including the survival of the Confidentiality Agreements) and 6.4, Article XI and Section 12.6 of this Agreement shall remain in full force and effect and (ii) such termination shall not relieve either party of any liability for any breach of any representation, warranty, covenant or agreement contained in this Agreement. ARTICLE XII MISCELLANEOUS AGREEMENTS OF THE PARTIES --------------------------------------- 12.1 Notices ------------- All communications provided for hereunder shall be in writing and shall be deemed to be given when delivered in person or by private courier with receipt, when telefaxed and received, or seven days after being deposited in the United States mail, first-class, registered or certified, return receipt requested, with postage paid and, If to Purchaser: Truckee Meadows Water Authority c/o City of Sparks 431 Prater Way Sparks, Nevada 89432 Attention: Mr. Bill Isaeff Fax: (775) 353-2489 with a copy to: Swendseid & Stern Bank of America Building 50 West Liberty Street, Suite 660 Reno, Nevada 89501 Attention: John O. Swendseid, Esq. Fax: (775) 323-2339 38 If to Seller: Sierra Pacific Power Company P.O. Box 30150 6100 Neil Road Reno, Nevada 89511 Attention: General Counsel Fax: (775) 834-4098 with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Attention: Alan G. Schwartz Fax: (212) 455-2502 or to such other address as any such party shall designate by written notice to the other parties hereto. 12.2 Bulk Transfers -------------------- Purchaser waives compliance with the provisions of all applicable laws relating to bulk transfers in connection with the transfer of the Purchased Assets. 12.3 Severability ------------------ If any provision of this Agreement shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement shall not be affected and shall remain in full force and effect, and Seller and Purchaser shall negotiate in good faith to replace such illegal, void or unenforceable provision with a provision that corresponds as closely as possible to the intentions of the parties as expressed by such illegal, void or unenforceable provision. 12.4 Further Assurances; Further Cooperation --------------------------------------------- Subject to the terms and conditions hereof, each of the parties hereto agrees to use commercially reasonable efforts to execute and deliver, or cause to be executed and delivered, all documents and to take, or cause to be taken, all actions that may be reasonably necessary or appropriate, in the reasonable opinion of counsel for Seller and Purchaser, to effectuate the provisions of this Agreement. 12.5 Counterparts ------------------ This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 12.5, provided that receipt of copies of such counterparts is confirmed. - -------- 39 12.6 Expenses -------------- Whether or not the Closing occurs, Seller and Purchaser shall each pay their respective expenses (such as legal, investment banker and accounting fees) incurred in connection with this Agreement and the transactions contemplated hereby; provided, however, that if the Seller terminates this Agreement as a result of any term or condition imposed by the PUC relating to the use of proceeds from the transactions contemplated by this Agreement, Seller gshall pay upon demand by Purchaser all of Purchaser's reasonable, documented out-of-pocket expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement up to an aggregate of $5,000,000 (including 50% of staff salaries allocable to the transactions contemplated by this Agreement up to a maximum of $500,000); provided, further, however, that Seller shall not be obligated to pay Purchaser such out-of-pocket expenses unless Purchaser has obtained the approvals described in Section 6.18. 12.7 Non-Assignability ----------------------- This Agreement shall not be assigned by either party hereto without the prior written consent of the other party, and any attempted assignment, without such consent, shall be null and void; provided, however, that no such -------- ------- assignment shall release Purchaser from any of its liabilities or obligations hereunder. 12.8 Amendment; Waiver ----------------------- This Agreement may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. No waiver by either party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with each Closing hereunder. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. 12.9 Specific Performance -------------------------- The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement and the Exhibits hereto was not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in addition to any other remedy to which they are entitled at law or in equity. 12.10 Third Parties ------------------- This Agreement does not create any rights, claims or benefits inuring to any person that is not a party hereto nor create or establish any third party beneficiary hereto. 40 12.11 Governing Law ------------------- This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada, except for the internal matters of any corporation, partnership or similar entity which shall be governed by the laws of the jurisdictions of incorporation of such corporation, partnership or similar entity. 12.12 Consent to Jurisdiction; Waiver of Jury Trial --------------------------------------------------- Each party hereto irrevocably submits to the exclusive jurisdiction of the United States District Court for the District of Nevada, or if such court does not have jurisdiction, the trial courts of the State of Nevada, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties hereto, further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth in Section 12.1 shall be effective service of process for any action, suit or proceeding in Nevada with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the parties hereto, irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (a) the United States District Court for the District of Nevada or (b) the trial courts of the State of Nevada, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The parties hereto hereby irrevocably and unconditionally waive trial by jury in any legal action or proceeding relating to this Agreement or any other agreement entered into in connection therewith and for any counterclaim with respect thereto. 12.13 Interpretation; Absence of Presumption -------------------------------------------- (a) This agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. (b) Whenever the words "include", "including" or "includes" appear in this Agreement, they shall be read to be followed by the words "without limitation" or words having similar import. 12.14 Entire Agreement ---------------------- This Agreement, Annex A, the Schedules, the Exhibits hereto and the Confidentiality Agreement set forth the entire understanding of the parties hereto with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the parties or their respective Subsidiaries other than those set forth or referred to herein. 41 12.15 Section Headings; Table of Contents ----------------------------------- The section headings contained in this Agreement and the Table of Contents to this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 12.16 Schedules --------------- Disclosures included in any schedule to this Agreement shall be considered to be made for purposes of all other schedules to this Agreement referred to in such schedule. Inclusion of any matter or item in any schedule to this Agreement does not imply that such matter or item would, under the provisions of this Agreement, have to be included in any schedule to this Agreement or that such matter or term is otherwise material. For purposes of determining any liability of Seller following Closing for misrepresentation or breach of warranty under this Agreement, unless Purchaser objects as provided in the next succeeding sentence the schedules delivered by Seller on the date of this Agreement shall be deemed to include such other information as may be set forth in any written amendment or supplement to such schedules delivered by Seller to Purchaser and its counsel prior to the Closing (including any supplement to such schedules which adds an additional schedule to, and a corresponding reference thereto in, this Agreement) and identified in writing as an amendment or supplement to the schedules. The Purchaser shall have ten days to object to the amendment or supplement and if Purchaser submits an objection in writing to Sellers, then the amendment or supplement shall not affect Purchaser's rights under Section 8.3(a) or Purchaser's indemnification rights under this Agreement. IN WITNESS WHEREOF, the parties have caused this Asset Purchase Agreement to be duly executed as of the date first above written. SIERRA PACIFIC POWER COMPANY By:___________________________ Name: Title: TRUCKEE MEADOWS WATER AUTHORITY By:___________________________ Name: Title: ANNEX A "AAA" has the meaning set forth in Section 3.4(b). --- "Affiliate" of a person means a person that directly or indirectly, --------- through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person. "Agreement" has the meaning set forth in the Recitals to this --------- Agreement. "Antitrust Regulations" has the meaning set forth in Section 4.3. --------------------- "Arbitrator" has the meaning set forth in Section 3.4(b). ---------- "Assigned MPAT Employees" means management, professional, ----------------------- administrative and technical employees of Seller who elected to be assigned to the Water Business. "Assumed Liabilities" has the meaning set forth in Section 2.2. ------------------- "Balance Sheet Date" has the meaning set forth in Section 4.4. ------------------ "Benefit Plans of Purchaser" has the meaning set forth in Section -------------------------- 6.6(c). "Books and Records" has the meaning set forth in Section 6.5(a). ----------------- "Business Day" means any day other than a Saturday, a Sunday or a day ------------ on which banks in New York City are permitted or required by law to close. "CERCLA" shall mean the Comprehensive Environmental Response, ------ Compensation and Liability Act, 42 U.S.C. ss.ss.9601 et seq., as amended, and all regulations promulgated thereunder, as in effect on the date of this Agreement. "Closing" has the meaning set forth in Section 9.1. ------- "Closing Date" has the meaning set forth in Section 9.1. ------------ "Closing Date Assets" means the Purchased Assets on the Closing Date as ------------------- determined in a manner consistent with the accounting practices as set forth on the Financial Statements. "Closing Date Liabilities" means the Assumed Liabilities as determined ------------------------ in a manner consistent with the accounting practices as set forth on the Financial Statements. "Closing Date Statement" means the final statement of Closing Date ---------------------- Assets and Closing Date Liabilities. "COBRA" has the meaning set forth in Section 6.6(g). ----- "Code" means the Internal Revenue Code of 1986, as amended. ---- A-2 "commercially reasonable efforts" when used in connection with this ------------------------------- Agreement with regard to either party shall mean the reasonable undertakings of a corporate entity engaged in a business similar to the Water Business. "Competing Business" has the meaning set forth in Section 6.8. ------------------ "Confidentiality Agreements" has the meaning set forth in Section -------------------------- 6.2(c). "Consent" has the meaning set forth in Section 4.3. ------- "Contracts" has the meaning set forth in Section 4.7(a). --------- "Conveyed Property" has the meaning set forth in Section 4.6(d). ----------------- "Covered Schedules" has the meaning set forth in Section 4.7(a). ----------------- "D&T" has the meaning set forth in Section 3.4(b). --- "Damages" has the meaning set forth in Section 6.6(i). ------- "Deductible" has the meaning set forth in Section 10.2(b). ---------- "Deficiency" means the amount, if any, by which the Net Worth Amount is ---------- less than the Signing Net Worth Amount. "Disclosed Contracts" has the meaning set forth in Section 4.7(a). ------------------- "Disputed Item(s)" has the meaning set forth in Section 3.4(a). ---------------- "dollars" or "$", when used in this Agreement or any other Transaction ------- - Document, means United States dollars unless otherwise stated. "Due Diligence Period" has the meaning set forth in Section 6.2(b). -------------------- "Environmental Claims" has the meaning set forth in Section 4.14. -------------------- "Environmental Laws" has the meaning set forth in Section 4.14. ------------------ "ERISA" has the meaning set forth in Section 4.12(a). ----- "Excess" means the amount, if any, by which the Net Worth Amount is ------ more than the Signing Net Worth Amount. "Excluded Assets" means (a) Seller's corporate books and records of --------------- internal corporate proceedings, tax records, work papers and books and records relating to the Water Business and the Purchased Assets that Seller is required by law to retain as described on Exhibit C, provided, however, that Seller shall provide Purchaser with a copy of all such materials which relate primarily to the Water Business; (b) all cash and cash equivalents, bank deposits and accounts A-3 receivable except in the meter installment fund (including receivables relating to earned but unbilled revenues, but excluding amounts due from developers for distribution facilities); (c) all accounting records and internal reports relating to the business activities of Seller, provided, however, that Seller shall provide Purchaser with a copy of all such records and reports which relate primarily to the Water Business and provided, further, however, that any accounting records or internal reports which solely relate to the Water Business and accounting information including customer names, addresses, size of service, etc., needed for billing Water Business Customers shall constitute Purchased Assets; (d) other than the Water Business Intellectual Property, all software, software systems, databases and database systems, to the extent they exist, whether owned, leased or licensed by Seller, which are not used primarily with respect to the Water Business; (e) any prepaid property and casualty or liability insurance policies relating to the Water Business or the Purchased Assets and any rights, claims or chooses in action under such insurance policies; (f) any prepaid income, sales, payroll or other Taxes and any rights to refunds of any Tax payments in respect of the Water Business or the Purchased Assets relating to any period ending on or prior to the Closing Date; provided, -------- that any credit or refund resulting from an overpayment of Taxes shall be prorated based upon the method employed in the definition of Excluded Liabilities; (g) the names "Sierra Pacific Resources," "Sierra Pacific Power Company," "Westpac" and "Sierra Pacific" or any related or similar trade names, trademarks, service marks or logos; (h) electric distribution, substation and communication facilities and related support equipment except as described in Schedule 4.6; (i) except to the extent specifically required by law, the - ------------ personnel records relating to any employees of Seller provided, however, that Seller shall provide Purchaser with a copy of all such records and (j) the items set forth on Exhibit C. "Excluded Liabilities" means (a) any liability of Seller for legal, -------------------- accounting or broker's fees incurred in connection with the negotiation of this Agreement or the consummation of the transactions contemplated hereby; (b) liabilities in respect of any Taxes for periods or portions thereof ending on or prior to the Closing Date arising out of the Purchased Assets; provided, that -------- with respect to any Tax that is imposed on a periodic basis and is payable for a taxable period that begins before and ends after the Closing Date, the portion of such Taxes which is payable for the portion of such taxable period ending on such Closing Date shall be the amount of such Tax for the entire period (or, in the case of such Taxes determined on an arrears basis, the amount of such Tax for the preceding period) multiplied by a fraction, the numerator of which is the number of days in the portion of such taxable period ending on such Closing Date and the denominator of which is the number of days in the entire taxable period; (c) liabilities for accounts payable; (d) compensation expenses related to stay bonuses or any pre-closing employee-related liabilities except as set forth in Section 6.6; or (e) indebtedness for borrowed money or guarantees or other obligations in respect of any other Person. "Farad Facility" has the meaning set forth in Section 2.5. -------------- "Financial Statements" has the meaning set forth in Section 4.4(a). -------------------- "GAAP" means generally accepted accounting principles as in effect from ---- time to time in the United States, consistently applied. A-4 "Governmental Authority" has the meaning set forth in Section 4.3. ---------------------- "Hazardous Materials" has the meaning set forth in Section 4.14. ------------------- "Health Agency" has the meaning set forth in Section 4.3. ------------- "Hydro Assets" means the assets comprising the hydroelectric power ------------ generating business of Seller including diversion structures, flumes, canals, penstocks, turbine-generators, buildings and land associated with these facilities, and Seller's Water Rights under the 1915 Truckee River General Electric Decree as recognized and confirmed under Claim number 4 of the Orr Ditch Decree and as affected by the Truckee River Agreement and Water Rights Claims, numbers 5 through 9, under the Orr Ditch Decree and Water Rights for hydroelectric generation associated with Donner and Independence Lakes. "Hydro Assets Purchase Price" has the meaning set forth in Section 3.2. --------------------------- "IBEW 1245 Employees" has the meaning set forth in Section 6.6(e). ------------------- "Indemnified Party" means a Purchaser Indemnified Party or a Seller ----------------- Indemnified Party, as the case may be. "Indemnifying Party" has the meaning set forth in Section 10.3(a). ------------------ "Indemnity Claim" has the meaning set forth in Section 10.3(b). --------------- "Infringement" has the meaning set forth in Section 4.9. ------------ "Intellectual Property" has the meaning set forth in Section 4.9. --------------------- "Interim Services Agreement" has the meaning set forth in Section 6.7. -------------------------- "Interim Storage Agreement" means the Interim Water Storage Agreement, ------------------------- dated June 29, 1994, among Seller, the Bureau of Reclamation of the Department of the Interior, WCWCD and the Pyramid Lake Tribe. "IRS" means the United States Internal Revenue Service. --- "JPA Agreement" means the Cooperative Agreement, entered into on or ------------- about December 15, 2000, among the City of Reno, the City of Sparks and the County of Washoe. "the knowledge of" or "the best knowledge of" a party hereto means, ---------------- --------------------- with respect to Seller, the actual knowledge of the individuals listed on Part 1 of Exhibit B hereto, and with respect to Purchaser, the actual knowledge of the individuals listed on Part 2 of Exhibit B hereto. "Law" means any. applicable common law and any statute, ordinance, code or --- other law, rule, regulation, order, technical or other written standard, requirement, policy or procedure enacted, adopted, promulgated, applied or followed by any Governmental Authority, including A-5 any judgment, writ, order, injunction, award and decree and all judicial decisions applying common law or interpreting any other Law, in each case, as amended. "Leased Real Property" has the meaning set forth in Section 4.6(c). -------------------- "Leased Water Rights" has the meaning set forth in Section 4.6(d). ------------------- "Lien" any security interest, security agreement, financing statement ---- filed with any Governmental Authority, conditional sale or other title retention agreement, any lease, consignment or bailment given for purposes of security, any mortgage, lien, indenture, pledge, option, claim, charge, encumbrance, adverse interest, constructive trust or other trust, claim, attachment, exception to, defect in or other condition affecting title or other ownership interest (including, but not limited to, reservations, rights of entry, possibilities of reverter, encroachments, protrusions, easements, rights-of-way, rights of first refusal, restrictive covenants, leases and licenses) of any kind, which constitutes an interest in or claim against property, whether arising pursuant to any Law, Contract or otherwise. "Losses" means Purchaser Losses or Seller Losses, as the case may be. ------ "Members" has the meaning set forth in Section 5.4. ------- "Minimum Claim Threshold" has the meaning set forth in Section 10.2(b). ----------------------- "NDEP" has the meaning set forth in Schedule 4.14(a). ---- "Net Worth Amount" means the Closing Date Assets less the Closing Date ---------------- Liabilities as set forth on the Closing Date Statement. "New IBEW Contract" has the meaning set forth in Section 6.6(e). ----------------- "Non-Hydro Assets" means the Purchased Assets other than the Hydro ---------------- Assets. "Off-Site Location" means any real property other than the Real ----------------- Property. "Order" means any judgment, rule, writ, injunction, order or decree, ----- whether federal, state, local or foreign. "Orr Ditch Decree" means the decree, dated January 1, 1944, concerning ---------------- certain Water Rights of the Seller as set forth on Schedule 4.6(d). "Other Real Property Interests" has the meaning set forth in Section ----------------------------- 4.6(b). "Other Tax Items" has the meaning set forth in 10.3(b). --------------- "Owned Real Property" has the meaning set forth in Section 4.6(b). ------------------- "Owned Water Rights" has the meaning set forth in Section 4.6(c). ------------------ A-6 "Permitted Lien" means any (a) Lien securing Taxes, assessments and -------------- governmental charges not yet due and payable, (b) zoning law or ordinance or any similar Law, (c) right reserved to any Governmental Authority to regulate the affected property, (d) as to Owned Real Property and Other Real Property Interests, any Lien not securing indebtedness or arising out of the obligation to pay money that does not individually or in the aggregate interfere with the right or ability to own, use or operate the Owned Real Property or Other Real Property Interests as they are being used or operated or materially diminish the value of such Owned Real Property or Other Real Property Interests, (e) in the case of Owned Real Property and Leased Real Property, any lease or sublease by Seller in favor of a third party that is disclosed in the Schedules to this Agreement, and (f) in the case of Leased Real Property, (i) the rights of any lessor and (ii) any Lien granted by any lessor of Leased Real Property; provided that "Permitted Lien" will not include any Lien securing a debt or claim (other than inchoate materialmen's, mechanics', workmen's, repairmen's or other like Liens arising in the ordinary course of business or any Lien described in clause (c) or (e) above) or any Lien which could prevent or materially impair the conduct of the Water Business as it is currently being conducted. "Person" means an individual, corporation, partnership, association, ------ trust, incorporated organization, other entity or group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934). "PR" has the meaning set forth in Section 3.4(b). -- "Preliminary Settlement Agreement" means an agreement entered into -------------------------------- between Seller and the Pyramid Lake Paiute Tribe of Indians, May 29, 1989, and ratified by the United States. "PUC" has the meaning set forth in Section 4.3. --- "PUHCA" has the meaning set forth in Schedule 4.3. ----- "Purchase" means the purchase by Purchaser of the Purchased Assets upon -------- the terms and subject to the conditions of this Agreement. "Purchase Price" has the meaning set forth in Section 3.1. -------------- "Purchase Price Adjustment Amount" has the meaning set forth in Section -------------------------------- 3.4(c). "Purchased Assets" means the assets set forth on Exhibit A and all ---------------- other rights and assets owned, leased or used by Seller in the operation of the Water Business, other than the Excluded Assets. "Purchaser" has the meaning set forth in the Recitals to this --------- Agreement. "Purchaser Debt" has the meaning set forth in Section 6.13(a). -------------- "Purchaser Expenses" has the meaning set forth in Section 5.4. ------------------ "Purchaser Indemnified Party" has the meaning set forth in Section --------------------------- 10.1(a). A-7 "Purchaser Losses" has the meaning set forth in Section 10.1(a). ---------------- "Purchaser Material Adverse Effect" has the meaning set forth in --------------------------------- Section 5.3. "Purchaser Plans" has the meaning set forth in Section 6.6(e). --------------- "Pyramid Lake Tribe" means the Pyramid Lake Paiute Tribe of Indians. ------------------ "Qualifying Offer of Employment" has the meaning set forth in Section ------------------------------ 6.6(b). "Real Property" has the meaning set forth in Section 4.6(b). ------------- "Release" has the meaning set forth in Section 4.14. ------- "Remediation" means an action of any kind to address the Release of ----------- Hazardous Materials or the presence of Hazardous Materials at the Purchased Assets or an Off-Site Location, including any or all of the following activities to the extent they relate to or arise from the presence of a Hazardous Material at the Purchased Assets or an Off-Site Location: (i) monitoring, investigation, assessment, treatment, cleanup, containment, removal, mitigation, response or restoration work; (ii) obtaining any permits, consents, approvals or authorizations of any Governmental Authority necessary to conduct any such activity; (iii) preparing and implementing any plans or studies for any such activity; (iv) obtaining written notice from a Governmental Authority with jurisdiction over the Purchased Assets or an Off-Site Location under Environmental Laws that no material additional work is required by such Governmental Authority; (v) the use, implementation, application, installation, operation or maintenance of removal actions on the Purchased Assets or an Off-Site Location, remedial technologies applied to the surface or subsurface soils, excavation and treatment or disposal of soils at an Off-Site Location, systems for long-term treatment of surface water or ground water, engineering controls or institutional controls; and (vi) any other activities reasonably determined by a party to be necessary or appropriate or required under Environmental Laws to address the presence or Release of Hazardous Materials at the Purchased Assets or an Off-Site Location. "SEC" means the Securities and Exchange Commission. --- "Seller" has the meaning set forth in the Recitals to this Agreement. ------ "Seller Corporate Policies" has the meaning set forth in Section 6.11. ------------------------- "Seller Indemnified Party" has the meaning set forth in Section ------------------------ 10.1(b). "Seller Losses" has the meaning set forth in Section 10.1(b). ------------- "Seller Material Adverse Effect" means any effect on the financial ------------------------------ condition or results of operations of the Water Business, taken as a whole, that is so severe as to substantially frustrate the benefits of the Purchase to Purchaser, including, without limitation, (a) any material damage to the Chalk Bluff or Glendale water treatment plants which render either plant inoperable for a period in excess of seven (7) days (other than as a result of changes in general economic A-8 conditions, or of changes affecting industries in which the Water Business operates) and (b) an uninsurable Title Defect sufficiently material as to deny Purchaser the use of, or an inability to transfer, the Chalk Bluff or Glendale water treatment plants or the Fleish, Verdi or Washoe Hydro Facilities. "Seller Plans" has the meaning set forth in Section 4.12(a). ------------ "Settlement Act" means Public Law 101-618. -------------- "Signing Net Worth Amount" means the difference as of September 30, ------------------------ 2000 between Purchased Assets and Assumed Liabilities (each as determined using GAAP as set forth on Schedule 4.4). Signing Net Worth is approximately $264 million. "SPPC" means Sierra Pacific Power Company. ---- "Subsidiary" or "Subsidiaries" of Purchaser, Seller or any other person ---------- ------------ means any corporation, partnership or other legal entity of which Purchaser, Seller or such other person, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. "Tax" or "Taxes" means all federal, state, local and foreign income, --- ----- profits, franchise, sales, use, occupation, property, ad valorem, transfer, excise, payroll, withholding, employment, estimated and other taxes of any nature, including interest, penalties and other additions to such taxes. "Tax Benefit" has the meaning set forth in 10.3(b). ----------- "Tax Return" means any return, declaration, report and information ---------- statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "1060 Forms" has the meaning set forth in Section 3.3. ---------- "Title Commitments" has the meaning set forth in Section 6.17(a). ----------------- "Title Company" has the meaning set forth in Section 6.17(a). ------------- "Title Defect" has the meaning set forth in Section 6.17(c). ------------ "Transaction Documents" has the meaning set forth in Section 4.2. --------------------- "Transferred Management Employees" has the meaning set forth in Section -------------------------------- 6.6(b). "TROA" is a proposed agreement among the States of Nevada and ---- California, the Pyramid Lake Paiute Tribe of Indians, the United States, Seller and other parties, the current draft of which is in Schedule 7.1. ------------ A-9 "Truckee River Agreement" means the agreement, dated June 13, 1935, ----------------------- among Seller, the United States, WCWCD, the Truckee Carson Irrigation District et al. "Truckee River Corridor" means Seller's real property described under ---------------------- such title in Exhibit C hereto. "Vacation Policy" has the meaning set forth in Section 6.6(g). --------------- "WARN" has the meaning set forth in Section 6.6(f). ---- "Water Business" has the meaning set forth in the Recitals hereto. -------------- "Water Business Intellectual Property" has the meaning set forth in ------------------------------------ Section 4.9. "Water Rights" has the meaning set forth in Section 4.6(c). ------------ EXHIBIT A --------- Purchased Assets ---------------- I. Fee Owned Properties - ------------------------------------------------------------------------------- Property APN - Area -------- --- ---- - ------------------------------------------------------------------------------- Army Air Guard Well 086-240-07 - 1.0 acres - ------------------------------------------------------------------------------- Chalk Bluff Treatment Plant 039-161-18 - 114.37 acres 039-161-29 - 17.76 acres 039-161-30 - 5.77 acres - ------------------------------------------------------------------------------- Coleman Booster Pump 002-233-01 - 1.52 acres - ------------------------------------------------------------------------------- Comstock Drive Water Tank 003-362-07 - 3.60 acres - ------------------------------------------------------------------------------- Corbett School Well 013-333-31 - .098 acres - ------------------------------------------------------------------------------- Delucchi Lane Well 025-460-03 - .37 acres - ------------------------------------------------------------------------------- East 4th Street Well 008-372-03 - .20 acres - ------------------------------------------------------------------------------- East Peckham Lane Well 025-261-34 - 1.19 acres - ------------------------------------------------------------------------------- Farad Hydro 048-030-14 - 28.43 acres 048-060-07 - .5 acres - ------------------------------------------------------------------------------- Fleish Hydro 038-260-16 - 84.44 acres - ------------------------------------------------------------------------------- Glen Hare Well 010-051-36 - .18 acres - ------------------------------------------------------------------------------- Glendale Water Treatment Plant 034-010-27 - .67 acres 21st Street Well 034-010-56 - 1.53 acres Galletti Well 034-010-61 - 30.82 acres - ------------------------------------------------------------------------------- Greg Street Well 034-403-05 - .91 acres - ------------------------------------------------------------------------------- Highland Canal [survey in progress] - ------------------------------------------------------------------------------- Highland Res./Stead Pump House 002-040-09 - .37 acres - ------------------------------------------------------------------------------- Highland Reservoir 002-040-11 - 20.55 acres - ------------------------------------------------------------------------------- Holcomb Lane Well 044-291-15 - .186 acres - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Property APN - Area -------- --- ---- - ------------------------------------------------------------------------------- Hunter Creek Reservoir 009-030-05 - 34.30 acres - ------------------------------------------------------------------------------- Kietzke Lane Well 012-391-02 - .82 acres 012-391-13 - .40 acres - ------------------------------------------------------------------------------- Kings Row Tank 001-510-03 - 2.41 acres - ------------------------------------------------------------------------------- Lakeridge Tank 042-313-63 - 1.44 acres - ------------------------------------------------------------------------------- Lakeside Well 042-222-09 - .086 acres - ------------------------------------------------------------------------------- Longley Lane Pump Station 164-131-01 - .20 7 acres - ------------------------------------------------------------------------------- Mogul Water Plant 038-730-36 - 2.964 acres - ------------------------------------------------------------------------------- Mogul Water Tanks 1 & 2 038-720-01 - 3.204 acres - ------------------------------------------------------------------------------- Moraine Way Pump 003-272-04 - .189 acres - ------------------------------------------------------------------------------- Morrill Avenue Well 008-360-25 - .14 acres - ------------------------------------------------------------------------------- Northgate Tank #1 204-010-12 - 1.5 acres 204-171-04 - .066 acres - ------------------------------------------------------------------------------- Northgate Tank #1 Pump Station 204-173-28 - .791 acres (aka Tappan Pump) - ------------------------------------------------------------------------------- Northgate Tank #2 038-800-06 - 3.903 acres - ------------------------------------------------------------------------------- Patriot Well 043-020-33 - .49 acres - ------------------------------------------------------------------------------- Poplar Street Well #1 & #2 032-275-13 - .32 acres - ------------------------------------------------------------------------------- Pyramid Highway Water Tank 028-012-01 - .80 acres 028-012-07 - .70 acres 028-012-09 - .013 acres - ------------------------------------------------------------------------------- Raleigh Heights Booster Pump 082-353-17 - .67 acres - ------------------------------------------------------------------------------- Rattlesnake Mountain - 022-172-01 - 11.08 acres Water Tank - ------------------------------------------------------------------------------- Reno Highlands Tank 082-631-04 - 4.591 acres - ------------------------------------------------------------------------------- Skyline Tank No. 1 023-061-02 - .94 acres - ------------------------------------------------------------------------------- Skyline Tank No. 2 041-241-01 - 2.61 acres - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Property APN - Area -------- --- ---- - ------------------------------------------------------------------------------- Silver Lake Tank 560-020-03 - 3.77 acres - ------------------------------------------------------------------------------- Silver Lake North Well 090-050-47 - 1.0 acres - ------------------------------------------------------------------------------- Socrates Tank 003-620-12 - .94 acres - ------------------------------------------------------------------------------- South Hills Booster Pump 044-300-06 - .08 acres - ------------------------------------------------------------------------------- South Hills Tank (aka Zollezzi Tank) 162-121-03 - 1.538 acres - ------------------------------------------------------------------------------- South Virginia Street Well 025-330-09 - .16 acres - ------------------------------------------------------------------------------- Southwest Terrace Tank 041-241-04 - 2.0 acres - ------------------------------------------------------------------------------- Sparks Avenue Well 032-166-03 - .16 acres - ------------------------------------------------------------------------------- Stead 1 & 2 Tank 090-150-02 - 13.523 acres 554-102-20 - .095 acres 554-102-15 - .266 acres - ------------------------------------------------------------------------------- Stead Well 016-045-14 - .15 acres - ------------------------------------------------------------------------------- Sullivan Lane Tank 026-021-41 - 2.70 acres - ------------------------------------------------------------------------------- Swope Middle School Well 009-170-93 - .25 acres - ------------------------------------------------------------------------------- Terminal Way Well 013-332-15 - .18 acres - ------------------------------------------------------------------------------- Valley Road Booster Pump 008-013-25 - .014 acres - ------------------------------------------------------------------------------- Valley Road Complex/ 004-081-27 - .28 acres Vaughn Mill Tank - ------------------------------------------------------------------------------- Verdi Hydro 038-030-08 - 10.70 acres 038-060-29 - 14.64 acres 038-200-03 - 25.14 acres 038-250-03 - 10.92 acres 038-250-04 - 3.76 acres 038-260-09 - 19.22 acres 038-394-07 - 0.23 acres - ------------------------------------------------------------------------------- View Street Well 031-302-36 - .24 acres - ------------------------------------------------------------------------------- Vista Water Tank 512-010-05 - 6.205 acres - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Property APN - Area -------- --- ---- - ------------------------------------------------------------------------------- Washoe Highland Diversion 038-112-07 - 3.00 acres 038-112-08 - 1.15 acres 038-111-01 - 18.15 acres 038-112-10 - 0.78 acres 038-430-10 - 13.50 acres 038-430-07 - 0.27 acres 038-430-14 - 0.44 acres 038-430-05 - 3.52 acres - ------------------------------------------------------------------------------- Washoe Hydro 038-182-03 - 6.16 acres 038-140-10 - 11.68 acres - ------------------------------------------------------------------------------- Water Main in Fee 027-172-23 - .024 acres - ------------------------------------------------------------------------------- West 7/th/ Street Tank 001-271-06 - 2.5 acres - ------------------------------------------------------------------------------- II. Glendale Water Treatment Facility All structures and facilities located at the Glendale Water Treatment Plant, and all furniture, telemetry and laboratory equipment and office equipment contained within the facility as well as all PCs and related peripheral equipment for the employees who work at the plant and use the facility as their offices. III. Water Production Groundwater Facilities
- ------------------------------------------------------------------------------------------------------------- Groundwater Facilities Number of Facilities (in service) Maximum Capacity (mgd) ---------------------- --------------------------------- ---------------------- Normal Production wells 20 36.4 PCE wells 5 13.6 Blended wells 3 7.2 Other 1 1.0 Total Ground Wells 29 57.2 - -------------------------------------------------------------------------------------------------------------
IV. Run of the River Hydroelectric Facilities - ------------------ --------- ----------------------- ----------------- Date of Facility Size Commercial/Operations Status - ------------------ --------- ----------------------- ----------------- Re-design and Farad 2.60 MW 1900 construction Fleish 2.25 MW 1905 Operating Verdi 2.15 MW 1912 Operating Washoe 2.15 MW 1908 Operating - ---------------------------------------------------------------------- For each plant included are the weir, flumes, structural forebay and penstocks V. Chalk Bluff Water Treatment Facility All structures and facilities located at the Chalk Bluff Treatment Plant. Also included are all furniture and office equipment contained within the facility as well as all PCs and related peripheral equipment for the employees who work at the plant. VI. Water Distribution and Storage Assets - ---------------------------------------------------------------------------- Type of Facility Number of Facilities Capacity (Mgal) - ---------------- -------------------- --------------- Water Storage Tanks 30 53.2 Water Storage Reservoirs 2 50.0 Booster Pumps 94 - Distribution Mains 1000 miles - - ---------------------------------------------------------------------------- Together with all associated water meters, valves, regulators, telemeters, automated control systems and service lines. VII. Backflow Prevention Project PCs All PCs and related peripheral equipment for the Backflow Prevention Project work group VIII. Intellectual Property Bailey Control System/Software for Chalk Bluff Operating System SCADA system software (includes Dynac software) - historical data and control routines for Time of Use Pumping, Pump Logic and Meters H2O-Net Distribution Modeling Software and distribution system models (includes gravity models and pump zone models) Ground Water Model Surface Water Transport Model Water Rights Data Base Met-one Particle Counting System Intellution Control Software for Glendale Truckee River Operations Model IX. Water Rights
- ------------------------------------------------------------------------------------------------------ Face Value of Type of Water Right Water Right (AF) - ------------------------------------------------------------------------------------------------------ The "40 cfs right" allocated to the Water Business in the Orr Ditch Decree as the first 28,959 right on the River except for the Pyramid Lake Tribe's rights which are always made up by Truckee Meadows return flows. - ------------------------------------------------------------------------------------------------------ Hunter Creek 13.6 cfs right 9,847 - ------------------------------------------------------------------------------------------------------ Irrigation Rights deeded to the Company. Included are the so called "excess water 37,164 rights" which are required to be stored for drought supplies under TROA - ------------------------------------------------------------------------------------------------------ Irrigation Rights deeded to local governments for use by the Company for its new 18,601 service commitments - ------------------------------------------------------------------------------------------------------ Banked Irrigation Rights deeded to the Company by developers for their future needs. 2,976 - ------------------------------------------------------------------------------------------------------ Effluent makeup rights 267 - ------------------------------------------------------------------------------------------------------ Tributary Creek rights 366 - ------------------------------------------------------------------------------------------------------ Independence Lake water rights including 3,000 acre feet of very high priority vested 17,500 water rights. These rights are restored under the interim water storage agreement to augment drought supplies. - ------------------------------------------------------------------------------------------------------ Donner Lake undivided one half interest with TCID in 9,500 acre feet of very high 4,750 priority drought supplies. These rights have certain restrictions which limit the timing of their withdrawal and are restored under the interim water storage agreement to augment drought supplies. - ------------------------------------------------------------------------------------------------------ Groundwater permits in the Truckee Meadows are in excess of the amount of water the 47,757 State Engineer presently allows to be pumped. Recent orders by the State Engineer allow the capped amount of 14,440 to be pumped on a long term average so that 22,000 AF of water can be pumped in a drought year if pumping is cut back during normal years. - ------------------------------------------------------------------------------------------------------- Total Water Rights - -------------------------------------------------------------------------------------------------------
Hydro Assets Water Rights: Seller's water rights under the 1915 Truckee River General Electric Decree as recognized and confirmed under Claim number 4 of the Orr Ditch Decree and as affected by the Truckee River Agreement and water rights Claims, numbers 5 through 9, under the Orr Ditch Decree and water rights for hydroelectric generation associated with Donner and Independence Lakes. X. Other Assets All cash in meter installment fund in the approximate amount of $1.6 million (which is collected and held in escrow for the benefit of the Water Meter Retrofit Program). All Contracts set forth on Schedule 4.3 and Schedule 4.7. ------------ ------------ All Leases, Licenses and Permits set forth on Schedule 4.6(b). -------------- All Railroad Permits set forth on Schedule 4.6(b). -------------- GIS data with respect to the location of all Purchased Assets All vehicles and equipment with an original cost of $1.8 million on the attached list. Water Meter Testing Equipment. WATER COMPANY VEHICLES
- ------------------------------------------------------------------------------------------------------------------------------------ SPPC Dept. Equipment MJR. Original Lease Monthly End No. No. Description Make Model Year IMP. 4x4 Mileage Cost Company Rate Date Comment - ------------------------------------------------------------------------------------------------------------------------------------ D335 10-2420 1990 DODGE SHADOW 4 DR Dodge Shadow 1990 No 93,493 $10,254.00 Sedan - ------------------------------------------------------------------------------------------------------------------------------------ 110 GMC Truck w/Welder 85 1 Ton D335 20-1728 2WD GMC Truck 1985 No 139,119 $28,423.00 - ------------------------------------------------------------------------------------------------------------------------------------ D335 20-1853 1985 Ford 1 Ton Van Ford 1 Ton Van 1985 No 93,157 $18,737.00 - ------------------------------------------------------------------------------------------------------------------------------------ D335 20-2025 1986 1 Ton Van SB DRW 4x4 Ford 1 Ton 1986 Service Yes 99,672 25,470.00 Van Body - ------------------------------------------------------------------------------------------------------------------------------------ D367 20-2029 1987 Dodge 1 Ton Van 4x4 Dodge 3/4 Ton 1984 No 72,733 $17,264.00 Van - ------------------------------------------------------------------------------------------------------------------------------------ 1987 Jeep Cherokee 4 DR 1/2 Ton D335 20-2065 SUV 4x4 Jeep truck 4x4 1987 Yes 177,833 $16,396.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1 Ton D335 20-2095 1987 Dodge 1 Ton SB Dodge Truck 4x4 1987 No 72,584 $17,449.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1987 Jeep Cherokee 4 SUV 1/2 Ton D335 20-2120 4x4 Jeep Truck 4x4 1987 Yes 160,906 $15,802.00 - ------------------------------------------------------------------------------------------------------------------------------------ D335 20-2216 1988 Jeep Cherokee SUV 4x4 Jeep Cherokee 1988 Yes 118,992 $16,902.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1990 GMC 1 Ton SB 4x4 1 Ton Service D336 20-2352 Tommy Liftgate GMC Truck 1990 Body Yes 192,555 $21,490.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1 Ton Service D335 20-2395 1990 GMC 1 Ton S/B 4x4 Dodge Truck 4x4 1990 Body Yes 42,183 $21,034.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1990 GMC 1 Ton Weld 1 Ton D335 20-2400 Truck, DRW 4x4 Dodge Truck 4x4 1990 Yes 57,476 $41,470.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1/2 Ton D335 20-2401 1990 Ford1/2Ton P/U Ford Truck 1990 No 49,435 $15,207.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1991 Jeep Cherokee 4 DR D335 20-2483 SUV 4x4 Jeep Cherokee 1991 Yes 128,152 $20,786.00 - ------------------------------------------------------------------------------------------------------------------------------------ 3/4 Ton D335 20-2488 1991 GMC3/4Ton CLB CB 4x4 GMC Truck 4x4 1991 Yes 136,096 $19,500.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1 Ton Service D335 20-2569 1992 GMC 1 Ton S/B 4x4 GMC Truck 4x4 1992 Body Yes 29,823 $17,408.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1/2 Ton D335 20-2570 1992 Ford1/2Ton P/U 4x4 Ford Truck 4x4 1992 Yes 88,895 $20,705.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1992 Jeep Cherokee 4 DR D335 20-2571 SUV 4x4 Jeep Cherokee 1992 Yes 102,700 $25,752.00 - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ SPPC Dept. Equipment MJR. Original Lease Monthly End No. No. Description Make Model Year IMP. 4x4 Mileage Cost Company Rate Date - ----------------------------------------------------------------------------------------------------------------------------------- 1 Ton Service D367 20-2572 1992 GMC 1 Ton S/B GMC Truck 1992 Body No 145,748 $25,083.00 - ----------------------------------------------------------------------------------------------------------------------------------- D335 20-2616 1992 Dodge 1/2 Ton P/U Dodge Dakota 1992 Yes 59,772 $17,155.00 4x4 - ----------------------------------------------------------------------------------------------------------------------------------- 1993 GMC 3/r Ton 3/4 Ton D336 20-2647L EXTCABP/U 4x4 GMC Truck 1993 Yes 106,579 $22,905.66 BLC 190.88 12/31/03 - ----------------------------------------------------------------------------------------------------------------------------------- D335 20-2666: 1993 Dodge 1/2 Ton P/U Dodge Dakota 1993 Yes 88,599 $16,788.20 BLC 139.9 12/31/03 4x4 - ----------------------------------------------------------------------------------------------------------------------------------- D335 20-2667L 1994 Dodge 1/2 Ton P/U Dodge Dakota 1994 Yes 83,841 $17,016.91 BLC 141.81 12/31/03 4x4 - ----------------------------------------------------------------------------------------------------------------------------------- 1993 Jeep Cherokee 4 D335 20-2677LD DR SB 4x4 Jeep Cherokee 1993 Yes 31,324 $19,137.00 BLC 0 12/31/99 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 Ford 1 Ton S/B 1 Ton Service D336 20-2751 4x4 Ford Truck 1996 Body Yes 99,228 $46,648.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1 Ton Service D367 20-2757 1995 GMC 1 Ton S/B GMC Truck 1995 Body No 89,182 $41,618.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 Ford 1 T 4x4 SB 1 Ton Service D336 20-2785 SRW Ford Truck 1996 Body Yes 106,632 $40,210.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 Ford 3/4 Ton 3/4 Ton Service D335 20-2818 EXTCAB S/B 4x4 Ford Truck 4x4 1996 Body Yes 26,800 $35,000.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 Ford 3/4 Ton 3/4 Ton Service D335 20-2819 EXTCAB S/B 4x4 Ford Truck 4x4 1996 Body Yes 21,000 $35,000.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 Ford 3/4 Ton 3/4 Ton Service D335 20-2820 EXTCAB S/B 4x4 Ford Truck 4x4 1996 Body Yes 24,920 $35,000.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 Ford 3/4 Ton 3/4 Ton Service D335 20-2821 EXTCAB S/B 4x4 Ford Truck 4x4 1996 Body Yes 28,238 $35,000.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1/2 Ton D335 20-2824 1997 Ranger 4x4 Ford Truck 1997 Yes 49,221 $43,507.00 - ------------------------------------------------------------------------------------------------------------------------------------ P1999 Ford 1 Ton S/B Bw/LFTGTE, 1 Ton Service D336 20-2869L SNWPLW 4x4 Ford Truck 1999 Body Yes 30,455 $42,000.00 Mellon 433.8 5/31/03 - ------------------------------------------------------------------------------------------------------------------------------------ P1999 Ford 1 Ton 1 Ton Service D336 20-2870L S/B DRW Bw/LFTGTE 4x4 Ford Truck 1999 Body Yes 40,410 $40,000.00 Mellon 439.09 5/30/03 - ------------------------------------------------------------------------------------------------------------------------------------ B1999 Ford 1 Ton 1 Ton Service D335 20-2928L S/B 4x4 Ford Truck 4x4 1999 body Yes 15,224 $40,000 Mellon 434.73 6/30/03 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 Ford Explorer 4 D335 20-2929L DR SUV 4x4 Ford Explorer 2000 Yes 21,667 $23,973.11 Mellon 415.47 4/30/03 - ------------------------------------------------------------------------------------------------------------------------------------ 2000 Ford 1 1 Ton D335 20-2972L Ton P/U GMC Truck 2000 No 20,359 $25,319.00 Mellon 440.34 8/31/04 - ------------------------------------------------------------------------------------------------------------------------------------ - ---------------------------- Dept. No. Comment - ---------------------------- D335 - ---------------------------- D335 - ---------------------------- D335 - ---------------------------- D367 - ---------------------------- Sierra needs to D335 purchase - ---------------------------- D335 - ---------------------------- D335 - ---------------------------- D335 - ---------------------------- D336 - ---------------------------- D335 - ---------------------------- D335 - ---------------------------- D335 - ---------------------------- Plus Service D335 Body cost - ---------------------------- Plus Service D335 Body cost - ---------------------------- Plus Service D335 Body cost - ---------------------------- D335 - ---------------------------- D335 - ----------------------------
3
- ------------------------------------------------------------------------------------------------------------------------------------ SPPC Dept. Equipment MJR. Original Lease Monthly End No. No. Description Make Model Year IMP. 4x4 Mileage Cost Company Rate Date Comment - ------------------------------------------------------------------------------------------------------------------------------------ 2000 Ford 1/2 1/2 Ton D335 20-3012L Ton P/U 4x4 Ford Truck 4x4 1999 Yes 18,478 $20,420.00 Mellon 395.98 9/30/04 - ----------------------------------------------------------------------------------------------------------------------------------- D335 20-3070 1999 Cherokee 4x4 4DR Jeep Cherokee 1999 Yes N/A $19,964.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1/2 T 4x4 2 DR Full Size 1/2 Ton D336 21-1733 Utility Vehicle Ford Truck 1984 Yes 204,000 $10,895.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1/2 T Intermediate 4x4 1/2T D335 21-2077 Pickup Dodge Dakota 1987 Yes N/A $15,208.00 - ----------------------------------------------------------------------------------------------------------------------------------- Service 1999 Ford FB DRW 4x4 1 Ton Body D335 30-2927L w/Liftmoore Crane Ford Truck 1999 w/crane Yes 9,964 $55,488.64 Mellon 516.82 6/30/03 - ----------------------------------------------------------------------------------------------------------------------------------- 2000 Ford 1 Ton WLD TRK 1 Ton Service D335 30-3011L 4x4 Ford Truck 4x4 2000 Body Yes 8,930 $58,172.00 Mellon 518.72 8/31/04 - ----------------------------------------------------------------------------------------------------------------------------------- 2000 Ford 1 ton WLD TRK 1 Ton Service D335 30-3013L 4x4 Ford Truck 4x4 2000 Body Yes 5,538 $58,483.00 Mellon 518.72 8/31/04 - ----------------------------------------------------------------------------------------------------------------------------------- 2000 Ford F450 4x4 DRW Service D335 30-3076 w/SB w/Crane Ford F450 Truck 2000 Body Yes 1449 $65,742.00 - ----------------------------------------------------------------------------------------------------------------------------------- 5 Yd Dump D335 40-1722 1985 INTL 1654 4x2 INTL Truck 1985 No 114,170 $38,169.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1990 INTL 4900 4x2 SB Service D336 50-2284 w/CRANE INTL Truck 1990 Body No 209,816 $55,104.00 - ----------------------------------------------------------------------------------------------------------------------------------- 1990 INTL 2574 6x4 10/YD 10 YD D335 60-2385 Dump INTL Dump Truck 1990 No 71,851 $88,578.00 - ----------------------------------------------------------------------------------------------------------------------------------- Boom D335 60-2693 93 INTL 4x4 Boom Truck INTL $4,854 1993 TC4600 Yes 48,920 $141,990.00 - ----------------------------------------------------------------------------------------------------------------------------------- D335 70-1843 WATER PUMP TRAILER Trailer Pump 1985 N/A N/A Unavail. - ----------------------------------------------------------------------------------------------------------------------------------- 1821 D335 70-2244 FORKLIFT Clark Forklift 1988 N/A HRS $21,781.00 - ----------------------------------------------------------------------------------------------------------------------------------- 250 D335 70-2325 Generator TRLR Cummings Generator N/A N/A N/A $21,377.00 - ----------------------------------------------------------------------------------------------------------------------------------- 4 Wheel D335 70-2730 MULE 4x4 Kawasaki ATV 1994 Yes 1202 $9,469.00 - ----------------------------------------------------------------------------------------------------------------------------------- 4 Wheel D335 70-2731 MULE 4x4 Kawasaki ATV 1993 Yes 336 $9,469.00 - ----------------------------------------------------------------------------------------------------------------------------------- 331 D335 70-2732 7000LB Forklift Clark Forklift 1987 N/A HRS $17,490.00 - ----------------------------------------------------------------------------------------------------------------------------------- D336 70-2847 6x6 ATV Polaris ATV Unk Yes 266 $7,000.00 - ----------------------------------------------------------------------------------------------------------------------------------- D336 71-1863 Welder Trailer Trailer Welding 1990 No 115 $9,355.00 - ----------------------------------------------------------------------------------------------------------------------------------- 250 110 D335 71-2324 Generator TRLR Cummings Generator 1968 N/A HRS $11,247.00 - -----------------------------------------------------------------------------------------------------------------------------------
4
- ------------------------------------------------------------------------------------------------------------------------------------ SPPC Dept. Equipment MJR. Original Lease Monthly End No. No. Description Make Model Year IMP. 4x4 Mileage Cost Company Rate Date - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- D335 80-0990 Trailer, Cargo Trailer Utility 1969 N/A N/A $337.00 - ----------------------------------------------------------------------------------------------------------------------------------- D335 80-1040 Trailer, Tank Trailer Tank 1976 N/A N/A $893.00 - ----------------------------------------------------------------------------------------------------------------------------------- D335 80-2093 Chemical Tank Trailer Trailer Chemical 1987 N/A N/A $15,649.00 - ----------------------------------------------------------------------------------------------------------------------------------- Trailer, Utility Service D335 80-2152 Body Trailer Sign 1987 N/A N/A Unavail. - ----------------------------------------------------------------------------------------------------------------------------------- 900KW Trailer Mounted D336 80-2252 Generator Trailer Generator 1990 No N/A Unavail. - ----------------------------------------------------------------------------------------------------------------------------------- D367 80-2262 Water Meter Test Trailer Trailer Trailer 1987 N/A N/A $3,724.00 - ----------------------------------------------------------------------------------------------------------------------------------- Cargo Trailer, Water D335 80-2789 Meter Project Trailer Utility 1996 N/A N/A Unavail. - ----------------------------------------------------------------------------------------------------------------------------------- Cargo Trailer, Water D335 80-2798 Meter Project Trailer Utility 1996 N/A N/A Unavail. - ----------------------------------------------------------------------------------------------------------------------------------- Monthly $851.00 per D335 92-0002` 98 GMC Jimmy Leased GMC SUV 1998 Lease N/A mo. - ----------------------------------------------------------------------------------------------------------------------------------- $850.00 per D366 70-2140 FRONT END LOADER John Deere Loader 1987 mo. - ----------------------------------------------------------------------------------------------------------------------------------- Dodge Extended Cab Dakota Monthly $850.00 per D335 92-2002 4x4 Dodge Truck 2001 Lease Yes mo. - ----------------------------------------------------------------------------------------------------------------------------------- Dodge Extended Cab Dakota Monthly $850.00 per D335 92-2003 4x4 Dodge Truck 2001 Lease Yes mo. - ----------------------------------------------------------------------------------------------------------------------------------- Dodge Extended Cab Dakota Monthly 850.00 per D335 92-2004 4x4 Dodge Truck 2001 Lease Yes mo. - ----------------------------------------------------------------------------------------------------------------------------------- Dodge Extended Cab Dakota Monthly 850.00 per D335 92-2005 4x4 Dodge Truck 2001 Lease Yes mo. - ----------------------------------------------------------------------------------------------------------------------------------- Dodge Extended Cab Dakota Monthly 850.00 per D335 92-2006 4x4 Dodge Truck 2001 Lease Yes mo. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------- Dept. Comment No. - ----------------- - ----------------- D335 - ----------------- D335 - ----------------- D335 - ----------------- D335 - ----------------- D336 - ----------------- D367 - ----------------- D335 - ----------------- D335 - ----------------- D335 - ----------------- D366 - ----------------- D335 - ----------------- D335 - ----------------- D335 - ----------------- D335 - ----------------- D335 - -----------------
EXHIBIT B ---------- Part 1: Knowledge Persons of Seller --------------------------- Jeff Ceccarelli President William Peterson Sr. Vice President, General Counsel Steve Oldman Sr. Vice President, Corporate Development and Strategic Planning Lori Williams Director, Water Production and Policy Janet Carson Director, Water Policy Elizabeth Elliot Associate General Counsel Don Rhoden Project Manager, Water Divestiture Tony Karr Strategic Specialist Tony Garcia Environmental Engineer John Erwin Manager, Water Policy, Resources & Programs Debbie Kaye Manager, Water Treatment Paul Miller Manager, Water Quality Mark Foree Manager, Water System Planning & Engineering Peter McAllester Manager, Gas & Water Distribution Jim Neill Manager, Water Distribution, Hydro/Generation Marie Stuersel HR Partner Bruce Bullock Director, Gas & Water Distribution, Operation & Maintenance Kim Mazeres Director, Customer Care Part 2: Knowledge Persons of Purchaser ------------------------------ Jeff Griffin Director David Aiazzi Director Jessica Sferrazza-Hogan Director Tony Armstrong Director Mike Carrigan Director Geno Martini Director Jim Shaw Director EXHIBIT C - --------- Certain Excluded Assets - ----------------------- Real Property. (The references below reflect the sites of the excluded Real Property.)
- ---------------------------------------------------------------------------------------------------------------------- LOCATION A.P.N. AREA* DESCRIPTION - ---------------------------------------------------------------------------------------------------------------------- BARRY M. CIRCLE 005-082-39 0.664 ac REGULATOR STATION ON WEST SEVENTH STREET SUBSTATION. - ---------------------------------------------------------------------------------------------------------------------- CAUGHLIN TANK 041-243-04 14.85 ac TANK ON MT. ROSE SUBSTATION. - ---------------------------------------------------------------------------------------------------------------------- EL RANCHO WELL 031-021-02 0.08 ac WELL ON EL RANCHO SUBSTATION. - ---------------------------------------------------------------------------------------------------------------------- HIGH STREET WELL 012-015-07 11,167 SF WELL ON HIGH STREET SUBSTATION. - ---------------------------------------------------------------------------------------------------------------------- HOLCOMB OBSERVATION WELL 014-134-01 0.42 ac OBSERVATION WELL ON HOLCOMB SUBSTATION. - ---------------------------------------------------------------------------------------------------------------------- PEZZI WELL 012-317-01 14.31 ac WELL ON OHM ST. PROPERTY - ---------------------------------------------------------------------------------------------------------------------- SUTRO BOOSTER #1 004-130-52 39,916 S.F. BOOSTER PUMP ON ALAMEDA SUBSTATION - ---------------------------------------------------------------------------------------------------------------------- G.O.B. WELL 025-460-22 41.66 ac PROPOSED WELL AT SIERRA PLAZA - ---------------------------------------------------------------------------------------------------------------------- MILL ST. 013-083-18 35,532 SF WELL ON MILL ST. SUBSTATION - ---------------------------------------------------------------------------------------------------------------------- IDLEWILD 010-051-26 9.41 ac PUMP ON IDLEWILD FACILITY - ---------------------------------------------------------------------------------------------------------------------- WASHOE HYDRO 038-182-01 5.77 ac. WASHOE SUBSTATION - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 016-020-01 439.9 NEVADA COUNTY - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 016-010-04 Lake NEVADA COUNTY - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 016-010-03 40 NEVADA COUNTY - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 016-020-09 Lake NEVADA COUNTY - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 016-010-07 65.85 NEVADA COUNTY - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 016-010-05 135.33 NEVADA COUNTY - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 016-010-02 241.73 NEVADA COUNTY - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 019-050-007 178.5 SIERRA COUNTY - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 019-060-08 682.36 SIERRA COUNTY - ---------------------------------------------------------------------------------------------------------------------- INDEPENDENCE LAKE 019-060-10 Lake SIERRA COUNTY - ---------------------------------------------------------------------------------------------------------------------- WASHOE HIGHLAND DIVERSION 038-430-11 40.05 DIVERSION FOR HIGHLAND CANAL - ----------------------------------------------------------------------------------------------------------------------
*Acreage listed is for the servient estate; easement acreage will be available in the legal description. Other Real Property: Truckee River Corridor - ------------------------------------------------------------------------- NAME COUNTY A.P.N. ACRES - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-030-06 641.28 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-030-12 224.46 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-040-01 276.36 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-040-02 38.68 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-040-09 3.64 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-050-01 3.97 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-050-09 51.49 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-050-10 37.63 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-050-11 5.96 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-050-13 57.42 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-060-06 353 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-130-13 33.32 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-130-02 146 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-060-08 640 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-060-11 70.3 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-110-08 19.5 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-110-09 161.21 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-120-05 135.8 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-120-06 12.89 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-120-07 131.11 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-120-08 52.6 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-120-11 4.5 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-120-15 5 - ------------------------------------------------------------------------- TRUCKEE CANYON SIERRA 023-120-01 326.1 - ------------------------------------------------------------------------- TRUCKEE CANYON WASHOE 038-270-10 120 - ------------------------------------------------------------------------- TRUCKEE CANYON WASHOE 038-270-11 93.83 - ------------------------------------------------------------------------- TRUCKEE CANYON WASHOE 038-190-18 40 - ------------------------------------------------------------------------- TRUCKEE CANYON WASHOE 048-010-06 27.22 - ------------------------------------------------------------------------- TRUCKEE CANYON NEVADA 048-030-13 55.21 - ------------------------------------------------------------------------- 3,768.48 - ------------------------------------------------------------------------- Customer Information System (CIS) Proprietary Facility Design and Mapping Software Hi Band 800 MHZ frequency and Radio Equipment Telephone System Leased Centrex Lines and Equipment Office Space at 6100 Niel Road, Reno, NV 89511 Office Space at 1 Ohm Place, Reno, NV 89502 Office Space at 11 Ohm Place, Reno, NV 89502 Warehouse/Material Storage Space at 11 Ohm, Reno, NV 89502 EX-10.AA 36 0036.txt AMENDED & RESTATED CREDIT AGREEMENT Exhibit 10(AA) AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- ARRANGED BY MELLON BANK, N.A. This AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment and ------------- Restatement"), is made and entered into as of August 28, 2000, among SIERRA - ----------- PACIFIC POWER COMPANY (the "Company"), MELLON BANK, N.A. ("Mellon"), in its ------- ------ capacity as administrative agent under the Credit Agreement described below (the "Administrative Agent"), the financial institutions listed on the signature -------------------- pages hereto under the caption "Continuing Lenders" (the "Continuing Lenders") ------------------ and the financial institutions, if any, listed on the signature pages hereto under the caption "New Lenders" (the "New Lenders"; the Continuing Lenders and ----------- the New Lenders are hereinafter collectively referred to as the "Lenders"). ------- RECITALS -------- A. The Company, Mellon, in its capacity as Administrative Agent, First Union National Bank and Wells Fargo Bank, N.A., in their capacity as syndication agents, and the other financial institutions listed on the signature pages thereto have entered into a Credit Agreement, dated as of June 24, 1999 (as amended, modified and supplemented through but excluding the date hereof, the "Credit Agreement"). ---------------- B. The Company desires, and the Administrative Agent and the Lenders are willing, upon the terms set forth in this Amendment and Restatement, to amend the Credit Agreement as set forth herein and to restate the Credit Agreement in its entirety to read as set forth in the Credit Agreement with the amendments set forth below. NOW, THEREFORE, in consideration of the foregoing, the premises and mutual covenants contained herein and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby (i) agree that the Credit Agreement shall be amended and restated in its entirety to read as set forth in the Credit Agreement with the amendments set forth below and (ii) further agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized ------------- terms used herein shall have the meanings given thereto in the Credit Agreement. 2. Effectiveness of this Amendment and Restatement. So long as each ----------------------------------------------- of the following conditions shall be satisfied or waived by the Administrative Agent and the Lenders, this Amendment and Restatement shall become effective and the Credit Agreement shall be amended and restated as provided herein at 9:00 A.M. (Pacific time) (the "Effective Time") on August 28, 2000 (the "Effective -------------- --------- Date"): - ---- (a) Execution of Amendment and Restatement. The Company and the -------------------------------------- Lenders shall have executed a copy of this Amendment and Restatement (whether the same or different copies) and shall have delivered the same to the Administrative Agent. (b) No Litigation. The Administrative Agent and the Lenders shall be ------------- satisfied that, immediately prior to the Effective Time, no judgment, order, injunction or other restraint shall have been issued or filed which restrains, and no hearing seeking injunctive relief or other restraint is pending or has been noticed which seeks to restrain, the Company from consummating the transactions described in the Loan Documents or this Amendment and Restatement. (c) No Default; Representations and Warranties. The Administrative ------------------------------------------ Agent and the Lenders shall be satisfied that, immediately prior to the Effective Time and after giving effect to this Amendment and Restatement, (i) there shall exist no Default or Event of Default and (ii) the representations and warranties of the Company contained in the Loan Documents to which the Company is a party are true and correct in all material respects as of the Effective Time with the same effect as though such representations and warranties had been made on and as of the Effective Time (except for such representations and warranties made as of a specified date, which shall be true and correct in all material respects as of such specified date). (d) Corporate Proceedings. All corporate and legal proceedings and --------------------- all instruments and agreements in connection with the transactions contemplated in this Amendment and Restatement and the other Loan Documents shall be satisfactory in form and substance to the Administrative Agent and the Lenders, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings and governmental approvals, if any, which any Lender reasonably may have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. (e) Amendment and Restatement Fee. The Administrative Agent shall ----------------------------- have received from the Company, for the account of each Lender that executed and delivered its counterpart to this Amendment and Restatement by 5:00 P.M. (Pacific time) on August 18, 2000, an amendment and restatement fee equal to the product of 0.25% and the amount of such Lender's Commitment at the Effective Time. (f) Arrangement Fee. Mellon shall have received the arrangement fee --------------- set forth in the engagement letter dated June 12, 2000 from Mellon to Sierra Pacific Resources. (g) Other Payments. The Administrative Agent and each Lender shall -------------- have received all other amounts, if any, owing from the Company to such Person pursuant to the Credit Agreement through and including the Effective Date. All the certificates and other documents and papers referred to in this Section 2, unless otherwise specified, shall be delivered to the Administrative Agent's counsel, White & Case LLP, at 633 West Fifth Street, 19/th/ Floor, Los Angeles, CA 90071, for the account of each of the Lenders and in sufficient counterparts for each of the Lenders and shall be satisfactory in form and substance to the Administrative Agent and the Lenders. -2- 3. Amendment. At the Effective Time, --------- (a) The defined term "Consolidated Net Income Available to Common" set ------------------------------------------- forth in Section 1.01 of the Credit Agreement shall be deleted in its entirety and the following shall be substituted therefor: ""Consolidated Net Income Available to Common" means, for any ------------------------------------------- period, the consolidated net income of the Borrower and its consolidated Subsidiaries before giving effect to any extraordinary non-cash gains or non-cash losses less consolidated preferred dividends accrued by the Borrower and its consolidated Subsidiaries, in each case for such period.". (b) The defined term "Revolving Termination Date" set forth in Section -------------------------- 1.01 of the Credit Agreement shall be deleted in its entirety and the following shall be substituted therefor: ""Revolving Termination Date" means the earlier of (i) August 27, -------------------------- 2001, or such date after August 27, 2001 to which the Commitments are extended in accordance with Section 2.06(e), and (ii) the date the Obligations and Commitments under this Agreement terminate, whether by prepayment, cancellation, acceleration or otherwise.". (c) Section 6.01(b) of the Credit Agreement shall be deleted in its entirety and the following shall be substituted therefor: "(a) Fixed Charge Coverage Ratio. The Borrower shall not permit --------------------------- the Fixed Charge Coverage Ratio, determined as of the last day of each fiscal quarter set forth below for the period consisting of the four consecutive fiscal quarters ended on such last day, to be less than the ratio set forth opposite such last day:
Fiscal Quarter Ended Ratio ---------------------- ------ September 30, 2000 1.30:1 December 31, 2000 1.30:1 March 31, 2001 1.35:1 June 30, 2001 and each fiscal quarter ended thereafter 1.50:1.".
4. Representations and Warranties. The Company makes, as of the ------------------------------ Effective Date, each of the representations and warranties set forth in Article III of the Credit Agreement and such representations and warranties are, by this reference, incorporated herein as if set forth herein in their entirety, provided that references to "Loan Documents" shall, for purposes of this paragraph, be deemed to include this Amendment and Restatement. -3- 5. Miscellaneous. ------------- (a) Except as expressly modified by this Amendment and Restatement, the Credit Agreement shall continue to be and remain in full force and effect in accordance with its terms. Any future reference to the Credit Agreement shall, from and after the Effective Time, be deemed to be a reference to the Credit Agreement as amended and restated by this Amendment and Restatement. (b) This Amendment and Restatement may be executed in any number of counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. (c) THIS AMENDMENT AND RESTATEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CONFLICTS OF LAW RULES. (d) This Amendment and Restatement may be executed by facsimile signature and each such signature shall be treated in all respects as having the same effect as an original signature. (e) The rules of construction set forth in Section 1.03 of the Credit Agreement are, by this reference, incorporated herein as if set forth in their entirety, provided that references to "this Agreement" in such section shall mean references to this Amendment and Restatement. ***** -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be duly executed as of the date first above written. SIERRA PACIFIC POWER COMPANY By_______________________________ Name: Title: MELLON BANK, N.A., as Administrative Agent By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] Continuing Lenders ------------------ MELLON BANK, N.A. By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] FIRST UNION NATIONAL BANK By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] WELLS FARGO BANK, N.A. By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] BANK OF AMERICA, N.A. By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] THE BANK OF NEW YORK By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] BANK ONE, N.A. (Main Office-Chicago) By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] CREDIT SUISSE FIRST BOSTON By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] BNP PARIBAS By_______________________________ Name: Title: By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] UNION BANK OF CALIFORNIA, N.A. By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] BAYERISCHE LANDESBANK GIROZENTRALE By_______________________________ Name: Title: By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] FLEET NATIONAL BANK By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] FIRST SECURITY BANK OF NEVADA By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] KBC BANK, N.V. By_______________________________ Name: Title: By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] U.S. BANK NATIONAL ASSOCIATION By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] New Lenders ----------- THE INDUSTRIAL BANK OF JAPAN, LIMITED By_______________________________ Name: Title: [Signature Page to Amended and Restated Credit Agreement] EX-10.BB 37 0037.txt AMENDMENT & WAIVER AGREEMENT Exhibit 10(BB) AMENDMENT AND WAIVER AGREEMENT ------------------------------ This AMENDMENT AND WAIVER AGREEMENT (this "Agreement"), is made and entered --------- into as of March 1, 2001, among SIERRA PACIFIC POWER COMPANY (the "Company"), ------- MELLON BANK, N.A. ("Mellon"), FIRST UNION NATIONAL BANK ("First Union"), WELLS ------ ----------- FARGO BANK, N.A. ("Wells Fargo"), and the other parties set forth on the ----------- signatures pages hereto (the "Lenders"). ------- RECITALS -------- A. The Company, Mellon, in its capacity as administrative agent (the "Administrative Agent"), First Union and Wells Fargo, each in their capacity as - --------------------- syndication agent, and the Lenders have entered into a Credit Agreement, dated as of June 24, 1999 (as amended, modified and supplemented through the date hereof, the "Credit Agreement"). ---------------- B. Pursuant to Section 6.01(a) of the Credit Agreement, the Company's ratio of Total Indebtedness to the sum of Total Indebtedness and Shareholders' Equity (the "Debt to Equity Ratio"), determined as of the last day of each -------------------- fiscal quarter, shall not exceed 0.65 to 1. C. The Company reasonably believes that it will be in breach of its fixed charge coverage ratio set forth in Section 6.01(b) of the Credit Agreement for the four fiscal quarter period ended December 31, 2000 when it delivers its financial statements and compliance certificate for such quarter pursuant to Sections 5.01(a) and (c) of the Credit Agreement (as such breach relates to the four fiscal quarter period ended December 31, 2000 only, the "Financial Covenant ------------------ Breach"). - ------ D. The effect of the Financial Covenant Breach would, if not waived by March 31, 2001, result in a Default. E. The Company desires to sell its water assets consisting of treatment facilities and distribution infrastructure, hydroelectric facilities located on the Truckee River and water rights (surface and ground) and storage rights appurtenant to Donner and Independence Lakes (collectively, the "Water Assets") ------------ to the Truckee Meadows Water Authority ("TMWA") for approximately $350,000,000 ---- (such amount, plus or minus $25,000,000, the "Purchase Price"), which sale, if -------------- not waived, would cause the Company to breach its covenant set forth in Section 6.04 of the Credit Agreement and result in an Event of Default. F. The Company has requested that the Lenders (a) amend Section 6.01(a) of the Credit Agreement to reduce the Debt to Equity Ratio to 0.58 to 1, (b) waive any Default or Event of Default resulting from the Financial Covenant Breach and (c) consent to the sale of the Water Assets. NOW, THEREFORE, in consideration of the foregoing, the premises and mutual covenants contained herein and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms ------------- used herein shall have the meanings given thereto in the Credit Agreement. 2. Effectiveness of this Agreement. This Agreement shall become ------------------------------- effective and the waivers described in Section 3 and the amendment described in Section 4 below shall become effective at the time (the "Effective Time") on the -------------- first date (the "Effective Date") on which each of the following conditions -------------- shall be satisfied or waived by the Administrative Agent and the Required Lenders: (a) Execution of Agreement. The Company and the Required Lenders ---------------------- shall have executed a copy of this Agreement (whether the same or different copies) and shall have delivered the same to the Administrative Agent. (b) Quarterly Compliance Certificate. The Company shall have -------------------------------- delivered to the Administrative Agent a Quarterly Compliance Certificate for the four fiscal quarter period ended December 31, 2000, which Quarterly Compliance Certificate shall certify that the Company is in compliance with its financial covenants with respect to such quarter, except that the Fixed Charge Coverage Ratio shall be not less than 0.94 to 1. (c) No Litigation. The Administrative Agent and the Required Lenders ------------- shall be satisfied that, immediately prior to the Effective Time, no judgment, order, injunction or other restraint shall have been issued or filed which restrains, and no hearing seeking injunctive relief or other restraint is pending or has been noticed which seeks to restrain, the Company from consummating the transactions described in the Loan Documents or this Agreement. (d) No Default; Representations and Warranties. The Administrative ------------------------------------------ Agent and the Required Lenders shall be satisfied that, immediately prior to the Effective Time and after giving effect to this Agreement, (i) there shall exist no Default or Event of Default and (ii) the representations and warranties of the Company contained in the Loan Documents to which the Company is a party are true and correct in all material respects as of the Effective Time with the same effect as though such representations and warranties had been made on and as of the Effective Time (except for such representations and warranties made as of a specified date, which shall be true and correct in all material respects as of such specified date). (e) Corporate Proceedings. All corporate and legal proceedings and --------------------- all instruments and agreements in connection with the transactions contemplated in this Agreement and the other Loan Documents shall be satisfactory in form and substance to the Administrative Agent and the Required Lenders, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings and governmental approvals, if any, which any Lender reasonably may have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. -2- (f) Fee. For consenting to the amendment and waiver contained in this --- Agreement, each Lender that executes and delivers this Agreement prior to 5:00 p.m., Pacific Time, on March 1, 2001 shall have received on or before the Effective Date a fee in immediately available funds equal to the product of (i) 0.05% and (ii) the aggregate amount of such Lender's Commitments. (g) Other Payments. The Administrative Agent and each Lender shall -------------- have received all amounts, if any, owing from the Company to such Person through and including the Effective Date. All the certificates and other documents and papers referred to in this Section 2, unless otherwise specified, shall be delivered to the Administrative Agent's counsel, White & Case LLP, at 633 West Fifth Street, 19/th/ Floor, Los Angeles, CA 90071, facsimile (213) 687-0758, for the account of each of the Lenders and in sufficient counterparts for each of the Lenders and shall be satisfactory in form and substance to the Administrative Agent and the Required Lenders. 3. Waivers. At and from the Effective Time: ------- (a) The Administrative Agent and the Required Lenders agree to waive the Financial Covenant Breach to the extent (and only to the extent) the Company has complied with Section 2(b) of this Agreement. (b) The Administrative Agent and the Required Lenders hereby consent to the sale of the Water Assets to TMWA for the Purchase Price and waive any breach of Section 6.04 of the Credit Agreement which would otherwise result from such sale so long as (and only for so long as) (i) the Company shall not, unless and until the Administrative Agent, the Required Banks and the Company execute a written amendment to the Fixed Charge Coverage Ratio in Section 6.01(b) of the Credit Agreement, (A) dispose of any proceeds of such sale (the "Proceeds"), through dividend, distribution or -------- otherwise, notwithstanding any right to do so pursuant to Section 6.06 of the Credit Agreement or (B) declare or pay any dividend or redeem or repurchase any of its capital stock or otherwise make any distributions (any such transaction, a "Dividend" and all such transactions collectively, -------- the "Dividends"), if after giving effect to any proposed Dividend, the --------- total amount expended by the Company on all Dividends during any fiscal quarter at any time would exceed $20,000,000, and (ii) the aggregate amount of capital contributions received by the Company and the gross proceeds from the sale of capital stock by the Company during any fiscal quarter shall not be less than the amount of Dividends paid by the Company during such fiscal quarter (including any Dividends to be paid on the last day of such fiscal quarter), which determination shall be made as of the last day of such fiscal quarter. 4. Amendment. So long as the Effective Time shall have occurred, --------- concurrent with the sale of the Water Assets to TMWA for Proceeds of not less than the Purchase Price, Section 6.01(a) of the Credit Agreement shall be amended by deleting the text "0.65 to 1" and substituting therefor the text "0.58 to 1". -3- 5. Representations and Warranties. The Company makes, as of the Effective ------------------------------ Date, each of the representations and warranties set forth in Article V of the Credit Agreement and such representations and warranties are, by this reference, incorporated herein as if set forth herein in their entirety; provided that -------- references to "Loan Documents" shall, for purposes of this paragraph, be deemed to include this Agreement. 6. Miscellaneous. ------------- (a) The waivers contained in Sections 3(a) and 3(b) of this Agreement are one-time waivers only, are made only with respect to the specific provisions of the Credit Agreement referenced above and are made only to the extent and for the limited purposes described herein. Such waivers shall not be construed as waivers for any purpose other than as expressly set forth herein and shall not constitute an agreement or obligation on the part of the Administrative Agent or any Lender to grant any other or future waiver, or prevent any of them from enforcing any right or remedy under the Credit Agreement or otherwise with respect thereto. (b) Except as expressly modified by this Agreement, the Credit Agreement shall continue to be and remain in full force and effect in accordance with its terms. Any future reference to the Credit Agreement shall, from and after the Effective Time, be deemed to be a reference to the Credit Agreement as amended by Section 4 of this Agreement. (c) This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. (d) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CONFLICTS OF LAW RULES. (e) This Agreement may be executed by facsimile signature and each such signature shall be treated in all respects as having the same effect as an original signature. (f) The rules of construction set forth in Section 1.03 of the Credit Agreement are, by this reference, incorporated herein as if set forth in their entirety, provided that references to "this Agreement" in such section shall mean references to this Agreement. * * * -4- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. SIERRA PACIFIC POWER COMPANY By:__________________________________ Name: Mark A. Ruelle Title: Sr. Vice President, CFO -Signature Page- Amendment and Waiver Agreement MELLON BANK, N.A., as Administrative Agent and as a Lender By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement FIRST UNION NATIONAL BANK, as Syndication Agent and as a Lender By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement WELLS FARGO BANK, N.A., as Syndication Agent and as a Lender By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement BANK OF AMERICA, N.A. By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement THE BANK OF NEW YORK By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement BANK ONE, N.A. (Main Office-Chicago) By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement CREDIT SUISSE FIRST BOSTON By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement BNP PARIBAS By:_________________________________ Name: Title: By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement UNION BANK OF CALIFORNIA, N.A. By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement THE INDUSTRIAL BANK OF JAPAN, LTD. By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement BAYERISCHE LANDESBANK GIROZENTRALE By:_________________________________ Name: Title: By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement FLEETBOSTON FINANCIAL CORP. By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement FIRST SECURITY BANK OF NEVADA By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement KBC BANK, N.V. By:_________________________________ Name: Title: By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement U.S. BANK NATIONAL ASSOCIATION By:_________________________________ Name: Title: -Signature Page- Amendment and Waiver Agreement EX-12.A 38 0038.txt SIERRA'S, STATEMENT REGARDING COMPUTATION OF RATIOS SIERRA PACIFIC RESOURCES RATIOS OF EARNINGS TO FIXED CHARGES Exhibit 12(A)
Year Ended December 31, -------------------------------------------------------------------- Amount in 000's 2000 1999 1998 1997 1996 EARNINGS AS DEFINED: (Loss) Income From Continuing Operations After Interest Charges $ (27,001) $ 67,152 $ 94,686 $ 90,472 $ 78,868 Income Taxes (28,936) 26,570 45,471 45,225 42,884 -------------------------------------------------------------------- (Loss) Income From Continuing Operations before Income Taxes (55,937) 93,722 140,157 135,697 121,752 Fixed Charges 210,368 133,515 81,238 63,139 52,227 Capitalized Interest (10,634) (8,000) (6,080) (2,579) (890) Preference Security Dividend Requirements of Consolidated Subsidiaries (24,297) (20,127) (11,013) (7,256) - -------------------------------------------------------------------- Total $ 119,500 $199,110 $204,302 $189,001 $173,089 ==================================================================== FIXED CHARGES AS DEFINED: Interest Expensed and Capitalized(1) $186,071 $113,388 $ 70,225 $ 55,883 $ 52,227 Preference Security Dividend Requirements of Consolidated Subsidiaries 24,297 20,127 11,013 7,256 - -------------------------------------------------------------------- Total $210,368 $133,515 $ 81,238 $ 63,139 $ 52,227 ==================================================================== RATIO OF EARNINGS TO FIXED CHARGES 0.57 1.49 2.51 2.99 3.31 DEFICIENCY $ 90,868 $ - $ - $ - $ -
(1) Included amortization of premiums, discounts and capitalized debt expenses and interest components of rent expense. EX-12.B 39 0039.txt NEVADA'S, STATEMENT REGARDING COMPUTATION OF RATIOS Exhibit 12(B) NEVADA POWER COMPANY RATIOS OF EARNINGS TO FIXED CHARGES Year Ended December 31, ------------------------------------------------ Amounts in 000's 2000 1999 1998 1997 1996 EARNINGS AS DEFINED: (Loss) Income From Continuing Operations After Interest Charges(1)$ 7,244 $ 53,959 $ 94,686 $ 90,472 $ 78,868 Income Taxes (9,386) 21,213 45,471 45,225 42,884 ------------------------------------------------ (Loss) Income From Continuing Operations before Income Taxes (2,142) 75,172 140,157 135,697 121,752 Fixed Charges 103,933 97,734 81,238 63,139 52,227 Capitalized Interest (7,855) (8,356) (6,080) (2,579) (890) Preference Security Dividend Requirements of Consolidated Subsidiaries (15,172) (15,172) (11,013) (7,256) - ------------------------------------------------ Total $ 78,764 $149,378 $204,302 $189,001 $173,089 ================================================ FIXED CHARGES AS DEFINED: Interest Expensed and Capitalized (2) $ 88,761 $ 82,562 $ 70,225 $ 55,883 $ 52,227 Preference Security Dividend Requirements of Consolidated Subsidiaries 15,172 15,172 11,013 7,256 - ------------------------------------------------ Total $103,933 $ 97,734 $ 81,238 $ 63,139 $ 52,227 ================================================ RATIO OF EARNINGS TO FIXED CHARGES 0.76 1.53 2.51 2.99 3.31 DEFICIENCY $ 25,169 $ - $ - $ - $ - (1) Does not include equity in (losses) earnings of Sierra Pacific Resources in 2000 and 1999 (2) Includes amortization of premiums, discounts, and capitalized debt expense and interest component of rent expense. EX-12.C 40 0040.txt SIERRA'S, STATEMENT REGARDING COMPUTATION OF RATIOS Exhibit 12(C) SIERRA PACIFIC POWER COMPANY RATIOS OF EARNINGS TO FIXED CHARGES
Year Ended December 31, ------------------------------------------------------------------ Amounts in 000's 2000 1999 1998 1997 1996 EARNINGS AS DEFINED: (Loss) Income from Continuing Operations After Interest Charges $ (335) $ 68,364 $ 88,646 $ 86,132 $ 72,800 Income Taxes (1,362) 33,489 39,561 36,454 31,432 ------------------------------------------------------------------ (Loss) Income From Continuing Operations before Income Taxes (1,697) 101,853 128,207 122,586 104,232 Fixed Charges 56,753 48,503 47,526 45,611 41,219 Capitalized Interest (2,779) (141) (6,000) (4,718) (3,619) Preference Security Dividend Requirements of Consolidated Subsidiaries (3,742) (3,749) (4,171) (4,171) (1,749) ------------------------------------------------------------------ Total $48,535 $146,466 $165,562 $159,308 $140,083 ================================================================== FIXED CHARGES AS DEFINED: Interest Expensed and Capitalized (1) $53,011 $ 44,754 $ 43,355 $ 41,440 $ 39,470 Preference Security Dividend Requirements of Consolidated Subsidiaries 3,742 3,749 4,171 4,171 1,749 ------------------------------------------------------------------ Total $56,753 $ 48,503 $ 47,526 $ 45,611 $ 41,219 =================================================================== RATIO OF EARNINGS TO FIXED CHARGES 0.86 3.02 3.48 3.49 3.40 DEFICIENCY $ 8,218 $ - $ - $ - $ -
(1) Includes amortization of premiums, discounts and capitalized debt expense and interest component of rent expense. EX-23.A 41 0041.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23(A) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-92651 of Sierra Pacific Resources on Form S-8, Registration Statement No. 333-80149 of Sierra Pacific Resources on Form S-3 and Registration Statement No. 333-77523 of Sierra Pacific Resources on Form S-3 of our reports dated February 23, 2001 (March 9, 2001 as to Note 20), appearing in the Annual Report on Form 10-K of Sierra Pacific Resources for the year ended December 31, 2000. Deloitte & Touche LLP Reno, Nevada March 21, 2001 -----END PRIVACY-ENHANCED MESSAGE-----