MASTER SEPARATION AGREEMENT
by and among
TXU ELECTRIC DELIVERY COMPANY,
TXU GENERATION HOLDINGS COMPANY LLC,
TXU MERGER ENERGY TRADING COMPANY LP
TXU XXXXX COMPANY,
TXU XXXXX ENERGY SERVICES COMPANY,
TXU ENERGY RETAIL COMPANY LP, and
TXU ELECTRIC COMPANY
Dated as of December 14, 2001
TABLE OF CONTENTS
Page
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ARTICLE I Definitions........................................................3
Section 1.1 Accounting Terms........................................3
Section 1.2 Definitions.............................................3
ARTICLE II Separation.......................................................15
Section 2.1 Separation Date........................................15
Section 2.2 Unbundling Transactions................................15
ARTICLE III Indemnification.................................................15
Section 3.1 Indemnification By Genco...............................15
Section 3.2 Indemnification By T&D.................................16
Section 3.3 Indemnification By Trading Group.......................17
Section 3.4 Indemnification By TXU Retail Group....................18
Section 3.5 Indemnification By XXXXX Retail Group..................19
Section 3.6 Indemnification By XXXXX...............................20
Section 3.7 Procedures for Indemnification of Third Party Claims...20
Section 3.8 Additional Matters.....................................22
Section 3.9 Survival of Indemnities................................23
Section 3.10 Indemnification of Directors and Officers..............23
Section 3.11 Remedies Exclusive.....................................23
Section 3.12 Other Agreements Among Affiliates......................23
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ARTICLE IV True-Up and Other Financial Obligations..........................24
Section 4.1 Regulatory Proceedings.................................24
Section 4.2 Benefits/Obligations of Genco..........................25
Section 4.3 Retail Clawback........................................27
Section 4.4 Further Assurances for Modifications...................28
ARTICLE V Transferred Employees.............................................28
Section 5.1 Transferred Employees..................................28
ARTICLE VI Other Covenants..................................................29
Section 6.1 Other Agreements.......................................29
Section 6.2 Further Instruments....................................29
Section 6.3 Agreement For Exchange of Information..................30
Section 6.4 Cooperation in Litigation..............................31
ARTICLE VII Miscellaneous...................................................32
Section 7.1 Limitation of Liability................................32
Section 7.2 Entire Agreement.......................................32
Section 7.3 Conflicting Agreements.................................32
Section 7.4 Governing Law..........................................32
Section 7.5 Notices................................................32
Section 7.6 Counterparts; Copies...................................33
Section 7.7 Binding Effect; No Third Party Beneficiaries...........33
Section 7.8 Assignment; Change of Control..........................33
Section 7.9 Failure or Delay Not Waiver; Remedies Cumulative.......33
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Section 7.10 Amendment..............................................33
Section 7.11 Interpretation.........................................33
Section 7.12 Severability...........................................33
Section 7.13 Compliance with Legislative Changes....................34
SCHEDULES
Schedule 1.2 Affiliate Agreements
Schedule 2.2 Timeline for Restructuring Events
Schedule 3.1(e) Genco Litigation
Schedule 3.2(d) T&D Litigation
Schedule 3.3(d) Trading Litigation
Schedule 3.4(e) TXU Retail Litigation
Schedule 3.5(d) XXXXX Retail Litigation
Schedule 3.6(d) XXXXX Litigation
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THIS MASTER SEPARATION AGREEMENT (this "AGREEMENT"), dated December
14, 2001, by and among TXU Electric Company, a Texas corporation ("TXU
ELECTRIC"), TXU Electric Delivery Company, a Texas corporation ("T&D"), TXU
Generation Holdings Company LLC, a Delaware limited liability company ("GENCO"),
TXU Merger Energy Trading Company LP, a Texas limited partnership ("TRADING"),
TXU XXXXX Company, a Texas corporation ("XXXXX"), TXU XXXXX Energy Services
Company, a Texas corporation ("XXXXX RETAIL") and TXU Energy Retail Company LP,
a Texas limited partnership ("TXU RETAIL") (TXU Electric, T&D, Genco, Trading,
XXXXX, XXXXX Retail and TXU Retail are sometimes collectively referred to herein
as, the "PARTIES" or individually as, a "PARTY").
Separation of TXU Electric Company
WHEREAS, as mandated by the Utilities Code of the State of Texas
("UTILITIES CODE"), TXU Electric is required to separate its business activities
into separate units consisting of a power generation company, retail electric
provider and transmission and distribution utility, by January 1, 2002.
WHEREAS, on January 10, 2000, TXU Electric filed with the Public
Utility Commission of Texas ("PUCT") its business separation plan setting forth
its proposal for implementing the separation of its electric utility business,
which plan contemplated the separation of TXU Electric's utility business by
placing its generation assets in an affiliated power generation company, placing
its retail assets in an affiliated retail electric provider, and placing its
transmission and distribution assets in a transmission and distribution utility.
WHEREAS, on August 30, 2001, TXU Electric filed an amendment to its
original business separation plan, which amendment, among other things,
contemplated the transfer of TXU Electric's transmission and distribution assets
to an affiliated transmission and distribution utility (the original business
separation plan, as amended, is hereinafter referred to as the "TXU ELECTRIC
BUSINESS SEPARATION PLAN").
WHEREAS, the TXU Electric Business Separation Plan, as originally
filed, was approved by the PUCT in an Order, dated October 3, 2001, in Docket
No. 22350, Application of TXU Electric Company for Approval of Unbundled Cost of
Service, Initial Estimate of Stranded Costs, and Business Separation Plan.
WHEREAS, the amendment to the TXU Electric Business Separation Plan was
processed by the PUCT in Docket No. 24789 and approved in an Order, dated
November 9, 2001.
WHEREAS, TXU Electric will change its name to "TXU US Holdings Company"
(effective as of the time set forth in Article II hereof), and, after the
Separation Date, will no longer operate as a utility and will function solely as
a holding company of the regulated and unregulated businesses.
WHEREAS, effective as of the time set forth in Article II hereof, TXU
Energy Trading Company will merge with and into Trading whereby TXU Energy
Trading Company will cease to exist and Trading will change its name to "TXU
Energy Trading Company LP".
WHEREAS, in order to comply with the Utilities Code and in carrying out
the TXU Electric Business Separation Plan, TXU Electric will separate (effective
as of the time set forth in Article II hereof) its electric utility business by
transferring (i) its facilities and other assets associated with its generation
activities to one or more power generation companies (collectively, the "TXU
PGCS") pursuant to one or more Bills of Sale, Special Warranty Deeds, General
Assignment and Assumption Agreements, Assignments of Contracts and other
conveyance documents; (ii) its facilities and other assets associated with its
transmission and distribution activities to T&D, pursuant to one or more Bills
of Sale, Special Warranty Deeds, General Assignment and Assumption Agreements,
Assignments of Contracts and other conveyance documents; (iii) its facilities
and other assets associated with the retail sale of electricity to TXU Retail
pursuant to one or more Bills of Sale, General Assignment and Assumption
Agreements, Assignments of Contracts and other conveyance documents; and (iv)
its facilities and other assets associated with its wholesale energy trading
activities to Trading pursuant to one or more Bills of Sale, General Assignment
and Assumption Agreements, Assignments of Contracts and other conveyance
documents (the transactions identified in subsections (i) through (iv) above,
and any other transfers or conveyances made by TXU Electric in connection with
the restructuring ordered by the Utilities Code, are collectively referred to
herein as the "TXU ELECTRIC SEPARATION").
Separation of TXU XXXXX Company
WHEREAS, as mandated by the Utilities Code, XXXXX is required to
separate its transmission and distribution activities from its retail
activities, by January 1, 2002. XXXXX has no generation assets.
WHEREAS, XXXXX'x business separation plan was included in the TXU
Electric Business Separation Plan which contemplated the transfer of XXXXX'x
transmission and distribution assets, including its Certificate of Convenience
and Necessity (the "CCN"), to an affiliated transmission and distribution
utility (the "XXXXX BUSINESS SEPARATION PLAN"). Thereafter, a new affiliate
company would serve as the retail electric provider for XXXXX'x retail
customers.
WHEREAS, in order to comply with the Utilities Code and in carrying out
the XXXXX Business Separation Plan, XXXXX will separate (effective as of the
time set forth in Article II hereof) its electric utility business by (i)
ultimately placing its assets associated with its transmission and distribution
activities with T&D, including its CCN, pursuant to one or more Bills of Sale,
Special Warranty Deeds, General Assignment and Assumption Agreements and other
conveyance documents; and (ii) transferring its assets associated with the
retail sale of electricity to XXXXX Retail pursuant to one or more Bills of
Sale, General Assignment and Assumption Agreements and other conveyance
documents. The Dynegy Contract (as hereinafter defined) which provides XXXXX
with its purchased power will remain with XXXXX. The
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transactions identified in subsections (i) and (ii) are collectively referred to
herein as the "XXXXX SEPARATION". The XXXXX Separation and the TXU Electric
Separation are collectively referred to herein as the "SEPARATION".
WHEREAS, the Parties desire to set forth their understanding with
respect to certain rights and obligations the Parties will have as a result of
the Separation.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and intending to be legally bound hereby, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Accounting Terms. Any accounting terms used in this
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Agreement or the Ancillary Agreements (as hereinafter defined) shall, unless
otherwise specifically provided herein, have the meanings customarily given them
in accordance with United States generally accepted accounting principles
("GAAP") and all financial computations hereunder or thereunder shall, unless
otherwise specifically provided, be computed in accordance with GAAP
consistently applied as such rules may be amended from time to time.
Section 1.2 Definitions.
-----------
"Action" means any claim, demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
"Affiliate" of any Person means another Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. For this purpose "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the Person controlled, whether
through ownership of voting securities, by contract or otherwise. The fact that
any Person may be deemed at any time an Affiliate of another Person for purposes
of the Utilities Code shall not create any implication that such Persons are
"affiliates" for purposes of this Agreement.
"Affiliate Agreement" includes any agreement set forth on Schedule 1.2 attached
hereto and any other agreement between or among any Affiliates of TXU Corp. that
may exist prior to or after the Separation Date (other than any of the
Separation Documents).
"Agreement" has the meaning set forth in the introductory paragraph.
"Ancillary Agreements" means any other document, instrument or agreement
contemplated by this Agreement or the respective Separation Documents.
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"Appropriate Member of the Genco Group" has the meaning set forth in Section 3.1
hereof.
"Appropriate Member of the XXXXX Retail Group" has the meaning set forth in
Section 3.5 hereof.
"Appropriate Member of the T&D Group" has the meaning set forth in Section 3.2
hereof.
"Appropriate Member of the Trading Group" has the meaning set forth in Section
3.3 hereof.
"Appropriate Member of the TXU Retail Group" has the meaning set forth in
Section 3.4 hereof.
"Business" means with respect to (i) Genco, the Genco Business; (ii) T&D, the
T&D Business; (iii) TXU Retail, the TXU Retail Business; (iv) XXXXX Retail, the
XXXXX Retail Business; (v) XXXXX, the XXXXX Business and (vi) Trading, the
Trading Business.
"CCN" has the meaning set forth in the recital paragraphs.
A "Change of Control" shall be deemed to have occurred if any Party (including
each taxpayer which is taxable upon the income of a Party which is not, itself,
subject to federal income tax) is not a component member, or ceases to be a
component member, of a controlled group of corporations of which TXU Corp. is a
component member. As used in this definition of Change of Control, "controlled
group of corporations" and "component member" shall be defined as such terms are
defined in Section 1563 of the Internal Revenue Code of 1986, as amended.
"Confidential Information" shall include any Information provided by a Providing
Party to a Requesting Party pursuant to Section 6.3 hereof that, if in tangible
form, has been conspicuously marked "Confidential", or, if not in tangible form,
is otherwise designated as "Confidential" by the Providing Party. Confidential
Information shall not include Information that can be shown to have been (a) in
the public domain through no fault of such Requesting Party or such Requesting
Party's Subsidiaries, or (b) later lawfully acquired from other sources by the
Requesting Party (or such Requesting Party's Subsidiaries); provided, however,
in the case of (b) that such sources did not provide such Information in breach
of any confidentiality obligations.
"Docket Xx. 0000 Xxxxxxxxxx Costs" means the reserve established for the
write-off of costs associated with the repurchase of certain minority owners'
interest in the Comanche Peak nuclear plant which were disallowed by the PUCT.
"Dynegy Contract" means that certain Full Requirements Power Supply Agreement
between XXXXX and Dynegy Power Marketing, Inc. (formerly known as Electric
Clearinghouse, Inc., assignee of Destec Power Services, Inc.), dated February
28, 1997.
"Employment Obligations" means all rights and obligations of an employer in the
employer-employee relationship, including without limitation, those rights and
obligations associated with the design, implementation, interpretation and
administration of compensation plans, employee benefit plans, and fringe benefit
programs; the establishment, interpretation and enforcement of
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policies and procedures governing employee conduct; all employment-related
decisions and actions; all rights and obligations under employment agreements,
if any; all rights and obligations under collectively bargained agreements, if
any; and all rights and obligations under all laws affecting, or relating to,
the employer-employee relationship.
"Excess Mitigation Credit" has the meaning set forth in Section 4.2(b) hereof.
"GAAP" has the meaning set forth in Section 1.1 hereof.
"Genco" has the meaning set forth in the introductory paragraph.
"Genco Assets" means all of the generation assets (as that term is defined in
Section 39.251 of the Utilities Code) of TXU Electric, including, without
limitation, the real and personal property, contract rights and other assets
conveyed to a member of the Genco Group pursuant to the Genco Separation
Documents (including any such assets that may be further conveyed to a member of
the Genco Group after the Separation Date pursuant to Section 6.2(a) hereof) and
any asset acquired by any member of the Genco Group after the Separation Date.
For purposes of this definition, any asset that relates to the Genco Business,
but was inadvertently transferred to a member of a Group other than the Genco
Group, shall be and become part of the "Genco Assets" for all purposes on the
Separation Date.
"Genco Business" means the power generation business and operations conducted
with the Genco Assets by TXU Electric prior to the Separation Date and any
business conducted by any member of the Genco Group on and after the Separation
Date.
"Genco Group" includes Genco, each direct or indirect Subsidiary of Genco,
including TXU Generation Management Company LLC, a Delaware limited liability
company; TXU Generation Investment Company LLC, a Delaware limited liability
company; TXU Generation Company LP, a Texas limited partnership; TXU Big Xxxxx
Management Company LLC, a Delaware limited liability company; TXU Big Xxxxx
Investment Company LLC, a Delaware limited liability company; TXU Big Xxxxx
Company LP, a Texas limited partnership; TXU Xxxxxxx Management Company LLC, a
Delaware limited liability company; TXU Xxxxxxx Investment Company LLC, a
Delaware limited liability company; TXU Xxxxxxx Company LP, a Texas limited
partnership; TXU Mountain Creek Management Company LLC, a Delaware limited
liability company; TXU Mountain Creek Investment Company LLC, a Delaware limited
liability company; TXU Mountain Creek Company LP, a Texas limited partnership;
TXU Tradinghouse Management Company LLC, a Delaware limited liability company;
TXU Tradinghouse Investment Company LLC, a Delaware limited liability company;
TXU Tradinghouse Company LP, a Texas limited partnership; TXU DeCordova
Management Company LLC, a Delaware limited liability company; TXU DeCordova
Investment Company LLC, a Delaware limited liability company; TXU XxXxxxxxx
Company LP, a Texas limited partnership; TXU Big Xxxxx Lignite Management
Company LLC, a Delaware limited liability company; TXU Big Xxxxx Lignite
Investment Company LLC, a Delaware limited liability company; TXU Big Xxxxx
Lignite Company LP, a Texas limited partnership; and each Person that becomes a
Subsidiary of
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Genco after the Separation Date. The Genco Group shall not include any member of
the Trading Group, the TXU Retail Group, the T&D Group, the XXXXX Retail Group
or XXXXX.
"Genco Indemnitees" has the meaning set forth in Section 3.1 hereof.
"Genco Liabilities" shall mean (without duplication)
(i) any and all Liabilities that are expressly contemplated by
this Agreement, the Genco Separation Documents or any Ancillary Agreement as
Liabilities to be assumed by any member of the Genco Group, including
Liabilities under the contracts, agreements and permits included in the Genco
Assets;
(ii) all Liabilities relating to, arising out of, or resulting
from the operation of the Genco Business (including any Liability relating to,
arising out of or resulting from any act or failure to act by any director,
officer, employee, agent or representative (whether or not such act or failure
to act is or was within such Person's authority)); or
(iii) all Liabilities relating to, arising out of, or resulting from
the ownership or use of the Genco Assets.
"Genco Separation Documents" means, collectively, without limitation, one or
more Bills of Sale, Special Warranty Deeds, General Assignment and Assumption
Agreements, Assignments of Contracts and such other documents, instruments or
agreements, existing now or in the future, which effectuate the sale, transfer,
conveyance, assignment or assumption of any assets or liabilities of TXU
Electric to any member of the Genco Group as part of the unbundling process
required by the Utilities Code.
"Governmental Authority" shall mean any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
official or other regulatory, administrative, arbitrative or governmental
authority.
"Group" means with respect to (i) Genco, the Genco Group; (ii) T&D, the T&D
Group; (iii) Retail, the TXU Retail Group; (iv) Trading, the Trading Group; (v)
XXXXX Retail, the XXXXX Retail Group.
"Indebtedness" of any Person means, (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services, (f)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, or other encumbrance on property owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, (g) all guarantees by such Person of Indebtedness of others, (h) all
capital lease obligations of such
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Person, and (i) all securities or other similar instruments convertible or
exchangeable into any of the foregoing.
"Indemnifying Party" means any Party who is required to make any Indemnity
Payment to another Party pursuant to Article III hereof.
"Indemnitee" means any Party entitled to receive an Indemnity Payment pursuant
to Article III hereof .
"Indemnitee Notice Party" means with respect to (i) any member of the Genco
Group, Genco; (ii) any member of the T&D Group, T&D; (iii) any member of the TXU
Retail Group, TXU Retail; (iv) any member of the Trading Group, Trading; (v) any
member of the XXXXX Retail Group, XXXXX Retail.
"Indemnity Payment" means a payment made by one Party to another Party pursuant
to Article III hereof.
"Information" means information, whether or not patentable or copyrightable, in
written, oral, electronic or other tangible or intangible forms, stored in any
medium, including studies, reports, records, books, contracts, instruments,
surveys, discoveries, ideas, concepts, know-how, techniques, designs,
specifications, drawings, blueprints, diagrams, models, prototypes, samples,
flow charts, data, computer data, disks, diskettes, tapes, computer programs or
other software, marketing plans, customer names, communications by or to
attorneys (including attorney-client privileged communications), memos and other
materials prepared by attorneys or under their direction (including attorney
work product), and other technical, financial, employee or business information
or data.
"Legal Requirements" means any federal, state, local, administrative,
regulatory, municipal, foreign, international, multinational or constitutional
law, ordinance, order, decision, opinion, regulation, statute, treaty, rule or
code.
"Liabilities" shall mean any and all Indebtedness, liabilities and obligations,
whether accrued, fixed or contingent, mature or inchoate, known or unknown,
reflected on a balance sheet or otherwise, including, but not limited to, those
arising under any law, rule, regulation, Action, order, injunction, consent
decree or agreed order of any Governmental Authority or any judgment of any
court of any kind or any award of any arbitrator of any kind, and those arising
under any contract, operating lease, commitment or undertaking.
"Losses" shall mean any and all damages, losses, deficiencies, Liabilities,
obligations, penalties, judgments, settlements, claims, payments, fines,
interest costs and expenses (including, without limitation, the costs and
expenses of any and all Actions, assessments, judgments, settlements and
compromises relating thereto and the costs and expenses of attorneys',
accountants', consultants' and other professionals' fees and expenses incurred
in the investigation or defense thereof or the enforcement of rights hereunder),
including direct and consequential damages, but
7
excluding punitive damages (other than punitive damages awarded to any third
party against an Indemnified Party).
"Non-Transferred Entity" has the meaning set forth in Section 3.9 hereof.
"Party" has the meaning set forth in the introductory paragraph.
"Person" means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Providing Party" has the meaning set forth in Section 6.3(a) hereof.
"PUCT" has the meaning set forth in the recital paragraphs.
"Regulatory Proceedings" shall mean filings, notices, adjudicatory proceedings,
rulemakings, enforcement actions before an agency or in court relative to
regulatory activity, and any other proceedings at or before any regulatory or
administrative agency. The term shall also refer to any settlement negotiations
and appellate activities relative to any of the foregoing, including actions
seeking injunctions, writs of mandamus and appeals.
"Requesting Party" has the meaning set forth in Section 6.3(a) hereof.
"Securitization Order" has the meaning set forth in Section 4.2(d) hereof.
"Separation" has the meaning set forth in the recital paragraphs.
"Separation Date" has the meaning set forth in Section 2.1 hereof.
"Separation Documents" means, with respect to (i) Genco, the Genco Separation
Documents; (ii) T&D, the T&D Separation Documents; (iii) TXU Retail, the TXU
Retail Separation Documents; (iv) Trading, the Trading Separation Documents; (v)
XXXXX Retail, the XXXXX Retail Separation Documents and (vi) XXXXX T&D, the
XXXXX T&D Separation Documents.
"XXXXX" has the meaning set forth in the introductory paragraph.
"XXXXX Assets" means all of the assets of XXXXX, including the Dynegy Contract
(but excluding the XXXXX Retail Assets or the XXXXX T&D Assets) whether owned by
XXXXX prior to, or acquired by XXXXX after, the Separation Date. For purposes of
this definition, any asset that relates to the XXXXX Business, but was
inadvertently transferred to a member of a Group other than XXXXX, shall be and
become part of the "XXXXX Assets" for all purposes on the Separation Date.
"XXXXX Business" means the business and operations conducted by XXXXX (other
than the XXXXX T&D Business or the XXXXX Retail Business) prior to the
Separation Date and any business conducted by XXXXX on and after the Separation
Date.
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"XXXXX Business Separation Plan" has the meaning set forth in the recital
paragraphs.
"XXXXX Indemnitees" has the meaning set forth in Section 3.6 hereof.
"XXXXX Liabilities" shall mean (without duplication)
(i) any and all Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement as Liabilities to be assumed by XXXXX; or
(ii) all Liabilities primarily relating to, arising out of, or
resulting from the operation of the XXXXX Business (including any such Liability
relating to, arising out of or resulting from any act or failure to act by any
director, officer, employee, agent or representative (whether or not such act or
failure to act is or was within such Person's authority)), including all
Liabilities arising out of or resulting from the Dynegy Contract.
"XXXXX Retail" has the meaning set forth in the introductory paragraph.
"XXXXX Retail Assets" means all of the assets of XXXXX relating to the retail
sale of electricity which were transferred to XXXXX Retail pursuant to the XXXXX
Retail Separation Documents (including any such assets that may be further
conveyed to XXXXX Retail after the Separation Date pursuant to Section 6.2(a)
hereof) and any asset acquired by any member of the XXXXX Retail Group after the
Separation Date. For purposes of this definition, any asset that relates to the
XXXXX Retail Business, but was inadvertently transferred to a member of a Group
other than the XXXXX Retail Group, shall be and become part of the "XXXXX Retail
Assets" for all purposes on the Separation Date.
"XXXXX Retail Business" means the operations relating to the retail sale of
electricity conducted with the XXXXX Retail Assets by XXXXX prior to the
Separation Date and any business conducted by any member of the XXXXX Retail
Group on and after the Separation Date.
"XXXXX Retail Group" includes XXXXX Retail, any direct and indirect Subsidiary
of XXXXX Retail and each Person that becomes a Subsidiary of XXXXX Retail after
the Separation Date. The XXXXX Retail Group shall not include any member of the
Trading Group, the Genco Group, the TXU Retail Group, the T&D Group or XXXXX.
"XXXXX Retail Indemnitees" has the meaning set forth in Section 3.5 hereof.
"XXXXX Retail Liabilities" shall mean (without duplication)
(i) any and all Liabilities that are expressly contemplated by this
Agreement, the XXXXX Retail Separation Documents or any Ancillary Agreement as
Liabilities to be assumed by any member of the XXXXX Retail Group, including
Liabilities under the contracts, agreements and permits included in the XXXXX
Retail Assets;
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(ii) all Liabilities relating to, arising out of, or resulting from
the operation of the XXXXX Retail Business (including any such Liability
relating to, arising out of or resulting from any act or failure to act by any
director, officer, employee, agent or representative (whether or not such act or
failure to act is or was within such Person's authority)); or
(iii) all Liabilities relating to, arising out of, or resulting from
the ownership or use of the XXXXX Retail Assets.
"XXXXX Retail Separation Documents" means, collectively, without limitation, one
or more Bills of Sale, General Assignment and Assumption Agreements, Assignments
of Contracts and such other documents, instruments or agreements, existing now
or in the future, which effectuate the sale, transfer, conveyance, assignment or
assumption of any assets or liabilities of XXXXX to any member of the XXXXX
Retail Group as part of the unbundling process required by the Utilities Code.
"XXXXX Separation" has the meaning set forth in the recital paragraphs.
"XXXXX T&D Assets" means all of the assets of XXXXX relating to the transmission
and distribution of electricity, including the CCN of XXXXX, transferred to T&D
pursuant to the XXXXX T&D Separation Documents, including any such assets that
may be further conveyed to any member of the T&D Group after the Separation Date
pursuant to Section 6.2(a) hereof. For purposes of this definition, any asset
that relates to the XXXXX T&D Business, but was inadvertently transferred to a
member of a Group other than the T&D Group, shall be and become part of the
"XXXXX T&D Assets" for all purposes on the Separation Date.
"XXXXX T&D Business" means the operations relating to the transmission and
distribution of electricity conducted by XXXXX prior to the Separation Date and
any business conducted with the XXXXX T&D Assets by any member of the T&D Group
on and after the Separation Date.
"XXXXX T&D Separation Documents" means collectively, without limitation, one or
more Bills of Sale, Special Warranty Deeds, General Assignment and Assumption
Agreements, Assignments of Contracts and such other documents, instruments or
agreements, existing now or in the future, which effectuate the sale, transfer,
conveyance, assignment or assumption of any assets or liabilities of XXXXX to
any member of the T&D Group as part of the unbundling process required by the
Utilities Code.
"Stranded Costs" has the meaning set forth in Section 39.251 of the Utilities
Code.
"Subsidiary" of any Person means any corporation, limited partnership, limited
liability company, or other organization, whether incorporated or
unincorporated, of which at least a majority of the securities, partnership
interests, membership interests or other interests having by the terms thereof
ordinary voting power to elect the general partner or at least a majority of the
board of managers, the board of directors or others performing similar functions
with respect to such corporation, limited partnership, limited liability company
or other organization, is directly
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or indirectly owned or controlled by such Person or by any one or more of such
Person' Subsidiaries, or by such Person and one or more of its Subsidiaries.
"T&D" has the meaning set forth in the introductory paragraph.
"T&D Assets" means all of the transmission and distribution assets of TXU
Electric, including, without limitation, the real and personal property,
contract rights and other assets conveyed to T&D pursuant to the T&D Separation
Documents (including any such assets that may be further conveyed to any member
of the T&D Group after the Separation Date pursuant to Section 6.2(a) hereof)
and any asset acquired by any member of the T&D Group after the Separation Date.
For purposes of this definition, any asset that relates to the T&D Business, but
was inadvertently transferred to a member of a Group other than the T&D Group,
shall be and become part of the "T&D Assets" for all purposes on the Separation
Date.
"T&D Business" means the electric transmission and distribution business and
operations conducted with the T&D Assets by TXU Electric prior to the Separation
Date and any business conducted by any member of the T&D Group on and after the
Separation Date.
"T&D Group" includes T&D, any direct and indirect Subsidiary of T&D, including
TXU Transition Bond Company LLC and each Person that becomes a Subsidiary of T&D
after the Separation Date. The T&D Group shall not include any member of the
Trading Group, the Genco Group, the TXU Retail Group, the XXXXX Retail Group or
XXXXX.
"T&D Indemnitees" has the meaning set forth in Section 3.2 hereof.
"T&D Liabilities" shall mean (without duplication)
(i) any and all Liabilities that are expressly contemplated by
this Agreement, the T&D Separation Documents, the XXXXX T&D Separation Documents
or any Ancillary Agreement as Liabilities to be assumed by any member of the T&D
Group, including Liabilities under the contracts, agreements and permits
included in the T&D Assets or the XXXXX T&D Assets;
(ii) all Liabilities relating to, arising out of, or resulting
from (a) the operation of the T&D Business (including any Liability relating to,
arising out of or resulting from any act or failure to act by any director,
officer, employee, agent or representative (whether or not such act or failure
to act is or was within such Person's authority)) or (b) the ownership or use of
the T&D Assets; or
(iii) all Liabilities relating to, arising out of, or resulting
from the (a) operations of the XXXXX T&D Business, whether prior to or after the
Separation Date (including any such Liability relating to, arising out of or
resulting from any act or failure to act by any director, officer, employee,
agent or representative (whether or not such act or failure to act is or was
within such Person's authority)) or (b) the ownership or use of the XXXXX T&D
Assets.
11
"T&D Separation Documents" means, collectively, without limitation, one or more
Bills of Sale, Special Warranty Deeds, General Assignment and Assumption
Agreements, Assignments of Contracts and such other documents, instruments or
agreements, existing now or in the future, which effectuate the sale, transfer,
conveyance, assignment or assumption of any assets or liabilities of TXU
Electric to any member of the T&D Group as part of the unbundling process
required by the Utilities Code.
"Third Party Claim" has the meaning set forth in Section 3.7(a) hereof.
"Trading" has the meaning set forth in the introductory paragraph.
"Trading Assets" means all of the assets of TXU Electric relating to the
wholesale buying and selling of electricity, including, without limitation, the
personal property, contract rights and other assets conveyed to any member of
the Trading Group pursuant to the Trading Separation Documents (including any
such assets that may be further conveyed to any member of the Trading Group
after the Separation Date pursuant to Section 6.2(a) hereof), all of the assets
of TUFCO used in connection with the wholesale buying and selling of natural gas
that has been (or may be) conveyed to Trading prior to or after the Separation
Date, and any asset that may be acquired by any member of the Trading Group
after the Separation Date. For purposes of this definition, any asset that
relates to the Trading Business, but was inadvertently transferred to a member
of a Group other than the Trading Group, shall be and become part of the
"Trading Assets" for all purposes on the Separation Date.
"Trading Business" means the business and operations of wholesale buying and
selling of electricity conducted by TXU Electric prior to the Separation Date,
the business and operations of wholesale buying and selling of natural gas
conducted by TUFCO prior to the Separation Date and any business conducted by
any member of the Trading Group on and after the Separation Date.
"Trading Group" includes Trading; its general partner, TXU Energy Trading
Management Company LLC, a Delaware limited liability company; its limited
partner, TXU Energy Trading Investment Company LLC, a Delaware limited liability
company; each direct or indirect Subsidiary of Trading, including TXU Energy
Trading (California) Company, a Texas corporation; TXU Energy Trading Canada
Limited, a Canadian company; TXU Energy Trading (Canada) Company, a Texas
corporation; Energetica de Mexico, S.A. de C.V., a Mexican company; Servicios de
Energetica de Mexico, S.A. de C.V., a Mexican company; TXU ET Services Company,
a Texas corporation; and each Person that becomes a Subsidiary of Trading after
the Separation Date. The Trading Group shall not include any member of the TXU
Retail Group, the Genco Group, the T&D Group, the XXXXX Retail Group or XXXXX.
"Trading Indemnitees" has the meaning set forth in Section 3.3 hereof.
12
"Trading Liabilities" shall mean (without duplication)
(i) any and all Liabilities that are expressly contemplated by
this Agreement, the Trading Separation Documents or any Ancillary Agreement as
Liabilities to be assumed by Trading, including Liabilities under the contracts,
agreements and permits included in the Trading Assets;
(ii) all Liabilities relating to, arising out of, or resulting
from the operation of the Trading Business (including any such Liability
relating to, arising out of or resulting from any act or failure to act by any
director, officer, employee, agent or representative (whether or not such act or
failure to act is or was within such Person's authority)); or
(iii) all Liabilities relating to, arising out of, or resulting from
the ownership or use of the Trading Assets.
"Trading Separation Documents" means, collectively, without limitation, one or
more Bills of Sale, Special Warranty Deeds, General Assignment and Assumption
Agreements, Assignments of Contracts and such other documents, instruments or
agreements, existing now or in the future, which effectuate the sale, transfer,
conveyance, assignment or assumption of any assets or liabilities of TXU
Electric to any member of the Trading Group as part of the unbundling process
required by the Utilities Code.
"Transferred Entity" has the meaning set forth in Section 3.9 hereof.
"Transferee" includes any Person who shall have received any asset or assumed
any liability of TXU Electric as a result of the unbundling process required by
the Utilities Code.
"True-Up Order" has the meaning set forth in Section 4.1 hereof.
"True-Up Proceedings" means the proceedings contemplated by Sections 39.201 and
39.262 of the Utilities Code.
"TUFCO" means TXU Fuel Company, a Texas corporation.
"TXU Electric" has the meaning set forth in the introductory paragraph.
"TXU Electric Business Separation Plan" has the meaning set forth in the recital
paragraphs.
"TXU Electric Separation" has the meaning set forth in the recital paragraphs.
"TXU PGCs" has the meaning set forth in the recital paragraphs.
"TXU Retail" has the meaning set forth in the introductory paragraph.
"TXU Retail Assets" means all of the assets of TXU Electric used in connection
with the retail sale of electricity, including, without limitation, the personal
property, contract rights and other
13
assets conveyed to TXU Retail pursuant to the TXU Retail Separation Documents
(including any such assets that may be further conveyed to any member of the TXU
Retail Group after the Separation Date pursuant to Section 6.2(a) hereof) and
any asset acquired by any member of the TXU Retail Group after the Separation
Date. For purposes of this definition, any asset that relates to the TXU Retail
Business, but was inadvertently transferred to a member of a Group other than
the TXU Retail Group, shall be and become part of the "TXU Retail Assets" for
all purposes on the Separation Date.
"TXU Retail Business" means the operations relating to the retail sale of
electricity conducted with the TXU Retail Assets by TXU Electric prior to the
Separation Date and any business conducted by any member of the TXU Retail Group
on and after the Separation Date.
"TXU Retail Group" includes TXU Retail; its general partner, TXU Energy Retail
Management Company LLC, a Delaware limited liability company; its limited
partner, TXU Energy Retail Investment Company LLC, a Delaware limited liability
company; each direct and indirect Subsidiary of TXU Retail and each Person that
becomes a Subsidiary of TXU Retail after the Separation Date and any investment
in xxXxxxXxx.xxx, Inc., a Delaware corporation; and Pantellos Corporation, a
Delaware corporation. The TXU Retail Group shall not include any member of the
Trading Group, Genco Group, XXXXX Retail Group, the T&D Group or XXXXX.
"TXU Retail Indemnitees" has the meaning set forth in Section 3.4 hereof.
"TXU Retail Liabilities" shall mean (without duplication)
(i) any and all Liabilities that are expressly contemplated by
this Agreement, the TXU Retail Separation Documents or any Ancillary Agreement
as Liabilities to be assumed by any member of the TXU Retail Group, including
Liabilities under the contracts, agreements and permits included in the TXU
Retail Assets;
(ii) all Liabilities relating to, arising out of, or resulting
from the operation of the TXU Retail Business (including any such Liability
relating to, arising out of or resulting from any act or failure to act by any
director, officer, employee, agent or representative (whether or not such act or
failure to act is or was within such Person's authority)); or
(iii) all Liabilities relating to, arising out of, or resulting
from the ownership or use of the TXU Retail Assets.
"TXU Retail Separation Documents" means, collectively, without limitation, one
or more Bills of Sale, Special Warranty Deeds, General Assignment and Assumption
Agreements, Assignments of Contracts and such other documents, instruments or
agreements, existing now or in the future, which effectuate the sale, transfer,
conveyance, assignment or assumption of any assets or liabilities of TXU
Electric to any member of the TXU Retail Group as part of the unbundling process
required by the Utilities Code.
"Utilities Code" has the meaning set forth in the recital paragraphs.
14
ARTICLE II
SEPARATION
Section 2.1 Separation Date. Unless otherwise provided in this Agreement,
---------------
the effective date of the transactions contemplated by this Agreement shall be
January 1, 2002, except where a December 31, 2001 effective date is expressly
provided herein or in the Separation Documents (the "SEPARATION DATE").
Section 2.2 Unbundling Transactions. In order to effect the Separation
-----------------------
and to otherwise fully comply with the requirements of the Utilities Code, the
following actions have taken place, or will take place, at the times (based on
Dallas, Texas time) and on the dates set forth on Schedule 2.2 attached hereto.
The effective times and dates described on Schedule 2.2 shall control for all
purposes and, in the event of a conflict between the effective time or date for
a particular transaction as set forth in this Agreement and the effective time
or date for same set forth in any Ancillary Agreement, this Agreement shall
control.
ARTICLE III
INDEMNIFICATION
Section 3.1 Indemnification By Genco. Genco shall, and in addition, shall
------------------------
cause the Appropriate Member of the Genco Group to, indemnify, defend and hold
harmless TXU Electric, the T&D Group, the Trading Group, the XXXXX Retail Group,
the TXU Retail Group and XXXXX, and any member thereof, and, to the maximum
extent permitted by applicable Legal Requirements, each of their respective
directors, officers, managers, partners, employees, agents, and representatives,
and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "GENCO INDEMNITEES") from and against any and all Losses of
the Genco Indemnitees relating to, arising out of or resulting from any of the
following (without duplication), and Genco hereby assumes all Liabilities
associated therewith:
(a) the failure of Genco or any other member of the Genco Group or
any other Person to pay, perform or otherwise promptly discharge any Genco
Liabilities in accordance with their respective terms, whether prior to or after
the Separation Date;
(b) the Genco Business or any Genco Liabilities;
(c) any breach by Genco or any member of the Genco Group of this
Agreement or any of the Ancillary Agreements;
(d) any provision set forth in Section 4.2 hereof;
(e) any of the litigation set forth in Schedule 3.1(e) attached
hereto;
15
(f) any Indebtedness of TXU Electric assumed by Genco or any member
of the Genco Group under any Ancillary Agreement as part of the unbundling
process required by the Utilities Code;
(g) any Liability relating to any Genco Transferred Employee as set
forth in Section 5.1(a) hereof;
(h) the sale, lease, exchange or other transfer of all or part of
the Genco Assets to a Person who is not an Affiliate of TXU Corp.;
(i) a merger involving any member of the Genco Group with or into a
Person who is not an Affiliate of TXU Corp. wherein such member is not the
surviving entity; or
(j) a transaction or series of transactions wherein the beneficial
ownership of all or any part of the equity interests of any member of the Genco
Group is sold to a Person who is not an Affiliate of TXU Corp.
As used in this Section 3.1, "APPROPRIATE MEMBER OF THE GENCO GROUP" means the
member or members of the Genco Group, if any, whose business, assets,
operations, acts, conduct or omissions caused, gave rise to or resulted in the
Loss for which indemnity is provided.
Section 3.2 Indemnification By T&D. T&D shall, and in addition, shall
----------------------
cause the Appropriate Member of the T&D Group to, indemnify, defend and hold
harmless TXU Electric, the Genco Group, the Trading Group, the XXXXX Retail
Group, the TXU Retail Group and XXXXX, and any member thereof, and, to the
maximum extent permitted by applicable Legal Requirements, each of their
respective directors, officers, managers, partners, employees, agents and
representatives, and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "T&D INDEMNITEES") from and against any and
all Losses of the T&D Indemnitees relating to, arising out of or resulting from
any of the following (without duplication), and T&D hereby assumes all
Liabilities associated therewith:
(a) the failure of T&D or any other member of the T&D Group or any
other Person to pay, perform or otherwise promptly discharge any T&D Liabilities
in accordance with their respective terms, whether prior to or after the
Separation Date;
(b) the T&D Business or any T&D Liabilities;
(c) any breach by T&D or any member of the T&D Group of this
Agreement or any of the Ancillary Agreements;
(d) any of the litigation set forth in Schedule 3.2(d) attached
hereto;
(e) any Indebtedness of TXU Electric assumed by T&D or any member of
the T&D Group under any Ancillary Agreement as part of the unbundling process
required by the Utilities Code;
16
(f) any Liability relating to any T&D Transferred Employee as set
forth in Section 5.1(b) hereof;
(g) the sale, lease, exchange or other transfer of all or part of
the T&D Assets to a Person who is not an Affiliate of TXU Corp.;
(h) a merger involving any member of the T&D Group with or into a
Person who is not an Affiliate of TXU Corp. wherein such member is not the
surviving entity; or
(i) a transaction or series of transactions wherein the beneficial
ownership of all or part of the equity interests of any member of the T&D Group
is sold to a Person who is not an Affiliate of TXU Corp.
As used in this Section 3.2, "APPROPRIATE MEMBER OF THE T&D GROUP" means the
member or members of the T&D Group, if any, whose business, assets, operations,
acts, conduct or omissions caused, gave rise to or resulted in the Loss for
which indemnity is provided.
Section 3.3 Indemnification By Trading Group. Trading shall, and in
--------------------------------
addition, shall cause the Appropriate Member of the Trading Group to, indemnify,
defend and hold harmless TXU Electric, the Genco Group, the T&D Group, the XXXXX
Retail Group, the TXU Retail Group and XXXXX, and any member thereof, and, to
the maximum extent permitted by applicable Legal Requirements, each of their
respective directors, officers, managers, partners, employees, agents,
representatives, and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "TRADING INDEMNITEES") from and against any
and all Losses of the Trading Indemnitees relating to, arising out of or
resulting from any of the following (without duplication), and Trading hereby
assumes all Liabilities associated therewith:
(a) the failure of Trading or any other member of the Trading Group
or any other Person to pay, perform or otherwise promptly discharge any Trading
Liabilities in accordance with their respective terms, whether prior to or after
the Separation Date;
(b) the Trading Business or any Trading Liabilities;
(c) any breach by Trading or any member of the Trading Group of this
Agreement or any of the Ancillary Agreements;
(d) any of the litigation set forth in Schedule 3.3(d) attached
hereto;
(e) any Liability relating to any Trading Transferred Employee as
set forth in Section 5.1(d) hereof;
(f) the sale, lease, exchange or other transfer of all or part of
the Trading Assets to a Person who is not an Affiliate of TXU Corp.;
17
(g) a merger involving any member of the Trading Group with or into
a Person who is not an Affiliate of TXU Corp. wherein such member is not the
surviving entity; or
(h) a transaction or series of transactions wherein the beneficial
ownership of all or part of the equity interests of any member of the Trading
Group is sold to a Person who is not an Affiliate of TXU Corp.
As used in this Section 3.3, "APPROPRIATE MEMBER OF THE TRADING GROUP" means the
member or members of the Trading Group, if any, whose business, assets,
operations, acts, conduct or omissions caused, gave rise to or resulted in the
Loss for which indemnity is provided.
Section 3.4 Indemnification By TXU Retail Group. TXU Retail shall,
-----------------------------------
and in addition, shall cause the Appropriate Member of the TXU Retail Group to,
indemnify, defend and hold harmless TXU Electric, the Genco Group, the T&D
Group, the XXXXX Retail Group, the Trading Group and XXXXX, and any member
thereof, and, to the maximum extent permitted by applicable Legal Requirements,
each of their respective directors, officers, managers, partners, employees,
agent and representatives, and each of the heirs, executors, successors and
assigns of any of the foregoing (collectively, the "TXU RETAIL INDEMNITEES")
from and against any and all Losses of the TXU Retail Indemnitees relating to,
arising out of or resulting from any of the following (without duplication), and
TXU Retail hereby assumes all Liabilities associated therewith:
(a) the failure of TXU Retail or any other member of the TXU Retail
Group or any other Person to pay, perform or otherwise promptly discharge any
TXU Retail Liabilities in accordance with their respective terms, whether prior
to or after the Separation Date;
(b) the TXU Retail Business or any TXU Retail Liabilities;
(c) any breach by TXU Retail or any member of the TXU Retail Group
of this Agreement or any of the Ancillary Agreements;
(d) the retail clawback set forth in Section 4.3 hereof;
(e) any of the litigation set forth in Schedule 3.4(e) attached
hereto;
(f) any Liability relating to any TXU Retail Transferred Employee as
set forth in Section 5.1(c) hereof;
(g) the sale, lease, exchange or other transfer of all or part of
the TXU Retail Assets to a Person who is not an Affiliate of TXU Corp.;
(h) a merger involving any member of the TXU Retail Group with or
into a Person who is not an Affiliate of TXU Corp. wherein such member is not
the surviving entity; or
18
(i) a transaction or series of transactions wherein the beneficial
ownership of all or part of the equity interests of any member of the TXU Retail
Group is sold to a Person who is not an Affiliate of TXU Corp.
As used in this Section 3.4, "APPROPRIATE MEMBER OF THE TXU RETAIL GROUP" means
the member or members of the TXU Retail Group, if any, whose business, assets,
operations, acts, conduct or omissions caused, gave rise to or resulted in the
Loss for which indemnity is provided.
Section 3.5 Indemnification By XXXXX Retail Group. XXXXX Retail shall,
-------------------------------------
and in addition, shall cause the Appropriate Member of the XXXXX Retail Group
to, indemnify, defend and hold harmless TXU Electric, the Genco Group, the T&D
Group, the TXU Retail Group, the Trading Group and XXXXX, and any member
thereof, and, to the maximum extent permitted by applicable Legal Requirements,
each of their respective directors, officers, managers, partners, employees,
agent and representatives, and each of the heirs, executors, successors and
assigns of any of the foregoing (collectively, the "XXXXX RETAIL INDEMNITEES")
from and against any and all Losses of the XXXXX Retail Indemnitees relating to,
arising out of or resulting from any of the following (without duplication), and
XXXXX Retail hereby assumes all Liabilities associated therewith:
(a) the failure of XXXXX Retail or any other member of the XXXXX
Retail Group or any other Person to pay, perform or otherwise promptly discharge
any XXXXX Retail Liabilities in accordance with their respective terms, whether
prior to or after the Separation Date;
(b) the XXXXX Retail Business or any XXXXX Retail Liabilities;
(c) any breach by XXXXX Retail or any member of the XXXXX Retail
Group of this Agreement or any of the Ancillary Agreements;
(d) any of the litigation set forth on Schedule 3.5(d) attached
hereto;
(e) the retail clawback set forth in Section 4.3 hereof;
(f) the sale, lease, exchange or other transfer of all or part of
the XXXXX Retail Assets to a Person who is not an Affiliate of TXU Corp.;
(g) a merger involving any member of the XXXXX Retail Group with or
into a Person who is not an Affiliate of TXU Corp. wherein such member is not
the surviving entity; or
(h) a transaction or series of transactions wherein the beneficial
ownership of all or part of the equity interests of any member of the XXXXX
Retail Group is sold to a Person who is not an Affiliate of TXU Corp.
19
As used in this Section 3.5, "APPROPRIATE MEMBER OF THE XXXXX RETAIL GROUP"
means the member or members of the XXXXX Retail Group, if any, whose business,
assets, operations, acts, conduct or omissions caused, gave rise to or resulted
in the Loss for which indemnity is provided.
Section 3.6 Indemnification By XXXXX. XXXXX shall indemnify, defend and
------------------------
hold harmless TXU Electric, the Genco Group, the T&D Group, the TXU Retail
Group, the Trading Group and the XXXXX Retail Group, and any member thereof,
and, to the maximum extent permitted by applicable Legal Requirements, each of
their respective directors, officers, managers, partners, employees, agent and
representatives, and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "XXXXX INDEMNITEES") from and against any
and all Losses of the XXXXX Indemnitees, and XXXXX hereby assumes all
Liabilities, relating to, arising out of or resulting from any of the following
(without duplication):
(a) the failure of XXXXX or any other Person to pay, perform or
otherwise promptly discharge any XXXXX Liabilities in accordance with their
respective terms, whether prior to or after the Separation Date;
(b) the XXXXX Business or any XXXXX Liabilities;
(c) any breach by XXXXX of this Agreement or any of the Ancillary
Agreements;
(d) any of the litigation set forth on Schedule 3.6(d) attached
hereto;
(e) the sale, lease, exchange or other transfer of all or part of
the XXXXX Assets to a Person who is not an Affiliate of TXU Corp.;
(f) a merger involving XXXXX with or into a Person who is not an
Affiliate of TXU Corp. wherein XXXXX is not the surviving entity; or
(g) a transaction or series of transactions wherein the beneficial
ownership of all or part of the equity interests of XXXXX is sold to a Person
who is not an Affiliate of TXU Corp.
Section 3.7 Procedures for Indemnification of Third Party Claims.
----------------------------------------------------
(a) Except in connection with any of the litigation identified on
the Schedules attached hereto, if an Indemnitee shall receive notice or
otherwise learn of the assertion by a Person (including any Governmental
Authority) who is not a Party or an Affiliate of a Party of any claims or of the
commencement by any such Person of any Action (collectively, a "THIRD PARTY
CLAIM") with respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to Sections 3.1 through 3.6, or any
other Section of this Agreement or any Ancillary Agreement, such Indemnitee
shall give such Indemnifying Party notice thereof by giving written notice
within 45 days after becoming aware of such Third Party
20
Claim to such Indemnifying Party's Indemnity Notice Party. Any such notice shall
describe the Third Party Claim in reasonable detail. Notwithstanding the
foregoing, the failure of any Indemnitee or other Person to give notice as
provided in this Section 3.7(a) shall not relieve the corresponding Indemnifying
Party of its obligations under this Article III, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice.
(b) An Indemnifying Party may elect to defend and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Except in connection
with any of the litigation identified on the Schedules attached hereto, within
30 days after the receipt of notice from an Indemnitee in accordance with
Section 3.7(a) (or sooner, if the nature of such Third Party Claim so requires),
the Indemnity Notice Party shall notify the Indemnitee as to whether the
Indemnifying Party will assume responsibility for defending such Third Party
Claim, which election shall specify any reservations or exceptions. If such
Indemnifying Party shall elect to assume the defense of a Third Party Claim,
such Indemnitee shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise, or settlement thereof,
but the fees and expenses of such counsel shall be the expense of such
Indemnitee except as set forth in the next sentence. In the event that the
Indemnifying Party has elected to assume the defense of the Third Party Claim
but has specified, and continues to assert, any reservations or exceptions in
such notice, then, in any such case, the reasonable fees and expenses of one
separate counsel for all Indemnitees shall be borne by the Indemnifying Party.
(c) If the Indemnifying Party shall have a reasonable basis for
believing that such Third Party Claim involves comparative fault or
responsibility by an Indemnitee, the Indemnifying Party shall have the right to
join such Indemnitee in such Third Party Claim and such Indemnitee and
Indemnifying Party shall each use best efforts to have their respective measures
of comparative fault or responsibility in relation to each other and/or in
relation to other parties to such Third Party Claim, submitted to and determined
by a finder of fact. In the event the finder of fact is unable or not permitted
to make such determination and upon final adjudication or settlement of such
Third Party Claim, the Indemnifying Party is found to be liable therefor or, in
the event such claim for an Indemnity Payment arises under Section 3.8(a)
hereof, such Indemnitee and Indemnifying Party agree to use good faith efforts
to negotiate and determine their respective measures of comparative fault or
responsibility in relation to each other and/or in relation to other parties to
such Third Party Claim. If, it is determined by the finder of fact or by such
negotiation process, that the Indemnitee bears some percentage of fault or
responsibility as to the matter for which indemnity is being sought, the
Indemnifying Party shall not be required to indemnify such Indemnitee for any
Losses for or with respect to any percentage of fault or responsibility found to
be attributable to such Indemnitee.
(d) If the Indemnifying Party elects to assume the defense of a
Third Party Claim, the Indemnitee will (i) cooperate in all reasonable respects
with the Indemnifying Party in connection with such defense, (ii) not admit any
liability with respect to, or settle, compromise or discharge, any Third Party
Claim without the Indemnifying Party's prior written consent and (iii)
21
agree to any settlement, compromise or discharge of a Third Party Claim which
the Indemnifying Party may recommend and which by its terms does not cause the
Indemnitee to admit any liability, fault or violation of law and obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such Third Party Claim and releases the Indemnitee completely in connection with
such Third Party Claim.
(e) Anything contained in this Agreement to the contrary
notwithstanding, no Indemnifying Party shall be entitled to assume the defense
of any Third Party Claim if such Third Party Claim seeks an order, injunction or
other equitable relief or relief for other than monetary damages against the
Indemnitee which, if successful, would materially adversely affect the business
of the Indemnitee.
(f) If an Indemnifying Party elects not to assume, or is prohibited
from assuming, responsibility for defending a Third Party Claim, or fails to
notify an Indemnitee of its election as provided in Section 3.7(b), such
Indemnitee may defend such Third Party Claim at the cost and expense (included
allocated costs of in-house counsel and other personnel) of the Indemnifying
Party.
(g) Unless the Indemnifying Party has failed to assume the defense
of the Third Party Claim in accordance with the terms of this Agreement, no
Indemnitee may settle or compromise any Third Party Claim without the consent of
the Indemnifying Party.
(h) No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement of the Third Party Claim without the consent of an
Indemnitee if the effect thereof is to permit any injunction, declaratory
judgment, other order or other nonmonetary relief to be entered, directly or
indirectly, against such Indemnitee.
Section 3.8 Additional Matters.
------------------
(a) Any claim on account of a Loss which does not result from a
Third Party Claim shall be asserted by written notice given by the Indemnitee to
the Indemnity Notice Party of the related Indemnifying Party. Such Indemnity
Notice Party shall have a period of 30 days after the receipt of such notice
within which to respond thereto. If such Indemnity Notice Party does not respond
within such 30-day period, such Indemnifying Party shall be deemed to have
refused to accept responsibility to make payment. If such Indemnity Notice Party
does not respond within such 30-day period or rejects such claim in whole or in
part, such Indemnitee shall be free to pursue such remedies as may be available
to such Party as contemplated by this Agreement and the Ancillary Agreements.
The terms of this Section 3.8(a) shall not apply to any of the litigation
identified on the Schedules attached hereto.
(b) In the event of payment by or on behalf of any Indemnifying
Party to any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such Indemnitee
may have any right, defense or claim relating to such Third Party Claim against
any claimant or plaintiff asserting such Third Party Claim or against any
22
other person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense (including allocated costs of
in-house counsel and other personnel) of such Indemnifying Party, in prosecuting
any subrogated right, defense or claim. Notwithstanding anything to the contrary
set forth herein, so long as the Indemnitee and Indemnifying Party shall be
Affiliates of TXU Corp., in the event that an insurance claim may be made by an
insured with respect to a Loss which is the subject of an Indemnity Payment made
pursuant to Article III, the Parties shall mutually agree, on a case-by-case
basis, whether the insured shall pursue such insurance claim. The Parties
acknowledge and agree that such decision shall be made based, among other
things, on minimizing insurance-related costs and expenses for TXU Corp., as a
whole. A Transferred Entity shall at no time have any rights to subrogation
under an insurance policy of a Non-Transferred Entity for an Indemnity Payment
made pursuant to Article III.
(c) There shall be no obligation on any partner, shareholder,
member or other owner, whether direct or indirect, of such Indemnifying Party to
provide additional capital or otherwise advance any sums to any Indemnifying
Party to satisfy any indemnity obligation pursuant to this Article III.
(d) Each Party while an Affiliate of TXU Corp. agrees to cause its
insurers to waive any rights of subrogation under their respective policies of
insurance as against another Affiliate of TXU Corp.
Section 3.9 Survival of Indemnities. Upon the occurrence of a Change of
-----------------------
Control with respect to any Party (a "TRANSFERRED ENTITY"), the obligations
under Article III of the Party or Parties not experiencing the Change of Control
(a "NON-TRANSFERRED ENTITY") as an Indemnifying Party of the Transferred Entity,
shall automatically terminate; provided, however, the rights of the
Non-Transferred Entity under Article III as an Indemnitee of the Transferred
Entity, shall survive any such Change of Control in accordance with the terms of
this Agreement.
Section 3.10 Indemnification of Directors and Officers. For purpose of
-----------------------------------------
Article III, and notwithstanding anything to the contrary contained herein,
Persons who serve (or have served) as a director and/or officer of more than one
Party shall be deemed to be an Indemnitee of each Party to which he/she serves
and/or served.
Section 3.11 Remedies Exclusive. The remedies provided in this Article
------------------
III shall be exclusive and shall preclude assertion by any Indemnitee of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party with respect to any matters arising pursuant to this
Agreement.
Section 3.12 Other Agreements Among Affiliates. Notwithstanding anything
---------------------------------
to the contrary set forth herein, the indemnity agreements set forth in this
Article III shall not apply to any Losses arising under any of the Affiliate
Agreements.
23
ARTICLE IV
TRUE-UP AND OTHER FINANCIAL OBLIGATIONS
Section 4.1 Regulatory Proceedings. It is recognized and understood
----------------------
that high levels of cooperation and assistance will be required among the
Parties in connection with Regulatory Proceedings necessary to implement the
Separation and to continue to comply with the Utilities Code. During the period
from the Separation Date until an order issued by the PUCT in connection with
the True-Up Proceedings becomes final and nonappealable, including any
Regulatory Proceedings related thereto (a "TRUE-UP ORDER"), the Parties agree as
follows:
(a) Upon reasonable request, each of the Parties shall, and in
addition, shall cause any member of its respective Group, to provide personnel,
information and other assistance to the members of each other Group in order to
prepare, file and prosecute to completion Regulatory Proceedings which are
either (i) required to be filed under the Utilities Code or (ii) deemed by the
requesting party to be desirable to implement or preserve some aspect of the
Separation contemplated herein.
(b) Assistance provided may, without limitation, relate to
information that has been transferred to or retained by the assisting party in
the Separation or which the assisting party is uniquely qualified to provide in
connection with Regulatory Proceedings that relate to the Separation and its
implementation under the Utilities Code. Assistance may take the form of
developing, filing and giving testimony and reports to the PUCT or other
Governmental Authority.
(c) The appropriate members of the T&D Group, the Genco Group, the
TXU Retail Group, XXXXX or the XXXXX Retail Group shall timely file with the
PUCT or other Governmental Authority and shall prosecute to completion all
Regulatory Proceedings which are required to be filed under the Utilities Code
or required to implement the Business Separation Plan approved by the PUCT and
the other provisions of this Agreement, such as, without limitation, filings to
terminate the "Price To Beat" obligation, if appropriate, the determination of
any "clawback" related to wholesale or retail customers, and the determination
of stranded costs related to the Genco Assets.
(d) Unless otherwise required by any Legal Requirements, until the
issuance of a True-Up Order, none of the Parties will, directly or indirectly,
assert (or cause any member of their respective Group to assert) a position
which is adverse to the position of another Party (or any member of its
respective Group), without express written permission of such Party, which
permission shall not be unreasonably withheld, in any Regulatory Proceeding
before the PUCT, Texas legislature or any other Governmental
24
Authority, with respect to any amendment or other revision to the Utilities
Code. Unless otherwise required by any Legal Requirements, none of the Parties
will, directly or indirectly, assert (or cause any member of their respective
Group to assert) a position which is adverse to the position of a member of the
T&D Group in any Regulatory Proceeding before the PUCT, Texas legislature or any
other Governmental Authority with respect to the following matters (1) stranded
cost quantification or recovery or (ii) proper level or components of the
utility rates of T&D; provided, however, that positions taken by a member of the
TXU Retail Group or the XXXXX Retail Group relating solely to the allocation of
costs or use of a rate design consistent with Price to Beat rate designs will
not be considered adverse positions even if such positions differ from those
asserted by a member of the T&D Group.
(e) If any amount set forth in Section 4.2 hereof is required in any
Regulatory Proceeding to be offset against any other amount or amounts set forth
in Section 4.2 hereof (i) T&D shall use all reasonable efforts to collect from
retail electric providers or retail customers any amounts allowed to be
recovered, and remit to Genco or its designee, from time to time, any amounts so
collected; (ii) T&D shall use all reasonable efforts to refund to retail
electric providers or retail customers, from time to time, any amounts that are
required to be refunded (including any interest required to be paid in such
Regulatory Proceeding less the amount of interest, if any, earned on such funds
by T&D) and all such refunded amounts (plus any such interest) shall be the sole
obligation of Genco or (iii) Genco shall have the sole obligation with respect
to any amounts that are disallowed.
Section 4.2 Benefits/Obligations of Genco.
-----------------------------
(a) Genco shall cause the TXU PGCs to file with the PUCT the final
fuel reconciliation, for the period beginning July 1, 1998 and ending on the
date that the rates charged to retail electric providers no longer include
reconcilable fuel costs, by October 1, 2002 or as otherwise required by the
Utilities Code or the PUCT, in order to determine the reasonableness of TXU
Electric's fuel expenses incurred during this period. TXU Electric hereby
transfers any balance related to all such unrecovered fuel costs to Genco.
Immediately thereafter, Genco shall transfer the same to T&D whereby Genco shall
have the right to collect a receivable from T&D in the same amount, plus
interest at the rate specified in Substantive Rule 25.236; provided, that T&D
and Genco hereby agree that the final obligations with respect to any such
balance shall be discharged in accordance with Section 4.2(j) hereof.
(b) To the extent required in any Regulatory Proceeding, T&D shall
reduce its nonbypassable tariffs charged to retail electric providers by the
amount of the accumulated balance of TXU Electric's regulatory liability for
over-earnings as of December 31, 2001 (the "EXCESS MITIGATION CREDIT") (plus
interest at the rate established in any Regulatory Proceeding). TXU Electric
hereby transfers the balance of the Excess Mitigation Credit liability at
December 31, 2001 to Genco and Genco hereby transfers the same to T&D; provided,
that Genco hereby agrees to pay to T&D pursuant to a note payable, the amount of
the balance of the Excess Mitigation Credit liability, plus interest at the rate
established in any Regulatory Proceeding. In the event it is determined in any
Regulatory Proceeding that an Excess Mitigation Credit is no longer required,
T&D and Genco agree to take any necessary actions, including cancellation of the
note payable, so that neither Party will have any further obligation with
respect to the Excess Mitigation Credit.
25
(c) Any regulatory asset and liability balance related to redirected
depreciation at December 31, 2001, or thereafter as the result of the ultimate
resolution of any Regulatory Proceeding, shall be transferred to, or become the
obligation of, T&D, as the case may be; provided, that T&D and Genco hereby
agree that the final obligations related to any redirected depreciation shall be
discharged in accordance with Section 4.2(j) hereof.
(d) (i) All generation-related regulatory assets for the period
prior to December 31, 1998 (collectively, the "Generation-Related Regulatory
Assets") and related accumulated deferred federal income taxes ("ADFIT") shall
be transferred to T&D on the effective date hereof and, T&D agrees to pay for
the same on terms agreeable to TXU Electric and T&D.
(ii) In the event no financing order in any
Regulatory Proceeding with respect to the securitization of the
Generation-Related Regulatory Assets (a "SECURITIZATION ORDER") is received or,
if for any other reason, the Generation-Related Regulatory Assets are not
securitized, the amount of the Generation-Related Regulatory Assets and related
ADFIT shall remain at T&D pending consideration of the same in the True-Up
Proceedings or other Regulatory Proceedings; provided, that, the Parties hereby
agree that any amounts that may be disallowed in such True-Up Proceedings or
other Regulatory Proceedings shall be transferred to TXU Electric and TXU
Electric shall have the sole obligation with respect thereto and any amounts
that T&D may be allowed to collect from retail electric providers or retail
customers shall be retained by T&D. TXU Electric shall retain all of the rights
and obligations related to the book value of any Generation-Related Regulatory
Assets that may be disallowed under Section 39.262(f) of the Utilities Code.
(e) Genco shall cause the TXU PGCs to assume all of the rights and
obligations related to the value of the Genco Assets as such value may be
determined in the True-Up Proceedings or other Regulatory Proceedings.
(f) TXU Electric hereby transfers the balance relating to employee
severance costs for the period January 1, 1999 through December 31, 2001 to
Genco and Genco hereby transfers the same to T&D pending consideration of these
costs in the True-Up Proceedings or other Regulatory Proceedings; provided, that
T&D and Genco hereby agree that the final obligations related to employee
severance costs shall be discharged in accordance with Section 4.2(j) hereof.
(g) TXU Electric hereby transfers the balance relating to capacity
auction costs to Genco and Genco hereby transfers the same to T&D pending
consideration of these costs in the True-Up Proceedings or other Regulatory
Proceedings; provided, that T&D and Genco hereby agree that the final
obligations related to capacity auction costs shall be discharged in accordance
with Section 4.2(j) hereof.
26
(h) The Parties recognize and agree that the outcome of Docket No.
22652 relating to the remand of Docket No. 9300 shall be taken into
consideration in the True-Up Proceedings or other Regulatory Proceedings.
(i) In accordance with Section 39.262(d) of the Utilities Code and
PUCT Substantive Rule 25.381(h), Genco shall cause the TXU PGCs to reconcile and
credit or xxxx T&D the net sum of: (i) TXU Electric's final fuel balance
determined under Section 39.202(c) of the Utilities Code and (ii) any difference
between the price of power obtained through the capacity auctions under Sections
39.153 and 39.156 of the Utilities Code and the power cost projections that were
employed for the same time period in the ECOM model to estimate stranded costs
in the proceeding under Section 39.201 of the Utilities Code.
(j) Except as provided elsewhere herein, the rights and obligations
with respect to any amounts set forth in Sections 4.2(a), (c), (e), (f), (g) or
(h) that are ultimately determined as result of the True-Up Proceedings or other
Regulatory Proceedings shall be discharged as follows:
(i) T&D shall use all reasonable efforts to collect from
retail electric providers or retail customers any amounts allowed to be
recovered, and remit to Genco or its designee, from time to time, any amounts so
collected.
(ii) T&D shall use all reasonable efforts to refund to retail
electric providers or retail customers, from time to time, any amounts that are
required to be refunded (including any interest required to be paid in such
Regulatory Proceeding less the amount of interest, if any, earned on such funds
by T&D) and all such refunded amounts (plus any such interest) shall be the sole
obligation of Genco.
(iii) Genco shall have the sole obligation with respect to any
amounts that are disallowed.
For purposes of this Section 4.2, T&D's sole responsibility shall be to act
either as a collection agent or a disbursement agent of Genco with respect to
such amounts and T&D shall have no further rights or obligations with respect to
any amounts so collected or refunded.
Section 4.3 Retail Clawback. To the extent required in any Regulatory
---------------
Proceeding, each of XXXXX Retail and TXU Retail will pay to T&D the lesser of
(a) any positive difference between the Price to Beat established under Section
39.202 of the Utilities Code (reduced by the nonbypassable delivery charge
established under Section 39.201 of the Utilities Code) and the prevailing
market price of electricity during the same time period and (b) $150 multiplied
by the number of residential or small commercial customers served by T&D that
are buying electricity from TXU Retail or XXXXX Retail, as the case may be, at
the Price to Beat on the second anniversary of the beginning of competition,
minus the number of new customers obtained by TXU Retail or XXXXX Retail, as the
case may be, outside T&D's service area; provided, that no reconciliation is
required for a customer class if TXU Retail or XXXXX Retail, as the case may be,
satisfies the requirements of Section 39.202(e) (1) or (2) of the Utilities Code
before the
27
expiration of two years from the beginning of competition. To the extent
required in any Regulatory Proceeding, T&D shall use all reasonable efforts to
refund to retail electric providers or retail customers, from time to time, any
amounts that are required to be refunded pursuant to Section 39.262(e) of the
Utilities Code (including any interest required to be paid in such Regulatory
Proceeding less the amount of interest, if any, earned on such funds by T&D) and
all such refunded amounts (plus any such interest) shall be the sole obligation
of TXU Retail or XXXXX Retail, as the case may be.
Section 4.4 Further Assurances for Modifications.
------------------------------------
(a) The Parties recognize that some (or all) of the issues set forth
in Sections 4.2 and 4.3 hereof may be modified by the Parties prior to the
True-Up Proceedings. In such event, the Parties agree to execute and deliver, or
cause to be executed and delivered, as appropriate, such other agreements,
instruments, and other documents and do and perform such other acts or things to
the extent necessary or desirable to carry out the agreements set forth in
Sections 4.2 and 4.3 hereof, as modified.
(b) The Parties further recognize that settlements may be reached
with one or more third parties involving some (or all) of the issues set forth
in Sections 4.2 and 4.3 hereof prior to the True-Up Proceedings. In such event,
the Parties agree to execute and deliver, or cause to be executed and delivered,
as appropriate, such other agreements, instruments, and other documents and do
and perform such other acts or things to the extent necessary or desirable to
carry out the terms of any such settlement agreement.
(c) The Parties further recognize that any of the amounts set forth
in Sections 4.2 and 4.3 hereof may be increased or decreased in any Regulatory
Proceeding after the Separation Date. In such event, the Parties agree to
execute and deliver, or cause to be executed and delivered, as appropriate, such
other agreements, instruments, and other documents and do and perform such other
acts or things to the extent necessary or desirable so that the agreements set
forth in Sections 4.2 and 4.3 will reflect such amounts, as adjusted in any such
Regulatory Proceeding.
ARTICLE V
TRANSFERRED EMPLOYEES
Section 5.1 Transferred Employees.
---------------------
(a) With respect to the employees of TXU Electric that will be
transferred to Genco as a result of the TXU Electric Separation, Genco hereby
assumes all Employment Obligations with respect to such employees.
(b) With respect to the employees of TXU Electric and XXXXX that
will be transferred to T&D as a result of the Separation, T&D hereby assumes all
Employment Obligations with respect to such employees.
28
(c) With respect to the employees of TXU Electric that will be
transferred to TXU Retail as a result of the TXU Electric Separation, TXU Retail
hereby assumes all Employment Obligations with respect to such employees.
(d) With respect to the employees of TXU Electric that will be
transferred to Trading as a result of the TXU Electric Separation, Trading
hereby assumes all Employment Obligations with respect to such employees.
ARTICLE VI
OTHER COVENANTS
Section 6.1 Other Agreements. In addition to the specific agreements,
----------------
documents and instruments contemplated by this Agreement or any Ancillary
Agreement, the Parties agree to execute and deliver, or cause to be executed and
delivered, by the appropriate Parties, such other agreements, instruments and
other documents and do and perform such other acts or things as may be necessary
or desirable for effecting completely the transactions contemplated by this
Agreement or any Ancillary Agreement.
Section 6.2 Further Instruments.
-------------------
(a) It is the Parties intent to transfer any and all assets of TXU
Electric and XXXXX (other than the Dynegy Contract), as necessary, to fully
comply with the requirements of the Utilities Code. However, to the extent a
Transferee should determine that one or more additional assets may be required
to be transferred to complete the unbundling process required by the Utilities
Code, at the request of a Transferee, and without further consideration, to the
extent transferable or assignable without violating any third party agreement,
TXU Electric or XXXXX, as the case may be, will execute and deliver to such
Transferee, such other instruments of transfer, conveyance, assignment,
substitution and confirmation and take such action as such Transferee may
reasonably deem necessary or desirable in order to effectuate such further
transfer or transfers.
(b) At the request of a Transferee, and without further
consideration, TXU Electric or XXXXX, as the case may be, will effectively
transfer, convey and assign to such Transferee and confirm such Transferee's
title to all of the assets, rights and other things of value contemplated to be
transferred by the applicable Separation Documents to put such Transferee in
actual possession and operating control thereof and to permit such Transferee to
exercise all rights with respect thereto (including, without limitation, rights
under contracts and other arrangements as to which the consent of any third
party to the transfer thereof shall not have previously been obtained).
(c) At the request of TXU Electric or XXXXX, as the case may be, and
without further consideration, a Transferee will execute and deliver (or in the
case of a member of the Genco Group, Genco shall cause such member of the Genco
Group to execute and deliver) to TXU Electric or XXXXX, as the case may be, all
instruments, assumptions, novations,
29
undertakings, substitutions or other documents and take such other actions as
such transferor may reasonably deem necessary or desirable in order to have such
Transferee fully and unconditionally assume and discharge the liabilities
contemplated to be assumed by such Transferee under the applicable Separation
Documents and to relieve such transferor of any liability or obligation with
respect thereto and evidence the same to third parties.
Section 6.3 Agreement For Exchange of Information.
-------------------------------------
(a) Each of the Parties agrees to provide, or shall cause each
member of its respective Group to provide (a "PROVIDING PARTY") (except in the
case of a dispute brought by one Party against another Party, which shall be
governed by the discovery rules of applicable state or federal law), to each
other Party or any member of such Party's respective Group (a "REQUESTING
PARTY"), as soon as reasonably practicable after written request therefor, any
Information in the possession or under the control of a Providing Party, and to
make available, the former, current and future directors, officers, managers,
employees and other personnel and agents of the Providing Party (to the extent
business demands of such person reasonably allow), within its control or which
it otherwise has the ability to make available, to the extent that the
Requesting Party reasonably needs such Information or person, regardless of
whether such information relates or may relate to a matter subject to
indemnification hereunder, (i) to comply with reporting, disclosure, filing or
other requirements imposed on the Requesting Party (including under applicable
securities laws) by a Governmental Authority having jurisdiction over the
Requesting Party, (ii) for use in any Regulatory Proceeding, judicial proceeding
or other proceeding or in order to satisfy audit, accounting, claims,
regulatory, litigation or other similar requirements, (iii) to comply with its
obligations under this Agreement or any Ancillary Agreement or (iv) in
connection with the ongoing businesses of a Requesting Party, including
preparation of financial statements; provided, however, that in the event that
any Party determines that any such provision of Information could be
commercially detrimental, violate any law (including any substantive rule of the
PUCT) or agreement, or waive any attorney-client privilege, the Requesting Party
and the Providing Party shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequence. The Requesting Party shall bear all costs and expenses in
connection therewith (unless the Requesting Party is entitled to indemnification
therefor under Article III).
(b) Any Information owned by a Party that is provided to a
Requesting Party pursuant to this Section 6.3 shall be deemed to remain the
property of the Providing Party. Unless specifically set forth herein, nothing
contained in this Agreement shall be construed as granting or conferring rights
of license or otherwise in any such Information.
(c) To facilitate the possible exchange of Information pursuant to
this Section 6.3 and other provisions of this Agreement after the Separation
Date, each Party agrees to use its reasonable commercial efforts to retain all
Information in its respective possession or control on and after the Separation
Date substantially in accordance with its policies as in effect on the
Separation Date. No Party shall amend its (or any member of its respective
Group's) record retention policies in any manner that would materially affect
its ability to comply with its
30
obligations under this Section 6.3 without giving thirty (30) days prior written
notice of such change in the policy to the other Parties. No Party will destroy,
or permit any of its Subsidiaries to destroy, any Information that exists on or
after the Separation Date (other than Information that is permitted to be
destroyed under the current record retention policy of such Party) without first
using its reasonable commercial efforts to notify the other Parties of the
proposed destruction and giving the other Parties the opportunity to take
possession of such Information prior to such destruction.
(d) No Party shall have any liability to any other Party in the
event that any Information exchanged or provided pursuant to this Section is
found to be inaccurate, in the absence of willful misconduct by the Party
providing such Information. No Party shall have any liability to any other Party
if any Information is destroyed or lost after reasonable commercial efforts by
such Party to comply with the provisions of Section 6.3(c).
(e) Each Requesting Party agrees to hold, and shall cause each
member of its respective Group and their respective officers, employees, agents,
consultants and advisors to hold, any Confidential Information in strict
confidence and not to disclose or release any Confidential Information without
the prior written consent of the Providing Party; provided, that a Requesting
Party may disclose, or may permit disclosure of, any Confidential Information
(i) to its auditors, attorneys, financial advisors, bankers and other
appropriate consultants and advisors who have a need to know such information
and are informed of their obligation to hold such information confidential to
the same extent as is applicable to the Requesting Party and in respect of whose
failure to comply with such obligations, as the case may be, will be
responsible, (ii) to the extent a Requesting Party is compelled to disclose any
such Confidential Information by judicial or administrative process or, in the
opinion of legal counsel, by applicable Legal Requirements, or (iii) as
otherwise required by the rules of the applicable securities exchange wherein
such Requesting Party's securities may be listed. Notwithstanding the foregoing,
in the event that any demand or request for disclosure of Confidential
Information is made pursuant to clause (ii) above, a Requesting Party shall
promptly notify the Providing Party of the existence of such request or demand
and shall provide the Providing Party a reasonable opportunity to seek an
appropriate protective order or other remedy, which both Parties will cooperate
in seeking to obtain. In the event that such appropriate protective order or
other remedy is not obtained, the Requesting Party shall furnish, or cause to be
furnished, only that portion of the Confidential Information that is legally
required to be disclosed. Notwithstanding anything to the contrary set forth
herein, a Requesting Party shall be deemed to have satisfied its obligations
hereunder with respect to Confidential Information if it exercises the same
degree of care (but no less than a reasonable degree of care) as it takes to
preserve confidentiality for its own similar Information.
Section 6.4 Cooperation in Litigation. In the event and for so long as
-------------------------
any Party (or any member of such Parties' respective Group) is actively
contesting or defending against any Action (other than any Regulatory
Proceedings which may arise under Article IV, which shall be governed by the
terms of Article IV) in connection with any matter arising prior to, on or after
the Separation Date, the other Parties will cooperate with it and its counsel in
the contest or defense, make available their personnel, and provide such
testimony and access to their books
31
and records as shall be reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party
(unless the contesting or defending party is entitled to indemnification
therefor under Article III).
ARTICLE VII
MISCELLANEOUS
Section 7.1 Limitation of Liability. IN NO EVENT SHALL ANY PARTY
-----------------------
(OR ANY MEMBER OF SUCH PARTY'S RESPECTIVE GROUP) OR THEIR RESPECTIVE DIRECTORS,
OFFICERS AND EMPLOYEES BE LIABLE TO ANY OTHER PARTY FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY
OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS
SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO
THIRD PARTIES AS SET FORTH IN THIS AGREEMENT.
Section 7.2 Entire Agreement. This Agreement, the other Ancillary
----------------
Agreements and the Exhibits and Schedules referenced or attached hereto and
thereto, constitutes the entire agreement between the Parties with respect to
the subject matter hereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof, except with respect to any agreements among the Parties related
to the issues set forth in Section 4.2(d) hereof.
Section 7.3 Conflicting Agreements. In the event of a conflict
----------------------
between this Agreement, on the one hand, and any Ancillary Agreement, on the
other hand, or (subject to Section 3.12 hereof) this Agreement, on the one hand,
and any other agreement, on the other hand, the provisions of this Agreement
shall prevail.
Section 7.4 Governing Law. This Agreement shall be governed and
-------------
construed and enforced in accordance with the laws of the State of Texas as to
all matters regardless of the laws that might otherwise govern under the
principles of conflicts of laws applicable thereto.
Section 7.5 Notices. Unless expressly provided herein, all notices,
-------
claims, certificates, requests, demands and other communications hereunder shall
be in writing and shall be deemed to be duly given (i) when personally delivered
or (ii) if mailed registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter refused by
the addressee or its agent or (iii) if sent by overnight courier which delivers
only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent or (iv) if
sent by facsimile or other generally accepted means of electronic transmission,
on the date confirmation of transmission is received.
32
Section 7.6 Counterparts; Copies. This Agreement, including the
--------------------
Schedules and Exhibits hereto and the other documents referred to herein may be
executed in counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement. Xerox copies of this
Agreement shall have the same force and effect as any original of the same.
Section 7.7 Binding Effect; No Third Party Beneficiaries. Except as
--------------------------------------------
set forth in Section 3.9 hereof, this Agreement shall inure to the benefit of
and be binding upon the Parties hereto and, to the extent permitted by Section
7.8, their respective successors and assigns. Nothing in this Agreement, express
or implied, is intended to confer upon any other Person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
Section 7.8 Assignment; Change of Control. This Agreement may not
-----------------------------
be assigned by any Party hereto without the prior written consent of all other
Parties, which consent shall not be unreasonably withheld; provided, that, any
Party may assign this Agreement to any Affiliate of TXU Corp. upon written
notice to the other Parties. A Change of Control with respect to any Party shall
be deemed to be an assignment under this Section.
Section 7.9 Failure or Delay Not Waiver; Remedies Cumulative. No
------------------------------------------------
failure or delay on the part of any Party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any covenant or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. Except as provided in Section 3.11, all rights
and remedies existing under this Agreement or the Schedules or Exhibits attached
hereto are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
Section 7.10 Amendment. No change or amendment will be made to this
---------
Agreement except by an instrument in writing signed on behalf of each of the
Parties to this Agreement.
Section 7.11 Interpretation. The headings contained in this
--------------
Agreement, in any Exhibit or Schedule hereto and in the table of contents to
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Any capitalized term used in
any Schedule or Exhibit but not otherwise defined herein shall have the meaning
assigned to such term in this Agreement. When a reference is made in this
Agreement to an Article or a Section, Exhibit or Schedule, such reference shall
be to an Article or Section of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated.
Section 7.12 Severability. (i) If any term or other provision of
------------
this Agreement is determined by a nonappealable decision of any Governmental
Authority to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, or (ii) in the event of a change to any Legal Requirements
which renders any term or other provision of this Agreement invalid, illegal,
unenforceable or commercially impracticable (in any material manner), all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect; provided, that if the economic or legal substance of the
transactions contemplated hereby are affected in any manner materially adverse
to any Party, the Parties shall negotiate in good faith
33
to modify this Agreement so as to effect the original intent of the Parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
Section 7.13 Compliance with Legislative Changes. In the event of a
-----------------------------------
change to any Legal Requirements which grants a material right to, or imposes a
material obligation on, any Party regarding the implementation of the Separation
or otherwise, which was not previously addressed in this Agreement, the Parties
agree to take such actions and do such things, including negotiating in good
faith any modifications to this Agreement, to the extent necessary or desirable
to implement such new or changed Legal Requirements.
[SIGNATURES ON FOLLOWING PAGE]
34
WHEREFORE, the Parties have signed this Master Separation Agreement on
the date first set forth above to be effective on the Separation Date.
TXU GENERATION HOLDINGS TXU ENERGY RETAIL COMPANY LP
COMPANY LLC
By: TXU Energy Retail Management
Company LLC, its General Partner
By:/s/X.X. Xxxxxx By:/s/Xxxxxx X. XxXxx
----------------------------- -----------------------------
X. X. Xxxxxx, President Xxxxxx X. XxXxx, President
TXU ELECTRIC DELIVERY COMPANY TXU MERGER ENERGY TRADING
COMPANY LP
By: TXU Energy Trading Management
Company LLC, its General Partner
By:/s/Xxxxxx X. Xxxxx By:/s/XX Xxxxxx
----------------------------- -----------------------------
Xxxxxx X. Xxxxx, President XX Xxxxxx, President
TXU XXXXX COMPANY TXU XXXXX ENERGY SERVICES
COMPANY
By:/s/Xxxxxx X. Xxxxx By:/s/Xxxxxx X. XxXxx
----------------------------- -----------------------------
Xxxxxx X. Xxxxx, President Xxxxxx X. XxXxx, President
TXU ELECTRIC COMPANY
By:/s/Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxx, President
35
OMITTED SCHEDULES
Schedule 1.2 List of Affiliate Agreements
Schedule 2.2 Timeline for Restructuring Events
Schedule 3.1(e) List of Genco Litigation
Schedule 3.2(d) List of T&D Litigation
Schedule 3.3(d) List of Trading Litigation
Schedule 3.4(e) List of TXU Retail Litigation
Schedule 3.5(d) List of XXXXX Retail Litigation
Schedule 3.6(d) List of XXXXX Litigation
The schedules listed above have been omitted from this exhibit; however, each of
TXU Corp., TXU US Holdings Company and TXU Gas Company hereby agrees to furnish
supplementally a copy of any omitted schedule to the Commission upon request by
the Commission.
