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In the event that CAPP defaults under the PPA as a result of the failure by some Participating Members to appropriate funds for the purchase of electricity, Seller may declare a default under the PPA and terminate the agreement. In such event, none of the Participating Members will receive electricity under the PPA, without regard to whether a particular member appropriated or non-appropriated for electric energy. Further, no Participating member will have a claim for damages against CAPP. If CAPP could not sell the electric energy, as described above, TCEH would have the ability to terminate the PPA and demand a Buyer Termination Payment from CAPP, as explained above in the section "PPA - Limitation of Remedies; Damages Available Under the PPA." This situation would leave the Participating Members with some portion of their debt under the CAPP Participating Member Contract remaining outstanding and the Participating Members would not receive any electric energy under the PPA. Defeasance of CAPP's Bonds Will Not Be Realized ifSeller Defaults in Certain Events In the event of a Seller default, the Seller will only be responsible for the Seller Bond Portion and, at least the "make whole redemption premium" related thereto. Funds from a Buyer Termination Payment will only partially defease the CAPP contract revenue bonds - the portion of CAPP bonds issued relating to any reserve fund for the CAPP bonds or the portion issued to pay costs of issuance of the CAPP contract revenue bonds will remain outstanding. Under this scenario, the Participating Members could be in a situation where they are levying and collecting an ad valorem tax to make their capacity payment (debt service obligation) to CAPP under the CAPP-Participating Member Contract, although they may no longer be receiving any energy under the PPA. If this were to occur, there is the potential for Participating Members to collectively be responsible for up to approximately $12 million of CAPP's remaining contract revenue bonds. Seller has the ability to offset a portion of the Buyer Termination Payment under the PPA by paying Replacement Damages to CAPP when Seller fails to schedule energy from the units when such energy is available. Such Replacement Damages paid (1) the immediately preceding three (3) year period prior to any New Collateral Refinancing or (2) the immediately preceding five (5) year period following a New Collateral Refinancing will be subtracted from any Buyer Termination Payment owed by Seller. Seller receives a rolling three to five year credit for such Replacement Damages payment, while reducing the potential Buyer Termination Payment to CAPP. As TCEH=s credit ratings improve, a portion of the amount secured by the first lien security interest decreases in an amount equal to the Credit Threshold (as defined in the PPA). Therefore, if TCEH, as guarantor, were to become more credit-worthy and yet still declare bankruptcy and CAPP terminates the PPA, a portion of the Buyer Termination Payment due to CAPP (the make-whole price of CAPP=s contract revenue bonds) will be an unsecured claim (i.e., not secured by the first lien security interest under the LBO Financing Documents) and CAPP will not have the benefit of the other secured creditors. While the Credit Threshold gives Seller an economic incentive to improve its financial integrity and thus reduce the financial risk 8