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there are planned outages or unplanned outages which constitute an event of Force Majeure under the PPA, Seller is not obligated to provide electric energy to CAPP from such affected plants. Sellers are required under the PPA (sections 6.3, 12 and 15.6) to operate and maintain the PPA Facilities according to Prudent Industry Practices, which includes all existing and future Laws. However, CAPP has not undertaken any examination or inspection of the PPA Facilities. If an event of Force Majeure occurs, such as the destruction of a portion of the PPA Facilities contracted for electric supply under the PPA, Seller is partially excused from performing under the PPA and the rights and obligations under the PPA will be suspended. The Participating Members would not be receiving a portion of the contract energy under the CAPP- Participating Member Contract since Seller is not required to provide electric energy to CAPP under the PPA, and CAPP and the Participating Members would have to find other sources of electric energy (including a"wrap" contract) in the event of an extended Force Majeure, while still being liable to pay for its portion of the capacity payment pursuant to the CAPP- Participating Member Contract. TCEH/Seller Bankruptcy If Seller files ba.nkruptcy, this will not happen in a vacuum. It likely will be preceded by months of negotiation with threats of filing bankruptcy. There likely will be ample time to renegotiate the PPA if CAPP so desires. In the event of bankruptcy, the PPA will remain in effect unless it is specifically set aside. Electricity should continue to be provided by the facilities under contract. The risks of bankruptcy include: 1. Adequacy of collateral in the event of termination. The PPA contains an ipso facto clause providing that bankruptcy is a default, giving CAPP the right to terminate the agreement if it desires. The decision of whether to terminate would depend upon the value of assets and market prices for electricity at the time, neither of which can be predicted by CAPP. 2. Whether the PPA will be regarded as a forward contract or an executory agreement. The PPA specifies on its face that it is a"forward contract," but such statement does not bind a Bankruptcy Court. However, if the contract terms are not honored because the Court concludes the PPA is "executory," the likely result would be a renegotiated price closer to the then market rate. CAPP cannot predict what a future judge with broad discretion may rule. 3. The forum for bankruptcy may be Delaware, rather than Texas. TCEH is a Delaware corporation, but venue for pledged entities may be elsewhere. Competing courts will likely have to resolve a venue contest. 4. Whether the Court will apply a"business judgment" test (favoring Seller) or a "public interest" test (favoring CAPP). It is unknown whether courts would apply a heightened public interest standard for electrical energy supply to political subdivisions. 10 ~ 0 O0 0 1~