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HomeMy WebLinkAbout12-06-2001 BM MinutesALASKA ENERGY AUTHORITY Board Meeting December 6,2001 Minutes hy hese ro ofe ee, =, aesRAENAEy: SEES Seetis Sages BoSoweet . " r . 0 - " pear nar " : LaeehSeTRAatiiein3irae a oe ana. few rn of oy . ARTO AEEea 1 bs wees oe, aoWAaie 10. AND EXPORT AUTHORITY ALASKA INDUSTRIAL DEVELOPMENT =ALASKA ME ENERGY AUTHORITY we sa, 813 WEST NORTHERN LIGHTS BLVD.©ANCHORAGE,ALASKA 99503 ©907/269-3000 ©FAX 907/269-3044 TOLL FREE (ALASKA ONLY)888 /300-8534 AGENDA ALASKA ENERGY AUTHORITY Board of Directors December 6,2001,1:00 p.m. Anchorage,Alaska CALL TO ORDER BOARD OF DIRECTORS ROLL CALL PUBLIC ROLL CALL PUBLIC COMMENTS PRIOR MINUTES -November 13,2001 OLD BUSINESS NEW BUSINESS A.Four Dam Pool,Approval of Sale,Resolution No.2001-05 DIRECTOR COMMENTS A.Director's Status Report of AEA Programs and Projects B.Next Meeting Date BOARD COMMENTS ADJOURNMENT H:\ALL\bfuglestad\BOARD\Agenda AEA.doc ALASKA INDUSTRIAL DEVELOPMENT =”AND EXPORT AUTHORITY =>ALASKA GME )=ENERGY AUTHORITY 813 WEST NORTHERN LIGHTS BLVD.©ANCHORAGE,ALASKA 99503 ©907/269-3000 °¢FAX 907 /269-3044 TOLL FREE (ALASKA ONLY)888 /300-8534 ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS December 6,2001 -1:00 p.m. Anchorage,Alaska 1.CALL TO ORDER Chairman Hughes called the meeting of the Alaska Energy Authority to order on December 6, 2001,at 1:00 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Wilson Hughes (Chairman/Public Member),Commissioner Sedwick (Department of Community and Economic Development),Ms.Helvi Sandvik (Public Member),and Deputy Commissioner Larry Persily (Designee for Department of Revenue). 3.PUBLIC ROLL CALL Staff present in Anchorage:Robert Poe,Jr.(Executive Director),Valorie F.Walker (Deputy Director-Finance),James A.McMillan (Deputy Director-Credit),Brenda J.Fuglestad (Administrative Assistant),Peter Crimp (Development Specialist),and Stan Sieczkowski (Operations Manager). Others attending in Anchorage:Brian Bjorkquist (Department of Law),Jan Sieberts (Wells Fargo), Keith Laufer (Foster Pepper Rubini &Reeves LLC),Ken Vassar (Wohlforth Vassar Johnson & Brecht),James Elliston and Brian Nerland (KeyBank),Jim Erickson and Steve Hartung (Gateway Forest Products),Spencer Sneed (Dorsey and Whitney),Bob LeResche (LeResche &Company), Dave Carlson (Four Dam Pool),Theresa Obermeyer (Self). 4.PUBLIC COMMENTS There were no public comments. 5.PRIOR MINUTES -November 13,2001 The November 13,2001,minutes were approved as presented. AEA Board Meeting December 6,2001 Meeting Minutes Page 2 6.OLD BUSINESS There was no old business. 7.NEW BUSINESS 7A.Resolution No.2001-05,A Resolution Of The Alaska Energy Authority Approving The Sale Of The Four Dam Pool Hydroelectric Projects By The Authority To The Four Dam Pool Power Agency,Authorizing The Executive Director To Enter Into A Purchase And Sale Agreement With Respect To The Sale Of The Projects And Taking Related Actions Mr.Poe said the agreement being considered is the resolution to sign the Purchase and Sale Agreement for the Four Dam Pool Projects. Mr.LeResche briefed the Board with regard to the resolution.He stated that the Purchase and Sale Agreement follows the Memorandum of Understanding.AEA is proposing to sell and transfer all of the assets that they contro!related to the Four Dam Pool to the Joint Action Agency (JAA).The purchase price is $73 million.The JAA receives a $5 million credit toward the purchase price for giving up the $20 million low interest loan for the Southeast Intertie.The key part to the State is that the JAA also assumes all of the risks associated with the projects and releases the State from all obligations that it has had for the past 16 years under the Power Sales Agreement. He said the agreement covers land documents,rights-of-way,transfers of contracts,transfer of warranties,etc.The final Purchase and Sales Agreement tracks the MOU and accomplishes what the Legislation and the Board's previous decisions established as our goals.He recommended that the Board approve the resolution.In order for the closing to be effective it must be approved by the Board,JAA,and the five communities who were the original purchasers of the power,and the FERC licenses must be transferred.Given the fact that it is carried forth past the end of December,the JAA will owe the State an extra amount for energy used during January.This amount comes to approximately $750-$800 thousand dollars,all of which has been appropriated to the PCE Fund along with the rest of the proceeds of the sale. Mr.Carlson said he is currently the divestiture project coordinator for the Four Dam Pool.He said negotiations with the State began in August 1995.The Purchase and Sale Agreement reflects the provisions in the MOU,which was negotiated with the State and approved through Legislation.There are two cooperatives and three municipalities,all of which have differing ways of approving the documents.Even though we are taking final action this month,because of the readings and waiting periods it will go into January 2002. MOTION:Ms.Sandvik moved to approve Resolution No.2001-05.Seconded by Commissioner Sedwick. In response to Board questions,Mr.Bjorkquist said that the total amount going to the PCE will be $90 million,which includes the $10 million that has already been deposited from energy sales over the last two years. Mr.Laufer said that in addition to the $90 million and in connection to the release of other unrelated intertie funds,the Legislature appropriated an additional $100 million to the PCE AEA Board Meeting December 6,2001 Meeting Minutes Page 3 Endowment Fund.Thus,the total amount to the Endowment as a result of HB 447 and the sale is approximately $190 million. Mr.Bjorkquist said that in addition to the $190 million,there was approximately $10 million of revenues from the Four Dam Pool over the last two years that was appropriated into the PCE Fund itself,not the Endowment Fund.!n total there is approximately $200 million. Discussions ensued as to the timeline with regard to approving the resolution. Hearing no objections the Board held Item 7A,to be heard and acted upon on December 11, 2001,at 2:00 p.m. 10.ADJOURNMENT MOTION:Commissioner Sedwick moved to recess the December 6,2001,Board meeting to Tuesday,December 11,2001,at 2:00 p.m.Seconded by Deputy Commissioner Persily. There being no further discussion,the question was called.A roll call vote was taken and the motion passed unanimously. Chairman Hughes recessed the December 6,2001,board meeting at 1:25 p.m.to reconvene at 2:00 p.m.on December 11,2001. Robert Poe,Jr.,Sectetary ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY /=ALASKAae=ENERGY AUTHORITY 813 WEST NORTHERN LIGHTS BLVD.©ANCHORAGE,ALASKA 99503)©907/269-3000 ©FAX 907 /269-3044 TOLL FREE (ALASKA ONLY)888 /300-8534 ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS December 11,2001 -2:00 p.m. Reconvene the December 6,2001,Board meeting Anchorage,Juneau,Ambler,and Petersburg,Alaska,and Washington D.C. Teleconference 1.CALL TO ORDER Chairman Hughes reconvened the December 6,2001,meeting of the Alaska Energy Authority on December 11,2001,at 2:00 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Wilson Hughes (Chairman/Public Member),Commissioner Sedwick (Department of Community and Economic Development). Directors present in Ambler:Ms.Helvi Sandvik (Public Member). Directors present in Juneau:Deputy Commissioner Larry Persily (Designee for Department of Revenue). Directors present in Washington D.C.:Commissioner Joe Perkins (Department of Transportation and Public Facilities). 3.PUBLIC ROLL CALL Staff present in Anchorage:Robert Poe,Jr.(Executive Director),Valorie F.Walker (Deputy Director-Finance),Brenda J.Fuglestad (Administrative Assistant),and Stan Sieczkowski (Operations Manager). Others attending in Anchorage:Brian Bjorkquist (Department of Law),Keith Laufer (Foster Pepper Rubini &Reeves LLC). Others attending in Juneau:Bob LeResche (LeResche &Company). Others attending in Petersburg:Dave Carlson (Four Dam Pool). AEA Board Meeting December 11,2001 Meeting Minutes Page 2 7.NEW BUSINESS 7A.Resolution No.2001-05,A Resolution Of The Alaska Energy Authority Approving The Sale Of The Four Dam Pool Hydroelectric Projects By The Authority To The Four Dam Pool Power Agency,Authorizing The Executive Director To Enter Into A Purchase And Sale Agreement With Respect To The Sale Of The Projects And Taking Related Actions Mr.Bjorkquist stated there was a motion pending before the Board to approve Resolution No. 2001-05.However,a Board member who is not present at this time made the motion.He recommended that the Board entertain a new motion to approve the resolution so that the motion is made and seconded by members present. Mr.Poe said that the resolution is for the purchase and sale agreement which is the agreement that would potentially sell the Four Dam Pool Hydroelectric Projects to the Joint Action Agency (JAA).The JAA is the joint quasi-government entity that is formed by the various entities that are supplied power by the Four Dam Pool Hydroelectric projects.The communities are Wrangell, Petersburg,Ketchikan,Valdez,and Kodiak. MOTION:Commissioner Perkins moved to approve Resolution No.2001-05.Seconded by Commissioner Sedwick. Ms.Sandvik joined the meeting at this time. In response to Board questions,Mr.Poe said that AIDEA would be getting a much better rate of return on their money by lending than through the current investments. Mr.Laufer said currently the JAA could disburse and sell the projects to the communities but they could not sell to a third party or a private entity.However,they could sell if they received further legislative approval. He said there is a requirement under the AIDEA financing that certain things be submitted before AIDEA would make the loan. Mr.Laufer said the AIDEA loan provides for up to $5 million to be loaned to the JAA either for a portion of the funds that would be used to construct the intertie or to pay back the credit. There being no further discussion,the question was called.A roll call vote was taken and the motion passed unanimously. 10.ADJOURNMENT MOTION:Commissioner Sedwick moved to adjourn the meeting.Seconded by Commissioner Perkins.There being no discussion,the question was called.A roll call vote was taken and the motion passed unanimously. Chairman Hughes adjourned the meeting at 2:10 p.m. Robert Poe,Jr.,Secretéry ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY --_ALASKAqa?=ENERGY AUTHORITY se FoeBS eG 813 WEST NORTHERN LIGHTS BLVD.©ANCHORAGE,ALASKA 99503 e 907/269-3000 °¢FAX 907 /269-3044 TOLL FREE (ALASKA ONLY)888 /300-8534 ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS November 13,2001 -2:06 p.m. Anchorage,and Juneau,Alaska 1.CALL TO ORDER Chairman Hughes called the meeting of the Alaska Energy Authority to order on November 13, 2001,at 2:06 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Wilson Hughes (Chairman/Public Member),Commissioner Sedwick (Department of Community and Economic Development),Ms.Helvi Sandvik (Public Member),and Deputy Commissioner Larry Persily (Designee for Department of Revenue). Directors present in Juneau:Commissioner Joe Perkins (Department of Transportation and Public Facilities). 3.PUBLIC ROLL CALL Staff present in Anchorage:Robert Poe,Jr.(Executive Director),Valorie Walker (Deputy Director- Finance),James A.McMillan (Deputy Director-Credit),Brenda J.Fuglestad (Administrative Assistant),Lynn Kenney (Development Specialist),Brenda Applegate (Accountant),Christel Petty (Accountant),Amy McCollum (Accountant),Sara Fisher-Goad (Accountant),Linda MacMillan (Accountant),Karl Reiche (Projects Development Manager),Bruce Tiedeman (Rural Energy Manager). Others attending in Anchorage:Brian Bjorkquist (Department of Law),Jan Sieberts and Jerry Weaver (Wells Fargo),Jon Rubini and Keith Laufer (Foster Pepper Rubini &Reeves LLC),Ken Vassar (Wohlforth Vasser Johnson &Brecht),Tim Bradner (Alaska Economic Report). 4.PUBLIC COMMENTS There were no public comments. 5.PRIOR MINUTES -October 11,2001 The October 11,2001,minutes were approved as presented. AEA Board Meeting November 13,2001 'Meeting Minutes Page 2 6.OLD BUSINESS There was no old business. 7.NEW BUSINESS 7A.Financial Statements/Audit Report (KPMG) Ms.Kathy Porterfield,Managing Partner with KPMG,LLP,summarized the audited financial statements,and letter to the Board. Ms.Porterfield said the purpose of the audit is for KPMG to gain reasonable assurance that the financial statements are free of material misstatement.KPMG conducted appropriate audit procedures and has concluded that the financial statements are fairly stated in all material respects in accordance with generally accepted accounting principles,resulting in an unqualified or a clean opinion.KPMG obtained reasonable assurance during the audit that the financial statements are free of material misstatement. Ms.Porterfield said that there were no significant writedowns or unusual transactions. In reviewing the management letter,Ms.Porterfield said that last year there were several significant administrative and control issues that were brought to the attention of the Authority and the Board with regard to internal control.The only issue that the Authority is still working on is with respect to subrecipient monitoring.The Authority receives funds from the federal government that they pass through to other entities.There are specific subrecipient monitoring requirements that the federal government has that the Authority is still implementing internal processes to get that monitoring in place.The other recommendations from last year have all been taken care of.In KPMG's opinion,there has been substantial progress made. Mr.Poe said Valorie Walker heads up the finance department and has been a tremendous 'manager in guiding this team in solving a huge number of accounting problems.Mr.Poe introduced Brenda Applegate,Amy McCollum,Sara Fisher-Goad,and Linda MacMillan, recognizing them for their hard work and the effort they have put into solving these issues and bringing them under control. The Board acknowledged the challenges involved and complimented staff on _their aggressiveness toward dealing with and resolving the issues. Ms.Walker extended her thanks to the Department of Community and Economic Development's staff for their help and efforts in resolving some of the issues. 7B.GASB #34 Presentation (KPMG) Ms.Porterfield said that there are a few issues that AEA needs to deal with but they are ready to implement this new accounting standard.AEA will be given a complete list of tasks that they have to perform over the next couple of months so that they can implement the standard fully and be ready before the next audit. AEA Board Meeting November 13,2001 Meeting Minutes Page 3 8.DIRECTOR COMMENTS e Four Dam Pool Project Update Mr.Bjorkquist updated the Board with regard to the Four Dam Pool Project Purchase and Sale Agreement stating there has been much progress made on the agreement and it is basically in its final form.The Memorandum of Understanding sets the basic parameters for the sale and the purchasing agreement sets the details. Mr.Laufer stated that AIDEA would be financing the sale.The people involved have been meeting regularly over the last month on the financing package.The guidance from the Memorandum of Understanding was that the financing be structured in a way as would be typical for a financing done with publicly issued bonds.The only asset that the Joint Action Agency holds is the Power Sales Agreement and the projects themselves.As was always the case,it was understood that the current Power Sales Agreement could not be altered.AIDEA, however,is in a better position than AEA has been in that if there is ever a default,AIDEA has the ability to terminate the Power Sales Agreement and enter into a new Power Sales Agreement with the existing communities or others to sell this power.In that perspective, AIDEA would not be in a situation where if the loan were in default they would then be subject to taking over these projects in the same status as AEA had with the existing Power Sales Agreement. We are requiring the Joint Action Agency to take the revenues they receive monthly and keep them within the Agency consistent with the Power Sales Agreement.The debt service component was the payment that was previously going to AEA and ultimately going to Power Cost Equalization.A mechanism has been set up whereby they must deposit the monies into a dedicated account.They would then deposit monthly the amounts in that account to the Trustee.The Trustee would apply it,as would be the case in a traditional bond financing,to the payment of AIDEA's debt service and also to fund adequate reserves.Effectively,the debt service component is tied up with the Trustee where only the excess amounts over and above what is necessary for debt service and reserve and replacement requirements can be used by the Joint Action Agency for other purposes.This mechanism ensures that the funds are first used to pay AIDEA and to fund the reserve and replacement requirements for long term maintenance of the project.The basic parameters of how that is going to be structured have become clear and are generally accepted by the Joint Action Agency and their counsel. e Rural Energy Group Update Mr.Poe informed the Board that AEA has nine powerhouse operators graduating from AVTEC next week. He also said the Canadian Broadcasting crew has been in Alaska and are interested in taking a look at a number of AEA's projects with regard to the alternative energy programs. Under the Biomass program,Unisea has been doing test burns in Dutch Harbor on a 50/50 basis with fish oil and diesel.The diesel generator works great with the 50/50 burn and it reduces the emissions by 30%,and the estimated savings by burning this 50/50 mix will be approximately $465,000 per year. AEA Board Meeting November 13,2001 Meeting Minutes Page 4 9.BOARD COMMENTS There were no Board member comments. 10.ADJOURNMENT There being no objection and no further business of the Board,the meeting was adjourned at 2:25 p.m. faiRobertPoe,Jr.,Se€retary ALASKA ENERGY AUTHORITY RESOLUTION NO.2001-05 A RESOLUTION OF THE ALASKA ENERGY AUTHORITY APPROVING THE SALE OF THE FOUR DAM POOL HYDROELECTRIC PROJECTS BY THE AUTHORITY TO THE FOUR DAM POOL POWER AGENCY, AUTHORIZING THE EXECUTIVE DIRECTOR TO ENTER INTO A PURCHASE AND SALE AGREEMENT WITH RESPECT TO THE SALE OF THE PROJECTS AND TAKING RELATED ACTIONS WHEREAS,the Alaska Energy Authority ("AEA”or "Authority”)is the owner of the generation and transmission facilities and other property associated with the Swan Lake Hydroelectric Project,the Lake Tyee Hydroelectric Project,the Solomon Gulch Hydroelectric Project and the Terror Lake Hydroelectric Project (collectively the "Four Dam Pool Projects”or "Projects”); _WHEREAS,power from the Four Dam Pool Projects is sold by AEA to the City of Ketchikan d/b/a Ketchikan Public Utilities,the City of Wrangell d/b/a Wrangell Municipal Light and Power,the City of Petersburg,d/b/a Petersburg Municipal Power and Light,Copper Valley Electric Association,Inc.,and Kodiak Electric Association,Inc.(collectively the "Purchasing Utilities”)pursuant to the Long-Term Power Sales Agreement between the Purchasing Utilities and AEA effective October 28,1985; WHEREAS,AEA and the Purchasing Utilities have negotiated an agreement under which the State of Alaska,by and through AEA,would sell the Project to a joint action agency formed by the Purchasing Utilities,the terms of such agreement being set forth in a Memorandum of Understanding between the Purchasing Utilities and AEA dated April 11,2000, as amended by an Amendment to Memorandum of Understanding between the purchasing Utilities and AEA dated May 30,2000 (the "MOU”); WHEREAS,in the MOU,AEA and the Purchasing Utilities acknowledged that the sale of the Project would require,among other things,the enactment of certain enabling legislation by the State of Alaska; WHEREAS,the Alaska State Legislature and Governor enacted the legislation contemplated by the MOU approving the sale of the Project,making appropriations necessary to establish the PCE Endowment Fund,authorizing the Alaska Industrial Development and Export Authority,a public corporation and an agency of the State of Alaska,to provide financing for the sale of the Project (subject to the approval of AIDEA's Board of Directors),and providing for the formation of the JAA by the purchasing Utilities,which enabling legislation is set forth in Chapters 60 and 75,SLA 2000,and Chapter 4,SLA 2001 (the "Enabling Legislation'); WHEREAS,pursuant to the MOU and in accordance with the Enabling Legislation,the Purchasing Utilities have formed the Four Dam Pool Power Agency,a Joint Action Agency (the "JAA”),and AEA and the JAA have negotiated a definitive agreement (the "Purchase and Sale Agreement')setting forth the terms and conditions with respect to the sale of the Project and the transfer of the FERC licenses associated with the Project to the JAA; WHEREAS,the Purchase and Sale Agreement is attached hereto as Exhibit "A”; WHEREAS,pursuant to the MOU,in the event the sale of the Four Dam Pool Projects is not consummated on or before December 31,2001,the Purchasing Utilities are required to pay the State for power received by the Purchasing Utilities from the Four Dam Pool Projects from January 1,2002,to the date of the closing of the sale; WHEREAS,pursuant to the MOU and the Enabling Legislation,the proceeds received by the State from the sale of the Projects together with certain other funds have been appropriated to the Power Cost Equalization Endowment Fund to be used to provide a stable source of funding for the State's Power Cost Equalization Program; WHEREAS,it is in the best interest of the Authority and the State of Alaska that the Authority enter into the Purchase and Sale Agreement;and WHEREAS,it is in the best interest of the Authority and the State of Alaska that the Four Dam Pool Projects be sold to the JAA in accordance with the terms set forth in the Resolution No.2001-05 H:\All\bfuglestad\BOARD\RESOLUTI\Fdpool resolution 2001-05.doc Page 2 MOU and Purchase and Sale Agreement and that the sale of the Four Dam Pool Projects be consummated. NOW,THEREFORE,BE IT RESOLVED BY THE ALASKA ENERGY AUTHORITY: Section 1.The sale of the Four Dam Pool Projects by AEA to the Four Dam Pool Power Agency in accordance with the terms of the MOU and the Purchase and Sale Agreement is hereby approved. Section 2.The Executive Director is authorized to enter into the Purchase and Sale Agreement,on behalf of the Authority,substantially in the form set forth hereto as Exhibit A. Section 3.In the event the sale of the Four Dam Pool Projects to the JAA is not consummated on or before December 31,2001,as a condition to completing the sale,the Executive Director shall enter into an appropriate agreement or agreements with the JAA and/or Purchasing Utilities providing for the payment to the State for power received by the Purchasing Utilities from the Projects from January 1,2002,until the closing of the sale of the Projects to the JAA. Section 4.The Executive Director is authorized to take such actions as may be necessary or desirable in order to consummate the transactions contemplated in the Purchase and Sale Agreement,including,without limitation taking such actions and executing such deeds,transfer instruments and other documents as may be necessary to consummate the transfer of the Four Dam Pool Projects to the JAA. Section 5.Any action authorized by this resolution to be taken by the Executive Director of the authority may in the absence of such person be taken by a duly authorized officer of the authority designated to take such action pursuant to a written delegation executed by the Executive Director. Resolution No.2001-05 H:\All\bfuglestad\BOARD\RESOLUTI\Fdpool resolution 2001-05.doc Page 3 DATED at Anchorage,Alaska this 6"day of December,2001. Chair (SEAL) ATTEST Secretary Resolution No.2001-05 H:\All\bfuglestad\BOARD\RESOLUTI\Fdpoo!l resolution 2001-05.doc Page 4 ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY /x_ALASKAiENERGYAUTHORITY 813 WEST NORTHERN LIGHTS BLVD.*®ANCHORAGE,ALASKA 99503 ©907/269-3000 ©FAX 907/269-3044 TOLL FREE (ALASKA ONLY)888 /300-8534 MEMORANDUM TO:Board of Directors Alaska Energy Authority FROM:Robert Poe,Jr. Executive Director DATE:December 6,2001 _SUBJECT:Resolution Number 2001-05 Sale of the Four Dam Pool Hydroelectric Projects For the Board's consideration is Resolution No.2001-05 authorizing and approving the sale of the Four Dam Pool Hydroelectric Projects (the "Projects”)from the Alaska Energy Authority ("AEA”)to the Four Dam Pool Power Agency,a Joint Action Agency (the "JAA”).The JAA's members are the City of Ketchikan,the City of Wrangell,the City of Petersburg,Copper Valley Electric Association and Kodiak Electric Association (the "Purchasing Utilities”). Formal negotiations with the Purchasing Utilities for sale of the Projects commenced in the mid- 1990s.Over the intervening years,numerous sale proposals were considered by the parties but were ultimately rejected.Finally,in April 2000,AEA and the Purchasing Utilities entered into a Memorandum of Understanding ("MOU”)with respect to the sale of the projects.Among other things,the MOU provided for the following terms: e Sale of the Projects by AEA to ajoint action agency to be formed by the Purchasing Utilities. e A purchase price of $73 million. e A $5 million credit in favor of the Purchaser in recognition of the release of certain funds previously appropriated for a low interest loan for construction of an intertie between the Tyee Hydroelectric Project and Ketchikan and repayment of that credit in the event that the intertie is not constructed. e The assumption by the JAA of all risks associated with the Projects and the release by the JAA and Purchasing Utilities of AEA and the State of Alaska with respect to all such risks and all obligations under the existing Power Sales Agreement for the Projects. e Suspension of payments to the State with respect to power received by the Purchasing Utilities from July 1 through December 31,2001. Board of Directors December 6,2001 Page 2 e Maintenance of the existing Insurance Agreement for the Projects pending the sale and release of the AEA Insurance Fund upon the consummation of the sale. e Increase of the Purchase Price in the event amounts released from the Insurance Fund and received by AEA for power payments failed to meet a specified threshold amount. As an integral part of the transaction,the MOU required that the State establish a PCE Endowment Fund to provide for long-term funding of the State's Power Cost Equalization Program.The MOU required that all proceeds received from the State from the sale of the Projects,amounts released from the Insurance Fund as part of the sale,and certain other funds be appropriated to the PCE Endowment Fund.The MOU also provided that,as a condition of the sale,the Alaska Industrial Development and Export Authority ("AIDEA”)would be authorized to provide purchase financing to the JAA with respect to the sale under terms set forth in the MOU. The MOU specifically required that enabling legislation be enacted to:authorize the sale of the Projects in accordance with the terms set forth in the MOU,establish the PCE Endowment contemplated in the MOU and authorize AIDEA to provide the contemplated purchase financing. Among other things,the closing of the sale was also conditioned upon the approval of the transaction by the AEA Board of Directors,the governing bodies of the various purchasing utilities and the AIDEA Board of Directors as it relates to the financing. The MOU contemplated that following enactment of the enabling legislation,AEA and the Joint Action Agency would enter into a definitive Purchase and Sale Agreement which would incorporate the terms of the MOU and other terms and conditions as necessary to consummate the sale of the projects. The Alaska State Legislature and Governor Tony Knowles enacted the required enabling legislation which is set forth in Chapters 60 and 75,SLA 2000 and Chapter 4,SLA 2001 (the "Enabling Legislation').The Enabling Legislation required that the parties execute an amendment to the Memorandum of Understanding and that amendment was executed on May 30,2000. As contemplated by the MOU,the AEA staff and the representatives of the Four Dam Pool Power Agency have negotiated an Agreement for the Purchase and Sale of the Four Dam Pool Project (the "Purchase and Sale Agreement”)incorporating the terms of the MOU as amended, and other matters necessary for the consummation of the transactions contemplated in the MOU.The Purchase and Sale Agreement is attached as Exhibit "A”to Resolution No.2001-05. Among other things,the Purchase and Sale Agreement provides for detailed procedures for the transfer by AEA to the Joint Action Agency of the Four Dam Pool Project assets,transfer of the Federal Energy Regulatory Commission ("FERC”)licenses for the Projects to the JAA and other matters typical for the sale of assets. Resolution No.2001-05 authorizes the Executive Director to enter into the Purchase and Sale Agreement substantially in the form attached to the Resolution,approves the sale of the Four Dam Pool Projects to the JAA in accordance with the terms of the MOU and Purchase and Sale Board of Directors December 6,2001 Page 3 Agreement,and authorizes the Executive Director to take the actions necessary including the execution of appropriate transfer documents to consummate the transaction. The Joint Action and Purchasing Utilities have begun their procedures for formal approval of the Purchase and Sale Agreement,purchase financing and acquisition of the Four Dam Pool Project.It is anticipated that each of the Purchasing Utility governing bodies will complete their review and approval process in late January 2002.Upon the final approval by the Purchasing Utilities,the FERC will be in a position to transfer the project licenses from AEA to the JAA and the sale transaction can be consummated.As contemplated in the MOU,the Purchasing Utilities will be required to pay the State for power received from the Project from January 1, 2002,until the date of the closing.Resolution No.2001-05 requires that the Executive Director enter into appropriate agreements with the JAA and/or Purchasing Utilities to provide for such payments. The sale of the Four Dam Poo!Hydroelectric Projects to the communities served by the Projects has long been a goal of AEA.The transaction submitted to the Board for its approval provides fair value to the State for the Projects,relieves the State of significant liabilities and provides local control to the communities served by the Projects.The consummation of the transaction will provide funding to the PCE Endowment Fund ensuring long-term funding for the State's Power Cost Equalization program benefiting rural communities throughout the State.Staff recommends approval of Resolution No.2001-05. EXHIBIT A DRAFT December 5,2001 AGREEMENT FOR THE PURCHASE AND SALE OF THE FOUR DAM POOL PROJECT between the ALASKA ENERGY AUTHORITY and the FOUR DAM POOL POWER AGENCY Dated January 1,2002 TABLE OF CONTENTS Page ARTICLE I 2 SECTION 1.1 PURCHASE OF PROJECT .......ccccccssscsscocssececosvesssscevescscecsocvevsccecsveeecceccssssesacccccosoeensscsssuacacovossessosvecsscssesess 2 SECTION 1.2 PROJECT ASSETS ........cccsssscvsscssesssessanscsescoccssvssossvsscenccossesseccssucescoosennesessacscacscassconcosenseessconronacaancenasencos 2 SECTION 1.3 IDENTIFICATION OF PROJECT ASSETS .......cccsscsccesesecccoccvccscnceccccccccecsessuseccsesessccoorseneneceseansaencccssssnsneecencs 3 13.1.Personal Property Interests ....cccccccccccccccssnscsescescceesecenscsscccceacesensecenacceanccecacsonscessecscecanscescctaccesseensacensacease 3 1.3.2 Contracts and Contract Rights .....cccccccsscssssssssesscessccesccssccensccsscseescecorsnacesccosaceceaacesecescercascesacssacecseecacenses 3 1.3.3 Licenses and Permits ....cccccccccsccessocevsessscesccccccvssessscvsseccssocessevsvesscuseccessecsossesusesecesessesscccsusosssesssvsscosasevensse 4 L.3.4 Insurance Policies.....cccccccesccsssscccsnssssssssccsaseeccuvsscessssessosssccssnccoenscccencesscocsssessacovssevsscosceessaecouscsatessevsccsoense 4 1.3.5 Real Property Interests 0...ccccccccccssscessccocessscsccscssuccevsncesscceusccsseseessesascssssesseesaesesssesssessesessosssocsaseessessucosvaes 4 1.3.6 Project DOCUMENES.........ccccccssecercecesscsrscesccsceveccecssccssocessecsacecsssccesscavenascsevenscsvonsssssesscessesovssessovsesscnacessunse 5 SECTION 1.4 CONVEYANCE AND TRANSFER OF PROJECT ASSETS ....ccscscssscccsesscccssccceccececcsssscsscceersseccesceressncseesenseese 5 SECTION 1.5 WAIVER AND RELEASE OF CLAIMS TO RESIDUAL BALANCE OF INITIAL PROJECT REVENUE FUND.....5 SECTION 1.6 NO ASSUMPTION OF EMPLOYMENT CONTRACTS OR EMPLOYEE RELATED OBLIGATIONS ..........seeee00e 6 ARTICLE II 6 SECTION 2.1 PURCHASE PRICE.........:ccsssssssssssccccssssccesssncesssssuccccsessessccccessccessecrecsccscssssuenaascesessnsessessesssessesacssaceceeseees 6 SECTION 2.2 ADJUSTMENTS TO PURCHASE PRICE.......sssccssssscscccssvsssccccsssessssscsssccsesssscnsseceeseseneseaseosceccaeuenseaseeseeseseuse 6 2.2.1 Increase in Purchase Price Related to Debt Service Payments and Insurance Fund........ccccccscccesseeseees 6 2.2.2.Southeast Intertie Loan Funds Credit c...cccccccccccccccccccssscsssscssssscecsscnscccevscecesssncecevscessracceestacevssesessnseessaesees 6 SECTION 2.3 PROJECT PURCHASE FINANCING.......cccccsscscscscsscssecsesssessscscccsssconesssvsssvscectcsssscsenssensecesecessssnstenerserscceesens 6 ARTICLE II 7 SECTION 3.1 RELATIONSHIP BETWEEN AGREEMENT AND LEGISLATION/MOU ..........ccccccssscssscsessescccccececcccccaceceseeees 7 SECTION 3.2 PCE ENDOWMENT........cccccssccscssscsssccssccsscssssecccesccessscecesecesssccescenccsseccsesnsacaceecsscecscsesesereassessctcaceceeseeeee 7 SECTION 3.3 RELEASES FROM PURCHASING UTILITIES .........c-cccccsssssscecscscececssscessorscssssccnnacosccosssececesasaracessessccsecoesens 7 SECTION 3.4 FERC APPROVAL.....cccssssssscssesssrccosscesecscsessssssuecsseccesasenteesscseseusessuassscssssevsnceusossesssssacesscesevsessssseesecesseas 7 SECTION 3.5 SUBJECT TO APPROPRIATION.......cccssssssssscsccsssscsscccccosssstcescccsecssececsusesesssscssensccssscssnceseceuenecasessessnsanencess 7 ARTICLE IV 8 SECTION 4.1 REQUIRED REPAIRS/PENDING AND POTENTIAL CLAIMS .........ccccssssssssceseccsscessessssnscusesavscerssssnecccecesesors 8 SECTION 4.2 PROJECT CONDITION/RELEASE OF CLAIMS ......cscccccsesssossccsccsescsessesssseccosssessssocesessccccecessssesssssssccsensace 9 SECTION 4.3 INDEMNITY BY JAA ........ccsccsscccccssssscesssscsccsecsssssccesecssscscccesccsetsseccsecssssessecsessecsenscnsececesssesseensessusoeeess 10 4.3.1 Indemnification:Generally ....ceccccccccccccscssssccscsscscsscssssssssessccoscecssscecccssecssscssscevesccessessassscessesaseseassoeezeees 10 4.3.2 Indemnification:Hazardous SUDStANCES....cccccccccccccccccesccsecnscsccssscsssesscsssecscessessceusssssesseesssssessusasenasuaass 10 SECTION 4.4 CONDUCT PRIOR TO CLOSING ........csccccssscssccsssssserecccssssseccecessesvscecseseusesevseseucescsevsssneceecetsvstcessessecsesees 10 ARTICLE V j1 SECTION 5.1 CLOSING...ceescsceccscssscssevsccacevscsssevsessessvevsscssssessscsseccsecusscssscsesecsscsssecsececuseccensccssecccesesessecaveceseesesss ll SLT Closing Date ....cccccccccccsssesssecssscncccesssesscconsnscescuessavecccecectceesuscnscevensesccnsassndcnacersusccsssesceeeasssasocesoesscossscoses II F.1,2 -CloSI1NY AGEN....cecccsscccvcsesssesscssecaccsnccenssceccscceccssesscccsuccesccosesesscteesuucessuecesssonscescacesssenscceseseutsesssesassessseoee Il SECTION 5.2 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE CLOSING ......scsssscsssossesssecosccoeereovovonoe ll Section 5.2.1 Conditions to Obligation ofJAA to Effect the ClOSing .........cccccsccssscssssssssssessecessssscccorocceessccoces 12 Section 5.2.2.Conditions to Obligation of the AEA to Effect the C1IOSInG@........cccccccccccssssscceoeeessscoovesesseescovevoes 13 SECTION 5.3 CLOSING COSTS .....ccccccccsssscsssscsssssscvscsseceesessecsenessressessecusecssecssseesesceseseteustevscsscsevscacesenssesssesseesecssenerses 14 5.3.1 AEA Closing Costs ....ccccccccccccsssssccessscessesccssoscescescssnececusseseenssecevevsusssccsesseseestsasccssscecsssocsusscseesssevsceveveeseas 14 5.3.2 JAA ClOSING COStE.coc.cceccccccccssssesscesscecccsseveescesssssovesssesesssocssetsssccvsnsaccecosaccerssscsccossesovssaccesscorerecevcsscescoeee 14 SECTION 5.4 POSSESSION........cccsscsscccssscssessecsesssecssecseccesesessssecsesscesssessscsssnestseesscceceressvsescesescsesccacecenceasescesesacnsesececes 14 ARTICLE VI 14 SECTION 6.1 RESTRICTION ON SUBSEQUENT SALE OF PROJECT .....ccccccsssecssssescecccccsesessecesseccsscceccnceaacccectecsscesacevevee 14 i SECTION 6.2 COMPLIANCE WITH FINANCING DOCUMENTS.....:cccccccsscececssesssseseseseesesesecsssssccsvsacesessacecerenerssseesecsecaeees 14 SECTION 6.3 PROJECT MAINTENANCE AND OPERATION ....csssssssececsssccececceccsssesssssesssssesevsceceeserscesenneseccnsssecenessensacers 14 SECTION 6.4 FURTHER ASSURANCES ....cccccccsssssssssscocsscecsssccesesccessscsessssseesssssessevscsscseusessscscsevssevssaserececessenseesaseenens 14 SECTION 6.5 INSURANCE PREMIUM REBATES ........sccsssssssssssscsscesessccesscsecssssusessscsesseceesccusecsenscevensnaeesensceevausecerenserse 15 ARTICLE VII 15 SECTION 7.1 REPRESENTATIONS AND WARRANTIES OF JAA ....ccccsccscssscsccsscsssseccssccsecscescesscssesusecsacesasevsasenssessasoesess 15 SECTION 7.2 REPRESENTATIONS AND WARRANTIES OF AEA ......ccccssccsscocstesssccccecsssssssscosscsosssseesensescocssorensecscesosseos 16 ARTICLE VIII 16 SECTION 8.1 ASSIGNMENT.........cccccsssscessssessssssoesscsessessescssssessesseeussnseuscnesssssseecscseessnseseeconscssonsecsevaasesusssecesseavossaeeess 16 SECTION 8.2 NONMERGER .....:ccsscsssscossssssecessesessesessecesacecseccssucccausescecccecsevsuesessuevecseccaecseussanevecsescsaecassesescsecsssusesenoes 17 SECTION 8.3 NOTICES .......csccsscssscssscsseecscsnssssevenscensanseneceneeessnssessscssseseesessssssuseseesesscesecsessececausesssecsscecstcasscensuacsecsesess 17 SECTION 8.4 INTENTIONALLY LEFT BLANK ......csccccsscssesssssuccccsscssscsseesscovsecenseesessecnetecssenstesesasenstsvencosssscesteessessssccoces 18 SECTION 8.5 GOVERNING LAW/DISPUTES .....ccccccccsssssssssssscsscscssscevsstecessssesscsssssesssscssscesssscessessssesssscesssssessesescoovsnses 18 SECTION 8.6 WAIVER ......ccsccsscsssescccsscecssssscuscesscsessessccescetsesscescasescasceescsausessceusecesssecsasactseucsesucessacecseeusssensnsessescsees 18 SECTION 8.7 AMENDMENTS.......scccssssssscsssscessccessceeccecescssessecsscnsessscsessccsessescscecscscsesscsccesccsssuseeecuecesaesessecatseesarsnssesess 18 SECTION 8.8 NO PARTNERSHIP,JOINT VENTURE,ETC.......ccscccsssssecsscccsscsssessesscccssscssessesssseseceassessauseceeceenesssseseets 18 SECTION 8.9 NO THIRD PARTY BENEFICIARIES ....ccccccssssssccscccccssccssescesccssesscssessessesessusensassssssesecsarssecusessontscsscnseras 18 SECTION 8.10 SEVERABILITY ......:cssccssscsssscessscectecsecscnsecescesestsssecescesssecessesacceseneuecseceaceecseccussevsenseestessteessecenteeesee 18 SECTION 8.11 HEADINGS..........ccccccscecssssssssesceccssssesesssceesssestecsusucusensccuserscescnseusecusessescusasseussssccesssesstecscsssessseacosseuess 18 SECTION 8.12 CONSTRUCTION.....ccccccssscccssccsscecsssessscsssccsscacsssccstsecsucssscsecsecssscscsavecuessasessesecseceatececsusseessssessceeenes 19 SECTION 8.13 TIME OF THE ESSENCE .......ccsccsssssecscesscsessessccesssscscessssucvsescsscssstescscsucesssscscsssucsserseseseuseseessusscesuescees 19 SECTION 8.14 APPENDICES,ATTACHMENTS,SCHEDULES AND EXHIBITS .......cccsscssccesessssssssscseceecscssevsececcssescenees 19 SECTION 8.15 EXPENSES .......csccssssssscesssecessenesceeansesseceacsnesesensnsessuvosuucesseseaucuaneessesseneseseesesesesacenaaeseneusresacsteseaneces 19 SECTION 8.16 COUNTERPARTS ....cccccsccscsscusssscssssssssessccssssssscsssecsssaceecossecsssssusussssusoccssesnssecsevsueseussassensusesaeaascusseus 19 SECTION 8.17 TERMINATION OF SALE AND PURCHASE .....cccccsssssscessscesscsssccscsececseseuscsssesessesssesseeceeesseccccresetcoseeses 19 Appendix A -Definitions Attachment 1 -Memorandum of Understanding dated April 11,2000 Attachment 2 --Amendment to Memorandum of Understanding dated May 30,2000 Schedule 1.3.1 -Personal Property List Schedule 1.3.2-A -Material Contracts List Schedule 1.3.2-B -Warranty Claims List Schedule 1.3.3 -Licenses and Permits List Schedule 1.3.4 -Insurance Policy List Schedule 1.3.5 -Real Property List Schedule 4.1 -Swan Lake and Terror Lake Facilities Repairs Exhibit A -Form of Opinion of Counsel to the AEA Exhibit B -Form of Opinion of Counsel to the JAA ii AGREEMENT FOR THE PURCHASE AND SALE OF THE FOUR DAM POOL PROJECT THIS AGREEMENT FOR THE PURCHASE AND SALE OF THE FOUR DAM POOL PROJECT is made and entered into and effective as of the 1*day of January,2002,by and between the ALASKA ENERGY AUTHORITY,a public corporation and an agency of the State of Alaska,and the FOUR DAM POOL POWER AGENCY,a joint action agency formed under the authority of AS 42.45.300 -AS 42.45.320 by the City of Ketchikan d/b/a Ketchikan Public Utilities,the City of Wrangell d/b/a Wrangell Municipal Light and Power,the City of Petersburg d/b/a Petersburg Municipal Power and Light,Copper Valley Electric Association,Inc.,and Kodiak Electric Association,Inc.The AEA and the JAA are referred to herein collectively as "parties,”and each as a "party.” RECITALS WHEREAS,the AEA is the owner of the generation and transmission facilities and other property associated with the Swan Lake Hydroelectric Project,the Lake Tyee Hydroelectric Project,the Solomon Gulch Hydroelectric Project and the Terror Lake Hydroelectric Project;and WHEREAS,power from the Four Dam Pool Initial Project is sold by the AEA to the Purchasing Utilities pursuant to the Long-Term Power Sales Agreement between the Purchasing Utilities and the AEA effective October 28,1985;and WHEREAS,the AEA and the Purchasing Utilities have negotiated an agreement under which the State of Alaska,by and through the AEA,would sell the Project to a joint action agency formed by the Purchasing Utilities,the terms of such agreement being set forth in a Memorandum of Understanding between the Purchasing Utilities and the AEA dated April 11,2000,as amended by an Amendment to Memorandum of Understanding between the Purchasing Utilities and the AEA dated May 30,2000;and WHEREAS,in the MOU,the AEA and the Purchasing Utilities acknowledged that the sale of the Project would require,among other things,the enactment of certain enabling legislation by the Legislature of the State of Alaska;and WHEREAS,the Alaska State Legislature enacted the legislation contemplated by the MOU approving the sale of the Project,making appropriations necessary to establish the PCE Endowment, authorizing the Alaska Industrial Development and Export Authority,a public corporation and an agency of the State of Alaska,to provide financing for the sale of the Project (subject to the approval of the AIDEA's Board of Directors),and providing for the formation of the JAA by the Purchasing Utilities, which enabling legislation is set forth in Chapters 60 and 75,SLA 2000,and Chapter 4,SLA 2001;and WHEREAS,pursuant to the MOU and in accordance with the Legislation,the Purchasing Utilities have formed the JAA,and now desire that the AEA and the JAA enter into a definitive agreement setting forth the terms and conditions with respect to the sale of the Project and the transfer of four FERC licenses associated with the Project to the JAA;and Page 1 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc WHEREAS,this Agreement,including Appendix A -Definitions attached hereto and made a part hereof containing definitions of defined terms used herein,will set forth the terms and conditions agreed upon by the parties with respect to the sale of the Project to the JAA;and WHEREAS,the JAA and the AEA have applied to the Federal Energy Regulatory Commission for the transfer of the AEA's FERC licenses for each of the Facilities to ensure that they shall be transferred to the JAA in accordance with applicable FERC regulations and requirements at or before Closing as required in this Agreement;and NOW,THEREFORE,in consideration of the foregoing recitals which are incorporated herein and made a part of this Agreement,the mutual covenants,agreements,and promises herein contained,and other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged,the parties agree as follows: ARTICLE I PURCHASE OF PROJECT Section 1.1 Purchase of Project.Subject to the terms and conditions of this Agreement,the AEA agrees to sell,convey,transfer,assign and deliver to the JAA and the JAA agrees to purchase from the AEA,all of the AEA's right,title and interest in and to the Project,including without limitation all of the AEA's right,title and interest in and to the Project Assets described in this Article I and in the Project Asset Lists. Section 1.2 Project Assets.The Transfer of the Project,including the Project Assets,to the JAA shall occur as of Closing and include the sale,conveyance,transfer,assignment and delivery to the JAA of all of the AEA's property,rights and interests comprising the Project,including all of the AEA's property,rights and interests determined by the JAA to be necessary or desirable for the JAA to own and operate the Project in compliance with all FERC and other material regulatory requirements,including, without limitation,the following: (a)all of the personal property,both tangible and intangible,located at and/or used in connection with the Project; (b)the PSA,the Indemnification Agreement between the AEA and Ketchikan Electric Company,dated June 22,1998,the various Memoranda of Understanding entered into between the AEA and the Four Dam Pool Project Management Committee with respect to the operation,maintenance and repair of the Project,and all other existing material contracts and contract rights,contract claims and warranty claims with respect to any such material contracts for which a claim has been or could be asserted by the AEA (but excluding material contracts, contract rights,contract claims and warranty claims related to matters over which AEA has any ongoing duty or responsibility after Closing,until AEA is fully released from such ongoing duty or responsibility)related to the ownership,operation,maintenance and repair of the Project (including consultant services agreements and warranties provided to the AEA by third party suppliers and contractors for the Project)in effect as of the Closing Date to the extent assignment of such contracts and agreements is permitted under the terms of the contracts and agreements; (c)all licenses and permits related to each Facility that is part of the Project to the extent assignment of such licenses and permits is permitted under the terms of the licenses and Page 2 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc permits; (d)all of the real property,including fee title,leases,easements,rights of way and other land interests that comprise the Project; (e)all insurance policies purchased by the AEA with respect to the Project to the extent assignment of such policies is permitted under the terms of the policies;and (f)all Project records now existing or generated through the Closing Date,including plant accounting information,working papers,technical reports,maps,drawings,schedules and other documents. Section 1.3 Identification of Project Assets.The parties acknowledge that the Project Asset Lists have not been finalized at the time of the execution of this Agreement.Completion of the Project Assets Lists to the satisfaction of each of the parties shall be a condition to Closing as set forth in Sections 5.2.1 and 5.2.2 hereof.The parties agree to proceed to Closing in good faith and that each will continue to use reasonable commercial efforts to promptly complete the identification and description and the appropriate method of conveyance of particular Project Assets as soon as reasonably practicable to assure a timely Closing.The failure of the parties to include any Project Assets on any of the Project Asset Lists shall not operate to discharge or limit the obligation of the AEA to transfer,convey and/or assign any such Project Assets to the JAA in accordance with and pursuant to the AEA's obligations pursuant to this Agreement or prevent the Transfer of the Project and the Project Assets at Closing.In the event a Project Asset is identified subsequent to the Closing,the AEA will cooperate to the extent reasonably required with respect to the conveyance of such asset to the JAA in accordance with its obligations under Section 6.4 hereof;provided that,the AEA shall not be required to incur or become obligated to pay any fees or costs payable to third parties in cooperating with the JAA to complete any such conveyance. 1.3.1.Personal Property Interests.The parties shall jointly prepare a listing of the personal property,both tangible and intangible,which is part of the Project Assets and described generally in Section 1.2(a),which listing shall be attached to this Agreement as Schedule 1.3.1 prior to the Closing Date (the "Personal Property List”).The Personal Property List shall be agreed upon by the parties and shall include,at a minimum,(i)a description of all material items of equipment,including any vehicles or other equipment the ownership of which is evidenced by a certificate of title,(ii)a general description and/or specific listings of all other personal property which shall reasonably identify such property and its location,and (iii)the agreed-upon transfer documentation and procedures for each asset or category of assets. 1.3.2 Contracts and Contract Rights.The parties shall jointly prepare a listing of the material contracts related to the Project that are valid and enforceable at Closing which are part of the Project Assets described generally in Section 1.2(b),which listing shall be attached to this Agreement as Schedule 1.3.2-A on or before the Closing Date (the "Material Contracts List”).The parties,Purchasing Utilities,and TBPA shall also jointly prepare a listing of contract claims and warranty claims pending as of the Closing Date asserted by the AEA with respect to the Project,together with potential contract claims and warranty claims which the AEA and the JAA currently believe there are or may be material grounds to assert a claim,which listing shall be attached to this Agreement as Schedule 1.3.2-B on or before the Closing Date (the "Contract Claims and Warranty Claims List”)(the Material Contracts List and the Contract Claims and Warranty Claims List,together the "Contracts List”).The Contracts List shall be agreed upon by the parties and shall include,at a minimum,the identity,applicable Facility(ies), Page 3 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc parties,termination date,whether the contract,warranty,right or claim will be assigned or terminated, and,(i)if the contract,warranty or other rights or claims are to be assigned to the JAA,the agreed-upon assignment documentation and procedures for each such assignment,including the assumption of responsibilities and obligations by the JAA,or (ii)if the contract,warranty,right or claim is to be terminated,released or settled,the required documentation and procedures for such termination,release or settlement. 1.3.3.Licenses and Permits.The parties shall jointly prepare a detailed listing of licenses and permits held by the AEA as the owner and operator of the Project which are part of the Project Assets and described generally in Section 1.2(c),which listing shall be attached to this Agreement as Schedule 1.3.3 prior to the Closing Date (the "Licenses and Permits List”).The Licenses and Permits List shall be agreed upon by the parties and shall include,at a minimum,the identity,applicable project(s),party holding the permit,issuing agency,termination date,and agreed-upon transfer documentation and procedure for each license or permit,including the assumption of responsibilities and obligations by the JAA. 1.3.4 Insurance Policies.The parties shall jointly prepare a listing of insurance policies for or related to the Project which are part of the Project Assets and described generally in Section 1.2(e),which listing shall be attached to this Agreement as Schedule 1.3.4 prior to the Closing Date (the "Insurance Policy List”).The Insurance Policy List shall be agreed upon by the parties and shall include,at a minimum,the identity and type of policy,applicable Facility(ies),issuing insurance company,coverage amounts,premium amounts,termination date,whether the policy can be assigned or must be terminated,and,(i)if the policy is to be assigned to the JAA,the proposed assignment documentation and procedures for each policy,including the assumption of responsibilities and obligations by the JAA,or (ii)if the policy is to be terminated,the required documentation and procedures for termination and the anticipated premium rebate. 1.3.5 Real Property Interests.The parties shall jointly prepare a listing and description of real property interests which are part of the Project Assets and described generally in Section 1.2(d), including fee title,leases,easements,rights-of-way and other land interests,which listing shall be attached to this Agreement as Schedule 1.3.5 prior to the Closing Date (the "Real Property List”).The Real Property List shall be agreed upon by the parties and shall include,at a minimum,the identity, location,applicable Facility(ies),current ownership of the specific real property asset,and agreed upon transfer documentation and procedure for each asset. The JAA and the AEA agree to work in cooperation with and shall assist the State of Alaska Department of Natural Resources and other relevant State agencies in the timely determination of the interests in real property to be conveyed and the determination of limitations,if any,applicable to the Transfer.The JAA acknowledges and agrees that the extent and type of real property interests that may be conveyed to the JAA as part of the Transfer are subject to various conditions and compliance with the procedures governing DNR's transfer of such interests.Further,the JAA acknowledges and agrees that to the extent any Project Assets are comprised of property interests,licenses or permits under the control and/or ownership of State agencies other than the DNR,the federal government,or third parties,the interests in such assets to be transferred to the JAA may be subject to the satisfaction of various conditions and compliance with the procedures governing the transfer of such assets.In no event, however,shall the JAA have any obligation to close the sale transaction if,except for the payment of the reasonable fees and costs associated solely with compliance with regulatory and similar requirements associated with the transfer of such assets,the JAA would be obligated to pay any amounts in addition to Page 4 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc the Purchase Price as consideration for the transfer of such assets. 1.3.6 Project Documents.On or before the Closing Date,the AEA shall provide the JAA with originals or copies of all Project records,including plant accounting information,working papers,technical reports,maps,drawings,schedules and other documents related to the ownership, operation,maintenance and licensing of the Project (the "Project Documents”).Notwithstanding any other provision of this Agreement,the AEA shall not be required to provide to the JAA any privileged documents or documents not otherwise subject to public release involving claims or disputes between the AEA and the Purchasing Utilities,TBPA,the PMC or the JAA;AEA analysis discussion,or executive brabcg communications regarding divestiture (including legislation and negotiations);AEA'S analysis or position on PMC matters,and personnel matters.Further,AEA may redact information required by law to be kept confidential (e.g.,social security numbers)in documents otherwise produced.At the request of the JAA,the AEA shall provide a list of any withheld documents and the basis for their privileged status. To the extent the AEA provides original Project Documents to the JAA,the JAA agrees to retain such documents in accordance with a document retention policy to be established by the JAA and approved in writing by the AEA before taking effect,and to provide reasonable access to the AEA and to other State agencies.In addition,the JAA shall make all Project Documents available to the public:'as may be required under applicable public records requirements or as otherwise required by law. Section 1.4 Conveyance and Transfer of Project Assets.The Transfer shall occur on the Closing Date and shall be without warranty by the AEA,by quitclaim deed,bill of sale and other appropriate conveyance,transfer and assignment documents and instruments in form and substance reasonably acceptable to the JAA.The AEA agrees to cooperate with the JAA in the process of applying for and coordinating all transfers,consents and approvals required to be obtained from federal,state or local governmental agencies or other third parties.The parties acknowledge and agree,however,that the JAA shall have the responsibility,at the JAA's sole cost and expense,to apply for,coordinate and obtain all such required transfers,consents and approvals,other than those to be obtained from the AEA and DNR.To the extent required,the JAA may elect to close the sale transaction with certain third-party transfers still pending;provided that,the postponement will have no effect on the Purchase Price or the JAA's responsibility to pay the Purchase Price in full at Closing.In no event,however,shall the JAA have any obligation to close the sale transaction if all Project Assets have not been identified to the reasonable satisfaction of the JAA and all governmental consents and approvals related to the Transfer of Project Assets have not been obtained as required by Section 5.2(d).In the event a Project Asset is identified subsequent to the Closing,the AEA will cooperate to the extent reasonably required with respect to the conveyance of such asset to the JAA in accordance with its obligations under Section 6.4 hereof;provided that,the AEA shall not be required to incur or become obligated to pay any fees or costs payable to third parties in cooperating with the JAA to complete any such conveyance. Section 1.5 Waiver _and Release of Claims to Residual Balance of Initial Project Revenue Fund.In conjunction with the Closing,subject to and provided that the Purchasing Utilities have made the Debt Service Payments required by Section 5 of the PSA as modified by Section 4 of the MOU,the AEA shall release and waive any claims,including those related to Debt Service Payments for energy delivered after June 30,2001 and before January 1,2002,the AEA may have or assert in or to the balance of the Initial Project Revenue Fund. Section 1.6 No Assumption of Employment Contracts or Employee Related Obligations. Unless assumed in writing,the JAA shall not assume,be liable for,or incur any obligations to any employee,officer or agent of AEA for any salary,wages,fees,benefits or other obligations of the AEA Page 5 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc owed to such persons at anytime as a result of the Transfer of the Project Assets to the JAA,nor shall the JAA be deemed to be the successor to the AEA with respect to any such liabilities or obligations. ARTICLE II PURCHASE PRICE &RELATED PROVISIONS _ Section 2.1 Purchase Price.Subject to adjustment as provided in Section 2.2,the purchase price for the Project shall be Seventy Three Million Dollars ($73,000,000)(the "Purchase Price”).The Purchase Price shall be paid in full in immediately available funds by wire transfer at Closing. Section 2.2 Adjustments to Purchase Price. 2.2.1 Increase_in Purchase Price Related to Debt Service Payments and Insurance Fund.In the event the sum of (i)the Debt Service Payments received by the AEA for power sold from July 1,1999,through June 30,2001,and (ii)the amount of the Insurance Fund released to the AEA at the Closing ((i)and (ii)collectively the "Additional Funds”),is less than Thirty-Two Million Dollars ($32,000,000),the Purchase Price shall be increased by an amount equal to the difference between Thirty- Two Million Dollars ($32,000,000)and the Additional Funds.For purposes of this Section 2.2.1,the term "Debt Service Payments”shall mean those payments the Purchasing Utilities actually made to the AEA pursuant to Section 5(e)of the PSA. 2.2.2.Southeast Intertie Loan Funds Credit.In recognition of the reappropriation of Intertie Loan Funds,at Closing the JAA shall be provided a credit against the Purchase Price of Five Million Dollars ($5,000,000)(the "ILF Credit”).Subsequent to the Closing,the JAA shall have a continuing obligation to repay the ILF Credit to the AEA on one hundred eighty (180)days notice from the AEA,if (i)the JAA abandons efforts to complete the Southeast Intertie;(ii)prior to April 11,2005, the JAA has not provided AIDEA with an approved finance plan demonstrating sufficient funds to complete the Southeast Intertie;or (iii)field construction of the Southeast Intertie is not commenced on or before April 11,2010. Section 2.3 Project Purchase Financing.The JAA's obligation to purchase the Project pursuant to this Agreement is contingent on the JAA obtaining financing prior to the Closing Date in an amount and on terms and conditions reasonably acceptable to the JAA that will allow the JAA to pay the Purchase Price for the Project and to fund Project reserves to appropriate levels determined by the JAA. The parties acknowledge that the AIDEA is authorized to provide financing for the Purchase Price and to fund Project reserves,subject to AIDEA Board approval,as provided in Section 8 of the MOU and Section 15(b)of the Legislation.In the event the JAA does not procure financing in an amount and on terms and conditions the JAA in its discretion determines to be appropriate prior to the Closing,the JAA may terminate this Agreement on written notice to the AEA,and neither party shall have any further rights,duties or obligations under this Agreement other than those rights,duties or obligations which expressly or by their nature survive termination. ARTICLE Ii SPECIAL PROVISIONS/CONDITIONS Section 3.1 Relationship Between _Agreement_and_Legislation/MOU.This Agreement (including the Appendices,Attachments,Exhibits and Schedules hereto)sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements and Page 6 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc understandings with respect to the subject matter hereof.The parties acknowledge and agree,however,that the execution and delivery of this Agreement shall not operate to terminate the MOU and that the MOU shall survive the Closing and remain in effect and binding upon the parties.Further,the parties acknowledge and agree that all essential elements of the Transfer set forth in the provisions of the MOU have been incorporated into the terms and conditions of this Agreement in accordance with Section 12 of the MOU.The MOU and the Legislation shall govern and shall be relied upon in interpreting the provisions of this Agreement and the provisions of this Agreement shall be interpreted to be consistent with the MOU and Legislation if alternative interpretations can be ascribed to this Agreement. Section 3.2 PCE Endowment.The parties acknowledge and agree,pursuant to Section 3 of Chapter 75 SLA 2000 and as required by Section 2 of the MOU,that the proceeds of the Purchase Price have been appropriated into the Power Cost Equalization Endowment created under AS 42.45.070. Section 3.3 Releases from Purchasing Utilities.The AEA's obligation to close the sale of the Project and complete the Transfer as contemplated by this Agreement is contingent on the AEA receiving from the JAA and the Purchasing Utilities written releases,in form and substance satisfactory to the AEA and the State of Alaska,with respect to all risks and claims related to the Project of every kind or nature and whether known or unknown,including without limitation all liabilities,claims,expenses and ownership risks under the PSA and the Insurance Agreement;except that such written releases shall not release the AEA or the State from its obligation to complete any Required Repairs under Section 4.1(a)of this Agreement that have not been completed at Closing,nor shall such releases operate to release the AEA from any liabilities,claims or expenses with respect to claims or potential claims that AEA failed to disclose in breach of AEA's affirmative representation made under Section 4.1(c)of this Agreement.The JAA shall have the obligation to obtain such releases from the Purchasing Utilities and deliver the same to the AEA and the State on or prior to the Closing Date.The parties acknowledge that the JAA has provided such a release to the AEA and the State of Alaska in Section 4.2 of this Agreement. Section 3.4 FERC Approval.The parties acknowledge and agree that the parties'respective obligations to close the transactions contemplated by this Agreement is subject to the sale transaction receiving all necessary final approvals from FERC.The JAA shall have the primary responsibility for obtaining necessary FERC approvals,and the AEA shall use its best efforts to assure timely action by the State that is necessary to support the JAA's compliance with FERC regulations and requirements related to securing and finalizing such approvals. Section 3.5 Subject to Appropriation.The parties acknowledge and agree that in addition to any other conditions related to financial obligations of the AEA hereunder or under the Legislation or the MOJU,all such financial obligations are subject to the AEA receiving sufficient and lawful appropriations with respect to such obligations.The AEA shall use its best efforts to secure sufficient and lawful appropriations to support its obligations hereunder. ARTICLE IV CONDITION OF PROPERTY Section 4.1 Required_Repairs/Pending and Potential Claims.(a)The AEA acknowledges and agrees that it is responsible for completing in a manner satisfactory to the JAA those repairs previously identified at the Swan Lake and Terror Lake Facilities,which repairs are described on Schedule 4.1-A.Additionally,the AEA acknowledges that it is required to make any additional Project repairs required under the Insurance Agreement that are identified prior to the Closing Date,which repairs Page 7 -Agreement for the Purchase and Sale fdpoo!Purchase and sale agreement.doc shall be described in an appropriate amendment to Schedule 4.1-A executed by the parties.On or before the Closing Date,the parties shall execute an agreement with respect to the satisfaction of the AEA's repair obligations pursuant to this Section 4.1(a).This agreement shall,inter alia,(i)allocate responsibility for securing engineering and construction services with respect to the required repairs;(ii) assign responsibility for oversight and approval of the required repairs,(iii)include a commitment of an agreed-upon level of funding for completing the required repairs,(iv)provide for release of AEA from any further repair obligations.The agreement,together with any related documentation with respect to the satisfaction of the AEA's repair obligations,shall be included as part of Schedule 4.1-A.The JAA acknowledges and agrees that,except for the repair obligations that will be satisfied pursuant to the agreement included as part of Schedule 4.1-A,all other repairs with respect to the Project are the responsibility of the JAA,and the JAA assumes all risk of loss with respect to all other repairs and of the Project,whether the necessity for such other repairs arises before or after the Closing Date. (b)The parties,the Purchasing Utilities,and TBPA shall jointly prepare a listing and description as Schedule 4.1-B of any pending litigation or other proceedings or actions involving claims of any kind asserted against the AEA or the State with respect to the Project arising prior to the Closing Date by any parties other than the JAA,the Purchasing Utilities,TBPA,Ketchikan Electric Company, Alaska Power &Telephone,or Cape Fox Native Corporation,together with any potential claims of any kind with respect to the Project which the AEA and the JAA currently believes prior to the Closing Date there are grounds on which a claim could be asserted,maintained,and result in the successful recovery against the AEA by parties other than the JAA,the Purchasing Utilities,TBPA,Ketchikan Electric Company,Alaska Power &Telephone,or Cape Fox Native Corporation. (c)The AEA shall affirmatively represent to the JAA on the Closing Date that,to the actual knowledge of AEA/AIDEA's key employees related to the Projects,that AEA has not intentionally failed to disclose to the JAA known material claims or potential claims against the AEA or the State with respect to the Project,that should have been listed on Schedule 4.1-B,and that AEA/AIDEA's key employees related to the Projects believe there are substantial grounds for the third-party(ies)to obtain a material recovery against the AEA.The AEA representation made under this section 4.1(c)shall specifically exclude,and have no application towards,any claim or potential claim that (1)the JAA,the Purchasing Utilities,or the TBPA,or any employee,agent,representative,attorney,contractee,or affiliate of the JAA,the Purchasing Utilities,or the TBPA,has actual or constructive notice,(2)arises from or relates to title to land,or (3)arises from or relates to the Purchasing Utilities'or TBPA's operation or maintenance of the Project or any Project Asset.The JAA,Purchasing Utilities,and TBPA shall affirmatively represent at Closing that they have undertaken a diligent investigation and inquiry of the Projects and documents related to the Projects in an attempt to discover any grounds for claims or potential claims with respect to the Projects.Any action that includes any claim or allegation regarding this Section 4.1(c)of this Agreement shall be venued exclusively in the State of Alaska,Third Judicial District at Anchorage. Section 4.2 Project Condition/Release_of Claims.Except for the AEA's responsibility to complete those repairs described on Schedule 4.1-A ,the AEA hereby disclaims any and all warranties or representations of any kind whatsoever,express or implied,with respect to the condition of or claims related to the Project,and the AEA makes no representations or warranties (express or implied)with respect to,and shall have no liability to the JAA or the Purchasing Utilities for the condition of,the Page 8 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc Project,including without limitation the presence of any Hazardous Substances,and the JAA on its behalf and on behalf of its successors and assigns hereby releases and waives any and all claims,whether legal, equitable,or otherwise,whether known or unknown,which the JAA has or may have against the AEA or the State of Alaska or any agency or instrumentality thereof with respect to the condition of the Project, including without limitation claims pertaining to the presence of any Hazardous Substances,or claims under the PSA or the Insurance Agreement.The release set forth in this Section 4.2 shall take effect on the Closing Date. The JAA acknowledges to the AEA that the JAA has had the opportunity as of the Closing to fully inspect the Project,that the JAA has conducted or will conduct prior to the Closing such due diligence activities as the JAA deems appropriate with respect to the Project and with respect to the identification and sufficiency of the Project Assets,and that the JAA is purchasing the Project and accepting the Project and Project Assets AS IS,WITH ALL FAULTS,and that the JAA assumes the responsibility and risks of all defects and conditions other than the AEA's obligation to complete those repairs described on Schedule 4.1 hereto,including such defects and conditions,if any,that cannot be observed by casual inspection. The limitations on liability contained in this Section 4.2 have been specifically negotiated by the parties.It is expressly agreed that these limitations on liability constitute a condition precedent to the AEA's obligation to sell the Project to the JAA,and to provide for the other terms and conditions of this Agreement,and that the AEA would not be willing to sell the Project to the JAA or enter into this Agreement in the absence of such limitations on liability.These limitations on liability shall survive Closing and remain in full force and effect thereafter and shall not merge into the deeds,bills of sale or other conveyance,transfer or assignment documents or instruments to be delivered to the JAA hereunder, and shall be binding upon the JAA and its successors and assigns.Further,the AEA assumes no liability with respect to,and makes no representation or warranty,whether express or implied,regarding the merchantability or suitability of any portion of the Project or the fitness or adequacy of the Project for any particular or intended purpose or for the uses contemplated or proposed by the JAA.This release is solely for the benefit of the AEA and the State of Alaska and does not release any vendor or contractor of the AEA from its warranty obligations that are related to the Project. For purposes of this Section 4.2 and Section 4.3,the term "Hazardous Substances”means any flammables,explosives,radioactive materials,crude or refined petroleum,pollutants,contaminants,or any hazardous,toxic,or dangerous waste,substance,or material,including asbestos,defined as such in (or for purposes of)the Comprehensive Environmental Response,Compensation,and Liability Act (42 U.S.C.A.Sec.9601 et.seq.),any so-called "Superfund”or "Superlien”law,or any other Environmental Law,including,but not limited to,Alaska Statutes Title 46,Chapters .03,.08 and .09,as now or at any time hereafter in effect.For purposes of this Section 4.2,the term "Environmental Law”means any Federal,state,or local laws,ordinances,codes,regulations,rules,orders,or decrees,relating to,or imposing liability or standards of conduct concerning the treatment,storage,use or disposal of any Hazardous Substances. Section 4.3 Indemnity by the JAA. 4.3.1 Indemnification:Generally.The JAA shall save,protect,defend,indemnify and hold harmless the AEA and all of its officers,directors,employees and agents from and against any and all demands,claims,causes of action (whether in the nature of an action for damages,indemnity, contribution,government cost recovery or otherwise),actions,damages,fines,penalties,judgments,costs Page 9 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc and expenses (including without limitation costs of defense,settlement and reasonable attorney's fees), charges,forfeitures,liens,liabilities or losses of any nature or kind whatsoever,whether known or unknown,including,but not limited to,personal injury,property damage and wrongful death,arising or resulting directly or indirectly from,or in any way connected with the JAA,the PSA,the Insurance Agreement,the Indemnification Agreement between the AEA and Ketchikan Electric Company,dated June 22,1998,the various Memoranda of Understanding entered into between the AEA and the Four Dam Pool Project Management Committee with respect to the operation,maintenance and repair of the Project,or the Project arising after the Closing Date.Such right of indemnification shall not extend, however,to claims asserted against the AEA or any of its officers,directors,employees and agents that AEA failed to disclose in breach of AEA's affirmative representation made under Section 4.1(c)of this Agreement. 4.3.2 Indemnification:Hazardous Substances.Without limiting the duty to indemnify as provided in Section 4.3.1,the JAA shall save,protect,defend,indemnify and hold harmless the AEA from any and all demands,claims,causes of action,actions,damages,fines,penalties,judgments,costs and expenses,charges,forfeitures,liens,liabilities or losses of any nature and kind whatsoever,which arise after Closing from or in connection with the presence or suspected presence of Hazardous Substances in the soil,groundwater,or otherwise on,above or in the Project,or otherwise generating from the Project.This indemnification includes,without limitation,costs incurred in connection with any investigation of site conditions or any clean-up,remedial,removal,or restoration work required by any federal,state,or local government agency or political subdivision. Section 4.4 Conduct Prior to Closing. (a)Except as otherwise permitted by this Agreement or with the prior written consent of the JAA,prior to the Closing the AEA shall not:(i)mortgage,pledge,otherwise encumber or subject to lien any of the Project Assets or commit to do any of the foregoing;(ii)dispose of,or agree to dispose of,any of the Project Assets or lease or license to others,or agree so to lease or license,any of the Project Assets or make any commitment to do the same;(iii)physically relocate or remove any Project Assets to any other location;or (iv)agree or commit to do any of the foregoing. (b)Except as otherwise permitted by this Agreement or with the prior written consent of the JAA,prior to the Closing the AEA shall:(i)not cancel or change any existing policy of insurance (including self-insurance)or fidelity bond related to the Project Assets,or any policy or bond providing substantially the same coverage,unless replaced by a policy or bond providing substantially the same coverage or such cancellation or change is effective only on the Closing,and not change in any respect to currently existing policies and practices with respect to the maintenance of self-insurance reserves allocable to the AEA;(ii)advise the JAA in writing of any adverse change or any event, occurrence or circumstance which are likely to cause an adverse change in the condition or operation of the Project Assets or measurably affect the value of the Project Assets,including the value of the FERC licenses;and (iii)preserve all records related to the Project Assets. (c)The JAA acknowledges its association with the Purchasing Utilities and Thomas Bay Power Authority which entities operate and otherwise use the Project and Project Assets.The JAA acknowledges and agrees that this Section 4.4 imposes no obligation on the AEA regarding (i)the operation,use,physical relocation or removal,encumbrance (by mortgage,pledge,lien or otherwise), disposal,lease,or license of the Project or Project Assets,or agreement or commitment regarding any of the foregoing,by a Purchasing Utility or TBPA,(ii)notwithstanding Section 4.4(b),advising the JAA in Page 10 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc writing of any adverse change or any event,occurrence or circumstance related to the condition or operation of the Project or Project Assets that are otherwise known to a Purchasing Utility or TBPA,or (iii)preserving any record under the control of a Purchasing Utility or TBPA. ARTICLE V CLOSING Section 5.1 Closing. 5.1.1 Closing Date.The closing of the transactions contemplated by this Agreement (the "Closing”)shall occur on a date,time and place mutually agreeable to the parties after all of the conditions precedent to each parties'obligation to close has been satisfied;provided that,in any event the Closing shall occur on or before March 1,2002,unless the date is extended by mutual agreement of the parties.The actual date on which the Closing occurs is herein described generally as the "Closing Date.” 5.1.2 Closing Agent.Upon mutual agreement of the parties,the Closing may be completed through escrow,with an escrow closing agent acceptable to both parties,and with the parties equally sharing the costs of such closing escrow agent. Section 5.2 Conditions to Each Party's Obligations to Effect the Closing.The respective obligations of the AEA and the JAA to effect the sale and purchase of the Project and the Project Assets shall be subject to the fulfillment at or prior to the Closing of the following conditions: (a)there shall not be in effect on the Closing Date any order,regulation or law restraining,enjoining or otherwise prohibiting or making illegal or materially adversely affecting the consummation of any of the transactions contemplated by this Agreement,the Financing Agreement or any documents or instruments related thereto; (b)each of the Purchasing Utilities shall have taken all necessary and appropriate actions through their respective governing bodies or otherwise to approve,authorize and direct the JAA to complete the purchase of the Project and the Project Assets,the financing of such sale and consummate all transactions and other matters related thereto; (c)the AEA shall have taken all necessary and appropriate actions through its Board of Directors or otherwise to approve,authorize and direct the completion of the sale of the Project and the Transfer of the Project Assets and the consummation of all transactions and other matters related thereto; and (d)all governmental consents and approvals for the consummation of the sale and purchase of the Project and the Transfer of Project Assets as contemplated by the terms of this Agreement,and by the terms of the indenture,loan agreement or other agreement(s)entered into with the AIDEA to finance the purchase of the Project and any documents or instruments related thereto shall have been obtained,other than those consents and approvals that the JAA determines would not,in the aggregate,have a material adverse affect on the ability of the JAA to own and operate the Project. Section 5.2.1 Conditions to Obligation of the JAA to Effect the Closing.The obligation of the JAA to effect the sale and purchase of the Project and the Project Assets shall be subject to the fulfillment at or prior to the Closing of the following conditions: Page 11 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc (a)The Financing Agreement containing financing terms,conditions and covenants acceptable to the JAA shall have been negotiated,executed and delivered by the JAA and the AIDEA,or other financing upon terms and conditions satisfactory to the JAA shall have been obtained; (b)All conveyance and transfer documents related to the sale,conveyance,transfer, assignment and delivery to the JAA of the Project and the Project Assets required by Section 1.4 hereof shall have been approved by all applicable regulatory authorities and shall have been executed and delivered to the JAA or the designated escrow closing agent by the AEA and each of the other necessary transferor parties; (c)The attachment to this Agreement of the Project Asset Lists,and all other Schedules and Exhibits to this Agreement,each in form and substance satisfactory to the JAA; (d)Unless approved by the JAA,the Purchase Price shall not have increased (as a result of an adjustment in the Purchase Price pursuant to Section 2.2 hereof)to an amount in excess of Seventy-Three Million Dollars ($73,000,000); (e)Unless approved by the JAA,no material losses to the Project shall have occurred; (f)The resolution,to the satisfaction of the JAA and each of the Purchasing Utilities,in their reasonable discretion,of all litigation involving claims by Ketchikan Electric Company against the City of Ketchikan or challenging the validity of any orders issued by FERC with respect to the Project or any of the Facilities; (g)The resolution,to the satisfaction of the JAA and each of the Purchasing Utilities,in their reasonable discretion,of all material issues related to the governmental or other tax- exempt status of the JAA for Federal income tax purposes; (h)The release of all claims of the AEA in or to any amounts on deposit in or attributable to the Project R&R Fund; (i)The delivery to the JAA of a written release of all claims in and rights to the balance of the Initial Project Revenue Fund as required by Section 1.5 in form and substance satisfactory to the JAA; (Gj)The execution and delivery to the JAA of a Closing Certificate by a duly authorized officer of the AEA,to the effect that,to such officer's knowledge the representations and warranties of the AEA set forth in Section 7.2 of this Agreement and the other Closing documents are true and correct in all material respects as of the Closing Date and that all conditions to the obligations of the AEA to effect the Closing have been satisfied or appropriately waived by the AEA;and (k)The delivery to the JAA of an opinion of counsel to the AEA from the State of Alaska Attorney General's Office substantially in the form of Exhibit A attached hereto. ()Acceptance of Schedule 4.1-B (the list of known claims and potential claims)by the JAA,in its reasonable discretion. Page 12 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement,doc Section 5.2.2.Conditions to Obligation of the AEA to Effect the Closing.The obligation of the AEA to effect the sale and purchase of the Project and the Project Assets shall be subject to the fulfillment at or prior to the Closing of the following conditions: (a)The payment of the Purchase Price to the AEA or the designated escrow closing agent; (b)The execution and delivery by the JAA to the AEA or the designated escrow closing agent of all conveyance and transfer documents required by Section 1.4 hereof to which the JAA is a party; (c)The attachment to this Agreement of the Project Asset Lists,and all other Schedules and Exhibits to this Agreement,each in form and substance satisfactory to the AEA; (d)The execution and delivery to the AEA by each of the Purchasing Utilities of sufficient written releases in form and substance satisfactory to the AEA as required by Section 3.3 hereof; (e)The execution and delivery to the AEA of a Closing Certificate by a duly authorized officer of the JAA to the effect that,to such officer's knowledge the representations and warranties of the JAA set forth in Section 7.1 of this Agreement and the other Closing Documents are true and correct in all material respects as of the Closing Date and that all conditions to the obligations of the JAA to effect the Closing have been satisfied or appropriately waived by the JAA;and (f)The delivery to the AEA of an opinion of counsel to the JAA from Ater Wynne LLP in substantially in the form of Exhibit B attached hereto. Section 5.3 Closing Costs. 5.3.1 AEA Closing Costs.Unless otherwise expressly agreed to by the parties,the AEA shall pay the following Closing costs:(i)AEA's own attorney fees;(ii)AEA internal costs related to this transaction;(iii)any AEA consultant costs related to the Project Asset Lists to be prepared pursuant to Section 1.3 hereof;(iv)any costs or fees of DNR related to Project Asset transfers of State land interests that were the subject of public notice published by DNR in August 2001 and of water rights;and (v)one-half (4)of any recording or escrow closing agent fees. 5.3.2 JAA Closing Costs.Unless otherwise expressly agreed to by the parties,the JAA shall pay the following Closing costs:(i)JAA's own attorney fees;(ii)JAA internal costs related to this transaction;(ili)costs of JAA's third-party consultants and other costs related to the JAA's due diligence and the Project Asset Lists to be prepared pursuant to Section 1.3 hereof;(iv)costs related to any FERC or any other regulatory body approvals (other than costs or fees of DNR related to Project Asset transfers of State land interests that were the subject of public notice published by DNR in August 2001 and of water rights);(v)costs or fees of DNR related to Project Asset transfers of State land interests that were not the subject of public notice published by DNR in August 2001 (AEA will use its best efforts to ensure that any such fees shall be reasonable in amount)and (vi)one-half (4)of any recording or escrow closing agent fees. Page 13 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc Section 5.4 Possession.The JAA shall obtain possession of the Project and all Project Assets at Closing. ARTICLE VI POST-CLOSING PROVISIONS Section 6.1 Restriction on Subsequent Sale of Project.The parties acknowledge and agree that the conveyance and transfer of the Project Assets shall be subject to the restrictions on the subsequent sale of Project Assets as provided for in Section 15(a)of Chapter 60 SLA 2000 and Section 2 of the Amendment to the MOU.All conveyance,transfer and assignment documents and instruments shall incorporate such restrictions. Section 6.2 Compliance with Financing Documents.Subsequent to Closing,the JAA will timely and fully comply with the Financing Agreement and all other financing documents entered into in conjunction with the Closing to finance the payment of the Purchase Price. Section 6.3 Project Maintenance and Operation.Subsequent to Closing,the JAA shall at all times maintain and operate the Project in accordance with prudent utility practices.In addition,the JAA shall produce and maintain adequate records in accordance with prudent utility practices with respect to its operation and maintenance of the Project. Section 6.4 Further Assurances.In addition to the acts and deeds recited herein and contemplated to be performed,executed and/or delivered by either party at Closing,each party agrees to perform,execute and deliver,without further consideration,but without any obligation to incur any additional liability or any obligation to pay fees or costs payable to third parties,on or after the Closing, further documents,acts and assurances as may be reasonably necessary to consummate the transactions contemplated hereby or to further perfect the conveyance and transfer of the Project and the Project Assets (including any Project Assets identified subsequent to the Closing)to the JAA. Section 6.5 Insurance Premium Rebates.Following Closing,the AEA shall pay to the JAA expeditiously upon receipt of the same,an amount equal to the amount of all premium rebates received by the AEA with respect to the cancellation of insurance policies identified on the Insurance Policy List and not assigned to the JAA as part of the Transfer at Closing. Section 6.6 Southeast Intertie.The parties acknowledge and agree that the construction of the Southeast Intertie connecting the Lake Tyee and Swan Lake Facilities is anticipated to increase Project revenues because the Southeast Intertie will enable Lake Tyee excess energy and capacity to be sold to the City of Ketchikan,d/b/a Ketchikan Public Utilities (KPU)to the extent of KPU's needs,as is required under the Power Sales Agreement.The parties are committed to support the construction and operation of the Southeast Intertie if it is demonstrated to be feasible,and to support additional federal funding therefor as provided in the MOU. ARTICLE VII REPRESENTATIONS AND WARRANTIES Section 7.1 Representations and Warranties of the JAA.The JAA represents and warrants to, and agrees with,the AEA as follows: Page 14 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc (a)The JAA is a joint action agency organized under the authority of AS 42.45.300 - AS 42.45.320,which is duly organized,validly existing and in good standing under the laws of the State of Alaska.The JAA has the full power and authority to carry on its business as presently conducted and to own and operate its assets,properties and business. (b)The JAA has all requisite power and authority to execute and perform this Agreement and to consummate the transactions contemplated by this Agreement.On the Closing Date, the execution and delivery of this Agreement and all the transactions provided for in this Agreement shall have been duly authorized by proper proceedings and will be in all respects legally binding upon the JAA. (c)The party executing this Agreement on behalf of the JAA is duly authorized to do so,and upon execution hereof the Agreement will be enforceable against the JAA in accordance with its terms. (d)The JAA is not subject to any restriction contained in any law,regulation,joint action agency agreement,charter,bylaw,partnership or similar agreement,mortgage,lien,lease, agreement,instrument,order,judgment or decree which would prevent the consummation of the transactions contemplated by this Agreement. (e)The representations and warranties of the JAA contained in this Agreement shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date,and each and all of the agreements and conditions to be performed or observed by the JAA on or before the Closing Date pursuant to the terms hereof shall have been duly performed or observed. (f)As of the Closing Date,the JAA has fully inspected the Project and conducted all due diligence the JAA deems necessary or is otherwise prudent to determine or confirm (i)the condition of the Project;(ii)that the JAA is obtaining all necessary right,title and interest in and to the Project Assets to own and operate the Project;and (iii)that the Project can continue to be operated successfully and in accordance with prudent utility practices. (g)As of the Closing Date,all necessary approvals and consents from the Purchasing Utilities in conjunction with this transaction have been duly and properly obtained. Section 7.2 Representations and Warranties of the AEA.The AEA represents and warrants to,and agrees with,the JAA as follows: (a)The AEA is a public corporation of the State of Alaska in the Department of Community and Economic Development but with separate and independent legal existence created under AS 44.83.020.The AEA has full power and authority to carry on its business as presently conducted and to own and operate its assets,properties and business. (b)The AEA has all requisite power and authority to execute and perform this Agreement and to consummate the transactions contemplated by this Agreement.On the Closing Date, the execution and delivery of this Agreement and all the transactions provided for in this Agreement shall have been duly authorized by proper proceedings and will be in all respects legally binding upon the AEA. Page 15 -Agreement for the Purchase and Sale ;fdpool Purchase and sale agreement.doc (c)The party executing this Agreement on behalf of the AEA is duly authorized to do so. (d)The AEA is not subject to any restriction contained in any AEA statute (AS 44.83),AEA regulation or bylaw or,to its knowledge after reasonable inquiry,any other statute or any regulation or any agreement,mortgage,lien,lease,instrument,order,judgment or decree which would prevent the consummation of the transactions contemplated by this Agreement. (e)The representations and warranties of the AEA contained in this Agreement shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date,and each and all of the agreements and conditions to be performed or observed by the AEA on or before the Closing Date pursuant to the terms hereof shall have been duly performed or observed. ARTICLE VOI GENERAL PROVISIONS Section 8.1 Assignment.Except for an assignment to one or more of the Purchasing Utilities that is authorized by the Legislation,the JAA shall not assign or otherwise transfer its rights under this Agreement.No such assignment shall be effective,however,without the assignee first assuming all of the obligations of the assignor under this Agreement.Any assignment or transfer in violation hereof shall be null and void and of no force or effect.The AEA may assign its interest in this Agreement to anysuccessoragencyoftheStateofAlaskainaccordancewithStatelaw;provided that such assignment does not diminish the obligations of the AEA or a successor agency of the State of Alaska to the JAA as specified herein. Section 8.2 Nonmerger.All of the terms and provisions of this Agreement,including,but not limited to,the representations and warranties,the disclaimer and release of claims in Section 4.2,shall not merge in,but shall survive,the Closing of the transaction contemplated hereunder and the deeds,bills of sale and other conveyance,transfer and assignment documents to be delivered pursuant hereto. Section 8.3 Notices.Except as otherwise expressly provided in this Agreement,any notice, request,approval,consent,demand,or other communication required or permitted to be given by either party to the other hereunder shall be in writing and shall be deemed delivered upon receipt if personally delivered,upon confirmation of successful transmission if sent via facsimile,or five (5)days after deposit in the United States mail,postage prepaid,certified mail,and addressed as set forth below if mailed,or at such other address as such party shall have last designated by notice to the other. If to the AEA:Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage,Alaska 99503 Attention:Executive Director Telephone No.:(907)269-3000 Facsimile No.:(907)269-3044 With a copy by first class mail and facsimile to:Brian Bjorkquist,Esq. Assistant Attorney General Page 16 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc State of Alaska Department of Law 1031 West Fourth Avenue,Suite 200 Anchorage,Alaska 99501 Telephone No.:(907)269-5100 Facsimile No.:(907)258-4978 With an additional copy by first class mail and facsimile to: Keith Laufer,Esq. Foster Pepper Rubini &Reeves,LLC 1007 West Third Avenue,Suite 100 Anchorage,Alaska 99501 Telephone No.:(907)222-7118 Facsimile No.:(907)222-7198 If to the JAA:Four Dam Pool Power Agency P.O.Box 329 -11 South Nordic Drive Petersburg,Alaska 99833 Attention:Dennis Lewis,Chairman Telephone No.:(907)772-4203 Facsimile No.:(907)772-9287 With a copy by first class mail and facsimile to:Ronald L.Saxton,Esq. Ater Wynne LLP 222 SW Columbia,Suite 1800 Portland,Or 97201 Telephone No.:(503)226-1191 Facsimile No.:(503)226-0079 Section 8.4 Intentionally left blank. Section 8.5 Governing Law/Disputes.This Agreement and the rights of the parties under it shall be governed by and construed in all respects in accordance with the laws of the State of Alaska. Section 8.6 Waiver.Any waiver must be in writing,and any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Agreement.The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.All remedies of the parties shall be cumulative. Section 8.7 Amendments.This Agreement shall not be altered,modified,or otherwise amended except by an instrument in writing signed by all parties. \ Section 8.8 No Partnership,Joint Venture,Etc.Nothing in this Agreement shall be intended or deemed to create a partnership,joint venture,association,or other similar relationship between the Page 17 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc parties hereto. Section 8.9 No Third Party Beneficiaries.This Agreement does not create,and shall not be construed to create,any rights enforceable by any person not a party to this Agreement.Nothing in this Agreement is intended to relieve or discharge the obligation or liability of any third person to any party, nor give any third person any right of subrogation or action against any party. Section 8.10 Severability.If any provision of this Agreement or any application thereof shall be held invalid,illegal or unenforceable,the remainder of this Agreement or any other application of such provision shall not be affected thereby. Section 8.11 Headings.Title,section and paragraph headings used in this Agreement are for the convenience and reference of the parties only and in no way define,limit,extend or describe the scope of this Agreement or the intent of any of the provisions hereof. Section 8.12 Construction.This Agreement has been negotiated by the parties and their respective legal counsel,and the parties specifically agree that any legal or equitable principles that might require the construction of this Agreement or any provision of this Agreement against the party drafting will not apply in any construction or interpretation of this Agreement. Section 8.13 Time of the Essence.Time is of the essence in the performance of this Agreement. Section 8.14 Appendices,Attachments,Schedules and Exhibits.The Appendices, Attachments,Schedules and Exhibits attached hereto are an integral part of this Agreement and are incorporated herein by reference. Section 8.15 Expenses.Each party shall bear its own expenses incident to the negotiation, preparation and execution of this Agreement and the transaction documents to be entered into pursuant to this Agreement. Section 8.16 Counterparts.For the convenience of the parties hereto,this Agreement may be executed in one or more counterparts,including by facsimile signature,each identical to the other,so long as the counterparts in a set contain the signatures (and acknowledgements)of all the parties to this Agreement. Section 8.17 Termination of Sale and Purchase.The AEA and the JAA shall each have the right to terminate the sale and purchase of the Project at any time upon making specific written findings concluding that one or more conditions to its obligation to effect the Closing on or before March 1,2002 has not and cannot with reasonable diligence and effort be fulfilled at or prior to the Closing.Notice of termination pursuant to this Section 8.17 shall be made in writing and shall set forth the specific findings supporting termination.The parties shall promptly meet to discuss the Notice,and the termination shall be effective five (5)business days (excluding State of Alaska holidays)after that meeting unless the Notice is withdrawn by mutual consent of the parties.In the event either party terminates this Agreement as provided in this Section 8.17,neither party shall have any further rights,duties or obligations under this Agreement other than those rights,duties or obligations which expressly or by their nature survive termination. Page 18 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Page 19 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc IN WITNESS WHEREOF,the parties have executed this Agreement effective as of the date first hereinabove written. ALASKA ENERGY AUTHORITY FOUR DAM POOL POWER AGENCY Page 20 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc ACKNOWLEDGMENTS STATE OF ALASKA ) )ss. JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this day of 2001,before me,the undersigned,a Notary Public in and for the State of Alaska,duly commissioned and sworn as such, personally appeared ,known to me to be the of the ALASKA ENERGY AUTHORITY,a public corporation and agency of the State of Alaska,that executed the foregoing instrument,and he acknowledged that he executed said instrument as the free and voluntary act and deed of said public corporation and agency for the uses and purposes therein mentioned,and that he was authorized to execute said instrument. WITNESS my official hand and seal the day and year in this certificate first hereinabove written. Notary Public in and for Alaska My Commission Expires: STATE OF ALASKA ) )ss. JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this day of 2001,before me,the undersigned, a Notary Public in and for the State of Alaska,duly commissioned and sworn as such,personally appeared ,known to me to be the of the FOUR DAM POOL POWER AGENCY,a joint action agency formed under the authority of AS 42.45.300 -AS 42.45.320 that executed the foregoing instrument,and he acknowledged that he executed said instrument as the free and voluntary act and deed of said joint action agency for the uses and purposes therein mentioned,and that he was authorized to execute said instrument. WITNESS my official hand and seal the day and year in this certificate first hereinabove written. Notary Public in and for Alaska My Commission Expires: Page 21 -Agreement for the Purchase and Sale fdpool Purchase and sale agreement.doc Appendix A Definitions "AEA”means the Alaska Energy Authority,a public corporation and an agency of the State of Alaska. "Additional Funds”has the meaning given to such term in Section 2.2.1 of the Agreement. "Agreement”means the Agreement for the Purchase and Sale of the Four Dam Pool Project, together with all exhibits,schedules,appendices and attachments thereto,as the same may be amended or supplemented from time to time in accordance with its terms by agreement of the parties thereto. "AIDEA”means the Alaska Industrial Development and Export Authority,a public corporation and an agency of the State of Alaska. "Contract Claims and Warranty Claims List”means the listing of pending warranty claims and potential warranty claims with respect to the Project attached to the Agreement as Schedule 1.3.2-B. "Contracts List”means the Material Contracts List and the Contract Claims and Warranty Claims List,collectively. "Closing”means the closing of the transaction contemplated by this Agreement on a date,time and place mutually agreeable to the parties,on or before March 1,2002. "Closing Date”has the meaning given to such term in Section 5.1.1 of the Agreement. "DNR”means the State of Alaska Department of Natural Resources. "Debt Service Payments”for purposes of Section 2.2.1 of this Agreement means those payments actually made by the Purchasing Utilities to the AEA pursuant to Section 5(e)of the PSA. "Facility”or "Facilities”mean the Swan Lake Hydroelectric Project,the Lake Tyee Hydroelectric Project,the Solomon Gulch Hydroelectric Project and the Terror Lake Hydroelectric Project,related auxiliary facilities including,without limitation,all generation,transmission and substation facilities associated with each such Project,either individually or collectively,and includes all Project Assets. "FERC”means the Federal Energy Regulatory Commission. "Financing Agreement”means the indenture,loan agreement and/or other agreement(s)entered into between the JAA and the AIDEA to finance the purchase of the Project. "Four Dam Pool Initial Project”or "Project”means the Facilities,collectively. "Hazardous Substance”has the meaning given to such term in Section 4.2 of the Agreement. Page 1-AppendixA fdpool Purchase and sale agreement.doc Draft -12/05/01 "Initial Project Revenue Fund”means the Initial Project Revenue Fund established by the PMC pursuant to Section 5(e)of the PSA. "ILF Credit”means a credit against the Purchase Price in the amount of Five Million Dollars ($5,000,000)related to the reappropriation of Intertie Loan Funds as described in Section 2.2.2 of the Agreement. "Insurance Agreement”means the Amended Agreement for Satisfaction of Insurance Cost Payment Obligation and Concerning Risk Allocation dated June 24,1994 by and between the AEA and the PMC pursuant to the PSA. "Insurance Fund'means the Insurance Fund established by the AEA pursuant to the PSA and the Insurance Agreement to provide for the payment of insurance and risk management costs. "Insurance Policy List”means the listing of insurance policies for or related to the Project which are part of the Project Assets and described in Section 1.2(e)of the Agreement and attached to the Agreement as Schedule 1.3.4. "Intertie Loan Funds”mean the $20 million previously appropriated by the State to fund a portion of the costs of the Southeast Intertie,as described in Section 7 of the MOU. "JAA”means the Four Dam Pool Power Agency,a joint action agency formed under the authority of AS 42.45.300 -AS 42.45.320 by the City of Ketchikan d/b/a Ketchikan Public Utilities,the City of Wrangell d/b/a Wrangell Municipal Light and Power,the City of Petersburg d/b/a Petersburg Municipal Power and Light,Copper Valley Electric Association,Inc.,and Kodiak Electric Association, Inc. "Legislation”means Chapters 60 and 75,SLA 2000,and Chapter 4,SLA 2001 enacted by the Alaska State Legislature. "Licenses and Permits List”means the listing of licenses and permits which are part of the Project Assets and described in Section 1.2(c)of the Agreement and attached to the Agreement as Schedule 1.3.3. "Material Contracts List”means the listing of material contracts related to the Project which are part of the Project Assets and described in Section 1.2(b)of the Agreement and attached to the Agreement as Schedule 1.3.2-A. "Memorandum of Understanding”or "MOU”means a Memorandum of Understanding between the Purchasing Utilities and the AEA dated April 11,2000,as amended by an Amendment to Memorandum of Understanding between the Purchasing Utilities and the AEA dated May 30,2000, copies of which are attached to the Agreement as Attachment 1 and Attachment 2,respectively. "PMC”means the Four Dam Pool Project Management Committee established by Section 7 of the PSA. "Personal Property List”means the listing of personal property,both tangible and intangible, Page 2-AppendixA fdpool Purchase and sale agreement.doc Draft -12/05/01 which are part of the Project Assets and described in Section 1.2(a)of the Agreement and attached to the Agreement as Schedule 1.3.1. "Project Assets”mean all of the real and personal property,contracts,contract rights and other rights and interests comprising the Project and which are described in Sections 1.2 and 1.3 of the Agreement including,without limitation,all real and personal property,contracts,contact rights and other rights and interests described in detail in the Project Asset Lists. "Project Asset Lists”mean the Real Property List,the Personal Property List,the Contracts List, the Licenses and Permits List and the Insurance Policy List. "Project Documents”means originals or copies of all Project records including,without limitation,plant accounting information,working papers,technical reports,maps,drawings,schedules and other documents related to the ownership,operation,maintenance and licensing of the Project. "Project R&R Fund'means the R&R Fund established by the PMC pursuant to Section 6 of the PSA. "Prudent Utility Practices”means,at a particular time,those practices,methods,equipment and acts then engaged in or approved bya significant portion of the electric utility industry and commonly used in utility engineering and operations to design,construct,operate and maintain equipment similar to the facilities'equipment consistent with good business practices,economy,reliability,safety and expedition,having due regard for applicable codes. "PSA”or "Long-Term Power Sales Agreement”means the Long-Term Power Sales Agreement between the Purchasing Utilities and the AEA effective October 28,1985,as currently amended and supplemented. "Purchase Price”means Seventy-Three Million Dollars ($73,000,000),as such amount may be adjusted as provided in Section 2.2 of the Agreement. "Purchasing Utilities”mean the City of Ketchikan d/b/a Ketchikan Public Utilities,the City of Wrangell d/b/a Wrangell Municipal Light and Power,the City of Petersburg d/b/a Petersburg Municipal Power and Light,Copper Valley Electric Association,Inc.,and Kodiak Electric Association,Inc. "Real Property List”means the listing of real property interests that are part of the Project Assets and described in Section 1.2(d)of the Agreement and attached to the Agreement as Schedule 1.3.5. "Required Repairs”mean the repairs and improvements to the Swan Lake and Terror Lake Facilities described in Schedule 4.1 to the Agreement. _"Southeast Intertie”means the proposed transmission intertie between the Lake Tyee and Swan Lake Facilities. "TBPA”means the Thomas Bay Power Authority established by the City of Petersburg and the City of Wrangell to operate the Lake Tyee Facility. "Transfer”means the sale,conveyance,transfer,assignment and delivery of the Project and all Page 3-AppendixA fdpool Purchase and sale agreement.doc Draft -12/05/01 Project Assets to the JAA in accordance with the terms and conditions of the Agreement. Page 4-Appendix A fdpool Purchase and sale agreement.doc Draft -12/05/01 Schedule 1.3.1 Personal Property List Page 1 -Schedule 1.3.1 fdpool Purchase and sale agreement.doc , Draft -12/05/01 Schedule 1.3.2-A Material Contracts List Page 1 -Schedule 1.3.2-A fdpool Purchase and sale agreement.doc Draft -12/05/01 Schedule 1.3.2-B Contract Claims and Warranty Claims List Page 1 -Schedule 1.3.2-B fdpool Purchase and sale agreement.doc Draft -12/05/01 Schedule 1.3.3 Licenses and Permits List Page 1 -Schedule 1.3.3 fdpool Purchase and sale agreement.doc Draft -12/05/01 Schedule 1.3.4 Insurance Policy List Page 1 -Schedule 1.3.4 fdpool Purchase and sale agreement.doc Draft-12/05/01 Schedule 1.3.5 Real Property List Page 1 -Schedule 1.3.5 fdpool Purchase and sale agreement.doc Draft -12/05/01 Schedule 4.1 Swan Lake and Terror Lake Facilities Repairs Page 1 -Schedule 4.1 1 CVEA KEA KPU |PMPL WMLP |||J Proposed|\Four Dam 68 ¢kWh , Pool Flow of of Funds Operating 2.8 #/kWh|-PMC InitialExpenses<Project$500K/year Revenue Fund PMC R&R {yg JAA Excess Revenues |R&R Dedicated+<-__-__Expenditures Account Debt service prepay,additional As Needed reserves,project improvementsRequireddAmount+10%rs |and other uses as allowed Uninsured Risk _Trusteetee aoe ia jandCertainOtheresRevenue:Se ET aayInsuranceCosts|Fund As Available | As Needed _="Required Paymmenntuf 2 As Needed :1_Amount perPlan5AFund;2 :Required Amount Debt Service on,per Schedule.StateLoan "Debt Services] Debt Service ||Payment ||Reserve Fund||StabilizationFund|.. November 16,2001 "As Needed oe=:Shaded Area Indicates TruusteeControlledFundsandActivities.:: D.Hittle &Associates .