EXECUTION COPY
AMENDED AND RESTATED OPERATION AGREEMENT
by and among
UNION ELECTRIC COMPANY d/b/a AmerenUE
CENTRAL ILLINOIS
PUBLIC SERVICE COMPANY d/b/a AmerenCIPS
AMERICAN TRANSMISSION SYSTEMS, INCORPORATED
Northern indiana public service company
and
GRIDAMERICA LLC
February 14, 2003
TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................ 2
1.1. Definitions................................................ 2
1.2. Rules of Construction...................................... 11
ARTICLE II AUTHORIZATIONS BY THE TRANSMISSION OWNERS.................. 12
2.1. Functional Control Authorization........................... 12
2.2. Non-transferred Facilities................................. 13
2.3. Interconnection Agreements................................. 13
2.4. Network Upgrades........................................... 14
2.5. Revenue Collection and Distribution........................ 15
2.6. The Company as Owner of Transmission Facilities;
Non-Discrimination..................................... 15
ARTICLE III RIGHTS, POWERS, AND OBLIGATIONS OF THE GridAmerica
ITC......................................................16
3.1. Operation And Planning..................................... 16
3.2 Other Matters.............................................. 18
3.3. Responsibilities To The Transmission Owner................. 18
3.4. Additional Obligations..................................... 21
3.5. Information................................................ 24
ARTICLE IV RIGHTS, POWERS, AND OBLIGATIONS OF THE
TRANSMISSIONS OWNERS................................... 24
4.1. Operation and Planning..................................... 24
4.2. Additional Obligations..................................... 24
4.3. Payments to the Company.................................... 24
4.4. Transmission Owners' Remedies.............................. 35
ARTICLE V TERM AND TERMINATION....................................... 36
5.1. Term....................................................... 36
5.2. Termination................................................ 38
5.3. Effect of Termination Pursuant to Sections 5.1 or 5.2.3.... 39
5.4. Effect of Termination Pursuant to Section 5.2.2............ 40
5.5. Regulatory And Other Approvals Or Procedures............... 41
ARTICLE VI DISPUTE RESOLUTION......................................... 41
6.1. Negotiations............................................... 41
6.2. Arbitration................................................ 41
6.3. Arbitration of Certain Claims Regarding Removal of
Managing Member........................................ 46
i
ARTICLE VII TAX MATTERS................................................ 48
7.1. Responsibility for Transmission Owner Taxes................ 48
7.2. Responsibility for the Company Taxes....................... 48
ARTICLE VIII FORCE MAJEURE.............................................. 49
ARTICLE IX BREACH, CURE AND DEFAULT................................... 49
9.1. Continued Operation........................................ 49
9.2. Remedies................................................... 49
9.3. No Joint Liability......................................... 50
ARTICLE X MISCELLANEOUS PROVISIONS................................... 50
10.1. Not for Benefit of Third Parties........................... 50
10.2. Governing Law.............................................. 50
10.3 Successors And Assigns..................................... 50
10.4 Effect of Waiver........................................... 51
10.5 Severability............................................... 51
10.6 Renegotiation.............................................. 51
10.7 Representation And Warranties.............................. 51
10.8 Further Assistance......................................... 52
10.9 Notices.................................................... 53
10.10 Regulatory Proceedings..................................... 53
10.11 Entire Agreement; Amendments............................... 53
10.12 Efforts of the Parties..................................... 53
10.13 Third-Party Joint Agreements............................... 54
10.14 Confidentiality............................................ 54
10.15 No Partnership............................................. 57
10.16 Current Documents.......................................... 57
10.17 Late Payments.............................................. 57
10.18 Counterparts............................................... 57
10.19 Attorneys' Fees............................................ 57
10.20 Time is of the Essence..................................... 57
10.21 Representatives............................................ 57
APPENDICES
APPENDIX A DESCRIPTION OF TRANSFERRED FACILITIES
APPENDIX B THIRD-PARTY JOINT AGREEMENTS
APPENDIX C NOTICES
APPENDIX D - SCHEDULE 5A - DELINEATION OF FUNCTIONS BETWEEN MIDWEST
ISO, GRIDAMERICA AND GRIDAMERICA THREE
ii
AMENDED AND RESTATED OPERATION AGREEMENT
THIS AMENDED AND RESTATED OPERATION AGREEMENT is made and entered into as
of the 14th day of February, 2003 by and among (i) UNION ELECTRIC COMPANY d/b/a
AmerenUE and CENTRAL ILLINOIS PUBLIC SERVICE COMPANY d/b/a AmerenCIPS
(collectively, "Ameren," and for all purposes of this Agreement, a single
Transmission Owner), AMERICAN TRANSMISSION SYSTEMS, INCORPORATED ("ATSI"), and
NORTHERN INDIANA PUBLIC SERVICE COMPANY ("NIPSCO"), (ii) GRIDAMERICA LLC, a
Delaware limited liability company (the "Company"), each of which may be
referred to as a "Party", or collectively as the "Parties."
RECITALS
WHEREAS, the United States Federal Energy Regulatory Commission (together
with any successor agency, the "Commission") in Order No. 2000 called for the
formation of regional transmission organizations to promote the creation of
large electricity markets and to provide reliable, cost-efficient services to
customers;
WHEREAS, the Midwest Transmission System Operator, Inc. ("Midwest ISO") is
a Commission-approved regional transmission organization.
WHEREAS, on April 25, 2002, the Commission issued an order in Docket No.
EL02-65 (99 FERC P. 61,105 (2002)) encouraging the formation of an Independent
Transmission Company within the Midwest ISO.
WHEREAS, Ameren, ATSI and NIPSCO wish to comply with Order No. 2000 through
the formation of an Independent Transmission Company within the Midwest ISO.
WHEREAS, on October 31, 2002, (i) Ameren, ATSI and NIPSCO (or their
applicable affiliates), National Grid USA ("NGUSA"), the Initial Member and the
Company entered into a Master Agreement dated as of October 31, 2002 (the
"Original Master Agreement"), (ii) the Initial Member entered into the Limited
Liability Company Agreement of the Company dated as of October 31, 2002 (the
"Original LLC Agreement"), (iii) the Company and the Original GridAmerica
Companies, or their applicable affiliates, entered into the Operation Agreement
dated as of October 31, 2002 (the "Original Operation Agreement") and (iv) the
Company and the Midwest ISO entered into the Appendix I ITC Agreement dated as
of October 31, 2002 (the "Original MISO ITC Agreement");
WHEREAS, on December 19, 2002, the Commission issued an order in Docket
Nos. ER02-2233-001 and EC03-14-000 (101 FERC P. 61,320 (2002)) (the "FERC
Approving Order") conditionally accepting for filing, suspending and making
effective subject to future refund, future filings and further orders the
Original Master Agreement, the Original LLC Agreement, the Original Operation
Agreement and the Original MISO ITC Agreement;
WHEREAS, each Transmission Owner agrees to transfer Functional Control over
its Transmission Facilities to the Company and desires the Company to exercise
Functional Control
over its Transferred Facilities on the terms and conditions set forth herein and
in the MISO ITC Agreement;
WHEREAS, the Company agrees to accept Functional Control over the
Transferred Facilities of the Transmission Owners on the terms and conditions
set forth herein and in the MISO ITC Agreement, in each case as modified in
compliance with the FERC Approving Order.
NOW THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants, and agreements hereinafter set forth,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound, each
Transmission Owner, each acting in its individual capacity, and the Company
agree to amend and restate the Original Operation Agreement in its entirety as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Terms with initial capitalization used in this Agreement
without other definition shall have the meanings specified in this Article I.
"AAA" shall have the meaning given in Section 6.2(a).
"Acceptable Credit Bank" shall mean a bank that (i) is subject to review
and examination by a federal Governmental Authority, (ii) is in good standing
with such authority, (iii) has combined capital, surplus and undivided profits
aggregating not less than $500 million and (iv) has unsecured long-term debt
rated at least "A-" by Standard and Poor's Ratings Group and "A3" by Moody's
Investors Service.
"Accounting Failure" shall mean a material deficiency in the Company's
accounting practices or systems as identified in an audit conducted pursuant to
the terms of this Agreement.
"Additional Arbitration Request" shall have the meaning given in Section
6.2(i).
"Additional Claim" shall have the meaning given in Section 6.2(i).
"Additional Term" shall have the meaning given in Section 5.1.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly Controlling, Controlled by or under common Control with
such Person. As used in this definition, "Control" shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise); provided,
however, that, in any event, any Person that owns directly or indirectly
securities having at least a majority of the voting power for the election of
directors or other members of the governing body of a corporation or at least a
majority of the partnership or other ownership interests (that carry voting
power) of any other Person will be deemed to Control such corporation or other
Person.
2
"Agreement" shall mean this Amended and Restated Operation Agreement dated
as of February 14, 2003, as it may be amended, modified or otherwise
supplemented and in effect from time to time.
"Ameren" shall have the meaning given in the preamble.
"Ancillary Services" shall have the meaning given in the MISO OATT.
"Applicable Laws and Regulations" shall mean all applicable federal, state
and local Laws, ordinances, rules and regulations, and all duly promulgated
orders and other duly authorized actions of any Governmental Authority having
jurisdiction over a Party, its facilities and/or the services it provides.
"Approved Uses" shall have the meaning given in Section 10.14(a)(ii).
"Arbitration" shall have the meaning given in Section 6.2.
"Arbitration Notice" shall have the meaning given in Section 6.2(b).
"Arbitration Rules" shall have the meaning given in Section 6.2(a).
"ATSI" shall have the meaning given in the preamble.
"Business Day" shall mean any day other than Saturday, Sunday, or other day
on which banks are authorized or required to be closed in New York, New York.
"Cause" shall mean (i) Gross Negligence that causes, or is reasonably
likely in the future to cause, a Material Adverse Effect, (ii) Willful
Misconduct that causes, or is reasonably likely in the future to cause, a
Material Adverse Effect or (iii) in the case of the Initial Member as Managing
Member (A) the occurrence of any two Counted Years during any five calendar year
period, or (B) the failure of NGUSA to comply in any material respect with any
of its obligations set forth in Article III or Section 10.1 of the Master
Agreement.
"Claimant Party" shall have the meaning given in Section 6.2(b).
"Claims" shall have the meaning given in Section 6.2(a).
"Collection Account" shall have the meaning given in Section 3.3.4(a).
"Commission" or "FERC" shall mean the Federal Energy Regulatory Commission
or any successor agency.
"Company Payments" shall have the meaning given in Section 3.4.1(b).
"Company" shall mean GridAmerica LLC and any wholly-owned subsidiaries
created for the purpose of satisfying state domestication requirements.
"Confidential Information" shall mean all confidential or trade secret
information of a Disclosing Party provided to a Recipient pursuant to or in
connection with any Transaction
3
Agreement, including business information; strategies; methods; technical
information; pricing techniques and strategies; customer information; investor
information; price curves; positions, plans and strategies for expansion or
acquisitions, budgets, customer lists, studies of information and data,
electronic databases, computer programs, bids or proposals, organizational
structure, compensation of personnel, and new product information; provided,
however, "Confidential Information" shall not include information that (i) was
already known by (as established by dated documentation) a Recipient at the time
of the receipt of such information by such Recipient from the Disclosing Party,
(ii) is in, or subsequently enters, the public domain other than as a result of
a disclosure by the Recipient in breach of an obligation of confidence, (iii) is
received by the Recipient from a third party if such third party was not known
to be subject to any confidentiality obligation, (iv) is independently developed
by a Person without access to the Confidential Information provided by the
Disclosing Party, (v) was or is furnished by a Disclosing Party to another
Person without written confidentiality restrictions or (vi) is approved for
release by written authorization of the Disclosing Party.
"Consent" shall mean any authorization, consent, opinion, order, approval,
license, franchise, ruling, permit, tariff, rate, certification, exemption,
filing or registration from, by, or with any Governmental Authority, any Person
or any governing body of any Person.
"Counted Year" shall mean (i) any calendar year in which the Managing
Member would have had liability under Section 11.8(e)(i) of the LLC Agreement
but for the application of the limitation contained in clause (ii) of the
proviso to such Section 11.8(e)(i) or (ii) any calendar year that is an
Operation Agreement Counted Year; provided, however, that there may be only one
Counted Year in any calendar year.
"Disclosing Party" shall have the meaning given in Section 10.14.
"Dispute Parties" shall have the meaning given in Section 6.2(b).
"Early Termination Event" shall have the meaning given in the LLC
Agreement.
"Effective Date" shall mean October 31, 2002.
"Emergency" shall mean an event or situation which poses an imminent threat
of material damage to property or injury (including death) to persons, or is
imminently likely to cause a material adverse effect on the security of the
Transmission System or the electrical or transmission systems of any other
Person interconnected to the Transmission System.
"Entity" shall mean a corporation, limited liability company, partnership,
limited partnership, trust, firm, association, or other organization which has a
legal existence under the Laws of its jurisdiction of formation which is
separate and apart from its owner or owners and any Governmental Authority.
"Fair Market Value" shall have the meaning given in the Master Agreement.
"FERC Approving Order" shall have the meaning given in the recitals hereof.
"Force Majeure" shall have the meaning given in the MISO OATT.
4
"Functional Control" shall mean the exercise by the Company of control over
the operation of the Transmission System and performance of all of the
activities contemplated by Order 2000. Notwithstanding anything to the contrary
in this Agreement, Functional Control shall include all activities now or
hereafter required under Applicable Laws and Regulations to be performed by
RTOs.
"Generator" shall mean an Entity that owns or controls and operates an
electric power generation facility which produces electrical energy.
"Good Business Practice" shall mean (i) the Company's exercise of
Functional Control over the Transferred Facilities, except as ceded to the
Midwest ISO under the MISO ITC Agreement, in accordance with Good Utility
Practice and (ii) the Company's fulfillment in a commercially reasonable manner
and, where applicable, in accordance with Good Utility Practice, of its
obligations hereunder and under the other Transaction Agreements, all Applicable
Laws and Regulations and all other agreements to which the Company is a party.
"Good Business Practice Breach" shall have the meaning given in Section
3.4.1(a).
"Good Utility Practice" shall have the meaning given in the MISO OATT.
"Governmental Authority" shall mean a federal, state, local or foreign
governmental authority; a state, province, commonwealth, territory or district
thereof; a county or parish; a city, town, township, village or other
municipality; a district, ward or other subdivision of any of the foregoing; any
executive, legislative or other governing body of any of the foregoing; any
agency, authority, board, department, system, service, office, commission,
committee, council or other administrative body of any of the foregoing; any
court or other judicial body and any officer, official or other representative
of any of the foregoing.
"GridAmerica HoldCo" shall have the meaning given in the Master Agreement.
"GridAmerica ITC" shall mean the ITC created by the Transmission Owners,
the Company and NGUSA pursuant to the Master Agreement, the LLC Agreement and
this Agreement.
"Gross Negligence" shall mean the gross negligence of (i) the Company in
the performance of its duties or obligations under this Agreement other than in
its capacity as an owner of facilities that comprise part of the Transmission
System or (ii) any Affiliate of the Company that provides services to or for the
benefit of the Company in the performance of those services, other than any
Affiliate which owns facilities that are part of the Transmission System in its
capacity as such.
"Indemnified Owners" shall have the meaning given in Section 4.2.4(a).
"Indemnified Party" shall have the meaning given in Section 4.2.5(a).
"Indemnifying Owner" shall have the meaning given in Section 4.2.4(a).
"Indemnity Cap" shall have the meaning given in Section 4.2.4(c).
5
"Indemnifying Party" shall have the meaning given in Section 4.2.5(a).
"Independent Transmission Company" or "ITC" shall mean an independent
transmission company approved pursuant to Commission order or regulation.
"Initial Management Fee" shall have the meaning given on the LLC Agreement.
"Initial Member" shall have the meaning given in the LLC Agreement.
"Initial Public Offering" shall have the meaning given in the LLC
Agreement.
"Initial Term" shall mean the period commencing on the Effective Date and
ending on the fifth anniversary of the Transmission Service Date.
"Interconnection Agreement" shall mean an agreement between the Company and
either (i) a Generator governing the terms and conditions of the interconnection
of a generation facility to the Transmission System or (ii) a local distribution
entity governing the terms and conditions of the interconnection of distribution
facilities to the Transmission System.
"Interconnection Customer" shall mean a Generator or local distribution
entity which has entered into an Interconnection Agreement.
"Interconnection Procedures" shall mean those procedures and form of
agreement governing the interconnection of the facilities of a Generator or a
local distribution entity with the Transferred Facilities which are established
by the Company and effective pursuant to Applicable Laws and Regulations or,
prior to such effectiveness, the MISO OATT and the interconnection protocols of
the Midwest ISO, as each may be amended, modified or otherwise supplemented from
time to time.
"Interconnection Service" shall, with respect to a Generator, have the
meaning given in the MISO OATT, and, with respect to a local distribution
entity, have the meaning given in the Interconnection Agreement between the
Company and such local distribution entity.
"ITC Order" shall mean the order issued by the Commission authorizing the
Company to operate as an ITC within the Midwest ISO pursuant to the terms of the
MISO ITC Agreement and any other order of the Commission pertaining to the
Company's rights or responsibilities with respect to the Transferred Facilities.
"Law" shall mean any applicable constitutional provision, statute, act,
code (including the United States Internal Revenue Code of 1986, as amended from
time to time), law, regulation, rule, ordinance, order, decree, ruling,
proclamation, resolution, judgment, decision, declaration, or interpretive or
advisory opinion of a Governmental Authority.
"Liability Cap Amount" shall mean, in any calendar year, an amount equal to
the Initial Management Fee for such calendar year.
6
"LLC Agreement" shall mean the Amended and Restated Limited Liability
Company Agreement of the Company dated as of February 14, 2003, as the same may
be amended, modified, or otherwise supplemented and in effect from time to time.
"Lockbox Account" shall have the meaning given in Section 3.3.4(a).
"Lockbox Bank" shall have the meaning given in Section 3.3.4(a).
"Lockbox Subaccount" shall have the meaning given in Section 3.3.4(a)(ii).
"Losses" shall mean any and all damages, losses, claims, demands, suits,
recoveries, costs, expenses, liabilities to third parties, reasonable attorneys'
fees, and penalties or other sanctions imposed by Governmental Authorities.
"Majority of Indemnifying Transmission Owners" shall have the meaning given
in Section 4.2.5(b).
"Management Fee" shall have the meaning given in the LLC Agreement.
"Managing Member" shall mean the managing member of the Company as
designated in accordance with Section 6.1 of the LLC Agreement.
"Market Participant" shall mean a Person that is a "Market Participant"
within the meaning of Order 2000, or any subsequent rule, regulation or order of
the Commission establishing the requirements of independence for a Person
managing an ITC exercising the functions and responsibilities that the Company
will exercise under the MISO ITC Agreement.
"Master Agreement" shall mean the Amended and Restated Master Agreement
dated as of February 14, 2003 among the Company, NGUSA and each Transmission
Owner or its applicable Affiliate as the same may be amended, modified or
otherwise supplemented and in effect from time to time.
"Material Adverse Effect" means an effect that is, or is reasonably likely
to be, materially adverse to the business, assets, condition (financial or
otherwise) or operations of the Transmission System taken as a whole.
"Member" shall mean any Person who is a member of the Company, including
the Managing Member.
"Midwest ISO" shall mean the Midwest Independent Transmission System
Operator, Inc.
"MISO ITC Agreement" shall mean the Amended and Restated Appendix I ITC
Agreement by and between the Midwest ISO and the Company dated as of February
14, 2003, as the same may be amended, modified or otherwise supplemented and in
effect from time to time.
"MISO OATT" shall mean the Open Access Transmission Tariff of the Midwest
Independent Transmission System Operator, Inc. on file with the Commission, as
it may be amended, modified or otherwise supplemented and in effect from time to
time.
7
"NERC" shall mean the North American Reliability Council, applicable
regional electric reliability councils, or successor organizations.
"Net Plant" or "net plant" shall mean, as of the date of determination
thereof and with respect to any Transmission Facilities, the net book value of
such Transmission Facilities as computed using the information shown in the then
most recent FERC Form 1 filed with the Commission with respect to such
Transmission Facilities. For the avoidance of doubt, for any and all purposes of
this Agreement and the other Transaction Agreements, (i) "Net Plant" shall be
calculated, and if required adjusted, annually on each anniversary of the
Effective Date and (ii) the calculation made and FERC Form 1 information used
shall be the difference between (A) the information on page 207, Electric Plant
in Service (Account 101, 102, 103 and 106), line 53, Total Transmission Plant,
Column G, less (B) the information on page 219, Accumulated Provision for
Depreciation of Electric Utility Plant (Account 108), Section B. Balances at End
of Year According to Functional Classification, line 23, Transmission, Column C;
provided, however, that if FERC Form 1 is modified or changed such that the
foregoing designations no longer apply, the information used shall be that
information in the modified or changed form that provides, as nearly as
practicable, the same substantive result as the foregoing.
"Network Upgrades" shall have the meaning given in the MISO OATT.
"NGUSA" shall mean National Grid USA.
"NIPSCO" shall have the meaning given in the preamble.
"Non-Market Participant" shall mean a Person that is not a Market
Participant.
"Non-transferred Facilities" shall mean, with respect to any Transmission
Owner, such Transmission Owner's transmission facilities and distribution
facilities (i) which are not Transferred Facilities, but which are necessary for
the provision of Transmission Service or Wholesale Distribution Service to
Eligible Customers pursuant to the MISO OATT and which may be subject to an
agency agreement; and that are disclosed to the Company prior to the
Transmission Service Date or (ii) as a Transmission Owner may subsequently
include as "Non-transferred Facilities" for purposes of this Agreement.
"Notice of Removal Dispute" shall have the meaning given in Section 6.3.2.
"Operation Agreement Counted Year" shall mean a calendar year with respect
to which either (i) any Transmission Owner shall have any indemnity obligation
to the Company pursuant to Section 4.2.4(c) with respect to any Good Business
Practice Breach or (ii) any Transmission Owner would have had a claim for
indemnification against the Company pursuant to Section 3.4.1(a) with respect to
any claim occurring in such year and involving any Good Business Practice Breach
but for the fact that the amount of Losses suffered or incurred by such
Transmission Owner with respect to such claim plus the Company Payments in
respect of Losses occurring in such year exceeded the Liability Cap Amount for
such year.
"Operational Failure" shall mean in any calendar year (a) the failure of
the Company to perform the functions it is permitted to perform under the MISO
ITC Agreement with respect to the delivery of more than (i) 0.01% of the total
megawatt hours of Transmission Transactions
8
within the Transmission System or (ii) 0.4% of the total megawatt hours of
approved Transmission Transactions for a particular contract path within the
Transmission System or (b) any damage to facilities that comprise part of any
Transmission Owner's Transferred Facilities caused solely by the approval by the
Company to the extent permitted under the MISO ITC Agreement of a volume of
Transmission Transactions that exceed the capacity of the affected facilities;
provided, however, that failures caused by (i) Force Majeure occurrences, (ii)
the failure of a Transmission Owner to follow Good Utility Practice or (iii)
circumstances arising on an interconnected transmission system shall not be
considered in determining whether an Operational Failure has occurred.
"Order 2000" shall mean the Commission's order identified as Regional
Transmission Organizations, Docket No. RM99-2-000, 89 FERC P. 61,285 (1999), all
subsequent orders of the Commission in such docket, and all other orders of the
Commission pertaining to the rights and obligations of an RTO.
"Overpaid Party" shall have the meaning given in Section 3.3.4(c).
"Overpayment" shall have the meaning given in Section 3.3.4(c).
"Panel" shall have the meaning given in Section 6.2(d).
"Party" shall have the meaning given in the preamble.
"Pass-Through Basis" shall mean that the obligation of a Party making a
payment to another Party under this Agreement shall be only to pay that amount
which such Party receives from a third party in respect of such payment
obligation to such Person.
"Payment Event" shall have the meaning given in Section 4.2.4(c).
"Percentage Interests" shall have the meaning given in the LLC Agreement.
"Person" shall mean any natural person or Entity.
"Recipient" shall have the meaning given in Section 10.14.
"Regional Transmission Organization" or "RTO" shall have the meaning given
in 18 C.F.R ss. 35.34(b)(1) of the Commission's regulations or such successor
definition approved by the Commission.
"Related Proceeding" shall have the meaning given in Section 6.2(c).
"Removal Arbitration" shall have the meaning given in Section 6.3.
"Removal Claim" shall have the meaning given in Section 6.3.
"Removal Claimant" shall have the meaning given in Section 6.3.2.
"Removal Dispute Parties" shall have the meaning given in Section 6.3.2.
9
"Removal Notice " shall have the meaning given in Section 6.3.2.
"Removal Respondent Party" shall have the meaning given in Section 6.3.2.
"Representatives" shall have the meaning given in Section 10.14(a).
"Respondent Party" shall have the meaning given in Section 6.2(b).
"SEOs" shall have the meaning given in Section 6.1.
"Super Majority of Transmission Owners" shall mean (i) prior to the date on
which the Company first issues Units in exchange for Transmission Facilities,
two-thirds or more of the Transmission Owners and (ii) thereafter, one or more
owners of transmission facilities who, among them, own (through actual or deemed
ownership as provided below) Transmission Facilities that are subject to the
Functional Control of the Company pursuant to this Agreement or are owned by the
Company with a Net Plant greater than 66.67% of the aggregate Net Plant of all
Transmission Facilities subject to such Functional Control of the Company
pursuant to this Agreement or are owned by the Company. For purposes of the
above vote, the "owner of transmission facilities" means (i) in the case of
Transmission Facilities subject to the Company's Functional Control pursuant to
this Agreement, the Person that actually owns such Transmission Facilities and
(ii) in the case of Transmission Facilities actually owned by the Company, the
Members in accordance with their respective Percentage Interests (as defined in
the LLC Agreement). In the event that an Initial Public Offering shall have
occurred, the independent board members of GridAmerica HoldCo shall vote the
deemed ownership interest of GridAmerica HoldCo.
"Taxes" shall mean all taxes, charges, fees, levies, penalties, and all
other assessments imposed by any Governmental Authority, including, but not
limited to, income, excise, property sales, transfer, franchise, payroll,
withholding, social security, or other taxes, including any interest, penalties,
or additional charges attributable thereto.
"Tax Return" shall mean any return, report, information return or other
document (including any related or supporting information) required to be filed
with or supplied to any Governmental Authority with respect to Taxes.
"Third Party Claims" shall have the meaning given in Section 4.2.4(c).
"Third Party Recipient" shall have the meaning given in Section 10.14(c).
"Transaction Agreements" shall have the meaning given in the LLC Agreement.
"Transferred Facilities" shall mean, with respect to any Transmission
Owner, the Transmission Facilities owned by such Transmission Owner, for which
Functional Control has been transferred to the Company pursuant to this
Agreement and in compliance with Applicable Laws and Regulations, and which are
described on such Transmission Owner's subappendix to Appendix A, as Appendix A
may be amended, modified or otherwise supplemented from time to time in
compliance with Applicable Laws and Regulations.
10
"Transmission Business" shall mean, with respect to a Party, its business,
assets, and activities relating to the transmission of electricity through
Transferred Facilities.
"Transmission Customer" shall have the meaning given in the MISO OATT.
"Transmission Facilities" shall mean facilities used for the transmission
of electric power and energy of the kind subject to the jurisdiction of the
Commission.
"Transmission Owner" shall mean a Person who is a Party to this Agreement
and transfers Functional Control of Transmission Facilities to the Company. The
initial Transmission Owners are Ameren, ATSI, NIPSCO.
"Transmission Service" shall mean "Transmission Service" as defined in the
MISO OATT and "Network Integration Transmission Service" as defined in the MISO
OATT but shall not include Interconnection Service.
"Transmission Service Date" shall have the meaning given in the Master
Agreement.
"Transmission System" shall mean Transferred Facilities and Non-transferred
Facilities taken as a whole.
"Transmission Transaction" shall mean Transmission Service scheduled by the
Company to the extent permitted by the MISO ITC Agreement.
"Transmission User" shall have the meaning given to the term "Users" in the
MISO OATT.
"Underpaid Party" shall have the meaning given in Section 3.3.4(c).
"Underpayment" shall have the meaning given in Section 3.3.4(c).
"Willful Misconduct" shall mean (i) an act or omission by (A) the Company
in the performance of its duties or obligations under this Agreement or (B) any
Affiliate thereof that provides services to or for the benefit of the Company in
the performance of such services, in either case, that is in disregard of a
known, reasonably knowable or reasonably obvious risk that harm to the Company,
any Transmission Owner, or any of the facilities included in the Transmission
System is likely to follow or (ii) a deliberate breach of this Agreement by (A)
the Company in respect of any of its duties or obligations hereunder or (B) any
Affiliate thereof that provides services to or for the benefit of the Company,
in either case, in the performance of such services; provided, however, that an
act by the Company in its capacity as an owner of facilities that comprise part
of the Transmission System or any act or omission of an Affiliate which owns
facilities that are part of the Transmission System in its capacity as such
shall not be considered Willful Misconduct.
1.2 Rules of Construction. The following provisions shall be applied
wherever appropriate herein:
11
(i) "herein," "hereby," "hereunder," "hereof," "hereto" and other
equivalent words shall refer to this Agreement as an entirety and not
solely to the particular portion of this Agreement in which any such
word is used;
(ii) "including" means "including without limitation" and is a term of
illustration and not of limitation;
(iii)all definitions set forth herein shall be deemed applicable whether
the words defined are used herein in the singular or the plural;
(iv) unless otherwise expressly provided, any term defined in this Article
I by reference to any other document shall be deemed to be amended
herein to the extent that such term is subsequently amended in such
document;
(v) wherever used herein, any pronoun or pronouns shall be deemed to
include both the singular and plural and to cover all genders;
(vi) neither this Agreement nor any other agreement, document or instrument
referred to herein or executed and delivered in connection herewith
shall be construed against any Person as the principal draftsperson
hereof or thereof;
(vii)the Section headings appearing in this Agreement are inserted only as
a matter of convenience and in no way define, limit, construe or
describe the scope or extent of such section, or in any way affect
this Agreement;
(viii) any references herein to a particular Section, Article or Appendix
means a Section or Article of, or an Appendix to, this Agreement
unless another agreement is specified; and
(ix) the Appendices attached hereto are incorporated herein by reference
and shall be considered part of this Agreement.
ARTICLE II
AUTHORIZATIONS BY THE TRANSMISSION OWNERS
2.1 Functional Control Authorization. Each Transmission Owner hereby
agrees that on and as of the Transmission Service Date the Company shall, and
the Company hereby agrees to, (i) assume Functional Control over such
Transmission Owner's Transferred Facilities, and (ii) cede to the Midwest ISO
those functions set forth in the MISO ITC Agreement to be ceded to the Midwest
ISO, in each case for the Initial Term and any Additional Term. The Company
shall not exercise direct physical control over the Transferred Facilities
except as set forth in this Agreement or in a separate agreement with a
Transmission Owner. Notwithstanding the foregoing, the Parties shall not have
any rights, duties, or obligations under this Agreement until the Transmission
Service Date has occurred, except with respect to the Parties' respective
rights, duties, and obligations under Articles V, VI, VII, IX and X hereof, and
so much of Article I hereof as is applicable. If a Person becomes a Transmission
Owner pursuant to Section 3.4.3, the Company shall assume Functional Control
over the Transferred Facilities of such Transmission Owner on the later of (i)
the date set forth in the amendment hereto entered into
12
between the Company and such Transmission Owner pursuant to Section 3.4.3 and
(ii) the Transmission Service Date.
2.2 Non-transferred Facilities. Each Transmission Owner hereby appoints
the Company as its agent (and the Company hereby agrees to serve as such agent)
to exercise Functional Control over Non-transferred Facilities to the extent
necessary for the Company to perform its obligations under this Agreement and
the MISO ITC Agreement. Upon the Company's request, each Transmission Owner
further agrees to provide the Company with all information relating to its
Non-transferred Facilities that is necessary or appropriate for the Company to
perform its obligations under this Agreement and the functions set forth in the
MISO ITC Agreement. The agency authorization set forth in this Section 2.2 shall
not be construed as authorizing the Company to enter into any agreement that
creates any liability, costs, or other obligation to be borne by any
Transmission Owner that is not expressly set forth in the MISO OATT or to enter
into any agreement providing for Interconnection Service with regard to
Non-transferred Facilities.
2.3 Interconnection Agreements. Each Transmission Owner acknowledges and
agrees that the Company is obligated under the MISO ITC Agreement to be
responsible for Interconnection Service on the Transferred Facilities. Whether
or not the Transmission Owner also is a party to any such Interconnection
Agreement, each Transmission Owner authorizes the Company to enter into
Interconnection Agreements and related agreements involving its Transferred
Facilities (but not its Non-transferred Facilities) in accordance with the MISO
ITC Agreement and the Interconnection Procedures. Each Transmission Owner shall,
upon the reasonable request of the Company, cooperate in the performance of
activities necessary to implement requests for interconnection to its
Transferred Facilities and necessary to implement the terms of Interconnection
Agreements and other agreements related thereto. To the extent that such
Interconnection Agreements require the Company to design, procure, construct,
install, and/or maintain upgrades to a Transmission Owner's Transferred
Facilities or interconnection facilities between the point of interconnection
and a Transmission Owner's Transferred Facilities, such Transmission Owner shall
perform such activities (including providing for the design, procurement and
construction of the necessary facilities) to the extent directed by, and under
the supervision of, the Company. Such Transmission Owner shall timely provide to
the Company an estimate of the costs such Transmission Owner expects to incur in
the performance of such activities. To the maximum extent permitted under the
MISO ITC Agreement and the Interconnection Procedures, the Company shall require
an interconnecting Generator or local distribution entity, as the case may be,
to provide funds in advance of construction in amounts sufficient to compensate
the affected Transmission Owner for the amount estimated by the affected
Transmission Owner as the cost to be incurred in connection with such
interconnection facilities and any associated interconnection system upgrades
and the Company shall remit such funds to the Transmission Owner on a
Pass-Through Basis. If the Company is not permitted to require an
interconnecting Generator or local distribution entity to provide funding in
advance, the Company shall, to the extent permitted by the MISO ITC Agreement
and the Interconnection Procedures, assist the Transmission Owners to recover
their verifiable costs of performing interconnection activities. In no event
shall the Company be responsible for payments to the Transmission Owner other
than on a Pass-Through Basis except as follows: (i) to the extent that the
Company fails to require advance funds and/or credit support in an amount no
less than the amount estimated by the Transmission Owner or as otherwise
determined in an appropriate
13
proceeding as the cost to be incurred in connection with such interconnection
facilities and any associated interconnection system upgrades, provided that the
Company is permitted to require such amount of advance funds and/or credit
support under the MISO ITC Agreement, the Interconnection Procedures and
Applicable Laws and Regulations or (ii) if the Company initiates a proceeding
(except as is necessary or appropriate to comply with a Commission requirement
or Commission policy) to reduce the credit support requirements with respect to
interconnection customers generally or that customer in particular from the
levels permitted under the Interconnection Procedures without the written
consent of the Transmission Owners and such credit approval requirements are
reduced as a result of such proceeding. Any interconnection system upgrades
and/or interconnection facilities constructed or installed on the Transmission
System side of the point of interconnection and such other facilities as may be
identified in regard to the interconnection shall become part of such
Transmission Owner's Transferred Facilities subject to this Agreement. To the
extent the Company possesses property rights in any such interconnection
facilities, the Company shall execute appropriate and customary bills of sale,
easements, deeds, assignments, and other documents as may be necessary from time
to time to convey to such Transmission Owner any property interest that the
Company may have in such assets free and clear of all liens and encumbrances
created by the Company.
2.4 Network Upgrades. Each Transmission Owner acknowledges and agrees that
the Company is obligated under the MISO ITC Agreement to use commercially
reasonable efforts to construct Transmission Facilities as directed by the
Midwest ISO in order to enable the Midwest ISO to provide Transmission Service
pursuant to the MISO OATT. Each Transmission Owner authorizes the Company to
enter into agreements with Transmission Customers involving Network Upgrades to
its Transferred Facilities which are necessary or desirable to enable the
Company to perform its obligations under this Agreement and the MISO ITC
Agreement, provided that all such agreements shall be entered into in accordance
with the MISO OATT. Each Transmission Owner shall, upon the reasonable request
of the Company, cooperate in the performance of activities necessary to fulfill
the terms of any agreement involving such Network Upgrades and any agreements
related thereto. To the extent that such agreements require the Company to
design, procure, construct, install, and/or maintain upgrades or additions to a
Transmission Owner's Transferred Facilities, such Transmission Owner shall
perform such activities (including providing for the design, procurement and
construction of the necessary facilities) to the extent directed by, and under
the supervision of, the Company. Such Transmission Owner shall timely provide to
the Company an estimate of the costs such Transmission Owner expects to incur in
the performance of such activities. To the maximum extent permitted under the
MISO ITC Agreement and the MISO OATT, the Company shall require a Transmission
Customer to provide funds in advance of construction in amounts sufficient to
compensate the affected Transmission Owner for the amount estimated by the
affected Transmission Owner as the cost to be incurred in connection with such
Network Upgrades and shall remit such funds to the affected Transmission Owner
or Transmission Owners on a Pass-Through Basis. If the Company is not permitted
to require a Transmission Customer to provide funding in advance, the Company
shall, to the extent permitted by the MISO ITC Agreement and the MISO OATT,
assist each affected Transmission Owner to recover its verifiable costs of
performing the Network Upgrade activities. In no event shall the Company be
responsible for payments to the Transmission Owner other than on a Pass-Through
Basis, except as follows: (i) to the extent that the Company fails to require
advance funds and/or credit support in an amount no less than the amount
estimated by the Transmission Owner or as
14
otherwise determined in an appropriate proceeding as the cost to be incurred in
connection with such Network Upgrades, provided that the Company is permitted to
require such amount of advance funds and/or credit support under the MISO ITC
Agreement, the MISO OATT and Applicable Laws and Regulations or (ii) if the
Company initiates a proceeding (except as is necessary or appropriate to comply
with the MISO ITC Agreement, the MISO OATT or a Commission requirement or
Commission policy) to reduce the credit support requirements with respect to
Transmission Customers generally or that Transmission Customer in particular
from the levels permitted under the MISO ITC Agreement and the MISO OATT without
the written consent of the Transmission Owners and such credit approval
requirements are reduced as a result of such proceeding. Any Network Upgrades
constructed or installed on the Transmission System and such other facilities as
may be identified shall become part of the applicable Transmission Owner's
Transferred Facilities subject to this Agreement. To the extent the Company
possesses property rights in any such Network Upgrades, the Company shall
execute appropriate and customary bills of sale, easements, deeds, assignments,
and other documents as may be necessary from time to time to convey to such
Transmission Owner any property interest that the Company may have in such asset
free and clear of all liens and encumbrances created by the Company.
2.5 Revenue Collection and Distribution. Prior to the Transmission Service
Date the Transmission Owners shall provide to the Company written instructions
specifying the manner in which all revenues received for the provision of
Transmission Services and other services provided pursuant to the MISO OATT
shall be distributed among the Transmission Owners, and the Company shall comply
with such instructions unless and until such instructions are revised by the
Transmission Owners; provided, however, that all revenues comprising incentive
revenues, whether received by the Transmission Owners directly or indirectly
through the Company, shall be determined and allocated to the Company and to
each Transmission Owner as set forth in Section 4.3.2. To the extent that the
proper distribution of revenues requires a Transmission Owner to provide
information and/or instructions to the Company, the Company shall be entitled to
rely upon such information and/or instructions provided by the Transmission
Owner and shall not have any obligation to independently verify such
information.
2.6 The Company as Owner of Transmission Facilities; Non-Discrimination.
2.6.1The Company as Owner of Transmission Facilities. If the Company
acquires any facilities included in the Transmission System, it
shall operate such facilities as part of an integrated system
together with the other facilities included in the Transmission
System, but, except as specifically provided in this Agreement,
shall not be deemed to be a Transmission Owner pursuant to this
Agreement; provided, however, that if an Affiliate of the Company
acquires facilities that comprise part of the Transmission
System, such Affiliate shall execute an assumption agreement
assuming the rights, duties and obligations of the selling
Transmission Owner hereunder with respect to such facilities and
shall be treated as a Transmission Owner for all purposes under
this Agreement. Such Affiliate shall assume the same rights,
duties, and obligations under this Agreement as the Transmission
Owner from whom such Affiliate purchased the facilities.
15
2.6.2Nondiscrimination. The Company shall perform its obligations
under this Agreement in a manner that does not discriminate in
favor of or against the Transferred Facilities of any
Transmission Owner or of the Company or its Affiliates, and in
furtherance thereof, shall not engage in activities intended to
enhance the revenue of the Company or any Transmission Owner
relative to another Transmission Owner or the Company. The
Company shall treat the Transmission Facilities that are
Transferred Facilities but are not owned by the Company and the
Transmission Facilities the Company owns as a single integrated
business with respect to operations, rate design and other
matters affecting the financial return on such assets to their
owners and, in that connection, shall not give undue preference
to any particular Transmission Facilities. The Company's
compliance with this Section 2.6.2 shall be determined taking
into consideration the totality of the circumstances, and it
shall have an absolute defense to any claim of violation of this
Section that the action or inaction complained of was within the
authority ceded to the Midwest ISO or undertaken or not
undertaken at the direction of the Midwest ISO pursuant to the
MISO ITC Agreement. The fact that a Transmission Owner is
disadvantaged vis-a-vis any other Transmission Owner or the
Company shall not in itself constitute a violation of the
Company's obligations under this Section. A Transmission Owner
shall not be required to provide evidence of the Company's
express intent to disadvantage such Transmission Owner in order
to demonstrate that the Company has violated this Section. The
Parties agree to submit all disputes relating to this
anti-discrimination provision to the Commission for resolution;
provided, however, that a Party may institute an Arbitration if
the Commission disclaims jurisdiction over a dispute.
ARTICLE III
RIGHTS, POWERS, AND OBLIGATIONS OF THE GridAmerica ITC
3.1 Operation And Planning.
3.1.1 Standards.
(a) The Company shall participate in the Midwest ISO to the
extent set forth in the MISO ITC Agreement. The Company
shall perform its obligations under this Agreement, in
accordance with Good Business Practice. Notwithstanding the
foregoing, in recognition of the fact that the Company has
ceded certain functions with respect to the Transmission
Facilities to the Midwest ISO pursuant to the MISO ITC
Agreement, the Company shall not be deemed to have violated
Good Business Practice by entering into the MISO ITC
Agreement, any amendments or modifications thereto, or any
similar agreements in which one or more Regional
Transmission Organizations assumes responsibility for any
part of Functional Control of any Transmission Facilities or
the operation thereof, and
16
it shall be absolute defense to any claim that the Company
did not adhere to Good Business Practices that (i) the
Midwest ISO (or another RTO) had responsibility for the
performance of the function in question under the MISO ITC
Agreement or any similar agreement or under Applicable Laws
and Regulations or (ii) that the Company was acting under
instruction of the Midwest ISO (or another RTO) given
pursuant to the MISO ITC Agreement or any similar agreement,
provided that the Company shall have exercised Good Utility
Practice in its actions implementing such instructions.
(b) The Company shall adhere to all applicable reliability
guidelines, policies, standards, rules, regulations, orders,
license requirements and all other requirements of the
Midwest ISO, NERC or the regional reliability council of
NERC in which Transferred Facilities are located, each
Transmission Owner's specific reliability requirements and
operating guidelines applicable on the Transmission Service
Date and as thereafter modified by the Transmission Owner
with the agreement of the Company to the extent permitted
under the MISO ITC Agreement, and all Applicable Laws and
Regulations. Disputes regarding a Transmission Owner's
specific reliability requirements and operating guidelines
shall be submitted to the Midwest ISO for resolution.
Pending resolution of such disputes, to the extent permitted
under the MISO ITC Agreement, a Transmission Owner's
specific reliability requirements and operating guidelines
applicable on the Transmission Service Date (or thereafter
modified by the Transmission Owner with the consent of the
Company) shall be used by the Company with respect to the
Transmission Owner's facilities until the issue is resolved.
3.1.2Reliability. The Company hereby assumes and shall have
responsibility for the reliability of the Transferred Facilities
to the extent permitted under the MISO ITC Agreement, subject to
Applicable Laws and Regulations.
3.1.3Planning and Operating Activities. The Company shall adopt
detailed procedures for planning and operating the Transferred
Facilities, including procedures for developing plans for the
expansion and utilization of the Transferred Facilities and the
implementation of the Company's planning and operating
responsibilities under the MISO ITC Agreement. The procedures
adopted by the Company shall become effective as of the
Transmission Service Date for all purposes under this Agreement.
If, as of the Transmission Service Date, more than one
Transmission Owner disagrees with a procedure adopted by the
Company, then those Transmission Owners which so disagree jointly
shall have the right to submit the dispute to an independent
engineer who is a Non-Market Participant and is reasonably
acceptable to the Company; provided,
17
however, that no such disagreement or dispute resolution process
shall delay the occurrence of the Transmission Service Date; and
provided further, that the procedures adopted by the Company
shall remain in effect pending receipt of the recommendation of
the independent engineer. The Company shall adopt and make
effective, prospectively, the procedure recommended by the
independent engineer to the extent such recommended procedure
does not adversely affect the ability of the Company to perform
its obligations under the MISO ITC Agreement or to comply with
Applicable Laws and Regulations. The planning and operating
procedures shall set forth the process by which such procedures
may be amended, modified and supplemented from time to time after
the Transmission Service Date.
3.1.4Performance of Regulatory Obligations. The Company shall comply,
and shall provide such information to each Transmission Owner as
each such Transmission Owner requires to comply, and shall
otherwise assist each such Transmission Owner in complying, with
existing transmission, reporting, operating, filing, and planning
obligations of each such Transmission Owner that are imposed by
Applicable Laws and Regulations and which can no longer be
performed solely by such Transmission Owner following the
Transmission Service Date.
3.2 Other Matters.
3.2.1Pricing. The Company or one or more Transmission Owners may
propose to the Commission such transmission pricing for
Transmission Service provided on the Transmission System to the
extent permitted under Applicable Laws and Regulations.
3.2.2Ancillary Services. The Company may offer Ancillary Services to
the extent permitted by the MISO ITC Agreement, subject to
Applicable Laws and Regulations.
3.3 Responsibilities To The Transmission Owner.
3.3.1Relationship. Except to the extent that (a) a Transmission Owner
has divested some or all of its Transferred Facilities to the
Company or an Affiliate of the Company or (b) the Company and a
Transmission Owner have, by separate agreement, agreed to joint
ownership of certain Transferred Facilities, the Company shall
not by reason of this Agreement, have any ownership interest in
the Transferred Facilities or in any revenues or other monies to
which a Transmission Owner is entitled hereunder.
3.3.2Avoidance of Damage. If the Company undertakes any action or
avoidance of any action in compliance with instructions of the
Midwest ISO issued to the Company pursuant to the Midwest ISO's
functional
18
responsibilities under the MISO ITC Agreement, and a Transmission
Owner reasonably believes that such action or avoidance of action
would cause damage to the Transferred Facilities or any portion
thereof or any property of the Transmission Owner affected by the
Company's action or avoidance of action, such Transmission Owner
shall promptly advise the Company of the expected consequences of
the Company's action or inaction and the Company after receipt of
such notice shall promptly advise the Midwest ISO of such
expected consequences. Notwithstanding the foregoing, any action
or avoidance of action by the Company undertaken in compliance
with an instruction issued to the Company by the Midwest ISO
(after advising the Midwest ISO of the expected consequences) and
in accordance with the exercise of Good Business Practice shall
not constitute a breach of the Company's obligations under this
Agreement.
3.3.3 Duty to Maximize Transmission System Value. The Company shall
use commercially reasonable efforts to maximize the long-term value,
including net revenues, of the Transmission System so long as such
efforts are consistent with its reliability responsibilities, customer
service obligations and other obligations under this Agreement, the
MISO ITC Agreement and Applicable Laws and Regulations.
3.3.4 Lockbox Account.
(a) The Company shall establish promptly after the execution
hereof and shall maintain at all times a lockbox account
(together with any subaccounts) (the "Lockbox Account") with
an Acceptable Credit Bank selected by the Company (the
"Lockbox Bank"). All payments for Transmission Service
received by the Company shall be deposited in the Lockbox
Account to be allocated among the Company and the
Transmission Owners in a manner agreed to by the Parties.
The Company shall:
(i) establish a collection account (the "Collection
Account") which shall be expressly designated as a
custodial account established for the joint benefit of
the Company and each Transmission Owner into which
payments will be made by the Midwest ISO and any other
Person making payments to the Company;
(ii) establish a separate subaccount for each Transmission
Owner and the Company to facilitate the distribution of
funds to which each Transmission Owner and the Company
is entitled on a Pass-Through Basis or as otherwise
agreed
19
to by the Parties (with respect to each
Transmission Owner and the Company, its "Lockbox
Subaccount"); And
(iii)the grant of a security interest to each Transmission
Owner in (a) its Lockbox Subaccount and (b) to the
extent of its interests therein, the Collection Account
and all amounts deposited therein;
(iv) instruct the Lockbox Bank that funds deposited into the
Collection Account may be transferred by the Company
only into the Lockbox Subaccounts referred to in
Section 3.3.4(a)(ii) pursuant to Section 3.3.4(b).
(v) instruct the Lockbox Bank that each Transmission Owner
and the Company shall have the right, without the
consent of any other Person, to withdraw amounts on
deposit in such Transmission Owner's or the Company's
Lockbox Subaccount as and when desired by such
Transmission Owner and/or the Company.
(b) As soon as practical after receipt of collected funds in the
Collection Account, the Company shall cause the Lockbox Bank
to transfer the share of such funds belonging to each of the
Company and the Transmission Owners to its respective
Lockbox Subaccount. The Company and the Transmission Owners
acknowledge and agree that the Lockbox Subaccounts and all
amounts deposited therein are to constitute the sole and
exclusive property of the Transmission Owner or the Company
in whose name such Lockbox Subaccount is opened.
(c) Any Party that acquires actual knowledge that it has
received from the Lockbox Bank funds in excess of those to
which such Party is entitled hereunder (an "Overpayment")
promptly shall provide the Company with written notice of
such overpayment. If within one (1) year of receipt of funds
by a Party from the Lockbox Bank such Party determines that
it has received funds less than those to which such Party is
entitled hereunder (an "Underpayment"), such Party promptly
shall provide the Company with written notice of such
Underpayment. If the Company receives a notice of an
Overpayment or an Underpayment pursuant to this Section
3.3.4(c), the Company immediately shall (i) notify any other
Party that may be affected thereby and (ii) review the books
and records of the Company relating to the payment(s) in
question to ascertain whether an Underpayment and/or
Overpayment occurred. Any disputes regarding the existence
of an Overpayment or Underpayment and corrective actions to
be taken shall be resolved in accordance with Article VI. If
an Overpaid Party seeks
20
to terminate this Agreement for any reason, then such
Overpaid Party, shall, as a condition precedent to its
termination of this Agreement, pay to the Company, as agent
for and for remittance to each Underpaid Party the amount of
any Overpayment such Overpaid Party has received.
3.3.5The Company shall pay any fees of the Lockbox Bank and shall
cooperate with each Transmission Owner in effecting such
Transmission Owner's rights under this Section 3.3.5. The Company
shall also take such further actions, as such Transmission Owner
deems reasonably appropriate or advisable to effectuate the
purposes of this Section 3.3.5, to enable any Party to exercise
and enforce its rights and remedies under this Section 3.3.5, and
to perfect, preserve or protect the interest of such Party in the
Lockbox Account contemplated by this Section 3.3.5.
3.4 Additional Obligations.
3.4.1 Indemnification by the Company.
(a) The Company shall indemnify each Transmission Owner from all
Losses suffered or incurred by such Transmission Owner and
arising out of or caused by any failure of the Company to
meet its obligation to use Good Business Practices in
connection with the performance of the Company's duties and
obligations under this Agreement (any such failure being
hereinafter referred to as a "Good Business Practice
Breach"); provided, however, that, except as hereinafter
provided, the Company shall not be liable for Losses from
any claim or series of related claims involving any Good
Business Practice Breach (i) unless such Losses exceed
$150,000 in the aggregate, and then only to the extent that
such Losses exceed $150,000 or (ii) if and to the extent
that such Losses arising from any claim or series of related
claims occurring in any calendar year plus all Company
Payments with respect to all other claims occurring in such
calendar year are greater than the Liability Cap Amount for
such calendar year. Notwithstanding the foregoing, none of
the limitations on liability contained in this Section
3.4.1(a) shall apply in respect of any Losses arising out of
Gross Negligence or Willful Misconduct (and the Company
shall be fully liable for any breach of any provision of
this Agreement arising out of or caused by Gross Negligence
or Willful Misconduct or breaches by the Company of its
obligations under Sections 10.7 and 10.14). To the extent
that a claim asserted against the Company relates to Losses
suffered by more than one Transmission Owner, then the
Transmission Owner that asserted such claim and such other
Transmission Owners shall share the indemnification payments
made by the Company in respect thereof in proportion to the
Losses suffered by each.
21
(b) The term "Company Payments" means, with respect to any
calendar year, the sum of the following determined as of the
time in question:
(i) the aggregate amount of all indemnification payments
actually made by the Company under Section 3.4.1(a)
with respect to claims occurring in such calendar year
with respect to Good Business Practice Breaches
(excluding payments made out of insurance proceeds);
plus
(ii) the aggregate amount of all Losses actually paid or due
and payable by the Company (excluding payments made out
of insurance proceeds and excluding the application of
any indemnification payments from the Transmission
Owners pursuant to Section 4.2.4(c)) with respect to
Third Party Claims (other than claims by the
Transmission Owners pursuant to Section 3.4.1(a) of
this Agreement) occurring in such calendar year to the
extent such claims involve Good Business Practice
Breaches; plus
(iii)the aggregate amount of all "Managing Member Payments"
referred to in Section 11.8(f)(i) of the LLC Agreement
that are paid by the Managing Member in respect of
claims occurring in such year;
provided, however, that no amount paid by the Company as a
result of Gross Negligence or Willful Misconduct shall
constitute a Company Payment. For purposes of determining
the amount of the Company Payments in respect of any
calendar year, a claim shall be deemed to have occurred in
such calendar year if the facts, circumstances or events
which first gave rise to a Loss occurred during such
calendar year, regardless of when the claim was asserted or
when any particular element of Loss was incurred.
(c) For the avoidance of doubt, the Company shall have no
indemnification obligation under Section 3.4.1(a) with
respect to Losses arising out of any claim occurring in any
calendar year and which arises out of a Good Business
Practice Breach to the extent the amount of such Losses in
respect of such claim plus all Company Payments with respect
to all other claims in such calendar year are greater than
the Liability Cap Amount for such calendar year.
(d) Any Transmission Owner asserting a claim for damages against
the Company shall, promptly after the initiation of such
claim, give notice thereof to the other Transmission Owners
and the Members, which notice must include a reasonably
detailed description of the
22
basis for such claim. The Company and the Transmission
Owners agree that if any Member asserts a claim against the
Managing Member arising out of the same facts and
circumstances that give rise to the claim by the
Transmission Owner or Transmission owners asserting a claim
against the Company pursuant to Section 3.4.1(a), such claim
may, at the written request of such Member received by the
Managing Member within thirty (30) days of the date on which
such Member received notice of the initiation of such claim,
be consolidated with, and determined in the same proceeding
as the claim for indemnity asserted against the Company
pursuant to Section 3.4.1(a).
3.4.2Inspection and Auditing Procedures. The Company hereby grants to
each Transmission Owner and its outside auditors and consultants
such access to the Company's books and records as is necessary to
verify and audit compliance by the Company with the requirements
of this Agreement. Such access shall be at reasonable times and
under reasonable conditions. The Transmission Owners shall use
reasonable efforts to conduct any such audits in concert but
shall not be prohibited from exercising their rights under this
Section 3.4.2 individually. The Company shall also comply with
the accounting and reporting requirements of Governmental
Authorities having jurisdiction over the Company with respect to
the business aspects of its business operations.
3.4.3Agreements with Additional Transmission Owners. The Company may,
from time to time, in its discretion, enter into an amendment to
this Agreement for the purpose of adding as a Party hereto any
Person, including a Person that is an Affiliate of the Company,
that has Transmission Facilities that it proposes to subject to
this Agreement upon a determination by the Company, in its
reasonable discretion, that subjecting such Transmission
Facilities to this Agreement (x) will not result in any
significant detriment to existing Transmission Owners in their
capacity as such and (y) is likely to result in long term net
benefits to the Company; provided, however, that either (i) the
terms of such amendment must not be materially more favorable to
the counterparty thereto than the terms applicable to the other
Transmission Owners contained herein or (ii) the Company must
offer to make any such more favorable terms available to all
Transmission Owners on a non-discriminatory basis; provided,
further, that, so long as it does not significantly adversely
affect any other Transmission Owner, such an amendment to this
Agreement that is with an owner of Transmission Facilities that
is a Non-Market Participant may be made on terms that are
different than those set forth herein. The Company may not
exercise Functional Control over any Transmission Facilities
(other than those it owns) except pursuant to this Agreement.
23
3.4.4Insurance. At all times during the effectiveness of this
Agreement, the Company shall maintain insurance of the types and
in the amounts agreed to by the Company and the Transmission
Owners. If a Transmission Owner requests the Company to obtain
insurance in addition to the types or amount of coverage agreed
to, the Company shall obtain such insurance, provided that such
Transmission Owner shall pay all of the costs thereof. The
insurers or reinsurers and the Company, to the extent that it has
a right of subrogation, shall waive all rights of subrogation
against the Transmission Owners.
3.4.5Coordination with State Securitization Obligations. The Parties
acknowledge that a portion of the revenues payable under the MISO
OATT in respect of Transmission Service provided over a
particular Transmission Owner's Transferred Facilities may be
securitized, pledged, or otherwise subject to superior rights of
third parties ("securitized"). The Company shall cooperate with
such Transmission Owner with respect to such securitization
obligations.
3.5 Information. Subject to the confidentiality provisions set forth in
Section 10.14, the Company shall provide such information to
Transmission Owners as is necessary or appropriate for the
Transmission Owners to perform their obligations under this Agreement.
ARTICLE IV
RIGHTS, POWERS, AND OBLIGATIONS OF
THE TRANSMISSION OWNERS
4.1 Operation and Planning.
4.1.1 Standards.
(a) Each Transmission Owner shall physically operate its
Transferred Facilities in accordance with this Agreement and
the MISO OATT and shall comply with the procedures, manuals,
and directions of the Company issued in compliance with this
Agreement and the MISO ITC Agreement. The Transmission
Owners shall provide the services to be performed
individually by Transmission Owners as set forth on Schedule
5A attached hereto as Appendix D. No Transmission Owner
shall take any action that intentionally interferes with the
performance of any function by the Company other than to the
extent necessary to avoid an Emergency or during an
Emergency. This Section 4.1.1 (a) shall apply to the
Company if the Company owns facilities that comprise part
of the Transmission System.
(b) Each Transmission Owner shall operate its Transferred
Facilities in accordance with Good Utility Practice, and
shall adhere to all applicable reliability guidelines,
policies, standards, rules,
24
regulations, orders, licensing requirements and requirements
of NERC or the regional reliability council of NERC in which
a facility owned by it is located. If a Transmission Owner
believes that a direction given by the Company is in
contravention of the requirements of NERC or a regional
reliability council of NERC, it shall immediately advise the
Company. If a Transmission Owner and the Company disagree as
to whether such direction is in contravention of the
requirements of NERC or a regional reliability council of
NERC, the Company shall submit such dispute to the Midwest
ISO for resolution. No Transmission Owner shall engage in
behavior which manipulates available transfer capability to
the detriment of Transmission Users. The Transmission Owners
shall perform all duties and functions specified for the
Transmission Owners in this Agreement. This Section 4.1.1(b)
shall apply to the Company if the Company or any of its
Affiliates becomes an owner of facilities that comprise part
of the Transmission System.
4.1.2 Transmission Maintenance.
(a) Unless otherwise mutually and expressly agreed to by the
Company and a Transmission Owner, each Transmission Owner
(including the Company if it owns Transmission Facilities
that comprise part of the Transmission System) shall repair,
maintain, and replace its Transferred Facilities consistent
with Good Utility Practice; provided, however, that no
Transmission Owner shall exercise Functional Control over
the Transferred Facilities. Except as may be required to
exercise Functional Control, the Company shall have no
obligation or any right to repair, maintain, or replace a
Transmission Owner's Transferred Facilities or
Non-transferred Facilities.
(b) The Transmission Owner shall obtain the Company's approval
for all planned maintenance of such Transmission Owner's
Transferred Facilities. Each Transmission Owner shall submit
its planned maintenance schedules to the Company. All
proposed planned maintenance schedules shall be evaluated by
the Company on a non-discriminatory basis. The Company will
coordinate with both the operations and planning personnel
of the Transmission Owners for analysis and planning
purposes when a transmission maintenance request is
received. If requested by the Company, a Transmission Owner
will provide to the Company an estimate of the costs
associated with potential changes to an approved maintenance
schedule or any part thereof.
(c) After receiving a planned maintenance request for
non-critical Transmission Facilities (as such term is used
in the MISO ITC Agreement), the Company shall, in a timely
manner, either
25
approve the request or deny the request and provide an
alternative time frame in which the maintenance can be
performed; provided that any such approval shall not be
final and shall be subject to further modification after
receipt by the Company of the Midwest ISO's approval of the
schedule for critical Transmission Facilities (as such term
is used in the MISO ITC Agreement). The Company shall
determine in a nondiscriminatory manner and with the use of
appropriate analytical detail whether, and, if so, the
extent to which, a planned transmission maintenance request
for non-critical Transmission Facilities affects available
transfer capability, Ancillary Services, the security of the
Transmission System, and any other relevant matters. The
Company shall submit the maintenance schedule for critical
Transmission Facilities to the Midwest ISO for approval in
accordance with the MISO ITC Agreement. The Company shall
promptly notify the Transmission Owner of the Midwest ISO's
approval, disapproval or modification and shall modify the
schedule for maintenance on non-critical Transmission
Facilities if appropriate. The Company shall communicate the
final planned maintenance schedule for non-critical and
critical Transmission Facilities to the appropriate
Transmission Owner in a timely manner.
(d) If the Company revokes a planned transmission maintenance
outage schedule for non-critical Transmission Facilities of
a Transmission Owner after it has become final, the Company
shall notify such Transmission Owner of the decision to
revoke approval of the maintenance schedule as soon as
possible after the circumstances arise that create the need
for the revocation. If such Transmission Owner incurs any
additional costs associated with the deferred transmission
maintenance, the Company shall compensate on a Pass-Through
Basis such Transmission Owner for all such verifiable costs
collected by the Midwest ISO in rates or other charges.
Revocation of previously approved maintenance schedules and
compensation for related costs shall be applied in a
non-discriminatory basis.
(e) The Company shall document all planned transmission
maintenance requests, the disposition of those requests and
all data supporting the disposition of each request.
(f) A Transmission Owner shall notify the Company when such
Transmission Owner is performing maintenance on a facility
that could reasonably be expected to result in unplanned
outages within the Transmission System. The Company shall
coordinate with the Transmission Owners to implement
unplanned transmission maintenance as the need may arise. In
an Emergency, the applicable Transmission Owner shall
immediately notify the
26
Company of any necessary Emergency transmission maintenance
and the Transmission Owner shall document all events of
unplanned transmission maintenance and all data related to
the Emergency necessitating such maintenance. Prior approval
by the Company for such Emergency transmission maintenance
will not be required.
4.1.3 Construction of New Facilities.
(a) The Transmission Owners acknowledge and agree that the
Company may require a Transmission Owner to construct
planned Transmission Facilities, whether the construction is
required pursuant to a direction by the Midwest ISO to the
Company or at the initiative of the Company to the extent
permitted by the MISO ITC Agreement. Each Transmission Owner
and the Company if it is an owner of facilities which
comprise part of the Transmission System shall construct at
its sole cost and expense new Transmission Facilities
reviewed, approved, and ordered to be built by the Company
in accordance with planning processes and protocols
established by the Company and the Midwest ISO pursuant to
the MISO ITC Agreement and the planning procedures adopted
by the Company. The Company will develop non-discriminatory
criteria consistent with this Section 4.1.3 to determine
which Party (including the Company if it is an owner of
facilities comprising part of the Transmission System) will
be obligated to construct the new facilities. If the new
Transmission Facilities will be directly connected to the
existing facilities of one Transmission Owner or the Company
if it is an owner of facilities comprising part of the
Transmission System, that Transmission Owner or the Company
will be obligated to construct the new facilities if
required by the Company. If two or more Transmission Owners
or the Company as an owner of facilities comprising the
Transmission System will be interconnected directly to the
new facilities, the Company will assign construction
responsibilities in accordance with the non-discriminatory
criteria stated in the planning procedures adopted by the
Company. Prior to the acceptance by the Commission of
coordinated planning processes and protocols developed by
the Midwest ISO and the Company, the planning and
construction of new facilities shall be governed by the
planning processes and protocols of the Midwest ISO and the
planning procedures adopted by the Company, to the extent
such procedures are not inconsistent with the planning
processes and protocols of the Midwest ISO.
(b) The non-discriminatory criteria shall include cost
allocation methods for achieving equity among affected
Transmission Owners and the Company in circumstances where a
27
disproportionate, but otherwise unavoidable, burden is
placed on one or more Transmission Owners or the Company for
the construction of new Transmission Facilities. Any
Transmission Owner may propose its own cost allocation
methodology to the Commission for the purpose of achieving
equity in particular instances.
(c) If a Transmission Owner that is obligated to construct new
Transmission Facilities requests that the Company construct
such facilities, the Company shall have the right but not
the obligation to do so. If the Company declines to
construct such facilities, the Transmission Owner initially
obligated to construct the facilities shall remain obligated
to do so.
(d) A Transmission Owner, or the Company as an owner of
facilities comprising part of the Transmission System, may
satisfy its construction responsibilities by arranging that
another party will construct, finance, and/or own the new
Transmission Facilities. If the third party fails to perform
within the period of time specified by the Company for
construction of such new facilities, the Transmission Owner
or the Company, in the case of facilities for which the
Company has accepted the obligation to construct, shall
remain obligated to undertake the construction. The Company
shall determine in a non-discriminatory manner whether such
third party can meet all necessary criteria for financing
and/or owning Transmission Facilities interconnected to the
Transmission System. A determination by the Company that
such third party fails to meet all necessary criteria shall
not relieve the Transmission Owner of the obligation to
construct the facilities. Any such third party owning
Transmission Facilities shall be required to become a Party
to this Agreement pursuant to Section 3.4.3.
(e) The cost of new Transmission Facilities constructed by
Transmission Owners pursuant to this Section 4.1.3 shall be
recovered in accordance with the MISO OATT and the revenues
associated with such cost recovery received by the Company,
shall be distributed in accordance with this Agreement.
4.1.4Acquisition. If a Transmission Owner acquires Transmission
Facilities that are not part of the Transmission System, such
facilities shall become subject to this Agreement provided that
(i) such Transmission Facilities are physically interconnected
with any of the Transmission Facilities owned or Functionally
Controlled by the Company or, if such Transmission Facilities are
not physically interconnected with any of the Transmission
Facilities owned or Functionally Controlled by the Company, the
Company determines, in its reasonable discretion, that
28
subjecting such Transmission Facilities to this Agreement will
result in net benefits to the Company, (ii) such Transmission
Owner consents and (iii) such action does not violate Applicable
Laws and Regulations. If Transmission Facilities are added to the
Transmission System as set forth above, the Company and the
Transmission Owner transferring the facilities shall amend such
Transmission Owner's subappendix to Appendix A to include such
Transmission Facilities.
4.1.5Performance of Regulatory Obligations. Each Transmission Owner
and the Company if it owns facilities that comprise part of the
Transmission System shall comply, and shall provide such
information to the Company as it requires to comply, and shall
otherwise assist the Company in complying, with transmission,
reporting, operating, filing, and planning obligations of the
Company that are imposed by Applicable Laws and Regulations.
4.2 Additional Obligations.
4.2.1Information. Subject to the confidentiality provisions set forth
in Section 10.14, each Transmission Owner shall provide such
information concerning its Transferred Facilities to the Company
as is necessary or appropriate for the Company to perform its
obligations under this Agreement, the MISO OATT and the MISO ITC
Agreement.
4.2.2 Facilities Access.
(a) Each Transmission Owner shall upon reasonable notice allow
the Company access to its Transferred Facilities as is
necessary (i) to verify and audit compliance by such
Transmission Owner with this Agreement or (ii) for the
Company to perform its obligations under this Agreement and
the MISO ITC Agreement. Such access shall be at reasonable
times and under reasonable conditions. Representatives of
the Company shall comply with a Transmission Owner's safety
regulations when accessing such Transmission Owner's
Transferred Facilities.
(b) Each Transmission Owner's rights in its Transferred
Facilities shall be subject to the Company's Functional
Control of the Transmission System in accordance with the
terms of this Agreement and the MISO ITC Agreement. Nothing
in this Agreement shall be deemed to restrict or to prohibit
access to Transferred Facilities by the Transmission' Owner
that owns such Transferred Facilities, or those acting under
its authority.
4.2.3Inspection and Auditing Procedures. Each Transmission Owner shall
grant the Company and its outside auditors and consultants such
access to such Transmission Owner's books and records as is
necessary (i) to verify
29
and audit compliance by such Transmission Owner with this
Agreement or (ii) for the Company to perform its obligations
under this Agreement and the MISO ITC Agreement. Such access
shall be at reasonable times and under reasonable conditions.
Each Transmission Owner shall also comply with the accounting and
reporting requirements of any Governmental Authorities having
jurisdiction over the Transmission Owner with respect to aspects
of the Company's business operations. Contacts between officers,
employees, and agents of the Company and those of a Transmission
Owner, pursuant to this Section 4.2.3 shall be strictly limited
to the purpose of this Section 4.2.3.
4.2.4 Indemnification by Transmission Owners.
(a) Each Transmission Owner ("Indemnifying Owner") shall
indemnify and hold harmless each other Transmission Owner
("Indemnified Owners") from any Losses arising from the
Indemnifying Owner's performance, neglect or breach of its
obligations under this Agreement (whether arising from a
finding of negligence, strict liability or other fault or
responsibility), except in cases where, and only to the
extent that, the negligence or willful misconduct of any
other Indemnified Owner contributed to the Loss. In the
event two or more Transmission Owners have an
indemnification obligation under this Section 4.2.4(a) with
respect to the same matter, such indemnification obligation
shall be borne by such indemnifying Transmission Owners in
proportion to each such indemnifying Transmission Owner's
comparative fault. If the Company acquires ownership of
facilities that comprise part of the Transmission System,
the Company shall be treated as if it were a Transmission
Owner for purposes of this Section 4.2.4(a). Notwithstanding
any other provision of this Agreement, no Transmission Owner
shall be liable to any other Transmission Owner for any
actions taken in accordance with the instructions or
direction of the Company or the Midwest ISO except in cases
of the negligence or intentional wrong-doing of the first
Transmission Owner.
(b) Except with respect to its Transferred Facilities or as
otherwise provided in the MISO OATT or this Agreement, no
Transmission Owner shall be liable for any costs or expenses
relating to the operation, repair, maintenance, or
improvement of any of the Transmission Facilities
constituting part of the Transmission System that are owned,
operated, or controlled by any other Transmission Owner or
the Company.
(c) Each Transmission Owner shall severally and not jointly, on
a pro rata basis as described below, indemnify and hold
harmless the Company from any Losses (determined after
application of the
30
proceeds of any applicable insurance policies) suffered or
incurred by the Company (but excluding any lost profits and
similar damages suffered or incurred by the Company)
resulting from any claim by a third party by reason of the
Company's acts, omissions or alleged acts or omissions
arising under this Agreement, the MISO ITC Agreement or the
MISO OATT or by reason of any of the Midwest ISO's acts,
omissions or alleged acts or omissions ("Third Party
Claims"); provided, however, that such indemnity does not
cover (i) Losses arising out of any action or inaction (A)
of the Company taken in bad faith, (B) of the Company that
constitutes Gross Negligence or Willful Misconduct or (C) of
the Company in its capacity as an owner of facilities that
comprise part of the Transmission System, (ii) Losses
arising out of Third Party Claims occurring in any calendar
year which involve any Good Business Practice Breach, to the
extent the Losses paid or due and payable by the Company in
respect of such Third Party Claim plus all Company Payments
with respect to all other claims occurring in such calendar
year are less than the Liability Cap Amount for such
calendar year or (iii) Losses from any claim or series of
related claims unless such Losses exceed $150,000 and then
only to the extent that such Losses exceed $150,000. The pro
rata liability of each Transmission Owner under this Section
4.2.4(c) shall be equal to a percentage of the aggregate
amount of the Losses equal to the percentage that such
Transmission Owner's Net Plant bears to the aggregate Net
Plant as of the time in which the claim giving rise to the
Losses in question occurred. The obligations of each
Transmission Owner set forth in this Section 4.2.4(c) shall
terminate automatically for all purposes with respect to all
Losses from claims arising after the Initial Member ceases
to be the Managing Member for any reason. Notwithstanding
anything to the contrary in this Agreement, the Transmission
Owners' indemnification obligations under this Section
4.2.4(c) shall terminate automatically for all purposes in
the event one or more Transmission Owners and/or former
Transmission Owners pay, in the aggregate, an amount equal
to $25,000,000 in any year pursuant to this Section 4.2.4(c)
(the "Indemnity Cap"), regardless of when the claims which
gave rise to the indemnification obligations occurred and
regardless of whether the claims involve a Good Business
Practice Breach ("Payment Event"); provided, however, if
prior to the occurrence of the Payment Event, if the Company
owns Transmission Facilities having a Fair Market Value
equal to or greater than $250,000,000 in the aggregate at
the time of the acquisition, the indemnification obligations
of the Transmission Owners under this Section 4.2.4(c) shall
not terminate upon the occurrence of a Payment Event, but
nothing in this proviso is a limitation on the automatic
termination of the
31
Transmission Owners' indemnification obligations as provided
above in the event the Initial Member ceases to be the
Managing Member for any reason.
(d) For avoidance of doubt, no indemnification obligation is
owed by the Transmission Owners under Section 4.2.4(c) with
respect to Losses arising out of any claim occurring in any
calendar year and which arises out of a Good Business
Practice Breach to the extent that the amount of such Losses
plus all Company Payments with respect to all other claims
occurring in such calendar year are less than the Liability
Cap Amount for such year.
4.2.5 Administration of Third Party Claims.
(a) Promptly after receiving notice that a third party has
commenced a claim that would be subject to the
indemnification provisions of either Section 3.4.1 or 4.2.4,
each Party entitled to indemnification (individually and
collectively, "Indemnified Party") under such Sections shall
in turn give written notice of that claim to each Party
obligated to provide the indemnification under such Section
(individually and collectively, "Indemnifying Party"). The
written notice shall include reasonable detail in light of
the circumstances then known to the Indemnified Party.
Failure to give such notice, or any notice, will not relieve
the Indemnifying Party from its obligations under such
Sections except where, and then solely to the extent that,
such failure actually and materially prejudices the rights
of the Indemnifying Party.
(b) After receiving the written notice described in Section
4.2.5(a), the Indemnifying Party will have the right but not
the duty to defend such claim; provided, however, that the
Indemnifying Party shall acknowledge in writing its
indemnification obligations hereunder with respect to such
claim. If, with respect to a claim, the Indemnified Party
will retain liability for a material amount in connection
with such claim, the Indemnifying Party shall not have the
right to assume the defense of such claim hereunder. This
right to defend will include the right to pursue any
strategy in defending such claim, file any and all
pleadings, pursue discovery in any manner, make whatever
arguments the Indemnifying Party deems appropriate, and to
select counsel of its choice to defend the claim, provided
that (i) the Indemnified Party gives its written consent to
counsel selected by the Indemnifying Party (which consent
shall not be unreasonably withheld) and (ii) the
Indemnifying Party conducts the defense of such claim
actively and diligently. Attorneys' fees incurred by counsel
selected by the Indemnifying Party in defending the claim,
as well as other costs and expenses associated with
defending the claim, will be paid by the
32
Indemnifying Party. If the Indemnifying Party consists of
one or more of the Transmission Owners, the decision to
defend a claim and the administration of such claim as
provided in this Section 4.2.5(a) shall be made by
Transmission Owners whose collective Net Plant exceeds 50%
of the aggregate Net Plant of all Transmission Owners
comprising the Indemnifying Party (the "Majority of
Indemnifying Transmission Owners"). Each Transmission Owner
agrees that the Majority of Indemnifying Transmission Owners
shall have no liability to any other Transmission Owner in
connection with the administration of claims under this
Section 4.2.5 except to the extent the Majority of
Indemnifying Transmission Owners exercise their authority
hereunder in bad faith or in a grossly negligent manner.
(c) If the Indemnifying Party assumes the defense of such claim,
the Indemnified Party agrees to reasonably cooperate in such
defense as long as the Indemnified Party is not materially
prejudiced thereby. As long as the Indemnifying Party is
conducting the defense of such claim actively and
diligently, the Indemnified Party may retain separate
co-counsel at its own cost and expense and may participate
in the defense of such claim, though ultimate control of the
claim's defense shall remain with the Indemnifying Party.
(d) In the event the Indemnifying Party does not assume the
defense of such claim, or ceases to conduct the defense of
such claim actively and diligently, or has a conflict of
interest with the Indemnified Party, (i) the Indemnified
Party may defend against, and, with the prior written
consent of the Indemnifying Party (which consent shall not
be unreasonably withheld), consent to the entry of any
judgment or enter into any settlement with respect to, such
claim, (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of
defending against such claim, including reasonable
attorneys' fees and expenses, and (iii) the Indemnifying
Party will remain responsible for any Losses the Indemnified
Party may suffer as a result of such claim to the full
extent provided in Sections 3.4.1 and 4.2.4.
(e) If after the making of any indemnification payment the
amount of Losses to which such payment relates is reduced by
recovery, settlement or otherwise under any insurance
coverage, or pursuant to any claim, recovery, settlement or
payment by or against any other Person, the amount of such
reduction (less any costs, expenses, premiums or Taxes
incurred in connection therewith) will promptly be repaid by
the Indemnified Party to the Indemnifying Party. Upon making
any indemnification
33
payment, the Indemnifying Party will, to the extent of such
indemnification payment, be subrogated to all rights of the
Indemnified Party against any third party in respect of the
Losses to which the indemnification payment relates;
provided that (i) the Indemnifying Party is then in
compliance with its obligations under this Agreement in
respect of such Losses, and (ii) until the Indemnified Party
recovers full payment of such Losses, all claims of the
Indemnifying Party against any such third party on account
of said indemnification payment will be subrogated and
subordinated in right of payment to the Indemnified Party's
rights against such third party. Without limiting the
generality or effect of any other provision of this Section
4.2.5(e), each such Indemnified Party and Indemnifying Party
will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described
subrogation and subordination rights.
4.3 Payments to the Company
4.3.1Management Fee. Each Transmission Owner shall severally and
not jointly, pay the Company its pro rata share of the
annual Management Fee. Each Transmission Owner's pro rata
share of the Management Fee in each year shall be equal to
the percentage of the Management Fee equal to the percentage
that such Transmission Owner's Net Plant bears to the
aggregate Net Plant of all Transmission Facilities subject
to the Functional Control of the Company pursuant to this
Agreement in such year. The amount of the Initial Management
Fee, as adjusted pursuant to Section 6.3(b) of the LLC
Agreement, may be increased upon and in connection with the
addition of a Transmission Owner as a Party to this
Agreement pursuant to Section 3.4.3 of this Agreement by an
amount agreed upon between the Company and such additional
Transmission Owner; provided, however, that (a) no such
increase in the Initial Management Fee shall result in an
increase in the aggregate amount of the Initial Management
Fee payable by the Original GridAmerica Companies and (b)
after giving effect to such increase in the Initial
Management Fee, the several obligation of each Transmission
Owner to pay its pro rata share of the Initial Management
Fee under this Section 4.3 shall not exceed a percentage of
the increased Initial Management Fee equal to the percentage
that such Transmission Owner's Net Plant bears to the
aggregate Net Plant of all Transmission Facilities subject
to the Functional Control of the Company pursuant to this
Agreement in such year, adjusted to include the Net Plant of
the additional Transmission Owner, as of the effective date
of such increase in the Initial Management Fee.
4.3.2Incentive Compensation. In addition to the Management Fee
payable to the Company, each Transmission Owner shall pay to
the Company incentive compensation pursuant to such
incentive compensation arrangements as are agreed from time
to time between the Company and such other Transmission
Owners as shall agree thereto. The Company
34
shall, from time to time but no less frequently than within
thirty (30) days after the Transmission Service Date and
each anniversary thereof, propose to the Transmission Owners
incentive compensation arrangements designed to encourage
the efficient and enhanced operation of the Transferred
Facilities without regard to any benefit or detriment to
other businesses and activities of the Transmission Owners,
including their electric generation businesses and
activities, which may result from implementation of such
proposals. Any incentive arrangements between the Company
and the Transmission Owners shall provide that (a) not less
than 25 percent of net incentive revenues which are earned
through the implementation of Company's proposals, or
otherwise as a result of the Company's exercise of
Functional Control over the Transferred Facilities, shall be
payable to the Company as incentive compensation; and (b)
each Transmission Owner shall receive a percentage of the
balance of such net incentive revenues equal to the
percentage that such Transmission Owner's Net Plant bears to
the aggregate Net Plant of all Transmission Facilities
subject to the Functional Control of the Company pursuant to
this Agreement in such year .
4.4 Transmission Owners' Remedies.
4.4.1Accounting Failures. If an Accounting Failure occurs, at the
written request of a majority of the Transmission Owners
(each Transmission Owner having one vote), the Company shall
retain and pay for the services of an accounting firm of
national reputation, which accounting firm shall conduct an
examination and analysis of the accounting procedures of the
Company and shall be required to issue a written report
regarding such examination and analysis, including a
description of any material weaknesses in the Company's
accounting procedures discovered by such accounting firm,
and recommendations to correct such weaknesses. The Company
shall provide to the Transmission Owners copies of all draft
and final reports prepared by such accounting firm and
within thirty (30) days after issuance of a report, the
Company shall provide a response thereto delivered to the
Transmission Owner which states the extent to which the
Company accepts the report's findings and the basis for any
objections.
4.4.2Operational Failures. If an Operational Failure occurs, at
the written request of a majority of the Transmission Owners
(each Transmission Owner having one vote), the Company shall
retain and pay for the services of a consulting firm of
national reputation with experience in electric energy
operations and management and which is a Non-Market
Participant. Such consulting firm shall conduct an
examination and assessment of the Company's operating
procedures, management, staffing and such other matters as
such consulting firm deems appropriate under the
circumstances considering the nature of the Operational
Failure and shall be required to issue a written report
regarding such examination and assessment. The Company shall
provide to the Transmission Owners
35
copies of all draft and final reports prepared by such
consulting firm and within thirty (30) days after issuance
of a report, the Company shall provide a response thereto
delivered to the Transmission Owners which states the extent
to which the Company accepts the report's findings and the
basis for any objections.
4.4.3Removal of Managing Member for Cause. If a Super Majority of
Transmission Owners shall have delivered written notice that
they have elected to remove the Managing Member for Cause,
the Company shall cause the Managing Member to be removed in
accordance with the provisions of the LLC Agreement;
provided, however, that (x) if the Managing Member contests
its removal pursuant to the terms of the LLC Agreement, the
Company shall acknowledge and shall cause the Managing
Member to acknowledge the rights of the Transmission Owners
to participate in any proceeding to resolve the dispute over
the removal pursuant to Section 10.3 of the LLC Agreement or
Section 6.3 and (y) no removal of the Managing Member shall
be effective unless and until approved by the Commission.
4.4.4Replacement of Managing Member. If a Managing Member is
removed as a result of an Early Termination Event under the
LLC Agreement, including a removal for Cause, the Company
shall cause the successor Managing Member to be selected by
vote of a Super Majority of Transmission Owners.
ARTICLE V
TERM AND TERMINATION
5.1 Term. This Agreement shall become effective as to the Company and
each Transmission Owner on the Effective Date or the date set forth in the
amendment hereto entered into between the Company and a Transmission Owner
pursuant to Section 3.4.3. For each Transmission Owner and the Company, this
Agreement shall continue in effect until the end of the Initial Term.
Notwithstanding the scheduled termination hereof at the end of the Initial Term,
this Agreement automatically shall be extended as to a Transmission Owner for an
additional term of two (2) years at the end of the Initial Term, unless written
notice of termination hereof is given by such Transmission Owner to each other
Party at least six months prior to the last day of the Initial Term; provided,
however, that, if at the time such notice of termination is given by such
Transmission Owner, applicable provisions in the Midwest ISO Transmission Owners
Agreement governing the right of a "Transmission Owner" thereunder to withdraw
from the Midwest ISO specify a longer minimum time for notice of withdrawal,
then, unless the Commission shall otherwise approve, upon the effectiveness of
the termination of this Agreement as to any Transmission Owner, such
Transmission Owner shall automatically be and become a member of Midwest ISO for
a term of not less than the
36
minimum notice period for withdrawal specified in the Midwest ISO Transmission
Owners Agreement (measured from the date of the notice of termination delivered
hereunder) less six months. Following any such additional term, the term hereof
automatically shall be extended as to a Transmission Owner for successive
additional terms of two (2) years each (any additional term, whether following
the Initial Term or an additional term, being an "Additional Term") unless
written notice of termination hereof is given by such Transmission Owner to each
other Party at least six months prior to the last day of the then existing
Additional Term; provided, however, that, if at the time such notice of
termination is given by such Transmission Owner, applicable provisions in the
Midwest ISO Transmission Owners Agreement governing the right of a "Transmission
Owner" thereunder to withdraw from the Midwest ISO specify a longer minimum time
for notice of withdrawal from the Midwest ISO, then, unless the Commission shall
otherwise approve, upon the effectiveness of the termination of this Agreement
as to any Transmission Owner, such Transmission Owner shall automatically be and
become a member of Midwest ISO for a term of not less than the minimum notice
period for withdrawal specified in the Midwest ISO Transmission Owners Agreement
(measured from the date of the notice of termination delivered hereunder) less
six months.
Each Transmission Owner may withdraw from the GridAmerica ITC and this Agreement
shall terminate with respect to such Party under the following circumstances:
(a) if a Transmission Owner delivers notice of its intent to contribute its
Transferred Facilities to the Company pursuant to Section 5.1(a) of the Master
Agreement prior to the date thirty (30) months after the Effective Date, then
each Transmission Owner may withdraw from the GridAmerica ITC and terminate its
participation under this Agreement by providing all of the other Parties written
notice of such withdrawal within thirty (30) days of receipt of the notice of
such contribution; or (b) if no Transmission Owner has delivered notice of its
intent to contribute its Transferred Facilities to the Company pursuant to
Section 5.1(a) of the Master Agreement prior to the expiration of the
twenty-ninth (29th) month following the Effective Date, then each Transmission
Owner may withdraw from the GridAmerica ITC and terminate its participation
under this Agreement by providing all of the other Parties written notice of
such withdrawal within the thirtieth (30th) month following the Effective Date.
Any withdrawal from the GridAmerica ITC and termination of participation under
this Agreement shall be effective on the first day of the seventh month
following the month in which notice thereof is delivered in accordance with
Section 10.9; provided, however, that, notwithstanding the foregoing, unless the
Commission shall otherwise approve, no withdrawal by any Transmission Owner from
the GridAmerica ITC pursuant to Section 5.1(a) or Section 5.1(b) shall be or
become effective unless and until such Transmission
37
Owner becomes a member of the Midwest ISO. Upon receipt of any notice of
withdrawal from the GridAmerica ITC and termination of participation under this
Agreement pursuant to Section 5.1(a) or Section 5.1(b), each other Transmission
Owners shall have the right, exercisable within thirty (30) days of receipt of
such notice, to withdraw from the GridAmerica ITC and terminate its
participation under this Agreement; provided, however, that, notwithstanding the
foregoing, unless the Commission shall otherwise approve, no withdrawal by any
Transmission Owner from the GridAmerica ITC pursuant to this sentence of this
Section 5.1 shall be or become effective unless and until such Transmission
Owner becomes a member of the Midwest ISO. Without the prior written consent of
NGUSA pursuant to Section 5.7 of the Master Agreement, no part of the
Transferred Facilities of any Transmission Owner that withdraws from the
GridAmerica ITC and terminates its participation under this Agreement shall be
included in or managed by an ITC that exercises functions similar in scope to
the function exercised by the Company with respect to the Transferred Facilities
(determined after taking into account the functions exercised by the Midwest ISO
under the MISO ITC Agreement) for a period of one (1) year after the effective
date of such Transmission Owner's withdrawal, provided, however, that the
foregoing prohibition shall not apply if the Initial Member exercised its
resignation rights pursuant to Section 5.7(a) or Section 5.7(b) of the Master
Agreement prior to the date of any such withdrawal.
5.2 Termination.
5.2.1No Termination. No Party shall have any right to terminate or
withdraw from this Agreement, nor shall any Transmission Owner
have the right to withdraw any of its Transferred Facilities from
GridAmerica ITC, except as provided in Section 5.1 or this
Section 5.2. The provisions of Article 10 shall survive any
termination of this Agreement.
5.2.2Divestiture or Sale of Transferred Facilities. This Agreement
shall terminate as to any Transmission Owner on the date such
Transmission Owner contributes to the Company pursuant to Section
3.1(b) of the LLC Agreement or otherwise sells to a Person other
than the Company any of such Transmission Owner's Transferred
Facilities, but such termination shall only be to the extent of
and extend to such Transmission Owner only in respect of such
contributed or otherwise sold Transferred Facilities. Any
proposed sale by a Transmission Owner of Transferred Facilities
shall be conditioned on the delivery by the purchaser thereof of
an assumption agreement in form and substance reasonably
satisfactory to the Company pursuant to which the purchaser
assumes the obligations of the selling Transmission Owner
hereunder. Such Transmission Owner shall remain a party hereto to
the extent such Transmission Owner continues to own Transferred
Facilities. In the event that a Transmission Owner has
contributed all of its Transferred Facilities to the Company or
has otherwise sold all of its Transferred Facilities, this
Agreement shall
38
terminate as to the Transmission Owner as of the effective date
of the contribution or sale (as the case may be) of all of such
Transmission Owner's Transferred Facilities, including in the
case of a Transmission Owner that retains ownership of its
Non-transferred Facilities, except with respect to any
obligations of the Transmission Owner hereunder accruing prior to
the effective date of the contribution or sale, including
indemnification obligations pursuant to Section 4.2.4 arising
from any event occurring prior to the effective date of the
contribution or sale.
5.2.3ITC Status. A Transmission Owner may terminate this Agreement
with respect to the Transferred Facilities at any time following
(i) a determination by the Commission that the Company has ceased
to be an ITC, or (ii) an order by the Commission requiring or
authorizing the Company or the Transferred Facilities to become
subject to the control or direction of a Regional Transmission
Organization other than the Midwest ISO.
5.2.4Failure to Achieve Transmission Service Date. If the
Transmission Service Date has not occurred on or before June 30
2003, then at any time after June 30, 2003, any Party may, upon
thirty (30) days prior written notice to the other Parties, cause
the GridAmerica ITC and this Agreement to terminate.
5.3 Effect Of Termination Pursuant to Sections 5.1 or 5.2.3. In the event
that a Transmission Owner terminates this Agreement pursuant to Sections 5.1 or
5.2.3, the following provisions shall apply.
5.3.1Transmission Customers Held Harmless. Transmission Customers and
Interconnection Customers taking service that involves a
terminating Transmission Owner's Transferred Facilities,
including Transmission Service that involves transmission service
agreements and interconnection and/or operating agreements
executed before such Transmission Owner provided notice of its
termination shall receive service for the remaining term of the
agreement at the same rates, terms, and conditions that would
have been applicable if there were no termination, unless such
agreements are modified by the Commission in accordance with its
statutory authority or by agreement of the parties to the
agreement. Such Transmission Owner shall make its facilities
available to provide service to such Transmission Customers and
Interconnection Customers and allow the Company to continue to
exercise Functional Control over the Transferred Facilities with
respect to such service and shall receive no more in revenues for
that service than if there had been no termination by such
Transmission Owner. This Section 5.3.1 shall survive the
termination of the Agreement by a Transmission Owner.
5.3.2Existing Obligations. Obligations incurred and payments
applicable to time periods prior to the effective date of such
termination shall survive
39
the termination of this Agreement. The reconciliation and payment
of all such amounts shall be done as soon as practicable
following such termination. This Section 5.3.2 shall not
constitute a general guarantee of the obligations of the Company
by any Transmission Owner.
5.3.3Construction of Facilities. Obligations relating to the
construction of new facilities pursuant to an approved plan of
the Company, which imposed duties upon the terminating
Transmission Owner prior to such Transmission Owner's
termination, shall be renegotiated as between the Company and the
terminating Transmission Owner taking into consideration
commitments made to Transmission Customers and Interconnection
Customers and funds advanced, if any, prior to termination of
this Agreement with respect to such terminating Transmission
Owner. Such obligations shall survive the termination of this
Agreement with respect to such Transmission Owner.
5.3.4Other Obligations. Other obligations between the Company and the
terminating Transmission Owner shall be renegotiated as between
the Company and the terminating Transmission Owner, subject to
approval by the Commission. If such obligations cannot be
resolved through negotiations, they shall be resolved in
accordance with the dispute resolution procedures provided for in
this Agreement.
5.4 Effect of Termination Pursuant to Section 5.2.2. In the event that a
Transmission Owner terminates this Agreement pursuant to Section 5.2.2 by
divesting to the Company or otherwise selling to another Person all of its
Transferred Facilities, the following provisions shall apply.
5.4.1Transmission Customers Held Harmless. In the case of a
Transmission Owner that retains ownership of its Non-transferred
Facilities, Transmission Customers taking service that involves
transmission service over such Transmission Owner's
Non-transferred Facilities pursuant to agreements executed before
such Transmission Owner provided notice of its termination shall
continue to receive service for the remaining term of the
agreement at the same rates, terms, and conditions that would
have been applicable if there were no withdrawal, unless such
agreements are modified by the Commission in accordance with its
statutory authority or by agreement of the parties to the
agreement. Such Transmission Owner shall make its Non-transferred
Facilities available to provide service to such Transmission
Customers and allow the Company to continue to exercise
Functional Control over the Non-transferred Facilities and shall
receive no more in revenues for that service than if there had
been no termination by such Transmission Owner. This Section
5.4.1 shall survive the termination of the Agreement by a
Transmission Owner.
5.4.2Existing Obligations. Obligations incurred and payments
applicable to time periods prior to the effective date of such
termination shall survive
40
the termination of this Agreement. The reconciliation and payment
of all such amounts shall be done as soon as practicable
following such withdrawal. This Section 5.4.2 shall not
constitute a general guarantee of the obligations of the Company
by any Transmission Owner.
5.4.3Other Obligations. Other obligations between the Company and the
terminating Transmission Owner shall be renegotiated as between
the Company and the terminating Transmission Owner, subject to
approval by the Commission. If such obligations cannot be
resolved through negotiations, they shall be resolved in
accordance with the dispute resolution procedures provided for in
this Agreement.
5.5 Regulatory And Other Approvals Or Procedures. The termination by a
Transmission Owner of its obligations hereunder and/or withdrawal of some or all
of its Transferred Facilities from the GridAmerica ITC shall be subject to
applicable federal and state regulatory approvals or other regulatory
procedures, including, without limitation, any required approval of the
Commission and any requirement of the Commission that such Transmission Owner
join a Commission approved regional transmission organization.
ARTICLE VI
DISPUTE RESOLUTION
6.1 Negotiations. If a dispute between any two or more Parties arises out
of or relates to this Agreement, any such Party may notify each other Party that
it intends to initiate the dispute resolution procedures set forth herein.
Immediately upon the receipt of such notice, the Party sending the notice and
each other Party receiving the notice shall refer such dispute to a senior
executive officer (the "SEOs") of each such Party for consultation and advice
prior to the commencement of the arbitration proceedings. The SEOs shall meet in
person or by teleconference as soon as mutually practicable to consider such
matters. If the SEOs fail to resolve such dispute within thirty (30) days of
such notice being sent, any Party to the dispute may declare the consultation
procedure set forth in this Section 6.1 terminated and refer the dispute or
controversy to arbitration pursuant to Section 6.2.
6.2 Arbitration. If a dispute between any two or more Parties arises out
of or relates to this Agreement or to the relationship between the Parties
created by this Agreement, and such Parties have not successfully resolved such
dispute through negotiation on or before the thirtieth (30th) day following the
notice referred to in Section 6.1, then such dispute shall be resolved according
to this Section 6.2. If such dispute is subject to the jurisdiction of the
Commission, then any Party to the dispute may, within sixty (60) days of the
notice referred to in Section 6.2, bring such dispute before the Commission for
resolution. If no Party brings the dispute before the Commission within sixty
(60) days of the notice referred to in Section 6.1, or if the dispute is not
subject to the jurisdiction of the Commission, then such dispute shall be
resolved by binding arbitration ("Arbitration") under the following provisions.
For the avoidance of doubt, this Section 6.1 does not apply to disputes arising
under the MISO OATT, which shall be resolved in accordance with the procedures
set forth therein, or to disputes arising under another agreement between and
among the Company and one or more of the Transmission Owners or between the
41
Company and the Midwest ISO, which shall be resolved in accordance with the
dispute resolution procedures of such other agreement.
(a) All Claims To Be Arbitrated. Except as provided in the
immediately preceding sentence and in Sections 6.2(l) and
9.2.1, any and all claims, counterclaims, demands, causes of
action, disputes, controversies and other matters in
question arising out of or relating to this Agreement, any
provision hereof, the alleged breach hereof, or in any way
relating to the subject matter hereof or the relationship
between the Parties created hereby, involving the Parties
("Claims"), shall be finally resolved by binding arbitration
by a panel of arbitrators under the Commercial Arbitration
Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") to the extent not inconsistent with
the provisions of this Agreement, regardless of whether some
or all of such Claims allegedly (i) are extra-contractual in
nature, (ii) sound in contract, tort, or otherwise, (iii)
are provided by federal or state statute, common law or
otherwise or (iv) seek damages or any other relief, whether
at Law, in equity or otherwise.
(b) Referral of Claims to Arbitration. Subject to Section 6.1,
one or more Parties may refer a Claim to arbitration (the
"Claimant Party") by providing notice (an "Arbitration
Notice") to each other Party or Parties against which the
Claim is asserted (whether one or more parties, the
"Respondent Party") in the manner set forth in the
Arbitration Rules. The Arbitration Notice must include a
general description of the Claim and shall identify all
Respondent Parties and the reasons for asserting the Claim
against each Respondent Party. The Arbitration is commenced
between the Claimant Party and the Respondent Party
("Dispute Parties") by sending the Arbitration Notice to the
Respondent Party.
(c) Stay for Commission Proceedings; Effect of Commission
Orders. Following commencement of the Arbitration, if a
Party other than a Dispute Party institutes a proceeding
before the Commission that involves one or more of the
Dispute Parties and the relief sought in that proceeding
would require the Commission to resolve one or more issues
presented in the Arbitration (a "Related Proceeding"), then
the Dispute Parties agree that the Arbitration shall be
stayed during the pendency of such Related Proceedings. The
Dispute Parties further agree that the Commission's
resolution in Related Proceedings of any issue that is also
presented in the Arbitration shall be and is final and
binding as to that issue in the Arbitration.
42
(d) Number and Qualification of Arbitrators. The panel of
arbitrators (the "Panel") shall consist of three arbitrators
appointed in accordance with this Section 6.2 and the
Arbitration Rules. Arbitrators shall meet the qualifications
for arbitrators established by the AAA and, in addition,
shall have significant experience in the electric industry
and/or significant experience as an arbitrator in complex
commercial matters. The chairperson shall take an oath of
neutrality.
(e) Appointment of Arbitrators. By the fifteenth (15th) day
following the day on which the Arbitration Notice is sent to
the Respondent Party, the Claimant Party shall submit its
appointment of the first arbitrator to the Respondent Party
and the AAA. If the Claimant Party consists of more than one
Party, then those Parties shall jointly appoint the first
arbitrator. By the fifteenth (15th) day following the
appointment of the first arbitrator, the Respondent Party
shall submit its appointment of the second arbitrator to the
Claimant Party and the AAA. If the Respondent Party consists
of more than one Party, then those Parties shall jointly
appoint the second arbitrator. The two arbitrators appointed
by the Dispute Parties shall appoint a third arbitrator, who
shall be the chairperson of the Panel, by the fifteenth
(15th) day following the appointment of the second
arbitrator. If the second arbitrator has not been appointed
by the fifteenth (15th) day following the appointment of the
first arbitrator, or if the first two arbitrators have not
appointed the third arbitrator by the fifteenth (15th) day
following the appointment of the second arbitrator, any
Dispute Party may request the AAA to appoint the
arbitrator(s) in question. If any arbitrator resigns,
becomes incapacitated, or otherwise refuses or fails to
serve or to continue to serve as an arbitrator, the Dispute
Party or arbitrators entitled to designate that arbitrator
shall promptly designate a successor. In the event that
either of the Claimant Party or the Respondent Party consist
of more than one Party and those Parties are unable to agree
on the appointment of an arbitrator, then all three
arbitrators shall be appointed by the AAA; provided,
however, that the arbitrators so appointed shall meet the
qualifications set forth in Section 6.2(d).
(f) Governing Law. In deciding the substance of the Parties'
Claims, the arbitrators shall first rely upon the provisions
of this Agreement and shall then apply the substantive laws
governing this Agreement pursuant to Section 10.2.
(g) Powers of the Arbitrators; Limitations On Remedies. The
validity, construction and interpretation of this Agreement
to arbitrate, and all procedural aspects of the arbitration
conducted pursuant to this Agreement to arbitrate, including
the
43
determination of the issues that are subject to arbitration
(i.e., arbitrability), the scope of the arbitrable issues,
allegations of "fraud in the inducement" to enter into this
Agreement or this arbitration provision, allegations of
waiver, laches, delay or other defenses to arbitrability,
and the rules governing the conduct of the arbitration
(including the time for filing an answer, the time for the
filing of counterclaims, the times for amending the
pleadings, the specificity of the pleadings, the extent and
scope of discovery, the issuance of subpoenas, the times for
the designation of experts, whether the arbitration is to be
stayed pending resolution of related litigation involving
third parties not bound by this arbitration agreement, the
receipt of evidence and the like), shall be decided by the
arbitrators to the extent not provided for in this Article
VI. The arbitrators shall decide the Claims based on this
Agreement, the Arbitration Rules, and the governing Law, and
not ex aqueo et bono, as amiable compositeurs, or in equity.
The arbitrators shall not have the power to award any of
those remedies which are precluded by Section 9.2. The
arbitrators shall also have the power to enter such interim
orders as they deem necessary, including orders to preserve
the subject matter of the Claim or to preserve or adjust the
status of the Parties pending resolution of the Claim in the
Arbitration. The chairperson is empowered to issue interim
orders on his own authority in emergency situations and
where necessary to ensure the efficient administration of
the Arbitration on application from a Dispute Party, which
orders shall remain in effect until a meeting of all
arbitrators may be convened to consider the application. The
arbitrators shall have the power to assess the attorneys'
fees, costs and expenses of the Arbitration (including the
arbitrators' fees and expenses) against one or more of the
Parties in whatever manner or allocation the arbitrators
deem appropriate.
(h) Venue; Procedural Issues. The seat of the Arbitration shall
be New York, New York, or such other place as the Dispute
Parties may agree. The arbitrators shall set the date, the
time and the place of the hearing, which must commence on or
before the one hundred twentieth (120th) day following the
designation of the third arbitrator. All decisions of the
three arbitrators shall be made by majority vote. In
determining the extent of discovery, the number and length
of depositions and all other pre-hearing matters, the
arbitrators shall endeavor, to the extent possible, to
streamline the proceedings and minimize the time and cost of
the proceedings. There shall be no transcript of the
hearing. The final hearing shall not exceed ten (10)
Business Days, with the Claimant Party and Respondent Party
each granted one-half of the allocated time to present its
case to the arbitrators. All proceedings conducted hereunder
and the decision of the arbitrators shall be kept
44
confidential by the arbitrators, the AAA and any Persons
participating in the Arbitration, except that the
confidentiality obligations of the Parties shall be governed
by Section 10.14.
(i) Additional Claims. After the Arbitration has commenced and
the Panel has been appointed, if a further Claim arises
under this Agreement that is not successfully settled
pursuant to Section 6.1, and the further Claim (an
"Additional Claim") is related to the Claim in the
Arbitration or involves the same Dispute Parties, then any
Party to the Additional Claim may ask the Panel to accept
jurisdiction over the Additional Claim and include it in the
Arbitration by submitting an Arbitration Notice in the
manner set forth in Section 6.2(b) (an "Additional
Arbitration Request") and submitting a concurrent request to
the Panel to accept the Additional Claim. The Parties agree
that the Panel should accept jurisdiction over an Additional
Claim if the resolution of the Claim before the Panel will
involve some or all of the same legal and factual issues
presented by the Additional Claim or if accepting
jurisdiction over the Additional Claim would facilitate or
help minimize the costs of resolving the disputes at issue
and not unduly delay the Arbitration. The Parties agree,
however, that the Panel alone shall determine whether it
should accept jurisdiction over an Additional Claim and that
its determination shall be final and unappealable. If the
Panel refuses jurisdiction over the Additional Claim, then
the Additional Arbitration Request shall constitute a
separate request for arbitration, which shall proceed
independently and under this Section 6.2 as if filed on the
date the Panel denied the request to accept jurisdiction. So
long as there is no pending Additional Arbitration Request
to the Panel to accept jurisdiction, any Party to an
Additional Claim may commence a separate arbitration
proceeding in the manner set forth in this Section 6.2.
(j) Arbitration Awards. The arbitrators shall render their award
on or before the thirtieth (30th) day following the last
session of the hearing fully resolving all Claims that are
the subject of the Arbitration. The award shall be in
writing, shall give reasons for the decision(s) reached by
the arbitrators and shall be signed and dated by the
arbitrators, and a copy of the award shall be delivered to
each of the Dispute Parties. A Party against which the award
assesses a monetary obligation or enters an injunctive order
shall pay that obligation or comply with that order on or
before the thirtieth (30th) calendar day following the
receipt of the award or by such other date as the award may
provide. Any award of the arbitrators shall be consistent
with the limitations and terms of this Agreement. The
arbitrators' award may be confirmed in, and
45
judgment upon the award entered by, any court having
jurisdiction over the Parties.
(k) Binding Nature. The decisions of the arbitrators shall be
final and binding on the Parties and non-appealable to the
maximum extent permitted by Law.
(l) Assistance of Courts. It is the intent of the Parties that
the Arbitration shall be conducted expeditiously, without
initial recourse to the courts and without interlocutory
appeals of the arbitrators' decisions to the courts.
Notwithstanding any other provision of this Agreement,
however, a Party may seek court assistance in the following
circumstances: (i) if a Party refuses to honor its
obligations under this Agreement to arbitrate, any other
Party may obtain appropriate relief compelling arbitration
in any court having jurisdiction over the refusing Party,
and the order compelling arbitration shall require that the
arbitration proceedings take place in New York, New York,
and in the manner specified herein; (ii) a Dispute Party may
apply to any state or federal court having relevant
jurisdiction for orders requiring witnesses to obey
subpoenas issued by the arbitrators, including requests for
documents; and (iii) a Party may apply at any time before or
during the Arbitration to any court having relevant
jurisdiction for an order preserving the status quo ante
and/or evidence in anticipation of arbitration (for
avoidance of doubt, preservation of the status quo ante
includes an order compelling a Party to continue to fulfill
an obligation under this Agreement or to refrain from taking
an action that would constitute a default under this
Agreement; for further avoidance of doubt, such an
application to the courts is not intended to and does not
constitute waiver of the right to arbitrate Claims, nor does
it refer any Claim to court for decision). The Parties agree
to comply with any interim order issued by the arbitrators
or by the chairperson. Any and all of the arbitrators'
orders and decisions, including interim orders, may be
enforced by any state or federal court having jurisdiction.
Each Party agrees that arbitration pursuant to this Section
6.2 shall be the exclusive method for resolving all Claims
and that it will not commence an action or proceeding,
except as provided in this Section 6.2.
6.3 Arbitration of Certain Claims Regarding Removal of Managing Member. If
a Super Majority of Transmission Owners have attempted to remove the Managing
Member for Cause pursuant to Section 4.4.3 of this Agreement, and the Managing
Member disputes whether Cause for removal exists (a "Removal Claim"), then the
issue of whether Cause exists immediately shall be referred to and resolved by
binding arbitration ("Removal Arbitration") according to this Section 6.3. The
Removal Claim shall be finally resolved by one arbitrator appointed in
accordance with this Section 6.3 and the Arbitration Rules to the extent not
inconsistent with the provisions of this Agreement. The Expedited Procedures of
the Arbitration
46
Rules shall be used unless the arbitrator determines that they would be
inappropriate. The arbitrator shall take an oath of neutrality.
6.3.1Application to Removal Claim; Relation to Other Claims. Any
dispute other than a Removal Claim must be resolved in a separate
Arbitration pursuant to Section 6.2. A Removal Arbitration may
not be joined to or consolidated with an Arbitration without the
consent of all parties in the Removal Arbitration and the
Arbitration(s). The decision of the arbitrator on a Removal Claim
shall be final and conclusive and bind any arbitrators in an
Arbitration commenced under Section 6.2.
6.3.2Referral of Claims to Arbitration. A Managing Member who receives
a written notice of removal as contemplated in Section 4.4.3 (a
"Removal Notice"), and who disputes that Cause for removal
exists, or a Member or a Transmission Owner upon receipt of
notice from the Managing Member that it disputes that Cause
exists (the "Removal Claimant") may refer a Removal Claim to
Removal Arbitration by providing notice (a "Notice of Removal
Dispute") to the Managing Member, all Members, and all
Transmission Owners that are not the Removal Claimant (whether
one or more parties, the "Removal Respondent Party"), in the
manner set forth in the Arbitration Rules. The Notice of Removal
Dispute also must contain a list of five (5) proposed
arbitrators. The Removal Arbitration is commenced between the
Removal Claimant and the Removal Respondent Party ("Removal
Dispute Parties") by sending the Notice of Removal Dispute to the
Removal Respondent Party.
6.3.3Appointment of Arbitrator. Within ten (10) days of delivery of
the Notice of Removal Dispute, the Removal Respondent shall
deliver to the Removal Claimant and the AAA a list of five (5)
proposed arbitrators. If the lists provided by the Removal
Claimant and the Removal Respondent both contain a common
proposed arbitrator, such person shall be selected as arbitrator;
otherwise, the AAA shall appoint one of them as arbitrator. If no
persons are named on both lists, then the AAA shall appoint the
arbitrator according to the procedures contained in the
Arbitration Rules. If the arbitrator resigns, becomes
incapacitated, or otherwise refuses or fails to serve or to
continue to serve as an arbitrator, the Removal Dispute Parties
shall promptly designate a successor using the procedures
established in this Section 6.3. An arbitrator appointed pursuant
to this Section 6.3.3 may not also be appointed as an arbitrator
pursuant to Section 6.2.
6.3.4Governing Law. In deciding the substance of the Removal Claims,
the arbitrator shall first rely upon the provisions of this
Agreement and shall then apply the substantive laws of the State
of New York, in accordance with Section 10.2 hereof.
47
6.3.5Powers of the Arbitrators; Limitations On Remedies. The
arbitrator in a Removal Arbitration shall decide solely the
Removal Claim, and shall have no power to decide any other Claim.
The arbitrator shall decide the Removal Claim based on this
Agreement, the Arbitration Rules, and the governing law, and not
ex aqueo et bono, as amiable compositeur, or in equity. The
arbitrator shall have the power to assess attorney's fees (in
accordance with Section 10.19), costs, and expenses of the
Removal Arbitration (including the attorneys' fees and expenses)
against one or more of the Parties in whatever manner or
allocation the arbitrator deems appropriate.
6.3.6Venue; Procedural Issues. The seat of the Removal Arbitration
shall be New York, New York, or such other place as the Removal
Dispute Parties may agree. The arbitrator shall set the date, the
time and the place of the hearing, which must commence on or
before the thirtieth (30th) day following the appointment of the
arbitrator. There shall be no transcript of the hearing. The
final hearing shall not exceed ten (10) Business Days, with the
Removal Claimant and Removal Respondent Party each granted
one-half of the allocated time to present its case to the
arbitrator. All proceedings conducted hereunder and the decision
of the arbitrator shall be kept confidential by the arbitrator,
the AAA and any Persons participating in the Removal Arbitration.
6.3.7Arbitration Awards. The arbitrator shall render his award on or
before the tenth (10th) day following the hearing(s) on the
Removal Claim. The award shall be in writing and shall give a
reasonably detailed description of the reasons for the
decision(s) reached by the arbitrator and shall be signed and
dated by the arbitrator, and a copy of the award shall be
delivered to each of the Removal Dispute Parties. Any award of
the arbitrator shall be consistent with the limitations and terms
of this Agreement. The arbitrator's award may be confirmed in,
and judgment upon the award entered by, any court having
jurisdiction over the Parties.
ARTICLE VII
TAX MATTERS
7.1 Responsibility for Transmission Owner Taxes. Each Transmission Owner
shall be responsible for preparation and filing of all Tax Returns and other
filings related to its Transmission Business and Transferred Facilities and for
payment of any Tax liabilities related to its Transmission Business and
Transferred Facilities. No Party shall be responsible for, or required to, file
any Tax Returns or other reports for any other Transmission Owner and shall have
no liability for any Taxes related to any other Transmission Owner's
Transmission Business or Transferred Facilities.
7.2 Responsibility for the Company Taxes. The Company shall be responsible
for preparation and filing of all Tax Returns and other filings related to its
business and the facilities owned by it constituting part of the Transmission
System and for payment of any Tax liabilities
48
related thereto. No Transmission Owner shall have any responsibility for filing,
or be required to file, any Tax Returns or other reports for the Company and
shall have no liability for any Taxes related to the Company's owned facilities.
ARTICLE VIII
FORCE MAJEURE
If a Party is rendered wholly or partly unable to perform its obligations
under this Agreement because of a Force Majeure event, that Party shall be
excused from whatever performance is affected by such Force Majeure event but
only to the extent so affected, provided that: (i) the Party, within two (2)
days after the occurrence of the Force Majeure event, gives the other Parties
notice describing the particulars of the occurrence and its estimated duration;
(ii) the suspension of performance is of no greater scope and of no longer
duration than is required by the Force Majeure event; and (iii) the Party uses
commercially reasonable efforts to remedy its inability to perform and to resume
its full performance under this Agreement; provided, however, that the Party's
obligation to remedy its inability to perform shall not require the settlement
of any strike, walkout, lockout or other labor dispute on terms that, in the
sole judgment of the Party involved in said dispute, are contrary to its best
interest.
ARTICLE IX
BREACH, CURE AND DEFAULT
9.1 Continued Operation. In the event of a breach or default hereunder by
any Party, the Parties shall continue to operate and maintain their respective
facilities and perform all acts reasonably necessary for the Company to operate
and maintain the Transmission System in accordance with this Agreement and the
MISO ITC Agreement.
9.2 Remedies.
9.2.1Specific Performance. The Parties agree and stipulate that a
breach by a Party of this Agreement will result in irreparable
damage to the other Parties for which no money damages could
adequately compensate. In addition to all other remedies to which
the other Parties may be entitled hereunder, including reasonable
attorneys' fees pursuant to Section 10.19 and court costs, any
other Party shall be entitled to seek injunctive relief or
specific performance to restrain or compel the breaching Party.
Each of the Parties expressly waives any claim that an adequate
remedy at Law exists for such a breach.
9.2.2All Other Remedies. No right or remedy herein conferred is
intended to be exclusive of any other available right or remedy,
but each and every such right or remedy shall be cumulative and
shall be in addition to every other right or remedy given
hereunder or hereafter existing under Law or in equity. The
exercise of any one right or remedy shall not be deemed an
election of such right or remedy or preclude the exercise of any
other right or remedy. The resort to any right or remedy provided
for herein or provided for by Law or in equity shall not prevent
the concurrent or
49
subsequent employment of any other right or remedy.
Notwithstanding the foregoing:
(a) as between the Parties, notwithstanding anything to the
contrary in this Agreement, no Party will be liable to any
other Party for indirect, consequential, special or punitive
damages on account of any action or proceeding brought
hereunder or related hereto; provided, however, that the
foregoing shall not apply to indemnity obligations of any
Party hereunder that relate to liabilities of the
Indemnified Party to third parties, even if such liabilities
to third parties include liability for indirect,
consequential, special or punitive damages suffered by such
third parties; and
(b) except with respect of the obligations of the Company (i) to
reimburse Transmission Owners for costs on a Pass-Through
Basis under the circumstances described in Sections 2.3,
2.4, 2.5, 4.1.3(a), (ii) to pay amounts to the Transmission
Owners on a Pass-Through Basis as provided in this
Agreement, (iii) to perform its obligations under Section
3.3.4, and (iv) to indemnify the Transmission Owners as
provided in Section 3.4.1, the Company shall be liable to
the Transmission Owners only in the case of Gross Negligence
or Willful Misconduct.
9.3 No Joint Liability. The liabilities and obligations of each Party
under this Agreement shall be several and not joint, and no Party shall be
jointly liable under this Agreement with any other Party. Without in any way
limiting the foregoing, the failure of one Transmission Owner to perform its
obligations hereunder shall not constitute a failure to perform by any other
Transmission Owner.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Not for Benefit of Third Parties. This Agreement is intended to be
solely for the benefit of the Parties, their successors and permitted assignees,
and is not intended to and shall not confer any rights or benefits on any Person
not a signatory hereto.
10.2 Governing Law. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THIS
AGREEMENT IS REQUIRED TO BE INTERPRETED OR ENFORCED IN ACCORDANCE WITH THE
FEDERAL LAW OF THE UNITED STATES OF AMERICA, AND WITHOUT REFERENCE TO THE CHOICE
OF LAW PRINCIPLES IN THE STATE OF NEW YORK THAT REQUIRE APPLICATION OF THE LAWS
OF A DIFFERENT JURISDICTION.
10.3 Successors And Assigns. This Agreement shall inure to the benefit of,
and be binding upon, each of the Parties, their respective successors and
assigns. This Agreement may not be assigned by a Transmission Owner except that
this Agreement (i) shall be assigned to any
50
successor to the ownership of a Transmission Owner's Transferred Facilities, and
any such successor shall become a Transmission Owner under this Agreement or
(ii) may be assigned to a lender. This Agreement may not be assigned, by
operation of Law or otherwise by the Company, except to a lender. An assignment
of this Agreement by a Transmission Owner as to its Transferred Facilities in
conformance with clause (i) of this Section 10.3 shall release such Transmission
Owner from further liability or obligation under this Agreement as to
obligations arising after the date of such assignment.
10.4 Effect of Waiver. No waiver by a Party of any one or more defaults by
another Party hereto in the performance of this Agreement shall operate or be
construed as a waiver of any future default or defaults, whether of a like or
different character.
10.5 Severability. Except for Section 5.1 of this Agreement, any provision
of this Agreement that is prohibited or unenforceable in any jurisdiction shall,
as to that jurisdiction, be ineffective to the extent of that prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of that provision in any other
jurisdiction, and such invalid, void, or unenforceable provision may be replaced
with a suitable and equitable provision pursuant to Section 10.6 in order to
carry out, so far as may be valid and enforceable, the intent and purpose of
such invalid, void, or unenforceable provision.
10.6 Renegotiation. If any provision of this Agreement, or the application
thereof to any Person, Entity, or circumstance, is held by a court or
Governmental Authority of competent jurisdiction to be invalid, void, or
unenforceable, or if a modification or condition to this Agreement is imposed by
a Governmental Authority exercising jurisdiction over this Agreement, then the
Parties shall endeavor in good faith to negotiate such amendment or amendments
to this Agreement as will restore the relative rights, obligations, and economic
position of the Parties under this Agreement immediately prior to such holding,
modification, or condition to the extent consistent with the orders, decisions
or requirements of the applicable Governmental Authority. The rights and
obligations of the Parties under this Agreement shall be modified to the extent
necessary (i) to comply with an order of the Commission or (ii) as is necessary
to avoid a determination by the Commission that the Company has ceased to be an
ITC; provided, however, that any such modification (including any modification
of the definition of Functional Control and the scope of activities performed by
each Party hereunder) shall preserve to the maximum extent possible the relative
rights, obligations, and economic positions of the Parties hereunder as in
effect prior to giving effect to such modification.
10.7 Representations And Warranties. Each Party represents and warrants, as
of the Effective Date, to each other Party that:
(i) it is duly organized, validly existing and in good
standing under the applicable Laws of the jurisdiction
of its organization and is qualified to do business (A)
in the jurisdictions necessary to perform this
Agreement, in the case of the Company, or (B) in the
jurisdictions in which its Transferred Facilities are
located, in the case of a Transmission Owner;
51
(ii) it has the power to execute and deliver this Agreement
and to perform its obligations under this Agreement and
has taken all necessary corporate and/or other actions
to authorize such execution, delivery and performance;
(iii)its execution and delivery of this Agreement and its
performance of its obligations under this Agreement do
not violate or conflict with (A) any Laws applicable to
it, (B) any provision of its charter or by-laws (or
comparable constituent documents), (C) any order or
judgment of any court or Governmental Authority
applicable to it or any of its assets or (D) any
contractual restriction binding on or affecting it or
any of its assets, except third-party joint agreements
covered by Section 10.13;
(iv) subject to the receipt of any Required Consents (as
defined in the Master Agreement) required by it, to its
knowledge, there are no Consents required for it and
its Affiliates to perform their respective obligations
under this Agreement other than Consents which have
been obtained and Consents which may be required to
perform obligations which, by the terms of this
Agreement, will not arise and are not required to be
performed except upon the happening of one or more
contingencies specified in this Agreement;
(v) this Agreement has been duly executed and delivered by
the Party and constitutes its legal, valid, and binding
obligation, enforceable against it in accordance with
its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar Laws
affecting creditors' rights generally and subject, as
to enforceability, to equitable principles of general
application (regardless of whether enforcement is
sought in a proceeding in equity or at Law); and
(vi) except as otherwise permitted herein, it has neither
initiated nor received written notice of any pending
action, proceeding, or investigation, nor to its
knowledge is any such action, proceeding, or
investigation threatened (or any basis therefor known
to it), which questions the validity of this Agreement,
or which would materially or adversely affect its
rights or obligations under this Agreement.
10.8 Further Assurances. Each Party agrees that it shall hereafter execute
and deliver such further instruments, provide all information, and take or
forbear such further acts and things as may be reasonably required and useful to
carry out the intent and purpose of this Agreement and as are not inconsistent
with the provisions of this Agreement.
52
10.9 Notices. Every notice, request, or other statement to be made or
delivered to a Party pursuant to this Agreement shall be directed to such
Party's representative at the address or facsimile number for such Party set
forth on Appendix C or to such other address or facsimile number as the Party
may designate by written notice to each other Party from time to time. All
notices or other communications required or permitted to be given pursuant to
this Agreement must be in writing and will be considered as properly given if
sent by facsimile transmission (with confirmation notice sent by first class
mail, postage prepaid), by reputable nationwide overnight delivery service that
guarantees next Business Day delivery, by personal delivery, or, if mailed from
within the United States, by first class United States mail, postage prepaid,
registered or certified with return receipt requested. Any notice hereunder will
be deemed to have been duly given (i) on the date personally delivered, (ii)
when received, if sent by certified or registered mail, postage prepaid, return
receipt requested or if sent by overnight delivery service; and (iii) if sent by
facsimile transmission, on the date sent, provided confirmation notice is sent
by first-class mail, postage prepaid promptly thereafter.
10.10Regulatory Proceedings. Subject to the provisions of Section 10.6, no
Party shall seek to amend this Agreement through a unilateral application to the
Commission to do so. Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to prohibit or limit any Party's right to otherwise initiate or
intervene in any proceedings before the Commission or any other Governmental
Authority involving its rights, duties, and obligations under this Agreement or
any aspect of the Transmission System.
10.11Entire Agreement; Amendments. This Agreement constitutes the entire
agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, representations and understandings, written or
oral, pertaining thereto including that certain Letter of Intent dated June 20,
2002 among NGUSA, Ameren, ATSI and NIPSCO regarding the formation and operation
of GridAmerica as an ITC within the Midwest ISO. Except as otherwise provided in
Section 3.4.3, no amendment to or modification, termination or waiver of or
under any provision of this Agreement shall be valid unless the same shall be in
writing and signed by the Company and one or more Transmission Owners owning
Transmission Facilities with a Net Plant of at least 66.67% of the aggregate Net
Plant of all Transmission Facilities subject to the Functional Control of the
Company pursuant hereto (other than any Transmission Facilities owned by the
Company); provided, however, that (i) Sections 3.4.1, 4.2.4 and 4.3 may only be
so amended, modified, terminated or waived with the unanimous written consent of
the Company and all the Transmission Owners, (ii) any amendment, modification,
termination or waiver that materially adversely affects a specific Transmission
Owner must be approved in writing by such Transmission Owner, and (iii) a waiver
by a Party as to only its rights may be granted by such Party.
10.12Efforts of the Parties. Where the consent, agreement, or approval of
a Party must be obtained hereunder, such consent, agreement, or approval shall
not be unreasonably withheld, conditioned, or delayed. Where a Party is required
or permitted to act, or omit to act, based on its opinion or judgment, such
opinion or judgment shall not be unreasonably exercised. To the extent that the
jurisdiction of any Governmental Authority applies to any part of this Agreement
and/or the transactions or actions covered by this Agreement, each Transmission
Owner shall cooperate with the Company and all other Transmission Owners to
secure any
53
necessary or desirable approval or acceptance of such Governmental Authorities
of such part of this Agreement and/or such transactions or actions.
10.13Third-Party Joint Agreements. This Agreement, including the
appendices, shall not be construed, interpreted, or applied in such a manner as
to cause a Transmission Owner to be in material breach, anticipatory or
otherwise, of any agreement in effect on the Effective Date, between such
Transmission Owner and one or more third parties for the joint ownership,
operation, or maintenance of any electrical facilities covered by this Agreement
or the MISO OATT. If a Transmission Owner has such a third-party joint
agreement, it shall discuss with the Company any material conflict between such
third-party joint agreement and this Agreement raised by a third party to such
joint agreement, but the resolution of such a conflict shall, vis-a-vis the
Company, be and remain within the sole discretion of the Transmission Owner;
provided, however, that the Transmission Owner shall, if the conflict is
otherwise unresolved, utilize the available remedies and dispute resolution
procedures to resolve such conflict, including, but not limited to, submitting
such conflict to the Commission for resolution; provided, further, that unless
so ordered by the Commission or a court having jurisdiction, in no event shall
the Transmission Owner enter into a resolution of such conflict which would
impair the reliability of the Transmission System. Each Transmission Owner
hereby represents and warrants that, except as otherwise set forth on Appendix
B, the application of the provisions of this Section 10.13 will not have a
material adverse effect on the ability of the Company to perform its obligations
under this Agreement. Notwithstanding anything to the contrary in this
Agreement, the Company shall not be deemed to be in breach of any of its
obligations under this Agreement or subject to liability hereunder if it takes
action or fails to take action with respect to any matter involving a
Transmission Owner's exercise of its rights under this Section 10.13.
10.14Confidentiality. The following provisions set forth the obligations
arising out of the disclosure of Confidential Information by a Party (the
"Disclosing Party") to one or more Parties (the "Recipient" or "Recipients")
under any Transaction Agreement.
(a) Agreement of Non Disclosure and Non-Use. In consideration of
the disclosure by a Disclosing Party to a Recipient of
Confidential Information, the Recipient and its officers,
directors, partners, employees, Affiliates, agents,
representatives, outside auditors, attorneys, and any Third
Party Recipient who have access to the Confidential
Information (collectively, "Representatives"):
(i) shall keep Confidential Information confidential and
will not, without the prior written consent of such
Disclosing Party or as allowed by this Agreement,
disclose Confidential Information to other Persons; and
(ii) shall not use Confidential Information other than for
purposes legitimately related to the operation of the
business of the Company, including, without limitation,
the exercise of Functional Control over any Transferred
Facilities ("Approved Uses"); provided, however,
that
54
nothing contained herein shall limit the right of
the Company or any of its Representatives from using
any Confidential Information disclosed to the Company
by any Party consisting of methods, techniques, rate
design and other similar Confidential Information which
relates to the electric transmission industry
generally, and not to the business of any Party, (but
excluding any software developed by the Company or any
Transmission Owner and excluding any Confidential
Information of a Transmission Owner marked
"Proprietary" by such Transmission Owner) for other
than Approved Uses which are not in competition with
the business of such Party. Each Recipient agrees to
transmit the Confidential Information of a Disclosing
Party only to such of the Recipient's Representatives
who need to know the Confidential Information for the
purpose of assisting the Recipient in Approved Uses,
and who are informed of the provisions of this Section
10.14. A Recipient shall be fully liable for any breach
of this Agreement by its Representatives and agrees, at
its sole expense, to take reasonable measures to
restrain its Representatives from prohibited or
unauthorized disclosure or use of the Confidential
Information.
(b) Disclosure Required by Subpoena, Law, Litigation or Legal
Process. If any portion of Confidential Information is
required to be disclosed by subpoena, Law, litigation,
arbitration, or similar legal process, or to a Governmental
Authority, the Recipient will promptly inform the Disclosing
Party of the existence, terms and circumstances surrounding
such request before any such disclosure is required so as to
allow the Disclosing Party to protect the Confidential
Information. The Recipient will consult with the Disclosing
Party on the advisability of taking legally-available steps
to resist or narrow such request. The Disclosing Party may
thereafter seek to obtain a protective order, and the
Recipient shall cooperate with the Disclosing Party in its
efforts to obtain a protective order, to restrict access to,
and any use or disclosure of, the Confidential Information,
at the expense of the Disclosing Party. Notwithstanding
anything else to the contrary contained herein, Confidential
Information that is required to be disclosed in the ordinary
course of the Company's business to the Commission or other
Governmental Authority pursuant to Law or the MISO OATT may
be so disclosed without compliance with this Section
10.14(b).
(c) Disclosure In Connection with Financing Transactions or
Transfer of Transferred Facilities. In the event that
a Recipient
55
desires to disclose Confidential Information in connection
with a financing or other similar transaction or in
connection with a transfer of its Transferred Facilities,
including as part of the due diligence requested by a
proposed counterparty or transferee (a "Third Party
Recipient"), such Recipient may disclose such Confidential
Information to such Third Party Recipient only after receipt
by such Recipient from such Third Party Recipient of a
confidentiality agreement containing substantially the terms
and conditions set forth in this Section 10.14; provided,
however, that no competitively sensitive Confidential
Information concerning a Transmission Owner may be disclosed
to any Person that is a direct competitor of such
Transmission Owner without such Transmission Owner's prior
written consent.
(d) Disclosure in Connection with Dispute. A Recipient may
disclose Confidential Information to (i) the Panel in
connection with an Arbitration pursuant to Section 6.2, (ii)
to the Commission in connection with a Claim being heard by
the Commission and (iii) to a court in connection with a
dispute being heard by such court; provided, however, that
the Recipient shall take reasonable steps to protect the
confidentiality of such Confidential Information and, where
the Recipient would not be materially adversely affected by
its disclosure to the Disclosing Party of its intent to
disclose such Confidential Information in connection with a
dispute as provided above, the Recipient shall so disclose
to the Disclosing Party the Recipient's intent to so
disclose such Confidential Information so as to allow the
Disclosing Party the opportunity to protect such
Confidential Information. In such case, the Recipient shall
cooperate with the Disclosing Party in its efforts to obtain
a protective order, to restrict access to, and any other use
or disclosure of, the Confidential Information.
(e) Survival of Obligations. The obligations with respect to
Confidential Information set forth herein shall survive the
termination of this Agreement for five (5) years. Upon the
termination of the obligations of this Agreement with
respect to an item of Confidential Information, the
Recipient shall be free to use and disclose such item of
information freely and without any obligation to the
Disclosing Party.
(f) Ownership of Confidential Information. Each Disclosing Party
reserves its (and, if applicable, its licensor's) ownership
rights in and to its Confidential Information disclosed to a
Recipient and only grants a license to use such Confidential
Information for the Approved Uses. In addition, each
Recipient agrees that it does not acquire any ownership
interest in the Confidential Information of any Disclosing
Party by virtue of the combination of such
56
Confidential Information with other Confidential
Information, including that of the Company.
10.15No Partnership. This Agreement is not intended, and shall not be
construed, interpreted or applied, to create a partnership or joint venture, and
no Transmission Owner shall be entitled to act as an agent for any other
Transmission Owner with respect to the Company.
10.16Current Documents. The Company shall maintain current versions of all
agreements and procedures, all amendments thereto and shall post such documents
on its Internet World Wide Web Site or equivalent form of electronic posting and
provide such documents to the Transmission Owners.
10.17Late Payments. If a Party does not pay within ten (10) days of the
date required hereunder, all or any portion of an amount such Party is required
to pay as provided in this Agreement then (i) the amount such owing Party is
required to pay shall bear interest at (A) the sum of (I) a varying rate per
annum that is equal to the interest rate publicly quoted by The Wall Street
Journal, from time to time as the prime commercial or similar reference interest
rate with adjustments in that varying rate to be made on the same date as any
change in that rate plus (II) 2% per annum or (B) such lower rate required under
applicable Law, compounded annually and (ii) a Party to which payment is due may
take any action, at the cost and expense of the owing Party to obtain payment by
such owning Party of the portion of such owning Party's payment that is in
default, together with interest thereon as provided above.
10.18Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument, notwithstanding that all of the Parties are not
signatories to the original or to the same counterpart.
10.19Attorneys' Fees. In any dispute arising hereunder, the party
prevailing at final judgment shall be entitled to recover from the other party
all of its reasonable attorneys' fees and costs incurred in such a proceeding,
in addition to any affirmative or injunctive relief that it may receive.
10.20Time is of the Essence. Time is of the essence of each provision of
this Agreement.
10.21Representatives. No later than fourteen (14) days after the execution
of this Agreement by a Party, such Party shall appoint one (1) representative to
serve as a point of contact for matters arising under this Agreement. No
representative has the right to amend this Agreement or waive any rights under
this Agreement. A Party may replace its representative at any time at its own
discretion upon providing notice to the other Parties.
57
IN WITNESS WHEREOF, the Parties have caused their duly authorized
representatives to execute this Agreement, on their respective behalves.
GridAmerica LLC
By \s\Nicholas P. Winser
--------------------------------------------
Name (typed or printed): Nicholas P. Winser
Title Chief Executive Officer
Union Electric Company d/b/a/ AmerenUE
Central Illinois Public Service Company d/b/a/
AmerenCIPS
By: Ameren Services Company
(their agent)
By \s\David A. Whiteley
--------------------------------------------
Name (typed or printed): David A. Whiteley
Title Senior Vice President
American Transmission Systems, Incorporated
By \s\Stanley F. Szwed
--------------------------------------------
Name (typed or printed): Stanley F. Szwed
Title Vice President
Northern Indiana Public Service Company
By \s\Jerry L. Godwin
--------------------------------------------
Name (typed or printed): Jerry L. Godwin
Title Chief Operating Officer
58