EXHIBIT B-1
OPERATION AND MAINTENANCE AGREEMENT
FOR
TRANSMISSION FACILITIES
(TRANSFERRED UNDER WISCONSIN "RELIABILITY 2000" LEGISLATION)
BETWEEN
AMERICAN TRANSMISSION COMPANY LLC
AND
[ ]*
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DATED AS OF [ ], 2000
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------------------------
* A Transmission Utility that has transferred Transmission Facilities to the
American Transmission Company LLC.
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND INTERPRETATION............................................3
1.1 Definitions, Generally...............................................3
1.2 Special Definitions..................................................3
1.2.1 Baseline Maintenance Budget...................................3
1.2.2 Baseline Resource Hours.......................................3
1.2.3 Emergency Response Services...................................3
1.2.4 Facilities Maintenance Plan...................................4
1.2.5 Good Cause....................................................4
1.2.6 Good Utility Practice.........................................4
1.2.7 Key Personnel.................................................4
1.2.8 Maintenance Resource Budget...................................5
1.2.9 Maintenance Resource Hours....................................5
1.2.10 Maintenance Services..........................................5
1.2.11 Operations Date...............................................5
1.2.12 Operation Services............................................6
1.2.13 Party.........................................................6
1.2.14 Parties.......................................................6
1.2.15 Services......................................................6
1.2.16 Technology....................................................6
1.2.17 Transmission Facilities.......................................6
1.2.18 Transmission System...........................................7
2. TERM......................................................................7
2.1 Term of Agreement....................................................7
2.2 Extension............................................................7
3. REQUIRED REGULATORY APPROVALS.............................................7
4. RESPONSIBILITIES OF UTILITY CONTRACTOR....................................8
4.1 Scope of Services....................................................8
4.2 Performance Standards................................................8
4.3 Operation Services..................................................11
4.4 Maintenance Services................................................13
4.5 Utility Contractor Resources........................................16
4.6 Facilities Maintenance Plan.........................................17
4.7 Budget..............................................................19
4.8 Reports.............................................................20
4.9 Training............................................................21
4.10 Contracts with Third Parties........................................21
5. RESPONSIBILITIES OF ATCLLC...............................................22
6. COMPENSATION OF UTILITY CONTRACTOR.......................................23
6.1 Compensation for Operation Services and Maintenance Services........23
6.2 Methods of Calculating the Compensation Due.........................24
6.3 Minimum Compensation for Maintenance Services.......................24
6.4 Compensation for Inventory and Storage..............................25
6.5 Billing and Payment.................................................26
6.6 Audits and Adjustments..............................................26
7. OWNERSHIP................................................................27
8. DISPUTE RESOLUTION.......................................................28
9. FORCE MAJEURE............................................................28
10. LIMITATION ON LIABILITY..................................................29
11. INDEMNITY................................................................30
12. INSURANCE................................................................32
13. SUCCESSORS AND ASSIGNS...................................................34
14. NOTICE...................................................................35
15. MISCELLANEOUS............................................................36
15.1 Compliance with Laws................................................36
15.2 Entire Agreement....................................................36
15.3 Counterparts........................................................36
15.4 Amendment...........................................................36
15.5 Survival............................................................36
15.6 Independent Contractor..............................................37
15.7 Confidentiality.....................................................37
15.8 Standards of Conduct................................................38
15.9 No Implied Waivers..................................................38
15.10 No Third-Party Beneficiaries.......................................39
15.11 Severability.......................................................39
15.12 Governing Law......................................................39
15.13 Operation and Prospective Planning.................................39
15.14 Headings...........................................................40
15.15 Affiliate Status of Parties........................................40
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OPERATION AND MAINTENANCE AGREEMENT
FOR
TRANSMISSION FACILITIES
THIS OPERATION AND MAINTENANCE AGREEMENT FOR TRANSMISSION FACILITIES
("Agreement") is entered into as of , 2000 by and between [NAME
---------------
OF CONTRACTING UTILITY] or [SHORT FORM NAME OF CONTRACTING UTILITY]) ("Utility
Contractor"), a Wisconsin corporation, and American Transmission Company LLC
("ATCLLC"), a Wisconsin limited liability company (Utility Contractor and ATCLLC
are individually referred to as "Party" and collectively as "the Parties").
RECITALS
WHEREAS, Wisconsin Act 9 ("Reliability 2000 Legislation"), effective
October 29, 1999, authorized the organization of a new company to provide
electric transmission service;
WHEREAS, pursuant to the provisions of the Reliability 2000 Legislation,
ATCLLC was organized to provide transmission service;
WHEREAS, the Reliability 2000 Legislation authorized electric transmission
utilities to transfer their transmission assets to a new company organized to
provide transmission service; WHEREAS, [SHORT FORM NAME OF CONTRACTING UTILITY]
has agreed to transfer its transmission assets to ATCLLC;
WHEREAS, the Reliability 2000 Legislation requires ATCLLC to contract with
each utility that has transferred transmission facilities to the new company for
the utility to provide reasonable and cost-effective operation and maintenance
services to ATCLLC for a period of three years after ATCLLC commences
operations;
WHEREAS, Utility Contractor and ATCLLC each desire to use this Agreement to
satisfy said requirement of the Reliability 2000 Legislation.
WHEREAS, in furtherance of said requirement of the Reliability 2000
Legislation, the Parties desire to reflect herein their agreement for the
provision of Operation Services and Maintenance Services as defined in this
Agreement. The Parties have also entered into a Forming Party Agreement
Regarding Operating Principles dealing with the performance of certain functions
in operation of the Transmission System and a Transitional Services Agreement
pursuant to which the Parties have arranged for the provision of additional
services upon commencement of operations by ATCLLC and over a transitional
period.
WHEREAS, since the Parties intend that Utility Contractor will commit
resources to performance of the services contemplated hereunder and that ATCLLC
will develop the nature and level of maintenance activity to be performed in
accordance with the procedures, and subject to the standards of, this Agreement,
the Parties have provided that ATCLLC will commit to pay for a certain level of
activity in any event. To minimize the possibility that changes in ATCLLC's
maintenance plans will result in incurrence of this fixed cost obligation, the
Parties have further agreed that ATCLLC may, subject to certain conditions,
including compliance with applicable labor agreements, use the services of
Utility Contractor elsewhere on its system. For convenience, the Parties have
expressed the foregoing commitment as an obligation to use an annual minimum of
85% of the number of hours of Utility Contractor's own labor used in a
representative year for Transmission Facilities maintenance, to pay the direct
costs of such Utility Contractor's own labor at an agreed upon rate per hour,
and all associated overheads, and to pay an annual minimum of 85% of the annual
expenditure of Utility Contractor for Transmission Facilities maintenance in a
representative year.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, the Parties hereby agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS, GENERALLY.
Unless defined in Section 1.2 of this Agreement, the definition of each
defined term used in this Agreement shall be the same as the definition for that
term set forth in the OATT, the Operating Agreement of ATCLLC, or the Asset
Contribution Agreement between the Parties.
1.2 SPECIAL DEFINITIONS.
The following capitalized terms used in this Agreement shall be defined as
set forth below:
1.2.1 BASELINE MAINTENANCE BUDGET.
"Baseline Maintenance Budget" shall mean 85% of the Maintenance
Resource Budget.
1.2.2 BASELINE RESOURCE HOURS.
"Baseline Resource Hours" shall mean eighty-five percent (85%) of
Maintenance Resource Hours.
1.2.3 EMERGENCY RESPONSE SERVICES.
"Emergency Response Services" shall have the definition provided in
Section 4.3 of this Agreement and includes those Services identified on
Exhibit A to this Agreement as "Emergency Response Services."
1.2.4 FACILITIES MAINTENANCE PLAN.
"Facilities Maintenance Plan" shall mean the plan for the provision of
Maintenance Services as defined in Section 4.6 of this Agreement.
1.2.5 GOOD CAUSE.
"Good Cause" shall mean (i) misconduct that is or could be materially
detrimental to the Utility Contractor or ATCLLC, (ii) breach of a material
provision of any agreement to which the Utility Contractor is a party;
(iii) the commission of one or more acts which constitute an indictable
crime under United States Federal, state, or local law, or (iv) the failure
to substantially perform work-related duties.
1.2.6 GOOD UTILITY PRACTICE.
"Good Utility Practice" shall mean any of the practices, methods and
acts engaged in or approved by a significant portion of the electric
utility industry during the relevant time period, or any of the practices,
methods and acts which, in the exercise of reasonable judgment in light of
the facts known at the time the decision was made, could have been expected
to accomplish the desired result at a reasonable cost consistent with good
business practices, reliability, safety and expedition. Good Utility
Practice is not intended to be limited to the optimum practice, method or
act to the exclusion of all others, but rather is intended to include
acceptable practices, methods, or acts generally accepted in the region.
1.2.7 KEY PERSONNEL.
"Key Personnel" shall mean individuals employed by the Utility
Contractor in the positions of managers and supervisors and who are
designated as the individuals directly responsible for supervising or
managing work to be performed or services to be provided under this
Agreement.
1.2.8 MAINTENANCE RESOURCE BUDGET.
"Maintenance Resource Budget" shall mean the total Transmission
Facilities maintenance costs established consistent with Schedule 1 of this
Agreement, of Utility Contractor for the Transmission Facilities for a year
representative of normal conditions, which representative year shall be
based upon a normalized average of such costs over the past five years or
the projected 1/1/2001 Transmission Facilities maintenance budget of
Utility Contractor, as agreed by the Parties.
1.2.9 MAINTENANCE RESOURCE HOURS.
"Maintenance Resource Hours" is an annual unit of measurement that
shall mean the number of hours of transmission maintenance work performed
by Utility Contractor's own employees on the Transmission Facilities in a
year representative of normal conditions, which representative year shall
be based upon an average of such hours over the past five years or as
otherwise agreed by the Parties. Maintenance Resource Hours does not
include any work performed by Utility Contractor's supervisory or
management employees covered in overhead, or by Utility Contractor's
subcontractors.
1.2.10 MAINTENANCE SERVICES.
"Maintenance Services" shall mean those Services identified on Exhibit
A to this Agreement as "Maintenance Services and as further defined in
Section 4.4."
1.2.11 OPERATIONS DATE.
"Operations Date" shall mean January 1, 2001 or such later date on
which ATCLLC receives the necessary approvals, and commences operations.
1.2.12 OPERATION SERVICES.
"Operation Services" shall mean those Services identified on Exhibit A
to this Agreement as "Operation Services" and "Emergency Response
Services," and as further defined in Sections 4.3(a) and (b).
1.2.13 PARTY.
"Party" shall mean either Utility Contractor or ATCLLC.
1.2.14 PARTIES.
"Parties" shall mean both Utility Contractor and ATCLLC.
1.2.15 SERVICES.
"Services" shall mean all Operation Services and Maintenance Services.
1.2.16 TECHNOLOGY.
"Technology" shall mean any ideas, know-how, inventions, developments,
discoveries, trade secrets, processes, technical information, and
improvements relating in any way to the Services, including without
limitations, machines, manufactures, methods, techniques, systems, computer
software and documentation, data and information (including, but not
limited to, maintenance records, reports, training materials, findings,
charts, tables and diagrams) (irrespective of whether in human or
machine-readable form), works of authorship, and products, whether or not
patentable, copyrightable, or susceptible to any other form of protection
and whether or not reduced to practice, and whether or not described in
writing.
1.2.17 TRANSMISSION FACILITIES.
"Transmission Facilities" shall mean the facilities for the
transmission of electric energy and ancillary services transferred to
ATCLLC by Utility Contractor pursuant to, and identified in, the Asset
Contribution Agreement between ATCLLC and [ ], dated [ ],
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2000, and new facilities constructed or acquired by ATCLLC to the extent
ATCLLC requests that Utility Contractor provide Services for such
facilities and to the extent Utility Contractor agrees to provide such
Services.
1.2.18 TRANSMISSION SYSTEM.
"Transmission System" shall mean the system of facilities for the
transmission of electric energy and ancillary services owned or controlled
by ATCLLC and which are covered by the ATCLLC OATT.
2. TERM
2.1 TERM OF AGREEMENT.
Subject to Article 3, this Agreement shall be effective from the date of
its execution or the Operations Date, whichever is earlier, and shall continue
in effect for an initial term through the day before the third anniversary of
the Operations Date.
2.2 EXTENSION.
This Agreement shall automatically renew for subsequent one year terms
unless sooner terminated in accordance with the terms of this Agreement or
either Party provides written notice of its intent not to renew at least one
year prior to the end of the then-current term.
3. REQUIRED REGULATORY APPROVALS
The effectiveness of this Agreement is hereby expressly conditioned upon
the receipt by Utility Contractor and ATCLLC of all permits, regulatory
authorizations and regulatory approvals that shall be required by the Parties to
enter into and perform their obligations under this Agreement in a form
acceptable in the reasonable judgment of the Party affected thereby.
4. RESPONSIBILITIES OF UTILITY CONTRACTOR
4.1 SCOPE OF SERVICES.
(a) Utility Contractor shall perform, or cause to be performed, the
Services in accordance with the terms, conditions and procedures specified in
this Agreement.
(b) Except as specifically provided in this Agreement, Utility
Contractor shall be the exclusive provider of the Services to the Transmission
Facilities during the term of this Agreement.
(c) ATCLLC shall have the right to direct Utility Contractor to provide
any Operation Services, including Emergency Response Services, that may be
necessary or appropriate, in accordance with Good Utility Practice, for the
operation of any of the Transmission Facilities.
(d) Utility Contractor shall provide Maintenance Services for the
Transmission Facilities subject to any limitations on Utility Contractor's
obligation or right to provide such services which are contained in this
Agreement.
4.2 PERFORMANCE STANDARDS.
(a) In meeting their responsibilities hereunder, the Parties shall at
all times follow Good Utility Practice, the adequacy obligation set forth in
Section 2.7 of the Operating Agreement of ATCLLC, and the requirements of this
Agreement.
(b) Utility Contractor shall provide Services in accordance with ATCLLC
direction as necessary to give effect to ATCLLC policies, plans and business
decisions but Utility Contractor shall be responsible for determining the manner
of performance and for supervision of the work specified by ATCLLC or its duly
authorized designee. With respect to performance of Operation Services, should
Utility Contractor object to following the specifications or directives of
ATCLLC on any basis, Utility Contractor shall nonetheless follow such directives
and specifications. Where, in the judgment of Utility Contractor, following the
specifications or directives of ATCLLC would pose a substantial risk to property
or human safety, Utility Contractor shall, where time permits, notify a
representative of ATCLLC and seek relief from the specification or directive.
Where Utility Contractor does not have time to notify an ATCLLC representative
and obtain relief, the Utility Contractor may take reasonable steps to mitigate
damage to property or risk to human safety. In any non-emergency case in which
Utility Contractor objects to following the directives or specifications of
ATCLLC, its Key Personnel shall so notify ATCLLC in writing or confirm oral
notice in writing. Utility Contractor may, where it has given the notice
required in this Section, subsequently address its objections under the dispute
resolution process set forth in Article 8 of this Agreement.
(c) Except as directed by ATCLLC and/or the Facilities Maintenance Plan,
Utility Contractor shall make good faith efforts to maintain the pre-Agreement
quality and timeliness of its performance of the Services in accordance with
Good Utility Practice, including priority of work, maintenance intervals, and
methods.
(d) In providing the Operation Services, and in implementing the
Facilities Maintenance Plan, Utility Contractor shall, except as directed by
ATCLLC and/or provided in Facilities Maintenance Plans, continue to seek to
preserve the useful life of the Transmission Facilities.
(e) Except as otherwise directed by ATCLLC or as provided in the
Facilities Maintenance Plan, the Budget, or prescribed by Good Utility Practice,
Utility Contractor shall maintain and operate the Transmission Facilities (i) in
accordance with standards and procedures necessary to preserve coverages under
all insurance policies applicable to the Transmission Facilities; (ii) in
accordance with the procedures required to preserve all applicable
manufacturers' warranties; and (iii) with best efforts to leave any portion of
the Transmission Facilities on which work is performed in good repair and
reliable working order on completion of the work.
(f) Utility Contractor shall not be deemed to have failed to adequately
perform a specific Service under this Agreement where (i) Utility Contractor has
performed the specific Service in accordance with Good Utility Practice, the
Facilities Maintenance Plan, or any directive, specification, procedure or
policy of ATCLLC; or (ii) where its ability to adequately perform a specific
Service was constrained by an ATCLLC-imposed budgetary limitation on that
specific Service to which limitation Utility Contractor objected in writing, or
if orally, confirmed in writing by Key Personnel, at such time as the effect of
the budget restraint became known.
(g) If ATCLLC discovers that any Services performed fail to conform to
this Agreement, Utility Contractor shall, at ATCLLC's option, promptly correct
or re-perform such non-conforming Services so that they conform to this
Agreement. Without limiting the generality of this provision, Utility Contractor
shall provide the labor, engineering, supervision, equipment, tools and
materials necessary to effect such remedy. Utility Contractor shall perform its
remedial obligations hereunder in a timely manner consistent with ATCLLC's
reasonable requirements. If Utility Contractor repeatedly fails, or is unable,
to remedy such non-conforming Services during a period consistent with ATCLLC's
reasonable requirements, ATCLLC may undertake to remedy the non-conforming
Services and in such case Utility Contractor shall reimburse ATCLLC for any
reasonable costs incurred thereby. This subsection shall be in addition to any
other remedies provided by this Agreement or available at law or equity.
(h) In its performance of Emergency Response Services, Utility
Contractor shall undertake service restoration efforts in a fashion which does
not unduly favor or discriminate against any distribution system.
4.3 OPERATION SERVICES.
(a) OPERATIONS SERVICES.
Utility Contractor shall perform all of ATCLLC's requirements for Operation
Services identified in Exhibit A as specified and directed by ATCLLC. Exclusive
of Emergency Response Services, which are addressed separately below, Operation
Services consist of the following:
(i) field switching of transmission equipment,
(ii) investigating system anomalies and performing other field
operational activities necessary or appropriate for the operation of the
Transmission System. Utility Contractor shall perform these switching and
related activities using its employees who typically perform such
functions.
(b) EMERGENCY RESPONSE SERVICES.
Utility Contractor shall perform, or cause to be performed, all of ATCLLC's
requirements for Emergency Response Services. Emergency Response Services shall
mean all services needed for emergency response, repairs and reporting related
to the Transmission Facilities, including those items designated on Exhibit A as
Emergency Response Services. Utility Contractor shall maintain an organization
and personnel sufficient for 24-hours per day, seven days per week provision of
Emergency Response Services to ATCLLC. Communications between ATCLLC and Utility
Contractor concerning Emergency Response Services shall be made using the method
or methods appropriate under the circumstances at the time the communication
takes place. In carrying out such Services:
(1) Utility Contractor shall make timely reports to ATCLLC Operation
Centers of the impact of anticipated and actual weather and emergency
conditions on the Transmission Facilities, including regular updates as to
the actions taken by Utility Contractor in response thereto.
(2) Utility Contractor shall work closely with ATCLLC to coordinate
communications with customers, public agencies and the media about
emergency conditions and service restoration efforts.
(3) Utility Contractor shall take prompt and timely action to prevent
or minimize damage to Transmission Facilities, and to facilitate their
restoration to service, in a weather or other emergency. Utility Contractor
shall seek prior approval of such actions by ATCLLC if practicable. Such
prior approval may be in the form of an emergency response plan agreed to
by ATCLLC and Utility Contractor.
(4) Unless otherwise directed by ATCLLC, Utility Contractor shall
repair and replace damaged Transmission Facilities, and promptly restore
the Transmission Facilities to pre-emergency conditions.
(5) If ATCLLC reasonably believes that Utility Contractor either
lacks, or will be unable or unwilling to deploy, sufficient resources to
promptly restore Transmission Facilities to their pre-emergency condition
or to promptly facilitate their restoration to service, ATCLLC may,
notwithstanding Section 4.1(b), provide such resources itself or through
third parties, consistent with Good Utility Practice. In such event, and to
the extent available, Utility Contractor shall provide the necessary
equipment, spare parts, materials and supplies to ATCLLC or its contractors
as requested by ATCLLC.
4.4 MAINTENANCE SERVICES.
(a) GENERAL.
Except as expressly provided in this Agreement, Utility Contractor shall
perform, or cause to be performed, all Maintenance Services as described in
Exhibit A to this Agreement and in each Quarterly update of the Facilities
Maintenance Plan. In accordance with each Facilities Maintenance Plan, the work
shall include:
(1) periodic inspection, testing and monitoring;
(2) scheduling and execution of preventive and corrective
maintenance;
(3) scheduling and execution of outages needed to perform preventive
and corrective maintenance;
(4) compiling and maintaining records, reports and data bases related
to preventive and corrective maintenance activities;
(5) ensuring compliance with quality assurance policies and
procedures of ATCLLC, consistent with Good Utility Practice; and
(6) forestry work or other work for the maintenance of Transmission
Facilities rights-of-way or easements.
(b) UNSCHEDULED MAINTENANCE.
(1) Utility Contractor shall perform unscheduled maintenance on the
Transmission Facilities when such maintenance is required by Good Utility
Practice. For substantial unscheduled maintenance that is not covered in
the Facilities Maintenance Plan, Utility Contractor shall first provide
ATCLLC with a description of the work that Utility Contractor proposes to
perform, the resources needed to carry out the work, a schedule for the
work, and an estimate of the cost of the work to be performed. Utility
Contractor shall proceed with substantial unscheduled maintenance only
after receiving approval from ATCLLC, which approval may be given orally if
promptly confirmed in writing. For purposes of this paragraph, substantial
means having a cost, as determined in Article 6 of this Agreement, of more
than $2,500.
(c) LIMITS ON OBLIGATION OR RIGHT TO TAKE OR PROVIDE MAINTENANCE SERVICES.
(1) Utility Contractor shall not be required to perform Maintenance
Services during any year, the cost of which exceeds 115% of the Maintenance
Resource Budget or to use its own employees in excess of 115% of the number
of Maintenance Resource Hours.
(2) ATCLLC may provide, either itself or through third parties, up to
5% of the Baseline Maintenance Budget for the Transmission Facilities,
provided such Maintenance Services are not typically performed by Utility
Contractor's non-supervisory employees.
(3) Utility Contractor and ATCLLC shall use reasonable good faith
efforts to identify Resource Hours in excess of 115% of Baseline
Maintenance Hours which Utility Contractor may have available to perform
Maintenance Services ("Additional Resource Hours"). To the extent such
Additional Resource Hours are identified, ATCLLC, if it needs or desires
more Maintenance Services than could be obtained using 115% of the Baseline
Maintenance Hours, shall first request Utility Contractor to provide such
additional Maintenance Services. Utility Contractor shall respond to
ATCLLC's request for such additional Maintenance Services as soon as
reasonably possible but within seven days.
(4) Use of Utility Contractor's Employees for Maintenance Services on
the Transmission System: If at any point in time in a given calendar year
ATCLLC reasonably believes it may not, during the course of that calendar
year, request an amount of Maintenance Services from Utility Contractor
sufficient to exhaust the Baseline Resource Hours or Baseline Maintenance
Budget for work on the Transmission Facilities, ATCLLC may direct Utility
Contractor to perform Maintenance Services on other transmission facilities
owned by ATCLLC and Utility Contractor shall perform such Services using
either Utility Contractor's own employees or subcontractors, provided that:
(i) Such employees are otherwise typically assigned to perform
Maintenance Services;
(ii) Such employees are qualified to perform Maintenance Services
on such transmission facilities;
(iii) the provisions of any applicable labor agreement are not
violated;
(iv) subcontractors are not used to perform the Services unless
and until Baseline Resource Hours are exhausted; and
(v) performance by subcontractors is allowed under the relevant
subcontract. Utility Contractor shall not enter into any labor
contract or subcontract for any of the Services during the term of
this Agreement that would limit ATCLLC's use of Utility Contractor's
own employees or subcontractors under this Section 4.4(c).
(5) ATCLLC Use of Other Utilities to Perform Maintenance Services:
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Utility Contractor agrees that ATCLLC may direct any other utility which has
contributed or will contribute transmission facilities to ATCLLC (a
"Contributing Utility") to perform Maintenance Services on the Transmission
Facilities using Contributing Utility's employees or subcontractor if each of
the following conditions is satisfied:
(i) ATCLLC reasonably believes that the amount of Maintenance
Services it will request Utility Contractor to perform during the year will
equal or exceed either the Baseline Resource Hours in the case of using
Utility Contractor's own employees or the Baseline Maintenance Budget in
the case of using Utility Contractor's subcontractors;
(ii) The amount of Maintenance Services ATCLLC will request a
Contributing Utility to perform under an Operation and Maintenance
Agreement relating to transmission facilities that it contributed to ATCLLC
will be less than the Baseline Resource Hours or the Baseline Maintenance
Budget provided for in that Operation and Maintenance Agreement;
(iii) The Contributing Utility's employees are (A) typically assigned
to perform Maintenance Services, and (B) qualified to perform Maintenance
Services on the Transmission Facilities; and further provided that the
provisions of any applicable labor agreement would not be violated by
Contributing Utility's performance of services on the Transmission
Facilities.
(iv) The provisions of any applicable subcontract between Contributing
Utility and subcontractor would not be violated.
(v) Subcontractors are not used to perform the services unless and
until Utility Contractor's Baseline Resource Hours are exhausted.
4.5 UTILITY CONTRACTOR RESOURCES.
(a) Utility Contractor shall maintain and manage the organizational and
physical resources needed to continue to perform the Services.
(b) Utility Contractor shall maintain an organization and personnel,
including contractors, capable of performing the Services in a cost effective
manner. Qualifications for Key Personnel assigned to manage the performance of
Services shall be available to ATCLLC at any reasonable time. ATCLLC shall have
the right to interview the Key Personnel proposed by Utility Contractor to
manage the performance of Services and to reject such Key Personnel for Good
Cause at any time during the term of this Agreement.
(c) Utility Contractor shall maintain and manage the equipment, spare
parts, materials and supplies needed to perform the Services as required by this
Agreement.
4.6 FACILITIES MAINTENANCE PLAN.
(a) As soon as reasonably possible before the anticipated date for
transfer of the Transmission Facilities from Utility Contractor to ATCLLC, and
thereafter at least 90 days before the beginning of each quarter throughout the
term of this Agreement, ATCLLC will submit in writing to Utility Contractor, for
Utility Contractor's review and comment, a Facilities Maintenance Plan for the
12 month planning period beginning with such quarter, and for each month in such
planning period, describing ATCLLC's updated proposed plan for the operation and
maintenance of the Transmission Facilities. It is agreed however that ATCLLC
shall use Utility Contractor's Facilities Maintenance Plan and Budget for the
first 12 month period, subject to quarterly updates and revisions as provided
herein.
(b) The Facilities Maintenance Plan shall include the information, and
follow the format, specified by ATCLLC. The Facilities Maintenance Plan shall,
consistent with Good Utility Practice and the adequacy standard set forth in
Section 2.7 of the Operating Agreement of ATCLLC, describe the Maintenance
Services that ATCLLC expects Utility Contractor to perform for the first quarter
of the 12 month planning period, and shall include a good faith estimate of the
work ATCLLC proposes to have performed during the balance of the 12 month period
covered by the plan, and the scheduled outages associated with these activities.
The Facilities Management Plan shall provide for full utilization of Baseline
Resource Hours and Baseline Maintenance Budget and shall include sufficient
detail to permit Utility Contractor to plan the work, prepare the Budget, and
have available the necessary parts, materials, and supplies to perform the
Maintenance Services.
(c) Utility Contractor shall review, and recommend revisions as it deems
appropriate and are consistent with Good Utility Practice, and return the
Facilities Maintenance Plan to ATCLLC within 30 days after its submittal.
ATCLLC, may, after review and consultation with Utility Contractor with respect
to work force and material availability issues, revise the plan, provided that
any such revisions are consistent with the responsibilities of the Parties, and
approve and return the plan to Utility Contractor within 30 days prior to the
start of the next quarter. ATCLLC may at any time, in response to suggestions
made by Utility Contractor or on its own initiative, elect to revise the
Facilities Maintenance Plan to meet the then current needs of ATCLLC provided
that such revisions are consistent with the responsibilities of the Parties
under this Agreement, including ATCLLC's commitment to fully utilize Baseline
Resource Hours and its commitment to pay the Baseline Maintenance Budget. If
ATCLLC does so elect to revise the Facilities Maintenance Plan, ATCLLC shall
notify Utility Contractor with a change order in a timely fashion consistent
with the circumstances, and if such notification is given orally, ATCLLC shall
promptly confirm it in writing or via fax or electronic medium; provided,
however, that any costs incurred by Utility Contractor in reasonable
anticipation of performing Services under the Facilities Maintenance Plan as
previously approved by ATCLLC, and which could not reasonably have been
mitigated by Utility Contractor, shall be borne by ATCLLC. Services performed
pursuant to ATCLLC change orders shall be subject to all applicable terms and
conditions of this Agreement.
(d) The Facilities Maintenance Plan shall avoid, if possible, scheduling
Maintenance Services during anticipated peak usage of the Transmission System.
4.7 BUDGET.
(a) As soon as possible before the anticipated date for transfer of the
Transmission Facilities from Utility Contractor to ATCLLC, and thereafter at
least 60 days before the beginning of each quarter throughout the term of this
Agreement, Utility Contractor shall submit in writing to ATCLLC, for ATCLLC's
review and approval, a budget for the first quarter of the 12 month planning
period, and a good faith cost estimate for the work ATCLLC proposes to have
performed during the balance of the 12 month period covered by the Facilities
Maintenance Plan or updated Facilities Maintenance Plan for that 12 month period
("Budget"). The Budget prepared by Utility Contractor shall reflect full
utilization of Baseline Resource Hours and the Baseline Maintenance Budget.
(b) The Budget shall include the information, and follow the format used
by Utility Contractor in its budget associated with its existing plans for the
initial 12 month period with such modification as ATCLLC may reasonably require,
including coordinating the Budget with procedures for centralized ATCLLC cost
accounting and billing.
(c) ATCLLC shall review, consult with Utility Contractor about work
force and materials availability, and revise, as it deems appropriate, approve
and return the Budget to Utility Contractor within 30 days of its submittal.
During the term of the Budget, ATCLLC may at each quarterly review, in response
to suggestions made by Utility Contractor or on its own initiative, elect to
revise the Budget and the Facilities Maintenance Plan to meet the then current
needs of ATCLLC subject to Good Utility Practice and the adequacy obligation set
forth in Section 2.7 of the Operating Agreement of ATCLLC and ATCLLC's
commitment to fully utilize Baseline Resource Hours and to pay the amount of the
Baseline Maintenance Budget. If ATCLLC does elect to revise the Budget and the
Facilities Maintenance Plan, ATCLLC shall communicate the changes made to
Utility Contractor in writing, in a timely fashion; provided, however, that any
costs incurred by Utility Contractor in reasonable anticipation of performing
Services under the Budget as previously approved by ATCLLC, and which could not
reasonably have been mitigated by Utility Contractor, shall be borne by ATCLLC.
4.8 REPORTS.
(a) As part of the Services, Utility Contractor shall prepare and submit
the reports described in this Section. Such reports and data shall be provided
to ATCLLC without restriction, and are subject to the confidentiality provisions
of Section 15.7 of this Agreement.
(b) As part of the Services, Utility Contractor shall prepare, on a
quarterly basis within 30 days after the end of the quarter, a summary of the
significant maintenance and inspection work performed during the previous
quarter. Such report shall include a summary of all material deficiencies in the
Transmission Facilities observed or experienced by Utility Contractor, and
Utility Contractor's proposals for correcting such deficiencies.
(c) As part of the Services, Utility Contractor shall prepare, on a
monthly basis within 30 days after the end of the month, a budget variance
report setting forth actual and budgeted expenditures for the period and year to
date, together with Utility Contractor's explanation of any variance.
(d) Utility Contractor shall prepare such other reports, and provide
such other information, as ATCLLC may request regarding the operation and
maintenance of the Transmission Facilities.
4.9 TRAINING.
(a) As part of the Services, Utility Contractor shall train its
employees and agents appropriately to carry out its responsibilities to ATCLLC
under this Agreement. Upon request, Utility Contractor shall provide ATCLLC the
training materials, and the course materials used by the Utility Contractor in
any training programs conducted pursuant to this Section.
(b) As part of the Services, Utility Contractor shall provide training
sessions to familiarize ATCLLC employees or agents with the operation and
maintenance of the Transmission Facilities and the Services provided hereunder.
Utility Contractor shall provide such training sessions at such times and
locations, to such audiences, and with such content, as may be appropriate and
requested by ATCLLC.
4.10 CONTRACTS WITH THIRD PARTIES.
ATCLLC acknowledges that Utility Contractor may have entered into contracts
with third parties for the maintenance or operation of the Transmission
Facilities. ATCLLC further acknowledges that Utility Contractor may wish in the
future to enter into contracts with third parties to perform some of the
Services. All such third-party contracts shall be subject to the following
provisions.
(a) Existing contracts. As soon as practicable before the Operations
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Date, Utility Contractor shall provide ATCLLC, for its review, subject to the
confidentiality provisions of Section 15.7, copies of all third-party contracts
then currently in effect and under which the amounts payable are expected to
exceed $100,000 annually, for Services covered by this Agreement. During the
term of this Agreement, Utility Contractor shall not modify any of these
third-party contracts without the prior written approval of ATCLLC, which
approval ATCLLC shall not unreasonably withhold or delay.
(b) Future Contracts. Utility Contractor may enter into contracts with
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qualified third parties for the provision of Services, provided that Utility
Contractor obtains ATCLLC's prior written approval of all proposed contractors
and contracts under which the amounts payable are reasonably expected to exceed
$100,000 annually, which approval ATCLLC shall not unreasonably withhold or
delay.
(c) Utility Contractor may not split any contracts to avoid the $100,000
approval threshold.
(d) Contract Invoices. Utility Contractor shall pass all invoices it
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receives for third-party contract work used to provide Services under this
Agreement directly through to ATCLLC, with no additional charges or markups,
except as may be specifically authorized under this Agreement.
5. RESPONSIBILITIES OF ATCLLC
During the term of this Agreement, ATCLLC shall, at its cost and expense,
and in a manner consistent with Good Utility Practice, perform or provide the
following at the times required to support the provision of the Services:
(a) ATCLLC shall develop and maintain policies and procedures necessary
for maintenance of reliable, cost effective transmission service and maximizing
the useful life of the Transmission System, and shall implement those policies
through the establishment of the Facilities Maintenance Plan and its directives
to Utility Contractor.
(b) ATCLLC shall provide Utility Contractor with all necessary access to
the Transmission Facilities and ATCLLC properties upon which such Transmission
Facilities are located.
(c) ATCLLC shall, with the concurrence and assistance of Utility
Contractor as may be necessary or appropriate, procure and maintain in effect
all permits, certificates and licenses needed by the owner of the Transmission
Facilities for the operation and maintenance of such Transmission Facilities.
(d) ATCLLC shall prepare and submit to Utility Contractor, review with
Utility Contractor, revise, approve and update Facilities Maintenance Plans, as
described in Section 4.6 hereof. ATCLLC shall review, revise and approve
Budgets, as described in Section 4.7 hereof. All such Facilities Maintenance
Plans, revisions to Facilities Maintenance Plans, Budgets, and revisions to
Budgets shall be reasonable, consistent with Good Utility Practice, in
accordance with the adequacy language contained in Section 2.7 of the Operating
Agreement of ATCLLC, and subject to ATCLLC's commitment to fully utilize
Baseline Resource Hours and the Baseline Maintenance Budget. Approvals of
Facilities Maintenance Plans and Annual Budgets shall not be unreasonably
withheld or delayed.
(e) ATCLLC shall provide training sessions to familiarize Utility
Contractor personnel with the processes and procedures relating to the Services
that are developed by ATCLLC during the term of this Agreement for application
by ATCLLC throughout the ATCLLC Transmission System.
(f) ATCLLC shall provide Utility Contractor with such other information,
oversight and direction reasonably required by Utility Contractor to fulfill
Utility Contractor's responsibilities under this Agreement.
6. COMPENSATION OF UTILITY CONTRACTOR
6.1 COMPENSATION FOR OPERATION SERVICES AND MAINTENANCE SERVICES.
As full and complete compensation for Utility Contractor's provision of
Operation Services and Maintenance Services, ATCLLC shall pay Utility Contractor
all of the reasonable direct and indirect costs incurred by Utility Contractor
in performing such Services. Direct and indirect costs include but are not
limited to labor costs with loadings, which shall include labor costs for tasks
such as recording costs and invoicing ATCLLC and the cost of materials and
supplies; return of and on the cost of property employed; and payments to
contractors, plus all overheads directly associated with any and all of these
costs.
6.2 METHODS OF CALCULATING THE COMPENSATION DUE.
The methods and procedures for determining, recording, allocating, billing
and auditing of Utility Contractor's costs is set forth in Schedule 1 hereto.
6.3 MINIMUM COMPENSATION FOR MAINTENANCE SERVICES.
(a) Utility Contractor and ATCLLC shall in connection with the
preparation of the initial Facilities Maintenance Plan determine the Maintenance
Resource Budget.
(b) The Parties shall identify that portion of the Maintenance Resource
Budget that is attributable to Maintenance Resource Hours.
(c) Section 6.1 notwithstanding, as minimum compensation for the
performance of the Maintenance Services by Utility Contractor under this
Agreement, ATCLLC shall annually pay Utility Contractor (i) the amount
attributable to unused Baseline Resource Hours as determined pursuant to Section
6.3(d) below; and (ii) the amount of the Baseline Maintenance Budget less any
amount that ATCLLC pays for unused Baseline Resource Hours pursuant to Section
6.3(d).
(d) ATCLLC agrees to annually utilize all of the Baseline Resource
Hours. Utility Contractor agrees to limit the use of subcontractors to the
extent that use of subcontractors would result in Baseline Resource Hours not
being fully utilized, except as agreed by ATCLLC. If ATCLLC does not fully
utilize the Baseline Resource Hours, ATCLLC shall pay Utility Contractor for the
unused Baseline Resource Hours, calculated as the product of the number of
unused Baseline Resource Hours times an appropriately weighted annual average
hourly cost, which shall be calculated as the actual annual charge for
Maintenance Services rendered and as determined under Section 6.1, less
supplies, materials, and subcontractor payments, divided by the number of hours
spent by Utility Contractor's own employees in providing the Maintenance
Services.
(e) If payments of compensation under Section 6.1 are less than the
minimum payments required by Section 6.3(c), ATCLLC shall pay Utility Contractor
the difference.
(f) Where the total cost of Maintenance Services rendered exceeds the
Baseline Maintenance Budget payment, ATCLLC's obligation to pay for unused
Baseline Resource Hours is conditioned upon Utility Contractor's compliance with
its obligation under Section 6.3(d) to limit the use of subcontractors to the
extent that their use would result in underutilization of Baseline Resource
Hours.
(g) Where the parent of Utility Contractor is a registered holding
company under the Public Utility Holding Company Act of 1935, as amended
("PUHCA"), the minimum payment obligation set forth in Section 6.3(c) shall
apply only to the extent allowed by PUHCA, or authorized pursuant to an
exemption granted thereunder by the Securities and Exchange Commission.
(h) To the extent that Force Majeure prevents Utility Contractor from
performing Maintenance Services during the calendar year or prevents ATCLLC from
taking Maintenance Services during the calendar year, ATCLLC shall receive a
ratable credit against its obligation to utilize Baseline Resource Hours and its
obligation to pay the amount of the Baseline Maintenance Budget.
6.4 COMPENSATION FOR INVENTORY AND STORAGE.
(a) Upon cancellation or expiration of this Agreement, ATCLLC agrees to
purchase the inventory of materials and supplies under the provisions of Section
3.8 of the Asset Contribution Agreement.
(b) ATCLLC shall have the option to lease from Utility Contractor, or
rent at cost, the warehouse space and other facilities and systems used by
Utility Contractor to maintain and manage such materials and supplies.
6.5 BILLING AND PAYMENT.
Utility Contractor shall provide invoices to ATCLLC each month, setting
forth the costs incurred by Utility Contractor during the previous month to
provide the Services, and identifying costs accrued for Services by the Utility
Contractor during the previous month, which accrued costs will be invoiced at a
later date. ATCLLC shall pay each invoice within 15 days of receipt from Utility
Contractor. Within 60 days after the end of each calendar year of this
Agreement, Utility Contractor shall calculate the amount due under Section
6.3(c) above and shall provide ATCLLC with an invoice reflecting that amount.
Billing and payment disputes that cannot be resolved in the normal course of
business shall be resolved using the dispute resolution procedures described in
Article 8.
6.6 AUDITS AND ADJUSTMENTS.
Utility Contractor shall maintain and retain for such time as ATCLLC may
reasonably direct, but not for longer than six years, the books and other
records needed to document the costs Utility Contractor incurs as a result of
fulfilling its obligations under this Agreement. Utility Contractor shall
respond to any reasonable request from ATCLLC for information related to a cost
charged by Utility Contractor to ATCLLC by providing ATCLLC the information
reasonably needed by ATCLLC to verify the cost in question. From time to time,
ATCLLC may conduct, and Utility Contractor shall permit ATCLLC to conduct or
cause to be conducted by its authorized agents, at ATCLLC's expense, audits of
the books and records of Utility Contractor that relate to the Services provided
under this Agreement. Such audits will be conducted at reasonable, mutually
agreed upon times, provided that ATCLLC must contest invoices within one year of
receipt and must complete any audit relating to a contested invoice within a
reasonable period of time thereafter. Any adjustment identified to be made as a
result of an audit and that is payable under Section 5 of Schedule 1 shall be
made to the billing statement next issued following the conclusion of the audit.
7. OWNERSHIP
For the purpose of this Agreement:
(a) Rights in ATCLLC Independently Developed Technology: Any Technology
prepared, developed or acquired solely by the ATCLLC shall be owned solely by
ATCLLC (hereinafter, "ATCLLC Owned Technology"). Except as provided for herein,
nothing herein shall imply a license in the ATCLLC Owned Technology.
(b) Rights In Utility Contractor Independently Developed Technology: Any
Technology prepared, developed or acquired solely by Utility Contractor shall be
owned solely by Utility Contractor (hereinafter, "Utility Contractor Owned
Technology"). Except as provided for herein, nothing herein shall imply a
license in the Utility Contractor Owned Technology. (c) Rights In Jointly
Developed Technology: Any Technology jointly prepared, developed or acquired by
the ATCLLC and Utility Contractor, shall be jointly owned (hereinafter, "Joint
Technology"). The ownership rights granted under this paragraph shall be limited
to the Joint Technology only and, except as provided for herein, does not grant
any rights, license or otherwise in either the ATCLLC Owned Technology or
Utility Contractor Owned Technology that may be necessary to utilize the Joint
Technology.
(d) Grant Of Rights In ATCLLC Owned Technology: To the extent any ATCLLC
Owned Technology is needed by a Utility Contractor in furtherance of performing
the Services or any aspect thereof, the ATCLLC hereby grants to Utility
Contractor a full and complete, world-wide, royalty-free, fully paid-up,
non-exclusive license to use, without the right to grant sublicenses, the ATCLLC
Owned Technology.
(e) Grant Of Rights In Background Utility Contractor Technology: To the
extent that background or underlying technology of Utility Contractor used by
Utility Contractor in its performance of Services hereunder is required by
ATCLLC to make use of ATCLLC Owned Technology or the Joint Technology in order
to operate and maintain the Transmission Facilities, Utility Contractor hereby
grants to the ATCLLC a full and complete, world-wide, royalty-free, fully
paid-up, non-exclusive license to use the background or underlying technology of
the Utility Contractor, for the term of this Agreement and afterwards but only
for the purposes and to the extent used during the term of this Agreement,
without the right to grant sublicenses.
(f) Shared Rights in Joint Technology: The ATCLLC and Utility Contractor
shall retain perpetually full and complete rights to (e.g., make, use or sell)
the Joint Technology. Neither party may assign or otherwise transfer any rights
in the Joint Technology, by license or otherwise, to the detriment of the other.
8. DISPUTE RESOLUTION
Any dispute arising out of or in connection with this Agreement shall be
resolved according to the dispute resolution procedures set forth in Exhibit B
to the Operating Agreement of American Transmission ATCLLC.
9. FORCE MAJEURE
(a) Neither Party shall be responsible or liable, or deemed in breach
hereof, to the extent the performance of its respective obligations hereunder is
prevented or delayed due solely to circumstances beyond the reasonable control
and without the fault or negligence of the party experiencing such impediment to
performance, including but not limited to acts of God; war; riots; strikes,
lockouts or other labor disturbances; labor or material shortages, including
unavailability of Utility Contractor resources required for Operation Services
or required for fulfillment of the Facilities Maintenance Plan; actions or
failures to act on the part of governmental authorities preventing or delaying
performance; inability despite due diligence to obtain required licenses; or
fire (such causes hereinafter called "Force Majeure").
(b) The Party experiencing the Force Majeure shall exercise due
diligence in endeavoring to overcome any Force Majeure impediment to its
performance, but settlement of its labor disturbances shall be entirely within
its discretion. The Party experiencing the Force Majeure shall promptly give
written notification to the other Party. This written notification shall include
a full and complete explanation of the Force Majeure and its cause, the status
of the Force Majeure, and the actions such Party is taking and proposes to take
to overcome the Force Majeure. ATCLLC shall have the right, upon written notice
to Utility Contractor, to obtain alternate contractors to perform the Services
during any event of Force Majeure that prevents or delays Utility Contractor's
performance hereunder if the Force Majeure has or, in ATCLLC's reasonable
judgment, threatens to have an adverse effect on ATCLLC's ability to conduct its
operations.
10. LIMITATION ON LIABILITY
With respect to claims by and between the Parties under this Agreement, the
measure of damages at law or in equity in any action or proceeding shall be
limited to direct actual damages only, such direct actual damages shall be the
sole and exclusive remedy and all other remedies or damages at law or in equity
are waived and neither Party shall be liable in statute, contract, in tort
(including negligence), strict liability, warranty or under any other legal
theory or otherwise to the other Party, its agents, representatives, and/or
assigns, for any special, incidental, punitive, exemplary or consequential loss
or damage whatsoever, including, but not limited to, loss of profits or revenue
on work not performed, for loss of use of or under-utilization of the other
Party's facilities, loss of use of revenues, attorneys' fees, litigation costs,
or loss of anticipated profits, resulting from either Party's performance or
non-performance of an obligation imposed on it by this Agreement, without regard
to the cause or causes related thereto, including the negligence of any party.
The Parties expressly acknowledge and agree that this limitation shall apply to
any claims for indemnification under Article 11 of this Agreement. The
provisions of this section shall survive the termination or expiration of this
Agreement.
11. INDEMNITY
(a) Utility Contractor's Indemnification. Subject to the provisions of
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Article 10, Utility Contractor shall indemnify, hold harmless and defend ATCLLC,
and its officers, directors, employees, affiliates, managers, members, trustees,
shareholders, agents, contractors, subcontractors, affiliates' employees,
invitees and successors, from and against any and all claims, demands, suits,
obligations, payments, liabilities, costs, losses, judgments, damages and
expenses (including the reasonable costs and expenses of any and all actions,
suits, proceedings, assessments, judgments, settlements, and compromises
relating thereto, reasonable attorneys' and expert fees and reasonable
disbursements in connection therewith) for damage to property, injury to any
person or entity, or death of any individual, including ATCLLC's employees and
affiliates' employees, Utility Contractor's employees, or any other third
parties, to the extent caused wholly or in part by any act or omission,
negligent or otherwise, by Utility Contractor or its officers, directors,
employees, agents, contractors, subcontractors and invitees arising out of or
connected with Utility Contractor's performance or breach of this Agreement, or
the exercise by Utility Contractor of its rights hereunder; provided, however,
that the provisions of this Section shall not apply if any such injury, damage
or death is held to have been caused by the negligence or intentional wrongdoing
of ATCLLC, its agents or employees. In furtherance of the foregoing
indemnification and not by way of limitation thereof, Utility Contractor hereby
waives any defense it otherwise might have under applicable workers'
compensation laws.
(b) ATCLLC's Indemnification. Subject to the provisions of Article 10,
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ATCLLC shall indemnify, hold harmless and defend Utility Contractor, its parent
and its officers, directors, employees, affiliates, managers, members, trustees,
shareholders, agents, contractors, subcontractors, invitees and successors, from
and against any and all claims, demands, suits, obligations, payments,
liabilities, costs, losses, judgments, damages and expenses (including the
reasonable costs and expenses of any and all actions, suits, proceedings,
assessments, judgments, settlements, and compromises relating thereto,
reasonable attorneys' and expert fees and reasonable disbursements in connection
therewith) for damage to property, injury to any person or entity, or death of
any individual, including Utility Contractor's employees and affiliates'
employees, ATCLLC's employees, or any other third parties, to the extent caused
wholly or in part by any act or omission, negligent or otherwise, by ATCLLC or
its officers, directors, employees, agents, contractors, subcontractors and
invitees arising out of or connected with ATCLLC's performance or breach of this
Agreement, or the exercise by ATCLLC of its rights hereunder; provided, however,
that the provisions of this Section shall not apply if any such injury, damage
or death is held to have been caused by the negligence or intentional wrongdoing
of Utility Contractor, its agents or employees. In furtherance of the foregoing
indemnification and not by way of limitation thereof, ATCLLC hereby waives any
defense it otherwise might have under applicable workers' compensation laws.
(c) Indemnification Procedures. Any Party seeking indemnification under
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this Agreement shall give the other Party notice of such claim as soon as
practicable but in any event on or before the thirtieth (30th) day after the
Party's actual knowledge of such claim or action. Such notice shall describe the
claim in reasonable detail, and shall indicate the amount (estimated if
necessary) of the claim that has been, or may be sustained by, said Party. To
the extent that the other Party will have been actually and materially
prejudiced as a result of the failure to provide such notice, such notice will
be a condition precedent to any liability of the other Party under the
provisions for indemnification contained in this Agreement. Neither Party may
settle or compromise any claim for which indemnification is sought under this
Agreement without the prior consent of the other Party; provided, however, said
consent shall not be unreasonably withheld or delayed. Each Party's
indemnification obligation will survive expiration, cancellation or early
termination of this Agreement.
12. INSURANCE
(a) The Parties agree to maintain, at their own cost and expense,
general and automobile liability, worker's compensation, and other forms of
insurance relating to their operations for the life of this Agreement in the
manner, and amounts, at a minimum, as set forth below,
(i) Workers' Compensation Insurance in accordance with all applicable
state, federal and maritime law, including Employer's Liability
Insurance in the amount of $1,000,000 per accident;
(ii) Commercial General Liability Insurance, including Contractual
Liability Coverage for liabilities assumed under this Agreement, and
Personal Injury Coverage in the amount of $25,000,000 per occurrence
for bodily injury and property damage. Utility Contractor's policy
shall include ATCLLC and ATC Management Inc. as additional insureds
and ATCLLC's policy shall include Utility Contractor as an additional
insured;
(iii) Automobile Liability Insurance for all owned, non-owned, and hired
vehicles with bodily injury limits of no less than $5,000,000 per
person, $5,000,000 per accident; and property damage limits of no less
than $5,000,000 per accident. Utility Contractor's policy shall
include ATCLLC and ATC Management Inc. as additional insureds and
ATCLLC's policy shall include Utility Contractor as an additional
insured;
(iv) Where a Party has more than $100 million in assets it may, at its
option, self insure all or part of the insurances required in this
Article; provided, however, the self-insuring Party agrees that all
other provisions of this Article, including, but not limited to,
waiver of subrogation, waiver of rights of recourse, and additional
insured status, which provide or are intended to provide protection
for the other Party and its affiliated and associated companies under
this Agreement, shall remain enforceable. A Party's election to
self-insure shall not impair, limit, or in any manner result in a
reduction of rights and/or benefits otherwise available to the other
Party and its affiliated and associated companies through formal
insurance policies and endorsements as specified in the above parts of
this Article. The self-insuring Party agrees that all amounts of
self-insurance, retentions and/or deductibles are the responsibility
of and shall be borne by the self-insuring Party.
(b) Within fifteen (15) days of the Effective Date, and each anniversary
of the Effective Date, during the term of this Agreement, (including any
extensions), each Party shall provide to the other Party, properly executed and
current certificates of insurance with respect to all insurance policies
required to be maintained by such Party under this Agreement. Certificates of
insurance shall provide the following information:
(i) Name of insurance company, policy number and expiration date;
(ii) The coverage required and the limits on each, including the amount of
deductibles or self-insured retentions, which shall be for the account
of the Party maintaining such policy;
(iii) A statement indicating that the other Party shall receive at least
thirty (30) days prior written notice of cancellation or expiration of
a policy, or reduction of liability limits with respect to a policy;
and
(iv) A statement identifying and indicating that additional insureds have
been named as required by this Agreement.
(c) At a Party's request, in addition to the foregoing certifications,
the other Party shall deliver to the first Party a copy of applicable sections
of each insurance policy.
(d) Each Party shall have the right to inspect the original policies of
insurance applicable to this Agreement at the other Party's place of business
during regular business hours.
(e) If any insurance is written on a "claims made" basis, the respective
Party shall maintain the coverage for a minimum of seven years after the
termination of this Agreement.
(f) To the extent permitted by the insurer and commercially reasonable,
each Party shall obtain waivers of subrogation in favor of the other Party from
any insurer providing coverage that is required to be maintained under this
Article 12, except for the coverage required under Section 12(a)(i). A Party
shall not be required to obtain a waiver of subrogation if the other Party is
not able to obtain a waiver of subrogation from its insurance carrier.
13. SUCCESSORS AND ASSIGNS
This Agreement and each and every covenant, term and condition hereof,
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
Utility Contractor shall not assign its rights or obligations hereunder without
express written approval of ATCLLC, except it may assign its rights or
obligations to a purchaser (or an affiliate) who will own all or substantially
all of Utility Contractor's distribution assets or equity interests and who
shall then be bound by all of the provisions of this Agreement. ATCLLC shall not
assign its rights or obligations hereunder without express written approval of
Utility Contractor, except it may assign its rights and obligations to a
purchaser (or an affiliate) who will own all or substantially all of ATCLLC's
transmission assets and who shall then be bound by all of the provisions of this
Agreement.
14. NOTICE
(a) All certificates or notices required hereunder shall be given in
writing and addressed or delivered to the representative(s) specified in this
Agreement. Notices shall be deemed received (i) upon delivery, when personally
delivered; (ii) upon receipt, when sent via registered or certified mail; (iii)
the next business day, when sent via overnight courier; and (iv) upon
transmittal, when sent via facsimile. Copies of all general correspondence
regarding this Agreement shall also be sent to these representative(s).
(b) Notices submitted hereunder shall be directed to the following
individuals:
Notices to Utility Contractor:
Attn:
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Notices to ATCLLC:
Attn:
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(c) ATCLLC or Utility Contractor may change their respective
representative(s) designated to receive notice hereunder by written notice to
the other Party. All correspondence and transmittals between the Parties shall
be executed pursuant to coordination procedures that shall be developed by the
Parties.
15. MISCELLANEOUS
15.1 COMPLIANCE WITH LAWS.
Throughout the term of this Agreement, each Party shall perform its
obligations hereunder in compliance with all present and future federal, state
and local statutes, ordinances, rules and regulations, including, but not
limited to those pertaining to human safety, protection of property,
non-discrimination, and protection of the environment.
15.2 ENTIRE AGREEMENT.
This Agreement, together with the Appendices and Exhibits attached hereto,
is the entire understanding of the Parties regarding the subject matter hereof,
and supersedes all prior oral or written discussions, negotiations and
agreements the Parties may have had with respect to the subject matter hereof.
15.3 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
counterpart shall have the same force and effect as the original instrument.
15.4 AMENDMENT.
No amendment, modification or waiver of any term hereof shall be effective
unless set forth in a writing signed by both ATCLLC and Utility Contractor.
15.5 SURVIVAL.
All warranties, remedial obligations, indemnities and confidentiality
rights and obligations provided for herein shall survive the cancellation,
expiration or termination hereof.
15.6 INDEPENDENT CONTRACTOR.
Utility Contractor at all times shall be deemed to be an independent
contractor and none of its employees or the employees of its sub-contractors
shall be considered to be employees of ATCLLC during the term of this Agreement.
Utility Contractor shall have no authority to act on behalf of ATCLLC or bind
ATCLLC in any manner except as expressly set forth in this Agreement. The
Parties acknowledge that neither this Agreement nor any of its provisions are
intended to create any partnership or joint venture between the Parties.
15.7 CONFIDENTIALITY.
(a) "Confidential Information", as used in this Section 15.7, shall mean
all information or documentation disclosed or made available by either Party to
the other, including but not limited to correspondence between the Parties,
business plans, financial information, policies and procedures, computer
programs, reports and analyses, or other information which a Party in good faith
designates as "Trade Secrets" as that term is defined in Wis. Stat. ss.
134.90(1)(c).
(b) In consideration of the disclosure by one Party of Confidential
Information to the other Party, the Parties agree that each of them shall
undertake in good faith to accomplish the following additional actions with
respect thereto:
(i) to use the Confidential information for the sole purpose of
fulfilling the obligations of the Parties pursuant to this Agreement;
(ii) to safeguard and hold in strict confidence all Confidential
Information, limiting disclosure of Confidential Information to
employees, contractors or agents who have a need to know;
(iii) to protect Confidential Information from disclosure to
anyone not a party to this Agreement without the prior approval of the
disclosing Party; and
(iv) upon the request of the disclosing Party and in any event
upon cancellation or expiration of this Agreement, to return all
Confidential Information, or to certify that such Confidential
Information has been destroyed.
(c) The restrictions of this Section do not apply to any information
which is already known by the receiving party, possessed by a third party prior
to disclosure, acquired from anyone not a party to this Agreement without
restriction, or which is publicly available.
(d) Each Party retains all right, title and interest in and to any
Confidential Information disclosed by the party hereunder.
(e) In the event that either Party is required by applicable law to
disclose any Confidential Information of the other Party, such party shall
promptly notify the other Party of such requirement and cooperate with the other
Party to protect the Confidential Information from any disclosure not required
by law.
(f) The obligations of this Section shall survive for a period of 3
years following any expiration or cancellation of this Agreement.
15.8 STANDARDS OF CONDUCT.
If the performance of this Agreement requires ATCLLC to disclose
information about the Transmission System to Utility Contractor, the
dissemination of which by Utility Contractor would have been subject to FERC's
Standards of Conduct requirements, 18 C.F.R. Part 37, prior to the transfer of
the Transmission Facilities, such information shall not be disclosed by Utility
Contractor or ATCLLC to any persons that would not have been entitled to receive
such information prior to such transfer.
15.9 NO IMPLIED WAIVERS.
The failure of a Party to insist upon or enforce strict performance of any
of the provisions of this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assist or rely upon any
such provisions, rights and remedies in that or any other instance; rather, the
same shall be and remain in full force and effect.
15.10 NO THIRD-PARTY BENEFICIARIES.
This Agreement is intended to be solely for the benefit of ATCLLC and
Utility Contractor and their successors and permitted assigns and is not
intended to and shall not confer any rights or benefits on any third party
(other than successors and permitted assigns) not a signatory hereto.
15.11 SEVERABILITY.
In the event that any provision of this Agreement is deemed as a matter of
law to be unenforceable or null and void, such unenforceable or void portion of
such provision shall be deemed severable from this Agreement unless the removal
of the unenforceable provision materially alters the obligations of either Party
hereunder. Even if there is a material alteration in the remainder of the
Agreement, the Agreement shall continue in full force and effect as if such
provision was not contained herein., but the Parties shall negotiate in good
faith new provisions in relation to the deleted provision that will to the
extent practicable restore the benefit of the bargain contained in such
provision, and that are consistent with Good Utility Practice and the adequacy
obligation set forth in Section 2.7 of the Operating Agreement of ATCLLC.
15.12 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Wisconsin, with the exception of any choice of laws
provisions.
15.13 OPERATION AND PROSPECTIVE PLANNING.
Recognizing that the Parties have to prepare a Facilities Maintenance Plan
and Budget prior to the Operations Date, the Parties will operate under the
standards of this Agreement to prepare a Facilities Maintenance Plan, calculate
Baseline Resource Hours, calculate a Maintenance Response Budget, and develop a
Budget adhering as closely as possible to the timetables established for the
first year after the Operations Date.
15.14 HEADINGS.
The headings set forth herein are inserted for convenience and shall have
no effect on the interpretation or construction of this Agreement.
15.15 AFFILIATE STATUS OF PARTIES.
For purposes of Articles 10, 11, and 12, neither Party shall be treated as
an affiliate of the other.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized representatives, effective as of the date first written
above.
AMERICAN TRANSMISSION COMPANY LLC
BY
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TITLE
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[ ]
--------------------------------
BY
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TITLE
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
OPERATION SERVICES AND MAINTENANCE SERVICES
<S> <C> <C>
MAINTENANCE SERVICES MAINTENANCE SERVICES OPERATION SERVICES
(CONTINUED)
(A) FOR LINE EQUIPMENT (C) FOR ATCLLC STATIONS (A) OPERATIONS
o Inspection o Station Property Grass o Inspection
o aerial/walk/climb/infra-red Maintenance o Field Switching
o underground o Station Property Vegetation o Communications Repair
o submarine cable Control
o Painting o Station Property Building
o Wood Pole Maintenance (B) EMERGENCY RESPONSE
Inspection/Treatment/Repair o Station Property Snow Removal SERVICES
(some replacements may be o Station Property Gravel o Field Response
capital in nature) o Station Property Access o Emergency Cleanup Spill
o Line Repair Maintenance Response
(Insulation/Foundation/Hardware/ o Station Property Security Checks o Post-Emergency Repair
Conductor)
o Grounding
o Corrosion Control (D) MISCELLANEOUS
o Maintenance of insulating
fluids/gases, pumps, valves and o Special Maintenance Projects
protective devices) o Grounding Repair
o Right of Way Vegetation Control o Radio/TV Interference
o Right of Way Access o Major Equipment Repair
Maintenance
o Right of Way Security Checks
(B) FOR STATION EQUIPMENT
o Inspection
o Painting/Switches/Bus
o Structure/Foundation Repair
o Breaker
o DC System
o Transformer
o SF6 Management
o Relay Test/Maintenance System
(System Protection)
o Communications Repair (System
Protection)
o Operations Analysis (System
Protection)
o System Control Devices/RTUs,
etc.
o System Control Communications
Repair
</TABLE>
<PAGE>
SCHEDULE 1
(ATTACHED TO OPERATION & MAINTENANCE AGREEMENT)
1. GENERAL DESCRIPTION.
-------------------
Utility Contractor shall invoice to ATCLLC the actual costs of providing
Services for the previous month. The invoice will also identify any costs for
Services accrued during the previous month by Utility Contractor with the
understanding that these accrued costs will be invoiced for payment at a later
date (as they are paid by Utility Contractor). Utility Contractor's invoices to
ATCLLC will be in a consistent format and provided monthly together with the
Utility Contractor's detailed billing reports supporting the invoice.
2. METHODS OF CALCULATING COSTS TO BE PAID BY ATCLLC.
-------------------------------------------------
(a) Direct Costs. Costs incurred by the Utility Contractor that are
------------
solely and directly attributable to Transmission Facilities services shall be
directly billed to ATCLLC in full. These directly billed costs shall be recorded
as incurred by Utility Contractor to internal bookkeeping accounts designated as
transmission billing accounts. The direct cost for materials and supplies shall
be their book value.
(b) Indirect Costs. Costs incurred by the Utility Contractor for
--------------
activities that support the entire company or which support Transmission
Facilities and services to Transmission Facilities plus other divisions of the
company will be identified and a portion of these costs will be charged to
ATCLLC. Utility Contractor will identify and aggregate all of these costs into
recognizable categories and, in cooperation with ATCLLC, shall develop methods
for calculating the portion of each cost category that should be allocated to
ATCLLC. The method for determining the share allocable to ATCLLC may vary from
cost category to cost category. A document describing the methods for allocating
categories of costs to ATCLLC, including any allocation formulas, will be
attached to this Schedule 1.
(c) Labor Loadings. Loadings that account for pension and employee
--------------
benefit costs, payroll taxes and costs, and the expense of non-productive time
(paid leaves plus, if not a separate cost category, training) shall be added to
any direct or indirect labor costs billed to ATCLLC. A document describing the
methods Utility Contractor will use to calculate and apply labor loadings will
be attached to this Schedule 1.
(d) Extraordinary Costs. Subject to Article 4 of the Agreement, costs
-------------------
incurred by Utility Contractor that are unusual, special or extraordinary may
require unique treatment. Utility Contractor will notify ATCLLC in advance of
incurring such costs whenever possible and as soon as possible after incursion
of the cost if advance notice is not possible, but in any event prior to sending
ATCLLC an invoice that includes the cost.
(e) Utility Contractor's System for Recording Its Costs. Utility
---------------------------------------------------
Contractor will notify ATCLLC in advance of any changes to its system of
recording and tracking its costs that will significantly impact the calculation
or appearance of invoices to ATCLLC. Utility Contractor will, at ATCLLC's
expense, provide for the transfer to ATCLLC of electronic billing data in a form
usable by ATCLLC's electronic systems for recording and tracking costs of the
Services.
3. TRUE-UPS AND REVIEWS.
--------------------
Amounts that have been billed based on estimates will be adjusted to the
Utility Contractor's actual costs after actual costs are known and ATCLLC will
pay more or receive a credit, as appropriate, for any true-up. Such true-ups may
be performed at any time, but at least one annual true-up will be performed by
the Utility Contractor for the previous year before the expiration of the first
quarter of the following year. In addition, formulas, procedures and allocations
may be revised by either Party if the Party proposing the revision can
demonstrate to the other Party that new facts have come to light or that it has
discovered or developed an improved formula, procedure or method for accurately
determining or invoicing actual costs. Any such revision to a formula, procedure
or allocation will not be applied retroactively. Amounts previously billed in
error, however, will be corrected in accordance with Section 4 below; error here
includes the long or short-term misapplication of an approved formula. Where
refunds or additional amounts are owed due to a true-up or correction, the
refund or additional amount shall appear on the next monthly billing following
identification of the adjustment.
4. CONTESTED STATEMENTS.
--------------------
ATCLLC may contest, and Utility Contractor may correct, any particular
items included in any Utility Contractor invoice within one year of ATCLLC's
receipt of the invoice. This provision does not limit ATCLLC's right to audit
Utility Contractor under Section 6.6 of the Agreement.
5. ADJUSTMENTS.
-----------
Utility Contractor shall promptly reimburse or credit ATCLLC for any
charges that should not have been billed to ATCLLC as provided in the Agreement
and which either Party identifies within 12 months of the ATCLLC's receipt of
the invoice containing such charges. Such reimbursements shall be set forth in
the appropriate section of the invoice. Utility Contractor shall bill ATCLLC for
any charges that were not billed but should have been billed to ATCLLC as
provided in this Agreement and which either Party identifies within 12 months of
the month that the charges were incurred.
The amount of any adjustment under this Section shall reflect interest from
the date such amounts were due at the published prime interest rate of Firstar
Bank on the last business day of the preceding month.
