EXHIBIT 10.83

 

NewCorp Resources Electric Cooperative, Inc.

 

Substitute Sheet No. 1

Service Agreement No. 2

 

 

 

MASTER OPERATION, MAINTENANCE AND
ADMINISTRATIVE SERVICES AGREEMENT

 

This MASTER OPERATION, MAINTENANCE AND ADMINISTRATIVE SERVICES AGREEMENT (this
“Agreement”) is entered into as of September 29, 2003, by and between CAP ROCK
ENERGY CORPORATION, a Texas corporation (the “Services Provider”), and NEWCORP
RESOURCES ELECTRIC COOPERATIVE, INC., an electric cooperative corporation (the
“Owner”).  The Services Provider and the Owner are each referred to herein
individually as a “Party” and, collectively, as the “Parties”.

 

RECITALS

 

WHEREAS, the Owner owns a 305.9 mile electric transmission system and related
assets located in the West Texas area and within the Southwest Power Pool
service territory (the “System”); and

 

WHEREAS, the Owner desires to engage the Services Provider to perform and
provide, and the Services Provider has the capacity to perform and provide for
the benefit of the Owner, certain administrative, engineering, construction,
facility studies, facility upgrade and replacement services, planning,
operation, maintenance, insurance and other support services required in
connection with the System;

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:

 

1.                                     Definitions.  Capitalized terms used in
this Agreement without other definition shall have the meanings specified in
this Section 1, unless expressly stated otherwise.  The singular shall include
the plural and the masculine shall include the feminine and neuter, and vice
versa.  The terms “include”, “includes” and “including” shall mean “including,
but not limited to”, unless stated otherwise.

 

“Administrative Fee” has the meaning set forth in Section 5(a)(iii).

 

“Administrative Services” has the meaning set forth in Section 2.

 

“Annual Budget” has the meaning set forth in Section 6(a).

 

“Applicable Law” means any applicable laws, ordinances, rules, codes,
regulations, permits, licenses and legal requirements of any kind issued by
Governmental Authorities to the extent they apply to the System or the Services.

 

 

Issued by:

Lee D. Atkins

,

Secretary / Treasurer

Effective on:  October 1, 2003

 

Name

 

Title

 

 

 

Issued on:  September 29, 2003

 

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“Claims” means any and all losses, claims, causes of action, damages, and
liabilities of any kind or nature whatsoever, including but not limited to,
shortages, obligations, liabilities (joint or several), payments, judgments,
suits, litigation, proceedings, equitable relief granted, consents, agreed
orders, settlements, awards, demands, offsets, defenses, counterclaims, actions
or proceedings, assessments, deficiencies, taxes, fines, penalties, assessments,
costs, fees, disbursements, including without limitation, fees, disbursements
and reasonable expenses of attorneys (including fees, disbursements and
reasonable expenses of attorneys incurred in connection with the cost of defense
of any claims or causes of action but, in the case of claims between the
Parties, only to the extent incurred in connection with litigation or
arbitration), accountants and other professional advisors and of expert
witnesses and costs of investigation and preparation and costs of court of any
kind or nature whatsoever, interest and penalties.  “Claims” shall not include
diminution in value, indirect, consequential, special or punitive damages, loss
of profits or loss of reputational goodwill.

 

“Deferred Reimbursable Costs” has the meaning set forth in Section 7.

 

“Emergency Situation” means any event or circumstance that requires the taking
of immediate measures to prevent or mitigate a situation endangering life or
property.

 

“Facility Agreements” means, collectively, the OATT, the NITSA, and the NOA.

 

“FERC” means the Federal Energy Regulatory Commission or any successor thereto.

 

“Governmental Authority” means any federal, state or local governmental
department, authority, agency, political subdivision, court or other body,
office or public entity, including any zoning authority, building inspector, or
health, environmental, or safety inspector having jurisdiction over the Owner,
the Services Provider or the System.

 

“Invoice” has the meaning set forth in Section 5(c).

 

“Lender” means any entity or entities providing construction or permanent debt
financing for the System, including any assignee or successor thereto.

 

“NITSA” means the Network Integration Transmission Service Agreement entered
into between the Services Provider and the Owner consistent with the terms of
the OATT Tariff.

 

“NOA” means the Network Operating Agreement entered into between the Services
Provider and the Owner consistent with the terms of the OATT Tariff.

 

“OATT” means the Owner’s Open Access Transmission Tariff accepted for filing by
FERC in Docket No. OA97-14-001 on February 24, 1999 (FERC Electric Tariff, First
Revised Volume No. 2).

 

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“Prudent Utility Practice” means any of the practices, methods or acts engaged
in or approved by a significant portion of the national electric utility
industry that at a particular time, in the exercise of reasonable judgment in
light of the facts known at the time a decision was made, would have been
expected to accomplish the desired result, (i) in a manner consistent (to the
extent practicable) with applicable laws, reliability, safety, environmental
protection, economy and expedition and commercial considerations and (ii) with
due regard being had to the relevant equipment manufacturer’s recommended
standards, practices and procedures (as may be modified from time to time),
where this definition applies to the Owner, by the Owner and where this
definition applies to the Services Provider, by the Services Provider, in each
case in the light of operating and maintenance experience or the other
provisions of this definition.  By way of clarification, Prudent Utility
Practices are not intended to be limited to the optimum practice, method or act
to the exclusion of all others, but rather to be a range of possible practices,
methods or acts engaged in or approved by a significant portion of such electric
utility industry.

 

“Reimbursable Costs” has the meaning set forth in Section 5(a)(ii).

 

“Services” has the meaning set forth in Section 2.

 

“Services Fees” has the meaning set forth in Section 5(a).

 

“Subordinated Loans” has the meaning set forth in Section 7.

 

“Variable Services” has the meaning set forth in Section 2.

 

2.                                     Provision of Services.  The Owner hereby
engages the Services Provider to provide certain corporate administrative,
insurance, tax, accounting, information technology, legal, management and
consulting services (collective, the “Administrative Services”) and certain
engineering, construction, facility studies, facility upgrade and replacement
services, planning, operation, and maintenance, and other support services
(collective, the “Variable Services”), in case more specifically set forth and
described in Exhibit A hereto (collectively, the “Services”) and the Services
Provider hereby accepts such engagement and agrees to render such Services, in
each case, effective as of the date of this Agreement.  The Parties agree that
Exhibit A (which shall be incorporated by reference into this Agreement) may be
amended from time to time by the mutual agreement of the Parties.  In addition,
as and when requested by the Owner, the Services Provider shall use commercially
reasonable efforts to provide any other services requested by the Owner in
connection with the ownership, operation and/or maintenance of the System.

 

3.                                     Manner of Performance.

 

(a)                                  The Services Provider shall perform, or
cause to be performed, the Services in accordance with (i) Prudent Utility
Practices, (ii) the applicable provisions of all Facility Agreements as they
apply to the Services, (iii) all Applicable Laws, (iv) applicable terms of
applicable insurance policies, and so as not to void any

 

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manufacturer’s or subcontractor’s warranties, and (v) any other provision of
this Agreement.

 

(b)                                 The Services Provider may subcontract some
or all of the Services.  For purposes of this Agreement, no contractual
relationship will exist between the Owner and any such subcontractor or any
affiliate of the Services Provider.  In all cases under this subsection (b), the
Services Provider will remain responsible for the performance of its obligations
under this Agreement.  The Services Provider represents and warrants to the
Owner that the Services Provider shall employ only experienced services
personnel and/or qualified subcontractors, that have the skill and capacity
necessary to perform the Services.

 

(c)                                  The Services Provider will require all
persons performing the Services to comply with all generally applicable
policies, procedures and directives of the Services Provider, including
security, environmental protection, employee health and safety, sexual
harassment, access, use of alcohol and controlled substances, and similar
activities.

 

4.                                     Owner Responsibilities.

 

(a)                                  The Owner agrees to cooperate with, and to
assist and support, the Services Provider in connection with the performance of
the Services.

 

(b)                                 To the extent that access to the System or
other property or facilities of the Owner is at any time reasonably necessary or
appropriate in connection with the performance of the Services, the Owner agrees
to grant such access to the Services Provider and its subcontractors and
representatives.  The Services Provider shall not be responsible for any loss,
damage, fine, penalty, cost, expense, delay, interruption, breach,
non-performance or other failure of any of the Services to the extent resulting
from or arising out of or in connection with any failure by the Owner to provide
access to its property, facilities or personnel in connection with the
performance of the Services.

 

5.                                     Compensation.

 

(a)                                  In consideration for the Services to be
provided by the Services Provider pursuant to this Agreement, subject to the
limitations set forth in this Section 5 and Sections 6 and 7 below, the Owner
agrees to pay the Services Provider the following amounts (collectively, the
“Services Fees”):

 

(i)                                     all verifiable direct and indirect
reasonable costs by personnel of the Services Provider (including, but not
limited to costs of labor, benefits, materials, storage and transportation plus
a verifiable allocation of overhead costs calculated under the same methodology
as is employed by the Services Provider from time to time in connection with the
provision of services for affiliated entities and business units) in connection
with the performance of the Variable Services;

 

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(ii)                                  reimbursement for all Variable Services
performed by subcontractors based on the reasonable costs invoiced by such
subcontractors (without any mark-up or adder) other than subcontracts which the
Owner elects to pay directly (collectively, the amounts in clause (i) and (ii)
are referred to as the “Reimbursable Costs”); and

 

(iii)                               an administration fee equal to equal to the
amount agreed to in the Annual Budget for payment of all Administrative Services
(the “Administrative Fee”).

 

 

(b)                                 The Services Provider agrees that the Owner
shall have the right to pay the Service Provider’s subcontractors directly for
the costs incurred under any subcontract entered into for the provision of
Services and any amounts paid by the Owner directly to a subcontractor of the
Services Provider shall be excluded from the Services Fees.

 

(c)                                  On a monthly basis, the Services Provider
shall submit to the Owner a detailed, itemized invoice (an “Invoice”) setting
forth the Variable Services provided to the Owner during the previous month, the
applicable monthly portion of the Administrative Fee, and any outstanding
reimbursable expenses or charges incurred by the Services Provider under this
Agreement and the amount payable by the Owner for such Services and expenses or
charges pursuant to this Agreement.  The Owner shall pay all undisputed amounts
owing in respect of each Invoice within ten (10) days of receipt thereof.

 

(d)                                 Any amount not paid by the Owner when due
under this Agreement (except as contemplated in clause (e) and Section 7 below)
shall bear interest at a rate equal to the prime rate, as reported in the Wall
Street Journal on the last business day of the month in which the applicable
Invoice was received, plus two (2) percent per annum (or, if lower, the highest
rate permitted by applicable law) accrued from the due date of such payment
until such payment is actually received by the Services Provider.

 

(e)                                  Notwithstanding anything to the contrary in
this Agreement, the Services Provider hereby waives the right to receive payment
for or reimbursement by the Owner and agrees that it shall not be entitled to
collect from the Owner any Services Fees for charges associated with any of the
Services, or portions thereof, that the FERC determines not to be allocable by
the Owner to its transmission customers.

 

6.                                     Budgeting Process.

 

(a)                                  The Parties agree that the Reimbursable
Costs shall be paid to the Services Provider only to the extent that such
Reimbursable Costs are contemplated in a budget that has been approved in
advance by the Owner pursuant to the procedures set forth below (each such
approved budget, an “Annual Budget”); provided, that in the case of Emergency
Situations, the Services Provider shall have the right to expend up to an amount
not to exceed $250,000 without first obtaining the Owner’s approval.  The
initial Annual Budget for calendar year 2003 is attached hereto as Exhibit B.

 

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(b)                                 At least sixty (60) days prior to the end of
each calendar year, the Services Provider shall prepare and submit to the Owner
for approval a proposed annual operating plan for the following calendar year in
substantially the form of Exhibit B.

 

(c)                                  Owner shall review the Services Provider’s
proposed Annual Budget and shall provide comments within thirty (30) days after
receipt of such proposed Annual Budget.  The Owner and the Services Provider
shall then use their best efforts to agree upon a final Annual Budget before the
end of the calendar year.  The Parties acknowledge that such agreed upon Annual
Budget must be submitted to the Owner’s Lender for review and adoption in
accordance with the Owner’s applicable financing documents.  The final Annual
Budget as approved by the Parties and the Owner’s Lender shall remain in effect
throughout the applicable calendar year, subject to such necessary updating,
revisions or amendments as may be proposed by either Party and consented to in
writing by the other Party.  The Services Provider shall notify the Owner as
soon as reasonably possible of any material deviations or discrepancies from the
obligations contained in the Annual Budget.

 

(d)                                 If, by the first day of any calendar year,
the Parties have not been able to reach an agreement with respect to any portion
of the Annual Budget for such calendar year, then:

 

(i)                                     any agreed portions of the Annual Budget
shall be adopted and implemented for the applicable Operating Year in accordance
with Section 6(c), and

 

(ii)                                  the disagreement in respect of the
unresolved portions of the Annual Budget shall be resolved in accordance with
the provisions of Section 15 and, pending the resolutions of such dispute, the
applicable portions of the Annual Budget for the prior calendar year with
respect to such unresolved portions shall remain effective.

 

7.                                       Deferral of Payment; Subordinated
Loans.  The Services Provider hereby agrees to:  (a) defer receipt of payment
for any Reimbursable Costs for Services performed in connection with (i) the
repair or replacement of wires, poles, and related System assets which exceed
the amounts budgeted therefor in the Annual Budget and (ii) Emergency
Situations, in each case to the extent such Reimbursable Costs exceed the
amounts made available to the Owner under its applicable financing documents
after taking into account any applicable working capital funds, maintenance
reserves and insurance proceeds (collectively, the “Deferred Reimbursable
Costs”) and (b) pay any subcontractor or third party owed any such Deferred
Reimbursable Costs.  The Services Provider and Owner hereby agree that the
Owner’s failure to pay for the Deferred Reimbursable Costs, except as set forth
in the immediately succeeding sentence, shall not constitute a material breach
of this Agreement.  All Deferred Reimbursable Costs shall be treated as
unsecured loans made by the Services Provider to the Owner which shall bear
interest at a rate of 12% per annum from the date of the applicable Invoice
until paid in full (such loans, the “Subordinated Loans”).  The unsecured loans
made by the Services Provider in respect of Deferred Reimbursable Costs shall be
fully subordinated in right of payment to any loans made by the Owner’s Lender
and shall have a maturity date of September 30, 2018;

 

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provided, however, that the Owner agrees to make principal and interest payments
with respect to such Subordinated Loans from time to time from any funds
available to the Owner after the payment of all other operation and maintenance
costs incurred by the Owner (including under this Agreement), debt service
obligations to the Owner’s Lender and the funding or replenishment of any
working capital or maintenance reserves under the Owner’s applicable financing
documents.

 

8.                                     Term.

 

(a)                                  The term of this Agreement shall commence
as of the date hereof and shall continue for a period of twenty (20) years,
unless earlier terminated pursuant to the terms of this Agreement.

 

(b)                                 This Agreement, or the provision of any
portion of the Services by the Services Provider hereunder, may be terminated at
any time upon the mutual written consent of the Services Provider and the Owner
(with the concurrence of the Owner’s Lender if applicable).

 

(c)                                  Either Party may, by written notice to the
other, terminate this Agreement or suspend its further performance without
terminating this Agreement if the other Party materially breaches any of its
material obligations under this Agreement and fails to cure such breach within
thirty (30) days following a final and binding determination, by mutual
agreement (with the concurrence of the Owner’s Lender), arbitration or final,
non-appealable judgment of a court of competent jurisdiction, that such breach
has occurred (or, if the breach is such that its cure is possible but will take
longer than thirty (30) days, fails to commence to cure such breach within such
thirty (30) day period and proceed diligently therewith until cured), and
(ii) the Services Provider may terminate this Agreement or suspend its further
performance without terminating this Agreement if the Owner (subject to the
limitations in Section (7)) fails to pay any amount due and owing to the
Services Provider hereunder within thirty (30) days following receipt of written
notice of non-payment from the Services Provider.

 

(d)                                 Upon expiration or termination of this
Agreement for any reason, the Owner shall promptly pay to the Services Provider
all amounts owing to the Services Provider for the Services performed or
reimbursable expenses incurred as provided herein prior to such expiration or
termination or, if terminated by the Owner.

 

(e)                                  Upon expiration or termination of this
Agreement, the Services shall terminate and no Party shall have any further duty
or obligation hereunder; provided, however, that the confidentiality and
indemnity provisions set forth as Section 11 and Section 12 of this Agreement
shall survive the termination or expiration of this Agreement.

 

9.                                     Books and Records.  The Services Provider
shall keep records and books of account showing all charges, disbursements or
expenses made or incurred by it in performing the Services and shall preserve
such records and books of account for a period of three (3) years following
incurrence of such expenses, or longer if required by Applicable Law.

 

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10.                               Access to Records.  The Owner, directly or
through authorized representatives, shall at all times during reasonable
business hours have access to and the right to audit, inspect and make copies of
any and all books, records and accounts, invoices, contracts, canceled checks,
payrolls and other documents and papers of every kind held by the Services
Provider pertaining to the performance of the Services and all charges,
disbursements and expenses made or incurred by the Services Provider in
performing the Services and all information related to the calculation of
overhead costs by the Services Provider.

 

11.                               Indemnification.  Except as set forth below,
the Services Provider agrees to indemnify, defend and hold harmless the Owner
and its officers, directors, representatives, agents, shareholders and employees
from and against and in respect of any and all Claims incurred or suffered by
the Owner in connection with, arising out of, or relating to, directly or
indirectly, the Services.  The Services Provider shall not indemnify, defend or
hold harmless the Owner from and against Claims incurred or suffered by the
Owner as a result of any negligence, gross negligence, reckless or willful
breach or misconduct by the Owner in connection with, arising out of or relating
to, directly or indirectly, the Services.

 

12.                               Confidentiality.  Each Party acknowledges that
its performance under this Agreement will necessarily involve access by the
other Party to certain information regarding the organization, personnel,
business activities, policies, finances, marketing plans, projected revenues,
rights, obligations, liabilities and strategies of the other Party.  Each Party
acknowledges that all such information is confidential and/or proprietary to the
other Party and agrees that, during the term of this Agreement and all times
thereafter, it will not disclose to any unauthorized party any such
information.  The restrictions of this Agreement shall not be applicable to any
information which: (i) is or becomes known to the public other than as a result
of a breach of this provision or (ii) is disclosed pursuant to the requirements
of Applicable Law.

 

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13.                               Limitation of Liability. THE SERVICES PROVIDER
SHALL NOT BE LIABLE HEREUNDER FOR ANY CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF
BUSINESS OR PROFITS, AND WHETHER OR NOT THE SERVICES PROVIDER HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED
OR INTERPRETED TO TREAT THE SERVICES PROVIDER AS THE GUARANTOR OF OWNER’S
OBLIGATIONS TO ANY LENDER UNDER ANY CREDIT AGREEMENT OR FINANCING ARRANGEMENTS
INVOLVING THE SYSTEM.

 

14.                               Limited Warranty.  The Services Provider will
perform the Services (i) in accordance with all performance standards set forth
in Section 3, and (ii) with at least the same degree of care, skill and
diligence with which it currently performs or has in the past performed similar
services for or with respect to the Owner.

 

15.                               Dispute Resolution.

 

(a)                                  Each Party shall, from time to time,
designate a senior officer (a “Dispute Representative”) who shall have the
authority to represent such Party and resolve and settle any dispute arising
under or in connection with this Agreement or the Services performed hereunder. 
The Parties hereto agree to attempt to resolve all such disputes equitably and
in a good faith manner (unless, in the reasonable judgment of the affected
Party, the immediate pursuit of judicial equitable relief is necessary to
prevent or mitigate a risk of irreparable harm or damage).

 

(b)                                 If any dispute arising under or in
connection with this Agreement or the Services performed hereunder is not
resolved pursuant to Section 15(a) within thirty (30) days from the date on
which such dispute is submitted to the Dispute Representatives, such dispute
shall, if the Parties so agree, be submitted to and resolved by binding
arbitration, or in the absence of such agreement either Party may pursue any and
all remedies in respect of such dispute available to such Party at law or in
equity.  Any arbitration proceeding arising under or in connection with this
Agreement or the Services performed hereunder shall be conducted pursuant to the
terms of the Federal Arbitration Act and (except as otherwise specified herein)
the Commercial Arbitration Rules of the American Arbitration Association in
effect at the time the arbitration is commenced.  The venue for the arbitration
shall be Midland, Texas.  The arbitration shall be conducted before a panel of
three (3) arbitrators, selected as follows:  (i) each Party shall specify one
arbitrator within ten (10) days of the end of the thirty (30) day period for
dispute resolution under Section 15(a), and (ii) a neutral person shall be
selected through the American Arbitration Association’s arbitrator selection
procedures to serve as the third arbitrator.  The arbitrator designated by any
Party need not be neutral.  In the event that any person fails or refuses timely
to name his arbitrator within the time specified herein , the American
Arbitration Association shall (immediately upon notice from the other Party)
appoint an arbitrator for the person or entity that has failed to appoint its
arbitrator.  To the extent practical, the arbitrators shall schedule the hearing
to commence within sixty (60) days after the arbitrators have been impaneled.  A
majority of the panel shall render an award or other decision within ten (10)
days of the completion of the hearing, which award or decision shall be final,
binding and conclusive upon the Parties hereto.

 

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Each Party shall have the right to have an award or decision of such panel
enforced by any court of competent jurisdiction.

 

16.                               Excusable Delay.  In no event shall the
Services Provider be deemed to be in default of any provision of this Agreement
or liable for delays or interruptions in the performance of Services to the
extent resulting from or arising out of or in connection with acts or events
beyond the reasonable control of the Services Provider; provided, however, that
the Services Provider shall exercise commercially reasonable efforts to minimize
the extent of any delays or interruptions in performance, and provided further,
that the excused delay or interruption shall last only as long as the acts or
events beyond the control of the Services Provider require.  Such acts or events
include without limitation acts of God, civil or military authority, civil
disturbance, war, strikes, fires, storms, other catastrophes, computer system
failures, acts of third parties, and other events of similar or dissimilar
nature beyond the Services Provider’s reasonable control.

 

17.                               Independent Contractor.  The Parties hereto
acknowledge and agree that in the performance of their respective duties and
obligations hereunder they are acting as independent contractors of each other.

 

18.                               No Assignment Absent Consent.

 

(a)                                  This Agreement shall be binding on and
inure to the benefit of each Party’s respective successors and assigns;
provided, however, that, subject to Section 18(b) below, no Party may transfer,
sell or assign, whether by operation of law or otherwise, its rights or
obligations under this Agreement without the prior written consent of the other
Party, which consent may be withheld in the sole discretion of such Party. 
Subject to Section 18(b) below, any attempt by a Party to transfer, sell or
assign, whether by operation of law or otherwise, its rights or obligations
under this Agreement without the prior written consent of the other Parties
shall be void and without force or effect.

 

(b)                                 Notwithstanding anything to the contrary in
this Agreement, the Owner shall be permitted to assign any or all of their
rights, title and interest hereunder to any of the Owner’s Lenders: (i) as
security in connection with obtaining or arranging financing for the business
activities of the Owner or (ii) in order to enforce any security assignment
described in clause (i) above.  The Services Provider shall, upon request,
furnish such consents to assignment, opinions, certifications and
representations and other documents as may be reasonably requested by the Owner
or Lenders in form and content reasonably acceptable to such Lenders.

 

19.                               Complete Agreement.  This Agreement
constitutes the complete understanding between the Parties with respect to the
subject matter of this Agreement.

 

20.                               Amendment.  No modification or amendment of
this Agreement shall be binding upon any Party unless in writing and signed by
the Parties.

 

21.                               Governing Law.  This Agreement has been made
and shall be governed, construed and enforced in accordance with the laws of the
State of Texas applied to contracts made and performed within the State of
Texas.

 

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22.                               Notice.  All notices and other communications
hereunder shall be in writing and shall be deemed duly given when personally
delivered or mailed (by registered or certified mail, return receipt requested,
postage prepaid) or faxed as follows:

 

(a)                                  If to the Services Provider:

 

Cap Rock Energy Corporation
500 West Wall, Suite 400
Midland, TX  79701
Phone: (432) 684-0311
Fax:  (432) 684-0333

 

Attn:  Ulen North, Executive Vice President

 

(b)                                 If to the Owner:

 

NewCorp Resources Electric Cooperative, Inc.
500 West Wall, Suite 400
Midland, TX  79701
Phone: (432) 684-0303
Fax:  (432) 684-0333

 

Attn:  David W. Pruitt, President

 

Any Party may change the address to which such notice or communication shall be
sent by giving written notice to the other Parties of such modified address.

 

23.                               Severability.  In the event any portion of
this Agreement shall be found by a court of competent jurisdiction to be
unenforceable, that portion of this Agreement will be null and void, and the
remainder of this Agreement will be binding on the Parties as if the
unenforceable provisions had never been contained herein.

 

24.                               Time.  Time is of the essence with respect to
each of the provisions set forth in this Agreement.

 

25.                               Headings.  The headings used in this Agreement
are for convenience only and shall not affect the construction of any of the
terms of this Agreement.

 

26.                               Counterparts.  This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute the same Agreement.  Any signature
page of any such counterpart, or any electronic facsimile thereof, may be
attached or appended to any other counterpart to complete a fully executed
counterpart of this Agreement, and any telecopy or other facsimile transmission
of any signature shall be deemed an original and shall bind such Party.

 

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27.                               Further Assurances.  Upon the reasonable
request of the other Party, each Party hereto agrees to take any and all actions
necessary or appropriate to give effect to the terms set forth in this
Agreement.

 

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NewCorp Resources Electric Cooperative, Inc.

 

Substitute Sheet No. 13

Service Agreement No. 2

 

 

 

IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be
duly executed on its behalf as of the date first above written.

 

 

CAP ROCK ENERGY CORPORATION,

 

a Texas corporation

 

 

 

By:

/s/ ULEN NORTH, JR.

 

 

 

Name:  ULEN NORTH, JR.

 

 

Title:  Exec/VP

 

 

 

NEWCORP RESOURCES ELECTRIC
COOPERATIVE, INC.,

 

an electric cooperative corporation

 

 

 

By:

/s/ LEE D. ATKINS

 

 

Name:  LEE D. ATKINS

 

Title:  Secretary/Treasurer

 

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EXHIBIT A

 

SCOPE OF THE SERVICES

 

The “Administrative Services” shall mean the following specifically listed
services and activities to be rendered by the Services Provider on the behalf of
the Owner.

 

1.                                       Accounting Services.  Provision of (a)
budgeting, financial reporting and cash management services, (b) accounting and
auditing services, and (c) performance of such other accounting services as the
Owner may reasonably request.

 

2.                                       Tax Services.  Provision of preparation
and filing of all necessary tax returns for the Owner in connection with an
independent public accounting firm.

 

3.                                       Management Services.  Provision of
services in respect of the management of the assets of the Owner as the Owner
may reasonably request, including the administration of third party contracts
between the Owner and other parties.

 

4.                                       Information Services.  Provision of
information services to the Owner, including, but not limited to, the sharing of
information with the Owner acquired by the Services Provider as a result of its
membership with certain power or energy related industry organizations.

 

5.                                       Consulting Services.  Provision of
consulting services on various aspects of ownership and maintenance of the
System, including tariff analysis, power cost recovery factor review, ERCOT
matters, preparation required for storms and outages, and permitting and
environmental consulting services.

 

6.                                       Legal Services.  Provision of legal
services, including, but not limited to, (a) providing the Owner with legal
counseling as to the Owner’s business activities, and initiating, maintaining
and defending any claims, actions or proceedings to which the Owner is named as
a party; (b) supervising and monitoring Owner’s compliance with the terms and
conditions of all contracts under which Owner has any obligations or rights
(except this Agreement); and (c) advising or otherwise assisting the Owner with
all regulatory matters including, but not limited to, assisting the Owner in its
dealings with governmental, semi-governmental, administrative, fiscal or
judicial bodies, departments, commissions, authorities, agencies or other
entities having jurisdiction or regulatory power over the Owner’s business
activities.

 

7.                                       Insurance Services.  Provision and
maintenance of all insurance required to be maintained by Owner pursuant to any
agreement providing financing for the assets of the Owner.

 

8.                                       Other Overhead Services.  Provision of
such other administrative services, including utilities, office equipment and
supplies, postage, vending, recordkeeping, secretarial services and such other
services as the Owner may reasonably request.

 

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9.                                       Customer Services.  Handling of all
requests for transmission service, for transmission ancillary services, for
interconnections, and for facilities studies and system impact studies, or
arranging for a qualified third party to provide such services in the manner
required by applicable laws and regulations.

 

10.                                 Additional Administrative Services. 
Performance of such additional administrative services as the Owner identifies
from time to time as necessary for Owner to fully comply with all legal
requirements imposed on it as a transmission provider.

 

The “Variable Services” shall mean the following specifically listed services
and activities to be rendered by the Services Provider on the behalf of the
Owner and with respect to the Owner’s substations, transmission lines and other
transmission-related facilities (the “Facilities”), and all other such support
services as may be reasonably requested by the Owner and as are needed for it to
provide safe and reliable transmission service in accordance with prudent
utility practice and all applicable legal requirements.

 

1.                                       Direction of all operations of the
Facilities and taking any action necessary to provide reliable service to all of
Owner’s customers.

 

2.                                       Installation of system control and data
acquisition equipment, communications equipment, and related appurtenances as
required to provide telemetry and remote control of the Facilities.

 

3.                                       Performance of inspections to determine
the condition of the Facilities, to identify and label the Facilities in
accordance with the Owner’s property and accounting codes, and to determine the
need for the maintenance of or improvements to the Facilities.

 

4.                                       Installation and maintenance of
metering equipment, relaying equipment, and related appurtenances to the
Facilities.

 

5.                                       Provision of monthly and other
inspections of the Facilities as needed, including meter readings, recording
counters, testing batters, and visually checking condition of the substations
and circuit breakers, air reservoirs and bushings per manufacturer’s instruction
books and service bulletins, as well as disassembly, cleaning and lubrication of
operating mechanisms, and painting if necessary.

 

6.                                       Provision of all needed maintenance of
the Facilities and grounds, including the maintenance, replacement and testing
of reclosers, and performing electrical relay tests, operational checks, battery
tests, and oil samples, annual weed spraying, sand removal and mowing of weeds.

 

7.                                       Maintenance and upgrading of the
supervisory, control and data acquisition system (“SCADA”) for the System,
including radio communications equipment.

 

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8.                                       Monitoring of all substations and
transmission lines 24 hours a day 7 days a week using a SCADA system, including
monitoring alarms such as breaker position, analog values including voltage and
current.  In the event the SCADA system displays an alarm, the Services Provider
will determine what action is needed and contact appropriate persons to respond
to the alarm and, if needed, open or close reclosers or breakers to restore
power or de-energize a line.

 

9.                                       Utilizing data provided by the SCADA
system and other information and develop a “work plan” each year to project
needed transmission, substation and distribution system improvements, including
analyzing historical loading data and projecting the load on the System.

 

10.                                 Coordination of protective relays to limit
the size of outages and to remove the fault on the Facilities before equipment
is damaged and review the device coordination in the substations and
distribution system and make changes necessary to optimize the System
protection.

 

11.                                 Installation and removal of mobile
substations to serve the load on a substation so substation equipment can be
de-energized and maintained without subjecting customers to outages.

 

12.                                 Maintenance of transmission rights of way. 
The maintenance to be done will be dependent on the condition of the right of
way and agreements with the landowner.  CRE personal will determine the need for
work on the right of way, select a contractor to clear the right of way, and
work with the landowner to accomplish the work in a satisfactory manner.

 

13.                                 Performance of annual inspections using an
infrared camera to determine “hot” spots that need maintenance.

 

14.                                 Determination of needed repairs,
replacements and upgrades to Facilities equipment, including upgrading
protective relays, changing out regulators to units with higher load capability,
replacing worn or broken insulators, repairing or replacing poles, towers,
foundations and guy wires, and coordination with outside contractors, as
necessary to perform needed upgrade work.

 

15.                                 Provision of design and construction
services with respect to substation and transmission line facilities and, if
applicable, managing outside subcontracts.

 

16.                                 Provision of operation and maintenance
services with respect to vehicles used in the operation and maintenance of the
Facilities.

 

17.                                 Performance all repairs and replacements
needed to restore services in the event of forced outages and to repair storm
and other damage to the Facilities.

 

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EXHIBIT B

 

INITIAL ANNUAL BUDGET

 

[To be attached]

 

B-1

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