Exhibit 10.01

 

REDBUD GENERATING FACILITY

OWNERSHIP AND OPERATING AGREEMENT

by and among

GRAND RIVER DAM AUTHORITY,

OKLAHOMA GAS AND ELECTRIC COMPANY

 

and

 

OKLAHOMA MUNICIPAL POWER AUTHORITY

 

 

 

 

 

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TABLE OF CONTENTS

 

                    Page

 

ARTICLE I

DEFINITIONS AND INTERPRETATIONS

2

 

1.01

Defined Terms

2

 

1.02

Interpretations

17

ARTICLE II

REPRESENTATIONS AND WARRANTIES

18

 

2.01

GRDA Representations

18

 

2.02

OG&E Representations

19

 

2.03

OMPA Representations

20

ARTICLE III

OWNERSHIP

21

 

3.01

Ownership Interests and Pro Rata Shares

21

 

3.02

Waiver of Partition

22

ARTICLE IV

SCHEDULING AND DISPATCH

22

 

4.01

Owner Rights

22

 

4.02

Owner Responsibilities

22

 

4.03

Operations Manager Responsibilities

23

 

4.04

Sales, Purchases, Exchanges and Agency Agreements

24

 

4.05

Operations Manager’s Option to Purchase and Sell Defaulting Owner’s
Pro Rata Share of Net Capability

24

ARTICLE V

EXECUTIVE COMMITTEE

25

 

5.01

Establishment of Executive Committee

25

 

5.02

Composition of Executive Committee

26

 

5.03

Meetings of Executive Committee

27

 

5.04

Powers and Duties of Executive Committee

27

 

5.05

Election, Powers and Duties of Chairman

28

 

5.06

Voting

29

 

5.07

Supermajority Matters

29

 

5.08

Deadlock

30

ARTICLE VI

OPERATION AND MAINTENANCE AND PAYMENT OF OPERATING
COSTS

33

 

6.01

Operation of Redbud Generating Facility

33

 

6.02

Operating Costs and Other Costs and Expenses; Operating Budget; Budget
Disputes

34

 

 

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TABLE OF CONTENTS

(continued)

Page

 

 

6.03

Claims Treated as Operating Costs

37

 

6.04

Fuel Supply

38

 

6.05

Participation in Budget Trading Programs and Allowances

38

 

6.06

Books and Records; Audits of Operating Costs and Costs of Capital
Additions and Annual Audit of Operating Costs and Costs of Capital
Additions Disputes

39

 

6.07

Removal or Resignation of Operations Manager

42

 

6.08

Reports and Forecasts

46

ARTICLE VII

CERTAIN COVENANTS OF EACH PARTY

47

 

7.01

Efforts to Satisfy Conditions Precedent, Construct, Operate and Maintain

47

 

7.02

Transmission Credits and Transmission

48

 

7.03

Certain Expenses

49

 

7.04

Certain Notices

50

ARTICLE VIII

TAXES

51

 

8.01

Ad Valorem Taxes

51

 

8.02

Income and Gross Receipts Taxes

51

 

8.03

Sales and Use Taxes

51

 

8.04

Other Taxes

51

 

8.05

Exemptions

52

 

8.06

Contested Taxes

52

 

8.07

Election Regarding Subchapter K

52

 

8.08

Nonpayment of Tax

53

 

8.09

Contribution for Taxes

53

ARTICLE IX

INSURANCE

53

 

9.01

General

53

 

9.02

Terms of Insurance

53

 

9.03

Procurement Procedures

54

 

9.04

Owner Insurance

54

ARTICLE X

CONDITIONS PRECEDENT

55

 

10.01

Condition Precedent to GRDA’s Obligations

55

 

10.02

Condition Precedent to OG&E’s Obligations

55

 

 

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TABLE OF CONTENTS

(continued)

Page

 

 

10.03

Condition Precedent to OMPA’s Obligations

55

ARTICLE XI

DEFAULTS AND REMEDIES

55

 

11.01

Default

55

 

11.02

Demand for Performance

56

 

11.03

Disputed Defaults

56

 

11.04

Remedies

57

ARTICLE XII

DISPUTE RESOLUTION

59

 

12.01

Dispute Resolution; Arbitration

59

 

12.02

Performance during Dispute

64

ARTICLE XIII

LIMITATION OF LIABILITY AND INDEMNIFICATION

64

 

13.01

Owner Limitation

64

 

13.02

Operations Manager Limitation

64

 

13.03

Allocation

64

 

13.04

Indemnification by Owners of Operations Manager and Other Owners

65

 

13.05

Indemnification of Operations Manager by Owners against Third-Party
Claims

65

 

13.06

Indemnification of Owners by Operations Manager

66

 

13.07

Sole and Exclusive Remedies

66

ARTICLE XIV

DAMAGE TO OR CONDEMNATION OF REDBUD GENERATING
FACILITY; TERMINAITON OF OPERATIONS OF REDBUD
GENERATING FACILITY

67

 

14.01

Damage or Condemnation

67

 

14.02

Termination of Operations

70

ARTICLE XV

TERM AND TERMINATION

71

 

15.01

Term

71

 

15.02

Termination

71

ARTICLE XVI

ASSIGNMENTS AND TRANSFERS OF OWNERSHIP INTERESTS

72

 

16.01

Assignments and Transfers

72

 

16.02

Rights of First Refusal

72

 

16.03

Exception to Rights of First Refusal

74

 

16.04

Admission of New Owner and Actions Necessary to Effect Assignment or
Transfer of Ownership Interest

74

 

 

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TABLE OF CONTENTS

(continued)

Page

 

ARTICLE XVII

MISCELLANEOUS

75

 

17.01

Governing Law

75

 

17.02

Force Majeure

75

 

17.03

Attorneys’ Fees and Litigation Expenses

75

 

17.04

Notices

75

 

17.05

Waivers

79

 

17.06

No Reliance

79

 

17.07

Assumption of Risk

79

 

17.08

Waiver of Defenses

79

 

17.09

No Third-Party Beneficiaries

79

 

17.10

Severability

80

 

17.11

Representation by Counsel

80

 

17.12

Further Assurances

80

 

17.13

GRDA and OMPA Disclosure

80

 

17.14

No Partnership

81

 

17.15

Ancillary Services

82

 

17.16

Access

82

 

17.17

Entire Agreement

82

 

17.18

Cooperation in Financing

83

 

17.19

Amendment

83

 

 

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EXHIBITS

Item

Description

Exhibit A

GRDA’s Knowledge Persons

Exhibit B

OG&E’s Knowledge Persons

Exhibit C

OMPA’s Knowledge Persons

Exhibit D

Administrative and General Expense Allocation Methodology

Exhibit E

Initial Ownership Interests and Pro Rata Shares

Exhibit F

Scheduling, Dispatch and Fuel Procedures

Exhibit G

Form of Agreement of Representation

 

 

 

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REDBUD GENERATING FACILITY

 

OWNERSHIP AND OPERATING AGREEMENT

This Agreement is made and entered into as of the 21st day of January 2008 by
and among Grand River Dam Authority, a governmental agency of the State of
Oklahoma and a body politic and corporate (“GRDA”), Oklahoma Gas and Electric
Company, an Oklahoma corporation (“OG&E”), and Oklahoma Municipal Power
Authority, a governmental agency of the State of Oklahoma and a body politic and
corporate (“OMPA”).

W I T N E S S E T H:

WHEREAS, OG&E is the owner and operator of electric generation, transmission and
distribution facilities through which it is engaged in the business of
generating, transmitting and selling electric energy to the general public and
to other electric utilities, and GRDA and OMPA are the owners of ownership
interests in and the operators of electric generation and transmission
facilities through which each of them is engaged in the business of generating,
transmitting and selling electric energy to its customers; and

WHEREAS, GRDA, OG&E and OMPA wish to participate in the common ownership and
operation of the so-called the Redbud Generating Facility, a 1230 MW, natural
gas-fired, electric generating facility located in Luther, Oklahoma; and

WHEREAS, the Parties acknowledge that uncertainty exists as to the
enforceability of indemnification and hold harmless clauses in GRDA contracts
under various Oklahoma Attorney General Opinions, including 07-41, 06-11 and
01-2, primarily because of their potential violation of Oklahoma Constitution
Art. X, §23, even though obligations of GRDA have been held on several occasions
not to be governed by such constitutional provision, see, e.g., Kerr v. Grand
River Dam Authority, 154 P.2d 946 (Okla. 1945); Sheldon v. Grand River Dam
Authority, 76 P.2d 355 (Okla. 1938), and therefore the enforceability of such
clauses in this Agreement may be

 

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subject to the final decision of an Oklahoma court with proper jurisdiction, and
any indemnification and hold harmless provisions in this Agreement are included
herein with such uncertainty in mind;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained herein, the Parties hereby agree as follows:

ARTICLE I

 

DEFINITIONS AND INTERPRETATIONS

1.01     Defined Terms. For the purposes of this Agreement, the following terms
shall have the following meanings:

“AAA” has the meaning ascribed thereto in Section 12.01(c)(i).

“Actual Expenditures” means the sum total of (i) all expenditures (regardless of
amount) of any type budgeted for in the applicable Operating Budget, including
any and all amendments, modifications and supplements to such budget that are
approved by the Executive Committee and any and all work papers that are a part
of such budget or are a part of any such amendment, modification or supplement
thereto, (ii) all other expenditures that are otherwise approved by the
Executive Committee, including expenditures made pursuant to the terms of
contracts that are approved by the Executive Committee, and (iii) all
expenditures that are made in accordance with Prudent Utility Practices to avoid
or limit damages that would otherwise be reasonably expected to result from an
emergency (including events of Force Majeure).

“Affiliate” means any Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified. For purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise, and ownership by a
Person of 10% or more of the voting securities or other voting

 

 

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equity interests of another Person shall create a rebuttable presumption that
such Person controls such other Person.

“Agreement” means this Redbud Generating Facility Ownership and Operating
Agreement.

“Allowances” means all authorizations to release, discharge, or emit from the
Redbud Generating Facility specified units of a substance or compound, including
sulfur dioxide, nitrogen oxides, carbon dioxide, and mercury that are
established or administered by a Governmental Authority with jurisdiction over
the Redbud Generating Facility under (i) an air pollution control or emission
reduction program, including any cap-and-trade, emissions trading, banking,
offset, or budget trading program, (ii) a program designed to control or reduce
discharges to surface waters, watersheds, or groundwater, or (iii) any
environmental control program with a similar purpose, in each case regardless of
whether the Governmental Authority establishing or administering such
authorization designates the authorization by a name other than "Allowances" and
regardless of whether such Governmental Authority allows or imposes a monetary
payment in lieu of or in addition to requiring the possession or surrender of
"Allowances."

“Alternate Member” has the meaning ascribed thereto in Section 5.02.

“Ancillary Services” means ancillary services as defined by SPP under a FERC
approved tariff.

“Annual Operating Costs and Costs of Capital Additions Audit” has the meaning
ascribed thereto in Section 6.06(b)(i).

“Annual Operating Costs and Costs of Capital Additions Audit Dispute” has the
meaning ascribed thereto in Section 6.06(b)(iv).

 

 

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“Arbitrable Dispute” has the meaning ascribed thereto in Section 12.01(b).

“Arbitral Panel Selection Period” has the meaning ascribed thereto in Section
6.07(d)(i).

“Budget Estimate” has the meaning ascribed thereto in Section 6.02(b).

“Budgeted Expenditures” means the sum total of (i) all amounts specifically
budgeted for the various items set forth in the applicable Operating Budget,
including any and all amendments, modifications and supplements to such budget
that are approved by the Executive Committee, (ii) all other expenditures that
are otherwise approved by the Executive Committee, including expenditures made
pursuant to the terms of contracts that are approved by the Executive Committee,
and (iii) all expenditures that are made in accordance with Prudent Utility
Practices to avoid or limit damages that would otherwise be reasonably expected
to result from an emergency (including events of Force Majeure).

“Budgeted Expenditures Cap” means the amount equal to the product of (i) the
aggregate amount of Budgeted Expenditures for the applicable calendar year and
(ii) 1.10.

“Business Day” means any day that is not a Saturday, a Sunday or a national or
state of Oklahoma bank holiday.

“Buy-Sell Notice” has the meaning ascribed thereto in Section 5.08.

“Buy-Sell Procedure” has the meaning ascribed thereto in Section 5.08.

“Capacity” means the net MW output capacity of the Redbud Generating Facility as
determined annually in accordance with the formal test methods adopted by SPP.

“Capital Additions” means additions, improvements and betterments to the Redbud
Generating Facility.

 

 

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“Claiming Party” has the meaning ascribed thereto in the definition of Force
Majeure in this Section 1.01.

“Claims” means all claims, demands, losses, liabilities and expenses, including
reasonable attorney’s fees.

“Closing Date” has the meaning ascribed thereto in the Redbud APA.

“Code” means the Internal Revenue Code of 1986.

“Control Room Operator” means the function and Persons who, under the authority
of the Operations Manager, physically control the operation of the Redbud
Generating Facility.

“Costs of Capital Additions” means those costs incurred or to be incurred to
effect Capital Additions to the Redbud Generating Facility.

“Costs of NERC Compliance” means all costs and expenses incurred by the
Operations Manager in connection with NERC Compliance as such compliance relates
to the Redbud Generating Facility, including any and all fines, penalties and
such other monetary sanctions as may be imposed on the Operations Manager for
any failure to so comply.

“Default” has the meaning ascribed thereto in Section 11.01.

“Defaulting Owner” has the meaning ascribed thereto in Section 11.04(a).

“Demand” has the meaning ascribed thereto in Section 12.01(c)(i).

“Effective Date” means the date of this Agreement.

“Encumbrances” means any and all mortgages, pledges, claims, liens, security
interests, options, warrants, purchase rights, conditional and installment sales
agreements, easements, activity and use restrictions and limitations,
exceptions, right-of-way, deed restrictions, defects of title, encumbrances and
charges of any kind.

“Energy” means electric energy or electricity.

 

 

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“Energy Delivery Costs” means all fees, charges, penalties, liabilities, costs
and expenses, including all Imbalance Charges, incurred in connection with the
scheduling, sale, purchase, or other disposition of all or any portion of
Capacity or Net Capability, or the transmission or delivery of all or any
portion of Net Capability to any Owner’s network load or to any other point(s)
of delivery, excluding any Costs of Capital Additions, Fuel Costs,
Interconnection Costs, Operating Costs and Transmission Costs.

“Environmental Laws” means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. § 9601 et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Superfund
Amendments and Reauthorization Act of 1986; the Federal Water Pollution Control
Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic
Substances Control Act, 15 U.S.C. § 2601 et. seq.; the Oil Pollution Act, 33
U.S.C. § 2701 et seq.; the Emergency Planning and Community Right-to-Know Act,
42 U.S.C. § 11001 et seq.; Occupational Safety and Health Act, 29 U.S.C. §651,
et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300f et. seq.; and all similar
Laws of any Governmental Authority having jurisdiction over the Facilities
addressing pollution or protection of the environment and all amendments to such
Laws and all regulations implementing any of the foregoing.

“Excess Proceeds” has the meaning ascribed thereto in Section 4.05(a).

“Executive Committee” means the Executive Committee established pursuant to
Section 5.01.

“FERC” means the Federal Energy Regulatory Commission.

“Force Majeure” means an event that is not within the reasonable control of the
Person claiming suspension of a duty or obligation to perform (“Claiming Party”)
and, despite the

 

 

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Claiming Party’s exercise of due diligence, the Claiming Party is unable to
overcome in a commercially reasonable manner or obtain or cause to be obtained a
commercially reasonable substitute performance therefor, including (i) wrongful
or negligent acts of a Person or Persons other than the Claiming Party, (ii)
acts of God, (iii) fire, (iv) civil disturbance, (v) labor disputes or labor
shortages, (vi) strikes, (vii) sabotage, (viii) action or restraint by a
Governmental Authority, provided the Claiming Party has not applied for or
assisted in the application for and, where and to the extent reasonable, has
opposed such action or restraint, and (ix) inability after diligent application
to obtain or maintain required permits, licenses, zoning or other required
approvals from any Governmental Authority or other third Person whose consent is
required as a condition to the Claiming Party’s performance hereunder.

“Fuel Costs” means costs associated with the transportation and storage of fuel
for the Redbud Generating Facility.

“Governmental Authority” means any federal, state or local government, any
governmental, regulatory or administrative commission, body, agency or other
authority exercising or entitled to exercise any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power,
commission, official or other instrumentality of the United States or any state,
county, city or other political subdivision or similar governing entity.

“GRDA” has the meaning ascribed thereto in the introductory paragraph of this
Agreement.

“Imbalance Charges” means any penalties, fees or charges assessed by a
Transmission Operator or Transmission Provider for failure to satisfy
requirements for balancing of Energy receipts and deliveries or loads and
generation, or payable to any other Person in connection with the delivery of
Energy in an amount(s) different from the amount(s) scheduled.

 

 

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“Initiating Owner” has the meaning ascribed thereto in Section 5.08(a).

“Injury and Illness Report” has the meaning ascribed thereto in Section 6.08(c).

“Interconnection Costs” shall mean the costs of (i) submitting to SPP any
information, application(s), request(s) and/or fee(s) required under the
Standard Large Generator Interconnection Procedures in Attachment V to the SPP
OATT and (ii) any Interconnection Facilities, Distribution Upgrades or Network
Upgrades (each as defined in Attachment V to the SPP OATT) listed in Appendix A
to the Redbud LGIA.

“Knowledge” or similar terms used in this Agreement with respect to a Party
means (i) in the case of GRDA, the extent of the actual and current knowledge,
after reasonable investigation, of any of the Persons listed on Exhibit A, the
chief executive officer, the chief financial officer, the chief operating
officer, the chief accounting officer and the chief legal officer or general
counsel of GRDA, including the knowledge that such individuals would have
obtained as a result of the proper operation of established reporting procedures
concerning the business of GRDA, (ii) in the case of OG&E, the extent of the
actual and current knowledge, after reasonable investigation, of any of the
Persons listed on Exhibit B, the chief executive officer, the chief financial
officer, the chief operating officer, the chief accounting officer and the chief
legal officer or general counsel of OG&E, including the knowledge that such
individuals would have obtained as a result of the proper operation of
established reporting procedures concerning the business of OG&E, and (iii) in
the case of OMPA, the extent of the actual and current knowledge, after
reasonable investigation, of any of the Persons listed on Exhibit C, the chief
executive officer, the chief financial officer, the chief operating officer, the
chief accounting officer and the chief legal officer or general counsel of OMPA,
including the

 

 

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knowledge that such individual would have obtained as a result of the proper
operation of established reporting procedures concerning the business of OMPA.

“Law” means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the effect of law of the United States or any state,
county, city or other political subdivision or of any Governmental Authority,
including the following Oklahoma Statutes: (i) the Grand River Dam Authority Act
(82 O.S. § 861 et. seq.), (ii) the Oklahoma Surplus Property Act (74 O.S. § 62.1
- § 62.6) and (iii) the procedures for disposal of certain state-owned real
property (74 O.S. § 129.4).

“LTSA” means the Long-Term Parts and Service Agreement dated January 29, 2001,
as amended, between Redbud Energy LP and General Electric International, Inc.

“Majority of Members” means Members appointed by Owners holding in the aggregate
more than 50% of the aggregate Ownership Interests.

“Majority of Owners” means Owners holding in the aggregate more than 50% of the
aggregate Ownership Interests.

“Material Amendment” means any amendment, modification, supplement or other
change to the terms and conditions of any Material Contract that would result in
an annual cost increase of more than 15% to the Owners.

“Material Contracts” means any Maintenance & Operating Agreement, any long-term
service agreement with any third-party relating to any turbine or other major
piece of equipment constituting a part of the Redbud Generating Facility and any
long-term natural gas storage or transportation agreement relating to the Redbud
Generating Facility.

“Member” has the meaning ascribed thereto in Section 5.02.

 

 

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“Minimum Net Output” means the lowest net megawatt output of Energy that the
Redbud Generating Facility can reliably produce while being maintained in
service on a continuous basis, as determined from time to time by the Operations
Manager.

“NERC” means North American Electric Reliability Corporation.

“NERC Compliance” means compliance with the Critical Infrastructure Protection
(CIP) standards established by NERC from time to time.

“Net Capability” means the net amount of Energy, Ancillary Services and all
other related products of the Redbud Generating Facility that can be sold or
purchased, which are produced by the Redbud Generating Facility from time to
time under the operating conditions then existing, including periods when some
or all of the Redbud Generating Facility may be inoperable, after station use.

“Nominee Submission Period” has the meaning ascribed thereto in Section
6.07(d)(ii).

“Non-Budgeted Expenditures” means expenditures by the Operations Manager that
are not Budgeted Expenditures or Actual Expenditures.

“Non-Transferring Owners” has the meaning ascribed thereto in Section 16.02(a).

“OCC Competitive Procurement Rules” means the rules of the OCC set forth in
Section 165:35-34-1 through Section 165:35-34-3 of the Oklahoma Administrative
Code.

“Offer Period” has the meaning ascribed thereto in Section 5.08(a).

“OG&E” has the meaning ascribed thereto in the introductory paragraph of this
Agreement.

“OMPA” has the meaning ascribed thereto in the introductory paragraph of this
Agreement.

“Operating Budget” has the meaning ascribed thereto in Section 6.02(b).

 

 

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“Operating Costs” means all reasonable or necessary costs, expenses, losses,
liabilities and charges that are incurred by the Operations Manager in
performing Operating Work and are properly recorded as costs incurred in the
operation and maintenance of the Redbud Generating Facility under a system of
accounts that properly classifies all such costs, including Fuel Costs, Costs of
NERC Compliance, Redbud Insurance costs, all amounts payable under any such
Operating & Maintenance Agreements as may be in effect from time to time, the
costs of the Operations Manager associated with audits under Section 6.06(b)
and, without duplication, all direct and indirect administrative and general
charges allocated to such functions in accordance with the administrative and
general expense allocation methodology set forth in Exhibit D and all costs of
repairs, renewals and replacements that are necessary or reasonable to assure
design capability and reliability or are required by any Governmental Authority,
but excluding (i) any payments in lieu of property Taxes, (ii) the financing
costs, fees and expenses of an Owner relating to the ownership and acquisition
of its interest in the Redbud Generating Facility, (iii) any Taxes based upon
the net income of any Owner or individually assessed against any Owner’s
Ownership Interest in, or Pro Rata Share of, the Net Capability of the Redbud
Generating Facility or from which any Owner is exempt, and (iv) Costs of Capital
Additions, Energy Delivery Costs, Transmission Costs and the cost of any
Allowances purchased by the Operations Manager on behalf of an Owner pursuant to
Section 6.05.

“Operating & Maintenance Agreements” means any such separate agreements among
the Owners and the Operations Manager relating to the operation and maintenance
of the Redbud Generating Facility as may be in effect from time to time.

“Operations Manager” means OG&E, unless and until replaced by the Executive
Committee in accordance with Section 5.07(b) or Section 6.07.

 

 

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“Operations Manager Dispute” has the meaning ascribed thereto in Section
12.01(a).

“Operating Work” means operation, maintenance, use, repair or retirement of the
Redbud Generating Facility, including all related engineering, purchasing,
supervision, expediting, inspection, accounting, insurance, testing, scheduling
of maintenance, management, protection, handling of fuel, and the handling,
storage, and disposal of waste, and contracting therefor, performed by the
Operations Manager.

“OSHA” means the Occupational Safety and Health Administration.

“Owners” means GRDA, OG&E and OMPA, in each case for so long as such Party owns
an Ownership Interest, and any other Person that acquires an interest in the
Redbud Generating Facility in accordance with the terms of this Agreement.

“Owner Dispute” has the meaning ascribed thereto in Section 12.01(a).

“Ownership Interest” has the meaning ascribed thereto in Section 3.01(a).

“Parties” means the signatories to this Agreement.

“Performance Report” has the meaning ascribed thereto in Section 6.08(a).

“Permits” means all of the consents, approvals, authorizations, directions,
licenses, waivers and permits issued by any federal, state or local Governmental
Authority that are required with respect to the ownership, operation and
maintenance of the Redbud Generating Facility.

“Permitted Encumbrances” means (a) liens for Taxes, impositions, assessments or
other governmental charges (i) not yet delinquent or (ii) being contested in
good faith by appropriate proceedings, (b) statutory liens (including
materialmen’s, warehousemen’s, mechanics’, repairmen’s, landlords’, and other
similar liens) arising in the ordinary course of business and securing payments
not yet delinquent or being contested in good faith by the

 

 

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appropriate proceedings, (c) conditions, covenants, easements, rights of way and
servitudes, and any building, health, safety and zoning Laws and Environmental
Laws, relating to the use or operation of the Redbud Generating Facility and any
defects, imperfections or irregularities of title, if any, as would not
reasonably be expected to have material adverse effect on the operation of the
Redbud Generating Facility, and (d) such matters as would be revealed by a
recent, accurate survey and physical inspection of the real property comprising
the site of the Redbud Generating Facility and appurtenances thereto, including
possession, boundaries, location of improvements and rights of way, public or
private easements and encroachments to the extent that such matters would not
reasonably be expected to have material adverse effect on the operation of the
Redbud Generating Facility.

“Person” means any natural person, corporation, general partnership, limited
partnership, proprietorship, limited liability company, other business
organization, trust, union, association or Governmental Authority.

“Planned Outage Report” has the meaning ascribed thereto in Section 6.08(b).

“Proportionate Share” means the proportion that a Purchasing Owner’s Ownership
Interest bears to the total of the Ownership Interests of all Purchasing Owners,
and for all purposes of this Agreement, Proportionate Shares (expressed as
percentages) shall be calculated to up to four decimal places and rounded
upward, to the extent necessary, so that the sum of the Proportionate Shares of
all Purchasing Owners with respect to the same Transferring Interest shall be
equal to 100%.

“Pro Rata Share” has the meaning ascribed thereto in Section 3.01(a).

“Prudent Utility Practices” means the practices, methods and acts (including the
generally accepted practices, methods and acts engaged in or approved by the
operators of

 

 

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similar electric generating facilities) that, at the time such practice, method
or act is employed and in the exercise of reasonable judgment in light of the
facts known at such time, would be expected to accomplish the desired result in
a workmanlike manner, consistent with applicable Laws and other governmental
requirements and reliability, safety and environmental protection, but “Prudent
Utility Practices” shall not require the use of the optimum practice, method or
act, but only requires the use of acceptable practices, methods or acts
generally accepted in the United States in performing obligations in accordance
with Prudent Utility Practices.

“Purchasing Owner” has the meaning ascribed thereto in Section 16.02(a).

“Receiving Owners” has the meaning ascribed thereto in Section 5.08(a).

“Redbud APA” means the Asset Purchase Agreement dated January 21, 2008, among
GRDA, OG&E and OMPA.

“Redbud Generating Facility” means the so-called “Redbud” 1,230 MW gas-fired,
combined-cycle power generation plant and related facilities located in Luther,
Oklahoma, including the components thereof and the equipment necessary for
interconnection to the OG&E transmission system.

“Redbud Insurance” has the meaning ascribed thereto in Section 9.02.

“Redbud LGIA” has the meaning ascribed thereto in Section 7.02(a).

“Redbud PSA” means the Purchase and Sale Agreement dated January 21, 2008, by
and among OG&E and Redbud Energy I, LLC, Redbud Energy II, LLC and Redbud Energy
III, LLC.

“Redbud Purchase Agreements” means the Redbud APA and the Redbud PSA.

“Regulatory Approvals” means any and all approvals, authorizations, consents and
Permits of or from, and any and all filings with and notices to, any
Governmental Authority of competent jurisdiction over any of the Owners or the
Redbud Generating Facility.

 

 

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“Resolution Deadline” has the meaning ascribed thereto in Section 5.08.

“Right of First Refusal” has the meaning ascribed thereto in Section 16.02(a).

“Rules” has the meaning ascribed thereto in Section 12.01(c)(i).

“SPP” means Southwest Power Pool, Inc. or any successor thereto.

“SPP Criteria” means the document(s) adopted by SPP, including any schedules,
annexes, attachments or exhibits thereto, as amended from time to time, that
contain(s) the policies, standards, criteria and principles of conduct of SPP.

“SPP OATT” means the SPP Open Access Transmission Tariff, as approved by the
Federal Energy Regulatory Commission from time to time.

“Successor Operations Manager Selection Period” has the meaning ascribed thereto
in Section 6.07(d)(iii).

“Supermajority Appointment Period” has the meaning ascribed thereto in Section
6.07(d).

“Supermajority of Members” means Members representing Owners holding in the
aggregate more than 60% of aggregate Ownership Interests.

“Taking” means the taking of any of the Redbud Generating Facility as a result
of the exercise of the power of eminent domain or condemnation for public or
other use or the sale or conveyance of any of the Redbud Generating Facility
under the threat of a taking or condemnation.

“Taxes” means (i) any federal, state, local, or foreign income, gross receipts,
value added, windfall or other profits, alternative or add-on minimum,
estimated, franchise, profits, sales, use, real property, personal property, ad
valorem, vehicle, license, payroll, employment, workers’ compensation,
unemployment compensation, withholding, social security, disability, excise,

 

 

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severance, stamp, occupation, premium, environmental (including taxes under Code
section 59A), customs duties, import fees, capital stock transfer, title,
documentary, or registration, or other tax, duty, or impost of any kind, whether
disputed or not, (ii) any liability for any amount described in clause (i)
hereof as a result of being a member of an affiliated, consolidated, combined,
or unitary group for any taxable period, (iii) any liability for any amount
described in clause (i) hereof as a result of being a Person required to
withhold or collect Taxes imposed on another Person, (iv) any liability for any
amount described in clause (i) or (ii) hereof as a result of being a transferee
or successor to any Person or arising by contract or otherwise, and (v)
interest, penalties or additions to tax imposed with respect to any amount
described herein.

“Term” has the meaning ascribed thereto in Section 15.01.

“Termination Date” has the meaning ascribed thereto in Section 15.01.

“Third-Party Offer” has the meaning ascribed thereto in Section 16.02(a).

“Third-Party Offeror” has the meaning ascribed thereto in Section 16.02(a).

“Third-Party Offer Notice” has the meaning ascribed thereto in Section 16.02(a).

“Third-Party Offer Period” has the meaning ascribed thereto in Section 16.02(a).

“Transactions” means the transactions contemplated by this Agreement.

“Transferring Interest” has the meaning ascribed thereto in Section 16.02(a).

“Transferring Owner” has the meaning ascribed thereto in Section 16.02(a).

“Transmission Costs” has the meaning ascribed thereto in Section 7.02(b).

“Transmission Operator” means SPP or any Transmission Provider, independent
system operator, regional transmission operator or other transmission operator
from time to time having authority to control the transmission control area to
which the Redbud Generating Facility is interconnected.

 

 

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“Transmission Provider” means any Person or Persons that owns, operates or
controls facilities used for the transmission of Energy in interstate commerce.

“Variable Cost of Producing Energy” means the Variable Operating Maintenance
Share, plus Fuel Costs.

“Variable Operating Maintenance Share” means the cost, per megawatt hour (MWh),
from time to time of producing Energy, exclusive of Fuel Costs.

1.02     Interpretations. In this Agreement, unless clear contrary intention
appears: (a) the singular number includes the plural number and vice versa; (b)
reference to any Person includes such Person’s successors and assigns but, if
applicable, only if such successors and assigns are permitted by this Agreement,
and reference to a Person in a particular capacity excludes such Person in any
other capacity; (c) reference to any gender includes each other gender; (d)
reference to any agreement (including this Agreement), document or instrument
means such agreement, document or instrument as amended or modified and in
effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof; (e) reference to any Article, Section, Schedule or
Exhibit means such Article, Section, Schedule or Exhibit to this Agreement, and
references in any Article, Section, Schedule, Exhibit or definition to any
clause means such clause of such Article, Section, Schedule, Exhibit or
definition; (f) “herein,” “hereof,” “hereto,” “hereunder” and words of similar
import are reference to this Agreement as a whole and not to any particular
Section or other provision hereof; (g) relative to the determination of any
period of time, “from” means “from and including,” “to” means “to but excluding”
and “through” means “to and including”; (h) “including” (and with correlative
meaning “include”) means including without limiting the generality of any
description preceding such term; and (i) reference to any Law means such Law as
amended, modified, codified or

 

 

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reenacted, in whole or in part, and in effect from time to time, including rules
and regulations promulgated thereunder.

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES

2.01     GRDA Representations. GRDA represents and warrants to OG&E and OMPA
that:

(a)       Standing. GRDA is a governmental agency of the State of Oklahoma and a
body politic and corporate duly created and validly existing under the laws of
the State of Oklahoma. GRDA has full corporate and other requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. GRDA is qualified to do business in the State of Oklahoma. The
execution and delivery by GRDA of this Agreement and the performance by GRDA of
its obligations hereunder have been duly and validly authorized by all requisite
corporate and other action on the part of GRDA. The execution and delivery by
GRDA of this Agreement do not, and the performance by GRDA of its obligations
under this Agreement will not, violate any provision of any applicable Law,
GRDA’s corporate charter or bylaws or any indenture, agreement or instrument to
which GRDA is a party or by which GRDA or its property may be bound or otherwise
affected. This Agreement has been duly and validly executed and delivered by
GRDA and constitutes the legal valid and binding obligation of GRDA enforceable
against GRDA in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
arrangement or other similar Laws relating to or affecting the rights of
creditors generally or by general equitable principles.

(b)       No Violation of Law. GRDA is not in violation of any applicable Law or
any judgment entered by any Governmental Authority that, individually or in the
aggregate,

 

 

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would materially affect GRDA’s ability to perform its obligations under this
Agreement. Neither the execution, delivery and performance by GRDA of its
obligations under this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any authorizations, consents, exemptions,
decrees, licenses, policies, interpretations, guidelines, permits, certificates,
regulations, orders and approvals of and from any Governmental Authority of
which GRDA is or, upon exercise of reasonable diligence, should be aware or any
applicable Law.

2.02     OG&E Representations. OG&E represents and warrants to GRDA and OMPA
that:

(a)       Standing. OG&E is a corporation duly formed and validly existing under
the laws of the State of Oklahoma. OG&E has full corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
OG&E is qualified to do business in the State of Oklahoma. The execution and
delivery by OG&E of this Agreement and the performance by OG&E of its
obligations hereunder have been duly and validly authorized by all requisite
corporate action on the part of OG&E. The execution and delivery by OG&E of this
Agreement do not, and the performance by OG&E of its obligations under this
Agreement will not, violate any provision of any applicable Laws, OG&E’s
corporate charter or bylaws or any indenture, agreement or instrument to which
OG&E is a party or by which OG&E or its property may be bound or otherwise
affected. This Agreement has been duly and validly executed and delivered by
OG&E and constitutes the legal valid and binding obligation of OG&E enforceable
against OG&E in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
arrangement or other similar Laws relating to or affecting the rights of
creditors generally or by general equitable principles.

 

 

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(b)       No Violation of Law. OG&E is not in violation of any applicable Laws
or any judgment entered by any Governmental Authority that, individually or in
the aggregate, would materially affect OG&E’s ability to perform its obligations
under this Agreement. Neither the execution, delivery and performance by OG&E of
its obligations under this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any authorizations, consents, exemptions,
decrees, licenses, policies, interpretations, guidelines, permits, certificates,
regulations, orders and approvals of and from any Governmental Authority of
which OG&E is or, upon exercise of reasonable diligence should be, aware or any
applicable Law.

2.03     OMPA Representations. OMPA represents and warrants to GRDA and OG&E
that:

(a)       Standing. OMPA is a governmental agency of the State of Oklahoma and a
body politic and corporate duly created and validly existing under the laws of
the State of Oklahoma. OMPA has full corporate and other requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. OMPA is qualified to do business in the State of Oklahoma. The
execution and delivery by OMPA of this Agreement and the performance by OMPA of
its obligations hereunder have been duly and validly authorized by all requisite
corporate and other action on the part of OMPA. The execution and delivery by
OMPA of this Agreement do not, and the performance by OMPA of its obligations
under this Agreement will not, violate any provision of any applicable Law,
OMPA’s corporate charter or bylaws or any indenture, agreement or instrument to
which OMPA is a party or by which OMPA or its property may be bound or otherwise
affected. This Agreement has been duly and validly executed and delivered by
OMPA and constitutes the legal valid and binding obligation of OMPA enforceable
against OMPA in accordance with its terms, except as the same may be

 

 

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limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, arrangement or other similar Laws relating to or affecting the
rights of creditors generally or by general equitable principles.

(b)       No Violation of Law. OMPA is not in violation of any applicable Law or
any judgment entered by any Governmental Authority that, individually or in the
aggregate, would materially affect OMPA’s ability to perform its obligations
under this Agreement. Neither the execution, delivery and performance by OMPA of
its obligations under this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any authorizations, consents, exemptions,
decrees, licenses, policies, interpretations, guidelines, permits, certificates,
regulations, orders and approvals of and from any Governmental Authority of
which OMPA is or, upon exercise of reasonable diligence, should be aware or any
applicable Law.

ARTICLE III

 

OWNERSHIP

 

3.01

Ownership Interests and Pro Rata Shares.

(a)       Initial Ownership Interests and Pro Rata Shares. The Owners shall own
the Redbud Generating Facility as tenants in common and, as of the Effective
Date, the undivided ownership interest of each Owner in the Redbud Generating
Facility shall be equal to the percentage set forth opposite its name on Exhibit
E (such percentage, as the same may change or be changed from time to time as
expressly provided or permitted under this Agreement and to the extent allowed
by and subject to the requirements and procedures set forth in applicable Law,
being referred to as both an “Ownership Interest” and a “Pro Rata Share”).

(b)       Changes in Ownership Interests and Pro Rata Shares and Transfers of
Ownership Interests. Ownership Interests and Pro Rata Shares may change or be
changed, and

 

 

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Ownership Interests may be transferred, from time to time only as expressly
provided and permitted under Section 11.04(a), Section 14.01(b) or Article XVI.

3.02     Waiver of Partition. The Owners shall have no right of partition with
respect to the Redbud Generating Facility, whether by partition in kind or sale
and division of the proceeds thereof, until the end of the Redbud Generating
Facility operations as described in Section 16.02.

ARTICLE IV

 

SCHEDULING AND DISPATCH

4.01     Owner Rights. Each Owner shall be entitled to sell all or any part of
its Pro Rata Share of Capacity, and schedule, take and sell or, by any one or a
combination of commercially available means (including an Owner’s self-use
thereof), otherwise dispose of all or a specified portion of its Pro Rata Share
of associated Net Capability, in accordance with this Article IV and Exhibit F.

 

4.02

Owner Responsibilities.

(a)       Each Owner shall schedule the dispatch of all or any portion of its
Pro Rata Share of Net Capability in accordance with the scheduling and dispatch
procedures set forth in Exhibit F.

(b)       Each Owner shall take or dispose of its Pro Rata Share of Minimum Net
Output and shall bear and pay all Energy Delivery Costs incurred as a result of
any failure by such Owner to take or dispose of its Pro Rata Share of Minimum
Net Output in accordance with this Article IV and Exhibit F.

(c)       Each Owner shall bear and pay all Energy Delivery Costs associated
with all or any portion of its Pro Rata Share of Net Capability that such Owner
schedules, takes or, by any one or a combination of commercially available
means, disposes of or that is dispatched.

 

 

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(d)       Each Owner shall be responsible for representing or otherwise
communicating (e.g., by metering or in offer curves), in accordance with all
applicable Laws and all applicable rules, regulations, standards and guidelines
of NERC, the Transmission Provider and the Transmission Operator (including the
SPP Criteria), its Pro Rata Share of Net Capability to all Parties and third
parties as required for such Owner’s scheduling or disposal of all or any
portion of its Pro Rata Share of Net Capability, including such representation
or communication in connection with scheduling, dispatching, tagging, resource
plans, ancillary service plans, and offer curves. Any or all Owners may delegate
to the Operations Manager their responsibilities with respect to such
representation or communication on such terms and conditions as shall be
reasonably acceptable to the Operations Manager. No such delegation shall become
effective unless, at least six months before the delegation becomes effective
(or such shorter period before the delegation becomes effective as the
Operations Manager shall have agreed to), the Operations Manager and the
affected Owner(s) shall have agreed to, and the Executive Committee shall have
approved, an amendment to Exhibit F specifying the procedures that will govern
the performance by the Operations Manager of such responsibilities from and
after the effective date of such delegation.

 

4.03

Operations Manager Responsibilities.

(a)       The Operations Manager shall communicate simultaneously to all Owners
certain information regarding actual or anticipated outages and/or derates of
the Redbud Generating Facility, as described in further detail in Exhibit F. The
Operations Manager shall monitor the operating condition of the Redbud
Generating Facility and communicate such information to the Owners in accordance
with the procedures set forth in Exhibit F.

 

 

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(b)       The Operations Manager shall monitor and receive dispatch
instructions, directives and other communications from the Transmission Operator
relating to Net Capability or otherwise relating to the Redbud Generating
Facility in accordance with Prudent Utility Practices and the provisions of
Exhibit F.

(c)       Subject to the operational and design limitations of the Redbud
Generating Facility and of all applicable manufacturers’ guidelines, the
operating conditions of the Redbud Generating Facility then existing, and all
applicable limitations of the Permits, the Operations Manager shall dispatch the
Redbud Generating Facility in real-time pursuant and subject to the aggregate
dispatch instructions and directives of the Transmission Operator as described
in Exhibit F.

4.04     Sales, Purchases, Exchanges and Agency Agreements. All sales,
purchases, exchanges, and agency arrangements associated with Capacity or Net
Capability between or among Owners, or between or among one or more Owners and
one or more third parties, shall be made under separate agreements, none of
which may relieve any Owner from its responsibilities under this Agreement or
increase the responsibilities of any Owner (that is not a party to such separate
agreement) under this Agreement.

4.05     Operations Manager’s Option to Purchase and Sell Defaulting Owner’s Pro
Rata Share of Net Capability. Notwithstanding anything to the contrary in the
foregoing provisions of this Article IV, in the event that:

(a)       any Owner is in Default on one or more payments, the Operations
Manager shall have the option, exercisable at the sole discretion of the
Operations Manager, to purchase from the Defaulting Owner during the period of
such Default the Defaulting Owner’s Pro Rata Share of Net Capability at the
price equal to the Defaulting Owner’s cost of producing

 

 

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the same, and if the proceeds of any sale thereof by the Operations Manager
exceed the price paid by the Operations Manager therefor (the amount of any such
excess proceeds being referred to as “Excess Proceeds”), the Operations Manager
shall apply the Excess Proceeds to the payment(s) (plus any accrued interest
thereon pursuant to Section 11.04(a)) owed by the Defaulting Owner, and any
Excess Proceeds remaining after such payment(s) (plus any such accrued interest
thereon) have been paid in full shall be remitted to the Defaulting Owner; or

(b)       any Owner is in Default on the fulfillment of any covenant or the
performance of any of its other material obligations other than payment
obligations, the Operations Manager shall have the option, exercisable at the
sole discretion of the Operations Manager, to purchase from the Defaulting Owner
during the period of such Default the Defaulting Owner’s Pro Rata Share of Net
Capability at the price equal to the Defaulting Owner’s cost of producing the
same, and if any sale thereof by the Operations Manager yields Excess Proceeds,
the Operations Manager shall apply the Excess Proceeds to any actual damages
incurred by the non-Defaulting Owner(s) as the result of such Default, and any
Excess Proceeds remaining after such damages have been paid in full shall be
remitted to the Defaulting Owner.

ARTICLE V

 

EXECUTIVE COMMITTEE

5.01     Establishment of Executive Committee. The Executive Committee shall
have such powers, authority, duties and responsibilities as are set forth in
this Agreement and as may be otherwise delegated to it by the Owners,
collectively, in writing from time to time. In addition to the more specific
powers and authority set forth in Section 5.04, the Executive Committee shall
have the power to (a) establish policies and procedures for the operation and
maintenance of the Redbud Generating Facility, (b) review and approve operating
and capital budgets and any amendments, modifications and supplements thereto
and other material

 

 

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variances therefrom, annual schedules and reports, and similar major operations
and maintenance matters, and (c) generally provide such guidance and direction
as is needed to operate and maintain the Redbud Generating Facility.

5.02     Composition of Executive Committee. Each Owner shall appoint one
representative to the Executive Committee who shall have the power and authority
to bind the Owner by which the Member was appointed (each such representative
being referred to as a “Member”). Each Member shall have a single vote equal to
the Ownership Interest of the Owner by which the such Member was appointed. Each
Member shall hold office until death, resignation or removal at the pleasure of
the Owner by which the Member was appointed. If a vacancy occurs on the
Executive Committee, the Owner by which the vacating Member was appointed shall
appoint a successor. Each Owner may also appoint an alternate representative who
shall be authorized to act as a Member in the absence of the Member for whom he
or she is an alternate (each such alternate representative being referred to as
an “Alternate Member”). Each Alternate Member shall also hold office until
death, resignation or removal at the pleasure of the Owner by which the
Alternate Member was appointed. The initial Members and Alternate Members of the
Executive Committee and their respective successors shall be appointed by the
respective Owners by giving written notice of such appointments to the other
Owners. No Member or Alternate Member shall be entitled to compensation or
reimbursement of expenses from the Owners for attendance at meetings of the
Executive Committee. Any Owner may also vote and otherwise be represented at
meetings of the Executive Committee by a proxy, duly authorized as such by a
written appointment of proxy signed by such Owner or such Owner’s duly
authorized attorney-in-fact and delivered to the Executive Committee for
inclusion in the minutes of the meeting and filing with the Executive
Committee’s records. In the event that any

 

 

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Owner ceases to be an Owner for any reason whatsoever, the Member and any
Alternate Member appointed by such Owner shall immediately cease to be a Member
and an Alternate Member, respectively.

5.03     Meetings of Executive Committee. The Executive Committee shall hold
semi-annual meetings on the dates established from time to time by the Executive
Committee. Between regular meetings, any Member may call special meetings upon
three days’ written notice to all of the other Members and the Alternate Members
or, in the case of an emergency situation, upon such shorter telephonic notice
as the chairman of the Executive Committee determines is appropriate. The
Executive Committee shall keep written minutes of its meetings. Subject to
Section 5.07, any action that may be taken at a meeting of the Executive
Committee may be taken without a meeting by written action signed by all of the
Members or Alternate Members. Participation in any meeting of the Executive
Committee by conference telephone that enables all Members or Alternate Members
to hear one another shall constitute participation in person. The views of all
Members or Alternative Members will be heard and considered in respect of all
matters brought before the Executive Committee.

5.04     Powers and Duties of Executive Committee. Subject to the terms and
conditions of this Agreement, the Executive Committee shall have full power and
complete authority with respect to all aspects of the business and affairs of
the Redbud Generating Facility, including but not limited to (i) the approval or
disapproval of all matters that expressly require the approval of the Executive
Committee hereunder, (ii) the deciding of all matters that expressly require the
decision or determination of the Executive Committee hereunder, and (iii) the
delegation to the Operations Manager of such powers, authority, duties and
responsibilities as the Executive Committee may deem appropriate that increase,
supplement or otherwise expand or

 

 

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enhance, and do not decrease, diminish or otherwise limit or impair, any of the
powers, authority, duties and responsibilities of the Operations Manager set
forth in this Agreement. Subject to the provisions of Section 5.07, the
Executive Committee (a) may delegate such of its powers and authority and duties
and responsibilities to an Owner, or an officer or other employee of an Owner,
or such other Person or Persons (including a subcommittee of the Executive
Committee) as the Executive Committee may deem appropriate and (b) may authorize
such other Persons to employ or otherwise engage on behalf and at the expense of
the Owners such brokers, agents, accountants, attorneys and other advisors as
such other Persons may determine to be appropriate for the management of the
Redbud Generating Facility.

5.05     Election, Powers and Duties of Chairman. For so long as OG&E holds an
Ownership Interest of not less than 50%, the Member appointed by OG&E shall
serve as the chairman of the Executive Committee. At any time after OG&E’s
Ownership Interest has been reduced to less than 50%, the chairman of the
Executive Committee shall be elected by the vote of a Majority of Members. The
chairman of the Executive Committee shall be responsible for (a) providing
notice of meetings of the Executive Committee to all Members, (b) preparing an
agenda for all meetings of the Executive Committee, (c) setting the times for
decisions or other action by the Executive Committee, which shall be not less
than three days after the Executive Committee’s receipt of a request for such
decision or other action, except in the case of matters that (i) require, in his
or her judgment, emergency action or decision or (ii) are approved by all
Members, (d) presiding over all meetings of the Executive Committee and
directing the order of business and procedures thereof, (e) arranging for the
keeping of the minutes of all meetings of the Executive Committee and the
distribution thereof to all Members and (f) taking such other action with
respect to meetings of the Executive Committee as he or she may deem necessary
or

 

 

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appropriate. Subject to the first sentence of this Section 5.05, the chairman of
the Executive Committee may be removed, and a new chairman of the Executive
Committee may be appointed, at any time by the vote of a Majority of Members.

5.06     Voting. Each Member shall vote the entire Ownership Interest of the
Owner by which the Member was appointed on any matter to be decided by the
Executive Committee. Except as otherwise provided in Section 5.07, decisions of
the Executive Committee shall be made by the approval of a Majority of Members.
If a Member fails to record a vote on any matter within seven days following its
submission to the Executive Committee for approval (or within such longer period
as may be specified in such submission), such matter shall be deemed disapproved
by such Member. No Member shall disapprove, and the Executive Committee shall be
deemed to have approved, actions or inactions that have been found by an
arbitrator pursuant to the dispute resolution provisions of Article XII to be,
or to have been when taken or not taken (as the case may be), consistent with
Prudent Utility Practices.

5.07     Supermajority Matters. The following matters when submitted to the
Executive Committee shall require the approval of a Supermajority of Members:

(a)       subject to the provisions of Section 6.07(c), the appointment of a
successor Operations Manager;

(b)       except as otherwise provided in any Operating & Maintenance Agreement
or other Material Contract then in effect, (i) the termination of any such
Operating & Maintenance Agreement or other Material Contract that would result
in an annual cost increase of more than 15% to the Owners, (ii) any Material
Amendment to any such Operating & Maintenance Agreement or other Material
Contract, or (iii) the approval of any new, or the extension or renewal of any
existing, Operating & Maintenance Agreement or other Material

 

 

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Contract that would result in an annual cost increase of more than 15% to the
Owners (with such approval not to be unreasonably withheld or delayed);

(c)       a decision to settle any third-party claim (or series of related
third-party claims) where the uninsured portion of any such claim (or such
series of related claims) exceeds $10 million;

(d)       a decision to terminate the operations of the Redbud Generating
Facility under or pursuant to Section 14.01(a), 14.01(b) or 14.02;

(e)       any decision to require each of the Owners to pay its Pro Rata Share
of all uninsured and otherwise uncompensated costs of repair to the Redbud
Generating Facility under Section 14.01(b); and

(f)        a proposal that would have the effect of overriding, negating,
circumventing or otherwise changing, contradicting or violating any of the terms
of this Section 5.07.

5.08     Deadlock. In the event that (i) there is disagreement between or among
the Owners with respect to any matter requiring the approval of a Supermajority
of Members pursuant to Section 5.07(d), and (ii) such approval is not obtained,
and (iii) the respective senior management representatives of such Owners have
not resolved such disagreement within 30 days after the delivery of written
notice by any such Owner requesting such resolution (“Resolution Deadline”),
then (1) the dispute resolution provisions of Article XII shall not apply to
such disagreement (but will continue to apply with respect to any dispute
concerning the application of this Section 5.08 or the interpretation hereof),
and (2) any Owner that is not then in Default under this Agreement may by
written notice (“Buy-Sell Notice”) to the other Owners within 15 days after the
Resolution Deadline initiate the procedure set forth in subsections (a) through
(d)

 

 

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of this Section 5.08 (“Buy-Sell Procedure”) with respect to offers to buy and
sell each such Owner’s respective Ownership Interest. If no such Owner initiates
the Buy-Sell Procedure by timely delivery of a Buy-Sell Notice, the disagreement
shall be deemed unresolved and shall not be subject to the dispute resolutions
provisions of Article XII other than an Owner’s ability, if any, under Article
XII to pursue any legal and equitable remedies in the United States federal
courts located in, and the state courts of, the State of Oklahoma.

(a)       Offer to Purchase. Within 15 days after the date of delivery of the
Buy-Sell Notice, the initiating Owner (“Initiating Owner”) shall submit to all
of the other Owners (“Receiving Owners”) an offer in writing to purchase all of
the Ownership Interests of the Receiving Owners for the price per 1% of
Ownership Interest set forth in the offer (e.g., if the Initiating Owner were to
offer each Receiving Owner $1 million per 1% of the Receiving Owner’s Ownership
Interest, a Receiving Owner with a 25% Ownership Interest would receive $25
million for his 25% Ownership Interest). Such offer shall be irrevocable for a
period of 15 days from the date of submission to the Receiving Owners (“Offer
Period”).

(b)       Acceptance or Counteroffer. Prior to the end of the Offer Period, each
Receiving Owner must either (i) accept in writing the Initiating Owner’s offer
or (ii) make a counteroffer, which shall be irrevocable for a period of 15 days
from the date of submission thereof, to purchase all of the Interests of the
other Owners for a price per 1% of Ownership Interest that exceeds the offered
price per 1% of Ownership Interest by at least 5% of the offered price. If a
Receiving Owner makes a counteroffer pursuant to this Section 5.08(b), the
counteroffer shall be treated as an offer made pursuant to Section 5.08(a) and
shall initiate a new Offer Period, and the Receiving Owner making such
counteroffer shall be treated as the Initiating Owner, and the Owners receiving
the counteroffer shall be treated as, and shall have

 

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the rights of, the Receiving Owners pursuant to this Section 5.08(b) to either
accept the counteroffer or make a new counteroffer.

(c)       Termination of Buy-Sell Procedure. Notwithstanding the foregoing, at
any time prior to the end of any Offer Period, any Receiving Owner may terminate
the Buy-Sell Procedure with respect to its Ownership Interest by acquiescing in
writing in all respects to the position of then Initiating Owner with respect to
the matter or matters then in dispute. If as a result of such acquiescence, such
matter or matters are approved by a Supermajority of Members, the Buy-Sell
Procedure shall be terminated in respect of all Owners and the matter or matters
in question shall be deemed to have been approved by a Supermajority of Members.
If such acquiescence does not result in the approval of such matter or matters
by a Supermajority of Members, the Buy-Sell Procedure shall continue, but then
Initiating Owner’s offer shall not apply to the acquiescing Owner, which shall
not be considered to be a Receiving Owner with respect to such offer.

(d)       Purchase and Sale Agreement. Failure by a Receiving Owner to accept an
offer, make a conforming counteroffer or acquiesce in respect of the matter or
matters then in dispute as provided herein by the end of an Offer Period shall
constitute acceptance of the last conforming offer made. Within 30 days after
acceptance in writing or the end of an Offer Period resulting in deemed
acceptance of an offer by all of the Receiving Owners, all of the Receiving
Owners that have, or are deemed to have, accepted such offer and the Initiating
Owner with respect to such offer shall enter into a purchase and sale agreement
with respect to the Ownership Interests being purchased, which shall have
customary terms and conditions mutually agreed to by the parties thereto and
shall provide that (i) the purchase price shall be payable entirely in cash in
immediately available funds as of the closing under such purchase and sale
agreement, (ii)

 

 

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the Ownership Interests shall be free and clear of all liens and encumbrances
(other than Permitted Encumbrances), including but not limited to any
obligations with respect to the Capacity or Energy produced by the Redbud
Generating Facility, and (iii) this Agreement shall terminate as to such
Receiving Owner, subject to such Receiving Owner’s receipt of the purchase price
under such purchase and sale agreement, except to the extent of any rights or
obligations hereunder that have accrued to or been incurred by such Receiving
Owner, or to which such Receiving Owner shall have become subject, prior to the
closing under such purchase and sale agreement.

(e)       Failure to Initiate Buy-Sell Procedure. If no Owner initiates the
Buy-Sell Procedure by timely delivery of a Buy-Sell Notice, the dispute shall be
deemed unresolved and deemed to involve an amount in excess of $50 million and
shall be subject to the provisions of Article XII.

The provisions of this Section 5.08 shall be given effect only to the extent
allowed by, and subject to the requirements and procedures set forth in,
applicable Law.

ARTICLE VI

 

OPERATION AND MAINTENANCE AND PAYMENT OF OPERATING COSTS

6.01     Operation of Redbud Generating Facility. The day-to-day operation and
maintenance of the Redbud Generating Facility, including responsibility for NERC
compliance, shall be performed by OG&E as the Operations Manager, unless and
until replaced as Operations Manager by the Executive Committee pursuant to
Section 5.07(b) or 6.07. If the Executive Committee approves the appointment of
any replacement or successor Operations Manager and such replacement or
successor Operations Manager is not a Party, then, as a condition to the
effectiveness of such appointment, such successor or replacement Operations
Manager shall agree to be bound by all of the provisions of this Agreement, to
the extent

 

 

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applicable to the Operations Manager, pursuant to an agreement or instrument
approved by the Executive Committee. The Operations Manager shall report to the
Executive Committee and shall have such powers, authority, duties and
responsibilities as are set forth in this Agreement, including providing, or
causing to be provided, all labor and personnel required for the performance of
the Operating Work and all matters relating to the selection and retention of,
and relations with, all such labor and personnel, and shall have such additional
powers, authority duties and responsibilities as may be delegated to the
Operations Manager by the Executive Committee from time to time. The Operations
Manager shall operate the Redbud Generating Facility in accordance with Prudent
Utility Practices.

6.02     Operating Costs and Other Costs and Expenses; Operating Budget; Budget
Disputes.

(a)       Responsibility for Operating Costs and Other Costs and Expenses.
Except as otherwise provided in this Section 6.02(a) or to the extent otherwise
provided in any such Operating & Maintenance Agreement as may then be in effect,
each Owner shall be fully and individually responsible for the timely payment,
in accordance with Section 6.02(c), of its Pro Rata Share of all Operating Costs
and all Costs of Capital Additions (except, in the case of Operating Costs, as
may be otherwise provided in Exhibit F).

(i)        If any Operating & Maintenance Agreement is then in effect and
provides for the direct allocation of amounts payable thereunder to one or more
of the Owners, the terms of such Operating & Maintenance Agreement shall control
with respect to such amounts. If at any time following the Effective Date OG&E
so elects, the Parties shall execute and deliver a separate agreement governing
the Operations Manager’s recovery of costs and provision of services for the
operation and maintenance of the Redbud Generating Facility’s

 

 

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transmission assets (“Transmission Operating & Maintenance Agreement”) for the
purpose of OG&E’s filing of the same with the FERC under Section 205 of the
Federal Power Act, and shall amend this Agreement to clarify that the
Transmission Operating & Maintenance Agreement, and not this Agreement, shall
govern the Operations Manager’s recovery of costs and provision of services for
the operation and maintenance of the Redbud Generating Facility’s transmission
assets, provided that the Transmission Operating & Maintenance Agreement shall
reflect no substantive changes to any of the provisions of this Agreement.

(ii)       Except as may be otherwise unanimously agreed by all of the Owners,
costs payable hereunder or under any such Operating & Maintenance Agreement as
may then be in effect shall include only actual costs without markup, and for so
long as either GRDA or OMPA is an Owner and there are outstanding bonds or other
securities that were issued to finance or refinance the acquisition of GRDA’s or
OMPA’s Ownership Interest and the interest on such bonds or other securities is
excluded from gross income for federal income tax purposes, no Operating &
Maintenance Agreement shall include any provision that, on the basis of an
opinion of tax counsel, GRDA or OMPA determines could adversely affect the
exclusion of the interest on such bonds or other securities from gross income
for federal income tax purposes.

(iii)      Each Owner shall be fully and individually responsible for the
payment of its own financing costs whether arising in connection with this
Agreement or the Redbud Generating Facility or otherwise.

(b)       Operating Budgets and Budget Disputes. As soon as reasonably
practicable following the Closing Date and annually thereafter on or before the
first day of November of each year for the following calendar year, the
Operations Manager will prepare and

 

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submit to the Executive Committee for the Executive Committee’s approval an
operating budget (“Operating Budget”) for the next calendar year (or, in the
case of the first Operating Budget, for the remainder of the calendar year
following the Closing Date). The Operating Budget shall contain a reasonable
estimate of all costs and expenses to be incurred each month for the operation
and maintenance of the Redbud Generating Facility, including Fuel Costs,
Operating Costs and Costs of Capital Additions. The Executive Committee may
amend the Operating Budget from time to time. Any Owner whose Member votes
against the approval of an Operating Budget may dispute any item or items in
such budget pursuant to the dispute resolution procedures set forth in Article
XII, provided that the disputing Owner (i) shall identify in writing to the
Operations Manager within 10 Business Days after the Executive Committee meeting
at which such budget was approved by a Majority of Members the specific budget
item or items that it disputes, including a reasonably detailed description of
its reason or reasons for disputing such item or items, (ii) shall pay its Pro
Rata Share of such disputed item or items as and when invoiced therefor pursuant
to Section 6.02(c), and (iii) shall believe in good faith that such item or
items constitute or are the result of gross negligence or willful misconduct on
the part of the Operations Manager (any such dispute that satisfies the
conditions of this proviso being referred to as a “Budget Dispute”). If a Budget
Dispute is ultimately resolved in whole or in part in favor of the disputing
Owner pursuant to Article XII, (i) all or the applicable portion of any such
item shall be deemed a Non-Budgeted Expenditure and shall be deleted from such
Operating Budget, and the applicable Budgeted Expenditures Cap shall be adjusted
accordingly, and (ii) the Operations Manager shall pay, or reimburse the
disputing Owner for, all or the applicable portion of the disputing Owner’s
reasonable out-of-pocket costs and expenses of prosecuting such dispute,
including the fees of attorneys, accountants and other professional

 

 

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advisors, and shall return to the disputing Owner the amount of any overpayment
determined pursuant to Article XII, either by cash payment or by adjustment to a
subsequent invoice pursuant to Section 6.02(c). If all or any portion of the
amount of any such overpayment remains outstanding for more than 60 days after
the date on which the disputing Owner paid its Pro Rata Share of any such
disputed item under written protest that accompanied such payment, the
Operations Manager shall pay interest on such outstanding amount at then-current
ten-year U.S. Treasury Rate, plus 2%, calculated from the date on which such
Owner paid its Pro Rata Share of such disputed item under protest. If a Budget
Dispute is ultimately resolved in whole or in part in favor of the Operations
Manager pursuant to Article XII, the disputing Owner shall pay, or reimburse the
Operations Manager for, all or the applicable portion of the Operations
Manager’s reasonable out-of-pocket costs and expenses of defending such dispute,
including the fees of attorneys, accountants and other professional advisors,
and the amount of any such payment or reimbursement obligation of the disputing
Owner may be offset against the amount of any payment or reimbursement
obligation of the Operations Manager under clause (ii) of the fifth sentence of
this Section 6.02(b) and vice versa.

(c)       Payment of Operating Costs and Costs of Capital Additions. Within 15
days following its receipt of an invoice therefor from the Operations Manager,
each Owner shall pay the Operations Manager the Owner’s Pro Rata Share of the
actual Operating Costs and the Owner’s Pro Rata Share of actual Costs of Capital
Additions.

6.03     Claims Treated as Operating Costs. Except as otherwise specifically
provided herein and to the extent allowed by applicable Law, the Owners shall be
responsible for any and all Claims of Persons that are not Owners arising from
or related to the Redbud Generating Facility in proportion to their respective
Ownership Interests.

 

 

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6.04     Fuel Supply. Each of the Owners shall supply its own natural gas for
the operation of the Redbud Generating Facility and shall be solely responsible
for paying the seller of such self-supplied natural gas directly for the cost
thereof, provided that any Owner may elect to have the Operations Manager,
acting as agent for such Owner, purchase natural gas for the account of such
Owner, who shall be solely responsible for paying the seller of such natural gas
directly for the cost thereof.

6.05     Participation in Budget Trading Programs and Allowances. The Owners
shall execute an Agreement of Representation in substantially the form of
Exhibit G to facilitate the participation of the Redbud Generating Facility in
the allowance trading programs established under the Acid Rain Program or any
such other program established by an appropriate Governmental Authority that
requires the allocation and use of Allowances. The Owners will negotiate in good
faith such additional agreements and execute such additional documents as may be
required under Law to permit the Redbud Generating Facility to participate in
any subsequently adopted Allowance program. Unless otherwise required by
applicable Law, any Allowances allocated to the Redbud Generating Facility will
be distributed to the Owners in accordance with their respective Pro Rata
Shares. At least 30 days prior to any compliance or reporting deadline, each
Owner shall supply the number of Allowances that are equal to the product of (a)
the total number of Allowances required by applicable Law and (b) a fraction,
the numerator of which is the Energy received from the Redbud Generating
Facility for the benefit of that Owner and the denominator of which is the sum
of the Energy received from the Redbud Generating Facility for the benefit of
all of the Owners. If an Owner fails to provide such number of Allowances at
least 30 days prior to any such compliance or reporting deadline, the Operations
Manager may purchase such number of Allowances on behalf of such Owner under

 

 

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any such trading program or other market therefor as may then exist, and upon
receipt of the Operations Manager’s invoice therefor, such Owner shall promptly
reimburse the Operations Manager for the cost of such Allowances, including any
and all other expenses the Operations Manager may incur in connection with the
making of such purchase, and the Operations Manager shall be under no obligation
to make any effort whatsoever to purchase such Allowances on behalf of such
Owner at the best price available.

6.06     Books and Records; Audits of Operating Costs and Costs of Capital
Additions and Annual Audit of Operating Costs and Costs of Capital Additions
Disputes.

(a)       Books and Records. The Operations Manager shall keep, in conformity
with all requirements of Law, proper books, records, accounts, ledgers, time
cards, estimates, schedules, correspondence and other documents related to the
performance of its obligations under this Agreement and amounts due to the
Operations Manager under any such Operating & Maintenance Agreement as may then
be in effect. During ordinary business hours and upon reasonable notice to the
Operations Manager, each Owner may inspect and copy such books and records. The
Operations Manager shall be required to retain such books and records for such
period or periods of time as shall be required by the Operations Manager’s own
document retention policies, as in effect from time to time, and thereafter may
destroy such books and records in the ordinary course of business, provided
that, notwithstanding the foregoing provisions of this sentence, the Operations
Manager shall retain for five years following the termination of this Agreement
any such books and records not previously destroyed in the ordinary course of
business and, upon the request of any Owner, shall provide copies thereof to the
requesting Owner at the requesting Owner’s expense.

 

 

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(b)       Annual Audits of Operating Costs and Costs of Capital Additions and
Annual Audit of Operating Costs and Costs of Capital Additions Audit Disputes.

(i)        General. Within 120 days after the end of each calendar year
(including any partial calendar year after the Closing Date), the Operating
Costs and Costs of Capital Additions incurred and expenditures made by the
Operations Manager during such calendar year (or partial calendar year) shall be
audited jointly by the Owners (“Annual Operating Costs and Costs of Capital
Additions Audit”). Each Annual Operating Costs and Costs of Capital Additions
Audit shall be conducted during the Operations Manager’s ordinary business hours
on such date or dates as the Owners and the Operations Manager shall agree.

(ii)       Reconciliation of Billing Errors. If the results of an Annual
Operating Costs and Costs of Capital Additions Audit show that the aggregate
amount of Operating Costs and Costs of Capital Additions for which the Owners
were invoiced by the Operations Manager exceeds the aggregate amount of
Operating Costs and Costs of Capital Additions that were actually incurred by
the Operations Manager during the applicable calendar year (or partial calendar
year), the Operations Manager shall refund to each Owner the Owner’s Pro Rata
Share of the amount of such excess, and if the aggregate amount of such excess
exceeds $500,000, such refund by the Operations Manager shall include interest
thereon at then-current ten-year U.S. Treasury Rate, plus 2%, calculated in
respect of each overpayment from the date the overpayment was made by the Owner.
If the results of an Annual Operating Costs and Costs of Capital Additions Audit
show that the aggregate amount of Operating Costs and Costs of Capital Additions
actually incurred by the Operations Manager during the applicable calendar year
(or partial calendar year) exceeds the aggregate amount of Operating Costs and
Costs of Capital Additions for which the Owners were invoiced by the Operations
Manager, each of the

 

 

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Owners shall pay to the Operations Manager the Owner’s Pro Rata Share of the
amount of such excess.

(iii)      Expenditures Exceeding Budgeted Expenditures Cap. If an Annual
Operating Costs and Costs of Capital Additions Audit reveals that the aggregate
amount of all Actual Expenditures and Non-Budgeted Expenditures for the
applicable calendar year exceeds the Budgeted Expenditures Cap for such year,
any Owner or Owners may dispute the amount of such excess, provided that the
disputing Owner or Owners believe in good faith that such excess expenditures
constitute or are the result of gross negligence or willful misconduct on the
part of the Operations Manager (any such dispute being referred to as an “Annual
Operating Costs and Costs of Capital Additions Audit Dispute”). An Annual
Operating Costs and Costs of Capital Additions Audit Dispute shall be resolved
pursuant to the dispute resolution procedures set forth in Article XII. If an
Annual Operating Costs and Costs of Capital Additions Audit Dispute is
ultimately resolved in whole or in part in favor of the disputing Owner or
Owners pursuant to Article XII, (1) the amount to be paid by the Operations
Manager to a disputing Owner shall include interest thereon at then-current
ten-year U.S. Treasury Rate, plus 2%, calculated from July 1 of such year, and
(2) the Operations Manager shall pay, or reimburse such Owner or Owners for, all
or the applicable portion of such Owner’s or Owners’ reasonable out-of-pocket
costs and expenses of prosecuting such dispute, including the fees of attorneys,
accountants and other professional advisors. If an Annual Operating Costs and
Costs of Capital Additions Audit Dispute is ultimately resolved in whole or in
part in favor of the Operations Manager pursuant to Article XII, the disputing
Owner or Owners shall pay, or reimburse the Operations Manager for, all or the
applicable portion of the Operations Manager’s reasonable out-of-pocket costs
and expenses of defending such dispute, including the fees of attorneys,
accountants and other

 

 

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professional advisors, and the amount of any such payment or reimbursement
obligation of the disputing Owner may be offset against the amount of any
payment or reimbursement obligation of the Operations Manager under clause (2)
of the immediately preceding sentence and vice versa.

(c)       Interim Audits of Operating Costs and Costs of Capital Additions. In
addition to the annual audits of Operating Costs and Costs of Capital Additions
provided for in Section 6.06(b), any Owner may audit Operating Costs and Costs
of Capital Additions not more than once during each calendar year at the sole
cost and expense of such Owner.

6.07     Removal or Resignation of Operations Manager. The Operations Manager
may be discharged of its powers, duties and responsibilities as Operations
Manager and terminated as follows:

(a)       The Executive Committee (without the participation of the Member
representing an Owner that is the Operations Manager or an Owner whose Affiliate
is the Operations Manager) may remove the Operations Manager if:

(i)        the Operations Manager becomes insolvent or unable to pay its debts
as they mature, makes an assignment for the benefit of creditors, or seeks
relief under laws providing for the relief of debtors;

(ii)       a receiver is appointed for the Operations Manager or for
substantially all of its property or affairs; or

(iii)      the Operations Manager is in Default under Article XI with respect to
any of its duties as Operations Manager under this Agreement.

(b)       If the Operations Manager is an Owner or an Affiliate of an Owner, the
Operations Manager shall be deemed to have resigned, effective upon the
appointment of its

 

 

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successor as Operations Manager pursuant to Section 6.07(c), if the Ownership
Interest of such Owner is reduced to 21% or less in a single transaction or
series of transactions.

(c)       If the Operations Manager is removed pursuant to Section 6.07(a) or is
deemed to have resigned pursuant to Section 6.07(b), the Executive Committee
shall appoint a successor Operations Manager by the approval of a Supermajority
of Members. The vote of the Member appointed by the Owner that is the Operations
Manager, or by the Owner whose Affiliate is the Operations Manager, that was so
removed or is so deemed to have resigned as Operations Manager shall be excluded
from voting on the approval of the appointment of a successor Operations
Manager, if such Member fails to record a vote on such matter within seven days
after the submission of such matter to the Executive Committee for approval (or
within such longer period as may be specified in such submission) or if such
Member votes for the appointment or reappointment of the incumbent Operations
Manager or an Affiliate of the incumbent Operations Manager to succeed the
incumbent Operations Manager. If the exclusion of the vote of the Member
appointed by the Owner that is the Operations Manager (or by the Owner whose
Affiliate is the Operations Manager) pursuant to the immediately preceding
sentence renders it impossible to obtain the aggregate percentage of Ownership
Interests necessary to constitute a Supermajority of Members, then the
appointment of a successor Operations Manager shall be approved by the vote(s)
of the Member(s) representing a majority of the Ownership Interests represented
by Members whose votes are not so excluded.

(d)       The Operations Manger may resign as Operations Manager at any time
upon 30 days’ prior written notice to each of the Members, provided that, if a
Supermajority of Members is unable to agree on the appointment of a successor
Operations Manager within such thirty-day period (“Supermajority Appointment
Period”), the appointment of a successor

 

 

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Operations Manager shall become an Arbitrable Dispute, and notwithstanding the
provisions of Article XII, the following procedures shall apply:

(i)        Within 30 days following the expiration of the Supermajority
Appointment Period, the AAA shall select a panel of three arbitrators and shall
select one of the three arbitrators to be the chairman of the panel (such
thirty-day period being referred to as the “Arbitral Panel Selection Period”);

(ii)       Within 30 days following expiration of the Arbitral Panel Selection
Period, each of the Owners shall submit to the arbitral panel (1) its nominee to
be the successor Operations Manager and (2) a reasonably detailed summary of all
of the material terms and conditions of the Operating & Maintenance Agreement
that such nominee is prepared to execute and deliver if selected by the arbitral
panel as the successor Operations Manager (such thirty-day period being referred
to as the “Nominee Submission Period”), and any Owner that fails to submit such
nominee and summary to the arbitral panel during the Nominee Submission Period
shall be barred from doing so thereafter; and

(iii)      Within 90 days following the expiration of the Nominee Submission
Period, the arbitral panel shall select the nominee of one of the nominating
Owners to be the successor Operations Manager and shall notify each of the
Owners in writing of its selection (such ninety-day period being referred to as
the “Successor Operations Manager Selection Period”), and during the Successor
Operations Manager Selection Period, the arbitral panel shall hold such hearings
and meetings at such times and places within Oklahoma City, Oklahoma, at which
the presence of the appropriate representatives of the nominating Owners may be
required, and shall request from the nominating Owners such additional
information, as it

 

 

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shall deem necessary and appropriate in connection with the selection of the
successor Operations Manager.

Following the arbitral panel’s selection of a successor Operations Manager, the
Owners shall negotiate in good faith with the party selected by the arbitral
panel to be the successor Operations Manager to enter into an Operating &
Maintenance Agreement with such party on substantially the terms and conditions
summarized and submitted to the arbitral panel by the Owner that nominated such
party during the Nominee Submission Period. Any such Operating & Maintenance
Agreement approved by a Majority of Members (or, if applicable, a Supermajority
of Members pursuant to Section 5.07(b)(iii)) shall be executed and delivered by
all of the Owners. The incumbent Operations Manager shall continue to perform
its duties and responsibilities, and shall continue to have all of its powers
and authority, as Operations Manager pursuant to this Agreement until the date
on which the successor Operations Manager is ready to assume its duties and
responsibilities as Operations Manager under a duly executed Operating &
Maintenance Agreement, provided that, if a successor Operations Manager shall
not have so assumed its duties and responsibilities as Operations Manager for
whatever reason by the 240th day following the expiration of the Supermajority
Appointment Period, on such 240th day, the incumbent Operations Manager shall be
relieved of all of its duties and responsibilities, and shall relinquish all of
its powers and authority, as Operations Manager and may abandon its post as
Operations Manager without any liability of any kind or nature whatsoever to any
Owner for so doing, and each Owner that was not the incumbent Operations Manager
shall become the Operations Manager or a co-Operations Manager, as the case may
be, on and subject to the terms and conditions set forth in this Agreement.
Except as otherwise set forth in this Section 6.07(d), the provisions of Section
12.01(c) shall apply to any arbitration under this Section 6.07(d).

 

 

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(e)       In the event of the appointment of a successor Operations Manager
pursuant to this Section 6.07, the Owners shall enter into an Operating &
Maintenance Agreement upon such terms and conditions as shall be approved by a
Majority of Members or, if applicable, a Supermajority of Members pursuant to
Section 5.07(b)(iii), and this Agreement shall be amended concurrently therewith
to the full extent necessary to harmonize the terms and conditions of this
Agreement with the terms and conditions of such Operating & Maintenance
Agreement.

6.08     Reports and Forecasts. The Operations Manager shall prepare the
following reports:

(a)       Performance Report. Within 15 Business Days following the end of each
month, the Operations Manager shall submit a report to the Owners (“Performance
Report”), which shall contain event and performance information identified by
the Executive Committee from time to time to be pertinent and, where applicable,
conforms to the NERC Generation Availability Data System (GADS), regarding the
operation of the Redbud Generating Facility during such month, including:

 

(i)

Average Heat Rate (net in Btu/Kwh);

 

(ii)

Hourly Net Generation (MWh);

(iii)      Planned and Unplanned Outages (duration, cause (if known), and
general description of measures taken);

 

(iv)

Planned and Unplanned Deratings (duration and cause); and

(v)       Such additional information as may be necessary for the Owners to
prepare their respective GADS Reports.

 

 

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(b)       Planned Outage Report. Prior to November 1 of each year, the
Operations Manager shall prepare and submit to the Executive Committee for
approval a report detailing all planned outages of the Redbud Generating
Facility (“Planned Outage Report”) forecasted on a minimum five-calendar-year
basis. The Planned Outage Report shall include a schedule of such planned
outages and the nature and duration thereof.

(c)       Injury and Illness Report. Within 15 Business Days after the end of
each calendar quarter, the Operations Manager shall provide to the Executive
Committee a report of all reported OSHA recordable injuries and illnesses, and
all chargeable vehicle accidents (based on the Operations Manager’s
determination criteria therefor, as in effect from time to time), that are
attributable to the Redbud Generating Facility during such calendar quarter
(“Injury and Illness Report”). Injury and Illness Reports (i) shall be prepared
in accordance with the Operations Manager’s environmental, health and safety
management system or assurance program, as in effect from time to time, for so
long as any Owner is the Operations Manager and, in the event that a Person
other than an Owner becomes the Operations Manager, shall be prepared in
accordance with such environmental, health and safety management system or
assurance program as may be approved by the Executive Committee from time to
time, and (ii) for so long as OG&E is the Operations Manager, shall be based on
employee statistics for the Redbud Generating Facility, and (iii) in each case,
shall include copies of all written communications to or from a Governmental
Authority (including notices) and insurance companies.

ARTICLE VII

 

CERTAIN COVENANTS OF EACH PARTY

7.01     Efforts to Satisfy Conditions Precedent, Construct, Operate and
Maintain. Subject to the terms and conditions hereof, each of the Parties hereto
shall act in good faith, in

 

 

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exercising its rights and performing its duties under this Agreement and
otherwise in connection with the Transactions, and shall use its commercially
reasonable efforts to (i) consummate and make effective the Transactions,
including the satisfaction of all conditions thereto or to such Party’s
obligations hereunder set forth herein and (ii) cause the Redbud Generating
Facility to be operated and maintained in accordance with Prudent Utility
Practices from the Effective Date through the Termination Date. Such actions of
each Party shall include exercising its commercially reasonable efforts to
obtain each of the consents, authorizations and approvals of any Governmental
Authority or other Person that is reasonably necessary for it to effectuate the
Transactions, including Regulatory Approvals, and effecting all other necessary
registrations and filings with or notices to any Governmental Authority. Each
Party will promptly provide each other Party with copies of all written
communications received by it from any Governmental Authority relating to any
Regulatory Approvals or the approval or disapproval of this Agreement and the
Transactions. Each Party shall promptly and with all due diligence take any and
all actions necessary or otherwise appropriate to support any other Party, as
reasonably requested by such other Party, in obtaining any and all regulatory
and other approvals associated with the operation of, and the recovery of costs
relating to, the Redbud Generating Facility.

 

7.02

Transmission Credits and Transmission.

(a)       Transmission Credits. To the extent that OG&E receives transmission
credits from SPP pursuant to Section 11.4 of the Redbud Generating Facility’s
Large Generator Interconnection Agreement with SPP (“Redbud LGIA”), OG&E shall
make a payment within 30 days thereafter to each of the other Owners in an
amount equal to the Owner’s Pro Rata Share of such credits.

 

 

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(b)       Transmission. Each of the Owners shall submit a separate application
(or modification to an existing application) for transmission service to SPP in
order to transmit its Pro Rata Share of the Capacity of the Redbud Generating
Facility to the Owner’s network load or point(s) of delivery. The Owners agree
to coordinate the preparation of their applications so that the transmission
service requests of all three Owners are evaluated in an Aggregate Transmission
Service Study process under Attachment Z to the SPP OATT. If, as part of the
Aggregate Transmission Service Study process, SPP identifies facilities that
must be constructed by an Owner in order to satisfy the Owners’ requests for
transmission service pursuant to the immediately preceding sentence, then the
Owner shall construct and place, or cause to be constructed or placed, into
commercial operations the facilities identified by SPP prior to the Effective
Date. Each Owner shall be solely responsible for (i) all costs associated with
submitting to SPP any information, application(s), request(s) and/or fee(s)
required to secure transmission service from SPP to transmit the Owner’s Pro
Rata Share of the Capacity of the Redbud Generating Facility to the Owner’s
network load or point(s) of delivery and (ii) all transmission facility costs
allocated or assigned by SPP to the Owner in response to the Owner’s
transmission service request to transmit the Owner’s Pro Rata Share of the
Capacity of the Redbud Generating Facility to the Owner’s network load or
point(s) of delivery (collectively, “Transmission Costs”). The allocation of
costs under this Agreement is not intended to limit in any way the ability of
each Owner to seek to include such Transmission Costs in Owner’s rates for
service(s) when rendering transmission service to another Owner.

7.03     Certain Expenses. Regardless of whether the Transactions are
consummated, except as otherwise provided in any other provision of this
Agreement, all costs and expenses incurred in connection with this Agreement and
the Transactions shall be paid by the Party

 

 

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incurring such expenses. Notwithstanding the foregoing, all fees, charges and
costs of economists and other experts, if any, jointly retained by the Parties
in connection with submissions made to any Governmental Authority and advice in
connection therewith respecting approval of the Transactions, will be borne by
each Party in proportion to its Pro Rata Share. All such charges and expenses
shall be promptly settled among the Parties on or before the Closing Date or
upon termination or expiration of further proceedings under this Agreement, or
with respect to such charges and expenses not determined as of such time, as
soon thereafter as is reasonably practicable.

7.04     Certain Notices. In furtherance and not in limitation of Section 7.01,
at any time and from time to time, (a) GRDA shall notify each other Party
promptly of (i) the receipt by GRDA of any Regulatory Approval, (ii) the denial
by the relevant Governmental Authority of any Regulatory Approval or the
occurrence of any other circumstance of which GRDA has Knowledge that would
excuse GRDA from its obligations hereunder, and (iii) the occurrence of any
other event reasonably likely to impair GRDA’s ability to perform its
obligations hereunder, if GRDA has Knowledge of such occurrence, (b) OG&E shall
notify each other Party promptly of (i) the receipt by OG&E of any Regulatory
Approval, (ii) the denial by the relevant Governmental Authority of any
Regulatory Approval or the occurrence of any other circumstance of which OG&E
has Knowledge would excuse OG&E from its obligations hereunder and (iii) the
occurrence of any other event reasonably likely to impair OG&E’s ability to
perform its obligations hereunder, if OG&E has Knowledge of such occurrence, and
(c) OMPA shall notify each other Party promptly of (i) the receipt by OMPA of
any Regulatory Approval, (ii) the denial by the relevant Governmental Authority
of any Regulatory Approval or the occurrence of any other circumstance of which
OMPA has Knowledge that would excuse

 

 

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OMPA from its obligations hereunder, and (iii) the occurrence of any other event
reasonably likely to impair OMPA’s ability to perform its obligations hereunder,
if OMPA has Knowledge of such occurrence.

ARTICLE VIII

 

TAXES

8.01     Ad Valorem Taxes. Except as otherwise required by Law, each Owner that
is not exempt from ad valorem tax shall render for ad valorem taxation its
undivided ownership interest in the Redbud Generating Facility and shall
otherwise use its reasonable best efforts to have any taxing authority imposing
Taxes on the Redbud Generating Facility assess and levy such Taxes directly
against the ownership or beneficial interest of such Owner therein. If a taxing
authority levies such Taxes against the Redbud Generating Facility, each Owner
that is not exempt from such Taxes shall be responsible for its pro rata share
of such Taxes.

8.02     Income and Gross Receipts Taxes. Each Owner shall be solely responsible
for and shall timely pay any and all income and gross receipts Taxes payable
with respect to its Ownership Interest.

8.03     Sales and Use Taxes. For every purchase subject to sales or use taxes,
each Owner shall be solely responsible for and shall timely pay all sales and
use taxes that are levied against or with respect to such Owner’s interest in,
or pro rata share of, the purchase, use, ownership or beneficial interest in the
Redbud Generating Facility.

8.04     Other Taxes. Each Owner shall be solely responsible for and shall
timely pay all Taxes other than Taxes described in Section 8.01, 8.02 or 8.03
that are levied against or with respect to such Owner’s interest in, or pro rata
share of, the purchase, use, ownership or beneficial interest in the Redbud
Generating Facility.

 

 

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8.05     Exemptions. Each Owner claiming exemption from any Taxes shall be
responsible for and shall pay all expenses in connection with the sustaining or
determining of such claim, and each other Owner shall lend all reasonable
cooperation in connection with the filing of Tax renditions and reports and in
connection with the making of protests and payments under protest as may be
reasonably requested by each Owner claiming an exemption.

8.06     Contested Taxes. Any Owner may defer payment of any Tax to the extent
that and while such Tax is being contested by such Owner in good faith and by
appropriate proceedings and so long as such proceedings or the nonpayment of
such Tax is not reasonably expected to cause (a) the imminent threat of the
sale, forfeiture, loss or interference with the operation of any interest in the
Redbud Generating Facility, (b) any material adverse change in the title,
property or rights of any Party in or to the Redbud Generating Facility, (c) any
assessment or penalty against any Party other than the Owner contesting the
payment of such Tax, (d) any interference with payments by the Owners to the
Operations Manager or the application of such payments by the Operations Manager
or (e) any danger of criminal or other liability being imposed against any party
or agent other than the Owner contesting the payment of such Tax. Any Owner that
elects to defer payment of any Tax pursuant to this Section 8.06 shall protect,
indemnify and hold harmless all other parties from any and all claims, demands
or causes of action, suits or other proceedings (including all costs in
connection therewith and in connection with the defense thereof, including
reasonable attorneys’ fees) of every kind and character resulting from such
delay in payment.

8.07     Election Regarding Subchapter K. On behalf of the Owners, OG&E (a)
shall affirmatively elect, in the manner provided in the Treasury Regulations
promulgated under Section 761 of the Code, to have no provision of Subchapter K
of the Code apply to the

 

 

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transactions contemplated by this Agreement and (b) shall make any similar
election hereafter provided by the tax laws of the State of Oklahoma. GRDA and
OMPA shall timely provide OG&E with all information required for the filing of
such election or elections. No Owner shall take any position inconsistent with
such election or elections. No Owner shall be liable to any other Owner for any
adverse Tax consequences attributable to the application or nonapplication of
any partnership provision of the Code or the tax laws of any state.

8.08     Nonpayment of Tax. An Owner’s failure to pay any Tax for which it is
responsible at the time and in the manner required by this Article VIII shall
constitute a Default by such Owner. Notwithstanding the prior sentence in this
Section 8.08, a Default arising from nonpayment of any Tax pursuant to Section
8.06 will only be a Default if any other Owner must take action to forestall any
of the events listed in clauses (a) through (e) of Section 8.06.

8.09     Contribution for Taxes. If an Owner is required to pay a Tax described
in Section 8.01, 8.03(b) or 8.04 in excess of its pro rata share thereof, all
other Owners that are not exempt from liability for such Tax shall reimburse
such Owner for their respective shares of such excess.

ARTICLE IX

 

INSURANCE

9.01     General. The Executive Committee shall determine and the Operations
Manager shall obtain the insurance coverages, including insurable values,
limits, deductibles, retentions and other special terms during the periods
covered by and with respect to Operating Work or any phases thereof, in
accordance with Prudent Utility Practices.

9.02     Terms of Insurance. All policies of insurance obtained by the
Operations Manager for the benefit of the Owners in connection with the Redbud
Generating Facility (“Redbud Insurance”) shall:

 

 

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(a)       provide insurable values, limits, deductibles, retentions and other
special terms as determined by the Executive Committee;

 

(b)

name each Owner as an insured;

(c)       list the Operations Manager as agent for the insureds, for the
adjustment and payment of any insured loss, as their interests may appear;

(d)       contain endorsements providing for positive notice of material change
or cancellation to all parties listed as named or additional insureds;

(e)       contain endorsements providing that the insurance is primary insurance
for all purposes;

(f)        contain cross-liability endorsements for bodily injury liability and
property damage liability coverages; and

(g)       require the insurers to waive their rights of subrogation against all
Owners under such policies or arising out of this Agreement.

9.03     Procurement Procedures. The following procedures shall be observed in
connection with the procurement of Redbud Insurance and changes in Redbud
Insurance:

(a)       the Operations Manager shall give prompt written notice to each Owner
of the procurement of all insurance binders.

(b)       the Operations Manager shall furnish each Owner with evidence of each
of the policies of the insurance procured and naming the insurers and
underwriters and the extent of their participation.

9.04     Owner Insurance. Each Owner shall have the right to secure such
additional or different insurance coverage as it may desire at its expense and,
to the extent practicable, such additional or different insurance coverage may
be affected through endorsements on policies of

 

 

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Redbud Insurance. Such additional or different insurance coverage shall be
appropriately endorsed to provide waivers of subrogation to all Owners.

ARTICLE X

 

CONDITIONS PRECEDENT

10.01   Condition Precedent to GRDA’s Obligations. The obligations of GRDA
hereunder (except its obligations under any of Articles V, VII, XII, XVI and
XVII) shall be subject to the satisfaction of the condition precedent that the
closings of the transactions contemplated by each of the Redbud Purchase
Agreements shall have occurred.

10.02   Condition Precedent to OG&E’s Obligations. The obligations of OG&E
hereunder (except its obligations under any of Articles V, VII, XII, XVI and
XVII) shall be subject to the satisfaction of the condition precedent that the
closings of the transactions contemplated by each of the Redbud Purchase
Agreements shall have occurred.

10.03   Condition Precedent to OMPA’s Obligations. The obligations of OMPA
hereunder (except its obligations under any of Articles V, VII, XII, XVI and
XVII) shall be subject to the satisfaction of the condition precedent that the
closings of the transactions contemplated by each of the Redbud Purchase
Agreements shall have occurred.

ARTICLE XI

 

DEFAULTS AND REMEDIES

11.01   Default. The occurrence of any one or more of the following events shall
constitute a default hereunder (“Default”) by the Owner or Operations Manager to
which the event relates:

(a)       Nonpayment by any Owner of any amount payable by it hereunder when
due, or nonpayment by the Operations Manager of an amount payable by it under
Section 6.02(b) or 6.06(b)(iii) when due, provided that, in the case of the
first two occurrences of such

 

 

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nonpayment in respect of which written demand for payment is made upon such
Owner or Operations Manager pursuant to Section 11.02, such nonpayment shall not
constitute a Default if such nonpayment is cured within 15 calendar days from
the date of the applicable demand pursuant to Section 11.02; and

(b)       Except as excused by Force Majeure, the failure by any Owner or
Operations Manager to fulfill any covenant or perform any of its other material
obligations hereunder in accordance with the terms of this Agreement (other than
a failure that constitutes or, with the making of a demand for payment and
passage of time, would constitute a Default under Section 11.01(a)), if such
failure (i) is not the result of an action or inaction for which remedies are
barred under Section 13.01 or 13.02, as the case may be, and (ii) is not cured
within 30 calendar days from the date of a demand made upon such Owner or
Operations Manager for the fulfillment of such covenant or performance of such
obligation.

11.02   Demand for Performance. Upon (a) the nonpayment by any Owner or the
Operations Manager of any amount payable by it hereunder when due or (b) except
as excused by Force Majeure, the failure by any Owner or the Operations Manager
to fulfill any covenant or perform any of its other material obligations
hereunder in accordance with the terms of this Agreement, any Owner may make
written demand upon such Owner or the Operations Manager for the payment of such
amount, fulfillment of such covenant or performance of such obligation, as
applicable.

11.03   Disputed Defaults. If an Owner or the Operations Manager in good faith
disputes the existence or extent of any nonpayment described in Section 11.01(a)
or failure described in Section 11.01(b), it shall nonetheless make such
payment, fulfill such covenant or perform such other material obligation within
the applicable cure period specified in Section

 

 

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11.01(a) or Section 11.01(b), as the case may be, under written protest directed
to the Owners (other than, in the case of such a dispute by an Owner, such
Owner). Such dispute shall be governed by the dispute resolution provisions of
Article XII.

 

11.04

Remedies.

(a)       Remedies for Owner Payment Defaults. If a Default is limited to the
failure of the Owner who is in Default (“Defaulting Owner”) to make one or more
payments when due, irrespective of protest by the Defaulting Owner and
regardless of whether any such nonpayment constitutes a Default, (1) the
amount(s) of such payment(s) may be advanced by the other Owner(s) and, if so
advanced, shall bear interest until paid at a variable rate of interest equal to
the U.S. Treasury Rate, as in effect from time to time during the applicable
period (plus 2%), or the highest lawful rate, whichever is lower, or (2) the
Operations Manager may exercise its option under Section 4.05(a) to purchase the
Defaulting Owner’s Pro Rata Share of Net Capability and apply the Excess
Proceeds of any sale thereof to the payments(s) (plus any accrued interest
thereon) owed by the Defaulting Owner. If a payment Default (including accrued
interest thereon) has not been brought current by the Defaulting Owner by the
180th day following the original due date of such payment:

(i)        the Operations Manager may elect not to dispatch the Defaulting
Owner’s Pro Rata Share of Net Capability until such payment Default (including
accrued interest thereon) is brought current by the Defaulting Owner; or

(ii)       any non-Defaulting Owner may elect, to the extent allowed by and
subject to the requirements and procedures set forth in applicable Law, by
giving 30 days’ prior written notice to the Defaulting Owner, to increase its
respective Ownership Interest and Pro

 

 

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Rata Share (and the Ownership Interest and Pro Rata Share of the Defaulting
Owner shall be correspondingly reduced) according to the following formula:

 

Increased Interest = SI     x     A 
                                              TV

where:

 

 

SI

means the Defaulting Owner’s then current Ownership Interest;

A

means the aggregate amount then owed by such Defaulting Owner (including
interest accrued thereon through the effective date of the increase of the
respective Ownership Interest(s) and Pro Rata Shares(s) of the electing
Owner(s)); and

TV

means the product of such Defaulting Owner’s then current Ownership Interest
multiplied by the weighted average of the purchase price paid or the aggregate
payments made of Costs of Capital Additions, less depreciation calculated at
rates approved by the Oklahoma Corporation Commission or, if the Oklahoma
Corporation Commission has not approved depreciation rates, calculated on a
straight-line basis based on a total plant life of 30 years on the basis of a
365 day year, as applicable, by all Owners for or in respect of their respective
Ownership Interests.

 

If more than one Owner elects to increase its Ownership Interest and Pro Rata
Share in lieu of receiving a cash payment from the Defaulting Owner, the
increases shall be apportioned on a pro rata basis among the prior Ownership
Interests and Pro Rata Shares of the electing Owners. In the event of any such
transfer of all or any portion of a Defaulting Owner’s Ownership Interest to one
or more electing Owners pursuant to this Section 11.04(a), each of the Owners
shall take any and all such actions, including the execution and delivery of any
and all such documents and instruments, as may be required to obtain any and all
such Permits as may be required or otherwise legally effect and confirm such
transfer. No Owner shall be required to elect to

 

 

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increase its Ownership Interest and Pro Rata Share in lieu of any other remedy
hereunder, including receiving a cash payment from a Defaulting Owner hereunder.

(b)       Remedies for Owner Defaults Other Than Payment Defaults. If a Default
involves the failure of the Defaulting Owner to fulfill any covenant or perform
any of its other material obligations other than payment obligations, the
Operations Manager may exercise its option under Section 4.05(b) to purchase the
Defaulting Owner’s Pro Rata Share of Net Capability and apply the Excess
Proceeds of any sale thereof to any actual damages incurred by the
non-Defaulting Owner(s) as the result of such Default. If a Default on the
fulfillment of a covenant or the performance of any other material obligation
(other than a payment obligation) is not cured by the Defaulting Owner by the
180th day following the date by or before which such covenant was to have
originally been fulfilled or such other material obligation was to have
originally been performed, the Operations Manager may elect not to dispatch the
Defaulting Owner’s Pro Rata Share of Net Capability until such Default is cured
by the Defaulting Owner.

(c)       Other Remedies. In addition to the rights granted in this Section
11.04, any non-Defaulting Owner may seek injunctive relief, including specific
performance, to enforce a Defaulting Owner’s obligation under this Agreement,
provided that all claims to recover damages or payments on account of any
default will be subject to the dispute resolution procedures set forth in
Article XII to the extent allowed by, and subject to any applicable requirements
and procedures set forth in, applicable Law.

ARTICLE XII

 

DISPUTE RESOLUTION

 

12.01

Dispute Resolution; Arbitration.

(a)       Senior Executives Panel. Any dispute or claim arising between or among
Owners (“Owner Dispute”) or between or among an Owner or Owners and the
Operations

 

 

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Manager (“Operations Manager Dispute”) under this Agreement that cannot be
resolved through negotiation shall be referred for review and resolution to a
panel consisting of a senior executive of each of the parties to the dispute
with authority to decide or resolve the matter in dispute. Such senior
executives shall meet at least once and attempt to resolve the dispute within 30
days.

(b)       Legal and Equitable Remedies and Arbitration. If an Owner Dispute or
an Operations Manager Dispute is not resolved as provided in Section 12.01(a)
and such dispute: (i) only involves one or more claims or demands for money that
are for less than $50 million, individually or in the aggregate, or in respect
of which the recovery of money damages of less than such amount would constitute
an adequate remedy, (ii) is whether an Owner or the Operations Manager is in
Default, (iii) is over the selection of a replacement Operations Manager, or
(iv) is whether to settle any third-party claim where the uninsured portion of
such claim exceeds $20 million (each of the foregoing disputes being referred to
as an “Arbitrable Dispute”), the Arbitrable Dispute shall be resolved by final
and binding arbitration in accordance with the procedures set forth in Section
12.01(c) to the extent allowed by, and subject to any applicable requirements
and procedures set forth in, applicable Law. Notwithstanding the foregoing, no
claim for damages that is barred by Article XIII, or any other claim for
multiple or enhanced damages, shall be an Arbitrable Dispute. If an Owner
Dispute or an Operations Manager Dispute is not resolved as provided in Section
12.01(a) and such dispute is not an Arbitrable Dispute, each of the parties to
the dispute shall have the ability to pursue any applicable legal and equitable
remedies in the United States federal courts located in, and the state courts
of, the State of Oklahoma or, with the written agreement of all of the parties
to the dispute, to submit the dispute to arbitration in accordance with the
procedures set forth in Section 12.01(c), provided that, in each such case, as
well as in the case of an Arbitrable Dispute, if the dispute involves a

 

 

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claim by an Owner or Owners against the Operations Manager, such Owner or Owners
shall not be entitled to an award of money damages or any other form of legal or
equitable remedy or relief from any court, or from any panel of arbitrators
under Section 12.01(c), unless such court or a majority of such arbitrators, as
the case may be, finds that:

(i)        (1) if the claim involves a Budget Dispute under Section 6.02(b), (a)
the dispute satisfies all of the conditions of a Budget Dispute set forth in
Section 6.02(b), and (b) the disputed Operating Budget items constitute or are
the result of gross negligence or willful misconduct on the part of the
Operations Manager, or (2) if the claim involves an Annual Operating Costs and
Costs of Capital Additions Audit Dispute under Section 6.06(b)(iii), (a) the
dispute satisfies all of the conditions of an Annual Operating Costs and Costs
of Capital Additions Audit Dispute set forth in Section 6.06(b)(iii), and (b)
the disputed expenditures in excess of the Budgeted Expenditures Cap constitute
or are the result of gross negligence or willful misconduct on the part of the
Operations Manager; or

(ii)       if the claim involves anything other than a Budget Dispute under
Section 6.02(b) or an Annual Operating Costs and Costs of Capital Additions
Audit Dispute under Section 6.06(b)(iii), the conduct of the Operations Manager,
as it relates to the facts and circumstances giving rise to such claim,
constitutes gross negligence or willful misconduct.

(c)       Arbitration Procedures. Any Arbitrable Dispute and, if all of the
parties thereto shall so agree in writing, any Owner Dispute or Operations
Manager Dispute that is not an Arbitrable Dispute, shall be arbitrated in
accordance with the following procedures:

(i)        Any party to the dispute may by written notice to the other parties
to the dispute demand (such notice being referred to as a “Demand”) that the
dispute be finally settled by binding arbitration before a panel of three
arbitrators in accordance with the

 

 

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Commercial Arbitration Rules (“Rules”) of the American Arbitration Association
(“AAA”) then in effect, except as modified herein. The Demand must include
statements of the facts and circumstances surrounding the dispute, the legal
obligation breached by the other party or parties to the dispute, the amount in
controversy and the requested relief and shall be accompanied by all relevant
documents supporting the Demand.

(ii)       Unless all of the parties to the dispute otherwise agree, arbitration
shall be held in Oklahoma City, Oklahoma. The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. § 1 et seq.

(iii)      The party to the dispute that makes the Demand shall select one
arbitrator, and the other party or parties to the dispute shall select one
arbitrator, within ten days after the delivery of the Demand, or if any such
party or parties to the dispute fail to make such selection within ten days
after the delivery of the Demand, the AAA shall make such appointment. The two
arbitrators thus appointed shall select the third arbitrator, who shall act as
the chairman of the panel. If the two arbitrators fail to agree on a third
arbitrator within 30 days after the selection of the second arbitrator, the AAA
shall make such appointment.

(iv)      The award and the reasons therefor shall be stated in writing and
shall be final and binding upon the parties and shall be the sole and exclusive
remedy between or among the parties regarding any claims, counterclaims, issues,
or accountings presented to the arbitral panel. The arbitral panel shall be
authorized to grant in its discretion pre-award and post-award interest at
commercial rates. Judgment upon any award may be entered in any court having
jurisdiction. For the purposes of a pre-arbitral injunction, pre-arbitral
attachment or other order in aid of arbitration proceedings, the parties shall
submit to the jurisdiction of the United States federal courts located in, and
the state courts of, the State of Oklahoma. Each of the

 

 

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Owners and the Operations Manager irrevocably waive, to the fullest extent
permitted by applicable Law, any objection any of them may now or hereafter have
to the jurisdiction of such courts or the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Each of the
Owners and the Operations Managers hereby consents to service of process by
registered mail at their respective addresses set forth in this Agreement and
agree that their submission to jurisdiction and their consent to service of
process by mail is made for the express benefit of the other parties to any
Owner Dispute or Operations Manager Dispute that is arbitrated pursuant to this
Section 12.01(c).

(v)       This Agreement and the rights and obligations of the Owners and the
Operations Manager hereunder shall remain in full force and effect pending the
award in any arbitration proceeding hereunder.

(vi)      Unless otherwise ordered by the arbitrators or except as otherwise
provided in Section 6.02(b) or 6.06(b)(iii), each party to the dispute shall
bear its own costs and fees, including attorneys’ fees and expenses. The
arbitrators shall have no power to consider or award money damages or any other
form of legal or equitable remedy or relief that is inconsistent with any other
provision of this Agreement, including the provisions of Section 12.01(b).

(vii)     To the fullest extent permitted by Law, the Owners and the Operations
Managers hereby irrevocably waive and exclude any rights of application or
appeal or rights to state a special case for the opinion of the courts or any
other recourse to the courts other than to enforce the agreement to arbitrate
pursuant to this Section 12.01(c) for attachment or other order in aid of
arbitration proceedings or to enforce the award of the arbitral panel.

 

 

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12.02   Performance during Dispute. During the pendency of any dispute, the
parties thereto shall continue to perform their respective obligations under
this Agreement.

ARTICLE XIII

 

LIMITATION OF LIABILITY AND INDEMNIFICATION

13.01   Owner Limitation. No Owner shall have any remedy against any other Owner
for tortious conduct arising out of its ownership or interest in the Redbud
Generating Facility or any portion thereof except when such liability, loss,
cost, damage or expense results from such Owners’ gross negligence or willful
misconduct, provided that, subject to the third sentence in Section 13.07, any
claim for money damages that an Owner may have based on another Owner’s breach
of this Agreement shall not be subject to the foregoing limitation on remedies.

13.02   Operations Manager Limitation. The Owners shall have no remedies against
the Operations Manager for any action taken or failed to be taken pursuant to or
in connection with any Operating Work or Capital Additions or otherwise in
performing its duties and obligations hereunder, whether based on a contract,
tort (including the sole negligence of the Operations Manager) or otherwise
except when such loss, cost, damage or expense results from the Operations
Manager’s (a) gross negligence or willful misconduct or (b) failure to pay any
amount(s) required to be paid, refunded or reimbursed to any Owner pursuant to
Section 6.02(b) or 6.06(b)(iii).

13.03   Allocation. Except for liability, loss, cost, damage or expense
resulting from gross negligence or willful misconduct by any Owner or the
Operations Manager (as the case may be) or as may be otherwise provided in this
Agreement and to the extent allowed by applicable Law, any loss, cost, damage or
expense arising from a claim of liability to a third party or parties (including
civil penalties imposed by Governmental Authorities) against any or all Owners
or the Operations Managers and arising out of or resulting from the ownership or

 

 

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operation of the Redbud Generating Facility or any part thereof, whether based
on contract, tort (including negligence) or otherwise, shall be shared (after
application thereto of any insurance coverage or proceeds) by the Owners in the
proportion of the Owners’ respective Ownership Interests, and any amount paid by
an Owner or the Operations Manager by reason of such liability (other than
liability for gross negligence or willful misconduct) shall be considered
Operating Costs.

13.04   Indemnification by Owners of Operations Manager and Other Owners. To the
extent allowed by applicable Law, each of the Owners shall protect, indemnify,
and hold each of the other Owners and the Operations Manager and their
respective directors, officers and employees free and harmless from and against
any and all claims, demands, causes of action, suits or other proceedings
(including all costs in connection therewith and in connection with the defense
thereof, including reasonable attorneys’ fees) of every kind and character
arising in favor of such Owner’s own customers (or anyone claiming through said
customers) on account of bodily injuries, death, damage to property or economic
loss in any way occurring, incident to, arising out of or in connection with the
furnishing of, or failure to furnish, service to said customers. It is the
intention of this Section 13.04 to impose on each Owner the sole responsibility
for the defense and discharge of such claims, demands, causes of action, suits
or other proceedings brought against one or more Owners by such Owner’s
customers even when caused by the sole fault of another Owner. Nothing in this
Section 13.04 shall impair the remedies of one or more Owners against another
Owner preserved by Sections 13.01 and 13.02 hereof.

13.05   Indemnification of Operations Manager by Owners against Third-Party
Claims. To the extent allowed by applicable Law, each of the Owners shall
protect, indemnify,

 

 

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and hold the Operations Manager and its directors, officers and employees free
and harmless from and against any and all uninsured, or any uninsured portion(s)
of any and all, claims, demands, causes of action, suits or other proceedings
(including all costs in connection therewith and in connection with the defense
thereof, including reasonable attorneys’ fees) of every kind and character
brought or initiated by a third party and arising out of or otherwise relating
to the performance by the Operations Manager of its duties and responsibilities
hereunder, even when caused by the sole fault of the Operations Manager, unless
such third-party claims, demands, causes of action, suits or other proceedings
result from the Operations Manager’s gross negligence or willful misconduct in
performing its duties and obligations hereunder.

13.06   Indemnification of Owners by Operations Manager. The Operations Manager
shall protect, indemnify, and hold each of the Owners and its directors,
officers and employees free and harmless from and against any and all claims,
demands, causes of action, suits or other proceedings (including all costs in
connection therewith and in connection with the defense thereof, including
reasonable attorneys’ fees) of every kind and character arising from the
performance by the Operations Manager of its duties and responsibilities
hereunder, to the extent that such claims, demands, causes of action, suits or
other proceedings result from the Operations Manager’s gross negligence or
willful misconduct in performing its duties and obligations hereunder.

13.07   Sole and Exclusive Remedies. TO THE EXTENT THAT SECTION 13.03, 13.04 OR
13.05 PROVIDES AN EXPRESS REMEDY FOR MONEY DAMAGES WITH RESPECT TO A PARTICULAR
CAUSE OF ACTION, CLAIM, DEMAND, LIABILITY OR LOSS AS DESCRIBED THEREIN, SUCH
REMEDY SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF ANY OWNER OR THE OPERATIONS
MANAGER, AS THE

 

 

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CASE MAY BE, FOR MONEY DAMAGES, AND ALL OTHER REMEDIES FOR MONEY DAMAGES
AVAILABLE AT LAW OR IN EQUITY WITH RESPECT TO SUCH CAUSE OF ACTION, CLAIM,
DEMAND, LIABILITY OR LOSS ARE HEREBY WAIVED. EXCEPT AS OTHERWISE PROVIDED IN THE
IMMEDIATELY PRECEDING SENTENCE AND SUBJECT TO ALL OF THE LIMITATIONS SET FORTH
IN THIS ARTICLE XIV (INCLUDING THE IMMEDIATELY SUCCEEDING SENTENCE), ANY OWNER
OR OPERATIONS MANAGER MAY PURSUE SUCH REMEDIES (INCLUDING DAMAGES AND FEES AND
EXPENSES OF ATTORNEYS) AS MAY BE AVAILABLE UNDER THIS AGREEMENT (INCLUDING
ARTICLE XI) OR AT LAW OR IN EQUITY. NOTWITHSTANDING THE IMMEDIATELY PRECEDING
SENTENCE, NO OWNER OR OPERATIONS MANAGER SHALL UNDER ANY CIRCUMSTANCES BE LIABLE
FOR SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR EXEMPLARY DAMAGES, WHETHER
BY STATUTE, IN TORT OR BY CONTRACT OR OTHERWISE. THE LIMITATIONS IMPOSED ON
REMEDIES BY THE IMMEDIATELY PRECEDING SENTENCE AND THE MEASURE OF DAMAGES SHALL
BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO. THE PROVISIONS OF THIS
SECTION 13.07 SHALL BE ENFORCEABLE ONLY TO THE EXTENT ALLOWED BY, AND SHALL BE
SUBJECT TO ANY APPLICABLE REQUIREMENTS AND PROCEDURES SET FORTH IN, APPLICABLE
LAW.

ARTICLE XIV

 

DAMAGE TO OR CONDEMNATION OF REDBUD GENERATING FACILITY; TERMINAITON OF
OPERATIONS OF REDBUD GENERATING FACILITY

 

14.01

Damage or Condemnation.

 

 

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(a)       Uninsured Cost Not in Excess of $50 Million. If the Redbud Generating
Facility suffers damage resulting from causes other than ordinary wear, tear or
deterioration or suffers a Taking and, in either case, the estimated uninsured
and otherwise uncompensated cost of repair, as determined by a Majority of
Members based on an appraisal by a nationally-recognized and qualified
engineering firm, does not exceed $50 million, and if a Supermajority of Members
does not determine that the operations of the Redbud Generating Facility shall
be terminated pursuant to Section 14.02, the Operations Manager will submit a
revised Operating Budget as soon as reasonably practicable and will proceed to
repair or cause the repair of such damage, and each Owner will pay into a
separate account its Pro Rata Share of the estimated uninsured and otherwise
uncompensated cost of such repair as budgeted in such revised Operating Budget.

(b)       Notice to Repair When Uninsured Cost Exceeds $50 Million. If the
Redbud Generating Facility suffers damage or a Taking and the estimated
uninsured and otherwise uncompensated cost of repair exceeds $50 million,
determined in accordance with Section 14.01(a), a Majority of Members will
determine, based on an appraisal by a nationally-recognized and qualified
engineering firm, the estimated value of the Redbud Generating Facility as and
when repaired, and if a Supermajority of Members determines that the estimated
uninsured and otherwise uncompensated cost of repair shall be paid by all of the
Owners, the Operations Manager will submit a revised Operating Budget as soon as
reasonably practicable and will proceed to repair or cause the repair of such
damage, and each Owner will pay into a separate account its Pro Rata Share of
the estimated uninsured and otherwise uncompensated cost of repair as budgeted
in such revised Operating Budget. If a Supermajority of Members does not
determine that the estimated uninsured and otherwise uncompensated cost of
repair

 

 

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shall be paid by all of the Owners and does not determine that the operations of
the Redbud Generating Facility shall be terminated pursuant to Section 14.02,
each Owner that, within 15 Business Days, gives notice in writing to the other
Owners of its desire that the damage to the Redbud Generating Facility be
repaired will pay into a separate account, in the proportion that its Ownership
Interest bears to the total of the Ownership Interests of all Owners giving such
notice, all of the estimated uninsured and otherwise uncompensated cost of such
repair as budgeted in such revised Operating Budget. If any Owner gives such a
notice, the Ownership Interest of each Owner that does not give such a notice
will be reduced, at the end of such fifteen-day period and to the extent allowed
by and subject to the requirements and procedures set forth in applicable Law,
to the extent determined by the following formula.

 

X = Y x V-(C-I)
               V

 

where:

 

 

V = Estimated value of the Redbud Generating Facility as repaired

 

C = Estimated cost of repair

 

I = Estimated insurance or compensation proceeds, if any,

 

inuring to the benefit of all Owners (shall not include

 

insurance or compensation proceeds to which only

 

individual Owners are entitled)

 

Y = Ownership Interest prior to loss

 

X = Reduced Ownership Interest

 

At the same time, the amount of such reductions will be added to the Ownership
Interests of the Owners giving such notice in the proportion that the Ownership
Interest of each Owner giving such notice bears to the total of the Ownership
Interests of all Owners giving such notice.

(c)       Absence of Notice to Repair When Uninsured Cost Exceeds $50 Million.
If the Redbud Generating Facility suffers damage to the extent that the
estimated uninsured and otherwise uncompensated cost of repair as determined in
accordance with Section 14.01(a) exceeds $50 million and no Owner gives the
notice required by Section 14.01(b), the damage to

 

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the Redbud Generating Facility shall not be repaired. If portions of the Redbud
Generating Facility are still capable of economically generating electricity,
the Operations Manager implement the procedures specified in Section 14.02 with
respect to the damaged facilities only and continue to operate the remaining
facilities. If no portion of the Redbud Generating Facility is still capable of
economically generating electricity, the Executive Committee shall cause the
Operations Manager to terminate the operations of the Redbud Generating Facility
pursuant to Section 14.02.

(d)       Insurance Proceeds and Condemnation Awards. In the case of repair of
damage to the Redbud Generating Facility pursuant to Section 14.01(a) or
15.01(b), all proceeds of insurance and condemnation awards shall first be
applied to repair of such damage, and any excess proceeds (or, in the case of a
situation such as that described in Section 14.01(c), the entire amount of such
proceeds) will be distributed to the Owners in accordance with their respective
Ownership Interests.

14.02   Termination of Operations. To the extent allowed by and subject to the
requirements and procedures set forth in applicable Law, when the Redbud
Generating Facility can no longer be made capable, consistent with Prudent
Utility Practices, of producing electricity or cannot obtain required Permits,
or when a Supermajority of Members otherwise determines to terminate the
operations of the Redbud Generating Facility, the Operations Manager shall sell
for removal all salable parts of the Redbud Generating Facility to the highest
bidder(s). Each Owner shall bear its Pro Rata Share of all costs of termination
of the operations of the Redbud Generating Facility, including the costs of
razing all structures and disposing of the debris and meeting all requirements
of applicable Law. Each Owner shall receive its Pro Rata Share of any proceeds
resulting from the liquidation of the Redbud Generating Facility by the
Operations

 

 

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Manager pursuant to this Section 14.02 only after the payment of all costs of
termination of the operations of the Redbud Generating Facility, including
payment of any expenses authorized by the Executive Committee.

ARTICLE XV

 

TERM AND TERMINATION

15.01   Term. This Agreement shall become effective on the Effective Date. The
term of this Agreement (“Term”) shall be from the Effective Date through the
earlier of (a) the date of the termination of the operations of the Redbud
Generating Facility as provided in Section 14.02 or (b) the date of termination
of either or both of the Redbud Purchase Agreements prior to the closing of the
transactions contemplated thereby (such earlier date being referred to as the
“Termination Date”).

15.02   Termination. This Agreement shall not be subject to termination except
as expressly provided in Section 15.01. Each of the Owners, to the extent
allowed by applicable Law, waives all rights now or hereafter existing,
conferred by statute, common law or otherwise to quit, terminate or surrender
this Agreement. If, at any time after the Effective Date, this Agreement shall
have been terminated in accordance with Section 15.01, this Agreement and all
rights and obligations of any Owner hereunder shall terminate upon the
Termination Date, except (a) any rights or obligations hereunder that have
accrued to or been incurred by such Owner, or to which such Owner shall have
become subject, prior to such termination, and (b) the obligations set forth in
Sections 7.03, Article XII, Article XIII and Article XVII, shall survive such
termination.

 

 

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ARTICLE XVI

 

ASSIGNMENTS AND TRANSFERS OF OWNERSHIP INTERESTS

16.01   Assignments and Transfers. Except as expressly provided in Section
11.04(a) and 14.01(b) and to the extent allowed by and subject to the
requirements and procedures set forth in applicable Law, the assignment or
transfer of all or any portion of an Ownership Interest shall be effective only
if made in compliance with all of the applicable provisions of this Article XVI,
and any purported assignment or transfer of all or any portion of an Ownership
Interest that fails to comply with the applicable provisions of this Article XVI
shall be null and void.

 

16.02

Rights of First Refusal.

(a)       Notice of Third-Party Offer. If any Owner desires to transfer all or
any portion of its Ownership Interest pursuant to a bona fide offer (which offer
shall include all of the terms and conditions of the proposed transfer) from any
Person (such Owner being referred to as the “Transferring Owner”; the whole of
such Ownership Interest or any lesser portion thereof to be transferred, as the
case may be, being referred to as the “Transferring Interest”; such offer being
referred to as the “Third-Party Offer”; and such Person making the Third-Party
Offer being referred to as the “Third-Party Offeror”), the Transferring Owner
shall deliver written notice thereof, which shall include a copy of the
Third-Party Offer (such written notice, including such copy of the Third-Party
Offer, being referred to as the “Third-Party Offer Notice”), to each of the
other Owners (“Non-Transferring Owners”), and for a period of 60 days following
its receipt of the Third-Party Offer Notice (such sixty-day period being
referred to as the “Third-Party Offer Period”), each of the Non-Transferring
Owners shall have the right to acquire its Proportionate Share of the
Transferring Interest on the terms and conditions set forth in the Third-Party
Offer (such right being referred to as a “Right of First Refusal”), provided
that the consideration to be paid by a Non-Transferring Owner that elects to
exercise its Right of First

 

 

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Refusal (such Non-Transferring Owner being referred to as a “Purchasing Owner”)
shall be its Proportionate Share of:

(i)        cash in the amount set forth in the Third-Party Offer, if the Third
Party Offer is in cash;

(ii)       cash in the amount of the aggregate market value of publicly-traded
securities, if the Third-Party Offer is in publicly-traded securities with a
readily ascertainable market value;

(iii)      cash in the amount determined pursuant to Sections 16.02(a)(i) and
16.02(a)(ii), if the Third-Party Offer is in a combination of cash and
publicly-traded securities with a readily ascertainable market value; or

(iv)      cash in the amount of the fair market value of the Transferring
Interest, if the Third-Party Offer is in neither cash nor publicly-traded
securities with a readily ascertainable market value.

(b)       Exercise of Right(s) of First Refusal. If a Non-Transferring Owner
elects to exercise its Right of First Refusal, it must do so in writing
delivered to the Transferring Owner within the Third-Party Offer Period, and the
Purchasing Owner(s) and the Transferring Owner shall consummate the transfer of
the Transferring Interest as promptly as practicable thereafter in accordance
with the terms and conditions of the Third-Party Offer, except as provided in
Sections 16.02(a)(ii), 16.02(a)(iii) and 16.02(a)(iv).

(c)       Non-Exercise of Right(s) of First Refusal. If none of the
Non-Transferring Owners elect to exercise their Rights of First Refusal within
the Third-Party Offer Period, the Transferring Owner and the Third-Party Offeror
shall have 365 days after the end of the Third-Party Offer Period in which to
consummate the transfer of the Transferring Interest in

 

 

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strict accordance with the terms and conditions of the Third-Party Offer, as set
forth in the Third-Party Offer Notice. If the transfer of the Transferring
Interest is not consummated within such 365-day period or the terms and
conditions of such transfer (as set forth in the Third-Party Offer Notice) are
modified in any way that is financially or otherwise more favorable to the
Third-Party Offeror, the Third-Party Offer shall be deemed to have been made
anew and shall again be subject to all of the provisions of this Section 16.02.

16.03   Exception to Rights of First Refusal. The provisions of Section 16.02
shall not apply to an Owner’s transfer of all or any portion of its Ownership
Interest to any of its direct or indirect, wholly-owned subsidiaries, or to any
other direct or indirect, wholly-owned subsidiary of any Person of which such
Owner is a direct or indirect, wholly-owned subsidiary, as part of a corporate
reorganization or restructuring or otherwise.

16.04   Admission of New Owner and Actions Necessary to Effect Assignment or
Transfer of Ownership Interest. No person shall succeed to or acquire any of the
rights of an Owner under this Agreement, unless and until such Person becomes a
party to this Agreement by executing a counterpart hereof, including such
amendments, modifications and supplements hereto as the admission of a new Owner
may require and the nonassigning or nontransferring Owner(s) shall approve. In
the event of an assignment or transfer of all or any portion of an Ownership
Interest in compliance with all of the applicable provisions of this Article
XVI, each of the Owners shall take any and all such actions, including the
execution and delivery of any and all such documents and instruments, as may be
required to obtain any and all such Permits as may be required or otherwise
legally effect and confirm such assignment or transfers.

 

 

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ARTICLE XVII

 

MISCELLANEOUS

17.01   Governing Law. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with, the substantive Law of the State of
Oklahoma without reference to any principles of conflicts of Laws thereof.

17.02   Force Majeure. If an Owner or the Operations Manager is rendered unable
by Force Majeure to carry out, in whole or in part, its obligations under this
Agreement and such Owner or Operations Manager gives written notice and full
details of the event to the other Owner(s) and the Operations Manager, or to the
Owners, as soon as practicable after the occurrence of the event, then during
the pendency of such Force Majeure but for no longer period, the obligations of
the Owner or the Operations Manager affected by the event (other than the
obligation to make payments then due or becoming due with respect to performance
prior to the event) shall be suspended to the extent required. The Claiming
Party shall endeavor to remedy the Force Majeure with all reasonable dispatch.

17.03   Attorneys’ Fees and Litigation Expenses. Subject in the case of
arbitration to the provisions of Section 12.01(c)(vi), in the event any action
is commenced to recover damages or enforce any rights or obligations under this
Agreement, then the prevailing party in such action shall be entitled to recover
its attorney fees, including the reasonable fees of in-house counsel, expert
fees, and all reasonable out-of-pocket expenses incurred in enforcing the
prevailing party’s rights under this Agreement, regardless of whether those
fees, costs or expenses are otherwise recoverable as costs in the action,
including all fees and expenses incurred in connection with the investigation
and preparation of the action before it is filed and upon appeal.

 

17.04

Notices.

 

 

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(a)       Means of Notification. Unless this Agreement specifically requires
otherwise, any notice, demand or request provided for in this Agreement, or
served, given or made in connection with it, shall be in writing and shall be
deemed properly served, given or made if delivered in person or sent by
facsimile or electronic mail or by registered or certified mail, postage
prepaid, or by a nationally-recognized overnight courier service that provides a
receipt of delivery, in each case, to the Parties at the addresses specified
below:

If to GRDA:

Grand River Dam Authority

 

Street Address:

226 Dwain Willis Avenue

Vinita, OK 74301-4654

 

Post Office Box Address:

P.O. Box 409

Vinita, OK 74301-0409

 

Attn: Chief Executive Officer

Facsimile No.: (918) 256-2983

 

 

with a copy to:

Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C.

 

 

Street Address:

320 South Boston Avenue, Suite 400

Tulsa, OK 74103-3708

 

Attn: Michael D. Cooke, Esq.

Stuart E. Van De Wiele, Esq.

Facsimile No.: (918) 594-0505

 

 

 

 

 

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If to OG&E, as Owner:

Oklahoma Gas and Electric Company

 

Street Address:

321 North Harvey Avenue

Oklahoma City, OK 73102-3405

 

Post Office Box Address:

P.O. Box 321

Oklahoma City, OK 73101-0321

 

Attn: General Counsel

Facsimile No.: (405) 553-3198

 

 

with a copy to:

OGE Energy Corp.

 

 

Street Address:

321 North Harvey Avenue

Oklahoma City, OK 73102-3405

 

Post Office Box Address:

P.O. Box 321

Oklahoma City, OK 73101-0321

 

Attn: General Counsel

Facsimile No.: (405) 553-3760

 

 

If to OG&E, as Operations Manager:

Oklahoma Gas and Electric Company

 

Street Address:

321 North Harvey Avenue

Oklahoma City, OK 73102-3405

 

Post Office Box Address:

P.O. Box 321

Oklahoma City, OK 73101-0321

 

Attn: Vice President, Power Supply

Facsimile No.: (405) 553-2115

 

 

 

 

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with a copy to:

OGE Energy Corp.

 

 

Street Address:

321 North Harvey Avenue

Oklahoma City, OK 73102-3405

 

Post Office Box Address:

P.O. Box 321

Oklahoma City, OK 73101-0321

 

Attn: General Counsel

Facsimile No.: (405) 553-3760

 

 

If to OMPA:

Oklahoma Municipal Power Authority

 

Street Address:

2300 East Second Street

Edmond, OK 73034-6703

 

Post Office Box Address:

P.O. Box 1960

Edmond, OK 73083-1960

 

Attn: General Manager

Facsimile No.: (405) 359-1071

 

 

with a copy to:

Oklahoma Municipal Power Authority

 

 

Street Address:

2300 East Second Street

Edmond, OK 73034-6703

 

Post Office Box Address:

P.O. Box 1960

Edmond, OK 73083-1960

 

Attn: General Counsel

Facsimile No.: (405) 359-1071

 

(b)       Effective Time. Notice given by personal delivery, mail or overnight
courier pursuant to this Section 17.04 shall be effective upon physical receipt.
Notice given by facsimile or electronic mail pursuant to this Section 17.04
shall be effective as of (i) the date of confirmed delivery if delivered before
5:00 p.m. Oklahoma time on any Business Day, or (ii) the

 

 

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next succeeding Business Day if confirmed delivery is after 5:00 p.m. Oklahoma
time on any Business Day or during any non-Business Day.

17.05   Waivers. Except as otherwise provided herein, no provision of this
Agreement may be waived except in writing. No failure by any Party to exercise,
and no delay in exercising, short of the statutory period, any right, power or
remedy under this Agreement shall operate as a waiver thereof. Any waiver at any
time by any Party of its rights with respect to a default under this Agreement,
or with respect to any other matter arising in connection therewith, shall not
be deemed a waiver with respect to any subsequent default or matter.

17.06   No Reliance. In entering into this Agreement, no Party has relied on any
statement, representation or promise of any other Party or any other Person
except as expressly stated in this Agreement.

17.07   Assumption of Risk. In entering into this Agreement, each of the Parties
assumes the risk of any mistake of fact or Law, and the subsequent discovery by
any Party that its understanding of the facts or the Law was incorrect shall not
entitle that Party or any other Party to set aside, or attempt to set aside,
this Agreement or any provision hereof.

17.08   Waiver of Defenses. Upon the execution of this Agreement, the Parties
release each other from any and all claims relating to the formation and
negotiation of this Agreement, including but not limited to reformation,
rescission, mistake of fact or mistake of Law, and waive, and will not raise in
any court, administrative body or other tribunal, any claim in avoidance of or
defense to the enforcement of this Agreement except as expressly provided in
this Agreement.

17.09   No Third-Party Beneficiaries. None of the promises, rights or
obligations contained in this Agreement shall inure to the benefit of any Person
other than the Parties; and no

 

 

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action may be commenced or prosecuted against any Party by any third party
claiming to be a third-party beneficiary of this Agreement or the transactions
contemplated hereby.

17.10   Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, but none of and the
rights or obligations of any Party are materially and adversely affected
thereby, (a) such provision will be fully severable, (b) this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, (c) the remaining provisions of this
Agreement shall remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance herefrom, and
(d) in lieu of such illegal, invalid or unenforceable provision, there shall be
added automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as shall be possible.

17.11   Representation by Counsel. Each Party has been represented by its chosen
legal counsel in connection with this Agreement and fully understands the terms
of this Agreement.

17.12   Further Assurances. Each Party shall promptly and with all due diligence
take all necessary action in aid of obtaining all Permits necessary to carry out
its obligations under this Agreement. Each Party, from time-to-time on request,
shall execute such other documents and instruments as may be necessary to carry
out the purposes and intents of, and consummate the transactions contemplated
by, this Agreement.

17.13   GRDA and OMPA Disclosure. Following the execution and delivery of this
Agreement by each of the Parties, GRDA and OMPA may disclose this Agreement and
its terms (a) to the underwriters of bonds to be issued to finance GRDA’s or
OMPA’s Ownership Interest, (b) to counsel for such underwriters, (c) to rating
agencies and bond insurers, (d) to credit and

 

 

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liquidity support providers, (e) in any application to Oklahoma Council of Bond
Oversight for approval of a bond issue, (f) in any official statement or other
disclosure required by applicable securities Law, and (g) to tax authorities in
order to obtain letter rulings regarding the tax-exempt status of their
respective bonds.

17.14   No Partnership. Nothing in this Agreement shall create a partnership,
joint venture, association or trust. The Owners shall affirmatively elect not to
apply the provisions of Subchapter K of the Code. Each Owner shall individually
bear its respective share of all obligations and liabilities of the Redbud
Generating Facility as they arise in accordance with the terms of this
Agreement. No Owner shall have any right or power to bind any other Owner
without the other Owner’s written consent, except as may be expressly provided
in this Agreement. In their relations with each other under this Agreement, the
Owners shall not be considered fiduciaries or to have established a confidential
relationship but rather shall be free to act on an arm’s length basis in
accordance with their own respective self-interests, subject, however, to the
obligations of the Owners to act in good faith in their dealings with each other
with respect to the Transactions and other activities contemplated hereunder. No
Member or Alternate Member has any fiduciary duties or any other duties or
obligations to any Owner under or in connection with this Agreement or the
Transactions, except (a) as may be otherwise expressly set forth in this
Agreement or (b) the duties and obligations any Member or Alternative Member has
to the Owner by which such Member or Alternate Member was appointed. No Owner or
Affiliate of any Owner, by reason of its Ownership Interest or appointment as a
Member or an Alternate Member, shall be precluded from engaging in any
activities similar to those to be conducted by the other Owners in respect of
the Redbud Generating Facility or any activities incidental or related thereto
in the United States of America or anywhere else, and no

 

 

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Owner or any Affiliate of any Owner shall have any obligation, by reason of its
Ownership Interest or appointment as a Member or an Alternate Member, to make
available to any other Person any other opportunity that such Owner or any of
its Affiliates may have to develop, construct, own, operate, maintain or finance
any other project of any kind or nature, including but not limited to any power
plant project.

17.15   Ancillary Services. To the extent the Redbud Generating Facility is used
or may be used to generate Ancillary Services or related products from time to
time, as may be required by applicable Law or otherwise, the Owners shall
negotiate in good faith in an attempt to agree on an equitable allocation of the
costs and benefits, consistent with their respective Ownership Interests, to
account for such Ancillary Services or related products.

17.16   Access. Each Owner and its designees shall have access at any time to
the Redbud Generating Facility, subject to the necessity of efficient and safe
operation of the Redbud Generating Facility, notwithstanding the fact that the
Operations Manager alone shall have possession and control, for and on behalf of
all of the Owners, of the Redbud Generating Facility.

17.17   Entire Agreement. This Agreement and the other agreements expressly
provided for herein, including all schedules and exhibits hereto and thereto,
set forth the entire understanding of the Parties with respect to the subject
matter hereof and thereof and supercede all prior oral and written contracts,
agreements, arrangements, communications, discussions, representations and
warranties between or among the Parties (including the Confidentiality Agreement
among GRDA, OG&E and OMPA dated December 7, 2007, which is hereby terminated).
This Agreement may be signed in counterparts.

 

 

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17.18   Cooperation in Financing. Each of the Owners shall cooperate with the
other Owners in terms of providing any information about itself and the Redbud
Generating Facility that another Owner may be required to disclose under
applicable securities Law, or in response to any reasonable request of its
lender(s), in connection with the financing or refinancing of its Ownership
Interest.

17.19   Amendment. This Agreement may not be amended except by a writing signed
by all of the Owners.

 

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first written above.

 

GRAND RIVER DAM AUTHORITY, as Owner

 

 

By: /s/ Kevin A. Easley  

Name: Kevin A. Easley
Title: Chief Executive Officer

 

 

 

 

OKLAHOMA GAS AND ELECTRIC COMPANY, as Owner

 

 

By: /s/ Jesse B. Langston  

Name: Jesse B. Langston
Title: Vice President, Utility
Commercial Operations

 

 

 

 

OKLAHOMA GAS AND ELECTRIC COMPANY, as Operations Manager

 

 

By: /s/ John Wendling, Jr.  

Name: John Wendling, Jr.
Title: Vice President, Power Supply

 

 

 

 

OKLAHOMA MUNICIPAL POWER AUTHORITY, as Owner

 

 

By: /s/ Cindy Holman  

Name: Cindy Holman
Title: General Manager

 

 

 

 

 

 

- S-1 -

 

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Exhibit A

 

GRDA’s Knowledge Persons

Charles Barney, PE, Assistant General Manager Thermal Generation

James M. Stafford, Superintendent Operations, Off System Marketing

 

 

- A-1 -

 

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Exhibit B

 

OG&E’s Knowledge Persons

Jesse B. Langston – Vice President, Utility Commercial Operations

John Wendling, Jr. – Vice President, Power Supply

Gary D. Clear – Manager, Power Supply Regulatory Support

 

 

- B-1 -

 

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Exhibit C

 

OMPA’s Knowledge Persons

David W. Osburn – Director of Operations

Robin Morecroft – Director of Engineering Services

 

 

- C-1 -

 

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Exhibit D

Oklahoma Gas and Electric

Administrative and General Expense Allocation Methodology

In order to properly allocate the administrative and general expenses of
Oklahoma Gas and Electric Company (OG&E) to co-owners of jointly owned
facilities, OG&E adds to the direct cost of the jointly owned facility an amount
calculated as follows:

 

Allocation Amount

= (X * Y) * Z

 

Where,

X = Total OGE - Enterprise Services Administrative & General Expenses adjusted
for taxes and depreciation, as charged to OG&E;

Y = The simple average of the quotients of Power Supply’s portion of Payroll &
Benefits, Headcount, and Net Plant divided by the Total OG&E Business Units
amount for such categories, respectively; and

Z = The subject plant’s generating capability (e.g., Redbud Generating
Facility’s 1,230 MW) as a percent of the total OG&E fleet generating capability.

The Administrative and General Expense Allocation Amount (“Allocation Amount”)
is calculated annually. The OGE and OG&E audited financial information is
available by the end of February each year. The above calculated Allocation
Amount is applied to all billings from February through January of the following
year.

This allocation methodology is required to ensure that co-owners of jointly
owned facilities and OG&E customers pay the appropriate share of administrative
and general expenses and neither group subsidizes the other.

 

 

- D-1 -

 

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A sample calculation of the Administrative and General Expense Allocation Amount
is set forth below:

 

[d-2.gif]

 

 

- D-2 -

 

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Exhibit E

 

Initial Ownership Interests and Pro Rata Shares

GRDA - 36%

OG&E - 51%

OMPA - 13%

 

 

- E-1 -

 

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Exhibit F

Scheduling, Dispatch and Fuel Procedures

1.

Unit commitment

 

a.

Operations Manager provides the Net Capability, as well as the net capability
and status of the individual units, and other agreed upon detail in an agreeable
format to all Owners. The information is updated by the Operations Manager as
capabilities and unit statuses change.

 

i.

The unit status will be online, offline available for commitment, or offline
unavailable.

 

b.

All Owners will submit anticipated needs (separate nominations for Energy and
Ancillary Services) to Operations Manager by {_____ CPT} of the day preceding
the operating day.

 

c.

Operations Manager will provide feedback to Owners by {_____ CPT} on the
committed units with feedback on duct firing levels if any.

 

i.

The selection of specific units to be committed will be consistent with the
minimization of cost and risk for all owners.

 

ii.

The unplanned use of duct firing should be avoided by the Operations Manager
except under emergencies.

 

d.

Owners are required to provide an affirmative response to the Operations Manager
to accept utilization of duct burners . Acceptance of use of duct burners for
energy or ancillary services requires acceptance of associated fuel costs such
as pilot gas and duct firing gas.

 

e.

Owners adjust schedules/tags as needed.

 

f.

Feedback to Owners on adjustments if any.

 

g.

Requesting a unit start

 

i.

A single Owner or multiple Owners may request a unit start at any time
(notwithstanding the commitment plan), subject to the applicable start time,
ramping, minimum run time , and startup costs

 

ii.

Owner(s) will have rights to Energy and Ancillary Services from committed unit
until the operating day for the next commitment plan. Each Owner reserves the
right to recall their Pro Rata Share of Net Capability; provided, however, that
the recalling Owner shall reimburse the starting Owner(s) in accordance with
procedures to be determined later, and that the Net Capability is only
recallable for changes associated with service to the recalling Owner’s firm
load obligations

2.

Scheduling

 

 

F-1

 

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a.

Intra-day changes are allowed consistent with SPP requirements for tagging and
scheduling.

 

b.

An Owner may request a total amount of Energy and Ancillary Services up to the
owner’s share of the Net Capability

 

c.

The in-merit start-up and ramp Energy allocation process will be determined
later.

 

d.

All Owners are responsible for submitting their schedules/E-tags to SPP.

3.

Gas Issues

 

a.

Firm natural gas transportation charges will be allocated based on ownership
ratio, except for those charges that relate to the volume of gas delivered,
which will be allocated on a variable basis in a manner consistent with the
determination of natural gas supply responsibilities.

 

b.

Each Owner’s gas volumes will be calculated on daily average heat rates for base
and duct firing separately. Each Owner’s gas volume will be calculated hourly
based on their respective actual usage of Net Capability, including the Owner’s
share of purchases from and sales to the SPP market by the Operations Manager on
behalf of the Owners .

 

c.

Gas Allocation Process

 

i.

By { } CPT the day before the operating day, each Owner will determine their
generation needs from the plant and corresponding estimated gas burn. This
information forms the basis for each Owner’s individual gas purchases and their
transportation nomination to the OGT gas pipeline.

 

ii.

The OGT pipeline will deliver nominated volumes for the applicable gas day(s)
(0900 to 0900 CPT) up to limits of applicable gas transportation agreement(s).

 

iii.

During each operating day (0000 to 2400 CPT) the Operations Manager will commit
units based on the unit commitment provisions in this Exhibit F.

 

iv.

Imbalances of gas volumes between nominated quantities and actual burn for each
of the Owners will be accounted for separately in a mutually agreeable manner.
By { } CPT of the day following, the Operations Manager will make available to
each Owner the estimated MWH, Heat Rate and MMBTU attributable to each Owner’s
actual usage of Net Capability. This information will be derived using an
allocation algorithm (to be developed) that allows each Owner to make gas buying
decisions for the next day’s operations.

 

v.

Final MWH and MMBtu quantities will be determined for each Owner using billing
meter quantities. This information will be available for distribution on or
about the middle of the month following the operating month.

 

vi.

Quantity of gas in each Owner’s respective accounts will be trued up using the
information supplied in the power allocation report not more than 5 working days
after the power allocation report is published.

4.

SPP Market

 

 

F-2

 

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a.

Units will be scheduled (Energy and Ancillary Services) by the Owners and any
Energy available, subject to operating limits, from all on-line units will be
offered at incremental cost. The calculation methodology along with relevant
data pertaining to the calculation will be shared with all Owners.

 

b.

On-line units are anticipated to be made available to SPP for market dispatch.
Exceptions will be during unit startups/shutdowns and any other activity that
requires a unit to remain at a stable generating level.

 

c.

Each Owner acknowledges that the ability to jointly offer unscheduled Energy
from an on-line unit into the SPP market is necessary to achieve reasonably
economic operation of the units, and that the Owner would not participate in the
purchase of the plant at the offered price in the absence of reasonable
expectations that the O&O Agreement will provide for such offers. The Owners
agree to develop mutually agreeable procedures for the determination of
incremental cost and development of an offer curve in a manner that maximizes
the value of the units to all Owners collectively and provides that the
Operations Manager will submit any offer curve on behalf of all Owners.

 

d.

The Owners agree to determine, no later than one year after the Effective Date,
whether to settle the plant with SPP as one unit or multiple units.

 

e.

In the event the Owners are unable to reach a mutually satisfactory agreement
for either of items (c) or (d) above, the Owners agree to submit the matter to
binding arbitration in accordance with the dispute resolution procedures in the
O&O Agreement, but with the arbitrator limited to selecting one of the proposals
offered by an Owner.

 

f.

The table below shows the anticipated ratios that will be applied and the
instances when they are applicable. Specifics around allocations of SPP EIS
Market activity still need to be investigated to ensure all parties are being
properly allocated all SPP EIS Market charges associated with operation of the
Redbud Generating Facility.

Ratio Name

When Applied

Schedule Ratio

Purchase EIS

Offered Ratio

Selling EIS

Ownership Ratio

1.       Plant generates more than stated Plant Capability for an hour

2.       Uninstructed Deviation

3.       Revenue Neutrality Uplift

4.       Miscellaneous Charge Type

Schedule Ratio:  Is the ratio of an Owner’s Scheduled MWs divided by the total
Scheduled MW.  Owner 1’s Scheduled Ratio:

[img1.gif]

 

 

 

F-3

 

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Offered Ratio:  Is the ratio of an Owner’s Unallocated Portion divided by the
total Unallocated Portion. Owner 1’s Offered Ratio is equal to:

[img2.gif]

Unallocated Portion: Any portion of a Counterparty’s Pro that has not been
scheduled as defined or allocated to an Ancillary Service. Owner 1’s Unallocated
Portion is equal to:

[img3.gif]

 

g.

Billing and Invoicing

 

i.

The Initial SPP Settlement Statement for the Operating Day will be received by
end of business seven Business Days after the Operating Day.

 

ii.

Every Thursday by 0800, OG&E will download the official SPP invoice that rolls
up the previous Wednesday through Tuesday Settlement Days. OG&E intends to send
each Owner an invoice reflecting its portion of the charges/credits for the
Redbud Generating Facility on the following Business Day. Similar to the SPP
calendar regarding payments and credits, OG&E requires payments to be received
by end of business on the Wednesday following the invoice and will make payments
to the Owners by end of business on the second Friday following the invoice. For
example:

SPP Invoice Date:

Thursday, March 6, 2008

OMPA to Receive Invoice:

Friday, March 7, 2008

OMPA makes any Payments Due to OG&E:

Tuesday, March 12, 2008

OG&E makes any Payments Due to SPP:

Wednesday, March 13, 2008

OG&E receives any Credits from SPP:

Friday, March 15, 2008

OMPA receives any Credits Due from OG&E:

Monday, March 18, 2008

 

h.

OG&E will submit the resource plan, offer curves, and Ancillary Service Plans on
behalf of all Owners.

 

i.

OG&E will file disputes associated with the Redbud Generating Facility on behalf
of all Owners. OG&E will file a dispute when the difference between the SPP
Settlement Statement and OG&E’s internal shadow settlement is $500 or greater
for any hourly SPP EIS charge type. The thresholds will be reviewed at least
quarterly to determine if they are appropriate. SPP dictates that a party can
file a dispute up to 90 days after the initial settlement date, but OG&E intends
on filing no later than 14 Business Days after the settlement date.

5.

Other

 

a.

Utilization of Ancillary Services will be available to all Owners to the extent
reasonable by the SPP Tariff and SPP Systems. Each Owner may nominate, up to
their Ownership Interest, any amount of their available capability for Ancillary
Services. Owners shall identify the amount of Ancillary Services in their daily

 

 

F-4

 

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nominations to the Operations Manager, who has the option to supply the
Ancillary Services from an alternate resource.

 

b.

Feasibility of all four units being equipped with automatic generation control
capability will be examined and a recommendation will be made to the Executive
Committee.

 

c.

The Operations Manager will provide all readily available operating information
to all Owners.

 

d.

The Operations Manager will cooperate with any Owner(s) wanting to install RTUs
or other acceptable output measurement for all four units. The cost of such
equipment and installation shall be at the responsibility of requesting Owners,
who will have exclusive rights to the information.

 

e.

The Operations Manager has the option to supply any Owner’s Energy schedule
associated with the Redbud Generating Facility from alternate resources when
applicable, provided that such alternative arrangements do not have a
significant adverse impact on the Owner as compared to the supply of Energy from
one of the units at the Redbud Generating Facility.

 

f.

The Energy replacement costs associated with reserve sharing for the Redbud
Generating Facility will be passed through at cost without escalation to all
Owners. This includes all responding companies including OG&E.

 

 

F-5

 

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Exhibit G

Form of Agreement of Representation

 

[Date]

Grand River Dam Authority

226 Dwain Willis Avenue

Vinita, Oklahoma 74301-4654

Attn:____________________

Facsimile No.: (918) ___-____

 

Oklahoma Gas and Electric Company

321 North Harvey Avenue

Oklahoma City, Oklahoma 73102-3405

Attn:____________________

Facsimile No.: (405) 553-____

 

Oklahoma Municipal Power Authority

2300 East Second Street

Edmond, Oklahoma 73034-6703

Attn: General Manager

Facsimile No.: (405) 359-1071

 

Re: Agreement of Representation – EPA Allowance Programs

Ladies and Gentlemen:

Reference is made to that certain Redbud Generating Facility Ownership and
Operating Agreement dated as of January 21, 2008 (“O&O Agreement”), by and among
Grand River Dam Authority, a governmental agency of the State of Oklahoma and a
body politic and corporate (“GRDA”), Oklahoma Gas and Electric Company, an
Oklahoma corporation (“OG&E”), and Oklahoma Municipal Power Authority, a
governmental agency of the State of Oklahoma and a body politic and corporate
(OMPA”). Capitalized terms used in this letter agreement (“Agreement”) and not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the O&O Agreement.

Pursuant to Section 6.05 of the O&O Agreement, the Owners have agreed (among
other things) to execute an Agreement of Representation, substantially in the
form of Exhibit G to the O&O Agreement, to facilitate the participation of the
Redbud Generating Facility in the allowance trading programs established under
the Acid Rain Program. This Agreement has been executed as of the date first
written above pursuant to said agreement of the Owners under Section 6.05 of the
O&O Agreement. The representation authorized under this Agreement relates to
allowances and accounts associated with the operation of only the Redbud
Generating Facility, and nothing in this Agreement permits the establishment of,
or the interaction with,

 

 

G-1

 

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accounts of the Owners that are associated with other generating facilities,
including EPA General Accounts.

Pursuant to regulations adopted by the U.S. Environmental Protection Agency
(“EPA”) to implement the Clean Air Act (“Act”), allowance accounts must be
established for the purpose of holding and transferring nitrogen oxide (NOx),
sulfur dioxide (SO2), and mercury (Hg) emission allowances allocated to affected
sources, and general allowance accounts also may be established. The Operations
Manager shall establish accounts for the NOx, SO2 and Hg allowance programs for
the Redbud Generating Facility (“Accounts”). Employees of the Operations Manager
will serve as the designated representative and/or authorized account
representative (“Representative”) and the alternate (“Alternate”) for the
Accounts on the terms and subject to the conditions of this Agreement. Each
Owner shall establish its own NOx, SO2 and Hg allowance accounts for
dsitribution of their Pro Rata Shares of NOx, SO2 and Hg allowances allocated to
the Redbud Generating Facility.

Accordingly, [John Wendling] is authorized to act as the Representative, and
[David Branecky] is authorized to act as the Alternate for the existing
Accounts, and to establish such additional emission allowance accounts as may be
necessary to fulfill their duties under this Agreement. Accounts may be
established in the name of any Owner, or in the name of the Operations Manager
for the benefit of any Owner.

The Representative and Alternate shall commence their duties under this
Agreement as of the Closing Date. The Alternate may act in lieu of the
Representative at any time or from time to time, as mutually determined by the
Representative and Alternate, subject only to the limitations set forth below
which apply in the event the Representative or Alternate resigns or is
discharged or otherwise incapacitated. In acting in lieu of the Representative,
the Alternate will be subject to the terms and conditions of this Agreement as
if he were the Representative. In addition, the Representative and Alternate
shall be authorized, if permitted under the relevant regulations and emission
programs, to name one or more employees or agents of the Operations Manager as
their agents (“Agents”) for the purposes of discharging some or all of their
rights and responsibilities regarding the Accounts. Changes in the appointments
of Agents by the Representative and Alternate shall be accompanied by written
notice, furnished by the Operations Manager in accordance with Section 17.04 of
the O&O Agreement, to each Owner.

If the Representative or his Agents are temporarily absent, unavailable or
otherwise unable to perform their duties and responsibilities under the
applicable allowance program and this Agreement at any time, the Representative
shall notify the Alternate of the unavailability and the Alternate and his
Agents shall assume the duties and responsibilities of the Representative under
the applicable regulations and this Agreement without formal notice or
communication to or from any Owner or the Operations Manager.

If at any time the Representative resigns or is discharged or otherwise
incapacitated, the Operations Manager shall notify the Alternate through a
written notice, signed by an officer of the Operations Manager, and authorize
the Alternate and his Agents to assume the duties of the Representative. In such
event, neither the Representative nor his Agents shall be authorized to perform
any duties related to the Accounts, unless and until a written notice, signed by
an officer of the Operations Manager, has been issued authorizing the resumption
of duties by the

 

 

G-2

 

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Representative and his Agents. If at any time the Alternate resigns or is
discharged or otherwise incapacitated, the Operations Manager shall notify the
Representative through a written notice, signed by an officer of the Operations
Manager. In such event, neither the Alternate nor his Agents shall be authorized
to perform any duties related to the Accounts, unless and until a written
notice, signed by an officer of the Operations Manager, has been issued
authorizing the resumption of duties by the Alternate and his Agents. A copy of
each written notice issued by the Operations Manager affecting the authority of
the Representative or the Alternate and their respective Agents shall be
delivered to the Representative, the Alternate, their Agents, and each Owner.

During the performance of their duties hereunder, the Representative and
Alternate will continue to be employees of OG&E and will be deemed to be
employees of OG&E in its capacity as the Operations Manager, and none of the
Representative, Alternate or any of their respective Agents will be construed at
any time to be an employee of OG&E in its capacity as an Owner or of any other
Owner. Except as provided elsewhere in this Agreement, all salaries, benefits,
expenses, and other costs associated with their activities hereunder will be the
responsibility of the Operations Manager, subject to reimbursement by each Owner
in accordance with the O&O Agreement. The Operations Manager shall provide
appropriate support to the Representative, Alternate and their respective Agents
to allow them to carry out their duties hereunder.

The Operations Manager may change the Representative or the Alternate by
submitting a new agreement for the approval of the Owners, which shall not be
unreasonably withheld, and preparing and filing a new certificate of
representation with EPA. If individual employees of the Operations Manager
acting as the Representative, Alternate or an Agent leave the employment of the
Operations Manager their authority to act as Representative, Alternate or Agent,
as the case may be, shall cease immediately upon termination of employment. If
the Operations Manager engages any individual or other Person to act as an Agent
of the Representative or Alternate, the authority of such individual or other
Person to act as an Agent of the Representative or Alternate shall cease
immediately upon the termination of their engagement by the Operations Manager
or upon the termination of employment of the applicable Representative or
Alternate.

The duties of the Representative, Alternate and their respective Agents shall be
those specified in the Clean Air Act or other applicable federal or state law,
as implemented by the applicable regulations. The Representative and Alternate
shall represent and legally bind each Owner to the extent specified by
applicable law and regulations in all matters pertaining to the relevant
emissions program Accounts. The Agents of the Representative and Alternate shall
represent and legally bind each Owner to the extent specified by applicable law
and regulations, but only with respect to those matters pertaining to the
relevant emissions program that are delegated to them by the Representative and
the Alternate, as applicable.

The Representative shall use the electronic account management system (CAMD
Business System) established by the EPA for conducting all transactions in
allowances under this Agreement and shall cause the automatic notification via
electronic mail of one representative of each Owner. Each Owner will provide the
Representative with the name and e-mail address of the individual to whom such
notification shall be sent.

 

 

G-3

 

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Each Owner hereby grants all necessary authority to the Representative,
Alternate and their respective Agents to carry out the duties and
responsibilities of said positions. Each Owner agrees to be fully bound by and
liable for any actions, inactions or submissions made by the Representative,
Alternate and their Agents acting in their respective capacities as such, and
further agrees to be bound by any order issued to the Representative, Alternate
or any Agent by the EPA or any other federal or state regulatory agency or a
court having appropriate jurisdiction over its Accounts. Notwithstanding the
foregoing, each Owner retains the right to contest the validity of any such
order in accordance with law.

The term of this Agreement shall commence on the Closing Date and shall continue
until the expiration or termination of the O&O Agreement, except to the extent
that this Agreement is terminated earlier or the Operations Manager is removed,
resigns or is deemed to have resigned in accordance with Section 6.07 of the O&O
Agreement. This Agreement may be terminated at any time, as between any Owner
and the Operations Manager, by the submission of thirty days advance written
notice by such Owner or the Operations Manager to the other, with a copy to the
other parties. This Agreement is also subject to termination at any time by
mutual assent of the parties. The Representative, Alternate and their respective
Agents shall continue to act subject to the terms and conditions of this
Agreement until it is amended or replaced and a complete certificate of
representation has been filed with EPA for a replacement Representative or
Alternate.

The Operations Manager shall not be liable to any Owner, whether in contract,
tort, negligence, strict liability or otherwise, for costs, damages, fines or
penalties associated with any action or failure to act of the Representative or
the Alternate or their respective Agents under this Agreement, except for any
costs, damages, fines or penalties caused by the willful misconduct or gross
negligence of the Representative or the Alternate or their respective Agents,
which materially affects such Owner.

This Agreement shall be governed by, and construed, interpreted and enforced in
accordance with, the substantive Laws of the State of Oklahoma without reference
to any principles of conflicts of Laws thereof.

All notices, requests, claims, demands and other communications required
hereunder or served, given or made in connection with this Agreement shall be
served shall be given or made in accordance with Section 17.04 of the O&O
Agreement.

None of the promises, rights or obligations contained in this Agreement shall
inure to the benefit of any Person other than the parties hereto and their
respective successors and permitted assigns. No Owner may assign or otherwise
transfer in whole or in part (whether by operation of Law or otherwise), this
Agreement or any right, interest or obligation of such Owner hereunder without
the prior written consent of the Operations Manager, and any attempt to do so
shall be null and void, provided that, to the extent any Owner assigns or
otherwise transfers all or any portion of its Ownership Interest in accordance
with the O&O Agreement, such Owner may assign or otherwise transfer, without the
prior written consent of the Operations Manager, all or a corresponding portion
of its rights, interests and obligations hereunder together with the Ownership
Interest (or portion thereof) so assigned or transferred. The Operations Manager
may

 

 

G-4

 

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not assign or otherwise transfer this Agreement or any right, interest or
obligation of the Operations Manager hereunder without the prior written consent
of all other parties hereto.

This Agreement is delivered pursuant to and is subject to the terms of the O&O
Agreement. In the event that any provision of this Agreement is construed to
conflict with any provision of the O&O Agreement, the provisions of the O&O
Agreement shall be deemed controlling.

This Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same instrument,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.

If the foregoing is acceptable to you, please so confirm by executing duplicate
copies of this Agreement at the place designated for your signature and
returning one of them so executed to us, thereby constituting this letter a
binding agreement among the Owners and the Operations Manager.

OKLAHOMA GAS AND ELECTRIC COMPANY, as Operations Manager

By: ______________________________

[OFFICER]

[TITLE]

Confirmed and accepted as of the date first written above by:

 

 

OKLAHOMA GAS AND ELECTRIC COMPANY, as Owner

By: ______________________________

[OFFICER]

[TITLE]

GRAND RIVER DAM AUTHORITY, as Owner

By: ______________________________

[OFFICER]

[TITLE]

OKLAHOMA MUNICIPAL POWER AUTHORITY, as Owner

By: ______________________________

[OFFICER]

[TITLE]

 

 

 

G-5