**EXHIBIT 10.83**

 
| NewCorp Resources  Electric Cooperative, Inc. |   | Substitute Sheet  No. 1 |
|-----------------------------------------------|--------|-------------------------|
| Service Agreement No. 2                       |   |                    |

 

**MASTER OPERATION, MAINTENANCE ANDADMINISTRATIVE SERVICES AGREEMENT**

 

This MASTER OPERATION,MAINTENANCE AND ADMINISTRATIVE SERVICES AGREEMENT (this “Agreement”) isentered into as of September 29, 2003, by and between CAP ROCK ENERGYCORPORATION**,**a Texas corporation (the “Services Provider”), andNEWCORP RESOURCES ELECTRIC COOPERATIVE, INC., an electric cooperativecorporation (the “Owner”).  TheServices Provider and the Owner are each referred to herein individually as a “Party”and, collectively, as the “Parties”.

 

**RECITALS**

 

WHEREAS, the Owner owns a305.9 mile electric transmission system and related assets located in the WestTexas area and within the Southwest Power Pool service territory (the “System”);and

 

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

 

NOW, THEREFORE, inconsideration of the foregoing premises and the mutual covenants and agreementscontained herein and other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the Parties hereby agree asfollows:

 

1.                                     Definitions.  Capitalized terms used in this Agreementwithout other definition shall have the meanings specified in this Section 1,unless expressly stated otherwise.  Thesingular shall include the plural and the masculine shall include the feminineand neuter, and vice versa.  The terms“include”, “includes” and “including” shall mean “including, but not limitedto”, unless stated otherwise.

 

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

 

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

 

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

 

“ApplicableLaw” means any applicable laws,ordinances, rules, codes, regulations, permits, licenses and legal requirementsof any kind issued by Governmental Authorities to the extent they apply to theSystem or the Services.

 

 
| Issued by:                           | Lee D. Atkins | ,      | Secretary / Treasurer | Effective on:  October 1, 2003 |
|--------------------------------------|---------------|--------|-----------------------|-------------------------------------|
|                                 | *Name*        |   | *Title*               |
|                                 |          |   |
| Issued on:   September 29, 2003 |

 

----

 

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

 

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

 

“EmergencySituation” means any event or circumstance that requires the taking ofimmediate measures to prevent or mitigate a situation endangering life orproperty.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

----

 

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

 

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

 

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

 

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

 

“SubordinatedLoans” has the meaning set forth in Section 7.

 

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

 

2.                                     Provisionof Services.  The Owner herebyengages the Services Provider to provide certain corporate administrative,insurance, tax, accounting, information technology, legal, management andconsulting services (collective, the “Administrative Services”) andcertain engineering, construction, facility studies, facility upgrade andreplacement services, planning, operation, and maintenance, and other supportservices (collective, the “Variable Services”), in case morespecifically set forth and described in Exhibit A hereto (collectively,the “Services”) and the Services Provider hereby accepts such engagementand agrees to render such Services, in each case, effective as of the date ofthis Agreement.  The Parties agree that Exhibit A(which shall be incorporated by reference into this Agreement) may be amendedfrom time to time by the mutual agreement of the Parties.  In addition, as and when requested by theOwner, the Services Provider shall use commercially reasonable efforts toprovide any other services requested by the Owner in connection with theownership, operation and/or maintenance of the System.

 

3.                                     Mannerof Performance.

 

(a)                                  TheServices Provider shall perform, or cause to be performed, the Services inaccordance with (i) Prudent Utility Practices, (ii) the applicable provisionsof all Facility Agreements as they apply to the Services, (iii) all ApplicableLaws, (iv) applicable terms of applicable insurance policies, and so asnot to void any

 

3

----

 

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

 

(b)                                 TheServices Provider may subcontract some or all of the Services.  For purposes of this Agreement, nocontractual relationship will exist between the Owner and any suchsubcontractor or any affiliate of the Services Provider.  In all cases under this subsection (b), theServices Provider will remain responsible for the performance of itsobligations under this Agreement.  TheServices Provider represents and warrants to the Owner that the ServicesProvider shall employ only experienced services personnel and/or qualifiedsubcontractors, that have the skill and capacity necessary to perform theServices.

 

(c)                                  TheServices Provider will require all persons performing the Services to complywith all generally applicable policies, procedures and directives of theServices Provider, including security, environmental protection, employeehealth and safety, sexual harassment, access, use of alcohol and controlledsubstances, and similar activities.

 

4.                                     OwnerResponsibilities.

 

(a)                                  TheOwner agrees to cooperate with, and to assist and support, the ServicesProvider in connection with the performance of the Services.

 

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

 

5.                                     Compensation.

 

(a)                                  Inconsideration for the Services to be provided by the Services Provider pursuantto this Agreement, subject to the limitations set forth in this Section 5 andSections 6 and 7 below, the Owner agrees to pay the Services Provider thefollowing amounts (collectively, the “Services Fees”):

 

(i)                                     allverifiable direct and indirect reasonable costs by personnel of the ServicesProvider (including, but not limited to costs of labor, benefits, materials,storage and transportation plus a verifiable allocation of overhead costscalculated under the same methodology as is employed by the Services Providerfrom time to time in connection with the provision of services for affiliatedentities and business units) in connection with the performance of the VariableServices;

 

4

----

 

(ii)                                  reimbursementfor all Variable Services performed by subcontractors based on the reasonablecosts invoiced by such subcontractors (without any mark-up or adder) other thansubcontracts which the Owner elects to pay directly (collectively, the amountsin clause (i) and (ii) are referred to as the “Reimbursable Costs”); and

 

(iii)                               anadministration fee equal to equal to the amount agreed to in the Annual Budgetfor payment of all Administrative Services (the “Administrative Fee”).

 

 

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

 

(c)                                  Ona monthly basis, the Services Provider shall submit to the Owner a detailed,itemized invoice (an “Invoice”) setting forth the Variable Servicesprovided to the Owner during the previous month, the applicable monthly portionof the Administrative Fee, and any outstanding reimbursable expenses or chargesincurred by the Services Provider under this Agreement and the amount payableby the Owner for such Services and expenses or charges pursuant to thisAgreement.  The Owner shall pay allundisputed amounts owing in respect of each Invoice within ten (10) days ofreceipt thereof.

 

(d)                                 Anyamount not paid by the Owner when due under this Agreement (except ascontemplated in clause (e) and Section 7 below) shall bear interest at a rateequal to the prime rate, as reported in the Wall Street Journal on the lastbusiness day of the month in which the applicable Invoice was received, plustwo (2) percent per annum (or, if lower, the highest rate permitted byapplicable law) accrued from the due date of such payment until such payment isactually received by the Services Provider.

 

(e)                                  Notwithstandinganything to the contrary in this Agreement, the Services Provider hereby waivesthe right to receive payment for or reimbursement by the Owner and agrees thatit shall not be entitled to collect from the Owner any Services Fees forcharges associated with any of the Services, or portions thereof, that the FERCdetermines not to be allocable by the Owner to its transmission customers.

 

6.                                     BudgetingProcess.

 

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

 

5

----

 

(b)                                 Atleast sixty (60) days prior to the end of each calendar year, the ServicesProvider shall prepare and submit to the Owner for approval a proposed annualoperating plan for the following calendar year in substantially the form of ExhibitB.

 

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

 

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

 

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

 

(ii)                                  thedisagreement in respect of the unresolved portions of the Annual Budget shallbe resolved in accordance with the provisions of Section 15 and, pending theresolutions of such dispute, the applicable portions of the Annual Budget forthe prior calendar year with respect to such unresolved portions shall remaineffective.

 

7.                                       Deferralof Payment; Subordinated Loans.  TheServices Provider hereby agrees to: (a) defer receipt of payment for any Reimbursable Costs forServices performed in connection with (i) the repair or replacement ofwires, poles, and related System assets which exceed the amounts budgetedtherefor in the Annual Budget and (ii) Emergency Situations, in each caseto the extent such Reimbursable Costs exceed the amounts made available to theOwner under its applicable financing documents after taking into account anyapplicable working capital funds, maintenance reserves and insurance proceeds(collectively, the “Deferred Reimbursable Costs”) and (b) pay anysubcontractor or third party owed any such Deferred Reimbursable Costs.  The Services Provider and Owner hereby agreethat the Owner’s failure to pay for the Deferred Reimbursable Costs, except asset forth in the immediately succeeding sentence, shall not constitute amaterial breach of this Agreement.  AllDeferred Reimbursable Costs shall be treated as unsecured loans made by theServices Provider to the Owner which shall bear interest at a rate of 12% perannum from the date of the applicable Invoice until paid in full (such loans,the “Subordinated Loans”).  Theunsecured loans made by the Services Provider in respect of DeferredReimbursable Costs shall be fully subordinated in right of payment to any loansmade by the Owner’s Lender and shall have a maturity date of September 30,2018;

 

6

----

 

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

 

8.                                     Term.

 

(a)                                  Theterm of this Agreement shall commence as of the date hereof and shall continuefor a period of twenty (20) years, unless earlier terminated pursuant to theterms of this Agreement.

 

(b)                                 ThisAgreement, or the provision of any portion of the Services by the ServicesProvider hereunder, may be terminated at any time upon the mutual writtenconsent of the Services Provider and the Owner (with the concurrence of theOwner’s Lender if applicable).

 

(c)                                  EitherParty may, by written notice to the other, terminate this Agreement or suspendits further performance without terminating this Agreement if the other Partymaterially breaches any of its material obligations under this Agreement andfails to cure such breach within thirty (30) days following a final and bindingdetermination, by mutual agreement (with the concurrence of the Owner’sLender), arbitration or final, non-appealable judgment of a court of competentjurisdiction, that such breach has occurred (or, if the breach is such that itscure is possible but will take longer than thirty (30) days, fails to commenceto cure such breach within such thirty (30) day period and proceed diligentlytherewith until cured), and (ii) the Services Provider may terminate thisAgreement or suspend its further performance without terminating this Agreementif the Owner (subject to the limitations in Section (7)) fails to pay anyamount due and owing to the Services Provider hereunder within thirty (30) daysfollowing receipt of written notice of non-payment from the Services Provider.

 

(d)                                 Uponexpiration or termination of this Agreement for any reason, the Owner shallpromptly pay to the Services Provider all amounts owing to the ServicesProvider for the Services performed or reimbursable expenses incurred asprovided herein prior to such expiration or termination or, if terminated bythe Owner.

 

(e)                                  Uponexpiration or termination of this Agreement, the Services shall terminate andno Party shall have any further duty or obligation hereunder; provided,however, that the confidentiality and indemnity provisions set forth asSection 11 and Section 12 of this Agreement shall survive the termination orexpiration of this Agreement.

 

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

 

7

----

 

10.                               Accessto Records.  The Owner, directly orthrough authorized representatives, shall at all times during reasonablebusiness hours have access to and the right to audit, inspect and make copiesof any and all books, records and accounts, invoices, contracts, canceledchecks, payrolls and other documents and papers of every kind held by theServices Provider pertaining to the performance of the Services and allcharges, disbursements and expenses made or incurred by the Services Providerin performing the Services and all information related to the calculation ofoverhead costs by the Services Provider.

 

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

 

12.                               Confidentiality.  Each Party acknowledges that its performanceunder this Agreement will necessarily involve access by the other Party tocertain information regarding the organization, personnel, business activities,policies, finances, marketing plans, projected revenues, rights, obligations,liabilities and strategies of the other Party. Each Party acknowledges that all such information is confidential and/orproprietary to the other Party and agrees that, during the term of thisAgreement and all times thereafter, it will not disclose to any unauthorizedparty any such information.  Therestrictions of this Agreement shall not be applicable to any informationwhich: (i) is or becomes known to the public other than as a result of a breachof this provision or (ii) is disclosed pursuant to the requirements ofApplicable Law.

 

8

----

 

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

 

14.                               LimitedWarranty.  The Services Providerwill perform the Services (i) in accordance with all performance standards setforth in Section 3, and (ii) with at least the same degree of care, skill anddiligence with which it currently performs or has in the past performed similarservices for or with respect to the Owner.

 

15.                               DisputeResolution.

 

(a)                                  EachParty shall, from time to time, designate a senior officer (a “DisputeRepresentative”) who shall have the authority to represent such Party andresolve and settle any dispute arising under or in connection with thisAgreement or the Services performed hereunder. The Parties hereto agree to attempt to resolve all such disputesequitably and in a good faith manner (unless, in the reasonable judgment of theaffected Party, the immediate pursuit of judicial equitable relief is necessaryto prevent or mitigate a risk of irreparable harm or damage).

 

(b)                                 Ifany dispute arising under or in connection with this Agreement or the Servicesperformed hereunder is not resolved pursuant to Section 15(a) within thirty(30) days from the date on which such dispute is submitted to the DisputeRepresentatives, such dispute shall, if the Parties so agree, be submitted toand resolved by binding arbitration, or in the absence of such agreement eitherParty may pursue any and all remedies in respect of such dispute available tosuch Party at law or in equity.  Anyarbitration proceeding arising under or in connection with this Agreement orthe Services performed hereunder shall be conducted pursuant to the terms ofthe Federal Arbitration Act and (except as otherwise specified herein) theCommercial Arbitration Rules of the American Arbitration Association in effectat the time the arbitration is commenced. The venue for the arbitration shall be Midland, Texas.  The arbitration shall be conducted before apanel of three (3) arbitrators, selected as follows:  (i) each Party shall specify one arbitrator within ten (10) daysof the end of the thirty (30) day period for dispute resolution under Section15(a), and (ii) a neutral person shall be selected through the American ArbitrationAssociation’s arbitrator selection procedures to serve as the thirdarbitrator.  The arbitrator designatedby any Party need not be neutral.  Inthe event that any person fails or refuses timely to name his arbitrator withinthe time specified herein , the American Arbitration Association shall(immediately upon notice from the other Party) appoint an arbitrator for theperson or entity that has failed to appoint its arbitrator.  To the extent practical, the arbitratorsshall schedule the hearing to commence within sixty (60) days after thearbitrators have been impaneled.  Amajority of the panel shall render an award or other decision within ten (10)days of the completion of the hearing, which award or decision shall be final,binding and conclusive upon the Parties hereto.

 

9

----

 

Each Party shall have theright to have an award or decision of such panel enforced by any court ofcompetent jurisdiction.

 

16.                               ExcusableDelay.  In no event shall the ServicesProvider be deemed to be in default of any provision of this Agreement orliable for delays or interruptions in the performance of Services to the extentresulting from or arising out of or in connection with acts or events beyondthe reasonable control of the Services Provider; provided, however, thatthe Services Provider shall exercise commercially reasonable efforts tominimize the extent of any delays or interruptions in performance, and providedfurther, that the excused delay or interruption shall last only as long asthe acts or events beyond the control of the Services Provider require.  Such acts or events include withoutlimitation acts of God, civil or military authority, civil disturbance, war,strikes, fires, storms, other catastrophes, computer system failures, acts ofthird parties, and other events of similar or dissimilar nature beyond theServices Provider’s reasonable control.

 

17.                               IndependentContractor.  The Parties heretoacknowledge and agree that in the performance of their respective duties andobligations hereunder they are acting as independent contractors of each other.

 

18.                               NoAssignment Absent Consent.

 

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

 

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

 

19.                               CompleteAgreement.  This Agreementconstitutes the complete understanding between the Parties with respect to thesubject matter of this Agreement.

 

20.                               Amendment.  No modification or amendment of thisAgreement shall be binding upon any Party unless in writing and signed by theParties.

 

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

 

10

----

 

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

 

(a)                                  Ifto the Services Provider:

 

Cap Rock EnergyCorporation500 West Wall, Suite 400Midland, TX  79701Phone: (432) 684-0311Fax:  (432) 684-0333

 

Attn:  Ulen North, Executive Vice President

 

(b)                                 Ifto the Owner:

 

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

 

Attn:  David W. Pruitt, President

 

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

 

23.                               Severability.  In the event any portion of this Agreementshall be found by a court of competent jurisdiction to be unenforceable, thatportion of this Agreement will be null and void, and the remainder of thisAgreement will be binding on the Parties as if the unenforceable provisions hadnever been contained herein.

 

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

 

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

 

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

 

11

----

 

27.                               FurtherAssurances.  Upon the reasonablerequest of the other Party, each Party hereto agrees to take any and all actionsnecessary or appropriate to give effect to the terms set forth in thisAgreement.

 

12

----

 
| NewCorp Resources  Electric Cooperative, Inc. |   | Substitute Sheet  No. 13 |
|-----------------------------------------------|--------|--------------------------|
| Service Agreement No. 2                       |   |                     |

 

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

 
|   | CAP ROCK ENERGY  CORPORATION,                   |
|--------|-------------------------------------------------|
|   | a Texas corporation                             |
|   |
|   |
|   | By:                                             | /s/ ULEN NORTH,  JR. |   |
|   |                                            | Name:  ULEN  NORTH, JR. |
|   |                                            | Title:  Exec/VP |
|   |
|   |
|   | NEWCORP RESOURCES  ELECTRIC  COOPERATIVE, INC., |
|   | an electric cooperative  corporation            |
|   |
|   |
|   | By:                                             | /s/ LEE D. ATKINS |   |
|   | Name:  LEE D.  ATKINS                 |
|   | Title:  Secretary/Treasurer           |
|        |                                                 |  |  |  |  |  |

 

13

----

 

**EXHIBITA**

 

SCOPE OF THESERVICES

 

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

 

1.                                       AccountingServices.  Provision of (a)budgeting, financial reporting and cash management services, (b) accounting andauditing services, and (c) performance of such other accounting services as theOwner may reasonably request.

 

2.                                       TaxServices.  Provision of preparationand filing of all necessary tax returns for the Owner in connection with anindependent public accounting firm.

 

3.                                       ManagementServices.  Provision of services inrespect of the management of the assets of the Owner as the Owner mayreasonably request, including the administration of third party contractsbetween the Owner and other parties.

 

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

 

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

 

6.                                       Legal Services. Provision of legal services, including, but not limited to, (a)providing the Owner with legal counseling as to the Owner’s businessactivities, and initiating, maintaining and defending any claims,actions or proceedings to which the Owner is named as a party; (b) supervisingand monitoring Owner’s compliance with the terms and conditions of allcontracts under which Owner has any obligations or rights (except thisAgreement); and (c) advising or otherwise assisting the Owner with allregulatory matters including, but not limited to, assisting the Owner in itsdealings with governmental, semi-governmental, administrative, fiscal orjudicial bodies, departments, commissions, authorities, agencies or otherentities having jurisdiction or regulatory power over the Owner’s businessactivities.

 

7.                                       InsuranceServices.  Provision and maintenanceof all insurance required to be maintained by Owner pursuant to any agreementproviding financing for the assets of the Owner.

 

8.                                       OtherOverhead Services.  Provision ofsuch other administrative services, including utilities, office equipment andsupplies, postage, vending, recordkeeping, secretarial services and such otherservices as the Owner may reasonably request.

 

A-1

----

 

9.                                       CustomerServices.  Handling of all requestsfor transmission service, for transmission ancillary services, forinterconnections, and for facilities studies and system impact studies, orarranging for a qualified third party to provide such services in the mannerrequired by applicable laws and regulations.

 

10.                                 AdditionalAdministrative Services. Performance of such additional administrative services as the Owneridentifies from time to time as necessary for Owner to fully comply with alllegal requirements imposed on it as a transmission provider.

 

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

 

1.                                       Directionof all operations of the Facilities and taking any action necessary to providereliable service to all of Owner’s customers.

 

2.                                       Installationof system control and data acquisition equipment, communications equipment, andrelated appurtenances as required to provide telemetry and remote control ofthe Facilities.

 

3.                                       Performanceof inspections to determine the condition of the Facilities, to identify andlabel the Facilities in accordance with the Owner’s property and accountingcodes, and to determine the need for the maintenance of or improvements to theFacilities.

 

4.                                       Installationand maintenance of metering equipment, relaying equipment, and relatedappurtenances to the Facilities.

 

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

 

6.                                       Provisionof all needed maintenance of the Facilities and grounds, including themaintenance, replacement and testing of reclosers, and performing electricalrelay tests, operational checks, battery tests, and oil samples, annual weedspraying, sand removal and mowing of weeds.

 

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

 

A-2

----

 

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

 

9.                                       Utilizingdata provided by the SCADA system and other information and develop a “work plan” each year to project neededtransmission, substation and distribution system improvements, includinganalyzing historical loading data and projecting the load on the System.

 

10.                                 Coordinationof protective relays to limit the size of outages and to remove the fault onthe Facilities before equipment is damaged and review the device coordinationin the substations and distribution system and make changes necessary tooptimize the System protection.

 

11.                                 Installationand removal of mobile substations to serve the load on a substation sosubstation equipment can be de-energized and maintained without subjectingcustomers to outages.

 

12.                                 Maintenanceof transmission rights of way.  Themaintenance to be done will be dependent on the condition of the right of wayand agreements with the landowner.  CREpersonal will determine the need for work on the right of way, select acontractor to clear the right of way, and work with the landowner to accomplishthe work in a satisfactory manner.

 

13.                                 Performanceof annual inspections using an infrared camera to determine “hot” spots thatneed maintenance.

 

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

 

15.                                 Provisionof design and construction services with respect to substation and transmissionline facilities and, if applicable, managing outside subcontracts.

 

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

 

17.                                 Performanceall repairs and replacements needed to restore services in the event of forcedoutages and to repair storm and other damage to the Facilities.

 

A-3

----

 

**EXHIBITB**

 

INITIAL ANNUALBUDGET

 

[To be attached]

 

B-1

----