LIMITED LIABILITY COMPANY AGREEMENT OF GRIDAMERICA LLC A Delaware Limited Liability Company Dated: October 31, 2002

Section 4.4.            Capital Contributions After the Effective Date.  Subject to Section 3.1(d), the Managing Member (i) may, from time to time in its discretion, accept from an existing Member or a proposed new Member a Capital Contribution in exchange for Units consisting of cash, Transmission Facilities and/or other assets and (ii) if a Capital Contribution is being made pursuant to the Put Right contained in Article V of the Master Agreement, shall, from time to time, accept from an existing Member or a proposed new Member a Capital Contribution consisting primarily of Transmission Facilities over which the Company exercises Functional Control. Any such Capital Contribution must have a Fair Market Value not less than the Fair Market Value of any consideration to be paid by the Company to such Person, including the Units to be issued to such Person. In connection with Capital Contributions of Transmission Facilities by the Managing Member or any Affiliate of the Managing Member (and, in the case of the Initial Member, by any Affiliated Investor), the Members, other than the Managing Member and its Affiliates, shall represent the interests of the Company.

Section 4.5.            No Other Required Capital Contributions.  Unless it agrees otherwise and except as set forth in Sections 4.1 and 4.2, no Member shall be obligated to make any additional Capital Contributions to the Company.

Section 4.6.            Return of Capital Contributions.  No Member shall be entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is not a liability of the Company or of any Member. A Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return any Member's Capital Contributions.

Section 4.7.            Capital Accounts. (a)                A Capital Account shall be established and maintained for each Member. Each Member's Capital Account (i) shall be increased by (A) the amount of money contributed by that Member to the Company, (B) the Book Value of property contributed by that Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Code Section 752) and (C) allocations to that Member of Profits and any items of income or gain allocated to such Member pursuant to the Regulatory Allocations and (ii) shall be decreased by (A) the amount of money distributed to that Member by the Company, (B) the Book Value of property distributed to that Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Code Section 752) and (C) allocations to that Member of Losses and any items of loss or deduction allocated to such Member pursuant to the Regulatory Allocations. A Member that has more than one Unit shall have a single Capital Account that reflects all such Units, regardless of the class of Units owned by such Member and regardless of the time or manner in which such Units were acquired. Upon the disposition of any Units, the Capital Account of the disposing Member that is attributable to such Units shall carry over to the assignee in accordance with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(1).

(b)               The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Treasury Regulations. In the event the Managing Member shall determine that it is necessary to modify the manner in which the Capital Accounts, or any debits or credits thereto, are computed in order to comply with such Treasury Regulations, the Managing Member may make such modification; provided, however, that (i) it is not likely to have a material effect on the amounts distributed to any Member pursuant to Section 5.6(d) upon the liquidation of the Company and (ii) prior to making any such modification (A) the Managing Member obtains the written consent of all Members that may be reasonably likely to be adversely affected by such modification or (B) if such consent or consents cannot be obtained, the Managing Member obtains a tax opinion from a nationally recognized tax counsel with expertise in partnership tax matters, which counsel is reasonably acceptable to the Members holding a majority in interest of the Percentage Interests, to the effect that the proposed modifications of the Managing Member are necessary to comply with the Treasury Regulations. The Managing Member also shall be entitled to make, subject to the foregoing proviso, (i) any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company's balance sheet, as computed for book purposes, in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) any appropriate modifications in the event unanticipated events (for example, the acquisition by the Company of oil or gas properties) might otherwise cause this Agreement not to comply with Treasury Regulations Section 1.704-1(b).

Section 4.8.            Units Issued In Respect of Capital Contributions.  A Member that makes Capital Contributions shall receive Units having a Fair Market Value equal to the amount of cash or the Fair Market Value of any other property so contributed as a Capital Contribution.







Section 5.3.            Curative Allocations.  The Regulatory Allocations are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 5.3. Therefore, notwithstanding any other provision of this Article V (other than the Regulatory Allocations), the Managing Member shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines to be appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Partnership items were allocated pursuant to Section 5.1. In exercising its discretion under this Section 5.3, the Managing Member shall take into account future Regulatory Allocations under Sections 5.2(iii) and 5.2(iv) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 5.2(i) and 5.2(ii).

Section 5.4.            Income Tax Allocations.

(a)                All items of income, gain, loss and deduction for federal income tax purposes shall be allocated in the same manner as the corresponding item of Profits and Losses is allocated, except as provided in Section 5.4(b).

(b)               In accordance with Code Section 704(c) and the applicable Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Book Value. In the event that any property is adjusted pursuant to clause (ii) or (iv) of the definition of Book Value, subsequent allocations of income, gain, loss and deduction with respect to such property shall take account of any variation between the adjusted basis of such property for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) and the applicable Regulations thereunder. For purposes of such allocations, the Company shall elect the Designated Allocation Method, and in applying the Designated Allocation Method to depreciable property, the Company shall compute allocations using the method set forth on Schedule B. Subject to the provisions of Treasury Regulations Section 1.704-3, the Company may use different methods with respect to different items of property.

(c)                Any (i) recapture of depreciation deductions shall be allocated, in accordance with Treasury Regulations Section 1.1245-1(e), to the Members who received the benefit of such deductions (taking into account the effect of the Designated Allocation Method) and (ii) recapture of credits shall be allocated to the Members in accordance with Treasury Regulation Section 1.704-1(b)(4)(ii) unless the applicable Code section shall otherwise require.

(d)               Allocations pursuant to this Section 5.4 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.

Section 5.5.            Other Allocation Rules.

(a)                All items of income, gain, loss, deduction and credit allocable to an interest in the Company that may have been transferred shall be allocated between the transferor and the transferee in accordance with the interim closing of the books method as provided in the Treasury Regulations under Code Section 706(d).

(b)               The Members' proportionate shares of the "excess nonrecourse liabilities" of the Company, within the meaning of Treasury Regulation Section 1.752-3(a)(3), shall be determined in accordance with their Percentage Interests.

Section 5.6.            Distributions.

(a)                Distributions Upon Contributions of GridAmerica Transmission Facilities. The Managing Member shall cause the Company to make the distributions required by Section 4.2(a)(iii).

(b)               Regular Distributions. The Managing Member shall cause the Company to distribute simultaneously to each Member in proportion to its respective Percentage Interest, not less frequently than each calendar month, not less than eighty percent (80%) of Available Cash and (ii) the Managing Member may, in its discretion make additional distributions of Available Cash, but any such other distributions must be made simultaneously to each Member in proportion to its respective Percentage Interest.

(c)                Tax Distribution. As soon as practicable following the close of each taxable period, the Company shall, to the extent it has Available Cash therefor, distribute to each Member the excess, if any, of (i) the product of (A) the Cumulative Net Profits allocated to such Member, multiplied by (B) the highest marginal federal ordinary income tax rate applicable to corporations, over (ii) the amount of any distributions previously made pursuant to Section 5.6(b) and this Section 5.6(c) to such Member. In the event that adequate Available Cash does not exist to make the distributions required by this Section 5.6(b), the Company shall use commercially reasonable efforts to incur Debt in at least the amount necessary to make such distributions.

(d)               Distributions on Dissolution and Winding Up. Upon the dissolution and winding up of the Company, after adjusting the Capital Accounts for all distributions made under Sections 5.6(a), 5.6(b) and 5.6(c), and all allocations under this Article V, all available assets distributable to the Members as determined under Section 9.2(v) shall be distributed to the Members in accordance with their positive Capital Account balances.

Section 6.1.            Management of the Company.

(a)                Managing Member. The management of the Company shall be vested in the Member that is designated as the "Managing Member" in accordance with Sections 6.1(b) and 6.1(e). Except as otherwise expressly provided in this Agreement, the Managing Member shall have full power and authority to manage the business and affairs of the Company to the extent provided in the Act, and no other Member shall have any such management power and authority. The Managing Member shall use commercially reasonable efforts to employ or otherwise secure the services of Persons responsible for the management and system-wide operation of the Transmission Facilities owned and/or Functionally Controlled by the Company; provided, however, that except for Excluded Employees, such Persons shall be employees of the Managing Member or the Company and not employees of any Affiliate of the Managing Member (other than the Company or any subsidiary of the Managing Member or the Company).  Initially (x) ▇▇▇▇ ▇▇▇▇▇▇ of NGUSA will serve as chief executive officer of the Company and will devote significant time and attention to the business and affairs of the Company and (y) ▇▇▇▇ ▇▇▇▇▇ of NGUSA will serve as general counsel of the Company and will devote significant time and attention to the business and affairs of the Company, provided, that ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ may each also serve in a similar or different roles and capacities for other ITCs as well as for NGUSA and its Affiliates.  Subject to the right of the Initial Member to resign as Managing Member as permitted by Section 6.1(d), for so long as the Initial Member is the Managing Member, the Initial Member and its Affiliates will maintain Non-Market Participant status.

(b)               Designation and Removal of Managing Member. The Initial Member shall be the initial Managing Member. It shall serve for a term (the "Initial Term") that commences on the Effective Date and shall end upon the fifth anniversary of the Transmission Service Date (the "Scheduled Termination Date"); provided, however, that the Initial Member's term as Managing Member shall terminate prior to the Scheduled Termination Date or prior to the end of any Additional Term (i) if it (or any of its Affiliates that are required to maintain Non-Market Participant status) shall have been found by the Commission, in a final order of the Commission that is no longer subject to rehearing, to be a Market Participant or (ii) for Cause if a Super Majority of Transmission Owners shall have delivered written notice that they have elected to remove the Managing Member for Cause pursuant to this Agreement or a Super Majority of Transmission Owners shall have delivered written notice that they have elected to cause the Company to remove the Managing Member for "cause" pursuant to Section 4.4.3 of the Operation Agreement, which removal shall become effective on the date specified in, but no sooner than sixty (60) days after, delivery to the Managing Member, each GridAmerica Company and each NDTO of a written notice of such election to remove (each, an "Early Termination Event"). Notwithstanding anything in clause (ii) of the immediately proceeding sentence to the contrary, if the Managing Member disputes whether the grounds for removal exist by written notice to each GridAmerica Company and each NDTO delivered within thirty (30) days of receipt by the Managing Member of the election to remove the Managing Member, no Early Termination Event shall be deemed to occur until sixty (60) days after receipt of a final arbitration award pursuant to Section 10.3 finding that such grounds for removal exist. The initial term of any successor Managing Member (a "Successor Initial Term") shall be as set forth in the instrument appointing such successor Managing Member, but, in any event, shall terminate upon an Early Termination Event.

(c)                Automatic Extension of Managing Member's Term. Notwithstanding the expiration of the Initial Term on the Scheduled Termination Date, the Initial Term and, unless otherwise provided in the instrument appointing a successor Managing Member, the Successor Initial Term of any successor Managing Member, automatically shall be extended for an additional term of two (2) years at the end of the Initial Term or Successor Initial Term (as the case may be) unless written notice of termination of the Managing Member is given to all the other Members at least six months prior to the last day of the Initial Term or Successor Initial Term (as the case may be) by the Managing Member (a "MM Termination Notice") or a Majority of Class A Members (a "Non-MM Termination Notice"). Following any such additional term, the Managing Member's term automatically shall be extended for successive additional terms of two (2) years each (any additional term, whether following the Initial Term, a Successor Initial Term or an additional term, being an "Additional Term") unless written notice of termination of the Managing Member is given to all the other Members at least six months prior to the end of the then existing Additional Term by the Managing Member or a Majority of Class A Members.

(d)               Resignation.  The Managing Member shall not be entitled to resign or withdraw from its position as Managing Member prior to the end of the Initial Term or any Successor Initial Term or any Additional Term; provided, however, that (i) the Initial Member may (x) upon thirty (30) days notice, resign as Managing Member after March 31, 2003 if, as of the date of such resignation, the Transmission Service Date has not occurred and (y) may resign as Managing Member as permitted by Section 2.2(c) of the Master Agreement and (ii) the Managing Member shall resign as Managing Member (A) if required by the Company in accordance with the Operation Agreement, (B) if required under the Master Agreement, (C) effective as of the time set forth in Section 6.1 (b) if removed pursuant to such Section 6.1(b) unless, in the case of either clause (A) or clause (C), the Managing Member contests its removal under Article X of this Agreement or Article XII of the Master Agreement or Article VI of the Operation Agreement, in which case the Managing Member shall resign at the time directed in any order or judgment of the arbitrator issued pursuant to such Article X of this Agreement or Article XII of the Master Agreement or Article VI of the Operation Agreement, if so directed, or (D) as permitted pursuant to Section 5.7 of the Master Agreement.

(e)                Replacement of Managing Member.  If a Member's term as the Managing Member ends (i) at the expiration of the Initial Term or Successor Initial Term because the Initial Term or Successor Initial Term is not automatically extended to an Additional Term or (ii) at the end of any Additional Term because such Additional Term is not automatically extended to a subsequent Additional Term, then a Majority of Class A Members shall select the replacement Managing Member who may not be such Member or an Affiliate thereof. If the Managing Member's Initial Term or Successor Initial Term or any Additional Term ends pursuant to an Early Termination Event, a Super Majority of Transmission Owners shall select the replacement Managing Member.

(f)                 Transitional Provisions. If a Person's term as Managing Member ends, such Person shall, at the request of the Company, negotiate in good faith to provide transition services on commercially reasonable terms and conditions (including compensation) to facilitate a smooth transition of the management of the Company.

Section 6.2.            Redemption of Units Upon Termination of Initial Member as Managing Member; Rights of the Company.

(a)                Redemption of Units Upon Non-Renewal of Term by Members.  If the Initial Member's term as Managing Member ends at the expiration of the Initial Term because a Majority of Class A Members elect not to extend automatically to an Additional Term or at the end of any Additional Term because a Majority of Class A Members elect not to extend automatically to a subsequent Additional Term, then the Initial Member may, by written notice delivered within sixty (60) days after the end of the Initial Member's term as Managing Member, require the Company to redeem any Units issued to and held by any Affiliated Investor in respect of Capital Contributions made pursuant to Sections 4.1 (a) and 4.1 (b) (to the extent such Units are still held by an Affiliated Investor) for a redemption price equal to the Fair Market Value of such Units on the date of delivery of the notice referred to above. Subject to Section 6.2(b), on the date set forth in the request for redemption, which date must be not more than one hundred eighty (180) days but not less than one hundred twenty (120) days after the date of such notice, the Company shall purchase such Units from such Affiliated Investors and such Affiliated Investors shall sell such Units, free and clear of all Encumbrances for cash for their Fair Market Value, and the Managing Member shall make the appropriate notation thereof in the Unit Registry. The right of redemption described in this Section 6.2(a) shall not apply (i) to Units issued under any other provision of this Agreement other than Sections 4.1(a) or 4.1(b), (ii) to Units held by any other Person other than the Initial Member and/or such Affiliated Investors, (iii) upon a removal of the Managing Member upon an Early Termination Event or if the Initial Member resigns pursuant to Section 5.7 of the Master Agreement or (iv) if the Initial Member, any Affiliated Investor and/or any Affiliate thereof voted any of the Units owned by them in favor of not extending the Initial Member's term as Managing Member.

(b)               Conditions to Closing Redemption.  In connection with any redemption of Units by the Company from any Person pursuant to this Agreement, such Person must deliver such Units to the Company on the date set for redemption free and clear of any Encumbrances, and the closing of such redemption shall be conditioned upon the satisfaction of customary closing conditions, including (i) execution and delivery to the Company by such Person of an instrument or agreement of transfer in form and substance reasonably, satisfactory to a Majority of Non-Managing Members and which contains customary representations and warranties in respect of due authorization, title, enforceability and no conflicts with agreements or applicable Laws and the need for any third-party or Governmental consents, (ii) delivery to the Company of a Favorable Opinion of Counsel, (iii) the redemption not violating any Laws or agreements to which the Company or such Person is a party and (iv) receipt of any necessary consents or approvals of any Governmental Authorities.

(c)                Acquisition of Managing Member's Assets and Employees.  If the Initial Member ceases to be the Managing Member for any reason (including upon resignation or removal if the Transmission Service Date shall not have occurred on or before March 31, 2003), the Company shall have the right, but not the obligation, to either (i) acquire one hundred percent (100%) of the outstanding Equity Interests of the Initial Member or one hundred percent (100%) of the assets and liabilities of the Initial Member for a price equal to the Net Book Value of the Initial Member determined as of the date on which the Initial Member ceases to be Managing Member or (ii) offer (or a designee of the Company may offer) employment to any employee of the Initial Member, other than Excluded Employees. The Company may exercise the rights granted by this Section 6.2(c) by delivering notice within sixty (60) days of the date on which the Initial Member ceases to be Managing Member.

(d)               Closing of Acquisition.  If the Company elects to acquire the Equity Interests or assets and liabilities of the Initial Member, the Initial Member shall cause such Equity Interests or assets and liabilities to be transferred to the Company free and clear of all Encumbrances (except, in the case of the assets of the Initial Member, Encumbrances that have been disclosed to the Company), and the Initial Member shall cause NGUSA and the seller of such Equity Interests to make customary representations and warranties in respect of due authorization, title, enforceability, no conflicts with agreements or applicable Laws, the need for any third party or Governmental consents and disclosing material assets, contracts and liabilities. The "Net Book Value" of the Initial Member shall be the difference, but not less than zero, between the aggregate assets of the Initial Member less the aggregate liabilities of the Initial Member, both determined in accordance with GAAP. Any dispute regarding the Net Book Value of the Initial Member shall be finally determined by the Agreed Accounting Firm designated in accordance with the Master Agreement. The acquisition of the Equity Interests of the Initial Member or the assets and liabilities of the Initial Member by the Company or its designee shall not include any Units or Shares or any indebtedness incurred to acquire any Units or Shares, and (i) immediately prior to the closing of such acquisition, the Initial Member shall distribute or otherwise transfer any Units or Shares held by it to its member(s) or shareholder(s) (as the case may be) and cause the Initial Member to be released from any indebtedness incurred to acquire any Units or Shares, and shall cause any Encumbrances on assets of the Company securing acquisition indebtedness for such Units or Shares to be released and (ii) any such Units or Shares and any such indebtedness shall not be included in determining the Net Book Value of the Initial Member.

(e)                Hiring of Employees.  If the Company or its designee elects to offer employment to any employees of the Initial Member (or, in the case of a purchase of the Equity Interests of the Initial Member, if the Company or its designee elects to retain the services of any such employees), it shall do so on such terms and subject to such conditions as it may from time to time elect; provided, however, that no such offer shall be deemed to be a "Qualifying Offer" with respect to any such employee unless such offer is made during the sixty (60) day period referred to in Section 6.2(c), and such offer offers employment in a position of comparable authority with an overall compensation package which, taken as a whole, is comparable to the overall compensation package then provided by the Initial Member. During the sixty (60) day period referred to in Section 6.2(c), the Initial Member shall not, and shall cause NGUSA and the NGUSA Affiliates (other than the Company) not to, offer employment to or otherwise directly or indirectly retain or seek to retain the services of any employee of the Initial Member, other than any Excluded Employee, and the Initial Member shall not, and shall cause NGUSA and the NGUSA Affiliates (other than the Company) not to, engage in any such activities. After the expiration of such sixty (60) day period, NGUSA and any NGUSA Affiliate may offer employment to any employee of the Initial Member; provided, however, that the Initial Member shall not, and shall cause NGUSA and the NGUSA Affiliates (other than the Company) not to, offer employment to or otherwise directly or indirectly retain or seek to retain the services of any employee of the Initial Member other than any Excluded Employee who receives a Qualifying Offer for a period of one year after the date such Qualifying Offer is made. The Company shall provide NGUSA with copies of all Qualifying Offers of employment made to employees of the Initial Member. The Initial Member shall have no obligation to retain any employee of the Initial Member as an employee after the expiration of the Initial Member's term as Managing Member or the removal of the Initial Member as Managing Member.

(f)                 Exercise of Rights of Company.  In the event that there are holders of Class A Units other than NGUSA or Affiliated Investors at the time the Initial Member ceases to be the Managing Member, then such holders shall represent the interests of the Company in connection with the exercise by the Company of the rights contained in Sections 6.2(c) through 6.2(e). In the event that there are no holders of Class A Units other than NGUSA or Affiliated Investors, then (i) if the Company has issued at least $250,000,000 in Class B Units to Persons other than the Initial Member and/or its Affiliates, then the holders of such Units shall represent the interests of the Company and (ii) otherwise a Super Majority of Transmission Owners may, if they so elect, by giving notice to NGUSA and the Initial Member delivered not fewer than fifteen (15) days after the receipt of a MM Termination Notice, a Non-MM Termination Notice or the notice of removal delivered pursuant to Section 6.1(b), represent the interests of the Company in connection with the exercise by the Company of the rights contained in Sections 6.2(c) through 6.2(e) to the extent permitted by applicable Law.

(g)                Consents and Approvals.  The Initial Member shall, and shall cause its Affiliates to, use commercially reasonable efforts to obtain any necessary consents or approvals of any Governmental Authorities and of any third parties in connection with an acquisition pursuant to Sections 6.2(c) through 6.2(e). The Initial Member shall not, and shall not permit its Affiliates to, enter into or suffer to exist any agreement that would prohibit, hinder or frustrate the Company's rights under Sections 6.2(c) through 6.2(e); provided, however, that, the Company may enter into one or more agreements in respect of financings for the Company that provide for aggregate borrowings of not more than $100,000,000 prior to the date the Company first owns GridAmerica Transmission Facilities and $250,000,000 thereafter, unless a Majority of Non-Managing Members shall have approved a greater amount of borrowings, that contain a covenant prohibiting a change-in-control of the Managing Member if the Initial Member, in the good faith performance of its duties and obligations as Managing Member determines that such provisions are necessary in order to obtain financing on commercially reasonable terms.

Section 6.3.            Compensation of Managing Member; Expenses.

(a)                General.  The Initial Member, commencing on the Effective Date and continuing until the end of the Initial Term, shall be entitled to receive the following as compensation for serving as Managing Member:


(b)               Adjustment of Initial Management Fee.  As of January 1 following the fifth anniversary of the Effective Date and each January 1 thereafter, the Initial Management Fee for the calendar year beginning on such January 1 shall be adjusted to equal the sum of the following:
(c)                Adjustment of Initial Management Fee Upon Admission of New Members or Additions of New Parties to Operation Agreement.  The amount of the Initial Management Fee, as adjusted as provided in Section 6.3(b), may be increased upon and in connection with the admission of new Members or the addition of new Transmission Owners as parties to the Operation Agreement as agreed between the Managing Member and such new Member or party to the Operation Agreement; provided, however, that (i) no such increase in the Initial Management Fee shall result in an increase in the aggregate amount of the Initial Management Fee payable by the Original GridAmerica Companies under Section 4.3 of the Operation Agreement without the consent of the Original GridAmerica Companies and (ii) after giving effect to such increase in the Initial Management Fee, the several obligation of each Transmission Owner (under and as defined in the Operation Agreement) to pay its pro rata share of the Initial Management Fee pursuant to Section 4.3 of the Operation Agreement shall not exceed a percentage of the increased Initial Management Fee equal to the percentage that such Transmission Owner's Net Plant bears to the aggregate Net Plant in such year, adjusted to include the Net Plant of the additional Transmission Owner as of the effective date of such increase in the Initial Management Fee.

(d)               Incentive Compensation.  In addition to the amounts payable pursuant to Sections 6.3(a), (b) and (c), the Initial Member shall receive incentive compensation pursuant to such incentive compensation arrangements as are agreed from time to time between the Initial Member and such of the other participants in GridAmerica ITC as shall agree thereto.  Notwithstanding the generality of the foregoing, any incentive compensation arrangements agreed between the Initial Member and the other participants in GridAmerica ITC shall provide that not less than 25% of net incentives earned through or as a result of the Company's exercise of Functional Control over the GridAmerica Transmission Facilities pursuant to the Operation Agreement shall be payable to the Initial Member as incentive compensation and the balance of such net incentives shall be distributed to the participants in GridAmerica ITC as set forth in Section 4.3.2 of the Operation Agreement.

(e)                Prorated Payments.  Any amounts payable to the Managing Member for serving as Managing Member for periods of less than a full calendar month shall be prorated for the period in which the Managing Member served based on the actual number of days elapsed.

(f)                 Compensation of Successor Managing Member.  The compensation of any Managing Member (other than the Initial Member as Managing Member) shall be as set forth in the instrument appointing such successor Managing Member.

Section 6.4.            Obligations of the Company.

(a)                General.  The Company and each of its Subsidiaries shall:

(b)               Non-Market Participant Certifications.  Promptly after the receipt by the Company of any Non-Market Participant Certification of a Member, the Company shall deliver a copy thereof to each other Member.

(c)                Subsidiaries.  The Company shall not have any subsidiaries other than wholly owned subsidiaries formed to own or hold Transmission Facilities and related assets where such separate ownership or possession is necessary in order to comply with applicable Laws (each, a "Subsidiary"). The Managing Member shall cause any such Subsidiary to not take any action that, if taken by the Company, would not be permitted under this Agreement or would require the consent of the Members.

(d)               Insurance.  At all times during the effectiveness of this Agreement and the Operation Agreement, the Company shall maintain insurance of the types and in the amounts as shall be agreed between the Company and the Transmission Owners (under and as defined in the Operation Agreement), provided, that such coverages are available at commercially reasonable rates.  If a Transmission Owner (under and as defined in the Operation Agreement) requests the Company to obtain insurance in addition to such types or amounts as shall have been agreed as aforesaid, the Company shall obtain such insurance provided such Transmission Owner pays the cost thereof.

(e)                Debt Securities.  Subject to Section 6.4(a)(v), the Company may from time to time, on such terms and conditions as may be approved by the Managing Member in its sole discretion, incur Debt in furtherance of the Company's business and, in connection therewith, issue Debt securities of the Company to evidence such Debt. In the event of the incurrence of any such Debt by the Company, the Company shall use commercially reasonable efforts to recover through the rate-making process the principal and interest (and transactional costs) associated with such Debt.

(f)                 Incentive Compensation.  The Managing Member shall, from time to time but no less frequently within thirty (30) days of the Transmission Service Date and each anniversary thereof, propose to the other participants in GridAmerica ITC incentive compensation arrangements designed to encourage the efficient and enhanced operation of the GridAmerica Transmission Facilities.  Such arrangements shall not take into account the other businesses and activities of the GridAmerica ITC participants, including, without limitation, their electric generation businesses and activities.

Section 6.5.            Obligations and Duties of the Managing Member.  The Managing Member shall:



Section 6.6.            Limitations on Managing Member Activities.

(a)                Restrictions.  Notwithstanding any other provision of this Agreement, the Managing Member shall not have the right or power to:


(b)               Actions Requiring Member Consent. Anything in this Agreement to the contrary notwithstanding, the Company shall not, and the Managing Member shall cause the Company not to, take the following actions without the affirmative written approval of a Super Majority of Non-Managing Members in their sole discretion:



Section 6.7.            No Duties of Non-Managing Members.  Except as otherwise provided herein, the Members (other than the Managing Member) shall not have any duties to the Company or to any other Member.


Section 6.8.            Contracts with Members and Affiliates.

(a)                Competitive Bidding.  The Company may contract with Members, NDTOs and their respective Affiliates for the provision of goods and/or services to the Company. In so contracting, where required to do so by the Commission, the Company shall employ competitive bidding. In connection with any competitive bidding process, the Managing Member shall select the lowest responsive bid from a responsible bidder; provided, however, that the Managing Member may, in good faith, select a different bid if it determines that selection of such different bid is in the best interests of the Company.

(b)               Other Limitations on Contracts.  Except for the Basic Agreements and as provided in Section 6.8(c), the Company shall not enter into any agreement or contract with a Member, an NDTO or any Affiliate thereof providing for the provision of goods and/or services to the Company unless any such agreement or contract contains in all respects terms and conditions that are no less favorable to the Company than could be obtained from a comparable, unaffiliated disinterested third party in a similar agreement or contract entered into by the Company as the result of arm's-length negotiations with such third party.

(c)                Contracts for Transitional Services.  Notwithstanding Sections 6.8(a) and 6.8(b), in connection with the acquisition of Transmission Facilities from a DTO, the Company may, to the extent permitted by applicable Law, enter into contracts with such DTO for operation and maintenance and other services.

Section 6.9.            Agency of Members; Members' Businesses.
(a)                Except as expressly provided herein, no provision of this Agreement shall be construed to limit in any manner the Members (other than the Managing Member) in the carrying on of their own respective businesses or activities. Except as otherwise set forth herein with respect to the Managing Member, nothing herein shall be construed to constitute a Member, in the Member's capacity as such, the agent of any other Member.

(b)               Any Member or Affiliate thereof (but excluding the Managing Member (but including its Affiliates other than its subsidiaries)) may engage in or possess an interest in any other business venture of any nature or description, independently or with other Persons, similar or dissimilar to the business of the Company, and neither the Company nor any of the Members shall have any rights by virtue of this Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Company, shall not be deemed wrongful or improper. Except as expressly provided herein, no Member or Affiliate thereof (other than the Managing Member (but including its Affiliates other than its subsidiaries)) shall be obligated to present any particular investment opportunity to the Company even if such opportunity is of a character which, if presented to the Company, could be taken by the Company, and any Member or Affiliate thereof (other than the Managing Member (but including its Affiliates other than its subsidiaries)), shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment opportunity.

Section 6.10.        Power of Attorney.

(a)                Power of Attorney. Each Member hereby irrevocably constitutes and appoints the Managing Member as its true and lawful attorney-in-fact and agent of such Member, to execute, acknowledge, verify, swear to, deliver, record and file, in its or its assignee's name, place and stead, all in accordance with the terms of this Agreement, all instruments, documents and certificates that may, from time to time be required by applicable Law to effectuate, implement and continue the valid existence and affairs of the Company.

(b)               Other Provisions. The power of attorney granted pursuant to Section 6.10(a) shall terminate upon the bankruptcy or dissolution of the Managing Member. The power of attorney granted pursuant to Section 6.10(a) shall be deemed to be coupled with an interest, shall be irrevocable, shall survive and not be affected by the liquidation, dissolution, bankruptcy or legal disability of the Member or the transfer of all or any part of the Member's interest in the Company and shall extend to its successors and assigns; and may be exercisable by such attorney-in-fact and agent for the Member by listing the Member's name on any such instrument and executing such instrument acting as attorney-in-fact. Any person dealing with the Company may conclusively presume and rely upon the fact that any instrument referred to above, executed by such attorney-in-fact and agent, is authorized, regular and binding, without further inquiry. If required, a Member shall execute and deliver to the Managing Member promptly after the receipt of a request therefor, such further designations, powers of attorney or other instruments as the Managing Member shall reasonably deem necessary to accomplish the purposes of this Section 6.10.

Section 6.11.        Reliance by Third Parties.  Persons dealing with the Company are entitled to rely conclusively upon the power and authority of the Managing Member set forth in this Agreement.


Section 6.12.        Reliance on Certificates.  Any Person dealing with the Company may rely on a certificate signed by any officer of the Managing Member:



Section 6.13.        Limitations on Employees, Officers and Directors.  Each employee, officer and director of the Company and/or the Managing Member and their respective spouses and minor children shall be Independent Persons. No employee, officer or director of the Company or the Managing Member may be in the employ of any NDTO, Member or Affiliate thereof (other than the Managing Member).


Section 6.14.        New Parties to Operation Agreement.  The Managing Member may from time to time, in its discretion, cause the Company to amend the Operation Agreement in accordance with its terms to allow the Company to exercise Functional Control over the Transmission Facilities of any other Person that meets the requirements of this Section 6.14; provided, however, that the terms of such amendment must either (i) not be materially more favorable to the counterparty thereto than the terms applicable to the Original GridAmerica Companies or (ii) the Company must offer to make such more favorable terms available to all parties to the Operation Agreement on a non-discriminatory basis; provided, further, that, so long as it does not adversely affect the Company or any Member, the Company may enter into an amendment to the Operation Agreement with an owner of Transmission Facilities that is a Non-Market Participant on terms different than those set forth in the Operation Agreement. For any Person other than a GridAmerica Company to be eligible to subject its Transmission Facilities to the Functional Control of the Company pursuant to an Operation Agreement, (i) the Company must determine, in its reasonable discretion, that subjecting the Transmission Facilities of such Person to the Functional Control of the Company (x) will not result in any significant detriment to the other parties to the Operation Agreement in their capacity as such and (y) is likely to result in long-term benefits to the Company and (ii) such Person must enter into an amendment to the Operation Agreement with the Company in form and substance satisfactory to the Managing Member. Such Person shall not be a Member of the Company and shall not be issued Units unless such Person otherwise makes a Capital Contribution and is admitted to the Company as a Member pursuant to Section 3.1(b), 3.1 (c) or 3.3.



Section 7.1.            Maintenance of Records.  The Company shall maintain at its principal office complete and accurate books, records, files and accounts of the business, affairs and finances of the Company, including books of account in which full, true and correct entries in conformity with GAAP shall be made of all transactions relating to the Company's business and affairs.


Section 7.2.            Reports.  The Company shall engage a nationally recognized firm of independent certified public accountants who shall audit the books and records of the Company. Within ninety (90) days after the end of each fiscal year, the Managing Member shall cause to be delivered to each Member statements of income, changes in Members' capital and changes in financial position of the Company for such fiscal year, and a balance sheet of the Company as at the end of such fiscal year, each of which shall have been prepared in accordance with GAAP and audited by such firm. Within forty-five (45) days after the end of each calendar quarter (except the fourth calendar quarter), the Managing Member shall cause to be delivered to each Member unaudited statements of income, changes in Members' capital and changes in financial position of the Company for the quarter then ended and on a year-to-date basis, and an unaudited balance sheet of the Company as of the end of such quarter.


Section 7.3.            Inspection Rights.  Each Member and such Member's officers, directors, partners, employees, agents, representatives, outside auditors and attorneys and any lender or potential lender to, counterparty or potential counterparty to a financing transaction with or proposed transferee of Units of any Member, and such Person's officers, directors, partners, employees, agents, representatives, outside auditors and attorneys, shall have the right to examine the books, records and accounts of the Company, and to make photocopies thereof, and shall have the right to discuss the business, affairs and finances of the Company with the Managing Member and its officers, agents and employees, at such reasonable times during regular business hours as there may reasonably request; provided, however, that (i) no information of the Company may be provided to the extent that providing such information would violate applicable Law and (ii) no Person shall have access to (A) information subject to a confidentiality obligation in favor of a third-party or (B) competitively sensitive commercial information of a kind not disclosed in due diligence in connection with merger and acquisition transactions; provided, further, that, in the case of clauses (i) and (ii), to the extent feasible, a waiver of such confidentiality obligations shall be sought and, in any event, to the extent feasible all such information shall be disclosed in summary or redacted form and such information may not be provided to any other Person.

Section 7.4.            Bank Accounts.  The Managing Member shall establish one or more separate bank and investment accounts and arrangements for the Company, which shall be maintained in the Company's name with such financial institutions and firms as the Managing Member may determine. The Company may not commingle (or permit to be commingled) the Company's funds with the funds of a Member or any other Person.