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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended February 28, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from______________ to______________
Commission file number 0-72
York Research Corporation
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(Exact name of registrant as specified)
Delaware 06-0608633
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(State or other jurisdiction of (I.R.S. Employer
of incorporation or organization) Identification No.)
280 Park Avenue, Suite 2700 West, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 557-6200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.01 per share
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(Title of class)
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of May 20, 1998 was as follows:
Common Stock, $.01 par value - $89,139,914
(Based on a closing price of $7.375 for the common stock on such date).
The number of shares outstanding of the Registrant's classes of common
stock, as of May 20, 1998:
Common Stock, $.01 par value 14,879,782 shares
Documents incorporated by reference: None
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report, including certain statements in the "Business" and
"Management's Discussion And Analysis of Financial Condition and Results of
Operations" sections, contain certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. When used in
this Report, the words "believe," "anticipate," "intend," "plan," "seek,"
"will be," "expects," "estimates," "projects" and similar expressions
identify such forward-looking statements. Such statements regarding future
events and/or the future financial performance of the Company are subject to
certain risks and uncertainties which could cause actual events or the actual
future results of the Company to differ materially from any forward-looking
statements. Certain of these risks include changes in the markets in which
the Company operates, price volatility, interest rate volatility, currency
risks (in the case of offshore projects and procurement), changes in
applicable regulations, or change in supply or demand for energy and energy
projects. In light of the significant risks and uncertainties inherent in the
forward-looking statements included herein, the inclusion of such statements
should not be regarded as a representation by the Company or any other person
that the objective and plans of the Company will be achieved.
<PAGE>
PART I
ITEM 1 BUSINESS
A. General
York Research Corporation ("York" or the "Company") is a developer,
owner and marketer of energy related projects and products. York, through its
subsidiaries, partnerships, joint ventures and affiliates, conducts business
in two complementary areas of the energy industry: (i) developing,
constructing and operating energy production facilities, primarily those that
utilize natural gas as fuel to produce thermal and electric power
("cogeneration"), and renewable energy projects that convert wind energy into
transmittable electric power (collectively, "Power Project Development") and
(ii) marketing (purchase and sale) of energy, both electric power and natural
gas, in wholesale markets, and in limited retail markets ("Energy Marketing").
Within its power project development business, the Company has two
currently operating cogeneration facilities in New York City-the 28 Megawatt
("MW") Warbasse facility (the "Warbasse facility") and the 286 MW Brooklyn
Navy Yard facility (the "BNY facility"). The Company has begun
preconstruction development of a 35 MW wind energy facility in Big Spring,
Texas (the "Big Spring project"), scheduled for completion by February 1999.
The Company is also planning construction of a 215 MW natural gas fueled
power project in the Republic of Trinidad and Tobago (the "Trinidad project")
scheduled for completion by the fall of 1999. Other power projects, both
domestic and international, are in earlier stages of development.
The Company's Energy Marketing business has been developed to take
advantage of the evolving deregulation in the electric power and natural gas
industries. York participates in the wholesale energy market through its 85%
owned subsidiary, North American Energy Conservation, Inc. ("NAEC"). NAEC
began to market wholesale electricity in 1994. As one of the first such
federally licensed entities, NAEC has concentrated its activities in the
northeastern United States, a high cost area for electricity. Beginning in
1996, York established a natural gas marketing group in NAEC. NAEC's natural
gas marketing operation is comprised of wholesale and retail marketing and
trading.
York's power project development strategy is to increase its project
development activities selectively around the world, giving priority to
negotiated rather than publicly bid opportunities. The Company believes that
the market for wind energy projects will grow as wind power becomes
increasingly competitive as a source of energy, as a function of its price
and environmental benefits. York plans to retain increased ownership
interests in its developed projects rather than seeking up-front development
fees, as it has in the past, and to expand its marketing activities to blend
power generated by its future projects with supplies purchased from
third-party producers. York's energy marketing strategy seeks to generate
reasonable profit margins while maintaining controlled expansion of its
marketing activities by
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gradually expanding geographically, creating or entering into renewable
energy marketing ventures (including the trading of renewable energy credits
as, and if, such markets develop) and, as retail markets become viable,
developing integrated facilities and services.
Management believes that these areas of current concentration will
allow the Company to capitalize on its strengths and experience while
positioning it for the future. During the past several years, the Company has
invested a significant portion of its capital resources in developing and
nurturing new markets and projects. These efforts and expenditures, which
need to continue at some level in the near term, have not yet reached their
full potential, but management believes their potential rewards warrant the
efforts.
All note references are to Notes to Consolidated Financial
Statements.
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B. Power Project Development
1. The Warbasse Project
Between 1987 and 1989, York, under contract with the project owner,
Warbasse-Cogeneration Technologies Partnership L.P. ("WCTP") (see Item 1.D),
constructed and operated a 7 MW engine powered cogeneration project that
supplied all of the utility services including electricity, heat, hot water
and air conditioning to Amalgamated Warbasse Houses, Inc. ("AWH"), a 10,000
resident middle income housing complex in Brooklyn, New York. During 1989,
York, as agent for the project owner, WCTP, negotiated a 21 MW Power Sale
Agreement between Consolidated Edison Company of New York, Inc. ("Con
Edison") and WCTP based upon expansion of the project. The Power Sale
Agreement required WCTP to replace and expand its facility, converting it
from an engine facility to a larger gas turbine facility, interconnect with
the utility system and achieve commercial operation by the end of 1991, and
to achieve full rated capacity no later than December 31, 1994, all of which
was accomplished ahead of schedule. This Agreement was approved by the New
York State Public Service Commission ("PSC") in October 1989 and includes
capacity, energy and operation and maintenance payments continuing through
the year 2011, with payments indexed to prevailing fuel price levels and
inflation. The Warbasse facility is on land leased from AWH, its thermal host.
The Company and WCTP executed an Agreement to Provide for
Construction of Additional Capacity in 1990, pursuant to which the Company
constructed the expansion of the facility to service the Con Edison contract.
The Company and WCTP also executed an Operations and Maintenance ("O&M")
Agreement in 1989 pursuant to which the Company agreed to operate the
facility for its life (see Note 5).
The Warbasse facility supplies all of the thermal and electric
needs of AWH and the full capacity requirements of its electric power
contract with Con Edison, as dispatched. See Item 13 and Note 5 for
information regarding receivables due to the Company from WCTP and the
operations of the Warbasse facility.
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2. Brooklyn Navy Yard Project
Brooklyn Navy Yard Cogeneration Partners, L.P. ("BNYLP"), is owned
equally by a subsidiary of Edison Mission Energy ("Mission"), which is an
indirect wholly owned subsidiary of Edison International, and B-41 Associates
L.P. ("B-41LP") (see Item 1.D). BNYLP was formed to develop, construct,
finance, own and operate the 286 megawatt natural gas fired combined cycle
BNY Facility.
The facility has been operational since 1996 and supplies Con Ed
with both electricity and steam under a 40 year contract. Steam is delivered
to Con Ed's New York City district steam system, the world's largest, through
a tunnel under the East River. BNYLP currently provides more than 15% of Con
Ed's total steam in New York City. Electric energy delivered represents about
3% of peak power demand in the service territory. The facility also supplies
energy to the host industrial park and to an adjacent waste water facility.
The project began in 1989 when York executed a lease on the
abandoned navy yard coal fired power plant. In 1990, York and associated
entities submitted bids to Con Ed, and were awarded separate contracts for
three small plants to supply energy to Con Ed. These three successful parties
later combined their interests to form B-41LP (which is 74.7% owned by York)
and began negotiations to supply the power and steam from a single larger
plant by initiating permitting activities and purchasing equipment. In order
to finance further development and construction, B-41LP sold 50% of the
project to Mission. York and Mission proceeded to complete development and
construction of the larger project and negotiated a new 40 year integrated
energy supply contract with Con Ed. The project entered service at the end of
1996. Long-term non-recourse project financing was closed on December 17,
1997 with the sale of $100.0 million aggregate principal amount of Senior
Secured Bonds Due 2020 and $307.0 million aggregate principal amount of New
York City Industrial Development Agency Industrial Development Revenue Bonds
due from 2022 to 2036.
Pursuant to the provisions of the amended and restated partnership
agreement, Mission retains the right to take all the votes on the Management
Committee that controls the day to day operations of BNYLP. If Mission
decides to exercise its right to cast all votes on the BNYLP Management
Committee, B-41LP still remains a 50% general and limited partner in the Navy
Yard project and retains all its other rights, including an equal vote with
Mission on certain material decisions affecting the BNY facility, such as
sale of assets and renegotiation of power contracts.
Like other large projects of this nature, the BNY cogeneration facility
is subject to various risks. There can be no assurance that the facility,
although completed, will operate at sufficient levels to cover all operation
and maintenance expenses and debt service. The Company has no liability for
any such shortfalls, although if the shortfalls occur, they could impact the
general partner and royalty fees to be paid to B-41LP under the amended and
restated partnership agreement (see Note 4), which are subordinate to debt
service.
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3. Big Spring Project
On October 21, 1997, York acquired 100% of the partnership interests
in New World Power Texas Renewable Energy Limited Partnership, which is a
party to a power purchase agreement with Texas Utilities Electric Company
("TU Electric"). York has commenced procurement and other preconstruction
tasks, and currently expects full commercial operation by February 1999. When
completed, the facility is expected to have a capacity of 35 MW and include
46 turbines, including four 1,650 Kilowatt ("kW") wind turbines.
The TU Electric power purchase agreement has an initial term of 15
years. During the initial term, TU Electric will pay a fixed but escalating
price per kilowatt hour ("kWh") for energy delivered up to a specified
maximum. A balancing account adjusts for variable wind years by allowing any
shortfall in production by the project to be carried forward and credited
against excess production over the life of the power purchase agreement. At
the end of the initial term, TU Electric may extend the power purchase
agreement for each of two 5 year periods. If the power purchase agreement is
not extended, York may either sell its output to TU Electric at TU Electric's
then avoided costs or market its energy elsewhere. The owner of the project
(currently 100% York) is entitled to accelerated U.S. Federal income tax
depreciation and to a 1.7 cents per kWh (escalating) wind production tax
credit over the first 10 years of operation. This credit may be applied to
any income subject to U.S. Federal income taxation. York expects thereby to
offset taxable income from Energy Marketing and from other projects. York has
subcontracted turbine supply, delivery, erection and commissioning
(approximately 75% of the project's estimated construction costs) to Vestas
Wind Systems A/S, the largest manufacturer of wind turbines in the world.
There can be no assurance that the Big Spring project will be completed on
the terms and in the manner described above.
4. Trinidad and Tobago Project
The Company is currently in the process of preconstruction
development and negotiating agreements for a 215 MW natural gas fueled
combustion turbine project in the Republic of Trinidad and Tobago. Through a
local subsidiary, York plans to construct the project for commercial
operation by fall 1999. The Trinidad project will sell the bulk of its output
under a 30 year contract signed on February 12, 1998 with Trinidad and Tobago
Electricity Commission ("T&TEC"), Trinidad's government-owned power
distribution utility. Fixed capacity payments, primarily tied to U.S.
inflation rates, will constitute the majority of project revenues. T&TEC will
have the obligation to supply and pay for fuel for the project, thereby
eliminating York's fuel risk on the project. T&TEC's obligations under the
power purchase agreement are expected to be supported by a guarantee of the
Trinidad government. The Trinidad project is also expected to supply energy
to several proposed new industrial developments.
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York has funded development costs to date, may fund initial site
construction, and anticipates funding the balance of project costs through
non-recourse project financing. The power purchase agreement requires York to
retain no less than 51% project ownership for at least ten years. However,
York currently plans to retain a greater percentage of project ownership.
There can be no assurance that the Trinidad project will be completed on the
terms and in the manner described above or that York will be able to obtain
the necessary financing.
5. Other Power and Wind Projects Under Development
York has been funding development work on a variety of large and
small potential projects in the United States, Canada, Mexico, the Caribbean,
Africa, several Mediterranean countries and in Central Asia. There can be no
assurances that any of these projects will be completed or successful.
C. Energy Marketing
During Fiscal 1997, the Company purchased 85% of the outstanding
shares of NAEC (see Note 15). NAEC is engaged in the marketing of electricity
and natural gas in wholesale and retail markets. NAEC's personnel have been
recruited for the most part from utilities, and their background is in the
operational and logistical aspects of energy marketing and arranging for the
efficient transportation of electricity or natural gas.
Wholesale Power
The transmission of electricity in interstate commerce is subject to
regulation by the Federal Energy Regulatory Commission ("FERC"). Currently,
transmission-owning utilities are required to provide comparable and
non-discriminatory transmission service on their systems to power marketers
and others selling electricity. Marketers may buy power from utilities and
other marketers, structure a transmission path, and sell electricity at
negotiated rates at various destinations to other marketers and to consuming
utilities including municipally owned power companies and cooperatives.
In 1997, NAEC's marketing and trading activities increased as other
hubs emerged in the Eastern United States. In order to manage this growing
area, additional support personnel were added to the trading and marketing
staff of NAEC.
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Natural Gas
Deregulation in the United States began more than ten years ago when
the natural gas pipelines were required to begin the process of unbundling.
While the wholesale supply of natural gas has become a commodity marketplace,
transmission, storage, and seasonality provide opportunities for profit in
selected areas. Trading in the wholesale markets principally occurs at market
centers, which are locations where several pipelines meet. Retail
deregulation of natural gas is more advanced than retail deregulation of
electricity, but it is not complete.
Beginning in 1996, and in conjunction with NAEC's acquisition, York
established a natural gas marketing group in NAEC. NAEC's natural gas
marketing operation is comprised of wholesale and retail marketing and
trading. The wholesale group trades with utilities, producers, and marketing
companies, who buy and sell natural gas daily in order to meet fluctuating
market obligations. NAEC does business over approximately 12 to 15 market
centers mainly in the Northeast United States but also at locations in the
Mid-Atlantic and Gulf of Mexico regions. NAEC has buy/sell commitments with
many suppliers and customers.
The wholesale group also purchases natural gas for NAEC's retail
group, which markets it to industrial and commercial accounts in Western and
Central New York. Currently NAEC has approximately 60 contracts (typically
with up to a one year term) with retail customers.
Future Opportunities
As deregulation progresses, the Company anticipates supporting its
Energy Marketing activities from existing projects such as the Warbasse
facility, and new projects which may be developed or acquired by York and
through possible alliances with third party energy producers. In addition,
the Company may seek to capitalize on the future synergy between wholesale
and retail power marketing.
D. Subsidiaries, Partnerships and Joint Ventures
The Company conducts a substantial portion of its business through
subsidiaries, partnerships and joint ventures, in some of which affiliates of
the Company have an interest.
York owns 100% of the outstanding shares of B-41 Management Corp.
("B41MC"), Cogeneration Technologies, Inc. ("Cogen"), and York Internet Power
Services, Inc., all of which are Delaware Corporations; 85% of the
outstanding shares of NAEC, a Delaware Corporation; and 100% of the
outstanding shares of York Research Canada, Inc. ("York Canada"), an entity
incorporated under the laws of Canada. York Canada owns 100% of the
outstanding shares of York Windpower Corp., an entity incorporated under the
laws of Canada.
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York and its subsidiaries own 74.7% of B-41LP, the 50% partner in
BNYLP, as a result of the following:
B-41MC holds a 5% general partnership interest in B-41LP.
Cogen holds a 22% limited partnership in B-41LP resulting from
assignment of a 40 MW Power Contract to B-41LP.
York holds a 90% limited partnership interest in York Cogen Partners
L.P. ("YCP"), which in turn holds a 53% limited partnership interest in
B-41LP resulting from assignment of a 90 MW power contract to B-41LP.
RV Associates L.P. ("RVA"), an entity controlled by the chairman of the
Company, holds a 5% general partnership interest and a 15% limited
partnership interest in B-41LP, resulting from assignment of a 40 MW
contract to B-41LP, assumption of certain partnership liabilities and
acceptance of a reduced share of development fees and reimbursements.
A portion of B-41LP's partnership interest in BNYLP has been pledged as
collateral to unaffiliated third parties to secure certain obligations
of B-41LP.
York has established several offshore subsidiaries in connection
with the Trinidad project. Each is a wholly owned subsidiary of the company
listed above it. York Holdings (Caymans) L.L.C. is a wholly owned subsidiary
of York Research Corporation
York Holdings (Caymans) L.L.C. is an Exempted Company incorporated in
the Cayman Islands with limited liability.
York Ex International S.R.L. is organized under the Societies with
Restricted Liabilities Act of Barbados, B.W.I.
York Holdings (Barbados) S.R.L. is organized under the Societies with
Restricted Liabilities Act of Barbados, B.W.I.
InnCOGEN, Limited is a corporation incorporated under the laws of the
Republic of Trinidad and Tobago.
In connection with the Big Spring project, the Company has
established two wholly owned subsidiaries, Big Spring Holdings, Inc., and Big
Spring Texas Energy Management, Inc., which in turn own 100% of New World
Power Texas Renewable Energy L.P.
WCTP is a limited partnership whose 25% general partner is RRR'S
Ventures Ltd. ("RRR'S"). The Chairman of the Company is president and a major
shareholder in RRR'S. Entities unaffiliated with the Company or RRR'S own an
aggregate of 75% limited partnership interest in WCTP. RRR'S also holds a 10%
general partnership interest in YCP (see Item 13).
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North American Energy Conservation, Inc. is 15% owned by the Chairman
of the Company.
E. Backlog
The Company does not currently calculate backlog because the revenue
streams are dependent upon a number of variable factors such as inflation,
fuel prices, electric utility rates and utilizations, and natural gas prices
and supply.
F. Patents and Trademarks
The Company and its subsidiaries have no patents or trademarks that can
be considered material to the Company's or its subsidiaries' businesses.
G. Research and Development
Since research and development costs are not significant, the Company
does not account separately for these costs.
H. Raw Materials and Suppliers
The Company and its subsidiaries are not dependent on any single source
of supplies or services for their activities.
I. Marketing
York markets its projects and products through a dedicated sales staff,
supplemented by technical support personnel and management personnel from the
Company, and by representatives internationally.
J. Employees
As of May 12, 1998, the Company and its subsidiaries employed 48 people
on a full-time basis. Most of the Company's executives are technically trained
and actively engaged in the project development and sales areas.
K. Competition
There are many companies with access to greater financial resources
that are active in various aspects of the Company's energy business. These
companies will continue to compete in the energy marketplace. The Company cannot
assess the effect of competition in the future.
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L. Customers
During Fiscal 1998, all of the services revenues were derived from
WCTP and BNYLP. Energy sales were derived from numerous retail customers and
utilities. Each customer accounted for less than 10% of total revenues. Due
to the relatively short-term nature of contracts with customers, the loss of
one of these customers would have no material adverse effect on the Company.
M. Environmental Matters
The Company believes that the various technologies it employs, which
provide for increased efficiency, compared to conventional power generation
facilities, are not environmentally sensitive. The construction of power
generation facilities requires typical environmental impact statements and
permitting procedures which may result in delays. The Company believes that
it is in compliance with federal, state and local laws involving the
protection of the environment. The Company does not believe that continued
compliance will require any material capital expenditures. The Company's
facilities are designed to comply with all applicable environmental laws.
N. Regulation
A subsidiary of the Company operates the Warbasse cogeneration
facility in New York, a qualifying cogeneration facility ("QF") pursuant to
the Public Utility Regulatory Policies Act of 1978 ("PURPA"). The BNY
facility in New York has also obtained QF status.
Cogeneration projects that meet the QF criteria stated in the
federal rules generally are exempt from most of the federal, state and local
regulations that apply to generating facilities which are not QFs. However,
the New York State Public Service Commission ("NYPSC") has determined that it
has the authority to regulate sales of electricity by QFs to retail
customers, though the regulatory regime is less burdensome than that applied
to traditional utilities. Under New York statutes, QFs, like the Warbasse
cogeneration facility, having a maximum generating capacity of less than 80
MW, may distribute electricity to users located at or near a project site and
remain exempt from NYPSC regulation.
One of the criteria for QF status is that a total of no more than 50
percent of the equity interests may be owned by one or more companies that
are electric utility holding companies under the Public Utility Holding
Company Act of 1935 ("PUHCA"). Under PUHCA, an entity which owns 10 percent
or more of the voting securities of, or otherwise controls, an electric
utility company, is an electric utility holding company. An electric utility
company is defined in PUHCA to mean a company that owns or operates physical
facilities for the generation, transmission or distribution of electricity
for sale. QFs are expressly exempt from this definition, and the Company
therefore is not a public utility holding company by virtue of its interests
in QFs.
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The BNY facility intends to operate as an exempt wholesale generator
("EWG"). An EWG must be engaged exclusively in the business of owning or
operating an eligible facility and selling electricity at wholesale. An
eligible facility is a generating facility that is used solely to produce
electricity for sale at wholesale. An EWG is exempt under PUHCA and the
Company would not become a holding company under PUHCA by virtue of it or one
of its subsidiaries or affiliates holding 10% or more of the voting
securities or partnership interests in the BNY facility.
When operated solely as an EWG, the BNY facility would be subject to
the New York Public Service Law and the jurisdiction of the NYPSC with
respect to matters other than the sale of electricity at wholesale. Assuming
that the NYPSC applies the policies that it has applied to other EWGs in
previous cases, the BNY facility will be required to comply with minimal
regulatory requirements regarding financial and organizational matters. The
NYPSC has no jurisdiction over the rates, terms and conditions of the sale of
electricity generated by the BNY facility and sold to Con Edison and Brooklyn
Navy Yard Development Corp. for resale. Further, to the extent operated
solely as an EWG, the BNY facility operates and maintains a steam plant and
would be subject to regulation by the NYPSC as a steam corporation. The NYPSC
has issued a certificate of public convenience and necessity to the BNY
facility as a steam corporation, and has required that the BNY facility
comply with only minimal regulatory requirements regarding financial and
organizational matters.
Power Brokering
A power broker is not considered to be a public utility under the
Federal Power Act ("FPA") and is not subject to regulation by the Federal
Energy Regulatory Commission, which administers the FPA. A power broker
arranges transactions for a buyer and seller and receives a fee for its
services. To date, no company that is a power broker has been found by the
Securities and Exchange Commission ("SEC") to be an electric utility company
under PUHCA. Accordingly, the Company believes that its activities as a
broker of electricity also would not result in its becoming an electric
utility company or an electric utility holding company under PUHCA, and would
not affect the QF status of the Projects.
Power Marketing
NAEC is considered to be a public utility under the FPA and its
transactions are regulated under the FPA. A power marketer takes title to
electricity and resells it at wholesale in interstate commerce. To date, no
company that is a power marketer has been found by the SEC to be an electric
utility company under PUHCA, but there can be no assurance as to the future.
The Company believes that NAEC's activities as a power marketer would not
result in the Company becoming an electric utility company or an electric
utility holding company under PUHCA and would not affect the QF status of the
Projects.
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Natural Gas Sales and Marketing
NAEC does not own or operate any physical facilities for the
transmission of natural gas. NAEC is not considered a natural gas company, as
that term is defined in the Natural Gas Act of 1938, nor by virtue of its
wholesale and retail brokering or marketing of natural gas is it subject to
the jurisdiction of the Federal Energy Regulating Commission. NAEC sells
natural gas in the State of New York at retail. Based on the existing
practice of the NYPSC, the NYPSC's administrative determinations, and
judicial decisions concerning the applicability of the Public Service Law of
the State of New York to gas marketers, NAEC's retail sales of gas are not
subject to the jurisdiction of the NYPSC.
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ITEM 2 PROPERTIES
The Company leases its facilities. The Company considers its facilities
to be suitable and adequate for the purposes for which they are used.
<TABLE>
<CAPTION>
Square
Entity/Location Footage Use
--------------- ------- ---
<S> <C> <C>
York Research Corporation (1) Office
280 Park Avenue
New York, New York
Subsidiaries
Cogeneration Technologies, Inc. (1) Office
280 Park Avenue
New York, New York
York Research Canada, Inc. (2) Office
York Windpower Corp.
1000 De La Gauchetiere
Street West
Montreal, Quebec, Canada
North American Energy Conservation, Inc. (3) Office
100 Clinton Square, Suite 400
126 North Salina Street
Syracuse, New York
InnCogen Ltd. (4) Office
#10 Marine Villas
Columbus Blvd.
West Moorings By the Sea
Trinidad, West Indies
</TABLE>
(1) Total square footage shared by York and Cogen at this location
is currently 12,300. Effective July 1, 1998, the square
footage will be 16,700.
(2) Total square footage shared by York Canada and York Windpower
Corp. at this location is currently 1,650.
(3) Total square footage leased by NAEC at this location is
approximately 12,850, less approximately 4,500 square feet
sublet to three tenants.
(4) Total square footage leased at this location is approximately
2,000 square feet.
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ITEM 3 LEGAL PROCEEDINGS
There is no material litigation directly affecting the Company. See
Note 4 as to certain litigation involving BNYLP.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
MARKET FOR THE REGISTRANTS COMMON STOCK
ITEM 5 AND RELATED SECURITY HOLDER MATTERS
The Company's common stock is traded in the over-the-counter market
under the symbol "YORK". The following table shows the range of high and low
closing sales prices for the common stock on the NASDAQ National Market System.
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
Fiscal Year 1998
First Quarter 9-1/4 7
Second Quarter 7-15/16 6
Third Quarter 10 7
Fourth Quarter 8-13/16 7-1/8
Fiscal Year 1997
First Quarter 9-7/8 5-7/8
Second Quarter 10-5/16 8-5/8
Third Quarter 11-5/8 9-3/8
Fourth Quarter 10-1/2 8-7/8
</TABLE>
On May 20, 1998, the Company had 478 holders of record of its common
stock. The Company has not declared any common stock or cash dividends during
the last five years and has no present intention to declare cash dividends.
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ITEM 6 SELECTED FINANCIAL DATA
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
For the Year Ended
------------------------------------------------------------------------
2/28/98 2/28/97 2/28/96 2/28/95 2/28/94
--------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Total revenues $502,980 $46,327 $14,392 $7,524 $6,494
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Income (loss) before
extraordinary gain $2,670 $7,823 $4,400 $222 ($416)
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Net income (loss) $8,223 $7,823 $4,400 $222 ($416)
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Net income (loss) per
common share - Basic $0.59 $0.61 $0.38 $0.02 ($0.03)
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Net income (loss) per
common share - Diluted $0.53 $0.52 $0.35 $0.02 ($0.03)
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Total assets $145,488 $84,829 $60,002 $50,685 $29,467
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Limited recourse long-
term liabilities (1) $0 $19,982 $20,232 $20,482 $0
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Other long-term
liabilities $942 $885 $685 $638 $1,155
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Deferred revenue and
other credits $3,287 $3,460 $3,460 $3,478 $4,097
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Stockholders' equity $60,749 $46,990 $32,827 $21,886 $18,742
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Cash dividends declared
per common share $0 $0 $0 $0 $0
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
</TABLE>
(1) Recourse to certain of B-41LP's cash flow and not recourse to the
Company. This limited recourse obligation was settled subsequent to
February 28, 1997 (see Note 5).
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Brooklyn Navy Yard Project
Brooklyn Navy Yard Cogeneration Partners, L.P. ("BNYLP"), a joint
venture, was formed on October 19, 1992. BNYLP is owned equally by a
subsidiary of Edison Mission Energy ("Mission"), which is an indirect wholly
owned subsidiary of Edison International, and a limited partnership, B-41
Associates, L.P.("B-41 LP"), in which the Company is the majority partner
(see Note 4).
On November 1, 1996, the BNY facility commenced operations,
generating electricity and steam in accordance with its contracts. In
December, 1997, a $407,000,000 non-recourse financing for the BNY facility
was completed. This financing included tax free Industrial Development
Revenue Bonds with maturities to October 1, 2036, as well as taxable bonds
due in 2020. The Company provided no guarantees with regard to this
financing, and has no obligation to provide funding of any sort, other than
an obligation to reimburse Mission for a portion of certain costs, if any,
related to a legal action (see Note 4). As a result of this financing, and as
compensation for services rendered, the Company received a fee of $6 million
from Mission, which was included in Service Revenues in the fourth quarter of
Fiscal 1998. The Company also expects to receive continuing general partner
and other fees over the 40 year life of the project.
In March 1997, B-41LP settled all its obligations to Sanwa Business
Credit Corp. ("SBCC") for a cash payment of $2,750,000. SBCC, in exchange for
this cash payment gave up all its interest in the future cash flow from the
BNY facility and has no continuing interest in any of the Company's projects
or assets (see Note 4).
Like other large projects of this nature, the BNY facility is subject
to various risks. There can be no assurance that the facility, although
completed and financed, will operate at sufficient levels to cover all
operation and maintenance expenses and debt service. The Company has no
liability for any such shortfalls, but if such shortfalls do occur, it could
impact the continuing fees mentioned above.
Warbasse Project
The Company, through a subsidiary, operates the Warbasse facility,
and since September 1994 has supplied on a continuous basis, all the electric
and thermal energy needs of the host, Amalgamated Warbasse Houses, Inc.
("AWH"), and is supplying up to the full capacity requirements of its
electric power contract with Consolidated Edison Company of New York, Inc.
("Con Ed"), when dispatched.
The Company transferred the completed facility to
Warbasse-Cogeneration Technologies Partnership L.P. ("WCTP") on August 1,
1996. As a result of being a senior secured creditor of WCTP, the Company has
recorded approximately $4,510,000 of interest income on its long-term notes
receivable from WCTP for the year ended February 28, 1998.
18
<PAGE>
Project Finance
The Company is seeking to arrange long-term project financing, in
the form of one or more long-term bond issues, which will provide full
construction and development funding for the Big Spring wind project and the
Trinidad power project, as well as additional funds for general corporate
purposes and future development activities. It is contemplated that these
bond issues will be non-recourse to York but may be secured by cash flow from
BNY and WCTP. There can be no assurance that the bond issuances will be
successfully completed or will be of sufficient size to provide for all
anticipated needs.
NAEC
The Company's energy marketing subsidiary, North American Energy
Conservation, Inc. ("NAEC"), has experienced dramatic growth since the
Company acquired it in November 1996. Revenues have increased from
approximately $27 million for the four months ended February 28, 1997 to
approximately $489 million for the year ended February 28, 1998. The Company
expects this business to continue to grow and improve its margins, although
revenues will not continue to grow at the pace experienced in Fiscal 1998,
the first full year of combined natural gas and electric marketing. In order
to support that growth, in December 1997, NAEC completed a $20,000,000
revolving line of credit with Congress Financial Corp., collateralized by
NAEC's receivables and other assets, and guaranteed by York. The Company
believes this line of credit and possible future expansions thereof will be
sufficient to support the capital and credit needs of NAEC.
The Company uses put and call options, and futures contracts
("Instruments") in various combinations, to hedge physical positions in
electricity and natural gas as well as occasionally for trading purposes. All
of these Instruments are settled in the underlying commodity. The ultimate
impact of these Instruments will be determined by the prevailing applicable
market price.
NAEC has sold call options related to the wholesale electric
business and collected premiums totaling approximately $3 million at February
28, 1998. Of this amount, approximately $2.9 million will be recognized as
revenue in Fiscal 1999, offset by approximately $.7 million of prepaid
brokerage fees and call option expense.
General
During the year ended February 28, 1998, cash balances decreased by
approximately $1.3 million. Approximately $5.3 million was generated by
operating activities. Net income from operations generated approximately $2.7
million excluding a non-cash extraordinary gain of approximately $5.6
million. This net increase from operations along with increases in accounts
payable, accrued expenses, other long-term liabilities and accrued taxes of
approximately $62.0 million were offset by increases in receivables of
approximately $59.4 million, and amortization of deferred credits of
approximately $1.7 million. During the year ended February 28, 1997, cash
balances increased by approximately $6.0 million. Net income from operations
generated approximately $7.8 million and increases in accounts payable,
accrued expenses and other long-term liabilities generated approximately $5.2
million. These sources of cash were offset by
19
<PAGE>
an increase in receivables of approximately $11.0 million predominantly due
to the acquisition of NAEC, which principally accounts for cash generated by
operating activities of approximately $2.1 million. During Fiscal 1996, the
Company had net income of approximately $4.4 million offset by approximately
$3.0 million spent on construction of the Warbasse project, and an increase
in receivables of approximately $1.7 million, resulting in cash used in
operating activities of approximately $509,000.
During Fiscal 1998, approximately $4.4 million was used in investing
activities, mostly for construction in progress.
During Fiscal 1998, approximately $2.2 million was used in financing
activities. $2.7 million was used to settle the Company's obligation to SBCC,
offset by proceeds from the exercise of options and warrants of approximately
$.6 million. Approximately $3.9 million was generated by financing activities
during Fiscal 1997, mainly due to proceeds from the exercise of stock options
and warrants of approximately $3.7 million and the repayment by the York
Research Corporation Employee Stock Ownership Trust ("ESOP") of $450,000.
Cash generated by financing activities in Fiscal 1996 was approximately
$4,416,000, due to the repayment by the ESOP of $3,079,000 of the demand
purchase money loans due to the Company, and $1,455,000 due to proceeds from
the exercise of stock warrants and options.
The ESOP purchased from the Company a total of 3,793,500 shares of
the Company's Common Stock between 1988 and February 28, 1996 in exchange for
demand purchase money loans, totaling approximately $14,462,000 (see Note
11). During Fiscal 1996, the ESOP trustee sold 606,000 shares of the
Company's common stock at a profit to the ESOP, and repaid $3,079,000 of the
demand purchase money loan. During Fiscal 1997, the ESOP trustee sold 50,000
shares of the Company's common stock, and repaid $450,000 of the demand
purchase money loan. There were no repayments during Fiscal 1998.
See Note 3 for disclosure of the impact of significant new
accounting pronouncements.
Year 2000 Compliance
The Company has completed a review of its computer systems and
operations to determine the extent to which its systems will be vulnerable to
potential errors and failures as a result of the "Year 2000" problem. The
Year 2000 problem is the result of prior computer programs being written
using two digits, rather than four digits, to define the applicable year. Any
of the Company's programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in major system failure or miscalculations.
The Company has concluded that its significant computer programs and
operations will not be affected by the Year 2000 problem and that the
programs that will be affected can and will be properly modified or replaced
by the end of 1999 at a cost which will not be significant to the Company.
20
<PAGE>
In addition, the Company is unable at this time to assess the extent
to which it will be impacted by the Year 2000 issue with respect to
businesses and other entities who provide data to or receive data from the
Company, or whose financial condition or operational capability is important
to the Company, as suppliers or customers.
Results of Operations
1998 Compared to 1997
In a year to year comparison between Fiscal 1998 and Fiscal 1997,
total revenues increased approximately $456,700,000. This increase is due to
an increase in energy sales by NAEC of approximately $462,600,000. Fiscal
1998 reflects a growth in electric power revenues and the first full year of
combined electric power and natural gas revenues, while Fiscal 1997 reflects
only four months of predominantly electric revenues as a result of the
acquisition of NAEC on November 1, 1996.
Service revenues decreased approximately $6,000,000 as a result of a
number of factors. During Fiscal 1998, B-41LP received a fee of $6,000,000
from Mission related to the closing of the Brooklyn Navy Yard long-term
project financing (see Note 4). Service revenues to WCTP increased
approximately $1,800,000 due to higher fuel and other operating costs. These
increases in service revenues were offset by decreases due to certain
revenues recognized in Fiscal 1997 but not in Fiscal 1998. A decrease of
$11,000,000 resulted from the recognition of revenues during Fiscal 1997
pursuant to a services agreement between WCTP and RVA and the Company (see
Note 14), and a decrease of $2,500,000 resulted from the recognition of
revenues during Fiscal 1997 due to reimbursements by BNYLP for certain
engineering costs, a portion of which had been expensed in prior periods.
Cost of energy increased approximately $462,900,000, predominantly
due to an increase in energy sales. Gross margins on the energy business will
be impacted by changes in unit prices, supply and seasonal factors.
Cost of services, which include fuel and other operations and
maintenance costs, increased approximately $1,800,000, commensurate with
service revenues from WCTP.
Selling, general and administrative expenses increased approximately
$1,700,000. The inclusion of a full year of expenses for NAEC accounted for
an increase of approximately $2,200,000. Expenses also increased by
approximately $300,000 as a result of recognition of the redemption of Class
B Warrants (see Note 10). These increases were offset by a decrease of
approximately $650,000 in expenditures for consulting and professional fees.
Interest income-WCTP increased approximately $1,000,000 due to the
commencement of interest due on the long-term note receivable from WCTP
related to the sale of the Warbasse facility on August 1, 1996. Fiscal 1998
reflects a full year of interest income, while Fiscal 1997 reflects seven
months.
Interest and other income increased approximately $2,000,000. The
commencement in December 1996 of general partner fees received by B-41LP
21
<PAGE>
from BNYLP accounts for approximately $1,000,000 of this increase, since
Fiscal 1998 reflects a full year of general partner fees, while Fiscal 1997
reflects only three months. The balance of the increase was due to the
recognition of approximately $1,100,000 as royalty fees, which commenced in
January 1998, and will continue for four years.
An extraordinary gain of approximately $5,600,000 was recorded in
Fiscal 1998 relating to the settlement of the obligation to SBCC.
1997 Compared to 1996
Total revenues in Fiscal 1997 increased by approximately $31,936,000
over Fiscal 1996, due predominantly to the acquisition of NAEC on November 1,
1996 (see Note 15), which accounted for the increase in energy sales of
approximately $26,571,000. Service revenues increased by approximately
$9,307,000, due mainly to an increase of $11,000,000 as a result of a
services agreement between WCTP and RVA, and the Company (see Note 14), and
an increase of approximately $748,000 in service revenues to WCTP due to
higher fuel costs, and an increase in purchases of supplies, spare parts,
etc. These increases were offset by a decrease in engineering services of
approximately $2,442,000, due mainly to $2,500,000 of reimbursements in
Fiscal 1997 by BNYLP for certain engineering costs a portion of which was
expensed in prior periods versus $5,000,000 of similar reimbursements in
Fiscal 1996. Development and other fees decreased approximately $3,942,000
due to none being earned in Fiscal 1997.
Cost of services, which include fuel and other operations and
maintenance costs, increased approximately $763,000 during Fiscal 1997,
commensurate with service revenues from WCTP.
Cost of energy increased approximately $25,000,000 as a result of
the commencement of energy sales due to the acquisition of NAEC. The gross
margin from energy sales is subject to various market fluctuations and may
vary from year to year.
Selling, general and administrative expenses increased approximately
$1,840,000. The operations of NAEC accounted for approximately $1,135,000 of
the total increase in selling, general and administrative expenses, with the
remaining increase resulting from an additional $470,000 spent on payroll and
employee benefits in Fiscal 1997, due to salary increases and bonuses, and
increased consulting fees of approximately $360,000 for the development of
potential new markets.
Interest income-WCTP increased approximately $1,130,000. This was
mainly due to interest recorded by Cogen due on the note receivable from WCTP
which commenced in August, 1996 (see Note 5).
Interest and other income increased approximately $644,000.
Additional receipts of approximately $168,000 from AWH, recognized as other
income, in payment of certain amounts due to Cogen which were deferred in
prior years, accounted for a portion of this increase. The commencement in
December 1996 of general partner fees received by B-41LP from BNYLP accounted
for an increase in other income of approximately $299,000.
22
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on Page 33.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9 ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
23
<PAGE>
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company are:
Robert M. Beningson Chairman of the Board, President
and Chief Executive Officer
Michael Trachtenberg Executive Vice President, Chief
Financial and Accounting Officer
and Secretary
Robert C. Paladino Executive Vice President
Vito L. Elefante Vice President
Stanley Weinstein Director
Howard Sommer Director
Mr. Robert M. Beningson, 69, was elected a director of the Company
in October 1981. In February 1982, Mr. Beningson was elected Chairman of the
Board, President and Chief Executive Officer of the Company. Mr. Beningson is
Chief Executive Officer and Chairman of the Board of each of the Company's
subsidiaries. Previously, Mr. Beningson was Chairman of the Board of
Directors of the Company between 1968 and 1979.
Mr. Michael Trachtenberg, 49, a Certified Public Accountant, joined
the Company in January 1987 and was elected Vice President, Chief Financial
Officer and Secretary in March 1987. From November 1985, until joining the
Company, Mr. Trachtenberg was a financial consultant in private practice.
Prior thereto, Mr. Trachtenberg was Vice President-Finance and Chief
Financial Officer of S&S Corrugated Paper Machinery Co., Inc. From 1980 to
1984 Mr. Trachtenberg held various positions with Carter Day Industries,
Inc., an agricultural equipment manufacturer and energy and environmental
systems company, culminating in his appointments as Vice President, Treasurer
and Chief Financial Officer.
Mr. Robert C. Paladino, 47, joined the Company in January 1987 and
was elected Executive Vice President in April 1990. From October 1980 until
joining the Company, Mr. Paladino was Senior Vice President and General
Counsel of NPS Technologies Group, Inc., an engineering and construction
company serving the electric utility industry. From 1974 to 1980, Mr.
Paladino held various positions with the Edison Electric Institute, the
national organization for the investor-owned electric utility industry,
culminating in his appointment as Director of Fossil Fuels and Assistant to
the President.
Mr. Vito L. Elefante, 48, joined the Company in April 1998 and was
then elected Vice President. Prior to joining York, Mr. Elefante was Vice
President of Edison Mission Energy New York, Inc. and Executive Director of
Brooklyn Navy Yard Cogeneration Partners, L.P. Prior to that, Mr. Elefante
worked at Long Island Lighting Company for twenty years, where he was
responsible for independent power generation, purchasing and fuels. Mr.
24
<PAGE>
Elefante is excluded from Items 11 and 12, as he joined the Company
subsequent to February 28, 1998.
Mr. Stanley Weinstein, 72, was elected to the Board of Directors in
May, 1995. Until 1991, Mr. Weinstein was a partner at Deloitte and Touche,
certified public accountants, and since such date, has been an independent
consultant.
Mr. Howard Sommer, 57, was elected to fill a vacancy on the Board of
Directors in September, 1997. In September 1995, Mr. Sommer was elected the
President and Chief Executive Officer of New York Community Investment
Company L.L.C., an equity fund created and funded by eleven major banks in
New York City. Beginning in 1973, as President of U.S. Capital Corporation
and Fundex Capital Corporation, he managed finance and investment company
activities that provided over $100 million in funding to small businesses.
Prior to that time, Mr. Sommer served in a management capacity for IBM and
Xerox Corporation.
Mr. H. Clifton Whiteman, who had served as a Director of the Company
since July, 1991, resigned from the Board of Directors in June, 1997, and has
been excluded from all information on directors included in the Form 10-K for
the year ended February 28, 1998.
None of the directors or executive officers of the Company are
related to each other.
ITEM 11 EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the
Company's Chief Executive Officer and the remaining most highly paid executive
officers for the three fiscal years ended February 28, 1998.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------
Awards Payouts
------------------- -------
Restr All Other
Other Stock Options/ LTIP Compen-
Salary Bonus Compensation Awards SAR's Payouts sation
Name & Principal Position Year ($) ($) ($)(2) ($) (#)(1) ($) ($)(3)
- -------------------------- ---- ------- ------- ------------ ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ROBERT M. BENINGSON 1998 400,681 0 0 0 0 0 18,568
Chairman, President & 1997 400,681 0 0 0 0 0 18,875
Chief Executive Officer 1996 400,681 0 0 0 0 0 12,109
MICHAEL TRACHTENBERG 1998 210,000 0 0 0 0 0 20,044
Executive Vice President & 1997 199,231 100,000 0 0 0 0 23,418
Chief Financial and Accounting 1996 190,000 0 0 0 0 0 14,699
Officer
ROBERT C. PALADINO 1998 210,000 0 0 0 0 0 20,044
Executive Vice President 1997 193,846 100,000 0 0 0 0 23,418
1996 179,538 0 15,000 0 0 0 14,699
</TABLE>
(1) The Company does not grant SAR's.
(2) Forgiveness of indebtedness.
(3) Represents the value of the Company's contribution to the ESOP
allocable to executives' accounts for such year.
25
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information on option grants in Fiscal
1998 to the named executive officers.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------
% of Total
Options Alternative
Options Granted to Exercise Grant Date
Granted Employees in Price Expiration Present Value
Name (#) Fiscal Year ($/Share) Date ($)
------ ------- ------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
ROBERT M. BENINGSON 0 N/A N/A N/A N/A
MICHAEL TRACHTENBERG 0 N/A N/A N/A N/A
ROBERT C. PALADINO 0 N/A N/A N/A N/A
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUE
The following table sets forth information on option exercises in
Fiscal 1998 by the named executive officers and the value of such officers
unexercised options at February 28, 1998.
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired Unexercised Options In-the-Money Options
on Value at Fiscal Year End (#) at Fiscal Year End ($) (1)
Exercise Realized ------------------------------- -----------------------------
Name (#) ($) (1) Exercisable Unexercisable Exercisable Unexercisable
------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ROBERT M. BENINGSON 0 0 1,725,000 0 4,093,000 0
MICHAEL TRACHTENBERG 25,000 121,872 214,000 26,000 560,750 86,250
ROBERT C. PALADINO 4,000 15,000 177,000 15,000 478,125 48,125
</TABLE>
(1) Value calculated is the difference between closing price on the date of
exercise or year end, respectively, and the exercise price.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service (2)
Remuneration(1) 10 15 20 25 30 35+
- --------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
50,000 3,200 4,125 5,200 6,250 7,500 8,750
100,000 8,200 11,625 15,200 18,250 21,675 24,175
150,000 13,200 19,125 25,200 30,750 36,675 40,425
200,000 18,200 26,625 35,200 43,250 51,675 56,675
250,000 23,200 34,125 45,200 55,750 66,675 72,925
</TABLE>
(1) Based on highest five year average and includes annual salary and cash
bonus, if any.
(2) The years of credited service for individuals listed in the Summary
Compensation Table are 42 for Robert M. Beningson, 11 for Robert C.
Paladino, and 15 for Michael Trachtenberg.
26
<PAGE>
IRS regulations limit the amount of compensation credited for Pension
Plan purposes to $150,000 per year, subject to cost of living increases.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on its review of Forms 3, 4 and 5 submitted to it by is
Directors and Executive Officers, the Company is not aware of any
non-compliance with the reporting provisions of Section 16 by its Directors
or Executive Officers.
COMPENSATION OF DIRECTORS
Directors receive fees for attending Board or Committee meetings. In
both Fiscal 1998 and Fiscal 1997, Mr. Weinstein received $24,000. Mr. Sommer
received $10,000 in Fiscal 1998.
The Company has not entered into any employment contracts with any of
the herein named Officers or Directors.
SECURITY OWNERSHIP OF
ITEM 12 CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
a. Security Ownership of Certain Beneficial Owners
The following table sets forth the information indicated as of
February 28, 1998, as to all persons known by the Board of Directors to be
the beneficial owners of more than five percent of the Corporation's Common
Stock.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class (1)
- ------------------- -------------------- ----------
<S> <C> <C>
Robert M. Beningson 3,491,000 (1) (2) 20.9%
280 Park Avenue
New York, NY 10017
Stanley Weinstein 1,020,014 (1) (4) 6.8%
280 Park Avenue
New York, NY 10017
York Research Corp. 980,014 (1) 6.6%
Employee Stock Ownership Plan
280 Park Avenue
New York, NY 10017
</TABLE>
See note references below.
27
<PAGE>
b. Security Ownership of Management
The following table sets forth the information indicated as of
February 28, 1998 with respect to common stock of the Company beneficially
owned by directors and officers of the Company and by directors and officers
as a group:
<TABLE>
<CAPTION>
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class (1)
- ---------------- -------------------- ---------
<S> <C> <C>
Robert M. Beningson 3,491,000 (1)(2) 20.9%
Michael Trachtenberg 277,000 (1)(2) 1.8%
Robert C. Paladino 202,000 (1)(5) 1.3%
Stanley Weinstein 1,020,014 (1)(4) 6.8%
Howard Sommer 20,000 (1)(6) (6)
Directors and Officers 5,010,014 (1) 29.2%
as a group (5) persons
</TABLE>
(1) The Percent of Class is based upon 14,961,438 issued and outstanding
shares of common stock at February 28, 1998 plus the shares that
underlie unexercised warrants or options held by the individuals.
(2) Includes 824,000 shares owned directly, plus warrants to purchase
1,150,000 shares of common stock, options to purchase 575,000 shares of
common stock and 942,000 shares owned by RRR'S Ventures, Ltd., a
corporation controlled by Mr. Beningson.
(3) Includes 37,000 shares owned directly by Mr. Trachtenberg and options
to purchase 240,000 shares of common stock.
(4) Includes warrants to purchase 40,000 shares of common stock, and
980,014 shares held by the ESOP of which Mr. Weinstein is the trustee.
(5) Includes 10,000 shares owned directly by Mr. Paladino and options to
purchase 192,000 shares of common stock.
(6) Includes warrants to purchase 20,000 shares of common stock; less than
1% ownership.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Beningson is President and a major shareholder of RRR'S
Ventures, Ltd., a corporation in which the Chief Financial Officer of the
Company is also a minor shareholder, which is 25% general partner in WCTP,
limited partner in RV Associates L.P. ("RVA") (which in turn is a minority
partner in B-41LP), and 10% general partner in York Cogen Partners L.P.
("YCP"), a limited partner in B-41LP (see Note 4). Mr. Beningson is also a
15% shareholder in NAEC.
At February 28, 1998, WCTP was indebted to the Company for
approximately $5,620,000 related to operations and maintenance services and
other related receivables, for approximately $2,651,000 for loans to WCTP and
for professional
28
<PAGE>
services paid for on behalf of WCTP, for approximately $29,369,000 related to
the transfer of the Warbasse Facility, and indebted to YCP for $28,522,000
(see Note 5).
At February 28, 1998, Mr. Beningson was indebted to the Company for
$5,971,500 related to the exercise of warrants and purchase of common shares
in prior years. Mr. Trachtenberg is indebted to the Company for $214,860
related to the exercise of options. Mr. Paladino is indebted to the Company
for $399,000 related to the exercise of options and certain advances. All
these amounts are non-interest bearing and are payable on demand.
In March 1997, B-41LP settled all its obligations to SBCC for a cash
payment of $2,750,000. SBCC, in exchange for this cash payment gave up all
its interest in the future cash flow from the Brooklyn Navy Yard Project and
has no continuing interest in any of the Company's projects or assets. In
settling this obligation, B-41LP caused RVA and its partners to lose tax
benefits that they would have been able to utilize. Therefore, the Company
compensated RVA for its lost tax benefits in the total amount of $4 million.
The form of this non-cash transaction with RVA and its partners was the
exercise of 500,000 pre-existing warrants at $6 per share for a total of
$3,000,000, and the transfer of $1,000,000 of the Company's note receivable
from the Chairman to a nonconsolidated affiliate. This extinguishment of the
SBCC liability resulted in an extraordinary gain of approximately $5.6
million net of taxes, which was reflected in the first quarter of Fiscal 1998.
As of November 1, 1996, the Company acquired 85% of the shares of
NAEC for $1 from NAEC. Prior to the acquisition, all of the stock was owned
by the Company's chairman. The acquisition has been accounted for as a
purchase. In Fiscal 1997, prior to the acquisition, the Company recognized
approximately $924,000 as reimbursement of cost.
In the year ended February 28, 1997, the Company recorded
$11,000,000 of fees for services rendered through February 28, 1997 to WCTP
and RV Associates L.P. ("RVA"), two partnerships of which a company
controlled by the Company's chairman is the general partner. This amount was
included in service revenues. These fees were recorded pursuant to a services
agreement between WCTP, RVA, CTI and York. The services include ongoing
negotiations of consolidation agreements with Con Edison and Edison Mission
Energy, aiding in resolving various contract issues concerning WCTP's and
RVA's power purchase agreements with Con Edison, and various issues related
to the progress of the Brooklyn Navy Yard Project.
The Company recognizes that potential conflicts of interest may
arise by reason of the fact that Mr. Beningson controls RRR'S Ventures, Ltd.
and RVA, and is President and Chief Executive Officer of the Company. Mr.
Beningson has advised the Company that in all transactions between or
affecting any affiliated entity and the Company he will act in the best
interests of the shareholders of the Company, as determined by the Board of
Directors of the Company, excluding himself.
29
<PAGE>
PART IV
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 14 AND REPORTS ON FORM 8-K
(1)(1) and (a)(2): See Index to Consolidated Financial Statements at Page 33.
(a)(3) Exhibits:
3(a) Certificate of Incorporation of the Company, as amended. (1)
3(a) (I) Certificate of Amendment to the Company's Certificate of
Incorporation as filed with the Secretary of State of the
State of Delaware on May 16, 1988.
3(b) Bylaws of the Company. (1)
4(a) Form of Certificate evidencing Common Stock, $.01 par value
per share, of the Company. (2)
10(o) Agreement for Construction of Additional Capacity, dated May
7, 1990, between Warbasse-Cogeneration Technologies
Partnership, L.P. and York Research Corporation. (3)
10(q) Lease and Energy Sale Agreement, dated December 18, 1989
between the Brooklyn Navy Yard Development Corporation and
Cogeneration Technologies, Inc., a wholly owned subsidiary of
the Company. (4)
10(r) Amended and Restated Limited Partnership Agreement by and
between Mission Energy New York, Inc. and B-41 Associates,
L.P., dated November 1, 1997, with Exhibits thereto. (9)
10(s) Stipulation of Settlement among counsel to plaintiffs in
litigation entitled In Re York Research Corporation Securities
Litigation, United States District Court, Southern District of
New York, Master File No. 91 Civ. 5040 (LJF), and counsel for
all defendants therein, dated January 15, 1993, with Exhibits
thereto. (5)
10(t) Final Judgment of Dismissal with Prejudice, In Re York
Research Corporation Securities Litigation, United States
District Court, Southern District of New York, Master File No.
91 Civ. 5040 (LJF). (5)
10(u) Amended and Restated Agreement of Limited Partnership of B-41
Associates L.P., dated December 26, 1992. (5)
10(bb) Promissory Note, dated November 17, 1994, made by
Warbasse-Cogeneration Technologies Partnership L.P. payable to
the order of Cogeneration Technologies, Inc. (8)
30
<PAGE>
10(cc) Security Agreement, dated as of November 17, 1994, made by
Warbasse- Cogeneration Technologies Partnership L.P. to
Cogeneration Technologies, Inc. (8)
10(dd) Assignment and Security Agreement, dated as of November 17,
1994, made by Warbasse-Cogeneration Technologies Partnership
L.P. to Cogeneration Technologies, Inc. (8)
10(ee) Intercreditor Agreement, dated as of November 17, 1994, by and
among Tomen Power Corporation, B-41 Associates, L.P.,
Cogeneration Technologies, Inc. and Warbasse-Cogeneration
Technologies Partnership L.P. (8)
10(ff) Restructuring Fee Agreement, dated as of November 17, 1994, by
and among Warbasse-Cogeneration Technologies Partnership L.P.,
B-41 Associates, L.P. and Cogeneration Technologies, Inc. (8)
10(gg) Subordinated Promissory Note, dated as of November 17, 1994,
made by Warbasse-Cogeneration Technologies Partnership L.P.
payable to the order of B-41 Associates, L.P. in the principal
amount of $3,000,000. (8)
10(hh) Subordinated Promissory Note, dated as of November 17, 1994,
made by Warbasse-Cogeneration Technologies Partnership L.P.
payable to the order of Cogeneration Technologies, Inc. in the
principal amount of $3,000,000. (8)
10(ii) Agreement of Limited Partnership of York Cogen Partners, L.P.
10(jj) Renegotiation and Payment Agreement dated February 28, 1997 by
and between Sanwa Business Credit Corporation and B-41
Associates, L.P.
10(kk) York Partners Reimbursement Agreement (PMNC) dated as of
November 1, 1997, among B-41 Associates, L.P., Brooklyn Navy
Yard Cogeneration Partners, L.P. and Edison Mission
Energy. (9)
10(ll) Amended and Restated Agreement of Limited Partnership of New
World Power Texas Renewable Energy Limited Partnership dated
as of September 29, 1997. (9)
10(mm) Renewable Resource Energy Purchase Agreement between Texas
Utilities Electric Company and New World Power Texas Renewable
Energy Limited Partnership dated September 13, 1994, and
Amendment No. 1 thereto dated November 25, 1996, Amendment No.
2 thereto dated February 19, 1997 and Amendment No. 3 thereto
dated August 29, 1997. (9)
10(nn) Wind Turbine Equipment Sales and Installation Contract dated
as of March 31, 1998 between York Research Corporation and
Vestas-American Wind Technology, Inc. (9)
21 Subsidiaries of the Company (9)
23 Consent of Independent Certified Public Accountants.
31
<PAGE>
(b) Consolidated Financial Statements
See Index to Consolidated Financial Statements at Page 33.
All other exhibits and financial statement schedules have been omitted
because they have been previously filed or incorporated by reference,
in the Company's Form 10-K for the fiscal year ended September 30,
1990, are inapplicable, or the required information is included
elsewhere in the Consolidated Financial Statements or the notes
thereto.
(c) Reports on Form 8-K
The following reports on Form 8-K were filed during the year ended
February 28, 1998:
None
(1) Previously filed as an Exhibit, under the corresponding exhibit number,
to the Company's Form 10-K for the fiscal year ended September 30,
1982, Commission file number 0-72, and incorporated herein by
reference.
(2) Previously filed as an Exhibit, under the corresponding exhibit number
with Registration Statement No. 33-13899 on April 30, 1987 and
incorporated herein by reference.
(3) Previously filed as an Exhibit with the Company's Form 10-Q for the
quarter ended June 30, 1990 and incorporated herein by reference.
(4) Previously filed as an Exhibit with the Company's Form 10-K for the
year ended September 30, 1990 and incorporated herein by reference.
(5) Previously filed as an Exhibit with the Company's Form 10-K for the
year ended February 28, 1993 and incorporated herein by reference.
(6) Previously filed as an Exhibit with the Company's Form 10-K for the
year ended February 28, 1994 and incorporated herein by reference.
(7) Previously filed as an Exhibit with the Company's Form 10-Q for the
quarter ended August 31, 1994 and incorporated herein by reference.
(8) Previously filed as an Exhibit with the Company's Form 10-Q for the
quarter ended November 30, 1994 and incorporated herein by reference.
(9) To be filed by amendment.
32
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page(s)
<S> <C>
York Research Corporation and Consolidated Subsidiaries:
Report of Independent Certified Public Accountants 34
Consolidated Financial Statements:
Consolidated Balance Sheets - February 28, 1998 and 1997 35
Consolidated Statements of Income for the Years Ended February 28,
1998, February 28, 1997 and February 28, 1996 36
Consolidated Statement of Stockholders' Equity for the Years Ended
February 28, 1998, February 28, 1997 and February 28, 1996 37
Consolidated Statements of Cash Flows for the Years Ended February 28,
1998, February 28, 1997 and February 28, 1996 38
Notes to Consolidated Financial Statements 39
through
65
</TABLE>
33
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
York Research Corporation:
We have audited the accompanying consolidated balance sheets of York
Research Corporation and Subsidiaries as of February 28, 1998 and 1997, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended February 28, 1998.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of York Research Corporation and Subsidiaries at February 28, 1998 and 1997,
and the consolidated results of their operations and their consolidated cash
flows for each of the three years in the period ended February 28, 1998, in
conformity with generally accepted accounting principles.
Grant Thornton LLP
New York, New York
May 22, 1998
34
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, February 28,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 10,254,366 $11,513,026
Energy accounts receivable 64,655,498 7,900,114
Other receivables - related parties 6,026,479 8,298,806
Inventory - natural gas -- 1,312,086
Deferred tax asset 1,238,000 661,000
Other current assets (including advances to
employees of $85,700 and $146,300, respectively) 1,924,972 311,356
------------ ------------
Total current assets 84,099,315 29,996,388
Property, plant and equipment, net 577,058 602,428
Long-term receivable - WCTP 4,905,689 --
Construction in progress 4,187,134 --
Long-term note receivable - WCTP 49,490,535 49,490,535
Advances to minority partner -- 2,000,000
Other assets (including advances to employees and a
former director of $730,167 and $608,267, respectively) 1,929,723 2,402,082
Excess of investment over net assets acquired, net 298,568 337,940
------------ ------------
Total assets $145,488,022 $84,829,373
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Energy accounts payable $ 62,633,944 $ 8,652,263
Accrued expenses and other payables 7,237,081 3,772,284
Accrued income taxes 88,178 765,498
Current portion of deferred revenue 2,991,307 --
------------ ------------
Total current liabilities 72,950,510 13,190,045
Due to SBCC -- 19,982,000
Other long-term liabilities 942,146 884,949
Deferred revenue and other credits 3,287,000 3,460,000
Deferred tax liability 5,632,100 --
------------ ------------
Total liabilities 82,811,756 37,516,994
Minority interest in partnership 1,927,342 321,942
Commitments and contingencies -- --
Stockholders' equity
Common stock, Class A, $.01 par value; authorized
10,000,000 shares; none issued -- --
Common stock, $.01 par value; authorized 50,000,000
shares; issued and outstanding 14,961,438 and
14,256,304 shares in 1998 and 1997, respectively 149,614 142,563
Additional paid-in capital 65,212,681 60,350,127
Accumulated earnings (deficit) 4,139,729 (4,083,050)
------------ ------------
69,502,024 56,409,640
Less:
Treasury stock, at cost (123,124 and 47,124
shares, respectively) (1,409,401) (706,401)
Notes receivable - sale of common stock (6,832,938) (7,960,313)
Deferred compensation - ESOP (510,761) (752,489)
------------ ------------
Total stockholders' equity 60,748,924 46,990,437
------------ ------------
Total liabilities and stockholders' equity $145,488,022 $84,829,373
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED FEBRUARY 28,
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- ----------
<S> <C> <C> <C>
Revenues:
Energy sales $489,192,939 $26,570,707 $ --
Services 13,786,604 19,756,615 14,391,749
------------ ----------- -----------
Total revenues 502,979,543 46,327,322 14,391,749
------------ ----------- -----------
Costs and expenses:
Cost of energy 488,045,224 25,112,691 --
Cost of services 7,606,762 6,216,115 5,452,869
Selling, general and administrative 9,520,248 7,859,239 6,019,547
Interest income - WCTP (4,510,531) (3,490,122) (2,359,531)
Interest and other (income) expense (2,727,772) (715,154) (70,764)
Minority interest in partnership 567,646 321,942 500,000
------------ ----------- -----------
Total costs and expenses 498,501,577 35,304,711 9,542,121
------------ ----------- -----------
Income before income taxes and extraordinary gain 4,477,966 11,022,611 4,849,628
Provision for income taxes 1,808,000 3,200,000 450,000
------------ ----------- -----------
Income before extraordinary gain 2,669,966 7,822,611 4,399,628
Extraordinary gain, net of tax and allocation to minority interest 5,552,813 -- --
------------ ----------- -----------
Net income $ 8,222,779 $ 7,822,611 $ 4,399,628
------------ ----------- -----------
------------ ----------- -----------
Earnings per share - Basic:
Per common share before extraordinary gain $0.19 $0.61 $0.38
Extraordinary gain 0.40 -- --
------------ ----------- -----------
Per common share $0.59 $0.61 $0.38
------------ ----------- -----------
------------ ----------- -----------
Weighted average number of common shares used in
computing basic earnings per share 14,022,387 12,782,551 11,666,395
------------ ----------- -----------
------------ ----------- -----------
Earnings per share - Diluted:
Per common share before extraordinary gain $0.17 $0.52 $0.35
Extraordinary gain 0.36 -- --
------------ ----------- -----------
Per common share $0.53 $0.52 $0.35
------------ ----------- -----------
------------ ----------- -----------
Weighted average number of common shares and common share
equivalents used in computing diluted earnings per share 15,561,125 15,090,393 12,648,091
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 28, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock Additional Accumulated
Shares Paid-in Earnings Treasury Notes Deferred
Issued Amount Capital (Deficit) Stock Receivable Compensation
---------- -------- ----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1995 12,610,594 $126,106 $49,619,995 $(16,305,289) $(706,401) $(7,393,408) $(3,455,491)
Exercise of options 222,957 2,230 776,045 -- -- (296,379) --
Exercise of warrants 207,727 2,077 970,843 -- -- -- --
Cash receipts -- -- -- -- -- 150,000 3,079,000
Deferred compensation accrual -- -- 263,958 -- -- -- 148,778
Issuance of shares to ESOP 288,500 2,885 1,089,334 -- -- -- (1,092,219)
Tax effect of options and warrants -- -- 1,013,000 -- -- -- --
ESOP third party loans -- -- -- -- -- -- (65,000)
Issuance of warrants -- -- 497,675 -- -- -- --
Net income -- -- -- 4,399,628 -- -- --
---------- -------- ----------- ------------- ---------- ------------ ------------
Balance, February 28, 1996 13,329,778 133,298 54,230,850 (11,905,661) (706,401) (7,539,787) (1,384,932)
Exercise of options 333,800 3,338 1,015,350 -- -- (420,526) --
Exercise of warrants 589,726 5,897 2,743,124 -- -- -- --
Donation of stock 3,000 30 30,345 -- -- -- --
Cash receipts -- -- -- -- -- -- 450,000
Deferred compensation accrual -- -- 342,458 -- -- -- 182,443
Tax effect of options and warrants -- -- 1,988,000 -- -- -- --
Net income -- -- -- 7,822,611 -- -- --
---------- -------- ----------- ------------- ---------- ------------ ------------
Balance, February 28, 1997 14,256,304 142,563 60,350,127 (4,083,050) (706,401) (7,960,313) (752,489)
Exercise of options 117,195 1,172 340,759 -- -- -- --
Exercise of warrants 587,939 5,879 3,491,413 -- -- (262,000) --
Deferred compensation accrual -- -- 351,382 -- -- -- 241,728
Tax effect of options and warrants -- -- 654,000 -- -- -- --
ESOP third party loans -- -- 25,000 -- -- -- --
Settlements of notes receivable -- -- -- -- (703,000) 1,389,375 --
Net income -- -- -- 8,222,779 -- -- --
---------- -------- ----------- ------------- ---------- ------------ ------------
Balance, February 28, 1998 14,961,438 $149,614 $65,212,681 $ 4,139,729 ($1,409,401) ($6,832,938) $(510,761)
---------- -------- ----------- ------------- ---------- ------------ ------------
---------- -------- ----------- ------------- ---------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28,
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income from operations $ 8,222,779 $ 7,822,611 $ 4,399,628
Adjustments to reconcile net income from operations to
net cash generated by (used in) operating activities:
Extraordinary gain (5,552,813) -- --
Depreciation and amortization 287,727 160,754 167,185
Deferred income taxes (577,000) 23,000 (684,000)
Non-cash charges 36,375 397,391 25,000
Common shares issued for services and donation -- 30,375 --
Amortization of deferred credits (1,717,897) -- (392,633)
ESOP contribution 593,109 524,901 412,736
Tax benefit of stock options and warrants 654,000 1,988,000 1,013,000
Increase in minority interest payable 1,605,400 -- --
Changes in operating assets and liabilities:
Increase in receivables (59,388,746) (10,988,635) (1,687,043)
Increase in construction in progress -- -- (2,984,374)
Net (increase) decrease in notes receivable, inventory,
other current assets, and other assets (191,251) (3,235,578) (246,483)
Net increase (decrease) in accounts payable, accrued
expenses, deferred revenue and long-term liabilities 62,039,879 5,156,465 (413,744)
Increase (decrease) in accrued taxes (677,320) 246,166 (118,151)
------------ ------------ -----------
NET CASH GENERATED BY (USED IN) OPERATING ACTIVITIES 5,334,242 2,125,450 (508,879)
------------ ------------ -----------
INVESTING ACTIVITIES:
Construction in progress (4,187,134) -- --
Purchase of machinery and equipment (222,985) (158,995) (144,697)
Purchase of NAEC, net of cash acquired -- 128,495 --
------------ ------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (4,410,119) (30,500) (144,697)
------------ ------------ -----------
FINANCING ACTIVITIES:
Amounts received from ESOP -- 450,000 3,079,000
Proceeds from notes receivable -- -- 150,000
Payments on capital leases (10,006) (31,687) (17,545)
Payment of due to SBCC (2,750,000) (250,000) (250,000)
Proceeds from exercise of stock options and warrants 577,223 3,719,573 1,454,816
------------ ------------ -----------
NET CASH GENERATED BY (USED IN) FINANCING ACTIVITIES (2,182,783) 3,887,886 4,416,271
------------ ------------ -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,258,660) 5,982,836 3,762,695
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11,513,026 5,530,190 1,767,495
------------ ------------ -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 10,254,366 $ 11,513,026 $ 5,530,190
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
Non-cash investing and financing activities:
During Fiscal 1998, a non-cash transaction of $3,000,000 occurred as a
result of the exercise of 500,000 warrants at $6 per share, and a non-cash
transfer of $1,000,000 of notes receivable to a nonconsolidated affiliate
was recorded. In addition, the Company received a stock payment in-lieu of
cash as payment of an advance to an employee of $350,000 and a note
receivable of $389,376.
During Fiscal 1998, an advance distribution of $2,000,000 to RVA n a prior
year was offset against minority interest payable.
During Fiscal 1997, $28,808,535 was reclassified from construction in
process, other long-term receivables-WCTP and payment in-lieu of
performance bond-WCTP to notes receivable-WCTP.
During Fiscal 1997, the Company acquired 85% of the common stock of NAEC
for $1. The fair value of assets acquired was $4,587,849, and liabilities
assumed were $4,960,240.
During Fiscal 1997, a capital lease obligation of $211,060 was incurred
when the Company entered into leases for new equipment.
During Fiscal 1996, the Company issued 288,500 shares of common stock to
the ESOP, in exchange for a note receivable for $1,092,219.
During Fiscal 1998, 1997 and 1996, the Company received $262,000, $420,526
and $296,379 of notes receivable - sale of common stock, respectively, for
options exercised.
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
1. Nature of Business
York Research Corporation ("York" or the "Company") is a developer,
owner and marketer of energy related projects and products and through its
subsidiaries, partnerships, joint ventures and affiliates. The Company
currently participates in two broad areas of the energy business -- power
project development and services, including cogeneration and wind energy, and
the marketing of energy and natural gas in the wholesale power markets and
the wholesale and retail natural gas markets.
The principal markets for the Company's products and services
currently are the United States. Revenues are principally derived from
entities that supply, broker or market energy to utilities, residential
complexes, and industrial concerns.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of York and subsidiaries and
all majority owned partnerships include the accounts of Cogeneration
Technologies, Inc. ("Cogen"), B-41 Associates L.P. ("B-41LP"), B-41
Management Corporation ("B-41MC"), York Cogen Partners L.P. ("YCP"), York
Internet Power Services, Inc., North American Energy Conservation, Inc.
("NAEC"), York Research Canada, Inc. ("York Canada") and York Windpower
Corp., which is 100% owned by York Canada. All material intercompany profits
and transactions have been eliminated in consolidation. In addition, in
Fiscal 1998, new subsidiaries were formed in connection with new projects for
which no significant activity occurred through February 28, 1998.
39
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Revenue Recognition
The Company recognizes service revenues and energy sales in the
period in which the work is performed or the commodity is delivered.
Development fees received, which are included in service revenues, were
either amortized over the related development period, or recognized as
received, based on their nature.
Construction in Progress
Construction in progress includes engineering, professional fees,
equipment procurement costs, and other costs related to the projects under
development through February 28, 1998.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are being
depreciated or amortized on the straight-line method over their estimated
useful lives as follows:
Machinery and equipment 5-10 years
Furniture and fixtures 5-10 years
Motor vehicles 3 years
Leasehold improvements 5-8 years
Income Taxes
The Company utilizes the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under
SFAS No. 109, deferred tax assets or liabilities are computed based on the
difference between the financial statement and income tax bases of assets and
liabilities including any net operating loss and alternative minimum tax
credit carryforwards, using the enacted marginal tax rate. Deferred income
tax expense or benefits are based on the changes in the asset or liability
from period to period. Deferred tax assets are recognized to the extent
realization of such benefits are more likely than not.
40
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
Excess of Investment Over Net Assets Acquired, Net
The Company's acquisition of Cogen in 1985 resulted in an $828,000
excess of investment over net assets acquired, which is being amortized on a
straight-line basis over 20 years. Accumulated amortization at February 28,
1998 and 1997 is approximately $529,000 and $490,000, respectively. At each
balance sheet date, the Company evaluates the realizability of goodwill based
upon expectations of nondiscounted cash flows and operating income for each
subsidiary having a material goodwill balance. Based upon its most recent
analysis, the Company believes that no material impairment of goodwill exists
at February 28, 1998.
Long-Term Receivable and Note Receivable-WCTP
The realizability of the long-term receivable and note
receivable-WCTP is evaluated by the Company by review of the present value of
the currently expected future cash flow from the Warbasse facility.
Per Share Data
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"),
Earnings Per Share, which is effective for financial statements for both
interim and annual periods ending after December 15, 1997. Early adoption of
the new standard was not permitted so SFAS No. 128 was adopted in the fourth
quarter of Fiscal 1998. The new standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and diluted earnings
per share together with disclosure of how the per share amounts were computed
for all periods presented. Basic earnings per share excludes dilution and is
computed by dividing income available to common shareholders by the
weighted-average common shares outstanding for the period. Diluted earnings
per share reflects the weighted average common shares outstanding plus the
potential dilutive effect of securities or contracts which are in the money
and convertible to common shares, such as options and warrants, unless
antidilutive based upon income before extraordinary gain. The following is a
reconciliation of the number of basic to diluted shares used in the
computation of earnings per share for the years ended February 28, 1998, 1997
and 1996:
41
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Weighted average number of common shares
outstanding 14,776,882 13,705,557 12,885,674
Average of unreleased ESOP shares (754,495) (923,006) (1,219,279)
---------- ---------- -----------
Weighted average number of common shares
outstanding - basic 14,022,387 12,782,551 11,666,395
Dilution (warrants and options) 1,538,738 2,307,842 981,696
---------- ---------- -----------
Weighted average number of common share
and common share equivalents outstanding -
diluted 15,561,125 15,090,393 12,648,091
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The amounts shown as average of unreleased ESOP shares and dilution
(warrants and options) reflect the averages for the periods presented.
Options and warrants to purchase 175,000, 50,000 and 25,000 shares
of common stock were outstanding in Fiscal 1998, 1997 and 1996, respectively,
ranging from $9.63 to $11.00, $10.00 to $11.00, and $11.00 per share,
respectively, but were not included in the computation of diluted earnings
per share because the options' exercise prices were greater than the average
market price of common shares. The options and warrants, which expire between
April 26, 2000 and September 6, 2006, were still outstanding at February 28,
1998.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts and
other receivables, accrued expenses and accounts payable approximate fair
value, principally because of the short maturity of these items. For the fair
value of Due to SBCC, see Note 5. For long-term receivable and note
receivable-WCTP (see Note 5 for terms) and advances to minority partner (see
Note 14 for terms), there are no quoted market prices, and a reasonable
estimate of fair value could not be made without incurring excessive costs.
42
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
Inventory
Inventory consists of natural gas held in storage. The Company
accounts for its natural gas inventory using lower of cost or market, cost
being determined using the average cost method.
Reclassifications
Certain amounts in the 1997 and 1996 consolidated financial
statements were reclassified to conform to the 1998 presentation.
Significant New Accounting Pronouncements
The Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"), governing the reporting and display of comprehensive income
and its components, and Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information" ("SFAS
No. 131"), requiring that all public businesses report financial and
descriptive information about their reportable operating segments. The
Company will implement SFAS 130 and SFAS 131 as required in Fiscal 1999. The
impact of adopting SFAS No. 130 is not expected to be material to the
consolidated financial statements or notes to consolidated financial
statements. Management is currently evaluating the effect of SFAS No. 131 on
consolidated financial statement disclosures.
The American Institute of Certified Public Accountant's Accounting
Standards Executive Committee recently issued Statement of Position 98-5
("SOP 98-5"), "Reporting on the Costs of Start-Up activities". SOP 98-5
requires that costs of start-up activities, including organization costs, be
expensed as incurred. Start-up activities are broadly defined and include
one-time activities related to opening a new facility, introducing a new
product or service, conducting business in a new territory, conducting
business with a new class of customer or beneficiary, initiating a new
process in an existing facility, commencing some new operation, and
organizing a new entity. SOP 98-5 is generally effective for financial
statements for fiscal years beginning after December 15, 1998, with initial
application reported as the cumulative effect of a change in accounting
principle. The Company is currently evaluating the impact that SOP 98-5 will
have on the Company's financial statements.
43
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
4. Brooklyn Navy Yard
Brooklyn Navy Yard Cogeneration Partners, L.P. ("BNYLP") is owned
equally by a subsidiary of Edison Mission Energy ("Mission"), which is an
indirect wholly-owned subsidiary of Edison International, and B-41LP. BNYLP
was formed to develop, construct, finance, own and operate the 286 megawatt
("MW") natural-gas-fired, combined-cycle Brooklyn Navy Yard ("BNY") facility.
The facility has been operational since 1996 and supplies
Consolidated Edison of New York, Inc. ("Con Ed") with both electricity and
steam under a 40 year contract. Steam is delivered to Con Ed's New York City
district steam system. The facility also supplies energy to the host
industrial park and to an adjacent waste water facility.
The project began in 1989 when York executed a lease on the
abandoned Navy Yard coal fired power plant. In 1990, York and associated
entities submitted bids to Con Ed, and were awarded separate contracts for
three small plants to supply energy to Con Ed. These three successful parties
later combined their interests (totaling 170 MW) to form B-41LP (which is
74.7% owned by York) and began negotiations to supply the power and steam
from a single larger plant by initiating permitting activities and purchasing
equipment. In order to finance further development and construction, B-41LP
sold 50% of the project to Mission. York and Mission proceeded to complete
development and construction of the larger project and negotiated a new 40
year integrated energy supply contract with Con Ed. The project entered
service at the end of 1996.
B-41LP was formed to more effectively develop and manage the
original partners' investments in the BNY facility. The profit sharing and
ownership percentages in the B-41LP partnership agreement, as amended, are as
follows:
1. RV Associates L.P. ("RVA"), whose limited partner, RRR'S
Ventures Ltd., and general partner are controlled by the
Chairman of the Company, is a 5% general partner. B-41MC, a
wholly-owned subsidiary of York, is also a 5% general partner.
2. RVA is also a 15% limited partner. RVA contributed a power
purchase agreement totaling 40 MW.
44
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
3. Cogen, a wholly-owned subsidiary of York, is a 22% limited
partner. Cogen contributed a power purchase agreement totaling
40 MW.
4. YCP is a 53% limited partner. RRR'S Ventures Ltd. is the 10%
general partner of YCP, and York is the 90%
limited partner in YCP. YCP contributed a power
purchase agreement totaling 90 MW.
For tax purposes, depreciation, operating losses and capital
transactions are subject to other sharing percentages.
The BNYLP partnership agreement as amended contains provisions,
among other things, with respect to the allocation of cash flow and tax
depreciation under various circumstances, profits and losses both before and
after Mission's advances have been repaid, management of the Partnership, and
dispute resolution. B-41LP and Mission have amended the Partnership agreement
to reflect certain changes pertaining to funding obligations, management, and
operations.
Upon formation of BNYLP, all of the project-related assets, contract
rights, leases or other intangible assets that had been accumulated by the
Company and B-41LP during the pre-joint venture development period, as well
as all related liabilities, were transferred to BNYLP. Although BNYLP
accounts for B-41LP's contribution at an agreed upon value of $7,000,000,
B-41LP recorded its investment in BNYLP at the historical carrying value of
the assets contributed of zero. B-41LP accounts for its investment in BNYLP
under the equity method.
For the years ended February 28, 1997 and 1996, BNYLP's only
activity was the construction, testing and operation of the BNY facility. As
capacity payments from Con Edison did not start until March 1997, BNYLP did
not recognize any revenues, expenses, or operating profits or losses prior to
that date. The summarized financial information of BNYLP as of and for the
years ending February 28, 1998 and 1997 is as follows:
45
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
1998 1997
------------- -------------
<S> <C> <C>
Current assets $ 20,283,000 $ 23,797,000
Noncurrent assets $494,515,000 $454,747,000
Current liabilities $ 20,679,000 $204,234,000
Noncurrent liabilities $501,942,000 $253,926,000
Net assets $ (7,823,000) $ 20,384,000
Total revenues $128,259,000 $ 0
Net loss $(28,142,000) $ 0
</TABLE>
On November 1, 1996, the BNY facility commenced operations,
generating electricity and steam in accordance with its contracts. Long-term
project financing was completed on December 17, 1997 with the sale of $100.0
million aggregate principal amount of Senior Secured Bonds Due 2020 and
$307.0 million aggregate principal amount of New York City Industrial
Development Agency Industrial Development Revenue Bonds due from 2022 to
2036. The Company provided no guarantees with regard to this financing, and
has no obligation to provide funding of any sort. As a result of this
financing, and as compensation for services rendered, the Company received a
fee of $6 million from Mission, which was included in Service Revenues in the
fourth quarter of Fiscal 1998. The Company also expects to receive continuing
general partner and other fees over the 40 year life of the project.
In March 1997, the Company settled all of its obligations related to
this project with a financing entity for $2,750,000, plus other consideration
(see Note 5).
In consideration for certain development services for the BNY
facility performed by the Company, RVA has assumed the obligation for certain
loans from Mission totaling $9,750,000 which are repayable only from amounts
received from third party BNYLP financings or BNY facility operations. In
addition, RVA has also accepted a reduced share of development fees and
reimbursements.
As of February 28, 1998, the Company and B-41LP have received a
total of $21,541,000 for development fees, a nonrefundable commission from a
vendor in connection with the procurement of certain BNYLP equipment, and for
reimbursement of development costs net of related liabilities assumed by
BNYLP. In Fiscal 1996, the Company recognized development fee revenue of
$3,267,000. At February 28, 1998, revenues of $3,287,000 were deferred, which
is one half of the nonrefundable commission deferred until the equipment was
placed in service, less $173,000 recognized in Fiscal 1998. The deferred
balance will be
46
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
recognized over the remaining estimated useful life of the related equipment
of twenty years.
In accordance with the joint venture agreement, the Company provides
engineering services for BNYLP. During Fiscal 1998, 1997 and 1996, the
Company recognized revenue from engineering services of approximately
$465,000, $838,000 and $780,000, respectively, which are reflected in service
revenues and cost of services. During Fiscal 1997 and 1996, the Company also
recognized reimbursements of $2,500,000 and $5,000,000, respectively, for
certain engineering and other costs a portion of which had been expensed in
prior periods. At February 28, 1998 and 1997, the Company had receivables
from BNYLP of approximately $50,000 and $280,000, respectively, related to
engineering services. These amounts are included in other receivables and
were fully collected subsequent to the respective year ends.
Commencing December 1, 1996 through December 31, 1997, BNYLP paid
general partner fees to B-41LP equal to 2.5% of gross monthly revenues of the
Brooklyn Navy Yard project. B-41LP in turn paid a general partner fee of
1.25% of gross monthly revenues to each of B-41MC and RVA. Pursuant to the
amended partnership agreement, the general partner fee was reduced to .5% of
gross revenues for the four years commencing January 1, 1998. In the years
ended February 28, 1998 and 1997, B-41MC recognized general partner fees of
approximately $1,355,000 and $299,000, respectively, with receivables of
approximately $420,000 and $167,000 at February 28, 1998 and 1997,
respectively. Royalty fees of approximately $1,078,000 were recognized during
Fiscal 1998. These royalties, which are equal to 4.5% of gross revenues,
commenced in January 1998, and will continue for four years. RVA has agreed
not to share in these royalties.
Pursuant to the provisions of the partnership agreement, Mission
retains the right to take all the votes on the Management Committee that
controls the day to day operations of BNYLP. If Mission decides to exercise
its right to cast all votes on the BNYLP Management Committee, B-41LP still
remains a 50% general and limited partner in the Navy Yard project and
retains all its other rights.
In February 1997, the general contractor of the Brooklyn Navy Yard
facility brought an action in California against BNYLP seeking damages of
$137 million for amounts owed under the turnkey contract and denying
liability under various claims. BNYLP responded to the complaint, denying all
the allegations contained therein and commenced an action in New York against
the general contractor denying any liability under the turnkey contract and
seeking damages in excess of
47
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
$13 million pursuant to various counterclaims. In addition, BNYLP has been
named as one of the defendants in another action relating to the construction
activity of the Brooklyn Navy Yard facility. Although it is a general partner
of BNYLP, B-41LP was not served in these complaints and is not a party to any
of the actions. Mission has agreed to indemnify both BNYLP and B-41LP against
any costs resulting from the Contractor's action. B-41LP has agreed to
reimburse Mission for 25% of the excess over $10 million of such costs, if
any, with an aggregate limit of $10 million, payable solely out of B-41LP's
partnership fees and distributions and further limited to $1 million per year
for 1998, 1999 and 2000, and $2 million per year thereafter.
Like other large projects of this nature, the BNY cogeneration
facility is subject to various risks. There can be no assurance that the
facility, although completed, will operate at sufficient levels to cover all
operation and maintenance expenses and debt service. The Company has no
liability for any such shortfalls, although if the shortfalls occur, they
could impact the general partner and royalty fees mentioned above.
5. Warbasse Project
In May 1990, an agreement was entered into between
Warbasse-Cogeneration Technologies Partnership L.P. ("WCTP") (see Note 14)
and the Company whereby the Company agreed to construct the expansion of the
Warbasse facility converting it from the engine facility previously
constructed for WCTP by the Company, to a larger gas turbine facility (the
"Warbasse Project") to enable it to service Con Edison pursuant to the
existing contract between WCTP and Con Edison.
The Company also contracted with WCTP to provide operations and
maintenance services for the Warbasse Project at its direct cost. The
services agreement includes providing fuel, operating, manning and
maintaining the facility. The Company operates the Warbasse Facility,
supplying on a continuous basis all the thermal and electric energy needs of
the host, Amalgamated Warbasse Houses, Inc., and supplying up to the full
capacity requirements of its electric power contract with Con Edison, when
dispatched. During Fiscal 1998, 1997 and 1996, the Company recognized
approximately $7,200,000, $5,400,000 and $4,700,000, respectively, for
operations and maintenance services revenues, which has been reflected in
service revenues. Cost of services for the same periods was approximately
$7,200,000, $5,400,0000 and $4,700,000, respectively.
48
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
On July 27, 1994, B-41LP purchased from Sanwa Business Credit Corp.
("SBCC") the note obligation of WCTP to SBCC together with all related
collateral and ancillary rights owned by SBCC. In payment, SBCC would have
received a share of the cash flow, if any, from the BNY project. The note
obligation of WCTP to B-41LP (the "B-41LP Note") has been recorded as a
Long-term note receivable - WCTP and has a face value of $28,522,000, which
includes accrued interest. This obligation is payable from a portion of the
net operating cash flow of the Warbasse project. On December 1, 1996, this
note obligation of WCTP (herein after referred to as the YCP Note) was
assigned to YCP by B-41LP. The YCP Partnership Agreement was amended to
provide that the amounts received by YCP in respect of the note obligation
shall be distributed 74.7% to York and 25.3% to RRR'S, its minority partner,
which are the same distribution percentages as were held by York and
affiliates of RRR'S in B-41LP.
The YCP Note has been reflected in the consolidated balance sheet at
an amount equal to the initial obligation to SBCC. The $7,840,000 difference
between the face amount of the note and the amount reflected will be adjusted
to income over time as principal payments of the long-term note receivable
are made by WCTP.
The obligation of B-41LP to SBCC had been recorded as Due to SBCC of
$20,682,000, which was the net present value of the maximum annual amount
payable to SBCC, over 30 years discounted at 7%. In March 1997, B-41LP
settled all its obligations to SBCC for a cash payment of $2,750,000. SBCC,
in exchange for this cash payment, gave up all its interest in the future
cash flow from the Brooklyn Navy Yard Project and has no continuing interest
in any of the Company's projects or assets. In settling this obligation,
B-41LP caused RVA and its partners to lose tax benefits that they would have
been able to utilize. Therefore, the Company compensated RVA for its lost tax
benefits in the total amount of $4 million. The form of this non-cash
transaction with RVA and its partners was the exercise of 500,000
pre-existing warrants at $6 per share for a total of $3,000,000, and the
transfer of $1,000,000 of the Company's note receivable from the Chairman to
a nonconsolidated affiliate. This extinguishment of the SBCC liability
resulted in an extraordinary gain of approximately $5.6 million net of taxes
of $4.3 million and minority interest of approximately $3.4 million, which
was reflected in the first quarter of Fiscal 1998.
On November 17, 1994, the YCP Note due from WCTP was restructured
along with other long-term debt of WCTP. Such other long-term debt of WCTP
includes a note payable to Tomen Power Corporation ("Tomen") and
49
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
includes a note payable to Cogen. The three notes will share in the net
operating cash flow of WCTP, as defined, pro rata in proportion to the
principal balances of the notes, and would share pari passu in the collateral
of WCTP in the event of a default. Management expects that all three notes
will be paid from the operations of WCTP, and each note carries an interest
rate of LIBOR plus 2%. In addition, YCP and Cogen will receive a
restructuring fee of $3,000,000 each, to be paid the year after the three
notes are fully paid.
The Company completed construction of the project, and on August 1,
1996, the Warbasse Facility was transferred by Cogen to WCTP, in exchange for
a Note Receivable of $28,808,535. The Note Receivable represents the total
construction cost of the facility plus (1) the unpaid balance of
approximately $1,530,000 in Other long-term receivables-WCTP at February 28,
1996, which related to operation and maintenance services performed for WCTP
in prior periods, (2) a $500,000 payment made to WCTP in lieu of a
performance bond and (3) an accrual for the remaining construction tasks
which generally relate to improving efficiency and operational control.
Therefore, the caption Long-term note receivable-WCTP on the balance sheet
consists of:
<TABLE>
<S> <C>
YCP Note $20,682,000
Cogen Note 28,808,535
-----------
$49,490,535
-----------
-----------
</TABLE>
Interest income on these notes amounted to approximately $4,510,000,
$3,490,000 and $2,360,000 for Fiscal 1998, 1997 and 1996, respectively.
6. Receivables - Related Parties
Other receivables - related parties at February 28, 1998 and 1997
consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Service and other receivables - WCTP $4,479,165 $8,019,190
Engineering service and general
partner and royalty fee receivables -
BNYLP 1,547,314 279,616
----------- ----------
$6,026,479 $8,298,806
----------- ----------
----------- ----------
</TABLE>
Included in long-term receivable-WCTP are receivables related to
operations and maintenance services and certain advances. These amounts are
non-interest bearing.
50
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
7. Property, Plant and Equipment
Property, plant and equipment at February 28, 1998 and 1997 consist
of the following:
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Machinery and equipment $ 1,094,629 $ 925,099
Furniture and fixtures 254,209 249,980
Motor vehicles 315,448 315,448
Leasehold improvements 85,290 36,064
------------ -----------
1,749,576 1,526,591
Less: accumulated depreciation (1,172,518) (924,163)
------------ -----------
$ 577,058 $ 602,428
------------ -----------
------------ -----------
</TABLE>
8. Construction in Progress
a) Big Spring Wind Project
On October 21, 1997, York acquired 100% of the partnership
interests in New World Power Texas Renewable Energy Limited Partnership,
whose significant asset was a power purchase agreement with Texas Utilities
Electric Company. York has commenced procurement and other preconstruction
tasks, and currently expects full commercial operation by February 1999. When
completed, the facility is expected to have a capacity of 35 MW and include
46 turbines, including four 1,650 Kilowatt ("kW") wind turbines. Through
February 28, 1998, the total costs incurred related to the development and
construction of this project were approximately $3,002,000, which is included
in construction in progress.
b) Trinidad Power Project
On February 12, 1998, InnCogen Ltd., a wholly owned indirect
subsidiary of York, signed a power purchase agreement with Trinidad and
Tobago Electricity Commission ("T&TEC") to supply electricity under a 30 year
contract. The Company has plans to construct a 215 MW natural gas fueled
combustion turbine project. Through February 1998, the total costs
capitalized that relate to the development and construction of this project
were approximately $1,185,000, which is included in construction in progress.
51
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
9. Accrued Expenses and Other Payables
Accrued expenses and other payables at February 28, 1998 and 1997
include:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Accounts payable other
than energy $3,013,000 $2,113,000
Professional fees 1,190,000 537,000
Taxes other than income 780,000 445,000
Accrued pension cost 376,000 398,000
Other 1,878,000 279,000
---------- ----------
Total accrued expenses and
other payables $7,237,000 $3,772,000
---------- ----------
---------- ----------
</TABLE>
10. Stockholders' Equity
Common Stock - The Company has authorized 50,000,000 shares of
common stock. In addition, the Company has authorized 10,000,000 shares of
Class A common stock, none of which have been issued. Each Class A common
share has one/hundredth of a vote as compared with the regular common stock
and is entitled to a $.20 dividend priority before any dividends are payable
on the full voting common stock.
Incentive Stock Option ("ISO") Plan - In 1982, the Company
authorized 1,400,000 qualified stock options, which have all been granted.
The 1982 Plan expired on April 26, 1992. In September 1993, the Company
adopted the 1993 ISO Plan, authorizing a total of 3,000,000 qualified and
nonqualified stock options, of which 2,045,500 qualified stock options were
granted to employees, and 41,000 nonqualified stock options were granted to
two consultants to the Company.
Options granted under both plans may not be granted at a price less
than the fair market value of the Common Stock on the date of grant (or 110%
of fair market value in the case of persons holding 10% or more of the voting
stock of the Company). Options granted under the Stock Option Plans will
expire not more than ten years from the date of grant.
In Fiscal 1998 and 1997, the Company granted 451,500 and 150,000
options, respectively, to employees of the Company. No options were granted
in Fiscal 1996. The exercise price of the options is equal to the fair market
value of the common stock at the date of the grant. These options vest over
five and three year periods, respectively.
The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, Accounting for Stock Based Compensation (FAS
52
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
123). It applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its plans and does
not recognize compensation expense for its stock based compensation plans. If
the Company had elected to recognize compensation expense based upon the fair
value at the grant date for awards under these plans consistent with the
methodology prescribed by FAS 123, the Company's net income and income per
share would be decreased to the pro forma amounts indicated below for the
year ended February 28, 1998 and 1997:
<TABLE>
<CAPTION>
As reported Proforma
----------- ----------
<S> <C> <C>
Year ended February 28, 1998
Net Income:
Net income before
extraordinary item $2,669,966 $2,077,669
Net income $8,222,779 $7,630,482
Income per share:
Basic:
Income before
extraordinary item $0.19 $0.15
Net income $0.59 $0.54
Diluted:
Income before
extraordinary item $0.17 $0.13
Net income $0.53 $0.49
Year ended February 28, 1997
Net Income $7,822,611 $7,698,490
Income per share
Basic $0.61 $0.60
Diluted $0.52 $0.51
</TABLE>
53
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related to
grants made before March 1, 1995. The fair value of these options was estimated
at the date of grant using Black-Scholes option-pricing model with the following
weighted-average assumptions for the years ended February 28, 1998 and 1997:
<TABLE>
<CAPTION>
For the year ended February 28,
1998 1997
---------- ----------
<S> <C> <C>
Volatility 71% 79%
Risk free rate 6.77% 6.98%
Expected life 10 years 10 years
Forfeiture rate 8% 33%
</TABLE>
The weighted average fair value of options granted during Fiscal
1998 and 1997, for which the exercise price equals the market price on the
grant date, was $5.61 and $7.64, respectively, and the weighted average
exercise price was $6.88 and $8.96, respectively.
Stock option activity during Fiscal 1998, 1997 and 1996 is summarized
below:
<TABLE>
<CAPTION>
Weighted-Average
Options Exercise Price
--------- ----------------
<S> <C> <C>
Balance, February 28, 1995 2,216,900 $4.37
Exercised (222,957) 4.24
Canceled (23,543) 4.23
----------
Balance, February 28, 1996 1,970,400 4.36
Granted 150,000 8.96
Exercised (333,800) 3.79
Canceled (40,773) 4.17
----------
Balance, February 28, 1997 1,745,827 4.90
Granted 451,500 6.88
Exercised (154,219) 4.36
Canceled (40,000) 7.44
----------
Balance, February 28, 1998 2,003,108 $5.34
----------
----------
</TABLE>
At February 28, 1998, 1997 and 1996, 1,460,980, 1,361,313 and
1,496,252, options, respectively, were exercisable.
54
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
The following table summarizes information concerning currently
outstanding and exercisable stock options:
<TABLE>
<CAPTION>
Weighted-Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Life Exercise Number Exercise
Prices Outstanding (Years) Price Exercisable Price
- -------- ----------- ---------------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$3.00-$4.50 685,223 6.44 $3.19 638,023 $3.20
$4.51-$6.75 627,085 4.91 $5.36 599,885 $5.36
$6.76-$10.00 690,800 8.12 $7.45 223,072 $8.05
----------- -----------
2,003,108 1,460,980
----------- -----------
----------- -----------
</TABLE>
Warrants - All warrants are exercisable upon grant, although the
underlying shares may not necessarily be registered, and the warrants expire
up to ten years. The exercise prices of the warrants are the NASDAQ closing
prices of the Company's common stock at the dates of grant.
In February and March 1988, the Company's Chairman exercised
warrants to purchase 850,000 shares of common stock in exchange for cash and
a noninterest bearing note totaling $3,531,250. In September 1989, the
Company's Chairman exercised warrants to purchase 625,000 shares of common
stock in exchange for cash and a noninterest bearing note payable on demand
totaling $3,706,250. In Fiscal 1992, the Company's Chairman repaid $600,000.
In Fiscal 1998, $1,000,000 of the Company's note receivable from the Chairman
was transferred to a nonconsolidated affiliate (see Note 5). These notes,
which total $5,971,500 and $6,971,500, respectively, at February 28, 1998 and
1997 are included in Notes receivable - sale of common stock. In June, 1996,
the Company's Chairman gifted 100,000 warrants to various third parties.
The following table presents Mr. Beningson's total number of
warrants outstanding as of February 28, 1998 (see Note 5):
<TABLE>
<CAPTION>
Date of # Warrants Price Per
Grant Held Share
- -------- ---------- ---------
<S> <C> <C>
1/91 350,000 $6.00 (reset from $8.00 on 7/16/93)
7/93 800,000 $6.00
---------
1,150,000
---------
---------
</TABLE>
In July 1995, Stanley Weinstein, a director of the Company, was
granted warrants to purchase 20,000 shares of the Company's common stock at
$5.44 per share through 2005. In September, 1997, warrants to purchase 20,000
shares of the Company's common stock at $7.31 per share were granted each to
Stanley Weinstein and Howard Sommer directors of the Company.
In Fiscal 1997, a former director of the Company exercised warrants
to purchase a total of 300,000 shares of the Company's common stock in
exchange for $1,387,500. In Fiscal 1996, this former director exercised
warrants to purchase a total of 200,000 shares in exchange for $925,000. At
February 28, 1998, this former Director holds warrants to purchase 700,000
shares of common stock which expire in 2002 and specify a purchase price of
$4.63.
55
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
During Fiscal 1998, a vice president of Cogen exercised warrants to
purchase 50,000 shares of common stock in exchange for cash and a note for
$262,000.
In July 1993, warrants were granted to purchase 75,000 shares of the
Company's common stock at a purchase price of $6.00 per share to three
entities that have performed various consulting services for the Company. In
September 1995, December 1995 and March 1996, warrants were granted at prices
ranging from $5.13 to $5.88 to purchase 30,000, 32,500 and 20,000 shares,
respectively, of the Company's common stock, to consultants that have
performed various services for the Company. During Fiscal 1997, 10,000
warrants were exercised for $51,250, and 25,000 warrants were exercised for
$137,500.
The Company has outstanding two classes of common stock purchase
warrants, which were issued in connection with the settlement of litigation
in 1993, as amended. As of February 28, 1998, there were outstanding Class B
Warrants evidencing the right to purchase 131,180 shares, which have the
following attributes: (i) an Exercise Price of $6.15; (ii) the Company has
the right to reduce the Exercise Price at any time; (iii) pursuant to an
agreement dated October 31, 1997, the Company redeemed 10% of outstanding B
Warrants in April, 1998 at $11.50 per warrant, and has agreed to redeem an
additional 10% on April 1, 1999 and the balance on April 1, 2000 at $11.50
per Warrant share and (iv) the redemption obligation is secured by a 17.5%
limited partnership interest in BNYLP, held by B-41LP. During the year ended
February 28, 1998, the Company recorded an expense of approximately $301,000
relating to this redemption. As of February 28, 1998, there were also
outstanding Class C Warrants evidencing the right to purchase 91,834 shares
at an exercise price of $6.50 per share, which Warrants expire between
September 27, 1998 and October 4, 1998, and have no redemption provisions.
In the aggregate, at February 28, 1998, warrants to purchase
2,707,391 shares of the Company's common stock at prices ranging from $4.50
to $11.00 were outstanding, expiring through 2005.
11. Employee Benefit Plans
Employee Savings Plan
During 1988, the Company adopted the York Research Corporation
401(k) Plan ("401(k) Plan"). The 401(k) Plan allows employees of the Company
to defer a portion of their earnings on a pre-tax basis through contributions
to the 401(k) Plan. The Company may at its discretion make a contribution to
the 401(k) Plan. To date the Company has elected not to contribute to the
401(k) Plan.
Defined Benefit Plan
The Company has a defined benefit pension plan covering
substantially all employees not covered by a collective bargaining agreement.
The benefits are based on years of service and the highest consecutive five
years of the employees' compensation. The Company's funding policy is to
contribute annually the amount necessary to satisfy the Internal Revenue
Service's funding standards. Contributions are intended to provide, not only
for benefits attributed to service to date, but also for those expected to be
earned in the future.
56
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
Pension cost for the years ended February 28, 1998, 1997 and 1996
include the following components:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Service cost -
benefits earned during
the current period $ 33,967 $ 30,756 $ 28,568
Interest cost on projected
benefit obligation 109,857 104,757 87,520
Actual return on plan assets (38,453) (39,633) (36,716)
Net amortization and deferral (9,966) (4,263) 4,178
-------- -------- -------
Net pension cost $ 95,405 $ 91,617 $83,550
-------- -------- -------
-------- -------- -------
</TABLE>
For all periods presented, the weighted average discount rate was
8.5% and rate of increase in future compensation levels was 3% used in
determining the actuarial present value of the projected benefit obligation.
The expected long-term rate of return on plan assets is 8.5%.
The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheet as of February 28, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $1,084,852 $1,195,570
----------- ----------
----------- ----------
Accumulated benefit obligation $1,065,017 $1,216,018
----------- ----------
----------- ----------
Projected benefit obligation $1,115,731 $1,292,437
Plan assets at fair value 693,325 860,810
----------- ----------
Unfunded obligation 422,406 431,627
Unamortized net transition obligation (97,440) (111,949)
Unrecognized net (gain) loss 102,832 78,357
----------- ----------
Accrued pension cost $427,798 $398,035
----------- ----------
----------- ----------
</TABLE>
Employee Stock Ownership Plan
During 1988, the Company adopted an Employee Stock Ownership Plan
("ESOP") that covers substantially all employees. Effective March 1, 1994,
the Company adopted the provisions of Statement of Position 93-6, "Employers'
Accounting for Employee Stock Ownership Plans" ("SOP 93-6"). The following
table presents the number of shares of common stock, which were unregistered
at the time and subsequently registered, the ESOP purchased from the Company,
at prices which represented 70% of the NASDAQ closing prices at the date of
purchase:
57
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
<TABLE>
<CAPTION>
Purchased in # Shares Purchase
Fiscal Year Purchased Price
- ------------- --------- -----------
<S> <C> <C>
1996 288,500 $ 1,092,219
1993 and prior 3,500,000 13,370,000
--------- -----------
3,788,500 $14,462,219
--------- -----------
--------- -----------
</TABLE>
Management believes the valuation represented the fair market value
of the unregistered shares on those dates.
The Company contributed approximately $593,000, $525,000 and
$413,000 to the ESOP during Fiscal 1998, 1997 and 1996, respectively. The
Company makes annual contributions to the ESOP as determined by the Board of
Directors and subject to certain limitations dictated by tax regulations.
To purchase the shares from the Company, the ESOP borrowed funds
from the Company. Repayment of these loans has been and is expected from
employer contributions, borrowing by the ESOP from third parties, and by sale
of unreleased ESOP shares to third parties. The Company has recorded all
amounts loaned to the ESOP as deferred compensation, a contra-equity account,
and has included the third party loans to the ESOP in other long-term
liabilities. Certain of the unreleased ESOP shares are used as collateral for
a third party loan to the ESOP.
During the quarter ended August 31, 1993, the ESOP borrowed
$1,150,000 from third parties. These funds, along with an additional
$12,987,000 generated through February 28, 1998 by the sale of the Company's
stock owned by the ESOP, were used to repay the demand purchase money loans
due to the Company. The $1,150,000 initially borrowed by the ESOP was
included in other long-term liabilities and as deferred compensation, a
contra-equity account, and had a balance of approximately $511,000 and
$626,000 at February 28, 1998 and 1997 as a result of repayments by the ESOP.
The ESOP incurred interest expense of approximately $43,000, $72,500 and
$65,000, respectively, related to these loans during Fiscal 1998, 1997 and
1996.
ESOP shares are released and allocated to participant accounts based
upon Company contributions and certain payments made to reduce ESOP debt to
the Company. The Company reports compensation expense as shares are committed
to be released equal to the current market price of the shares, and the
shares then become outstanding for earnings-per-share ("EPS") computations.
58
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
A summary of the ESOP shares as of February 28, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Allocated shares 608,002 551,649
Shares released for allocation 74,665 56,353
Unreleased shares 714,530 867,995
---------- ---------
1,397,197 1,475,997
---------- ---------
---------- ---------
Fair value of unreleased shares
at February 28, 1998 and 1997 $5,061,711 $8,028,954
---------- ---------
---------- ---------
</TABLE>
12. Income Taxes
The provision (benefit) for income taxes for each of the three years
ended February 28, 1998 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
Current:
Federal $ 833,000 $ 602,000 $ 75,000
State and local 898,000 587,000 46,000
----------- ---------- ---------
1,731,000 1,189,000 121,000
----------- ---------- ---------
Deferred:
Federal (475,000) (89,000) (399,000)
State and local (102,000) 112,000 (285,000)
----------- ----------- ----------
(577,000) 23,000 (684,000)
----------- ----------- ----------
Tax benefits allocated directly to
additional paid-in capital:
Federal 590,000 1,577,000 275,000
State and local 64,000 411,000 738,000
----------- ----------- ---------
654,000 1,988,000 1,013,000
----------- ----------- ---------
Provision $1,808,000 $3,200,000 $450,000
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
Through the fiscal year ended September 30, 1994, the Company filed
its tax returns based on a September year-end. On July 18, 1995, the Internal
Revenue Service granted the Company permission to file its tax returns on a
February year-end, effective February 28, 1995. At February 28, 1998, the
Company had the following net operating loss carryforwards for federal income
tax purposes:
<TABLE>
<CAPTION>
Year of Expiration Amount
- ------------------ ---------
<S> <C>
September 30, 2007 $ 936,000
September 30, 2009 155,000
----------
$1,091,000
----------
----------
</TABLE>
During the year ended February 28, 1997, the Company utilized all of
its alternative minimum tax net operating loss carryforwards. The difference
between these loss carryforward amounts is attributable to adjustments
required in the alternative minimum tax computation.
59
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
Internal Revenue Code Section 382 places a limitation on the
utilization of carryforwards when an ownership change, as defined in the tax
law, occurs. Generally, an ownership change occurs when there is a greater than
50 percent change in ownership. If such a change should occur, the actual
utilization of carryforwards, for tax purposes, would be limited annually to a
percentage, approximately 5%, of the fair market value of the Company at the
time of such change.
The reconciliation between the effective tax rate and the statutory
federal income tax rate for each of the three years ended February 28, 1998
is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Amount computed using the
statutory rate $1,523,000 $ 3,748,000 $ 1,646,000
Increase (reduction) in taxes
resulting from:
Increase (utilization) of
federal loss carryforwards -- (1,248,000) (1,391,000)
Reduction in valuation allowance
for loss carryforwards -- (434,000) (684,000)
Imputed interest income on
loans (4,000) 153,000 171,000
Nondeductible expenses 391,000 207,000 194,000
Foreign losses 80,000 6,000 325,000
Litigation settlement -- (45,000) 169,000
Intangibles (49,000) -- --
Valuation allowances on other
temporary differences (658,000) (522,000) (383,000)
State and local taxes, net
of federal tax benefit
and state loss carryforwards 567,000 733,000 329,000
Alternative minimum tax 20,000 602,000 75,000
Other (62,000) -- (1,000)
----------- ------------ -----------
$1,808,000 $3,200,000 $ 450,000
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
60
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
The components of the net current deferred tax asset and long-term
deferred tax liability as of February 28, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Current deferred tax asset
Loss carryforwards $ 1,565,000 $ 1,624,000
Credit carryovers 694,000 675,000
Accrued expenses 247,000 26,000
----------- -----------
2,506,000 2,325,000
Less: Valuation allowance (903,000) (1,337,000)
----------- -----------
Total current deferred
tax asset 1,603,000 988,000
----------- -----------
Current deferred tax liability
Partnership items 419,000 338,000
Other (54,000) (11,000)
----------- -----------
Total current deferred
tax liability 365,000 327,000
----------- -----------
Net current deferred
tax asset 1,238,000 661,000
Long-term deferred tax liability
Long-term note receivable -
WCTP (5,632,100) --
----------- -----------
Net deferred tax asset
(liability) $(4,394,100) $ 661,000
----------- -----------
----------- -----------
</TABLE>
During the year ended February 28, 1998, the reduction in the
valuation allowance of $434,000 was the result of current utilization of net
operating losses of $95,000, current additions for other deferred tax assets
of $27,000, and the recognition of $366,000 of additional deferred tax asset,
based on the Company's expectation of future taxable income.
The deferred tax asset relating to net operating loss carryforwards
for February 28, 1998 and 1997 include tax benefits of $287,000 for stock
options and warrants that were allocated directly to additional paid-in
capital in 1997.
The Company paid income taxes for:
Year ended February 28, 1998 $1,192,000
Year ended February 28, 1997 $ 608,000
Year ended February 28, 1996 $ 298,000
61
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
13. Lease Obligations
Future minimum annual rental payments for real property, required
under leases and having terms of more than one year at February 28, 1998, are
as follows:
<TABLE>
<CAPTION>
Operating
Leases
----------
<S> <C>
1999 $ 660,000
2000 614,000
2001 619,000
2002 619,000
2003 619,000
Thereafter 356,000
----------
Total minimum lease payments $3,487,000
----------
----------
</TABLE>
In July 1990, in connection with a lease for office space, the
Company received from the prior tenant a rent subsidy equal to the difference
between the market rate for the premises and the rental provided for in the
lease. This subsidy, which totaled $625,000, was paid to the Company in April
1991 and was being amortized over the life of the lease as a monthly
reduction to rent expense. At February 28, 1995, the unamortized balance was
$126,000. In May 1995, the lease was restructured and the remaining
unamortized balance of $72,000 was recognized. The restructuring of the lease
extended the life to 2003 at a reduced expense, and added another 2,500
square feet of office space.
Total rent expense for operating leases was approximately $513,000
in Fiscal 1998, $505,000 in Fiscal 1997, and $623,000 in Fiscal 1996.
The Company leases equipment under leases that have been classified
as capital leases for financial statement purposes. As of February 28, 1998,
included in property, plant and equipment are the following assets held under
capital leases:
<TABLE>
<S> <C>
Machinery and equipment $378,525
Accumulated depreciation 111,385
--------
$267,140
--------
--------
</TABLE>
62
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
Future minimum lease payments for assets under capital leases at
February 28, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 56,788
2000 56,788
2001 56,788
2002 37,820
2003 --
--------
208,184
Less: Amount representing
Interest 34,489
--------
Present value and net
minimum lease payments $173,695
--------
--------
</TABLE>
14. Related Party Transactions
In Fiscal 1998 and 1997, the Company paid Mr. Weinstein $24,000 for
directors fees, and in Fiscal 1998 and Fiscal 1996, granted warrants to
purchase 20,000 shares of the Company's common stock at $7.31 and $5.44 per
share, respectively. During Fiscal 1998, the Company paid Mr. Sommer $10,000
for directors fees, and granted warrants to purchase 20,000 shares of the
Company's common stock at $7.31 per share
Mr. Beningson is President and a major stockholder of RRR'S, which
is a 25% general partner of WCTP, limited partner of RVA, and a 10% general
partner of YCP. In Fiscal 1998 and 1997, RVA was allocated approximately
$568,000 and $322,000, respectively, of the interest income on the YCP Note
(see Note 5). In Fiscal 1996, RVA received $500,000 which was the minority
portion of the income of B-41LP. In Fiscal 1993, RVA received an advance
distribution of $2,000,000 from B- 41LP, which was charged against capital,
concurrent with the allocation of income during Fiscal 1998.
As discussed in Note 5, WCTP contracted with the Company to procure,
construct, design and place in operation a cogeneration facility. The
Company's Chairman and Chief Financial Officer are shareholders of the
general partner of WCTP. The general partner of WCTP receives a general
partners fee of 1% of WCTP revenues and an administrative services payment of
4% of WCTP revenues. The limited partners are not related parties to the
Company. The general partner may have the potential for substantial future
distributions from WCTP.
In the year ended February 28, 1997, the Company recorded
$11,000,000 of fees for services rendered through February 28, 1997 to WCTP
and RVA. This amount was included in service revenues. These fees were
recorded pursuant to a services agreement between WCTP, RVA, CTI and York.
The services included ongoing negotiations of consolidation agreements with
Con Edison and Edison
63
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
Mission Energy, aiding in resolving various contract issues concerning WCTP's
and RVA's power purchase agreements with Con Edison, and various issues related
to the progress of the Brooklyn Navy Yard Project.
Mr. Beningson is president and was previously the sole shareholder
of NAEC. The Company had an agreement with NAEC which provided for the
Company to be reimbursed for all costs associated with its activities related
to NAEC and the Company received a fee mutually agreed upon based on level of
activity. In Fiscal 1997, prior to acquisition of 85% of the shares of NAEC
(see Note 15), the Company recognized approximately $924,000 as reimbursement
of costs, and no power brokerage fees. In Fiscal 1996, the Company recognized
$1,200,000 as reimbursement of costs, and power brokerage fees of $675,000.
15. Acquisition of NAEC
As of November 1, 1996, the Company acquired 85% of the shares of
NAEC for $1 from NAEC. Prior to the acquisition, all of the stock was owned
by the Company's chairman. The acquisition has been accounted for as a
purchase and the operations of NAEC have been reflected as of the acquisition
date.
The following table reflects unaudited pro forma combined results of
operations for the Company and NAEC on the basis that the acquisition had
taken place at the beginning of the fiscal year:
<TABLE>
<CAPTION>
For the Year Ended
February 28,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues $70,048,380 $32,006,011
----------- -----------
Net Income $7,388,152 $ 2,717,124
----------- -----------
Net Income per Common Share $0.49 $0.18
----------- -----------
Shares Used in Computation 15,487,779 15,512,011
----------- -----------
</TABLE>
In managements' opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred had
the acquisition been consummated at the beginning of the periods presented or of
future operations of the combined companies under the ownership and management
of the Company.
64
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------
16. Significant Customers and Contracts and Commitments
Energy sales were derived from numerous retail customers and utilities.
Each customer accounted for less than 10% of total revenues during Fiscal 1998.
Two utilities accounted for approximately 20% and 15%, respectively, of the
total revenues in Fiscal 1997.
As part of its marketing operations, the Company routinely enters into
commitments for the purchase of electric and gas energy. The Company obtains
similar commitments from its customers.
The Company uses put and call options, and futures contracts
("Instruments") in various combinations, to hedge physical positions in
electricity and natural gas as well as occasionally for trading purposes. All
of these Instruments are settled in the underlying commodity. The ultimate
impact of these Instruments will be determined by the prevailing applicable
market price.
NAEC has sold call options related to the wholesale electric
business and collected premiums totaling approximately $3 million at February
28, 1998. Of this amount, approximately $2.9 million will be recognized as
revenue in Fiscal 1999, offset by approximately $.7 million of prepaid
brokerage fees and call option expense.
NAEC has a revolving line of credit of $20,000,000, which is
guaranteed by its assets, and further guaranteed by the Company. The line of
credit bears interest at one quarter percent per annum over the prime rate.
At February 28, 1998, there was no loan amount outstanding.
On March 31, 1998, York executed a contract with Vestas Wind Systems
A/S totaling approximately $31 million for the purchase of wind turbines for
the Big Spring project.
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
YORK RESEARCH CORPORATION
- --------------------------
(Registrant)
/s/ Robert M. Beningson /s/ Michael Trachtenberg
- ---------------------------------- ------------------------------
Robert M. Beningson Michael Trachtenberg
President, Chief Executive Officer Executive Vice President;
Chairman of the Board Chief Financial and Accounting
May 27, 1998 Officer; Secretary
May 27, 1998
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.
/s/ Robert M. Beningson
- -----------------------------
Robert M. Beningson
Director
May 27, 1998
/s/ Stanley Weinstein
- -----------------------------
Stanley Weinstein
Director
May 27, 1998
/s/ Howard Sommer
- -----------------------------
Howard Sommer
Director
May 27, 1998
66
<PAGE>
EX-10.kk
- ------------------------------------------------------------------------------
YORK PARTNERS REIMBURSEMENT AGREEMENT (PMNC)
Dated as of November 1, 1997
among
B-41 ASSOCIATES, L.P.
BROOKLYN NAVY YARD COGENERATION
PARTNERS, L.P.
and
EDISON MISSION ENERGY
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I
DEFINITIONS...................................................................2
Section 1.01 Definitions................................................2
ARTICLE II
REIMBURSEMENT AND INDEMNIFICATION.............................................3
Section 2.01 Reimbursement Obligation...................................3
Section 2.02 Liability Absolute.........................................4
Section 2.03 Waivers and Consents by York Partners......................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES................................................5
Section 3.01 Due Organization...........................................5
Section 3.02 Power of Authority.........................................5
Section 3.03 Valid and Binding Obligations..............................5
Section 3.04 Non-contravention..........................................5
Section 3.05 No Consents................................................6
Section 3.06 No Liens...................................................6
ARTICLE IV
COVENANTS.....................................................................6
Section 4.01 Grant of Security Interest.................................6
Section 4.02 No Other Liens.............................................6
Section 4.03 No Responsibility..........................................7
ARTICLE V
LITIGATION....................................................................7
Section 5.01 Notice of Litigation.......................................7
Section 5.02 Assumption of Litigation...................................7
Section 5.03 Litigation Support.........................................7
Section 5.04 Settlement.................................................8
Section 5.05 Indemnitor Appointed Attorney in Fact......................8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI
EVENTS OF DEFAULT.............................................................8
Section 6.01 Events of Default..........................................8
Section 6.02 Upon an Event of Default...................................8
ARTICLE VII
MISCELLANEOUS.................................................................9
Section 7.01 Amendments, Changes and Modifications......................9
Section 7.02 Notices....................................................9
Section 7.03 Further Assurances and Correct the Instruments............10
Section 7.04 Term of Agreement.........................................10
Section 7.05 Successors and Assigns....................................10
Section 7.06 Severability..............................................10
Section 7.07 Counterparts..............................................10
Section 7.08 GOVERNING LAW.............................................10
Section 7.09 Headings..................................................10
Section 7.10 Trial by Jury Waived......................................11
Section 7.11 Effective Date............................................11
</TABLE>
ii
<PAGE>
YORK PARTNERS REIMBURSEMENT AGREEMENT (PMNC)
THIS YORK PARTNERS REIMBURSEMENT AGREEMENT (PMNC) (this "Agreement") is
made as of November 1, 1997, by and among B-41 ASSOCIATES, L.P., a Delaware
limited partnership ("York Partners"), BROOKLYN NAVY YARD COGENERATION PARTNERS,
L.P., a Delaware limited partnership (the "Partnership"), and EDISON MISSION
ENERGY, a California corporation (the "Indemnitor").
W I T N E S S E T H:
WHEREAS, York Partners is a Partner in the Partnership, which was formed
for the purpose of designing, constructing, leasing, developing, owning,
financing, managing and operating a natural gas-fired cogeneration facility in
Brooklyn, New York (the "Project"); and
WHEREAS, as of the date hereof, York Partners and Mission Energy New York,
Inc. ("MENY") are entering into an Amended and Restated Limited Partnership
Agreement to be effective as of the Bond Closing Date (the "Amended Partnership
Agreement"); and
WHEREAS, the Partnership entered into an agreement, dated as of November
1, 1994 (the "Turnkey Agreement"), with PMNC, A Joint Venture, and its members,
Parsons Main of New York, Inc., Nab Construction Corporation and L.K. Comstock &
Company, Inc. (collectively, "PMNC"), jointly and severally for the engineering,
design, procurement and installation of equipment, construction, start-up and
testing of the Project and received a guaranty, dated as of November 1, 1994
(the "Guaranty"), respecting PMNC's timely performance of its obligations under
the Turnkey Agreement from The Parsons Corporation ("Parsons"); and
WHEREAS, there is pending currently certain litigation between the
Partnership and its Partners, on the one hand, and PMNC, its members and
Parsons, on the other hand, relating to disputes arising out of the Turnkey
Agreement and the Guaranty (the "Litigation"); and
WHEREAS, the Partnership plans to issue New Bonds on the Bond Closing
Date; and
WHEREAS, the Indemnitor, in connection with the issuance of the New Bonds,
has agreed or will agree to defend, indemnify and hold harmless York Partners
and the Partnership from any losses arising out of or in connection with the
Litigation under that certain Indemnity Agreement to be dated as of the Bond
Closing Date (the "Indemnity"); and
WHEREAS, the Partnership desires to assign all of its rights under the
Indemnity to United States Trust Company of New York, as its collateral agent
for the benefit of the holders of the New Bonds; and
<PAGE>
WHEREAS, as a condition to executing and delivering the Indemnity, the
Indemnitor has required York Partners to enter into this Agreement.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, covenants, representations and warranties set forth herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Terms not otherwise defined herein shall have
the same meanings as used in the Amended Partnership Agreement. In addition, the
following terms shall have the following respective meanings:
"Agreement" means this York Partners Reimbursement Agreement (PMNC) as the
same may be amended, modified, supplemented or restated from time to time.
"Claims" means all Claims as defined in the Indemnity.
"Event of Default" shall have the meaning set forth in Section 6.01 to
this Agreement.
"Indemnity" shall have the meaning set forth in the recitals to this
Agreement.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, in each case of any kind, to secure
payment of a debt or performance of an obligation.
"Litigation" shall have the meaning set forth in the recitals to this
Agreement.
"Amended Partnership Agreement" means the Amended and Restated Limited
Partnership Agreement dated as of the date hereof between MENY and York Partners
as the same may be amended, modified, supplemented or restated from time to
time.
"Prime Rate" means a rate equal to the rate per annum announced from time
to time by Citibank, N.A. as its prime or base rate, compounded daily and
calculated on the basis of a year of 365/366 days and the number of days
elapsed.
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ARTICLE II
REIMBURSEMENT AND INDEMNIFICATION
Section 2.01 Reimbursement Obligation.
(a) York Partners agrees in its separate capacity and not in its
capacity as a Partner in the Partnership, absolutely and unconditionally
to pay to the Indemnitor a sum in the aggregate equal to twenty-five (25)
percent of the total of all amounts paid from time to time by the
Indemnitor under the Indemnity in respect of Claims exceeding $10,000,000;
provided, however, York Partners shall not be obligated to reimburse the
Indemnitor for more than $10,000,000 of Claims and provided, further,
however, York Partners shall only be obligated to reimburse the Indemnitor
from payments of the General Partner Management Fee and Royalty Fee (as
defined in the Partnership Agreement) pursuant to the Partnership
Agreement or from distributions to York Partners pursuant to the
Partnership Agreement, in each case, only on and after the date notice is
given to York Partners pursuant to Section 2.01(b) below, and subject to
the prior obligations and liens described in Section 3.06 but subject to
the following payment limitations from the General Partner Management Fee
and Royalty Fee in each calendar year until all amounts due by York
Partners shall be fully paid to Indemnitor:
<TABLE>
<CAPTION>
<S> <C>
1998 $1,000,000
1999 $1,000,000
2000 $1,000,000
2001 and thereafter $2,000,000
</TABLE>
(b) All amounts to be paid by York Partners pursuant hereto shall be
due and payable on each Distribution Date (as defined in the Partnership
Agreement) following the calendar quarter in which the Partnership has
received notice from the Indemnitor of payment of Claims pursuant to the
Indemnity.
(c) All payments made pursuant to this Agreement shall be made to
the Indemnitor in lawful currency of the United States of America and in
immediately available or same-day funds to such account as Indemnitor may
designate from time to time.
(d) If and to the extent Indemnitor receives a refund or other
recovery of amounts paid by Indemnitor for Claims pursuant to the
Indemnity that have been reimbursed by York Partners pursuant to this
Agreement, Indemnitor agrees to refund to York Partners such amounts
received by Indemnitor on a pro rata basis with payments made by
Indemnitor.
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Section 2.02 Liability Absolute.
(a) The obligations of York Partners hereunder shall be absolute,
unconditional and irrevocable and shall be paid and performed strictly in
accordance with the terms of this Agreement, including without limitation,
the following circumstances:
(i) any lack of validity or enforceability of the Indemnity or
all or any provision of this Agreement;
(ii) any amendment or waiver of or any consent to departure
from all or any provision of this Agreement or the Indemnity;
(iii) the existence of any claim, set off, defense, reduction,
abatement or other right which York Partners may have at any time
against the Indemnitor or any other Person; or
(iv) any other circumstance, whether or not similar to any of
the foregoing.
(b) York Partners agrees that this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time payment to
the Indemnitor is rescinded or must otherwise be returned by the
Indemnitor upon the insolvency, bankruptcy or reorganization of York
Partners, or otherwise, as though such payment to the Indemnitor had not
been made. Without limitation of any other provision of this Agreement, if
any notice, demand, declaration or other condition to payment by York
Partners of any amount under this Agreement shall at any time be stayed or
enjoined for any reason (including, but not limited to, a stay or
injunction resulting from the pendency against York Partners or any other
Person of a bankruptcy, insolvency, reorganization or similar proceeding),
York Partners agrees that, for purposes of this Agreement and their
obligations hereunder, such notice, demand, declaration or other condition
shall be deemed to have been given, made or satisfied.
Section 2.03 Waivers and Consents by York Partners. York Partners each, on
its own behalf, and any and all others who are now or may become liable for all
or part of the obligations of York Partners under this Agreement (all of the
foregoing being referred to collectively in this Section 2.03 as the
"Obligors"), agree to be bound by this Agreement and (a) waive and renounce any
and all redemption and exemption rights and the benefit of all valuation and
appraisement privileges against any amounts to be paid hereunder or any
extension or renewal hereof; (b) waive presentment and demand for payment,
notices of nonpayment and of dishonor, protest of dishonor and notice of
protest; (c) waive all notices in connection with the delivery and acceptance
hereof and all other notices in connection with the performance, default or
enforcement of the payment hereof except as required by this Agreement; (d)
waive any and all lack of diligence and delays in the enforcement of the payment
hereof; (e) agree that the liability
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of each of the Obligors shall be unconditional and without regard to the
liability of any other person or entity for the payment hereof and shall not in
any manner be affected by any indulgence or forbearance granted or consented to
by the Indemnitor with respect hereto; (f) consent to any and all extensions of
time, renewals, waivers or modifications that may be granted by the Indemnitor
with respect to the payment or other provisions hereof, and to the release of
any security at any time given for the payment hereof, or any part thereof, with
or without substitution, and to the release of any person or entity liable for
the payment hereof; and (g) consent to the addition of any and all other makers,
endorsers, guarantors and other obligors for the payment hereof, and to the
acceptance of any and all other security for the payment hereof or thereof, and
agree that the addition of any such obligors or security shall not affect the
liability of any of the Obligors for the payment hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
York Partners represents and warrants to the Indemnitor as follows:
Section 3.01 Due Organization. York Partners is an entity duly organized,
validly existing and in good standing under the laws of the state of its
organization; York Partners is duly qualified to do business in good standing
under the laws of each jurisdiction where the character of its properties or the
nature of its activities makes such qualification necessary, except such
jurisdictions, if any, in which the failure to be so qualified will not have a
material adverse effect on the business or properties of York Partners.
Section 3.02 Power of Authority. York Partners has full right, power and
authority to own its properties and to conduct its business as presently
conducted; York Partners has the power and authority to execute, deliver and
perform this Agreement and to carry out the terms of this Agreement; and the
execution, delivery, and performance of this Agreement has been duly authorized
by York Partners by all necessary action.
Section 3.03 Valid and Binding Obligations. This Agreement constitutes a
legal, valid, and binding obligation of York Partners, enforceable in accordance
with its terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, receivership or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.
Section 3.04 Non-contravention. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof shall not
conflict with, result in any breach of any of the terms and provisions of, nor
constitute a default (nor an event which, with the giving of notice or passage
of time, or both, would constitute a default) under, the organizational
documents of York Partners, or any indenture, agreement, or other instrument to
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which York Partners is a party or by which it is bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, or other instrument; nor violate any law
or any order, rule, or regulation applicable to York Partners of any court or of
any federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over York Partners or its
properties.
Section 3.05 No Consents. No consent, license, approval or authorization
from, or registration or declaration with, any governmental authority, bureau or
agency, nor any consent, approval, waiver or notification of any creditor,
lessor or other non-governmental person, is required in connection with the
execution, delivery and performance by York Partners of this Agreement, except
(in each case) such as have been obtained and are in full force and effect as of
the date hereof.
Section 3.06 No Liens. Except for the Lien granted to MENY pursuant to the
York Partners Security Agreement and the Security Agreement dated as of May 26,
1993 between York Partners and Co-Lead Counsel for Plaintiffs as set forth
therein, and subject to the Consent and Subordination Agreement dated May 21,
1993 among York Partners, MENY, the Partnership, York Research Corporation and
Co-Lead Counsel for Plaintiffs, there are no Liens created or existing upon or
with respect to the General Partner Management Fee, the Royalty Fee or York
Partners' right to receive any distribution pursuant to the Amended Partnership
Agreement.
ARTICLE IV
COVENANTS
Section 4.01 Grant of Security Interest. York Partners hereby irrevocably
grants a security interest in, pledges, assigns and sets over to the Indemnitor
all of its right, title and interest in that portion of the General Partner
Management Fee, the Royalty Fee, and its right to receive distributions pursuant
to the Amended Partnership Agreement from the General Partner Interest of York
Partners and a portion of its Limited Partner Interest equal to a 30% Interest
(which is the same 30% Interest pledged to MENY pursuant to the York Partners
Security Agreement), together with the proceeds thereof, sufficient to discharge
the obligations during any calendar year contained in Section 2.01, for the
purpose of securing the obligations of York Partners contained in Section 2.01
herein (the "Reimbursement Security Interest"). York Partners agrees to execute
or cause to be executed one or more financing statements and renewals and
amendments thereof pursuant to the Uniform Commercial Code in any jurisdiction
in which the Indemnitor proposes to file such documents, and such other
documents as Indemnitor reasonably deems necessary or desirable to establish,
perfect and maintain such security interest, all in form reasonably satisfactory
to Indemnitor.
Section 4.02 No Other Liens. York Partners agrees and covenants with the
Indemnitor that, until the execution of an agreement satisfactory in form and
substance to the Indemnitor
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fully subordinating as to payment and exercise of remedies any proposed
obligation or Lien to the obligations and Lien of the Indemnitor hereunder, York
Partners shall not create, incur, assume or suffer to exist any security
interest or Lien, upon or with respect to the assets subject to the
Reimbursement Security Interest or sign or file under the Uniform Commercial
Code of any jurisdiction any financing statement with respect to the assets
subject to the Reimbursement Security Interest that names York Partners as a
debtor, or sign any security agreement authorizing any secured party thereunder
to file such financing statement. For the avoidance of doubt, Indemnitor and
York Partners agree that York Partners may pledge to another Person (i) its
right to receive amounts in respect of the General Partner Management Fee and
Royalty Fee in excess of the annual amounts set forth in Section 2.01 and (ii)
the portion of its Limited Partner Interest in excess of the 30% Interest.
Section 4.03 No Responsibility. York Partners acknowledges and agrees that
neither MENY nor Indemnitor by any decision, determination, action or inaction
has any obligation or responsibility for the payment of any amount with respect
to the Litigation and that the giving or grant of the Indemnity by the
Indemnitor and the allocation of the payment of claims pursuant to the
Indemnity, this Agreement or any other document does not reflect any culpability
or responsibility for such Claims but has been given or granted for the purpose
of issuing New Bonds on terms and conditions most favorable to the Partnership.
ARTICLE V
LITIGATION
Section 5.01 Notice of Litigation. Promptly after receipt by the
Partnership or York Partners of notice of the commencement of any action or
proceeding constituting Litigation, the Partnership or the Partner, as the case
may be, shall promptly notify the Indemnitor of the commencement of such action
or proceeding and provide to the Indemnitor all pleadings and other documents
relating to the Litigation.
Section 5.02 Assumption of Litigation. The Indemnitor may, but shall not
be obligated to, assume from the Partnership and York Partners the defense of
any or all actions or proceedings constituting Litigation; may, but shall not be
obligated to, employ counsel for the Partnership and York Partners satisfactory
to the Indemnitor; and may, but shall not be obligated to, pay the fees and
expenses of such counsel. Notwithstanding the preceding sentence, York Partners
shall be entitled to employ counsel separate from counsel for the Partnership
and from any other party in any such Litigation if York Partners reasonably
determines that a conflict of interest exists which makes representation by
counsel chosen by the Indemnitor not advisable or if York Partners reasonably
determines that the Indemnitor's assumption of the defense does not adequately
represent its interest. In such event, the reasonable fees and disbursements of
such separate counsel shall be paid by York Partners.
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Section 5.03 Litigation Support. The Partnership and York Partners agree,
without any additional cost or expense to the Indemnitor, but subject to the
rights specified in Section 4.03 of the Amended Partnership Agreement, to
cooperate in the preparation and prosecution of legal positions, defenses and
claims constituting Litigation, including the production of documents, providing
witnesses, answering interrogatories, giving any deposition or courtroom
testimony or otherwise becoming involved in the Litigation or response to any
claim constituting Litigation.
Section 5.04 Settlement. Each of the Partnership and York Partners agrees
that it will not, without the prior written consent of the Indemnitor, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding constituting Litigation. Indemnitor may, but
shall not be obligated to, for and on behalf of the Partnership and York
Partners, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action suit or proceeding constituting Litigation,
and the Partnership and York Partners agree to execute such documents and take
such action as may be reasonably necessary or desirable to evidence or implement
any such settlement, compromise, consent or entry of judgment.
Section 5.05 Indemnitor Appointed Attorney in Fact. Each of the
Partnership hereby irrevocably constitutes and appoints Indemnitor to act as the
Partnership's and York Partners' attorney in fact, with full authority in the
place and stead of the Partnership and York Partners and in the name of the
Partnership and York Partners or otherwise, from time to time in Indemnitor's
discretion, to take any action and to execute any instrument which Indemnitor
may deem necessary or advisable with respect to the Litigation including,
without limitation, to settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, suit or proceeding constituting
Litigation.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
(a) York Partners shall fail to pay any amount payable by York
Partners hereunder on the date when due; or
(b) York Partners shall fail to perform or observe any of the
covenants and agreements contained herein.
Section 6.02 Upon an Event of Default. If any Event of Default shall have
occurred and be continuing for thirty (30) days and notice from the Indemnitor,
the Indemnitor may proceed to enforce all of its remedies available hereunder,
under applicable law and in equity.
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ARTICLE VII
MISCELLANEOUS
Section 7.01 Amendments, Changes and Modifications. This Agreement may be
amended, changed, modified, altered or terminated only by written instrument or
written instruments signed by all of the parties hereto.
Section 7.02 Notices. All notices, certificates or other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered by hand, sent by overnight courier, sent by facsimile or telecopy, or
sent by certified or registered mail, postage prepaid, return receipt requested,
addressed to the appropriate address set forth below. Each party hereto may, by
telecopy notice or by such other notice described hereunder, designate any
further or different address to which subsequent notices, certificates or other
communications shall be sent without any requirement of execution of any
amendment to this Agreement.
B-41 ASSOCIATES, L.P.:
Address: 280 Park Avenue
Suite 2700 West
New York, NY 10017
Attention: Robert M. Beningson, President
Telephone: (212) 557-6200
Fax: (212) 557-5678
BROOKLYN NAVY YARD COGENERATION PARTNERS, L.P.:
Address: 230 Park Avenue
Suite 515
New York, NY10169
Attention: Executive Director
Telephone: (212) 687-4159
Fax: (212) 949-1932
EDISON MISSION ENERGY:
Address: 18101 Von Karman Avenue
Suite 1700
Irvine, CA 92715
Attention: General Counsel
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Telephone: (714) 752-5588
Fax: (714) 752-6401
Section 7.03 Further Assurances and Correct the Instruments. To the
fullest extent permitted by law, the parties hereto agree that they will, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further instruments
as the Indemnitor may reasonably request and as may be reasonably required in
the Indemnitor's judgment to effectuate the intention of or facilitate the
performance of this Agreement and to protect the interests of the Indemnitor,
including, without limitation, the creation and maintenance of a security
interest for the Indemnitor.
Section 7.04 Term of Agreement. This Agreement, and the grant of the
Reimbursement Security Interest hereunder, shall be subject to and effective as
of the Bond Closing Date and continue in effect until the occurrence of both (a)
the date on which the Indemnitor has no further liability under the Indemnity
and (b) the date on which York Partners shall have indefeasibly paid or caused
to be paid to the Indemnitor in full in cash all amounts to be paid by York
Partners hereunder.
Section 7.05 Successors and Assigns. This Agreement shall be a continuing
obligation of the parties hereto and shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Notwithstanding the foregoing, York Partners may not assign its rights
or obligations under this Agreement, or delegate any of its duties hereunder.
Without the prior written consent of the Indemnitor and, at any time, the
Indemnitor, in its sole discretion, may assign its rights and obligations under
this Agreement, or delegate any of its duties hereunder.
Section 7.06 Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by Indemnitor hereunder is unavailable or unenforceable shall not affect
in any way the ability of the Indemnitor to pursue any other remedy available to
it.
Section 7.07 Counterparts. This Agreement may be executed in counterparts
by the parties hereto and each such counterpart shall be considered an original
and all such counterparts shall constitute one and the same instrument.
Section 7.08 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED,
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
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Section 7.09 Headings. The headings of articles and sections and the table
of contents contained in this Agreement are provided for convenience only. They
form no part of this Agreement and shall not affect its construction, meaning,
effect or interpretation. Unless otherwise indicated, all references to articles
and sections in this Agreement refer to the corresponding articles and sections
of this Agreement.
Section 7.10 Trial by Jury Waived. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER. EACH PARTY
HERETO INTENDS TO ENFORCE THE FOREGOING WAIVER, AND EACH PARTY WAS INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THIS WAIVER.
Section 7.11 Effective Date. This Agreement shall be effective as of the
Bond Closing Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above mentioned.
B-41 ASSOCIATES, L.P.
By: B-41 Management Corp., its Managing
General Partner
By:
------------------------------------
Name:
Title:
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BROOKLYN NAVY YARD COGENERATION PARTNERS,
L.P., a Delaware limited partnership
By: Mission Energy New York, Inc.
By:
------------------------------------
Name:
Title:
By: B-41 Associates, L.P., a General Partner
By: B-41 Management Corp., its Managing
General Partner
By:
------------------------------------
Name:
Title:
EDISON MISSION ENERGY, a California
corporation
By:
------------------------------------
Name:
Title:
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EX-10.(ll)
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
NEW WORLD POWER TEXAS
RENEWABLE ENERGY LIMITED PARTNERSHIP
----------------------------------------
Dated as of September 29, 1997
----------------------------------------
<PAGE>
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (the
"Agreement") of New World Power Texas Renewable Energy Limited Partnership (the
"Partnership") is made as of this 29th day of September 1997 by The New World
Power Corporation, a Delaware corporation ("New World"), as a general partner
and DB Power, Inc., a Delaware corporation ("DB Power"), as a general partner
and limited partner. New World and DB are referred to herein collectively as the
"General Partners" and individually as a "General Partner." DB Power is also
referred to herein as the "Limited Partner."
WHEREAS, New World was invited to negotiate a power purchase agreement
with Texas Utilities Electric Company ("Texas Utilities"); and
WHEREAS, New World and Texas Utilities agreed that New World should form a
limited partnership to enter into the power purchase agreement; and
WHEREAS, both New World and John D. Kuhns desired to form a limited
partnership for the purpose of executing a power purchase agreement with Texas
Utilities and for the purpose of constructing, maintaining and operating a
windfarm in the Big Springs, Texas area; and
WHEREAS, New World as General Partner and John D. Kuhns as the limited
partner entered into an agreement of limited partnership as of September 12,
1994 for the purpose of forming the Partnership; and
WHEREAS, the Partnership is a party to that certain Renewable Resource
Energy Purchase Agreement dated September 13, 1994 with Texas Utilities as same
has been amended to date; and
WHEREAS, pursuant to a Bill of Sale dated February 1997 (the "Bill of
Sale"), New Power purported to assign 50% of its interest in the Partnership to
DB Power; and
WHEREAS, New Power and DB Power wish to rescind the Bill of Sale and have
DB Power acquire a general partnership interest directly from the Partnership
and thereby become a general partner of the Partnership; and
WHEREAS, DB Power has purchased the limited partnership interest of John
D. Kuhns pursuant to the terms of that certain Assignment of Limited Partnership
Interest dated September 29, 1997; and
<PAGE>
WHEREAS, New World and DB Power desire to amend the agreement of limited
partnership to admit DB Power as a general partner and limited partner of the
Partnership and to make certain other changes thereto,
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, the parties hereto covenant and agree as follows:
1. ORGANIZATION AND RELATED MATTERS.
1.1 Rescission of Bill of Sale; Admission of New Partners. (a) New Power
and DB Power hereby rescind and cancel the Bill of Sale with the same effect as
though it was never entered into and each of such parties will be restored to
the position it occupied immediately prior to entering into the Bill of Sale.
(b) Effective as of the date hereof: (i) DB Power hereby is admitted
as a second general partner of the Partnership and (ii) DB Power is admitted as
a limited partner of the Partnership in substitution for John D. Kuhns.
1.2 Continuation of Limited Partnership. The parties to this Agreement
hereby continue a limited partnership pursuant to and in accordance with the
provisions of the Delaware Revised Uniform Limited Partnership Act (the "Act").
1.3 Name. The name of the Partnership shall be "New World Power Texas
Renewable Energy Limited Partnership."
1.4 Purpose. The purpose of the Partnership is to negotiate and execute a
power purchase agreement with Texas Utilities Electric Company ("Texas
Utilities"), to construct, maintain and operate a windfarm to generate
electricity to sell to Texas Utilities, to acquire rights in real property in
connection with the foregoing, and to do all things relating thereto or in
connection therewith.
1.5 Principal Office and Registered Office.
(a) The principal office of the Partnership shall be 500 Rue Notre
Dame, 3rd Floor, Lachine, Quebec, Canada H8S 2B2, or at such other place as may
from time to time be designated by the General Partners. The General Partners
shall give prompt notice of any such change to each Partner (as hereinafter
defined). The Partnership may maintain such additional offices as the General
Partners may determine.
(b) The registered office of the Partnership shall be at 1209 Orange
Street, Corporate Trust Center, Wilmington, Delaware 19801. The name of the
registered agent in charge thereof shall be The Corporation Trust Company. The
General Partners may from time
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to time change such registered office and registered agent and shall give prompt
notice of any such change to each Partner.
1.6 Fiscal Year. The fiscal year of the Partnership shall end on the 31st
day of December in each year.
1.7 Term. The Partnership commenced upon the date a certificate of limited
partnership with respect to the Partnership was filed in the office of the
Secretary of State of the State of Delaware and shall continue until dissolved
pursuant to Section 9 hereof. Dissolution of the Partnership shall occur only
upon the occurrence of one of the events specified in Section 9 and, pursuant
thereto, the Partnership will be dissolved and liquidated.
2. PARTNERS. The Partnership shall consist of the General Partners and the
Limited Partner (the General Partners and the Limited Partner are sometimes
referred to herein collectively as the "Partners" and individually as a
"Partner," which terms shall include any party hereinafter admitted to the
Partnership and exclude any party that ceases to be a party). The business
address of each Partner is as follows:
<TABLE>
<CAPTION>
General Partner General Partner Limited Partner
- --------------- --------------- ---------------
<S> <C> <C>
The New World Power Corporation DB Power, Inc. DB Power, Inc.
500 Rue Notre Dame 500 Rue Notre Dame 500 Rue Notre Dame
Lachine, Quebec Lachine, Quebec Lachine, Quebec
Canada, H8S 2B2 Canada, H8S 2B2 Canada, H8S 2B2
</TABLE>
3. CAPITAL CONTRIBUTIONS.
3.1 Contributions; Percentage Interest. Each Partner shall contribute to
the Partnership the amount (a "Capital Contribution") shown opposite its name
below and, in exchange therefor, shall have a percentage interest in the
Partnership shown opposite its name below:
<TABLE>
<CAPTION>
Capital Nature of Percentage
Name of Partner Contribution Interest Interest
- --------------- ------------ -------- --------
<S> <C> <C> <C>
The New World Power $49.50 General Partner 49.5%
Corporation
DB Power, Inc. $49.50 General Partner 49.5%
DB Power, Inc. $ 1.00 Limited Partner 1.0%
</TABLE>
3.2 Except as provided for in Section 3.3 hereof, no Partner shall have
the right to withdraw or reduce its contribution of capital to the Partnership.
Capital Contributions shall be returned only upon the dissolution of the
Partnership and distribution of its assets as
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provided in Article 9; provided, however, that the General Partners shall have
no personal liability for repayment of the Capital Contributions of the Limited
Partner. No interest shall be paid on any Capital Contributions made by any
Partners to the Partnership.
3.3 Upon each General Partner satisfying its Capital Contribution pursuant
to Section 3.1 hereof, all additional development costs incurred by the
Partnership shall be paid by the General Partners on a fifty/fifty basis. In the
event that a General Partner does not pay its fifty percent share of any future
development costs incurred by the Partnership, then such General Partner shall
be deemed to be a "breaching partner" and the other General Partner (the
"non-breaching partner") shall have the right to pay the "breaching partner's"
fifty percent share of such development costs. Any payments made by such
non-breaching party shall be added to the non-breaching party's Capital
Contribution and deducted from the breaching partner's Capital Contribution.
4. ALLOCATION AND DISTRIBUTIONS.
4.1 Distributions. Any cash or other assets of the Partnership which the
General Partners may from time to time determine are not reasonably needed to
carry on the business of the Partnership and which the General Partners may
decide to distribute, shall be distributed to the Partners in proportion to
their Capital Contribution.
4.2 Partner's Shares of Tax Profits and Losses. The tax profits, tax
losses and tax credits of the Partnership, for state and federal income tax
purposes, for each taxable year of the Partnership, shall be allocated among the
Partners in proportion to their Capital Contribution.
5. AUTHORITY OF THE GENERAL PARTNERS.
Each of the General Partners shall have the full authority and right to
manage the business of the Partnership and shall have all of the rights and
powers which may be possessed by general partners under the Act including,
without limitation, the right and power to:
(a) Acquire by purchase, lease, or otherwise any real or personal property
which may be necessary, convenient, or incidental to the accomplishment of the
purposes of the Partnership;
(b) Operate, maintain, finance, improve, construct, own, grant options
with respect to, sell, convey, assign, mortgage, and lease any real estate and
any personal property necessary, convenient, or incidental to the accomplishment
of the purposes of the Partnership;
(c) Execute any and all agreements, contracts, documents, certifications,
and instruments necessary or convenient in connection with the purpose of the
Partnership, or in connection with managing the affairs of the Partnership,
including, but not limited to, a power
-4-
<PAGE>
purchase agreement with Texas Utilities, any financing agreements, operation and
maintenance agreements, and construction agreements.
(d) Borrow money and issue evidences of indebtedness necessary,
convenient, or incidental to the accomplishment of the purposes of the
Partnership, and secure the same by mortgage, pledge, or other lien on any asset
owned by the Partnership (the "Partnership Assets");
(e) Execute, in furtherance of any or all of the purposes of the
Partnership, any deed, lease, mortgage, deed of trust, mortgage note, promissory
note, bill of sale, contract, or other instrument purporting to convey or
encumber any or all of the Partnership Assets;
(f) Prepay in whole or in part, refinance, recast, increase, modify, or
extend any liabilities affecting the Partnership Assets and in connection
therewith execute any extensions or renewals of encumbrances on any or all of
the Partnership Assets;
(g) Care for and distribute funds to the General Partner and Limited
Partner by way of cash, income, return of capital, or otherwise, all in
accordance with the provisions of this Agreement, and perform all matters in
furtherance of the purposes of the Partnership or this Agreement;
(h) Contract on behalf of the Partnership for the employment and services
of employees and/or independent contractors, such as lawyers and accountants,
and delegate to such persons the duty to manage or supervise any of the assets
or operations of the Partnership;
(i) Engage in any kind of activity and perform and carry out contracts of
any kind (including contracts of insurance covering risks to Partnership
Property and General Partner liability) necessary or incidental to, or in
connection with, the accomplishment of the purposes of the Partnership, as may
be lawfully carried on or performed by a Partnership under the laws of each
state in which the Partnership is then formed or qualified;
(j) Obtain all permits and governmental approvals necessary in furtherance
of the purpose of the Partnership;
(k) Take, or refrain from taking, all actions, not expressly prescribed or
limited by this Agreement, as may be necessary or appropriate to accomplish the
purposes of the Partnership; and
(l) Institute, prosecute, defend, settle, compromise, and dismiss lawsuits
or other judicial or administrative proceedings brought on or in behalf of, or
against, the
-5-
<PAGE>
Partnership or the Partners in connection with activities arising out of,
connected with, or incidental to this Agreement, and to engage counsel or others
in connection therewith.
6. LIABILITY AND INDEMNIFICATION OF GENERAL PARTNERS.
6.1 Liability. As among the Partners, no personal liability shall be
imposed upon any General Partner by reason of any act or omission occurring in
the course of its management or control of the Partnership, for damages or
otherwise, except for such General Partner's gross negligence, fraud, bad faith
or willful misconduct or a breach of any provision of this Agreement.
6.2 Indemnification. The Partnership shall indemnify and hold harmless
each General Partner and its officers, directors, employees and other
representatives from and against any loss, expense, damage or injury suffered or
sustained by any of them by reason of any acts, omissions or alleged acts or
omissions arising out of his activities on behalf of the Partnership, including
without limitation, any judgment, award, settlement, reasonable attorney's fees
and costs and expenses incurred in connection with the defense and settlement of
any actual or threatened action, proceeding or claim, unless such acts,
omissions or alleged acts or omissions were made as a result of the gross
negligence, fraud, bad faith or willful misconduct by such General Partner or a
breach of any provision of this Agreement by such General Partner.
7. TRANSFERS OF INTERESTS. No Partner may transfer or assign all or any part of
its interest in the Partnership without the consent of the other Partners.
8. WITHDRAWAL OF PARTNERS. Any Partner may withdraw from the Partnership at any
time pursuant to an amendment to this Agreement signed by all Partners and such
substituted or additional partners as may be admitted to the Partnership
pursuant to such amendment. The effectiveness of any such amendment shall, as to
the Partner designated as withdrawing Partner in such amendment, constitute the
withdrawal of such Partner as a Partner in the Partnership and, because of such
withdrawal, such Partner shall not thereafter be required to make any Capital
Contribution of any kind whatsoever as a Partner in the Partnership.
9. DISSOLUTION AND TERMINATION.
9.1 Events of Dissolution. The Partnership shall be dissolved upon the
first to occur of the following events (an "Event of Termination"):
(a) The date ninety (90) days after the concurrent withdrawal of
both General Partners from the Partnership, unless during such period all of the
Limited Partners agree to continue the business of the Partnership and to the
appointment of one or more successor general partners; or
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<PAGE>
(b) In the event that there is only one General Partner, the date
that is ninety (90) days after the withdrawal of such sole General Partner from
the Partnership, unless during such period, all of the Limited Partners agree to
continue the business of the Partnership and to the appointment of one or more
successor General Partners; or
(c) The election to terminate the Partnership by the affirmative
vote of a majority of the General Partners; but in any event not later than
December 31, 2024.
9.2 Winding-Up. Upon the occurrence of an Event of Termination, the
Partnership shall be dissolved and wound up. In connection with the dissolution
and winding-up of the Partnership, the General Partners, or if there are no
General Partners, the Limited Partners, shall proceed with the dissolution of
the Partnership, the sale of the Partnership's assets and the final distribution
of the assets and proceeds of the sale thereof as contemplated by Section 9.3.
9.3 Distributions Upon Dissolution and Winding-Up. In the event of
dissolution of the Partnership, the assets and proceeds from the sale of the
assets of the Partnership shall be applied and/or distributed in one or more
installments as determined by the General Partners or, if the dissolution shall
be caused by the failure to continue the business of the Partnership following
the withdrawal of a general partner, by the remaining Partners, in the following
order or priority:
(a) Payment of debts and liabilities of the Partnership (other than
any loans or advances made by Partners to the Partnership) and the expenses of
liquidation; provided, however, that the General Partners shall have the right
to designate the order in which specific liabilities are to be satisfied out of
Partnership Assets, to the extent permitted with reference to the order provided
by law, in order to minimize the risk of personal liability on the part of any
Partner;
(b) Establishment of reserves deemed reasonably necessary to cover
contingent or unforeseen liabilities or obligations of the Partnership or any
General Partner arising out of or in connection with the Partnership. These
reserves may be paid over to an attorney-at-law or a bank or trust company to be
held in escrow for the purpose of paying any such contingent or unforeseen
liabilities or obligations and at the expiration of such period as the General
Partners shall deem advisable, any then remaining balance shall be distributed
as the General Partners shall direct but in accordance with the order of
priority set forth in classes (c) and (d) below;
(c) The repayment of any loans or advances made by the Partners to
the Partnership, plus accrued interest thereon, but if the amount available for
such repayment shall be insufficient then pro rata on account thereof;
(d) To the Partners in proportion to their Capital Contributions.
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<PAGE>
10. AMENDMENTS. This Agreement may be modified or amended only with the written
consent of the General Partners and a majority-in-interest of the Limited
Partners.
11. MISCELLANEOUS.
11.1 Waiver of Partition. Each of the Partners hereby irrevocably waives
any and all rights that it may have to maintain any action for partition of any
of the Partnership's property.
11.2 Choice of Law. This Agreement and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware.
11.3 Successors and Assigns. Except as herein otherwise specifically
provided, this Agreement shall be binding upon and inure to the benefit of the
parties hereunder and their legal representatives, heirs, administrators,
executors, successors and assigns.
11.4 Expenses of Organization. Upon each General Partner satisfying its
initial Capital Contribution pursuant to Section 3.1 hereof, the Partnership
shall pay all expenses of each General Partner for legal and accounting services
incurred in connection with the organization of the Partnership.
11.5 Severability. If any provision of this Agreement or the application
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
11.6 No Waiver. The failure of any Partner to insist upon strict
performance of a covenant hereunder or of any obligation hereunder or to
exercise any right or remedy hereunder, regardless of how long such failure
shall continue shall not be a waiver of such Partner's right to demand strict
compliance therewith in the future unless such waiver is written and signed by
the Partner giving the same.
11.7 Counterparts. This Agreement may be executed in multiple copies, each
of which shall for all purposes constitute one Agreement which is binding on the
Partners notwithstanding that all parties are not the signatories to the same
copy.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Agreement of Limited Partnership as of the date first above written.
General Partner
THE NEW WORLD POWER CORPORATION
By:____________________________________
Fred A. Mayer
Acting Chief Financial Officer
General Partner
DB POWER, INC.
By:____________________________________
Vitold Jordan
Its Vice President
Limited Partner:
DB POWER, INC.
By:____________________________________
Vitold Jordan
Its Vice President
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<PAGE>
Exhibit 10(ll)
AMENDMENT NO. 1 TO AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF NEW WORLD
POWER TEXAS RENEWABLE ENERGY LIMITED PARTNERSHIP
THIS AMENDMENT NO. 1 (this "Amendment") to the Amended and Restated
Agreement of Limited Partnership of New World Power Texas Renewable Energy
Limited Partnership (the "Partnership Agreement") dated as of September 29,
1997, between The New World Power Corporation ("New World") and DB Power, Inc.
("DBI").
WHEREAS, pursuant to the Partnership Purchase Agreement dated as of
October 21, 1997, among Big Springs Holdings, Inc. ("Holdings"), Big Springs
Texas Energy Management, Inc. ("Management"), New World Power Texas Renewable
Energy Limited Partnership (the "Partnership"), New World and DBI, Management
acquired the general partnership interests (the "GP Interests") of New World and
DBI, and Holdings acquired the limited partnership interests (the "LP
Interests") of DBI, respectively, in the Partnership;
WHEREAS, upon the acquisition of New World's and DBI's respective GP
Interests and DBI' s LP Interests, New World and DBI effectively withdrew as
general partners and, with respect to DBI, as a limited partner of the
Partnership;
WHEREAS, pursuant to Section 8 of the Partnership Agreement, the
admission of new members is required to be effected by way of amendment to the
Partnership Agreement.
NOW THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. Management is hereby admitted to the Partnership as its sole
general partner.
2. Holdings is hereby admitted to the Partnership as its sole
limited partner.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of October 23, 1997.
BIG SPRINGS TEXAS ENERGY
MANAGEMENT, INC.
By:______________________________
Name: Michael Trachtenberg
Title: Vice President
BIG SPRINGS HOLDINGS, INC.
<PAGE>
By:______________________________
Name: Michael Trachtenberg
Title: Vice President
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<PAGE>
Exhibit 10(ll)
BROOKLYN NAVY YARD COGENERATION PARTNERS L.P.,
A LIMITED PARTNERSHIP
AMENDED AND RESTATED
CONSTRUCTION LOAN NOTE
October 19, 1992
FOR VALUE RECEIVED, BROOKLYN NAVY YARD COGENERATION PARTNERS, L.P, a
Delaware limited partnership, having a principal place of business at Building
41, Brooklyn Navy Yard, Flushing Avenue and Cumberland Street, Brooklyn, New
York ("Borrower"), unconditionally promises to pay to the order of Mission
Energy New York, Inc., a California corporation having a principal place of
business at 18101 Von Karman Avenue, Suite 1750, Irvine, California, or its
successors or assigns ("Payee"), in the manner and in the place hereinafter
provided, on the MATURITY DATE, AS DEFINED BELOW, the unpaid principal amount of
all advances made by Payee to Borrower as Construction Loans (each such advance
a "Loan" and collectively, the "Loans") under the Partnership Agreement referred
to below, together with accrued interest thereon at the rates and in the manner
herein provided.
1. Principal.
This Note is the "Construction Loan Note," issued pursuant to, and
entitled to the benefits of, that certain Limited Partnership Agreement, dated
as of October 19, 1992, (as it may hereafter be amended, supplemented or
otherwise modified from time to time, the "Partnership Agreement") between B-4l
Associates, L.P., a Delaware limited partnership, ("York Partners") and Payee,
to which reference is made for the terms and conditions under which the Loans
evidenced hereby are made and are to be repaid. Capitalized terms used herein
without definition shall have the meanings set forth in the Partnership
Agreement.
2. Interest.
Borrower agrees to pay interest on the unpaid principal amount of
each of the Loans evidenced by this Note from and including each of the
respective dates specified on Attachment I hereto as the dates such Loans were
made until payment in full at a fluctuating rate per annum which shall be
determined in accordance with provisions of the Partnership Agreement (but, in
any event, no greater than the Maximum Lawful Rate, as defined in the
Partnership Agreement); provided, that after neither Payee nor any MENY
Affiliate holds a General Partner Interest in the
1
<PAGE>
Borrower, any principal amount not paid when due and, to the extent permitted by
applicable law, any interest not paid when due, in each case whether at
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(both before as well as after judgment), shall bear interest at the default rate
provided in Section 6 hereof. Interest on this Note shall be payable in arrears
on each day any principal is due and payable pursuant to the terms of the
Partnership Agreement, upon any Prepayment of this Note pursuant to Section 5
hereof (to the extent accrued on the amount being prepaid) and on the Maturity
Date. Each payment made hereunder shall be credited first to interest then due
and the remainder of such payment shall be credited to principal, and interest
shall thereupon cease to accrue upon the principal so credited. All computations
of interest accrued and payable hereunder shall be made daily on the basis of a
365-day or 366-day year and the actual number of days elapsed.
3. Maturity Date.
The entire unpaid balance of the principal amount owed hereunder,
together with all accrued and unpaid interest thereon, shall be due and payable
on the date of acceleration upon an Event of Default under Section 9 hereof (the
"Maturity Date"), subject to the provisions for prepayment, pursuant to Section
5 hereof.
4. Payments.
All payments of principal, interest or other amounts owed or payable
under this Note shall be made in lawful money of the United States of America at
such place as shall be designated by Payee in writing for such purpose in
accordance with the terms of the Partnership Agreement. Until notified in
writing of the transfer of this Note, Borrower shall be entitled to deem Payee,
or such person who has been identified by the transferor in writing to Borrower
as the holder of this Note, as the owner and holder of this Note. Each of Payee
and any subsequent holder of this Note agrees that before disposing of this Note
or any part hereof, it will make a notation on Attachment I hereto of all
amounts advanced to Borrower as Construction Loans and any principal payments
made; provided, however, that the failure to make a notation of any advances
under or payments made on this Note shall not limit or otherwise affect the
obligation of Borrower hereunder with respect to payments of principal or
interest on this Note.
Whenever any payment or any other amount payable in respect hereof
shall be stated to be due on a day that is not a Business Day, such payment
shall instead be made on the next succeeding Business Day, and such extension of
time shall be included in the computation of the payment of interest on this
Note.
5. Prepayments.
Borrower shall prepay the principal of this Note, in whole or in
part, together with all accrued and unpaid interest thereon and any other sums
or charges, if any, then due hereunder as required under the terms of the
Partnership Agreement (each such date, a "Prepayment
2
<PAGE>
Date"). In addition, Borrower shall have the right at any time and from time to
time to prepay on any Business Day the principal of this Note in whole or in
part, upon at least five days prior written notice together with all accrued and
unpaid interest thereon and any other sums or charges, if any, then due
hereunder; provided, that any prepayments shall be credited to interest and
principal owed hereunder as set forth in the penultimate sentence of Section 2
hereof. Any prepayment pursuant to this Section 5 shall be made without premium
or penalty.
6. Default Rate.
To the extent permitted by applicable law and, in any event, only
after neither Payee nor any MENY Affiliate holds a General Partner Interest in
the Borrower, principal and interest due and payable hereunder and not paid when
due (both before as well as after judgment), shall bear interest payable on
demand at a rate per annum which is one percent (1.00%) above the rate provided
in Section 2 hereof from the date such amount is due and payable until such
amount shall be paid in full, provided, however, that in no event shall such
rate exceed the Maximum Lawful Rate.
7. Indemnification.
Borrower agrees to indemnify and hold harmless the Payee for any
loss, liability or expense including any reasonable attorneys" fees and expenses
incurred by the Payee arising out of or in connection with the collection or
enforcement of this Note.
8. Representations and Warranties.
Borrower hereby represents and warrants to Payee that:
(a) it is a duly organized and validly existing limited partnership
in good standing under the laws of the jurisdiction of its formation and
has the partnership power and authority to own and operate its properties,
to transact the business in which it is now engaged and to execute,
deliver and perform its obligations under this Note;
(b) this Note constitutes the duly authorized, legally valid and
binding obligation of Borrower, enforceable against Borrower in accordance
with its terms;
(c) all acts, conditions, consents, grants of approvals and things
required to be done and performed and required to have been granted by any
Person in connection with the execution, delivery and performance of this
Note have been effected, obtained or granted in compliance with all
applicable laws;
(d) the execution, delivery and performance by Borrower of this Note
will not (i) violate any law, governmental rule or regulation, court order
or agreement
3
<PAGE>
to which it is subject or by which its properties are bound or the charter
documents or bylaws of Borrower or (ii) result in the creation of any lien
or other encumbrance with respect to the property of Borrower.
9. Events of Default.
Upon the occurrence of any of the following specified events (each
an "Event of Default"):
a. Payments. After neither Payee nor any MENY Affiliate
holds a General Partner Interest in the Borrower,
Borrower shall default in the payment (i) when due,
whether on any Prepayment Date or at maturity by
declaration, acceleration, demand or otherwise, of all
or any portion of the principal amount or interest
hereunder payable as of such date or (ii) within 30 days
after demand of any other amounts due and payable
hereunder;
b. Dissolution. Any order, judgment or decree shall be
entered against the Borrower in a proceeding instituted
by Borrower decreeing the voluntary or involuntary
dissolution or split up of the Borrower and such order
shall remain undischarged and unstayed for a period in
excess of 30 days; or the Borrower shall otherwise
dissolve or cease to exist, whether by merger or
otherwise; or
c. Bankruptcy, etc. If neither Payee nor any MENY Affiliate
is a General Partner of the Borrower, the Borrower or
any General Partner of the Borrower, shall commence a
voluntary case concerning itself under Title Il of the
United States Code entitled "Bankruptcy" as now or
hereafter in affect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case shall be
commenced against the Borrower or any General Partner
thereof and shall not be dismissed or stayed within 60
days after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) shall be appointed for,
or take charge of, all or substantially all of the
property of the Borrower or any General Partner thereof
or commence any other proceeding under any arrangement,
adjustment of debt, relief of debtors, insolvency or
similar law of any jurisdiction whether arrangement,
adjustments of debt, relief of debtors, insolvency or
similar law of any jurisdiction whether now or hereafter
in effect relating to the Borrower or
4
<PAGE>
a General Partner thereof, or there shall be commenced
against the Borrower or any General Partner thereof any
such proceeding which shall remain undismissed and
unstayed for a period of 60 days, or the Borrower or any
General Partner thereof shall be adjudicated insolvent
or bankrupt; or any order of relief in any such case or
proceeding shall be entered; or the Borrower or any
General Partner thereof shall suffer any appointment of
any custodian or the like for any substantial part of
the Borrower's, or any of its respective Partner's
property, to continue undischarged or unstayed for a
period of 60 days; or the Borrower makes a general
assignment for the benefit of creditors;
then (A) upon the occurrence of any Event of Default specified in clause (c)
above, the principal amount owed hereunder, together with accrued interest
thereon and any sums or charges due hereunder shall become immediately due and
payable without presentment, demand, notice, protest or other requirements of
any kind (all of which are hereby expressly waived by Borrower) and (B) upon the
occurrence during the continuance of any other Event of Default, Payee may by
written notice to Borrower declare the entire unpaid balance of the principal
amount owed hereunder, together with any accrued and unpaid interest thereon and
any sums or charges due hereunder, immediately due and payable, whereupon the
same shall become and be forthwith due and payable, without protest,
presentment, notice of dishonor, demand or further notice of any kind (all of
which are hereby expressly waived by Borrower).
10. Notices.
Any notice, demand or request required or permitted to be given or
made hereunder shall be in writing and shall be deemed given or made when
delivered in person, or when sent by facsimile transmission or other means of
telecommunication when receipt is confirmed by the addressee thereof, or `if
sent to Borrower or the Payee at the address set forth below (or such other
address as shall be designated by notice to the other party as set forth in this
section 10) by registered, certified or first class mail, upon delivery thereof.
The address of Borrower is:
Building 41
Brooklyn Navy Yard
Flushing Avenue and Cumberland Street
Brooklyn, New York 11205
5
<PAGE>
with copies to:
B-41 Associates, L.P.
280 Park Avenue, Suite 2700 West
New York, New York 10017
Attention: Michael Trachtenberg
Chief Financial Officer
Telephone: (212) 557-6200
Fax No.: (212) 557-5678
and
Moses & Singer LLP
1301 Avenue of the Americas 40th Floor
New York, New York
Attention: Philip S. Olick, Esq.
Telephone: (212) 554-7891
Fax No.: (212) 557-7700
The address of Payee is:
18101 Von Karman Avenue, Suite 1700
Irvine, California 92715
Attention: General Counsel
Telephone: (714) 798-7957
Fax No.: (714) 757-0807
11. Waiver.
Borrower hereby waives diligence, presentment, protest and demand,
notice of protest, dishonor and nonpayment of this Note, and expressly agrees
that, without in any way affecting the liability of Borrower hereunder, the
Payee may extend the Maturity Date, any Prepayment Date or the time for payment
of any amount due under the Note or the Partnership Agreement, accept any
security, release any party liable hereunder or thereunder and release any
security now or hereafter securing this Note without in any other way affecting
the liability and obligations of Borrower.
12. Severability.
Every provision of this Note is intended to be severable. In the
event any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such illegality
or invalidity shall not affect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable; provided
6
<PAGE>
however, that notwithstanding anything to the contrary contained herein, this
Note shall be subject to the terms and conditions, and shall be construed in
accordance with, the Partnership Agreement.
13. Headings.
Headings at the beginning of each numbered section of this Note are
intended for convenience of reference and are not to be deemed or construed to
be a part of this Note.
14. Assignment.
Borrower may not assign its obligations under this Note and Borrower
hereby acknowledges its obligations under this Note are not assignable. Borrower
further acknowledges that the Payee may transfer, assign or grant a
participation in all or a portion of its rights hereunder to an affiliate of
Payee, or as collateral to a lender, or to a transferee in connection with an
assignment or transfer of Payee"s Interest in the Partnership pursuant to the
Partnership Agreement.
15. Limitation of Liability.
Notwithstanding anything to the contrary in this Note, no recourse
shall be had, whether by levy or execution, or under any law, or by the
enforcement of any assessment or penalty or otherwise, for the payment of any of
the obligations owed hereunder, against any Partner of Borrower individually or
personally, any successor or Affiliate or partner of any Partner of Borrower, or
any of the assets of the aforesaid persons, it being expressly understood that
the sole remedies available to Payee pursuant to this Note with respect to the
obligations owed hereunder shall be against the Borrower; provided that nothing
in this Section 15 shall constitute a waiver, release or discharge of any of the
obligations owed hereunder, but the same shall continue until fully paid,
discharged, observed or performed.
16. Obligations Absolute.
Subject to Section 15 hereof, no reference herein to the Partnership
Agreement and no provision of this Note or the Partnership Agreement shall alter
or impair the obligation of Borrower, which is absolute and unconditional, to
pay the principal of and interest on this Note at the place, at the respective
times, and in the currency herein prescribed.
Borrower is a partnership and the agreement herein contained shall
remain in full force and effect notwithstanding any changes in the Persons
composing such partnership, and the term "Borrower", as used herein, shall
include any alternate or successor partnerships, but any predecessor
partnerships and their respective partners shall not thereby be released from
any liability. Payee may renew or extend any of the liabilities of any of the
Partners of the Partnership and may make additional advances or extensions of
credit to any of them or release or fail to set off any deposit account or
credit of any of them or grant other indulgences to any of them, all from time
to time, before or after the maturity hereof, with or without further notice to
or assent from any of the
7
<PAGE>
other Partners or other parties liable with respect hereto. Without limiting any
of the foregoing or any other provision of this Note, nothing contained in this
Note shall be construed so as to modify the terms and conditions of the
Partnership Agreement, including, without limitation, Payee's rights thereunder
to receive any payments or distributions of any kind as provided for therein.
17. Subordination.
The Loans evidenced by this Note are subject to the terms of
subordination set forth in, and shall constitute Subordinated Debt within the
meaning of, the Collateral Agency and Intercreditor Agreement dated as of
December 1, 1997 among the Borrower, U.S. Trust Company of New York, as
Collateral Agent, and the other parties named therein, which are incorporated by
reference herein.
IN WITNESS WHEREOF, the undersigned has executed this Note and
delivered the same as the date first written above.
BROOKLYN NAVY YARD COGENERATI0N
PARTNERS, L.P.
By: B-41 ASSOCIATES, L.P.
By: B-41 Management Corp.,
its Managing General Partner
By:
-----------------------------
Name:
Title:
By: MISSION ENERGY NEW YORK, INC.
By:
-----------------------------
Name:
Title:
8
<PAGE>
ATTACHMENT I
TRANSACTIONS ON CONSTRUCTION LOAN NOTE
<TABLE>
<CAPTION>
Amount of Amount of Outstanding
Amount of Principal Interest Principal
Loan Made Paid Paid Balance Notation
Date This Date This Date This Date This Date Made By
- ---- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
Attachment I - 1
<PAGE>
Exhibit 10(ll)
PRIORITY LOAN NOTE
B-41 ASSOCIATES, L.P.
A LIMITED PARTNERSHIP
October 19, 1992
FOR VALUE RECEIVED, B-41 ASSOCIATES, L.P., a Delaware limited
partnership, having a principal place of business at 280 Park Avenue, Suite 2700
West, New York, New York ("Borrower"), unconditionally promises to pay to the
order of Mission Energy New York, Inc., a California corporation having a
principal place of business at 18101 Von Karman Avenue, Suite 1750, Irvine,
California or its successors or assigns ("Payee"), in the manner and in the
place hereinafter provided, on the MATURITY DATE, AS DEFINED BELOW, the unpaid
principal amount of all advances made by Payee to Borrower as Priority Loans
(each such advance a "Loan" and collectively, the "Loans") under the Partnership
Agreement referred to below, together with accrued interest thereon at the rates
and in the manner herein provided.
1. Principal.
This Note is the "Priority Loan Note," issued pursuant to, and
entitled to the benefits of, that certain Limited Partnership Agreement, dated
as of October 19, 1992, (as it may hereafter be amended, supplemented or
otherwise modified from time to time, the "Partnership Agreement") between
Borrower and Payee, to which reference is made for the terms and conditions
under which the Loans evidenced hereby are made and are to be repaid.
Capitalized terms used herein without definition shall have the meanings set
forth in the Partnership Agreement.
2. Interest.
Borrower agrees to pay interest on the unpaid principal amount of
each of the Loans evidenced by this Note from and including each of the
respective dates specified on Attachment I hereto as the dates such Loans were
made until payment in full at a fluctuating rate per annum which shall be
determined in accordance with provisions of the Partnership Agreement (but, in
any event, no greater than the Maximum Lawful Rate, as defined in the
Partnership Agreement); provided, that after neither Payee nor any MENY
Affiliate holds a General Partner Interest in the Partnership, any principal
amount not paid when due and, to the extent permitted by applicable law, any
interest not paid when due, in each case whether at maturity, by required
prepayment, declaration, acceleration, demand or otherwise (both before as well
as after judgment), shall bear interest at the default rate provided in Section
6 hereof. Interest on this Note shall be payable in arrears on each day any
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principal is due and payable pursuant to the terms of the Partnership Agreement,
upon any Prepayment of this Note pursuant to Section 5 hereof (to the extent
accrued on the amount being prepaid) and on the Maturity Date. Each payment made
hereunder shall be credited first to interest then due and the remainder of such
payment shall be credited to principal, and interest shall thereupon cease to
accrue upon the principal so credited. All computations of interest accrued and
payable hereunder shall be made daily on the basis of a 365-day or 366-day year
and the actual number of days elapsed.
3. Maturity Date.
The entire unpaid balance of the principal amount owed hereunder,
together with all accrued and unpaid interest thereon, shall be due and payable
on the date of acceleration upon an Event of Default under Section 10 hereof
(the "Maturity Date"), subject to the provisions for prepayment, pursuant to
Section 5 hereof.
4. Payments.
All payments of principal, interest or other amounts owed or payable
under this Note or in respect of the New York Partners Security Agreement, as
defined in the Partnership Agreement (the "Security Agreement"), shall be made
in lawful money of the United States of America at such place as shall be
designated by Payee in writing for such purpose in accordance with the terms of
the Partnership Agreement. Until notified in writing of the transfer of this
Note, Borrower shall be entitled to deem Payee, or such person who has been
identified by the transferor in writing to Borrower as the holder of this Note,
as the owner and holder of this Note. Each of Payee and any subsequent holder of
this Note agrees that before disposing of this Note or any part hereof, it will
make a notation on Attachment I hereto of all amounts advanced to Borrower as
Priority Loans and any principal payments made; provided, however, that the
failure to make a notation of any advances under or payments made on this Note
shall not limit or otherwise affect the obligation of Borrower hereunder with
respect to payments of principal or interest on this Note.
Whenever any payment or any other amount payable in respect hereof
or under the Security Agreement shall be stated to be due on a day that is not a
Business Day, such payment shall instead be made on the next succeeding Business
Day, and such extension of time shall be included in the computation of the
payment of interest on this Note.
5. Prepayments.
Borrower shall prepay the principal of this Note, in whole or in
part, together with all accrued and unpaid interest thereon and any other sum or
charges, if any, then due hereunder or under the Security Agreement, as required
under the terms of the Partnership Agreement (each such date, a "Prepayment
Date"). In addition, Borrower shall have the right at any time and from time to
time to prepay on any Business Day the principal of this Note in whole or in
part, upon at least five days prior written notice together with all accrued and
unpaid interest thereon and any other
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sums or charges, if any, then due hereunder or under the Security Agreement;
provided, that any prepayments shall be credited to interest and principal owed
hereunder as set forth in the penultimate sentence of Section 2 hereof. Any
prepayment pursuant to this Section 5 shall be made without premium or penalty.
6. Default Rate.
To the extent permitted by applicable law and, in any event, only
after neither Payee nor any MENY Affiliate holds a General Partner Interest in
the Partnership, principal and interest due and payable hereunder and not paid
when due (both before as well as after judgment), shall bear interest payable on
demand at a rate per annum which is one percent (1.00%) above the rate provided
in Section 2 hereof from the date such amount is due and payable until such
amount shall be paid in full, provided, however, that in no event shall such
rate exceed the Maximum Lawful Rate.
7. Security.
This Note is secured by, and entitled to the benefits of, certain
collateral as defined in and provided for in the Security Agreement. Reference
is hereby made to the Security Agreement for a complete statement thereof and
for a description of said collateral.
8. Indemnification.
Borrower agrees to indemnify and hold harmless the Payee for any
loss, liability or expense including any reasonable attorneys' fees and expenses
incurred by the Payee arising out of or in connection with the collection or
enforcement of this Note or any of Payee's rights and remedies under the
Security Agreement.
9. Representations and Warranties.
Borrower hereby represents and warrants to Payee that:
(a) it is a duly organized and validly existing limited partnership
in good standing under the laws of the jurisdiction of its formation and
has the partnership power and authority to own and operate its properties,
to transact the business in which it is now engaged and to execute,
deliver and perform its obligations under this Note;
(b) this Note constitutes the duly authorized, legally valid and
binding obligation of Borrower, enforceable against Borrower in accordance
with its terms;
(c) all acts, conditions, consents, grants of approvals and things
required to be done and performed and required to have been granted by any
Person in connection with the execution, delivery and performance of this
Note have been effected, obtained or granted in compliance with all
applicable laws;
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(d) the execution, delivery and performance by Borrower of this Note
will not (i) violate any law, governmental rule or regulation, court order
or agreement to which it is subject or by which its properties are bound
or the charter documents or bylaws of Borrower or (ii) result in the
creation of any lien or other encumbrance with respect to the property of
Borrower other than the lien created pursuant to the Security Agreement;
10. Events of Default.
Upon the occurrence of any of the following specified events (each
an "Event of Default"):
a. Payments. After neither Payee nor any MENY Affiliate
holds a General Partner Interest in the Partnership,
Borrower shall default in the payment (i) when due,
whether on any Prepayment Date or at maturity by
declaration, acceleration, demand or otherwise, of all
or any portion of the principal amount or interest
hereunder payable as of such date or (ii) within 30 days
after demand of any other amounts due and payable
hereunder or under the Security Agreement;
b. Dissolution. Any order, judgment or decree shall be
entered against the Partnership in a proceeding
instituted by Borrower decreeing the voluntary or
involuntary dissolution or split up of the Partnership
and such order shall remain undischarged and unstayed
for a period in excess of 30 days; or the Partnership
shall otherwise dissolve or cease to exist, whether by
merger or otherwise;
c. Bankruptcy, etc. The Borrower or any General Partner of
the Borrower or, if neither Payee nor any MENY Affiliate
is a General Partner of the Partnership, the Partnership
or any General Partner of the Partnership, shall
commence a voluntary case concerning itself under Title
11 of the United States Code entitled "Bankruptcy" as
now or hereafter in affect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case shall be
commenced against the Partnership, Borrower or any
General Partner thereof and shall not be dismissed or
stayed within 60 days after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) shall be
appointed for, or take charge of, all or substantially
all of the property of the Partnership, Borrower or any
General Partner thereof or commence any other proceeding
under any arrangement, adjustment of debt, relief of
debtors, insolvency or similar law of any jurisdiction
whether arrangement, adjustments of debt, relief of
debtors, insolvency or similar law of any jurisdiction
whether now or hereafter in effect relating to the
Partnership, Borrower or a General Partner thereof, or
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<PAGE>
there shall be commenced against the Partnership,
Borrower or any General Partner thereof any such
proceeding which shall remain undismissed and unstayed
for a period of 60 days, or the Partnership, Borrower or
any General Partner thereof shall be adjudicated
insolvent or bankrupt; or any order of relief in any
such case or proceeding shall be entered; or the
Partnership, Borrower or any General Partner thereof
shall suffer any appointment of any custodian or the
like for any substantial part of the Partnership's
Borrower or any of their respective Partner's property,
to continue undischarged or unstayed for a period of 60
days; or the Partnership makes a general assignment for
the benefit of creditors; or
d. Security Agreement. Borrower shall default in the due
performance or observance of any term, covenant or
agreement on its part to be performed or observed
pursuant to the Security Agreement, or the Security
Agreement shall for any reason (other than by the
written agreement of the Payee or any of its affiliates)
cease in any material respect to be in full force and
effect or to give the Payee the liens contemplated
thereby, and in each case, such event continues
unremedied for a period of 30 days after notice thereof
is given to Borrower by Payee (which period shall be
extended for up to 90 days so long as Borrower is
diligently and in good faith pursuing a cure of such
default);
then (A) upon the occurrence of any Event of Default specified in
clause (c) above, the principal amount owed hereunder, together with
accrued interest thereon and any sums or charges due hereunder or
under the Security Agreement, shall become immediately due and
payable without presentment, demand, notice, protest or other
requirements of any kind (all of which are hereby expressly waived
by Borrower) and (B) upon the occurrence during the continuance of
any other Event of Default, Payee may by written notice to Borrower
declare the entire unpaid balance of the principal amount owed
hereunder, together with any accrued and unpaid interest thereon and
any sums or charges due hereunder or under the Security Agreement
immediately due and payable, whereupon the same shall become and be
forthwith due and payable, without protest, presentment, notice of
dishonor, demand or further notice of any kind (all of which are
hereby expressly waived by Borrower).
11. Notices.
Any notice, demand or request required or permitted to be given or
made hereunder shall be in writing and shall be deemed given or made when
delivered in person, or when sent by facsimile transmission or other means of
telecommunication when receipt is confirmed by the addressee thereof, or if sent
to Borrower or the Payee at the address set forth below (or such other
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<PAGE>
address as shall be designated by notice to the other party as set forth in this
Section 11) by registered, certified or first class mail, upon delivery thereof.
The address of Borrower is:
280 Park Avenue, Suite 2700 West
New York, New York 10017
Attention: Michael Trachtenberg
Chief Financial Officer
Telephone: (212) 557-6200
Fax No.: (212) 557-5678
With a copy to:
Moses & Singer LLP
1301 Avenue of the Americas
New York, New York
Attention: Philip S. Olick, Esq.
Telephone: (212) 554-7891
Fax No.: (212) 557-7700
The address of Payee is:
18101 Von Karman Avenue
Suite 1700
Irvine, California 92715
Attention: General Counsel
Telephone: (714) 798-7957
Fax No.: (714) 757-0807
12. Waiver.
Borrower hereby waives diligence, presentment, protest and demand,
notice of protest, dishonor and nonpayment of this Note, and expressly agrees
that without in any way affecting the liability of Borrower hereunder, the Payee
may extend the Maturity Date, any Prepayment Date or the time for payment of any
amount due under the Note, the Security Agreement or the Partnership Agreement,
accept additional security, release any party liable hereunder or thereunder and
release any security now or hereafter securing this Note without in any other
way affecting the liability and obligations of Borrower.
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<PAGE>
13. Severability.
Every provision of this Note is intended to be severable. In the
event any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such illegality
or invalidity shall not affect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable; provided
however, that notwithstanding anything to the contrary contained herein, this
Note shall be subject to the terms and conditions, and shall be construed in
accordance with, the Partnership Agreement.
14. Headings.
Headings at the beginning of each numbered section of this Note are
intended for convenience of reference and are not to be deemed or construed to
be a part of this Note.
15. Assignment.
Borrower may not assign its obligations under this Note and Borrower
hereby acknowledges its obligations under this Note and are not assignable.
Borrower further acknowledges that the Payee may transfer, assign or grant a
participation in all or a portion of its rights hereunder to an affiliate of
Payee, or as collateral to a lender, or to a transferee in connection with an
assignment or transfer of Payee's Interest in the Partnership pursuant to the
Partnership Agreement.
16. Limitation of Liability.
Notwithstanding anything to the contrary in this Note, no recourse
shall be had, whether by levy or execution, or under any law, or by the
enforcement of any assessment or penalty or otherwise, for the payment of any of
the obligations owed hereunder, against Borrower individually or personally, any
successor or Affiliate or partner of any Partner of Borrower, or any of the
assets of the aforesaid persons, it being expressly understood that the sole
remedies available to Payee pursuant to this Note with respect to the
obligations owed hereunder shall be against the Collateral as defined under the
Security Agreement; provided that nothing in this Section 16 shall (i)
constitute a waiver, release or discharge of any of the obligations owed
hereunder, but the same shall continue until fully paid, discharged, observed or
performed, or (ii) in any way limit or restrict any right of Secured Party as
defined under the Security Agreement to foreclose the security interests granted
pursuant to the Security Agreement or otherwise realize upon any of the
Collateral.
17. Obligations Absolute.
Subject to Section 16 hereof, no reference herein to the Partnership
Agreement and no provision of this Note or the Partnership Agreement shall alter
or impair the obligation of Borrower, which is absolute and unconditional, to
pay the principal of and interest on this Note at the place, at the respective
times, and in the currency herein prescribed.
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<PAGE>
Borrower is a partnership and the agreement herein contained shall
remain in full force and effect notwithstanding any changes in the Persons
composing such partnership, and the term "Borrower", as used herein, shall
include any alternate or successor partnership, but any predecessor partnerships
and their respective partners shall not thereby be released from any liability.
Payee may renew or extend any of the liabilities of any of the partners of the
partnership and may make additional advances or extensions of credit to any of
them or release or fail to set off any deposit account or credit of any of them
or grant other indulgences to any of them, all from time to time, before or
after the maturity hereof, with or without further notice to or assent from any
of the other partners or other parties liable with respect hereto. Without
limiting any of the foregoing or any other provision of this Note, nothing
contained in this Note shall be construed so as to modify the terms and
conditions of the Partnership Agreement, including, without limitation, Secured
Party's rights thereunder to receive any payments or distributions of any kind
with respect to the Collateral or as otherwise provided for therein.
IN WITNESS WHEREOF, the undersigned has executed this Note and
delivered the same as the date first written above.
B-41 ASSOCIATES, L.P.
By: B-41 Management Corp.,
its Managing General Partner
By:
-----------------------------
Name:
Title:
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ATTACHMENT I
TRANSACTIONS ON PRIORITY LOAN NOTE
<TABLE>
<CAPTION>
Outstanding
Amount of Amount of Amount of Principal
Loan Made Principal Paid Interest Paid Balance this Notation
Date this Date this Date this Date Date Made By
- ---- --------- --------- --------- ---- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
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Exhibit 10(ll)
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") is dated as of October
19, 1992 and entered into by and between B-41 ASSOCIATES, L.P., a Delaware
limited partnership ("Grantor"), and MISSION ENERGY NEW YORK, INC., a California
corporation ("Secured Party").
RECITALS
A. Grantor and Secured Party are parties to that certain Limited
Partnership Agreement dated as of October 19, 1992 (as it may hereafter be
amended, supplemented or otherwise modified form time to time, the "Partnership
Agreement"), and, pursuant to the terms thereof, Grantor owns a limited
partnership interest in Brooklyn Navy Yard Cogeneration Partners, L.P., a
Delaware limited partnership formed pursuant to the Agreement (the
"Partnership");
B. Pursuant to the terms and conditions set forth in the Partnership
Agreement, Secured Party may, from time to time, advance moneys and extend
certain loans referred to therein as Priority Loans (collectively, the "Loans").
C. Secured Party has agreed to enter into the Partnership Agreement
and to make the Loans only if Grantor grants the security interests and
undertakes the obligations contemplated by this Agreement.
D. Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings given them in the Partnership Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Secured Party to make the Loans under the Partnership Agreement and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Grantor hereby agrees with Security Party as follows:
SECTION 1. Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Code" has the meaning given that term in Section 12 hereof.
"Collateral" has the meaning given that term in Section 2 hereof.
<PAGE>
"Event of Default" means an event of default under the Note.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien (including judgement liens, liens of
mechanics, suppliers and other Persons for the provision of goods or services,
rights of set off and all other liens arising under statute, common law or
judicial interpretation), charge, claim (including reclamation claims), security
interest, easement or encumbrance, preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction.
"Note" means the Priority Loan Note.
"Pledged Interest" means the portion of Grantor's Limited Partner
Interest under the Partnership Agreement equal to a 30% interest in the
Partnership.
"Proceeds" shall mean "proceeds" as such term is defined in the Code
and, in any event, shall include (i) proceeds of any insurance, indemnity,
warranty or guaranty payable to Grantor or Secured Party from time to time with
respect to any of the Collateral, (ii) payments (in any form whatsoever) made or
due and payable to Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral and (iii) other amounts from time to time paid or payable under or in
connection with any of the Collateral.
"Secured Obligations" has the meaning given that term in Section 3
hereof.
"Security Documents" shall mean this Agreement, and all other
documents and agreements (including any amendment, modification, extension,
supplementation or renewal thereof) executed by Grantor or the Partnership after
the date hereof and now or hereafter securing the Secured Obligations or
evidencing the security interest granted hereunder.
SECTION 2. Grant of Security Interest. Grantor hereby assigns to
Secured Party, and hereby grants to Secured Party a security interest in, all of
Grantor's right, title and interest in and to the following (the "Collateral"):
(a) all of Grantor's right, title and interest as a limited partner
in the Partnership with respect to the Pledged Interest, whether now owned or
hereafter acquired, including without limitation all of Grantor's right, title
and interest in, to and under the Partnership Agreement with respect to the
Pledged Interest, together with all other rights, interests, claims and other
property of Grantor in any manner arising out of or relating to the Pledged
Interest, whatever their respective kind or character, whether they are tangible
or intangible property, and wheresoever they may exist or be located, and
further including, without
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<PAGE>
limitation, all of the rights of Grantor as a limited partner: (i) to (x)
receive money due and to become due (including without limitation dividends,
distributions, interest, income from partnership properties and operations,
proceeds of sale of partnership assets and returns of capital) under or pursuant
to the Partnership Agreement with respect to the Pledged Interest, (y) receive
payments upon termination of the Partnership Agreement with respect to the
Pledged Interest, and (z) receive any other payments or distributions, whether
cash or noncash, in respect of Grantor's limited partnership interest evidenced
by the Partnership Agreement with respect to the Pledged Interest; and (ii) in
and with respect to claims and causes of action arising out of or relating to
the Partnership to the extent Grantor's rights with respect to such claims and
causes of action relate to or arise in respect of the Pledged Interest;
(b) all Proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral.
Notwithstanding the foregoing, the "Collateral" shall not include any contract
which by its terms prohibits assignments thereof or security interests therein,
unless consent from the relevant party or parties has been obtained to the
security interests granted hereunder, or any contract in which the granting of a
security interest is prohibited under applicable law; provided that the
foregoing exclusion shall not apply to the extent that any term in a contract
between an account debtor and Grantor (A) prohibits assignment of an account or
requires the account debtor's consent to such assignment or security interest or
(B) prohibits creation of a security interest in a general intangible for money
due or to become due or requires the account debtor's consent to such assignment
or security interest to the extent the Code so provides.
SECTION 3. Security for Obligations. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. ss. 362(a)), of all obligations and liabilities
of every nature of Grantor now or hereafter existing under or arising out of or
in connection with the Note and all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Grantor, would accrue on such
obligations), fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party as a preference, fraudulent transfer or otherwise
(all such obligations and liabilities being the "Underlying Debt"), and all
obligations of every nature of Grantor now or hereafter existing under this
Agreement (all such obligations of Grantor, together with the Underlying Debt,
being the "Secured Obligations").
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SECTION 4. No Assumption. Notwithstanding any of the foregoing, this
Agreement shall not in any way be deemed to obligate Secured Party, or any
purchaser at a foreclosure sale under this Agreement to assume any of Grantor's
obligations, duties, expenses or liabilities under the Partnership Agreement or
under any and all other agreements now existing or hereafter drafted or executed
(collectively, the "Grantor Obligations") unless Secured Party, or any such
Purchaser otherwise expressly agrees to assume any or all of said Grantor
Obligations in writing. In the event of foreclosure by Secured Party, Grantor
shall remain bound and obligated to perform the Grantor Obligations and Secured
Party shall not be deemed to have assumed any of such Grantor Obligations except
as provided in the preceding sentence.
SECTION 5. Representations and Warranties. Grantor represents and
warrants as follows:
(a) Description of Collateral. Grantor is the owner and holder of
the Pledged Interest.
(b) Partnership Agreement. The Partnership Agreement has been duly
authorized, executed and delivered by Grantor and is in full force and effect,
except to the extent the effectiveness thereof may be limited by, or requires,
any action by or in respect of Secured Party or any affiliate thereof.
(c) Ownership of Collateral. Grantor is the legal and beneficial
owner of the Collateral free and clear of any Lien except for the security
interest created by this Agreement. Grantor has the full power, authority and
legal right to convey, transfer and assign its interest in the Collateral
pursuant to this Agreement. No effective financing statement or other instrument
similar in effect covering all or any port of the Collateral is on file in any
filing or recording office except such as may have been filed in favor of
Secured Party relating to this Agreement.
(d) Office Locations; Fictitious Names. The chief place of business,
the chief executive office and the office where Grantor keeps its records
regarding the Collateral is, and has been for the four month period preceding
the date hereof, located at 280 Park Avenue, Suite 2700 West, New York, New
York. Grantor does not do business under any tradename or fictitious business
name.
(e) Consents or Governmental Authorizations. No consent of any other
Person (including, without limitation, the general partner or any limited
partner of the Grantor or any creditor of Grantor), and no authorization,
approval or other action by, and no notice to or filing (other than the timely
filing of the financing statements under the Code pursuant to Section 5(f)
hereof) with, any governmental authority or regulatory body is required for
either (i) the grant by Grantor of the security interest granted hereby or for
the execution, delivery or performance of this Agreement by Grantor or (ii) the
perfection of the security interest granted hereunder or the exercise by Secured
Party of its rights and remedies hereunder (except as may have been taken by or
at the direction of Grantor).
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(f) Perfection. This Agreement, together with the filing of
financing statements under the Code in the jurisdictions identified on Schedule
l hereto, creates a valid, perfected and first priority security interest in the
Collateral, securing the payment of the Secured Obligations, and all filings and
other actions necessary or desirable to perfect and protect such security
interest have been duly made or taken.
(g) Validity of Agreement. This Agreement has been, and each
instrument or document required hereunder will be, duly executed and delivered
by Grantor, and this Agreement constitutes, and each instrument or document
required hereunder when executed and delivered hereunder will constitute, the
legally valid and binding obligation of Grantor, enforceable against Grantor in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws or equitable principles relating to or limiting creditors' rights
generally.
(h) Conflicts. The execution, delivery and performance of this
Agreement and the documents or instruments required hereunder will not violate
any provision of any existing law or regulation binding on Grantor, or any
order, judgment, award or decree of any court, arbitrator or governmental
authority binding on Grantor, or any mortgage, indenture, lease, contract or
other agreement, instrument or undertaking to which Grantor is a party or by
which Grantor or any of its assets may be bound, and will not result in, or
require, the creation or imposition of any Lien on any of its property, assets
or revenues pursuant to the provisions of any such mortgage, indenture, lease,
contract or other agreement, instrument or undertaking.
(i) Litigation. There is no pending or threatened action or
proceeding affecting Grantor before any court, governmental agency or arbitrator
which may adversely affect the ability of Grantor to perform or observe any of
its obligations hereunder or which would adversely affect Grantor's assignment,
pledge or grant of a security interest hereunder.
(j) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all respects.
SECTION 6. Further Assurances.
(a) Grantor agrees that from time to time, at the expense of
Grantor, Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Grantor will: (i)
at the request of Secured Party, mark conspicuously each of its records
pertaining to the Collateral with a legend, in form and substance satisfactory
to Secured Party, indicating that such Collateral is subject to the security
interest granted hereby; (ii) execute and file such financing or continuation
statements, or
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<PAGE>
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Secured Party may request, in order to perfect and preserve
the security interests granted or purported to be granted hereby, and (iii) at
Secured Party's request, appear in and defend any action or proceeding that may
affect Grantor's title to or Secured Party's security interest in all or any
part of the Collateral.
(b) Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor. Grantor agrees that
a carbon, photographic or other reproduction of this Agreement or of a financing
statement signed by Grantor shall be sufficient as a financing statement and may
be filed as a financing statement in any and all jurisdictions.
(c) Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
SECTION 7. Covenants of Grantor. Grantor shall:
(a) after neither Secured Party nor any MENY Affiliate holds a
General Partner Interest in the Partnership, not petition, request or take any
other legal or administrative action which seeks, or may reasonably be expected,
to rescind, terminate or suspend the Partnership Agreement, or (without the
consent of the Secured Party) amend or modify the Partnership Agreement;
(b) at its expense and after neither Secured Party nor any MENY
Affiliate holds a General Partner Interest in the Partnership, (i) perform and
comply in all material respects with all terms and provisions of the Partnership
Agreement required to be performed or complied with by it, (ii) maintain the
Partnership Agreement in full force and affect, (iii) enforce the Partnership
Agreement in accordance with its terms and (iv) take all such action to that end
as from time to time may be reasonably requested by Secured Party, in each case
to the extent required in order to give effect to the provisions of Section
13.2.2 of the Partnership Agreement; provided, however, that nothing herein
shall be construed so as to limit or modify any of Grantor's rights and
obligations under the Partnership Agreement;
(c) not create or suffer to exist any Lien upon or with respect to
any of the Collateral to secure the indebtedness or other obligations of any
Person, except for the security interest created by this Agreement;
(d) notify Secured Party of any change in Grantor's name, identity
or legal organizational structure within 15 days of such change;
(e) give Secured Party 30 days' prior written notice of any change
in Grantor's chief place of business, chief executive office or residence; and
6
<PAGE>
(f) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Collateral, except
to the extent the validity thereof is being contested in good faith; provided
that Grantor shall in any event pay such taxes, assessments, charges, levies or
claims not later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment entered or filed against Grantor or any
of the Collateral as a result of the failure to make such payment.
SECTION 8. Voting Rights; Profits, Interest and Dividends.
(a) So long as no Event of Default under the Note shall have
occurred and be continuing:
(i) Grantor shall be entitled to exercise any and all voting
and other consensual rights, if any, pertaining to the Collateral or any
part thereof (including without limitation rights of approval arising
under the Partnership Agreement) for any purpose not inconsistent with the
terms of this Agreement; provided, however, that Secured Party shall give
written notice to Grantor on or prior to the exercise of such right of the
manner in which it believes Grantor's exercise of such rights shall be
consistent with the terms of this Agreement; provided, further, that from
and after the date neither Secured Party nor any MENY Affiliate has a
General Partner Interest in the Partnership, Grantor shall give Secured
Party at least ten Business Days' prior written notice of any proposed
exercise of any such voting and other consensual rights (together with any
supporting information or materials as Secured Party may request in order
to make an informed decision thereon) and the manner in which it intends
to exercise such rights (it being understood that Secured Party's failure
to give the written notice set forth in the preceding proviso shall be
deemed to manifest its belief that the exercise of such rights in the
manner described by Grantor is consistent with the terms of this
Agreement);
(ii) subject to the terms of the Partnership Agreement,
including, without limitation, with respect to the repayment of the Loans,
Grantor shall be entitled to receive and retain, and to utilize free and
clear of the lien of this Agreement, any and all payments, including but
not limited to profits, dividends and other distributions, paid in respect
of the Collateral; provided, however, that any and all
(A) profits, dividends, and other distributions paid or
payable other than in cash, and instruments and other property
received, receivable or otherwise distributed, in each case in
exchange for any Collateral, and
(B) profits, dividends and other distributions paid or payable
in cash in respect of any Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction
of capital, shall be, and shall forthwith be delivered to Secured
Party to hold as, Collateral and shall, if received by Grantor, be
received in trust for the benefit of Secured Party, be segregated
7
<PAGE>
from the other property or funds of Grantor and be forthwith
delivered to Secured Party as Collateral in the same form as so
received (with all necessary endorsements); and
(iii) Secured Party shall execute and deliver (or cause to be
executed and delivered) to Grantor all such proxies and other instruments
as Grantor may from time to time reasonably request for the purpose of
enabling Grantor to exercise the voting and other consensual rights that
it is entitled to exercise pursuant to Section 8(a)(i) and to receive the
profits, dividends and other distributions that it is authorized to
receive and retain pursuant to Section 8(a)(ii).
(b) Upon the occurrence and during the continuation of an Event of
Default under the Note:
(i) upon written notice from Secured Party to Grantor, all
rights of Grantor to exercise the voting and other consensual rights, if
any, that it would otherwise be entitled to exercise pursuant to Section
8(a)(i) shall cease, and all such rights shall thereupon become vested in
Secured Party who shall thereupon have the sole right to exercise such
voting and other consensual rights;
(ii) all rights of Grantor to receive any and all payments
with respect to the Collateral under or in connection with the Partnership
Agreement including but not limited to the profits, dividends, and other
distributions which it would otherwise be authorized to receive and retain
pursuant to Section 8(a) (ii), shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole
right to receive and hold such payments as Collateral; and
(iii) all payments which are received by Grantor contrary to
the provisions of Section 8 (b) (ii) shall be received in trust for the
benefit of Secured Party, shall be segregated from other funds of Grantor
and shall be forthwith paid over to Secured Party as Collateral in the
same form as so received (with any necessary endorsement).
SECTION 9. Secured Party Appointed Attorney-in-Fact. Grantor hereby
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation:
(a) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
8
<PAGE>
(b) to receive, endorse and collect all instruments made payable to
Grantor representing any payment of profits, dividends or any other distribution
in respect of any of the Collateral;
(c) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral; and
(d) to do, at Secured Party's option and Grantor's expense, at any
time or from time to time, all acts and things that Secured Party deems
necessary to protect, preserve or realize upon the Collateral and Secured
Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as Grantor might do.
SECTION 10. Secured Party May Perform. If Grantor fails to perform
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Grantor under Section 14
hereof.
SECTION 11. Standard of Care. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for monies actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of any Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property of a similar nature.
SECTION 12. Remedies.
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Collateral), and Secured Party may also
in its sole discretion, without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange or broker's board or at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Collateral. Secured Party may be the purchaser of any or all
of the Collateral at any such sale and Secured Party shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
9
<PAGE>
apply any of the Secured Obligations as a credit on account of the purchase
price for any Collateral payable by Secured Party at such sale. Each purchaser
at any such sale shall hold the property sold absolutely free from any claim or
right on the part of Grantor, and Grantor hereby waives (to the extent permitted
by applicable law) all rights of redemption stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Secured Forty may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Grantor hereby valves any claims against Secured Party arising by reason of the
fact that the price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if Secured Party accepts the first offer received and does not offer such
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
(b) Grantor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and applicable state securities laws, Secured Party may be
compelled, with respect to any sale of all or any part of the Collateral
conducted without prior registration or qualification of such Collateral under
the Securities Act and/or such state securities laws, to limit purchasers to
those who will agree, among other things, to acquire the Collateral for their
own account, for investment and not with a view to the distribution or resale
thereof. Grantor acknowledges that any such private sales may be at prices and
on terms less favorable than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act) and, notwithstanding such
circumstances, Grantor agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Secured Party shall have
no obligation to engage in public sales and no obligation to delay the sale of
any Collateral for the period of time necessary to permit Company to register it
for a form of public sale requiring registration under the Securities Act or
under applicable state securities laws, even if Company would, or should, agree
to so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Collateral, upon written request, Grantor shall and shall cause
Company from time to time to furnish to Secured Party all such information as
Secured Party may request in order to determine the number and nature of the
interests included in the Collateral which may be sold by Secured Party in
exempt transactions under the Securities Act and the rules and regulations of
the Securities and Exchange Commission thereunder as the same are from time to
time in effect.
SECTION 13. Application of Proceeds. Except as expressly provided
10
<PAGE>
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of Secured Party, be held by Secured Party
as Collateral for, and/or then, or at any other time thereafter, applied in full
or in part by Secured Party against, the Secured Obligations in the following
order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by Secured Party in connection
therewith, and all amounts for which Secured Party is entitled to
indemnification hereunder and all advances made by Secured Party hereunder
for the account of Grantor, and to the payment of all costs and expenses
paid or incurred by Secured Party in connection with the exercise of any
right or remedy hereunder, all in accordance with Section 14;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof) in such order as Secured Party
shall elect; and
THIRD: To the payment to or upon the order of Grantor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 14. Indemnity and Expenses.
(a) Grantor agrees to indemnify Secured Party from and against any
and all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Security Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.
(b) Grantor will pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder, or (iv) the failure by Grantor to perform or observe
any of the provisions hereof.
(c) Anything contained in this Agreement to the contrary
notwithstanding, the obligations of Grantor set forth in this Section 14 are
included herein solely for the purpose of including such obligations within the
Secured Obligations, and such obligations shall in all respects be limited by
the provisions of Section 26; accordingly, nothing in this Section 14 shall be
construed in a manner which shall obligate Grantor to make any payment, or
provide any
11
<PAGE>
security, to Secured Party with respect to such obligations apart from the grant
of the security interest in the Collateral as set forth in Section 1 hereof.
SECTION 15. Waivers by Grantor. Grantor hereby waives presentment,
demand, or protest (to the extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral. Except notices which are
expressly provided for herein or in the Secured Obligations, Grantor hereby
waives notice (to the extent permitted by applicable law) of any kind in
connection with this Agreement. Grantor hereby further waives any claims of any
nature whatsoever against Secured Party (and its respective directors,
shareholders or controlling persons, officers, employees, agents, nominees and
each of them) arising out of or related to the sale or transfer of the
Collateral in accordance with this Agreement, notwithstanding that such sale or
transfer occurred at such time or in such a manner as to directly or indirectly
decrease the purchase price required to be paid for the Collateral.
SECTION 16. Continuing Security Interest; Transfer of Note. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the indefeasible payment in full
of the Secured Obligations, (b) be binding upon Grantor, its successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), Secured
Party may assign or otherwise transfer the Note held by it to any other Person,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to Secured Party herein or otherwise. Notwithstanding
anything to the contrary contained herein, the rights and obligations of Grantor
hereunder shall not be assigned to any Person without the prior written consent
of Secured Party, in its sole discretion. Upon the indefeasible payment in full
of all Secured Obligations, the security interest granted hereby shall terminate
and all rights to the collateral shall revert to Grantor. Upon any such
termination Secured Party will, at Grantor's expense, execute and deliver to
Grantor such documents as Grantor shall reasonably request to evidence such
termination.
SECTION 17. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, or consent to any departure by Grantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 18. Notices. Any notice or other communication herein
required or permitted to be given shall be in writing and may be personally
served, telecopied, telexed or sent by United States mail or courier service and
shall be deemed to have been given when delivered in person or by courier
service, upon receipt of telecopy or telex, or one Business Day after being sent
by registered or certified overnight mail, with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or, as to either
party, such other address as shall be designated by
12
<PAGE>
such party in a written notice delivered to the other party hereto.
SECTION 19. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 20. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 21. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 22. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT
TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 23. Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT
GRANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. Grantor
designates and appoints the Partnership and such other Persons as may hereafter
be selected by Grantor irrevocably agreeing in writing to so serve, as its agent
to receive on its behalf service of all process in any such proceedings in any
such court, such service being hereby acknowledged by Grantor to be effective
and binding service in every respect. A copy of any such process so served shall
be mailed by registered or certified mail to Grantor at its address provided in
Section
13
<PAGE>
18; provided that, unless otherwise provided by applicable law, any failure to
mail such copy shall not affect the validity of service of such process. If any
agent appointed by Grantor refuses to accept service, Grantor hereby agrees that
service of process sufficient for personal jurisdiction in any action against
Grantor in the State of New York may be made by registered or certified mail,
return receipt requested, to Grantor at its address provided in Section 18, and
Grantor hereby acknowledges that such service shall be effective and binding in
every respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of Secured Party to bring
proceedings against Grantor in the courts of any other jurisdiction.
SECTION 24. Waiver of Jury Trial. GRANTOR AND SECURED PARTY HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Grantor and Secured Party each
acknowledge that this waiver is a material inducement for Grantor and Secured
Party to enter into a business relationship, that Grantor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Grantor and
Secured Party further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS SECURITY AGREEMENT. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court.
SECTION 25. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
SECTION 26. No Recourse.
(a) Notwithstanding anything to the contrary in this Agreement, no
recourse shall be had, whether by levy or execution, or under any law, or by the
enforcement of any assessment or penalty or otherwise, for the payment of any of
the Secured Obligations, against Grantor individually or personally, any
successor or Affiliate or partner of Grantor, or any of the assets of the
aforesaid persons, it being expressly understood that the sole remedies
available to Secured Party pursuant to this Security Agreement with respect to
the Secured Obligations shall
14
<PAGE>
be against the Collateral; provided that nothing in this Section 26 shall (i)
constitute a waiver, release or discharge of any of the Secured Obligations, but
the same shall continue until fully paid, discharged, observed or performed, or
(ii) in any way limit or restrict any right of Secured Party to foreclose the
security interests granted pursuant to this Security Agreement or otherwise
realize upon any of the Collateral.
(b) Without limiting any of the foregoing, nothing contained in this
Agreement, including, without limitation, Section 8 hereof, shall be construed
so as to modify the terms and conditions of the Partnership Agreement,
including, without limitation, Secured Party's rights thereunder to receive any
payments or distributions of any kind with respect to the Collateral or as
otherwise provided for therein.
SECTION 27. Marshalling; Payments Set Aside. Secured Party shall not
be under any obligation to marshal any assets in favor of Grantor or any other
party or against or in payment of any or all of the Secured Obligations. To the
extent that Grantor makes a payment or payments to Secured Party or Secured
Party enforces its security interest or exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied, and all Liens, rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
15
<PAGE>
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
B-41 ASSOCIATES, L.P.
By: B-41 Management Corp.,
its Managing General Partner
By:
-----------------------------
Name:
Title:
Notice Address:
280 Park Avenue, Suite 2700 West
New York, New York 10017
Attention: Chief Financial Officer
Telephone: (212) 557-6200
Fax No.: (212) 557-5678
MISSION ENERGY NEW YORK, INC.
By:
-----------------------------
Name:
Title:
Notice Address:
18101 Von Karman Avenue
Suite 1700
Irvine, CA 92715
Attention: General Counsel
Telephone: (714) 752-5588
Fax No.: (714) 752-6401
16
<PAGE>
Acknowledged as of this 19th day of October, 1992
BROOKLYN NAVY YARD COGENERATION
PARTNERS, L.P.
By: B-41 ASSOCIATES, L.P.
By: B-41 Management Corp.,
its Managing General Partner
By:
---------------------------
Name:
Title:
By: MISSION ENERGY NEW YORK, INC.
By:
---------------------------
Name:
Title:
17
<PAGE>
SCHEDULE 1 TO SECURITY AGREEMENT
Jurisdictions for the filing of UCC-1 financing statements
Secretary of State, New York
City Register, New York County, New York
City Register, Kings County, New York
Secretary of State, Delaware
Recorder of Deeds, Kent County, Delaware
18
<PAGE>
EX-10(mm)
Renewable Resource
Energy Purchase Agreement Between
Texas Utilities Electric Company
and
New World Power
Texas Renewable Energy Limited Partnership
<PAGE>
Table of Contents
Article 1. Renewable Resource Facility Design and Interconnection........... 1
1.01 Renewable Resource Facility...................................... 1
1.02 Renewable Resource Facility Specifications....................... 1
1.03 Interconnection Facilities....................................... 3
1.04 Agreement for Electric Service................................... 5
1.05 TU Electric Approval............................................. 5
1.06 Exclusion of Liability........................................... 6
Article 2. Renewable Resource Facility Operation and Testing................ 6
2.01 Commercial Operation............................................. 6
2.02 Performance Tests................................................ 7
2.03 General Requirements............................................. 7
2.04 Required Disconnection........................................... 9
2.05 Energy Delivery.................................................. 9
2.06 No Parallel or Interstate Operations............................. 9
2.07 Access to Facility............................................... 10
Article 3. Payments, Records, and Billings.................................. 11
3.01 Monthly Payments................................................. 11
3.02 Interconnection Costs............................................ 11
3.03 Regulatory Action and Recoupment................................. 13
3.04 Cooperation...................................................... 14
3.05 Governmental Impositions......................................... 14
3.06 Records.......................................................... 15
3.07 Billing.......................................................... 15
3.08 Interest on Past Due Bills....................................... 15
3.09 Corrections...................................................... 16
Article 4. Outages.......................................................... 16
4.01 Outages.......................................................... 16
4.02 No Liability..................................................... 16
Article 5. Insurance and Indemnity.......................................... 16
5.01 Proof of Coverage................................................ 16
5.02 Policies......................................................... 17
5.03 Coverage and Liability Limits.................................... 17
5.04 Subcontractor Coverage........................................... 18
5.05 Reporting........................................................ 18
5.06 Release and Waiver............................................... 18
5.07 No Liability Limitation.......................................... 18
5.08 Indemnification.................................................. 18
5.09 Survival of Article.............................................. 19
Article 6. Term and Uncontrollable Force.................................. 19
Renewable Resource Energy Purchase Agreement - Page i
<PAGE>
6.01 Term............................................................. 19
6.02 Option to Extend Term............................................ 20
6.03 Regulatory Approval.............................................. 21
6.04 Insolvency....................................................... 22
6.05 Uncontrollable Force............................................. 22
6.06 Termination...................................................... 23
6.07 No Consequential Damages......................................... 24
Article 7. Representations and Warranties................................... 24
7.01 Representations and Warranties................................... 24
Article 8. Confidentiality.................................................. 26
8.01 Scope............................................................ 26
8.02 Obligation....................................................... 26
8.03 Term............................................................. 26
Article 9. Option to Purchase............................................... 27
9.01 Grant of Option.................................................. 27
9.02 Information...................................................... 27
9.03 Manner of Exercise............................................... 28
9.04 Title............................................................ 28
9.05 Possession and Risk of Loss...................................... 28
9.06 Closing Date..................................................... 28
9.07 Environmental Matters............................................ 28
9.08 Closing.......................................................... 29
9.09 Purchase Price................................................... 30
9.10 Assignment of Option............................................. 31
9.11 Memorandum of Option............................................. 31
Article 10 Miscellaneous................................................... 31
10.01 Subject to Regulation........................................... 31
10.02 Assignment...................................................... 31
10.03 Time Is of Essence.............................................. 31
10.04 Notices......................................................... 31
10.05 No Rights of Third Parties...................................... 32
10.06 Subject to Applicable Laws...................................... 32
10.07 No Partnership.................................................. 33
10.08 Amendment....................................................... 33
10.09 No Waiver....................................................... 33
10.10 Captions........................................................ 33
10.11 Complete Agreement.............................................. 33
10.12 Governing Law................................................... 33
10.13 Severability.................................................... 33
10.14 Exhibits........................................................ 33
10.15 Construction.................................................... 33
10.16 Delivery of Copy of Agreement................................... 34
Renewable Resource Energy Purchase Agreement - Page ii
<PAGE>
EXHIBIT 1.01
Description of Renewable Resource Facility................................. 35
EXHIBIT 1.02(g)
Relay Protective Requirements.............................................. 36
EXHIBIT 1.03
Interconnection Facilities................................................. 37
EXHIBIT 1.03(f)
Telemetering and SCADA Table Requirements.................................. 1
EXHIBIT 2.01(a)
List Of Items To Be Completed Before Phase One Partial Commercial Operation 1
EXHIBIT 2.01(b)
List Of Items To Be Completed Before Phase Two Partial Commercial Operation 1
EXHIBIT 2.01(c)
List Of Items To Be Completed Before Commercial Operation.................. 1
EXHIBIT 2.02(a)
Performance Test Procedures................................................ 1
EXHIBIT 3.01
Payment Schedule........................................................... 1
EXHIBIT 3.06(b)
Parameters to be Monitored and Recorded by Producer........................ 1
EXHIBIT 9.11
Memorandum of Option....................................................... 1
Renewable Resource Energy Purchase Agreement - Page iii
<PAGE>
Renewable Resource Energy Purchase Agreement
This Renewable Resource Energy Purchase Agreement ("Agreement") dated
Sept.13, 1994, is between Texas Utilities Electric Company ("TU Electric"), a
Texas corporation with offices in Dallas, Dallas County, Texas, and New World
Power Texas Renewable Energy Limited Partnership ("Producer"), a limited
partnership of which The New World Power Corporation ("New World"), a Delaware
corporation with offices in Lime Rock, Connecticut, is the general partner. In
consideration of the promises made in this Agreement, Producer agrees to
produce, deliver, and sell to TU Electric, and TU Electric agrees to take and
purchase from Producer, electrical energy under this Agreement's provisions.
Article 1. Renewable Resource Facility Design and Interconnection
1.01 Renewable Resource Facility. Producer intends, at its sole cost and
expense, to design, construct, and operate a wind generation facility (the
"Renewable Resource Facility"), with a total nameplate electrical generating
capacity of 40,000 kilowatts ("kW") and anticipated average net annual
generation of 113,000,000 kilowatt-hours ("kWh") located in Howard County,
Texas. Unless agreed otherwise by both parties in writing, all wind turbines in
the Renewable Resource Facility must be Enercon model E-40, 500 kW wind
turbines. Information about the Renewable Resource Facility--including
specifications of, and pertinent data about, its equipment and protective
features--is attached as Exhibit 1.01. Before beginning construction of the
Renewable Resource Facility, Producer shall furnish TU Electric with a specific
plot plan of the Renewable Resource Facility, as a supplement to Exhibit 1.01,
after ongoing meteorological data collection has been substantially completed
and reviewed by Producer, along with local site parameters. Producer may not
begin construction of the Renewable Resource Facility until TU Electric has
approved in writing the location of the wind turbines, Producer Substation,
control room and maintenance facility, and Interconnection Facilities, which
approval may not be unreasonably withheld. The Renewable Resource Facility
includes the Producer Substation as described on Exhibit 1.03.
1.02 Renewable Resource Facility Specifications. Producer shall design,
construct, and operate the Renewable Resource Facility so that it complies with
all legal and regulatory requirements applicable to the Renewable Resource
Facility, including national, state, and local construction and safety codes and
with these requirements:
(a) The Renewable Resource Facility's alternating current generating system
must be 60 Hertz ("Hz"), must be connected for balanced three-phase
operation, must not cause unreasonable unbalance on Company's electrical
system, and must adhere to the recommendations in two publications of the
Institute of Electrical and Electronic Engineers ("IEEE"): IEEE
Recommended Practices and Requirements for Harmonic Control in Electrical
Power Systems ("IEEE 519") and IEEE Recommended Practice for the
Electrical Design and Operation of Wind Generating Stations ("IEEE 1094").
Renewable Resource Energy Purchase Agreement - Page 1
<PAGE>
(b) The Renewable Resource Facility must be designed so that it (i)
automatically and instantaneously disconnects the Renewable Resource
Facility's generators from TU Electric's system in case of a forced outage
or interruption of TU Electric's system connected to the Renewable
Resource Facility and (ii) coordinates with the transfer trip scheme to be
installed by TU Electric on the Big Spring--Chalk 69 kV line section, as
shown on Exhibit 1.02(g).
(c) The Renewable Resource Facility must be designed so that it automatically
disconnects the Renewable Resource Facility from TU Electric's system
within 15 cycles if the operating frequency as measured at the Point of
Interconnection deviates more than +0.2 Hz or -0.7 Hz from a 60 Hz base
and within 10 cycles if a voltage deviation of +5% or -10% from nominal
occurs. If TU Electric system requirements dictate trip points other than
those stated above, then Producer shall make the necessary changes to the
Renewable Resource Facility to effect those settings. If Producer is
unable to effect those settings within a reasonable time after TU Electric
sends a written request for such changes, then TU Electric may provide, or
require Producer to provide, the necessary equipment in the
Interconnection Facilities, at Producer's expense.
(d) The Renewable Resource Facility must not be able to, nor be permitted to,
energize a de-energized circuit of TU Electric.
(e) The Renewable Resource Facility must include a manually operable 69 kV
isolating switch with visible break, accessible to TU Electric personnel
and capable of being locked in open position.
(f) The Renewable Resource Facility must be connected to TU Electric's 69
kilovolt transmission system through a power transformer or transformers.
(g) Producer shall install, own, operate, and maintain all necessary
facilities, including control and protective devices on Producer's side of
the Point of Interconnection that are appropriate for parallel operation
of the Renewable Resource Facility with TU Electric's system. At a
minimum, the installation must comply with the system protection
requirements shown on Exhibit 1.02(g). The "Point of Interconnection" is
the point where TU Electric's electrical conductors are connected to
Producer's electrical conductors, as shown on Exhibit 1.03.
(h) Producer is responsible for protecting the Renewable Resource Facility so
that scheduled or forced outages, short-circuits, and other disturbances
on TU Electric's system do not damage the Renewable Resource Facility.
(i) Producer shall, at its expense, provide corrections or additions to
existing control and protective equipment reasonably required to protect
TU Electric's system or if government or industry regulations or standards
change, to the extent that such corrections or additions are necessary due
to the existence of the Renewable Resource Facility, when requested by TU
Electric.
Renewable Resource Energy Purchase Agreement - Page 2
<PAGE>
(j) At a minimum, the Renewable Resource Facility must be able to operate
continuously under normal operating conditions with all available wind
turbines in service at a lagging power factor of 0.9 and a leading power
factor of 0.9. If the Renewable Resource Facility is not able to operate
continuously within this range, and if such inability results in
operational problems on TU Electric's system, additional Interconnection
Facilities may be required by TU Electric, at Producer's expense.
1.03 Interconnection Facilities.
(a) "Interconnection Facilities" are TU Electric's electric lines, protection,
metering, and other facilities that function as a part of TU Electric's
electrical system and that are required or appropriate, in TU Electric's
sole judgment, to effect an electrical interconnection between TU
Electric's system and the Renewable Resource Facility, as shown on Exhibit
1.03. The Interconnection Facilities include, without limitation:
(i) Tap structure in the Big Spring--Chalk 69 kV transmission line with
three sectionalizing switches;
(ii) 1.7 miles of 69 kV 336.4 MCM ACSR transmission line from tap
structure to TU Electric 69 kV switchyard;
(iii) TU Electric 69 kV Switchyard consisting of dead-end structures,
relaying equipment, RTU, metering, and relay house;
(iv) Line relay panels at Big Spring and Chalk; and
(v) Transmission right-of-way from tap point to switchyard, access road
from Producer road to TU Electric 69 kV switchyard, and property
provided for 69 kV switchyard.
(b) Producer shall pay TU Electric for the actual cost associated with the
Interconnection Facilities pursuant to Section 3.02(a).
(c) Producer shall grant or secure for TU Electric, at Producer's expense, any
rights-of-way, and shall provide suitable space on property owned or
controlled by Producer, necessary for construction, installation,
maintenance, and operation of the Interconnection Facilities, as requested
by TU Electric, including access roads.
(d) TU Electric shall furnish, install, maintain, and own, at Producer's
expense, the necessary metering equipment to record energy purchases under
this Agreement. Producer shall furnish and install, to TU Electric's
specifications, the meter sockets or other related metering equipment
necessary. TU Electric reserves the right to install, at its expense, any
additional metering or recording instruments in the Renewable Resource
Facility to collect test and operating data. Producer may request an
independent meter test of the meters used to record energy purchases under
this Agreement. If the meters are found to be within the accuracy
standards established by the American National
Renewable Resource Energy Purchase Agreement - Page 3
<PAGE>
Standards Institute, Incorporated, then the test is at Producer's expense;
otherwise, the test is at TU Electric's expense.
(e) TU Electric shall file an application with the Public Utility Commission
of Texas for an amendment to its certificate of convenience and necessity
("CCN"), if such an application is necessary, for the transmission
facilities within the Interconnection Facilities on or before March 1,
1995. If TU Electric is unable to obtain, on or before the later of (i)
December 1, 1995, or (ii) 12 months after the application for an amendment
to TU Electric's CCN is filed, in form and substance satisfactory to both
TU Electric and Producer, an amendment to its existing CCN, if required,
for construction of any of the Interconnection Facilities, then a party
that is dissatisfied, whether TU Electric or Producer, shall send a
written notice to the other party specifying the absence of, or
unsatisfactory portions of, an order granting the application for an
amendment to the CCN. Both parties shall cooperate in trying to remedy the
absence of, or unsatisfactory portions of, an order granting the
application for an amendment to the CCN. If an amendment to TU Electric's
CCN for construction of the Interconnection Facilities, in form and
substance satisfactory to TU Electric and Producer, is not obtained within
120 days after the notice of the lack of a satisfactory order is given,
then either TU Electric or Producer may terminate this Agreement on
written notice to the other party.
(f) The Renewable Resource Facility and the Interconnection Facilities must
include the "Communications and Telemetry Equipment," which means the
telemetering, communications, and data acquisition equipment, and
automatic switching control facilities, communication and data
transmission (telemetering) facilities, and control equipment operable
from the Texas Utilities System Operating Center ("SOC") and any other
locations designated by TU Electric that are necessary or convenient, as
decided by TU Electric, in its sole discretion, for the effective
operation of the Renewable Resource Facility and the other Interconnection
Facilities with TU Electric's system. The Communications and Telemetry
Equipment must include at least the following:
(i) one full period voice circuit (an off-premise extension for TU
Electric's PBX), the termination to which is the control room in the
Renewable Resource Facility;
(ii) one communication circuit (420 data circuit) from a multiport remote
terminal unit ("RTU"), which RTU must be provided by TU Electric at
Producer's expense, at TU Electric's 69 kV switchyard to SOC or any
other location designated from time to time by TU Electric;
(iii) one communication circuit from the RTU required under Section
1.03(f)(ii) to TU Electric's Western Region transmission office or
any other location designated from time to time by TU Electric;
(iv) sufficient communication, telemetering, and control equipment
connected from the Renewable Resource Facility control room or the
Producer Substation to the RTU
Renewable Resource Energy Purchase Agreement - Page 4
<PAGE>
required under Section 1.03(f)(ii) to provide for these control,
status, position, or readings:
(A) control of, and status indication for, all 69 kV circuit
breakers in the Producer Substation or in the Interconnection
Facilities;
(B) instantaneous three-phase megawatts and megavars reactive and
bus voltage on the 69 kV bus;
(C) TU Electric's meter readings, including MWh, MW, MVAR, all
both "in" and "out", from the meter stand in the TU Electric
69 kV switchyard in the Interconnection Facilities; and
(D) meteorological data, as specified in Exhibit 1.03(f);
(v) one full business voice circuit, which may be cellular, that
terminates in TU Electric's 69 kV switchyard in the Interconnection
Facilities to use in maintaining and operating the Interconnection
Facilities and to read the billing meter;
(vi) one full business voice circuit, which may be cellular, in the
Renewable Resource Facility's control room, including facsimile
capability compatible with the equipment used by SOC;
(vii) a facsimile machine in the Renewable Resource Facility's control
room.
Other specifications for the Communications and Telemetry Equipment are
contained in Exhibit 1.03(f). TU Electric shall design the Communications and
Telemetry Equipment. TU Electric shall install, maintain, and own the
Communications and Telemetry Equipment, except that Producer shall acquire,
install, and maintain, at its expense, the items described in Subsections
1.03(f)(i), 1.03(f)(iii), 1.03(f)(iv), 1.03(f)(v), 1.03(f)(vi), and
1.03(f)(vii), and Producer shall acquire, install, and maintain, at its expense,
the communications circuits described in Subsection 1.03(f)(ii). Producer shall
provide rights-of-way and space for TU Electric to install the Communications
and Telemetry Equipment.
1.04 Agreement for Electric Service. If Producer desires electric utility
service at the Renewable Resource Facility during construction, testing, or
otherwise, it will be provided by TU Electric under a separate Agreement for
Electric Service.
1.05 TU Electric Approval.
(a) "Plans" are all specifications, drawings, procedures, schedules, permits,
and equipment test reports reasonably required to design, construct, and
operate the Renewable Resource Facility in compliance with this Agreement.
Partial Commercial Operation may not commence until TU Electric has given
its written approval of the Plans. TU Electric's approval rights are
limited to those aspects of the Renewable Resource Facility that are
regulated by this Agreement and that affect the Renewable Resource
Facility's
Renewable Resource Energy Purchase Agreement - Page 5
<PAGE>
suitability for safe, compatible, reliable, and synchronous operation with
TU Electric's system.
(b) Producer shall notify TU Electric in writing at least 10 days before
energization and start-up testing of the Renewable Resource Facility. TU
Electric may inspect the Renewable Resource Facility and witness the
testing of any equipment and devices associated with interconnection.
(c) Producer may not materially modify the Renewable Resource Facility
(including replacement of major equipment items with whatever is then the
current state of the art technology) unless TU Electric has approved in
writing the Plans for the modification, which approval may not be
unreasonably withheld; it is not unreasonable for TU Electric to withhold
its approval until the parties reach agreement on a method to share
savings under Section 7.01(j).
1.06 Exclusion of Liability. TU Electric--by review, comment, failure to
comment, or approval of any Plans for design, construction, operation,
modification, or maintenance of any facilities under this Agreement--is not
responsible for strength of materials, design, adequacy, or compatibility of the
facilities, nor does it assume any responsibility or liability for damages or
physical injury to (a) either party's real or personal property or electrical
equipment, (b) the real or personal property of third persons or entities not a
party to this Agreement, (c) any persons who may come in contact with or upon
either party's facilities; or (d) any other persons or property, real or
personal. TU ELECTRIC'S REVIEW, COMMENT, FAILURE TO COMMENT, OR APPROVAL IS NOT
AN ENDORSEMENT OR WARRANTY OF THE FACILITIES.
Article 2. Renewable Resource Facility Operation and Testing
2.01 Commercial Operation.
(a) The "Phase One Partial Commercial Operation Date" is the next day after TU
Electric executes and delivers to Producer a "Certificate of Readiness for
Partial Commercial Operation" that evidences completion, to TU Electric's
reasonable satisfaction, of all of the items listed in Exhibit 2.01(a).
The Renewable Resource Facility's "Partial Commercial Operation" begins at
12:01 a.m. on the Phase One Partial Commercial Operation Date and
continues until the Commercial Operation Date or until this Agreement is
terminated, whichever occurs first. The Renewable Resource Facility may
not be connected to TU Electric's system before the Phase One Partial
Commercial Operation Date, except to perform the Performance Tests
outlined in Section 2.02(a) on Phase One of the Renewable Resource
Facility and as approved by TU Electric in writing in advance. "Phase
One," "Phase Two," and "Phase Three" of the Renewable Resource Facility
will be defined by Producer and TU Electric in the form of a supplement to
Exhibit 1.01 to be prepared by Producer after ongoing meteorological data
has been substantially completed and reviewed by Producer. Producer may
not begin construction of the Renewable Resource Facility until TU
Electric has approved in
Renewable Resource Energy Purchase Agreement - Page 6
<PAGE>
writing the definitions of Phase One, Phase Two, and Phase Three, which
approval may not be unreasonably withheld.
(b) The "Phase Two Partial Commercial Operation Date" is the next day after TU
Electric executes and delivers to Producer a "Certificate of Readiness for
Phase Two Partial Commercial Operation" that evidences completion, to TU
Electric's reasonable satisfaction, of all of the items listed in Exhibit
2.01(b).
(c) The "Commercial Operation Date" is the next day after TU Electric executes
and delivers to Producer a "Certificate of Readiness for Commercial
Operation" that evidences completion, to TU Electric's reasonable
satisfaction, of all of the items listed in Exhibit 2.01(c). The Renewable
Resource Facility's "Commercial Operation" begins at 12:01 a.m. on the
Commercial Operation Date and continues until this Agreement expires or is
otherwise terminated.
2.02 Performance Tests.
(a) Before the Phase One Partial Commercial Operation Date, Producer shall
perform (or allow TU Electric, at TU Electric's option, to perform, at
Producer's expense) the following tests ("Performance Tests") on Phase One
of the Renewable Resource Facility. Before the Phase Two Partial
Commercial Operation Date, Producer shall perform (or allow TU Electric,
at TU Electric's option, to perform, at Producer's expense) the following
tests ("Performance Tests") on Phase Two of the Renewable Resource
Facility. Before the Commercial Operation Date, Producer shall perform (or
allow TU Electric, at TU Electric's option, to perform, at Producer's
expense) the following tests ("Performance Tests") on the Renewable
Resource Facility. After the Commercial Operation Date, TU Electric may
require that each Performance Test be run at TU Electric's discretion. The
party running the Performance Test shall promptly give the written test
results to the other party. Each Performance Test must be performed under
the written procedures for the test contained in Exhibit 2.02(a). Each
party has the right to reasonable advance notice of, and to have personnel
present during, Performance Tests run by the other party.
(b) The Performance Tests are:
(i) A trip test ("Trip Test") (coordinated with TU Electric) of the
Renewable Resource Facility's protective relaying that trips the 69
kilovolt ("kV") circuit breaker connecting the Renewable Resource
Facility to TU Electric's electric system. The test must show that
the Renewable Resource Facility meets the specifications contained
in the protective relaying design as approved by TU Electric under
Subsection 1.05(a).
(ii) An operational test ("Relay Test") of the Renewable Resource
Facility's protective relaying for the 69 kV breaker and main
step-up transformer. The test must show that the Renewable Resource
Facility meets the specifications contained in the design of the
protective relaying as approved by TU Electric under Subsection
1.05(a).
Renewable Resource Energy Purchase Agreement - Page 7
<PAGE>
(iii) A test ("Power Factor Test") of the Renewable Resource Facility's
ability to operate under leading and lagging power factor
conditions. The test must be conducted by operating at each power
factor design limit for one hour. The test must show that the
Renewable Resource Facility meets the specifications contained in
Subsection 1.02(j).
2.03 General Requirements.
(a) All electric energy generated at the Renewable Resource Facility and
delivered to TU Electric must have a nominal frequency of 60 Hz and must
have the precise frequency, voltage, and other properties and
characteristics from time to time established by TU Electric for operation
of its electric system, provided that Producer must be given reasonable
advance notice of any change in the established frequency, voltage, and
other properties and characteristics.
(b) Producer shall maintain and operate the Renewable Resource Facility (i) to
minimize the likelihood of a disturbance affecting or impairing either TU
Electric's system or the quality of service to TU Electric's customers,
(ii) to maintain, within the Renewable Resource Facility's design
capability, power factor, and voltage as TU Electric requests from time to
time, and (iii) in compliance with all applicable legal and regulatory
requirements, including environmental requirements.
(c) Producer shall adequately staff the Renewable Resource Facility to
monitor, operate, and maintain the equipment and shall staff the Renewable
Resource Facility with a qualified operator during ordinary business
hours.
(d) Producer shall report to SOC, on a timely basis, those items and/or
conditions reasonably necessary for SOC's internal planning. The
information supplied shall include, without limitation, the following:
(i) status (on or off line) within 15 minutes;
(ii) daily plan for the next day, including capability released and
available for operation;
(iii) overhaul or scheduled outage plans for the year (updated weekly);
(iv) any scheduled or planned transmission or switch yard clearances or
maintenance plans for the next twelve (12) months (updated weekly);
and
(v) time and cause of outage of Producer's generators or circuit
breakers included in the Renewable Resource Facility.
(e) Producer must obtain TU Electric's approval before closing the Renewable
Resource Facility's 69 kV breaker or 69 kV isolating switch connecting to
the TU Electric system, whether for testing or for operations, which
approval may not be unreasonably withheld.
Renewable Resource Energy Purchase Agreement - Page 8
<PAGE>
(f) Producer must properly synchronize the Renewable Resource Facility with TU
Electric's system and is responsible for any damages caused to TU
Electric's system or its customers by improper synchronization.
(g) Producer is responsible for the proper operation of the equipment in the
Renewable Resource Facility designed to cause the Renewable Resource
Facility to trip off-line as required in Section 1.02(c), and Producer is
responsible for any damages caused to TU Electric's system or its
customers by failure of the Renewable Resource Facility to trip as
designed.
(h) Producer shall notify TU Electric of any emergency or hazardous condition
or occurrence that in any way affects, or could affect, the safe operation
of TU Electric's system.
(i) Producer may not electrically connect the Renewable Resource Facility to
any facilities other than those of TU Electric.
(j) Producer shall maintain and operate the Renewable Resource Facility and
facilities interconnecting the Renewable Resource Facility to the Point of
Interconnection in compliance with the applicable then-current guidelines
of the Electric Reliability Council of Texas ("ERCOT") or its successor
and under TU Electric's reasonable directions; if this Agreement conflicts
with the ERCOT guidelines, then this Agreement controls.
2.04 Required Disconnection. Producer shall immediately open the electrical
connection between the Renewable Resource Facility and the Interconnection
Facilities when requested by TU Electric for any of the following reasons:
(a) to facilitate maintenance or repair of any of TU Electric's facilities or
system or of Producer's facilities being maintained by TU Electric, as
decided by TU Electric in its sole discretion, as long as TU Electric
diligently proceeds with the repairs or maintenance;
(b) an emergency exists on the system of TU Electric or the ERCOT system, as
decided by TU Electric in its sole discretion, as long as TU Electric
diligently proceeds to correct or remedy the emergency to the extent that
action is reasonable;
(c) inspection of the Renewable Resource Facility's generating or protective
equipment reveals a hazardous condition or a lack of proper maintenance,
as decided by TU Electric in its sole discretion;
(d) the Renewable Resource Facility is operating, as decided by TU Electric in
its sole discretion, hazardously or so that it is interfering with TU
Electric's customers or the operation of TU Electric's system; or
Renewable Resource Energy Purchase Agreement - Page 9
<PAGE>
(e) upon termination or expiration of this Agreement; however--subject to TU
Electric's rights and Producer's representations, warranties, and
obligations under Section 2.06--Producer may stay interconnected with TU
Electric if Producer is entitled to, and has satisfied all prerequisites
to, interconnect with TU Electric under TU Electric's tariff in effect at
that time or under applicable law in effect at that time.
TU Electric may open the electrical connection between the Renewable Resource
Facility and the Interconnection Facilities, if it deems it necessary, in its
sole discretion, for any of the foregoing reasons, but TU Electric must allow
Producer to close the electrical connection between the Renewable Resource
Facility and the Interconnection Facilities as soon as it is reasonably
practical to do so.
2.05 Energy Delivery. All energy generated by the Renewable Resource Facility,
net of that required for operation of the Renewable Resource Facility, shall be
delivered to and taken by TU Electric under the provisions of this Agreement.
2.06 No Parallel or Interstate Operations.
(a) During the term of this Agreement, and during all renewals or extensions
of it, Producer agrees that no portion of the Renewable Resource Facility
will be electrically interconnected or operated in parallel with any part
or parts of any electric system other than the TU Electric system.
(b) Producer represents, and warrants and agrees, that after the termination
of this Agreement, including all renewals or extensions of it, Producer
will not, except in compliance with the Orders of the Federal Energy
Regulatory Commission ("FERC") in Dockets Nos. EL79-8 and E-9558 issued on
October 28, 1981, November 5, 1981, and January 29, 1982, and the Order
issued in FERC Docket No. EL79-8-002 on July 23, 1987, either directly or
indirectly, through other entities that are either directly or indirectly
interconnected with facilities owned or operated by TU Electric, transmit
electric energy in interstate commerce or sell, deliver, purchase, or
receive electric energy in interstate commerce or own or operate any
facilities therefor, or establish, maintain, modify, or utilize, directly
or through other entities, any connection or facility used or to be used
for the transmission, sale, delivery, purchase, or receipt of electric
energy in interstate commerce, unless Producer has first applied for and
obtained an order from the FERC, applicable to TU Electric (unless TU
Electric agrees in writing that such application need not be filed), under
Sections 210, 211, and 212 of the Federal Power Act, requiring the
establishment, maintenance, modification, or utilization of any such
connection that may be involved. The representations and warranties of
Producer contained in this Section 2.06(b) survive the termination or
expiration of this Agreement. If it is finally determined that TU Electric
is a "public utility" within the meaning of Section 201(e) of the Federal
Power Act and subject to the full plenary power of the FERC, then the
limitations of this Section 2.06(b) thereupon terminate.
(c) If Producer breaches any agreement, representation or warranty contained
in this Section 2.06, then TU Electric, in addition to any other remedies
it may have, including the remedy specified in Section 2.06(d) below, has
the options to do any one or more of the
Renewable Resource Energy Purchase Agreement - Page 10
<PAGE>
following: (i) immediately suspend receipt of electric energy from
Producer, (ii) immediately disconnect its facilities from the facilities
of Producer, or (iii) immediately terminate this Agreement.
(d) The parties agree that it will be impossible to measure in terms of money
the damages that may or will accrue by reason of any breach of any of the
representations and warranties set forth in this Section 2.06, or any
failure in the performance of any of the obligations contained in this
Section 2.06, and for that reason, among others, the parties agree that TU
Electric is entitled to specific performance of the provisions of this
Section 2.06, in addition to any other remedies that may exist. If TU
Electric institutes any proceedings to enforce any of the provisions of
this Section 2.06, Producer hereby waives any claim or defense that an
adequate remedy at law exists.
(e) Nothing in this Section precludes the use of connections for transmission
of electric energy in interstate commerce under bona fide emergencies
pursuant to the provisions of Section 202(d) of the Federal Power Act.
2.07 Access to Facility. TU Electric may enter the Renewable Resource Facility
at any reasonable time after giving Producer reasonable advance notice to
inspect the Renewable Resource Facility or to show it to third parties who may
accompany TU Electric to the Renewable Resource Facility. TU Electric may enter
the Interconnection Facilities at any time.
Article 3. Payments, Records, and Billings
3.01 Monthly Payments. TU Electric will pay Producer monthly for energy metered
at the Point of Interconnection in accordance with the payment schedule depicted
on Exhibit 3.01.
3.02 Interconnection Costs.
(a) Producer shall pay TU Electric for the Actual Cost associated with the
installation of the Interconnection Facilities described in Section 1.03,
except installation of the Interconnection Facilities for which Producer
is responsible (the "Interconnection Costs").
(b) Producer shall provide security acceptable to TU Electric in the amount of
$800,000, including rights-of-way costs, before TU Electric is required to
begin acquisition of rights-of-way and construction of the Interconnection
Facilities. Producer must pay the entire Interconnection Costs before the
Phase One Partial Commercial Operation Date.
(c) TU Electric shall inspect, maintain, repair and replace the
Interconnection Facilities, except for those items listed in Section 1.03
as being the responsibility of Producer. Beginning at the conclusion of
the first month after completion of construction of the Interconnection
Facilities, Producer shall pay TU Electric a monthly charge for
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inspection and maintenance of the Interconnection Facilities that are the
responsibility of TU Electric at the following rates:
Monthly Monthly
Year Charge Year Charge
1996 $320 2009 $460
1997 $330 2010 $480
1998 $340 2011 $490
1999 $350 2012 $510
2000 $360 2013 $530
2001 $370 2014 $540
2002 $380 2015 $560
2003 $390 2016 $580
2004 $400 2017 $590
2005 $410 2018 $610
2006 $420 2019 $630
2007 $440 2020 $650
2008 $450 2021 $670
Producer shall pay TU Electric for the Actual Cost of repairs or
replacements to the Interconnection Facilities that are TU Electric's
responsibility plus 15% of that Actual Cost.
(d) Actual Cost is calculated on the same basis as TU Electric calculates
costs for construction of its new facilities or for repair or replacement
of its facilities, as applicable. Actual Cost includes without limitation:
(i) "Material Costs" are TU Electric's costs for material, equipment,
and machinery incorporated in the facilities, whether purchased
expressly for that purpose or taken from stores, at their store
issue or purchase order price to TU Electric, including freight,
insurance, and taxes (except taxes included in the Purchasing and
Stores Expense as set forth in Section 3.02(d)(iv) below), and any
expenses incurred for storage, special transportation, and handling.
"Taxes" include sales, use excise, and other taxes that attach to or
are measured by the value or cost of materials.
(ii) "Labor Costs" are TU Electric's costs for its employees' labor at
the cost of all wages and salaries, including overtime pay and
premiums, paid to all construction and administrative employees,
including job bosses, supervisors, and inspectors, and travel time,
and employees' expenses such as social security contributions,
unemployment and payroll taxes, retirement benefits, hospitalization
and life insurance benefits, sick leave, vacation pay, and other
fringe benefits. All labor-related expense charges must be the same
as that used by TU Electric for its own accounting purposes. The
labor-related expenses are recalculated periodically; therefore,
percentages vary from time to time.
Renewable Resource Energy Purchase Agreement - Page 12
<PAGE>
(iii) "Subcontractor Costs" are the costs incurred by TU Electric for
work, including materials supplied, by TU Electric's contractors.
(iv) "Purchasing and Stores Expense" is a percentage charge applied to
material costs to cover TU Electric's cost of supervision, labor,
and expenses incurred in operating and maintaining its storeroom and
purchasing offices. The charge must be the same as that applied by
TU Electric to its material costs to calculate the costs of its new
construction, and is redetermined periodically following TU
Electric's established accounting procedures using the uniform
system of accounts prescribed by the Federal Energy Regulatory
Commission. The charge includes Texas state and local sales and use
taxes.
(v) "Transportation Costs" are priced at the cost per mile or per hour
dependent upon the type of equipment being used at the rates TU
Electric charges for its own accounting purposes. The per mile and
per hour rates are recalculated periodically; therefore, rates may
vary from time to time.
(vi) "Carrying Costs" is interest at the Commercial Paper Rate on
construction expenditures from the date the expenses are incurred
until the expenses are billed.
(vii) "Miscellaneous Expense" includes actual expenditures that are not
included in the other items of Actual Cost described in this
Section. Examples of these costs are engineering consultant
expenses, crew lodging and travel expense, laboratory tests and
equipment rental, including charges for using TU Electric's major
tools or major equipment.
(viii) "Overhead" is a percentage charge to recover TU Electric's costs of
design, engineering, supervision, and other applicable costs and
overhead. The charge must be the same as that applied by TU Electric
to calculate its costs of its new construction and is redetermined
periodically following TU Electric's established accounting
procedures using the uniform system of accounts prescribed by the
Federal Energy Regulatory Commission.
Actual Cost is the sum of Material Costs, Labor Costs, Subcontractor Costs,
Purchasing and Stores Expense, Transportation Costs, Carrying Costs, and
Miscellaneous Expense plus Overhead and an additional amount to compensate
TU Electric fully for any type of taxation or assessment of amounts paid by
Producer to TU Electric.
(e) Producer shall reimburse TU Electric for ad valorem taxes paid on the
Interconnection Facilities. The amount of ad valorem taxes on the
Interconnection Facilities for purposes of this Agreement is a portion of
TU Electric's total ad valorem taxes in Howard County, Texas, as reasonably
determined by TU Electric's tax department based on the facilities owned by
TU Electric that are related to the Renewable Resource Facility.
3.03 Regulatory Action and Recoupment.
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<PAGE>
(a) The parties intend that the prices set in this Agreement will be in effect
during the term of this Agreement, and they do not, by anything in this
Agreement, confer authority or jurisdiction upon any court or regulatory
authority, that it otherwise would not have, to change such prices. If,
however, at any time during the term of this Agreement, any court or
regulatory authority, including without limitation the Public Utility
Commission of Texas, alters the prices for energy purchases from Producer
under this Agreement or the payments by TU Electric resulting from those
prices, then the prices under this Agreement and the payments resulting
from those prices must thereafter be adjusted to the prices and payments
allowed by the court or regulatory authority.
(b) TU Electric's obligations to make payments to Producer under this
Agreement are conditioned upon TU Electric being permitted by the Public
Utility Commission of Texas or other regulatory authority to fully recoup
from TU Electric's ratepayers the payments made to Producer under this
Agreement. If the orders, rules, or regulations of the Public Utility
Commission of Texas or other regulatory authority do not allow the
recovery by TU Electric from its ratepayers of all of the payments
otherwise to be made by TU Electric to Producer under this Agreement, then
TU Electric is not obligated to pay to Producer any amount that is not
subject to recovery; however, nothing in this Section 3.03 may be
construed as requiring Producer to refund to TU Electric any amounts
previously paid to Producer that become non-recoverable by TU Electric on
account of any such orders, rules, or regulations of the Public Utility
Commission of Texas or other regulatory authority.
(c) If the Public Utility Commission of Texas or other regulatory
authority--by order, rule, or regulation--ever fails to allow TU Electric
to fully recoup payments that TU Electric has made to Producer under this
Agreement from TU Electric's ratepayers, or if the Public Utility
Commission of Texas or other regulatory authority--by order, rule, or
regulation--ever raises the prices under this Agreement, then TU Electric
may terminate this Agreement by giving written notice of such termination
to Producer within one year after the order, rule, or regulation effecting
such disallowance or pricing increase becomes final and appealable,
whether or not an appeal is filed.
(d) If the Public Utility Commission of Texas or other regulatory authority
ever lowers, either directly or through a regulatory disallowance--by
order, rule, or regulation--the prices under this Agreement, then Producer
may terminate this Agreement by giving written notice of such termination
to TU Electric within one year after the order, rule, or regulation
effecting such disallowance or pricing decrease becomes final and
appealable, whether or not an appeal is filed.
(e) Future prices for energy payments under this Agreement must be adjusted to
the recoupment levels allowed by the Public Utility Commission of Texas or
other regulatory authority or to the prices required by the Public Utility
Commission of Texas or other regulatory authority.
(f) Despite the other provisions of this Section:
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<PAGE>
(i) a party may not terminate this Agreement on the basis of a
disallowance or pricing alteration as described above if the order,
rule, or regulation effecting such disallowance or pricing
alteration was the result of a proceeding initiated by that party,
directly or indirectly, for the purpose of requesting or obtaining
such disallowance or pricing alteration;
(ii) the future prices for energy payments under this Agreement may not
be lowered on the basis of a disallowance or pricing decrease as
described above if the order, rule, or regulation effecting such
disallowance or pricing decrease was the result of a proceeding
initiated by TU Electric, directly or indirectly, for the purpose of
requesting or obtaining such disallowance or pricing decrease; and
(iii) the future prices for energy payments under this Agreement may not
be increased on the basis of a pricing increase as described above
if the order, rule, or regulation effecting such disallowance or
pricing increase was the result of a proceeding initiated by
Producer, directly or indirectly, for the purpose of requesting or
obtaining such disallowance or pricing increase.
3.04 Cooperation. In connection with any proceeding that might result in a
reduction in the level of energy payments as described Section 3.03, TU Electric
agrees that it will not oppose the intervention of Producer in such proceeding
and that it will provide reasonably available information to Producer in order
to assist Producer in defending the terms of this Agreement.
3.05 Governmental Impositions. Producer shall pay to TU Electric, as they may
occur, amounts equal to any taxes, assessments, or other governmental
impositions that TU Electric is required to pay because of its purchase of
electrical energy under this Agreement.
3.06 Records.
(a) TU Electric shall create and keep (i) meter records and other records
needed to show the energy generated at the Renewable Resource Facility and
delivered to TU Electric, and (ii) records of its costs and expenses
chargeable to Producer under this Agreement.
(b) Producer shall create and keep (i) meter records and other records needed
to show the energy generated at the Renewable Resource Facility and (ii)
maintenance records and operating logs of the generating, control, and
protective equipment at the Renewable Resource Facility. Producer shall
also create and keep records of parameters that materially affect the
production of electrical energy by the Renewable Resource Facility (for
example, wind profiles, etc.) as well as certain operating cost
information as described on Exhibit 3.06(b). Producer agrees to share this
information with TU Electric upon request, along with a summary
description of operations and maintenance problems incurred and actions
taken to mitigate the problems, and TU Electric may use the information
for its own purposes, subject to the confidentiality provisions in Article
8 of this Agreement.
(c) Each party shall maintain the records that it is required to create and
keep under this Section according to generally accepted accounting
principles, consistently applied. Each party shall keep and maintain those
records for four years after the respective
Renewable Resource Energy Purchase Agreement - Page 15
<PAGE>
records are created, and the other party may inspect and audit those
records during normal business hours upon reasonable advance written
notice.
3.07 Billing.
(a) TU Electric shall read the meters in the Interconnection Facilities
monthly. Within 30 days after the end of a month, TU Electric shall send
to Producer a statement detailing all amounts due from TU Electric to
Producer, based upon the meters in the Interconnection Facilities, and all
amounts due from Producer to TU Electric under this Agreement for the
month. If the 30 days end on a day that is not a Business Day, then the
period allowed for sending the above-described statement is extended to
the end of the next day that is a Business Day. A "Business Day" is any
day that is not a Saturday, Sunday, or a holiday observed by TU Electric's
Dallas office.
(b) TU Electric may offset payments due by Producer to TU Electric, including
without limitation amounts due under Article 3, against payments due by TU
Electric to Producer. Payment of any net amount shown to be due by TU
Electric to Producer must be included with the statement. If the statement
shows a net amount due from Producer to TU Electric, the payment is past
due if not made within 20 days after the date the statement is sent.
3.08 Interest on Past Due Bills. Any bills sent by TU Electric to Producer under
this Agreement that are not paid when due and any payments due by TU Electric to
Producer that are not paid when due bear interest, compounded monthly, from the
due date until paid, at the Commercial Paper Rate in effect on the first
Business Day of each calendar month in which interest accrues. "Commercial Paper
Rate" means the lesser of (i) the rate published weekly in the Federal Reserve
Statistical Release for "one month commercial paper" or (ii) the highest rate
permitted by applicable law. If the Federal Reserve Statistical Release is not
published or is otherwise not available, then a weekly average rate must be
determined from the Wall Street Journal for high grade unsecured notes sold
through dealers by major corporations or another recognized financial
publication for similar instruments. In computing the highest rate allowed by
applicable law, the indicated rate ceiling computed under Article
5069-1.04(a)(1) of the Texas Revised Civil Statutes applies.
3.09 Corrections. If either party to this Agreement discovers an error in
billings and payments under this Agreement due to metering or billing errors,
then the billings and payments must be corrected, provided that the party
asserting the error gives the other party notice of the error within one year
after the date of the bill or payment. Any corrections shall include interest at
the Commercial Paper Rate from the date that the incorrect payment was made
until the date of the corrected bill or corrected payment, as the case may be.
Article 4. Outages
4.01 Outages.
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<PAGE>
(a) The Renewable Resource Facility, Interconnection Facilities, and TU
Electric's transmission and distribution system will suffer, from time to
time, scheduled outages for construction, maintenance, repairs, or
inspection.
(b) The Renewable Resource Facility, Interconnection Facilities, and TU
Electric's transmission and distribution system will be subject, from time
to time, to forced outages. Forced outages include any reduction or
cessation of generation, transmission, or distribution caused by breakage
or malfunction of equipment, machinery, and facilities, or by storm,
casualty, emergency condition, or other unforeseen causes. Producer and TU
Electric shall promptly give notice to the other of any forced outage.
4.02 No Liability. Neither party violates this Agreement due to, or is liable to
the other for damages caused by, interruptions or curtailments of the delivery
or receipt of energy generated at the Renewable Resource Facility due to either
a scheduled outage or a forced outage described in Section 4.01, even if the
interruption or curtailment is caused, in whole or in part, by a party's
negligence. This does not limit a party's liability for intentional misconduct.
A party shall diligently perform scheduled maintenance on its facilities and
shall diligently pursue correction of forced outages of its facilities.
Article 5. Insurance and Indemnity
5.01 Proof of Coverage.
(a) During the term of this Agreement, and after that as provided in this
Article 5, Producer shall provide or cause to be provided to TU Electric
proof of the insurance required by Section 5.03 by providing two copies of
an insurance certificate in a form acceptable to TU Electric, certified by
Producer's insurance broker or insurance company representative, as well
as certified copies of all required insurance policies.
(b) Producer shall give TU Electric an opinion letter from Producer's
insurance agent or from Producer's legal counsel, confirming that the
insurance policies evidenced in the certificates provide all coverages
required by this Agreement.
(c) Producer shall give the initial certificates, opinion letters, and
certified copies of policies to TU Electric at the earliest practical time
after execution of this Agreement. Producer shall give copies of all
subsequent certificates, subsequent opinion letters, and certified copies
of all subsequent policies to TU Electric at the earliest practical time,
but never later than 30 days before the then-current policy expires.
Certificates and policies must provide that TU Electric must be given
written notice at least 60 days before any material change in, or
cancellation of, any insurance required by this Article.
5.02 Policies.
(a) All policies must be written with insurers with an A.M. Best rating of
"B+, VII" or better or, for insurers not rated by A.M. Best, the insurers
must be of a quality
Renewable Resource Energy Purchase Agreement - Page 17
<PAGE>
equivalent to that of an A.M. Best rating of "B+, VII" or better, as
decided by TU Electric in its sole discretion.
(b) All liability policies must (i) be written on an occurrence basis, unless
an occurrence basis policy becomes unavailable, (ii) include TU Electric,
TU Electric's parent corporation and affiliates, and their respective
directors, officers, shareholders, agents, servants, and employees ("TU
Electric Group") as named insureds, (iii) provide that each insured is
provided coverage as though a separate policy had been issued to each,
except the insurer's liability must not be increased beyond the amount or
amounts for which the insurer would have been liable had only one insured
been covered, and only one deductible applies per occurrence, no matter
the number of insureds, and (iv) provide that TU Electric and the other
named insureds specified above are never responsible for premium payment.
If Producer does not obtain occurrence basis policies throughout the term
of this Agreement, then Producer shall maintain all coverages required in
Section 5.03 in effect for four years after this Agreement terminates or
expires.
(c) All policies other than Workers' Compensation Insurance must contain an
endorsement (if the terminology is not in the printed form) that
Producer's policy is primary in all instances despite like coverages, if
any, carried by TU Electric.
5.03 Coverage and Liability Limits. Producer at its sole expense shall, during
the term of this Agreement and for a period of two years after the termination
or expiration of this Agreement, obtain and maintain the following types of
coverage and liability limits. The required limits may be satisfied by any
combination of primary or excess insurance in Producer's sole discretion:
(a) Employer's Liability Insurance and Worker's Compensation Insurance
providing statutory benefits in accordance with the laws and regulations
of the State of Texas. The limits for Employer's Liability Insurance shall
be at least $1 million per accident, $1 million per employee by disease,
and $1 million policy limit by disease.
(b) General Liability Insurance including premises and operations, personal
injury, broad form property damage, broad form blanket contractual
liability, including coverage for the indemnification provisions in the
Agreement, products and completed operations coverage, coverage for
explosion, collapse and underground hazards and independent contractors
coverages, with minimum limits of $1 million per occurrence for bodily
injury including death, and property damage combined.
(c) Automobile Liability Insurance for coverage of owned, non-owned and hired
automotive equipment, with a minimum combined single limit of $1 million
per occurrence for bodily injury and property damage.
(d) Excess Liability Insurance over and above the Employer's Liability,
General Liability and Automobile Liability Insurance policies listed
above, with total Excess Liability coverage of $25 million.
Renewable Resource Energy Purchase Agreement - Page 18
<PAGE>
5.04 Subcontractor Coverage. Producer shall require all of its contractors and
subcontractors to provide adequate insurance coverage that meets the provisions
of Section 5.02(b) above. Any deficiencies in the insurance provided by those
contractors and subcontractors are the sole responsibility of Producer, and
Producer is liable for any deficiencies in the insurance provided by any
contractor or subcontractor.
5.05 Reporting. Producer shall report to TU Electric, in writing, as soon as
practical, all accidents or occurrences resulting in injuries, including death,
and any property damage arising out of the performance of this Agreement.
5.06 Release and Waiver. Producer shall release, and shall require its insurers
(by policy endorsement) to waive their subrogation rights against any member of
the TU Electric Group for loss under the insurance policies described in this
Article, damages to Producer's properties, and any other loss sustained by
Producer, whether insured or not.
5.07 No Liability Limitation. Producer's liability under this Agreement is not
limited to the amount of insurance coverage required in this Article.
5.08 Indemnification.
(a) Producer agrees to and shall defend, protect, indemnify and hold harmless
TU Electric Group from and against all claims, losses, expenses, damages,
demands, judgments, causes of action, suits, and liability in tort,
contract, or any other basis and of every kind and character whatsoever
(hereinafter in this and the following paragraphs collectively referred to
as "CLAIMS"), for personal injury, death, or property damage of Producer,
Producer's parent and subsidiary corporations, all officers, directors,
shareholders, owners, employees, affiliated or related firms and entities,
servants and agents of each ("Producer Group") arising out of or incident
to, directly or indirectly, this Agreement, including but not limited to,
CLAIMS arising out of or resulting from (1) any condition of the
Producer's premises, (2) separate operations being conducted on the
Producer's premises, or (3) the imperfection or defective condition,
whether latent or patent, of any material or equipment sold, supplied, or
furnished by any member of the TU Electric Group and further, it is the
express intent of the parties that, for the purposes of this paragraph,
CLAIMS, and Producer's obligations to defend, protect, indemnify and hold
harmless, will include, but not be limited to, CLAIMS arising out of or
resulting from any member of TU Electric Group's sole or concurrent (1)
negligence, (2) strict liability, or (3) other fault of any nature.
(b) For all CLAIMS except those for personal injury, death or property damage
of those persons or entities within the scope of the preceding paragraph,
Producer agrees to and shall defend, protect, indemnify, and hold harmless
TU Electric Group from and against any and all CLAIMS arising out of or
incident to, directly or indirectly, this Agreement, including but not
limited to, CLAIMS arising out of or resulting from (1) any condition of
the Producer's premises, (2) separate operations being conducted on the
Producer's premises, or (3) the imperfection or defective condition,
whether latent or patent, of any material or equipment sold, supplied, or
furnished by any member of the TU Electric Group; and further, it is the
express intent of the parties that, for the purpose of this
Renewable Resource Energy Purchase Agreement - Page 19
<PAGE>
paragraph, CLAIMS, and Producer's obligations to defend, protect,
indemnify and hold harmless, shall include, but not be limited to, CLAIMS
arising out of or resulting from any member of TU Electric Group's
concurrent (1) negligence, (2) strict liability, or (3) other fault of any
nature.
(c) Producer shall pay all costs and expenses, including reasonable attorneys'
fees, arising from any CLAIM as to which a person or entity is indemnified
under this Section 5.08.
(d) Nothing in this Section limits a party's liability for intentional
misconduct or requires Producer to indemnify TU Electric for claims for TU
Electric's intentional misconduct.
5.09 Survival of Article. This Article survives the termination or expiration of
this Agreement.
Article 6. Term and Uncontrollable Force
6.01 Term.
(a) This Agreement is effective on the date first stated above, and unless
terminated earlier under other provisions of this Agreement it will
continue in effect for 15 years from the Commercial Operation Date or, if
either the option under Section 6.02(a) or the option under Section
6.02(c) is exercised, until 20 years after the Commercial Operation Date,
or, if either the option under Section 6.02(b) or the option under Section
6.02(d) is exercised, until 25 years after the Commercial Operation Date.
(b) If Producer has failed to attain Commercial Operation status on or before
the latest of (i) November 30, 1996, (ii) 18 months after the Public
Utility Commission of Texas approves a CCN for the Interconnection
Facilities, and (iii) 18 months after the Public Utility Commission of
Texas approves this Agreement to both parties' satisfaction, then TU
Electric has the option to immediately terminate this Agreement upon
written notice to Producer.
(c) If Producer ceases to deliver energy to TU Electric from the Renewable
Resource Facility for a period exceeding 45 consecutive days, exclusive of
failures to deliver energy caused by outages of facilities on TU
Electric's side of the Point of Interconnection, then TU Electric has the
option to terminate this Agreement upon written notice to Producer,
subject to Producer's cure rights under Section 6.06.
6.02 Option to Extend Term.
(a) TU Electric, at its option, may extend the term of this Agreement to a
date that is 20 years after the Commercial Operation Date. TU Electric may
exercise this option by giving Producer written notice at any time between
a date that is 13 years after the Commercial Operation Date and a date
that is 14 years after the Commercial Operation Date. If TU Electric
exercises this option, payments by TU Electric to Producer for
Renewable Resource Energy Purchase Agreement - Page 20
<PAGE>
electrical energy must be made at rates that are 0.5% higher in each
calendar year than the rate in effect in the immediately preceding
calendar year.
(b) If TU Electric has extended the term of this Agreement by exercising its
option under Section 6.02(a), then TU Electric, at its option, may extend
the term of this Agreement to a date that is 25 years after the Commercial
Operation Date. TU Electric may exercise this option by giving Producer
written notice at any time between a date that is 18 years after the
Commercial Operation Date and a date that is 19 years after the Commercial
Operation Date. If TU Electric exercises this option, payments by TU
Electric to Producer for electrical energy must be made at rates that are
0.5% higher in each calendar year than the rate in effect in the
immediately preceding calendar year.
(c) If TU Electric does not exercise its option under Article 9, and if TU
Electric does not exercise its option under Section 6.02(a), then Producer
may extend this Agreement to a date that is 20 years after the Commercial
Operation Date. Producer may exercise this option by giving TU Electric
written notice at any time between a date that is 14 years after the
Commercial Operation Date and a date that is 14 years and six months after
the Commercial Operation Date. If Producer exercises this option, payments
by TU Electric to Producer for electrical energy must be made at rates
that are at TU Electric's Rate LPP or its successor tariff, or if no such
tariff exists at that time, then at rates that are 95% of TU Electric's
avoided energy costs, determined monthly.
(d) If TU Electric does not exercise its option under Article 9, and if TU
Electric does not exercise its option under Section 6.02(b), and if
Producer has exercised its option under Section 6.02(c), then Producer may
extend this Agreement to a date that is 25 years after the Commercial
Operation Date. Producer may exercise this option by giving TU Electric
written notice at any time between a date that is 19 years after the
Commercial Operation Date and a date that is 19 years and six months after
the Commercial Operation Date. If Producer exercises this option, payments
by TU Electric to Producer for electrical energy must be made at rates
that are at TU Electric's Rate LPP or its successor tariff, or if no such
tariff exists at that time, then at rates that are 95% of TU Electric's
avoided energy costs, determined monthly.
6.03 Regulatory Approval. Producer may not deliver any energy to the TU Electric
system at any rate other than Rate LPP until the Public Utility Commission of
Texas (i) approves this Agreement, (ii) grants an exception to its substantive
rules that allows TU Electric to recover the payments that it makes to Producer
under this Agreement through a purchased power cost recovery factor, and (iii)
makes findings of fact and conclusions of law that are reasonably satisfactory
to both Producer and TU Electric. Findings of fact and conclusions of law that
are reasonably satisfactory include without limitation findings of fact and
conclusions of law that are substantially the same as the following:
The prices, terms, and conditions of this Agreement were reasonable at the
time this Agreement was entered into.
This Agreement is a voluntary contractual arrangement between TU Electric
and Producer.
Renewable Resource Energy Purchase Agreement - Page 21
<PAGE>
Purchase of renewable energy at the level provided under this Agreement is
a reasonable and appropriate component of TU Electric's 1995 Integrated
Resource Plan.
The reasonableness and necessity of the prices, terms, and conditions of
this Agreement and of TU Electric's decision to enter into this Agreement
are properly determined based on the facts and circumstances existing at
the time this Agreement was entered into.
The prices, terms, and conditions of this Agreement and TU Electric's
entry into this Agreement were prudent and reasonable, given the
information and alternatives available to TU Electric at the time at which
this Agreement was entered into.
TU Electric's action in entering into this Agreement was reasonable and in
the public interest.
The pricing provisions and other terms of this Agreement are more
favorable to TU Electric's customers than other proposed projects
available to TU Electric from renewable resources of like technology.
The price premium on electrical energy to be purchased by TU Electric
under this Agreement, relative to conventional fossil-fueled generation
that it will displace, is reasonable in light of the benefits that this
Agreement will provide on the whole.
The contingencies in this Agreement are reasonable.
The payments that TU Electric will make to Producer under this Agreement
are reasonable and necessary operating expenses of TU Electric.
Good cause exists to grant an exception to the Public Utility Commission
of Texas Substantive Rule 23.23, which exception allows the payments to be
made by TU Electric to Producer under this Agreement to be recovered under
a purchased power cost recovery factor.
If such approval, granting of an exception, findings of fact, and conclusions of
law are not obtained in a form that is reasonably satisfactory to both Producer
and TU Electric by the later of (i) May 1, 1995, or (ii) 270 days after TU
Electric files an application requesting approval of this Agreement by the
Public Utility Commission of Texas, then either party may immediately terminate
this Agreement upon written notice to the other party sent on or before the
later of (i) June 1, 1995, or (ii) 300 days after TU Electric files an
application requesting approval of this Agreement by the Public Utility
Commission of Texas. In the event of a termination under this Section, Producer
shall pay any Interconnection Costs, or other costs, due to TU Electric under
other provisions of this Agreement, in accordance with Article III. In lieu of
terminating this Agreement, either party may elect, by a written notice given to
the
Renewable Resource Energy Purchase Agreement - Page 22
<PAGE>
other party on or before the later of (i) July 1, 1995, or (ii) 330 days after
TU Electric files an application requesting approval of this Agreement by the
Public Utility Commission of Texas, to substitute the energy prices set out in
TU Electric's Rate LPP for the energy prices set out in this Agreement. If the
party receiving such a notice is not willing to proceed with this Agreement at
the energy prices set out in Rate LPP, then it can terminate this Agreement upon
written notice given to the other party sent on or before the later of (i)
August 1, 1995, or (ii) 360 days after TU Electric files an application
requesting approval of this Agreement by the Public Utility Commission of Texas.
6.04 Insolvency. Besides the other causes for termination provided in this
Agreement, a party (the "terminating party") may terminate this Agreement
immediately upon written notice to the other party (the "insolvent party"),
without any liability or responsibility under this Agreement, and without
prejudice to any other power, right, or remedy that the party may have under
this Agreement, if (a) the insolvent party files a voluntary petition under the
bankruptcy or insolvency laws, (b) an involuntary proceeding is initiated
against the insolvent party under the bankruptcy or insolvency laws, which
involuntary proceeding remains undismissed for 180 consecutive days, or (c) the
insolvent party cannot meet its debts in the ordinary course of business.
However, this Agreement does not terminate if, within 10 days after the
insolvent party receives written notice of the proposed termination, the
insolvent party, as debtor-in-possession, or the insolvent party's trustee,
receiver, assignee, or custodian, whichever is obligee under this Agreement, in
writing affirms this Agreement and proves, to the terminating party's
satisfaction, the ability to fulfill the insolvent party's obligations under
this Agreement.
6.05 Uncontrollable Force.
(a) An "Uncontrollable Force" is an act of God, strike, lockout, shortage of
material or labor, restriction by any governmental authority, civil riot,
flood, or any other cause not within the reasonable control of the party.
(b) If either party is wholly or partly unable to perform any of its
obligations under this Agreement, including without limitation Producer's
obligation to attain Commercial Operation status by a date certain under
Section 6.01(b), because of Uncontrollable Force, that party is excused to
the extent that its performance is affected by the Uncontrollable Force
if:
(i) the nonperforming party gives the other party, within 14 days after
the Uncontrollable Force begins, written notice describing the
particulars of the Uncontrollable Force;
(ii) the nonperforming party gives the other party, within 30 days after
the Uncontrollable Force begins, a written explanation of the
Uncontrollable Force and its effect on the nonperforming party's
performance;
(iii the suspension of performance is of no greater scope and of no
longer duration than the Uncontrollable Force requires; and
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(iv the nonperforming party uses its reasonable efforts to remedy its
inability to perform.
When the nonperforming party can resume performance of its obligations
under this Agreement, that party shall give the other party written notice
to that effect.
(c No Uncontrollable Force condition extends this Agreement's term.
(d Any excuse of non-performance due to an Uncontrollable Force condition
cannot last longer than 180 days except upon the performing party's
written consent, which the performing party may give or withhold in its
sole discretion. If the Uncontrollable Force condition is not removed
within 180 days, then Uncontrollable Force ceases to excuse
non-performance.
(e TU Electric may exercise the rights granted in Sections 2.06(c) and
2.06(d) if Producer violates Section 2.06, even though an Uncontrollable
Force caused the violation.
6.06 Termination.
(a If:
o either party materially breaches any warranty it makes in this
Agreement, or
o either party materially fails to fulfill any obligation it has under
this Agreement, or
o if any representation either party makes in this Agreement becomes,
after the date of this Agreement, materially inaccurate, or is
discovered to have not been materially accurate when made,
then the party to whom the representation or warranty was made, or to whom
the obligation was due, (the "Non-defaulting Party") may, besides any
other remedies that may be available at law or in equity, terminate this
Agreement upon 30 days advance written notice to the other party (the
"Defaulting Party"), the 30 days commencing with the date of the other
party's receipt of the notice. If, by the end of the 30-day period, the
Defaulting Party has cured the breach, misrepresentation, or default, then
the default ceases to exist, and this Agreement is not terminated. For any
breach, misrepresentation, or default other than the payment of money, if
breach, misrepresentation, or default cannot reasonably be cured within 30
days, and if the Defaulting Party begins work or other efforts to cure the
breach, misrepresentation, or default within 30 days after receipt of the
notice and then prosecutes the curative work with reasonable diligence
until the curative work is completed, and if as a result the breach,
misrepresentation, or default is cured within 90 days after the receipt of
the notice, then the breach, misrepresentation, or default specified in
the notice ceases to exist, and this Agreement is not terminated.
(b The rights to terminate in Section 6.06(a) are in addition to the rights
to terminate this Agreement given in the following Sections of this
Agreement, and the rights of a party to cure a default under Section
6.06(a) do not apply to termination rights given in, the following
Sections of this Agreement: 1.03(e), 2.06(c), 3.03(c), 3.03(d), 6.01(b),
6.03, and 6.04.
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(c A person that is providing debt or equity financing for Producer in
connection with the Renewable Resource Facility may cure any of Producer's
defaults under this Agreement, and the effect of that cure is the same as
if Producer had cured the default.
6.07 No Consequential Damages. Except as otherwise provided in Section 5.08,
neither party is liable to the other for any special, indirect, or consequential
damages or injury that may occur, in whole or in part, as a result of the breach
of any contract, a tort, or any other cause, whether or not a party had
knowledge of the circumstances that resulted in the special, indirect, or
consequential damages, or could have foreseen that such damages would occur.
Special, indirect, or consequential damages include--as representative examples
and without limiting the phrase--lost profits, lost production time, lost
business, lost work-in-process, claims of customers, replacement power, value of
employees' lost time, delayed production of goods, loss of goodwill, increased
costs, increased interest expense, and inability to make required payments.
Article 7. Representations and Warranties
7.01 Representations and Warranties. Besides the other representations,
obligations, and warranties of Producer, Producer now represents and warrants
unconditionally to TU Electric that:
(a Producer is a limited partnership duly organized, validly existing, and in
good standing under Delaware law and is duly authorized to do business in
Texas.
(b Producer has full power and lawful authority to accomplish, execute, and
fulfill all of its obligations and duties under this Agreement.
(c The Renewable Resource Facility is a Qualifying Facility, as that term is
used and defined in 18 C.F.R. (Code of Federal Regulations) Part 292 as of
the date of this Agreement, and Producer shall provide TU Electric with
certification by the Federal Energy Regulatory Commission of that
qualifying status under 18 C.F.R.ss.292.207(b) before the Partial
Commercial Operation Date. Producer covenants that it shall maintain the
Renewable Resource Facility as a Qualifying Facility.
(d Producer and New World will use reasonable efforts to obtain rights to
manufacture and sell the Enercon model E-40, 500 kW wind turbine generator
in North America. Upon request by TU Electric, Producer shall give TU
Electric documentation showing those reasonable efforts and their results.
(e If either Producer, or New World, or any affiliate of New World is
successful in obtaining rights to manufacture the Enercon model E-40, 500
kW wind turbine in North America and such rights result in a material
favorable reduction in overall project costs as a result of the
elimination of import duties or transportation costs, then Producer shall
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negotiate in good faith with TU Electric to arrive at a mutually
satisfactory arrangement to share any savings arising from such reduction
in costs.
(f New World has established a business alliance with Westinghouse Electric
Corporation. Producer and New World will use reasonable efforts to use the
Westinghouse facility in Round Rock, Texas, or other facilities in TU
Electric's service area for fabrication of the wind turbines to the
fullest extent economically practical. Upon request by TU Electric,
Producer shall give TU Electric documentation showing those reasonable
efforts and their results.
(g Producer will use the services of vendors located within the TU Electric
service area to the extent economically practical. Producer will solicit
and consider bids from such local vendors for work and materials such as
anchor bolts, steel support structures, electrical equipment, road
construction, etc. Upon request by TU Electric, Producer shall give TU
Electric documentation showing that its use of vendors in TU Electric's
service area was to the extent economically practical.
(h Producer will ensure that minority-owned and women-owned businesses have
equal opportunities to participate in its purchase of materials and
services for, and its construction, operation, and maintenance of, the
Renewable Resource Facility. Upon request by TU Electric, Producer shall
give TU Electric documentation showing the steps that it has taken to
ensure such equal opportunities and the results of those steps.
(i The major items installed (i.e., wind turbines, power conditioning
equipment, etc.) at the Renewable Resource Facility are newly manufactured
and state-of-the-art technology.
(j If technology improves, and Producer, in its sole judgement, decides to
retrofit the Renewable Resource Facility with improved, more economical,
or more efficient technology, and if TU Electric approves the proposed
retrofit under Section 1.05(c), Producer will share the savings with TU
Electric. In that event, Producer and TU Electric agree to negotiate in
good faith about a methodology to share those savings.
(k Producer will use its best efforts to ensure that the Commercial Operation
Date occurs no later than 90 days after the Phase One Commercial Operation
Date. Upon request by TU Electric, Producer shall give TU Electric
documentation showing those best efforts and their results.
(l Producer will use its reasonable efforts to assure that the Renewable
Resource Facility is maintained in accordance with prudent industry
utility practices for the same or similar facilities.
Article 8. Confidentiality
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8.01 Scope. Information that qualifies as Confidential Information is trade
secret information that concerns the internal aspects of the Renewable Resource
Facility, such as cost of materials, cost of equipment, pro formas, certain
third party agreements, and site-specific wind profiles. Information that
directly affects TU Electric or its customers--such as the quantities of
electrical energy produced or to be produced, the prices for electrical energy,
amounts paid, and the terms and conditions of this Agreement--cannot be claimed
to be Confidential Information, and TU Electric does not agree to keep it
confidential.
8.02 Obligation. TU Electric agrees-for itself, its parent, subsidiary, and
affiliated corporations, and their respective directors, officers, employees,
and representatives, including without limitation, attorneys, accountants, and
consultants (all collectively called "Affiliated Persons")--that it will
exercise its best efforts to avoid distributing or disclosing Confidential
Information, as defined above, to any person, corporation, or entity other than
TU Electric's Affiliated Persons, except as follows:
(a TU Electric may disclose Confidential Information under the valid order of
an administrative or judicial officer having jurisdiction. TU Electric
must oppose such an order unless opposition to it is waived in writing by
Producer, which waiver may not be unreasonably withheld. TU Electric is
not required to oppose any order requiring disclosure in any judicial or
administrative proceeding by appeal, separate legal proceeding, or
extraordinary measures if TU Electric gives Producer written notice of the
order, and Producer does not, within 10 days after receiving the notice,
agree to pay the reasonable costs (including attorney's fees) of any
opposition by appeal, separate legal proceeding, or extraordinary
measures.
(b TU Electric may disclose Confidential Information to governmental or
regulatory officials or the public as required by any law, regulation, or
order, including without limitation laws or regulations requiring
disclosure of financial information, information material to financial
matters, and filing of financial reports, but TU Electric shall make
reasonable efforts to restrict public access to the documents or other
information disclosed, by protective order or otherwise.
(c TU Electric may disclose Confidential Information as it deems necessary or
advisable to state and recover its costs through its rates from its
customers or to obtain any other regulatory approval or action that it
deems necessary or advisable, but TU Electric shall make reasonable
efforts to restrict public access to the documents or other information
disclosed, by protective order or otherwise.
TU Electric's obligations under this Article do not apply to any information (1)
that is already in, or that comes into, the public domain, (2) that is in TU
Electric's possession before Producer's response is submitted, or (3) that TU
Electric obtains from other sources.
8.03 Term. TU Electric's obligations to not disclose or distribute the
Confidential Information are effective for 21 years from the date of this
Agreement. TU Electric may terminate its obligation as to any Confidential
Information at any time before that by returning the Confidential Information to
Producer. Such an early termination only affects the
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Confidential Information returned and does not affect TU Electric's obligations
as to other Confidential Information in its possession.
Article 9. Option to Purchase
9.01 Grant of Option. When the term of this Agreement expires, TU Electric may,
at its option, purchase the Renewable Resource Facility, associated facilities,
all of Producer's land rights and interests in land associated with the
Renewable Resource Facility, including without limitation easements for ingress
and egress, rail transportation, electric transmission and distribution
facilities, communication lines, and other utility services (collectively the
"Property") and all contracts, contract rights, and legal rights associated with
the Property (the "Contract Rights"), as provided after this. If this Agreement
expires under its terms, the option period is 150 days, commencing one year
before the term of this Agreement expires. If this Agreement is terminated
before its stated term ends, then the option period is 150 days commencing on
the effective date of the termination. This option, this Article 9, and Section
10.04 of this Agreement survive the termination or expiration of this Agreement.
9.02 Information.
(a Producer shall give a copy of all of the following described documents to
TU Electric as soon as is reasonably practical:
(i documents concerning the financing and any refinancing of the
Renewable Resource Facility and any modifications to those
documents; and
(ii documents concerning the land rights and interests in land that are
associated with the Renewable Resource Facility and any
modifications to those documents.
(b TU Electric may request information as to the Renewable Resource Facility,
its costs of construction and operations, and other information pertinent
to exercise of any option:
(i during the thirteenth, fourteenth, and fifteenth years of the term
of this Agreement;
(ii if TU Electric exercises its first option to extend the term of this
Agreement, then during the eighteenth, nineteenth, and twentieth
years of the term of this Agreement;
(iii if TU Electric exercises its second option to extend the term of
this Agreement, then during the twenty-third, twenty-fourth, and
twenty-fifth years of the term of this Agreement; and
(iv if this Agreement is terminated earlier than its stated term, then
during the 210 days after the effective date of termination.
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Producer must promptly furnish the information so requested and may never
furnish the information later than 30 days after it receives the request.
(c If Producer fails or refuses to furnish any information requested under
Section 9.02(b) within 30 days, then:
(i TU Electric has 60 days from the request to conduct any reasonable
investigation at Producer's expense to obtain the information; and
(ii the option period is automatically extended 30 days, making the
option period 180 days.
9.03 Manner of Exercise. TU Electric may exercise any option granted in this
Article by giving written notice to Producer before the end of the option
period. If TU Electric fails to give notice within that period, then the option
terminates.
9.04 Title. Title to be conveyed to the Property must be marketable title, free
and clear of all liens, encumbrances, restrictions, and easements created or
knowingly allowed by Producer.
9.05 Possession and Risk of Loss. Producer shall continue in possession of the
Property until closing and shall maintain it in its then-present condition,
reasonable wear from ordinary use excepted. Possession must be transferred to TU
Electric on closing. Risk of loss from fire or other casualty to the Property is
Producer's until transfer of possession. Producer shall maintain adequate
insurance against loss, including extended coverage, during that period. In case
of damage to the Property by fire or other casualty after TU has exercised one
of its options but before closing, TU Electric may either (a) terminate the
option by written notice to Producer, or (b) give Producer written notice that
the insurance proceeds are to be used to repair the Property, have the Fair
Market Value redetermined, and go forward with the purchase option. Producer
must transfer all insurance policies on the Property to TU Electric at closing,
at TU Electric's option.
9.06 Closing Date.
(a The purchase must be closed on or before the latest of (i) the first
business day following expiration of this Agreement, (ii) if this
Agreement is terminated earlier than its stated term, the first business
day that is 300 days after this Agreement is terminated earlier than its
stated term, and (iii) 15 days after determination of Fair Market Value
under Subsection 9.09(a)(i).
(b If final regulatory approval is not obtained by the closing date, as
extended, or if the approval is not satisfactory to TU Electric, it may
withdraw its exercise of the option without penalty or other liability.
9.07 Environmental Matters.
(a If the option described in Section 9.01 is exercised, then Producer shall,
within 90 days after delivery of the notice of exercise, secure and submit
to TU Electric an environmental report covering the Property issued by a
person who is satisfactory to TU
Renewable Resource Energy Purchase Agreement - Page 29
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Electric. Within 10 days after that TU Electric shall give written notice
to Producer of any defects in or objections to the Property's
environmental condition described in that report, and Producer shall
remedy those defects and objections as soon as practicable but never later
than closing. If Producer does not remedy the defects and objections or
submit evidence of an ability and a plan to do so before closing, and the
failure continues for 120 days after the date the option was exercised,
then TU Electric may:
(i remedy the defects and objections to the extent so required before
closing and charge the cost of remedy to Producer; or
(ii terminate the option by giving written notice to Producer any time
before the closing date determined under Section 9.06.
(b Producer represents and warrants that the Property will comply with, at
closing, the following environmental conditions:
(i No Hazardous Materials are present on the Property except in a
manner acceptable to the United States Environmental Protection
Agency, the Texas Water Commission, the Texas Department of Health,
or the Texas Railroad Commission, or the successors of those
entities. "Hazardous Materials" means (A) any petroleum products,
radioactive materials, or any other substance or material defined as
a hazardous or toxic substance or waste by any federal, state, or
local law, ordinance, rule, or regulation, (B) any asbestos or
asbestos-containing substance, whether or not defined as hazardous
or toxic, and (C) industrial solid waste regulated by the Texas
Industrial Solid Waste Act or any successor or similar legislation.
(ii Producer has not been identified in any litigation, administrative
proceeding, or investigation as a potentially responsible party for
any liability under any federal, state, or local law, ordinance,
rule, regulation, or order with respect to the investigation,
generation, transportation, disposal, release, discharge, removal,
or remediation of Hazardous Materials at or from the Property.
(iii Other than in connection with the Renewable Resource Facility's
operation and in compliance with all applicable federal, state, and
local laws, ordinances, rules, regulations, and orders, none of the
Property contains, or is now, or ever has been, used by Producer to
generate, manufacture, refine, produce, treat, store, handle,
dispose of, transfer, process, build, or transport Hazardous
Materials.
(iv The Property complies with all applicable federal, state, and local
environmental standards and requirements affecting the Property and
has no environmental conditions that could interfere with the
Renewable Resource Facility's continued operation.
(v No underground storage tanks are or have been used to store
Hazardous Materials on the Property.
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9.08 Closing. At closing, Producer shall convey to TU Electric the Property and
shall assign to TU Electric (and TU Electric shall assume) such of the Contract
Rights as TU Electric may elect. Taxes and assessments for the current year,
rentals under existing leases and tenancies, and payments under contracts being
assumed must be prorated between the parties as of the closing date.
9.09 Purchase Price.
(a (i The purchase price is the Property's Fair Market Value. "Fair Market
Value" must be determined according to industry standards for
similar facilities; current use and the value of Renewable Resource
Facility licenses and permits may be considered. No value may be
attributed because of this Agreement.
(ii (A0 If the parties have not agreed upon Fair Market Value by 120
days before this Agreement expires, then either TU Electric or
Producer may give written notice to the other requesting
determination of Fair Market Value by appraisal, and TU
Electric and Producer shall then consult to appoint a mutually
acceptable qualified independent appraiser.
(B0 If this Agreement is terminated before its stated expiration
date, then if the parties have not agreed upon Fair Market
Value within 20 days after this Agreement is terminated, then
either TU Electric or Producer may give written notice to the
other requesting determination of Fair Market Value by
appraisal, and TU Electric and Producer shall then consult to
appoint a mutually acceptable qualified independent appraiser.
(iii If the parties are unable to agree on an appraiser within 20 days
after the notice is given, then Fair Market Value must be determined
by a panel of three independent appraisers. TU Electric may select
one appraiser, and Producer may select another appraiser; however,
if either TU Electric or Producer fails to notify the other party in
writing of the appraiser it has selected within 30 days after the
notice is given, then the American Arbitration Association (or its
successor) must select an appraiser for that party. The two
appraisers selected shall select the third appraiser or, if they do
not agree on a third appraiser within 10 days after each of the two
appraisers has been selected, then the American Arbitration
Association (or its successor) must choose the third appraiser.
(iv The appraiser or appraisers appointed must be instructed to
determine the Fair Market Value within 45 days after the
appointment. The determination of the appraiser or appraisers is
final and binding upon the parties. If three appraisers are
appointed, the determination of the appraiser that differs most from
the second highest determination of all three appraisers must be
excluded, the remaining two determinations must be averaged, and
that average is the determination of the appraisers.
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(v TU Electric shall pay the fees and expenses of the appraiser
appointed by or for TU Electric, Producer shall pay the fees and
expenses of the appraiser appointed by or for Producer, and the
parties shall each pay one-half of the fees and expenses of the
third appraiser.
(b TU Electric shall also assume Producer's obligations under any Contract
Rights that TU Electric elects to assume in its notice exercising its
option.
9.10 Assignment of Option. As long as TU Electric remains obligated to pay the
purchase price for the Property, TU Electric may assign any of its options,
before or after their exercise, to any wholly-owned subsidiary of Texas
Utilities Company or to any of its subsidiaries and one or more third parties or
to a partnership, corporation, or other entity owned by any of its subsidiaries
and one or more third parties.
9.11 Memorandum of Option. Producer shall execute, acknowledge, and deliver a
Memorandum of Option in the form attached as Exhibit 9.11 and agrees that TU
Electric may record the Memorandum in the records of the County Clerk in each
county in which the Property is located.
Article 10. Miscellaneous
10.01 Subject to Regulation. This Agreement may be subject to regulation by
regulatory authorities having jurisdiction. The parties do not intend by this
paragraph to confer or extend jurisdiction over this Agreement to any regulatory
authority.
10.02 Assignment. Producer may assign this Agreement for collateral security
purposes, but Producer may not otherwise assign this Agreement or any of its
rights, duties, or obligations under this Agreement without TU Electric's prior
written consent, which may not be unreasonably withheld or delayed. Any
attempted assignment that violates this Section is void and ineffective against
TU Electric. TU Electric may assign this Agreement, in whole or in part, to any
person or entity without obtaining Producer's consent. No assignment of this
Agreement releases the assignor from liability under this Agreement. This
Agreement inures to the benefit of and binds both (a) TU Electric, its
successors, and its assigns allowed under this Agreement, and (b) Producer, its
successors, and its assigns allowed under this Agreement.
10.03 Time Is of Essence. Time is of the essence with regard to performance of
this Agreement.
10.04 Notices.
(a Any notices, demands, or requests required or authorized by this
Agreement, or any other instrument or document required or authorized to
be tendered or delivered by either party, must be in writing and
personally delivered or sent by certified mail, return
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receipt requested (except that billing statements and payments may be by
regular mail), postage prepaid, to:
(i If to TU Electric:
(A0 with respect to operations: (B0 with respect to all other
matters:
Generation Coordinator Manager, Non-Utility Purchases
Texas Utilities Electric Company Texas Utilities Electric Company
2233-B Mountain Creek Skyway Tower
Parkway 400 North Olive St., L.B. 81
Dallas, Texas 75211 Dallas, TX 75201
Telephone: 214-944-7404
Facsimile: 214-330-4598
(ii If to Producer:
Al Austin, Secretary
New World Power Corporation
558 Lime Rock Road
Lime Rock, Connecticut 06039
Facsimile: 203-435-0505
(b Producer may designate by written notice one additional person to receive
operational notices.
(c Producer shall, before the Phase One Partial Commercial Operation Date,
notify TU Electric in writing of one or more telephone numbers that will
be answered by a representative of Producer for 24 hours every day.
(d The person to receive notices or the address for such notices may be
changed by written notice from one party to the other party under this
Section. Any written notice, demand, or request given under this Section
is deemed to be given upon the earlier of (i) actual receipt, or (ii)
deposit in the U.S. mail, properly addressed, and with adequate postage.
If a party is required to take some action within a certain time, which
period is begun by a notice given by mail, then the time is extended by
three Business Days. Routine operational notices and communications and
notices during an emergency or other unforeseen event may be made in
person or by telephone.
(e TU Electric shall send a copy of any notices of default by Producer to one
person designated by Producer to receive notices on behalf of parties
providing debt or equity financing to Producer in connection with the
Renewable Resource Facility. Producer may designate or redesignate such a
person to receive copies of notices by sending a written designation to TU
Electric.
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10.05 No Rights of Third Parties. This Agreement is intended only for the
parties' benefit. Nothing in this Agreement may be construed to create any duty
to, any standard of care concerning, or any liability to, any person not a party
to this Agreement.
10.06 Subject to Applicable Laws. This Agreement is subject to applicable
federal, state, and local laws, ordinances, rules, and regulations. Nothing in
this Agreement may be construed as a waiver of any right to question or contest
any law, ordinance, rule, regulation, or asserted regulatory jurisdiction.
10.07 No Partnership. This Agreement is not intended to create and does not
create an association, joint venture, or partnership between the parties or to
impose any partnership obligation or liability upon either party. Neither party
has any right, power, or authority to enter any agreement or undertaking for, or
act on behalf of, or to act as or be an agent or representative of, or to
otherwise bind, the other party.
10.08 Amendment. This Agreement may be amended any time, but only by a written
agreement signed by both parties to this Agreement.
10.09 No Waiver. The waiver of a breach of any provision of this Agreement does
not waive any other breach of that provision or of any other provision.
10.10 Captions. The captions of the various articles and sections of this
Agreement are for convenience and reference only and do not limit or define any
terms and provisions of this Agreement.
10.11 Complete Agreement. This Agreement (with its Exhibits) represents the
parties' final and mutual understanding concerning its subject matter. It
replaces and supersedes any prior agreements or understandings, whether written
or oral. No representations, inducements, promises, or agreements, oral or
otherwise, have been relied upon or made by any party, or anyone on behalf of a
party, that are not fully expressed in this Agreement. An agreement, statement,
or promise not contained in this Agreement is not valid or binding.
10.12 Governing Law. This Agreement shall be governed by, construed and enforced
in accordance with Texas law. The parties agree that the proper venue and
jurisdiction for any cause of action relating to this Agreement shall be in
Dallas County, Texas.
10.13 Severability. In the event any provision of this Agreement is held to be
void, unlawful, or otherwise unenforceable, that provision will be severed from
the remainder of the Agreement, and replaced automatically by a provision
containing terms as nearly like the void, unlawful, or unenforceable provision
as possible; and the Agreement, as so modified, will continue to be in full
force and effect. If the application of any provision of this Agreement to any
person or circumstance is held to be void, unlawful, or unenforceable, then that
provision remains valid, lawful, and enforceable as applied to other persons and
circumstances.
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10.14 Exhibits. The Exhibits attached to this Agreement and listed in the Table
of Contents are incorporated in this Agreement and made a part of this Agreement
as if repeated verbatim in this Agreement.
10.15 Construction. In this Agreement, the following rules of construction
apply, unless expressly provided otherwise or unless the context clearly
requires otherwise:
(a The singular includes the plural, and the plural includes the singular.
The present tense includes the future tense, and the future tense includes
the present tense. Words importing any gender include the other gender.
(b The word "shall" denotes a duty. The word "must" denotes a condition
precedent or subsequent. The word "may" denotes a privilege or
discretionary power. The phrase "may not" denotes a prohibition.
References to "writing" include printing, typing, lithography, and other
means of reproducing words in a tangible visible form. The words
"including", "includes", and "include" are deemed to be followed by the
words "without limitation."
(c References to Articles, Sections (or subdivisions of Sections), Exhibits,
annexes, appendices, or schedules are to this Agreement, unless expressly
stated otherwise. References to statutes, tariffs, or regulations include
all statutes, tariffs, or regulations consolidating, amending, or
replacing the statute, tariff, or regulation referred to. References to
industry publications (such as IEEE 519) include all publications
consolidating, amending, or replacing the publication referred to.
References to agreements and other contractual instruments include all
subsequent amendments and other modifications to the instruments, but only
to the extent the amendments and other modifications are not prohibited by
this Agreement. References to persons or entities include their respective
successors and permitted assigns and, for governmental entities, entities
succeeding to their respective functions and capacities.
10.16 Delivery of Copy of Agreement. TU Electric has delivered a copy of this
Agreement to Producer for its review; that delivery does not constitute an offer
to Producer. This Agreement is not effective until a copy executed by Producer
is delivered to and executed by TU Electric.
Executed as of the date first stated above.
Renewable Resource Energy Purchase Agreement - Page 35
<PAGE>
New World Power Texas Texas Utilities Electric Company
Renewable Energy Limited
Partnership
By:
----------------------------
By: The New World Power Corporation
Title:
-------------------------
Date:
-------------------------
By:
-------------------------
Title:
----------------------
Date:
----------------------
Renewable Resource Energy Purchase Agreement - Page 36
<PAGE>
EXHIBIT 1.01
Description of Renewable Resource Facility
One Line Diagram
Site Plan
Note: The following items are being developed by NWP and will be included with
the executed contract.
Structural Specifications Including Supporting Towers and Foundations
Enercon Wind Turbine Generator Specifications
Enercon Rotor Blade Specifications
Enercon Inverter Specifications
<PAGE>
EXHIBIT 1.01
Page 1 of 5
Description of Renewable Resource Facility
One Line Diagram
<PAGE>
EXHIBIT 1.01
Page 2 of 5
Description of Renewable Resource Facility
Site Plan Map
<PAGE>
EXHIBIT 1.01
Page 3 of 5
Description of Renewable Resource Facility
Enercon Wind Turbine Generator Specifications
Drawing and general descriptions
<PAGE>
EXHIBIT 1.01
Page 4 of 5
Description of Renewable Resource Facility
Technical Data for Grind conversion
Drawing of Enercon Inverter
<PAGE>
EXHIBIT 1.01
Page 5 of 5
Description of Renewable Resource Facility
Drawing of Enercon Wind Turbine Generator
<PAGE>
EXHIBIT 1.02(g)
Relay Protective Requirements
One line diagram depicting protective relays required for coordination with TU
Electric system.
<PAGE>
EXHIBIT 1.03
Interconnection Facilities
One line diagram showing point of interconnection between the Renewable Resource
Facility and TU Electric and the facilities to be added or modified to
accommodate the interconnection.
<PAGE>
EXHIBIT 1.03(f)
Telemetering and SCADA Table Requirements
DEVICE/LINE DATA REQUIRED PER DEVICE
69 kV side of Producer Substation Three phase megawatts
Three phase megavars
Voltage
69 kV circuit breaker in Producer Substation Control Status
indication Two sets of "a"
contacts
For 69 kV Renewable Resource Facility/TU MWh in Y1, K1, Z1 pulses
Electric Tie MW "In" and "Out"
Meteorological Data Wind Speed
Temperature
Wind Direction
Note: All analog signals to be 0 to + or - 1 mA transducer output
signals.
Exhibit 1.03(f) - Page 1 of 1
<PAGE>
EXHIBIT 2.01(a)
List Of Items To Be Completed Before Phase One Partial Commercial Operation
1. The construction of Phase One of the Renewable Resource Facility is
complete except for minor punch-list type items.
2. Phase One of the Renewable Resource Facility is available for normal and
continuous operation.
3. The Trip Test, Relay Test, and Test A under Power Factor Tests described
in Section 2.02(a) have been run and passed, and Test B under the Power
Factor Tests described in Section 2.02(a) has been run according to the
procedures and other conditions of Exhibit 2.02(a), including the
preparation and acceptance of the final written test reports.
4. TU Electric has given its written approval of the Renewable Resource
Facility Plans.
5. Producer has furnished TU Electric with an insurance certificate and
opinion letter evidencing that the insurance required by this Agreement is
in place.
6. Producer has paid in full any costs due to TU Electric, including all
costs for Interconnection Facilities.
7. The Public Utility Commission of Texas has approved this Agreement and
made the findings of fact and conclusions of law that are reasonably
satisfactory both to Producer and to TU Electric.
Exhibit 2.01(a) -- Page 1 of 1
<PAGE>
EXHIBIT 2.01(b)
List Of Items To Be Completed Before Phase Two Partial Commercial Operation
1. The construction of Phase One and Phase Two of the Renewable Resource
Facility is complete except for minor punch-list type items.
2. Phase One and Phase Two of the Renewable Resource Facility is available
for normal and continuous operation.
3. The Trip Test, Relay Test, and Test A under Power Factor Tests described
in Section 2.02(a) have been run and passed, and Test B under the Power
Factor Tests described in Section 2.02(a) has been run according to the
procedures and other conditions of Exhibit 2.02(a), including the
preparation and acceptance of the final written test reports.
4. TU Electric has given its written approval of the Renewable Resource
Facility Plans.
5. Producer has furnished TU Electric with an insurance certificate and
opinion letter evidencing that the insurance required by this Agreement is
in place.
6. Producer has paid in full any costs due to TU Electric, including all
costs for Interconnection Facilities.
7. The Public Utility Commission of Texas has approved this Agreement and
made the findings of fact and conclusions of law that are reasonably
satisfactory both to Producer and to TU Electric.
Exhibit 2.01(b) -- Page 1 of 1
<PAGE>
EXHIBIT 2.01(c)
List Of Items To Be Completed Before Commercial Operation
1. The construction of the Renewable Resource Facility is complete except for
minor punch-list type items.
2. The Renewable Resource Facility is available for normal and continuous
operation.
3. The Trip Test, Relay Test, and Test A under Power Factor Tests described
in Section 2.02(a) have been run and passed, and Test B under the Power
Factor Tests described in Section 2.02(a) has been run according to the
procedures and other conditions of Exhibit 2.02(a), including the
preparation and acceptance of the final written test reports.
4. TU Electric has given its written approval of the Renewable Resource
Facility Plans.
5. Producer has furnished TU Electric with an insurance certificate and
opinion letter evidencing that the insurance required by this Agreement is
in place.
6. Producer has paid in full any costs due to TU Electric, including all
costs for Interconnection Facilities.
7. The Public Utility Commission of Texas has approved this Agreement and
made the findings of fact and conclusions of law that are reasonably
satisfactory both to Producer and to TU Electric.
Exhibit 2.01(c) -- Page 1 of 1
<PAGE>
EXHIBIT 2.02(a)
Performance Test Procedures
1. Trip Test
Procedures: Perform a trip test on the 69 kV breaker connecting the
Renewable Resource Facility to TU Electric's transmission system. This
test should verify that each tripping relay and tripping power source will
trip the breaker and that the breaker is operating properly. This test
shall be in accordance with the manufacturer's recommendations.
2. Relay Test
Procedures: Perform calibration and functional tests on the Renewable
Resource Facility's protective relaying scheme for the 69 kV breaker and
main step-up transformer. Each relay connected to the 69 kV breaker or
step-up transformer should be calibrated and tested for proper operation.
These tests shall be in accordance with the manufacturer's
recommendations.
3. Power Factor Tests
Procedures:
Test A. Perform a power factor test on the Renewable Resource
Facility to verify the ability of individual wind
turbines to operate at a lagging power factor of 0.9
for 1 hour and a leading power factor of 0.9 for 1
hour. This test must be performed under normal
operating conditions on a representative number of
wind turbine generators, to be determined by TU
Electric. The power factor should be measured on the
low voltage bus of the pad transformer that steps the
voltage of the inverter up to the 25 kV level. The
written power factor test report must include data
sheets and results listing the power factor, total
generation, and voltage for each wind turbine
generator tested.
Test B. Perform a power factor test on the Renewable Resource
Facility to record the ability to operate at a lagging
power factor of 0.9 for 1 hour and a leading power
factor of 0.9 for 1 hour. This test must be performed
under normal operating conditions with all available
wind turbines in service. The power factor should be
measured at the Point of Interconnection. For both
0.9 leading and for 0.9 lagging conditions, the
written power factor test report must include data
sheets and results listing the Renewable Resource
Facility power factor, Renewable Resource Facility
total generation, Renewable Resource Facility voltage,
and number of wind turbines in service.
Exhibit 2.02(a) - Page 1 of 1
<PAGE>
EXHIBIT 3.01
Payment Schedule
Monthly Payments
A. Payable to TU Electric by Producer. Producer shall pay a monthly charge for
meter reading, billing, and administration of this Agreement based on TU
Electric's Rate LPP as is in effect from time to time. The applicable customer
charge for Rate LPP is currently $600.00 per month. The current Rate LPP is
attached to, and is part of, this Exhibit 3.01.
B. Payable to Producer by TU Electric. Trial Energy is:
1. All energy delivered to TU Electric at the Point of Interconnection
and produced by the Renewable Resource Facility before the Phase One
Partial Commercial Operation Date;
2. All energy delivered to TU Electric at the Point of Interconnection
and produced by portions of the Renewable Resource Facility other
than Phase One before the Phase Two Partial Commercial Operation
Date and on or after the Phase One Partial Commercial Operation
Date; and
3. All energy delivered to TU Electric at the Point of Interconnection
and produced by portions of the Renewable Resource Facility other
than Phase One and Phase Two before the Commercial Operation Date
and on or after the Phase Two Partial Commercial Operation Date.
After the Phase One Commercial Operation Date, the amount of Trial Energy in a
month is to be determined by reading Producer's meters.
TU Electric will pay Producer for Trial Energy at Rate LPP and will pay Producer
for all other electric energy delivered to TU Electric at the Point of
Interconnection and produced by the Renewable Resource Facility at the rates
stated in the table below.
================================ ===========================
Calendar Payment Rate Calendar Payment Rate
Year (Cents/kWh) Year (Cents/kWh)
- -------------------------------- ---------------------------
1996 3.90 2004 4.94
- -------------------------------- ---------------------------
1997 4.02 2005 5.09
- -------------------------------- ---------------------------
1998 4.14 2006 5.24
- -------------------------------- ---------------------------
1999 4.26 2007 5.40
- -------------------------------- ---------------------------
2000 4.39 2008 5.56
- -------------------------------- ---------------------------
2001 4.52 2009 5.73
- -------------------------------- ---------------------------
2002 4.66 2010 5.90
- -------------------------------- ---------------------------
2003 4.80 2011 6.08
================================ ===========================
Exhibit 3.01 - Page 1 of 1
<PAGE>
EXHIBIT 3.06(b)
Parameters to be Monitored and Recorded by Producer
PARAMETERS DESCRIPTION UNITS
---------- ----------- -----
1. Meteorological
1.1 Wind Speed 10 meter height miles/hr
40 meter hub height miles/hr
50 meter hub height miles/hr
1.2 Temperature met tower Degrees F
1.3 Wind Direction met tower compass(ENE)
2. Electrical
2.1 Main Unit Transformer Gross Demand kW
(25 kv bus) Gross Energy kWh
Gross Reactive Demand kVars
Current (a, b, c) amps
Potential kV
Frequency HZ
Top Oil Temperature degrees F
LTC Changes count
2.2 Renewable Resource Facility Demand kW
Circuit #1 Energy kWh
Reactive Demand kVars
Current (a, b, c) amps
Trip Count count
2.3 Renewable Resource Facility Demand kW
Circuit #2 Energy kWh
Reactive Demand kVars
Current (a, b, c) amps
Trip Count count
2.4 Renewable Resource Facility Demand kW
Circuit #3 Energy kWh
Reactive Demand kVars
Current (a, b, c) amps
Trip Count count
Exhibit 3.06(b) - Page 1 of 2
<PAGE>
NOTE: The information monitored and recorded by Producer under the heading "Cost
Data" immediately below is to be treated as highly sensitive Confidential
Information by TU Electric under the provisions of Article 8.
3. Cost Data
3.1 Actual Installed Cost Site Development and Total
Preparation
Wind Turbine Each
Structure Each
Electrical System Total
Balance of Plant by Each
major component
3.2 Operating Cost Land Annual
Routine Maintenance Annual
(including labor
rates and hours per
turbine)
Major Overhauls Annual
Operations Annual
Balance of Cost by Annual
major category
4. Outages
4.1 Forced Outages Cause Per Turbine
Description of Per Turbine
Failed Equipment
Time Required for Per Turbine
Repair
5. Avian Mortality
5.1 Type of Bird Cause (blade strike, Monthly
electrocution, etc.)
Exhibit 3.06(b) - Page 2 of 2
<PAGE>
EXHIBIT 9.11
Memorandum of Option
State of Texas
County of Howard
This Memorandum of Option ("Memorandum") is executed concurrently with a
Renewable Resource Energy Agreement ("Agreement") between the undersigned
parties, and both this Memorandum and the Agreement constitute an Agreement
between New World Power Texas Renewable Energy Partnership, a Texas limited
partnership ("Producer") and Texas Utilities Electric Company, a Texas
corporation ("TU Electric"), relating to a wind generation facility (the
"Renewable Resource Facility"), with a total nameplate electrical generating
capacity of 40,000 kilowatts ("kW") and anticipated average net annual
generation of 113,000,000 kilowatt-hours ("kWh") located in Howard County, Texas
and related contract rights (all of which is collectively called the
"Property"). The Renewable Resource Facility is located on the following real
property in Howard County, Texas:
[metes and bounds description of real property]
Producer hereby grants, for valuable consideration described in the Agreement,
to TU Electric the exclusive right and option to buy the Property at a price,
and under terms and conditions, described in the Agreement. This Option expires
if it is not exercised with in the time specified in the Agreement, which may be
as early as 150 days after the Agreement is terminated or as late as 25 years
after the Renewable Resource Facility begins Commercial Operation as defined in
the Agreement, which is anticipated to be near June 15, 1996.
Executed on the ___ day of ______, 1994.
New World Power Texas Texas Utilities Electric Company
Renewable Energy Limited
Partnership
By:
---------------------
By: The New World Power Title:
Corporation -------------------
General Partner Date:
-------------------
By:
---------------------
Title:
-------------------
Date:
-------------------
Exhibit 9.11 -- Page 1 of 2
<PAGE>
Acknowledgment
State of Texas
County of ______________
This instrument was acknowledged before me on __________________, 1994, by
______________________, _______________________ of The New World Power
Corporation, which is the general partner of New World Power Texas Renewable
Energy Partnership, a Texas limited
partnership, on behalf of said partnership.
--------------------------
Notary Public
--------------------------
Typed or printed name of notary
My commission expires:
--------------------------
Exhibit 9.11 -- Page 2 of 2
<PAGE>
Amendment No.2
To
Renewable Resource Energy Purchase Agreement
This Amendment No. 2 to Renewable Resource Energy Purchase Agreement (the
"Amendment") dated __________________, 1997, is between Texas Utilities Electric
Company ("TU Electric"), a Texas corporation with offices in Dallas, Dallas
County, Texas, and New World Power Texas Renewable Energy Limited Partnership
("Producer"), a limited partnership of which The New World Power Corporation, a
Delaware corporation with offices in Lime Rock, Connecticut, is the general
partner.
TU Electric and Producer entered into a Renewable Resource Energy Purchase
Agreement dated September 13, 1994 (the "Agreement") The parties now desire to
amend that Agreement.
Therefore, in consideration of the promises made in this Amendment, TU Electric
and Producer agree as follows:
1. This Amendment is effective only if both TU Electric and Producer have
executed it. The portions of the Agreement that are not modified by this
Amendment are still effective.
2. Exhibit 3.01 to the Agreement is replaced by the attached revised Exhibit
3.01 - "Revised Pursuant to Amendment No.2".
Signed and effective as of the date first stated above.
New World Power Texas Renewable Texas Utilities Electric Company
Energy Limited Partnership
By: The New World Power Corporation By:
------------------
Title:
----------------
Date:
----------------
General Partner
<PAGE>
By:
------------------
Title:
----------------
Date:
----------------
EXHIBIT 3.01
(Revised Pursuant to Amendment No.2)
Payment Schedule
Page 1 of 2
Monthly Payments
A. Payable to TU Electric by Producer. Producer shall pay a monthly charge for
meter reading, billing, and administration of this Agreement based on TU
Electric's Rate LPP as is in effect from time to time. The applicable customer
charge for Rate LPP is currently $600.00 per month. The current Rate LPP is
attached to, and is part of, this Exhibit 3.01.
B. Payable to Producer by TU Electric. Trial Energy is:
1. All energy delivered to TU Electric at the Point of Interconnection and
produced by the Renewable Resource Facility before the Phase One Partial
Commercial Operation Date:
2. All energy delivered to TU Electric at the Point of Interconnection and
produced by portions of the Renewable Resource Facility other than Phase
One before the Phase Two Partial Commercial Operation Date and on or after
the Phase One Partial Commercial Operation Date; and
3. All energy delivered to TU Electric at the Point of Interconnection and
produced by portions of the Renewable Resource Facility other than Phase
One and Phase Two before the Commercial Operation Date and on or after the
Phase Two Partial Commercial Operation Date.
After the Phase One Commercial Operation Date, the amount of Trial Energy in a
month is to be determined by reading Producer's meters.
-2-
<PAGE>
Renewable Resource Energy Purchase Agreement
-3-
<PAGE>
EXHIBIT 3.01
(Revised Pursuant to Amendment No.2)
Payment Schedule
Page 2 of 2
TU Electric will pay Producer for Trial Energy at Rate LPP and will pay Producer
for all other electric energy delivered to TU Electric at the Point of
Interconnection and produced by the Renewable Resource Facility at the rates
stated in the table below.
============================================================================
Calendar Year Payment Rate Calendar Year Payment Rate
(Cents/kWh) (Cents/kWh)
- ----------------------------------------------------------------------------
1997 4.02 2011 6.08
- ----------------------------------------------------------------------------
1998 4.14 2012 6.11
- ----------------------------------------------------------------------------
1999 4.26 2013 6.14
- ----------------------------------------------------------------------------
2000 4.39 2014 6.17
- ----------------------------------------------------------------------------
2001 4.52 2015 6.20
- ----------------------------------------------------------------------------
2002 4.66 2016 6.23
- ----------------------------------------------------------------------------
2003 4.80 2017 6.26
- ----------------------------------------------------------------------------
2004 4.94 2018 6.30
- ----------------------------------------------------------------------------
2005 5.09 2019 6.33
- ----------------------------------------------------------------------------
2006 5.24 2020 6.36
- ----------------------------------------------------------------------------
2007 5.40 2021 6.39
- ----------------------------------------------------------------------------
2008 5.56 2022 6.42
- ----------------------------------------------------------------------------
2009 5.73 2023 6.46
- ----------------------------------------------------------------------------
2010 5.90
============================================================================-
Renewable Resource energy Purchase Agreement
-4-
<PAGE>
Amendment No. 3
To
Renewable Resource Energy Purchase Agreement
This Amendment No. 3 to Renewable Resource Energy Purchase Agreement (the
"Amendment") dated August 29, 1997, is between Texas Utilities Electric Company
("TU Electric") a Texas corporation with offices in Dallas, County, Texas, and
New World Power Texas Renewable Energy Limited Partnership ("Producer"), a
limited partnership of which the New World Power Corporation, a Delaware
corporation, is the general partner.
TU Electric and Producer entered into a Renewable Resource Energy Purchase
Agreement dated September 13, 1994 (the "Agreement"). The Parties now desire to
amend that Agreement. Therefore, in consideration of the promises made in this
Amendment, TU Electric and Producer agree as follows:
1. This Amendment is effective only if both TU Electric and Producer have
executed it. The portions of the Agreement, as previously amended by
Amendment No. 1 and Amendment No. 2, that are not modified by this
Amendment No. 3 are still effective.
2. Section 6.01(b) of the Agreement is amended to read as follows:
(b) If Producer has failed to attain Commercial Operation status on or
before May 31, 1999, then TU Electric has the option to immediately
terminate this Agreement upon written notice to Producer.
3. Exhibit 1.01 Pages 3 of 6, 4 of 6, 5 of 6 and 6 of 6 "Revised Pursuant to
Amendment No. 1"to the Agreement are replaced by the attached Exhibit 1.01
age 3 of 9, 4 of 9, 5 of 9, 6 of 9, 7 of 9, 8 of 9 and 9 of 9. "Revised
Pursuant to Amendment No. 3".
4. Exhibit 3.01 "Revised Pursuant to Amendment No. 2" to the Agreement is
replaced by the attached revised Exhibit 3.01 "Revised Pursuant to
Amendment No. 3".
Signed and effective as of the date first stated above.
New World Power Texas Renewable Texas Utilities Electric Company
Energy Limited Partnership
By: The New World Power
Corporation,
General Partner
By: By:
----------------------- -----------------------
<PAGE>
Title: Title:
----------------------- -----------------------
<PAGE>
EXHIBIT 1.01
Page 3 of 9
(Revised Pursuant to Amendment No. 3)
Description of Renewable Resource Facility
Vestas V47 - 660 kW Wind Turbine and Tower
General Specifications
Cut-away Drawing of Wind Turbine of V47 Wind Turbine
-3-
<PAGE>
EXHIBIT 1.01
Page 4 of 9
(Revised Pursuant to Amendment No. 3)
Description of Renewable Resource Facility
Vestas V66 - 1,650 kW Wind Turbine and Tower
General Specifications
Cut-away Drawing: Vestas V66 - 1.65 MW Wind Turbine - Nacelle Layent
-4-
<PAGE>
EXHIBIT 1.01
Page 5 of 9
(Revised Pursuant to Amendment No. 3)
Description of Renewable Resource Facility
Wind Turbine and Tower
General Specifications (cont.)
General Specifications
<TABLE>
<CAPTION>
================================================================================================
Specification Vestas V47 - 660 kW Turbine Vestas V66 - 1.65 MW
Turbine
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
Rated Power 660 kW 1,650 kW (1.65 MW)
- ------------------------------------------------------------------------------------------------
Rotor 3 bladed, glassfibre reinforced 3 bladed, glassfibre reinforced
epoxy epoxy
- ------------------------------------------------------------------------------------------------
Rotor Orientation Horizontal axis, Unwind Horizontal axis, upwind
- ------------------------------------------------------------------------------------------------
Rotor diameter 47 meters (154 feet) 66 meters (216 feet)
- ------------------------------------------------------------------------------------------------
Rotor Speed 28.5 RPM 19/15 rpm
- ------------------------------------------------------------------------------------------------
Power Control Variable pitch ("Optitip") and Variable pitch ("Optitip") and
"Optislip" generator "Optislip" generator
- ------------------------------------------------------------------------------------------------
Tower Type Tapered tubular Tapered tubular
- ------------------------------------------------------------------------------------------------
Tower Weight 143,300 lbs. 268,500 lbs.
- ------------------------------------------------------------------------------------------------
Tower Height Approx. 63.4 meters (208 feet) Approx. 77.8 meters (255 feet)
- ------------------------------------------------------------------------------------------------
Hub Height 65 meters (213 feet) 80 meters (262 feet)
- ------------------------------------------------------------------------------------------------
Foundation Size Approx. 12' dia. x 25' deep Approx. 46' x 46' x 10' deep
- ------------------------------------------------------------------------------------------------
Generator Asynchronous, variable slip Asynchronous, variable slip
690 V - 60 Hz 690 V - 60 Hz
- ------------------------------------------------------------------------------------------------
Lightning Protection Vestas Total Vestas Total
Lightning Protection Lightning Protection
- ------------------------------------------------------------------------------------------------
Brake System Blade pitch & disc brake Blade pitch & disc brake
- ------------------------------------------------------------------------------------------------
Grid Connection Via Vestas VMP controller Via Vestas VMP controller
- ------------------------------------------------------------------------------------------------
Turbine Weight 60,850 lbs. (including rotor) 171,960 lbs. (including rotor)
- ------------------------------------------------------------------------------------------------
Cut-in Wind Speed 4.0 m/s (9.0 mph) 4.0 m/s (9.0 mph)
- ------------------------------------------------------------------------------------------------
Cut-out Wind Speed 25 m/s (56 mph) 25 m/s (56 mph)
- ------------------------------------------------------------------------------------------------
Survival Wind Speed 70 m/s (157 mph) 3 sec. gust 70 m/s (157 mph) 3 sec. gust
================================================================================================
</TABLE>
-5-
<PAGE>
EXHIBIT 1.01
Page 6 of 9
(Revised Pursuant to Amendment No. 3)
Description of Renewable Resource Facility
Vestas V47 - 660 kW Wind Turbine Technical Data For Grid Connection
The Vestas V47 wind turbine operates fully automatic. This is achieved by the
VMP-controller. The VMP-controller is separated into a top controller located in
the turbine nacelle, and a bottom controller located at the tower base. The
VMP-controller serves the following functions:
Before connection to the grid, the speed of rotation is synchronized to
the grid frequency in order to limit the cut-in current.
Thyristor cut-in of the generator to limit the cut-in current.
Automatic yawing of the nacelle in accordance with the wind direction.
Cut-in and cut-out of the power factor correction.
Monitoring of the utility grid.
Monitoring of the operation of the wind turbine.
Stop of the wind turbine in case of faults.
The generator and the power factor correction will be cut out if the voltage or
the frequency exceed the limits set forth below.
<TABLE>
<CAPTION>
====================================
Phase Voltage Grid Voltage
(400 V nominal) (690 V nominal)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
The voltage is 6% above the nominal voltage for 424 V 734 V
60 sec.
- ----------------------------------------------------------------------------------------
The voltage is 10% below the nominal voltage for 360 V 624 V
60 sec.
- ----------------------------------------------------------------------------------------
The frequency is above 62 Hz for 0.2 sec.
- ----------------------------------------------------------------------------------------
The frequency is below 57 Hz for 0.2 sec.
========================================================================================
</TABLE>
The power factor correction will cut-out if:
<TABLE>
<CAPTION>
====================================
Phase Voltage Grid Voltage
(400 V nominal) (690 V nominal)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
The voltage is 10% above the nominal voltage for 440 V 762 V
0.2 sec.
========================================================================================
</TABLE>
-7-
<PAGE>
The generator will cut-out if:
<TABLE>
<CAPTION>
====================================
Phase Voltage Grid Voltage
(400 V nominal) (690 V nominal)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
The voltage is 10% above the nominal voltage for 440 V 762 V
0.5 sec.
========================================================================================
</TABLE>
If a fault on the grid interrupts the voltage supply to the VMP-controller, the
emergency stop circuit will be opened immediately, and the generator and power
factor correction will be cut out simultaneously.
-8-
<PAGE>
EXHIBIT 1.01
Page 7 of 9
(Revised Pursuant to Amendment No. 3)
Description of Renewable Resource Facility
Vestas V66 - 1,650 kW Wind Turbine Technical Data For Grid Connection
The Vestas V66 wind turbine operates fully automatic. This is achieved by the
VMP-controller. The VMP-controller is separated into a top controller located in
the turbine nacelle, and a bottom controller located at the tower base. The
VMP-controller serves the following functions:
Before connection to the grid, the speed of rotation is synchronized to
the grid frequency in order to limit the cut-in current.
Thyristor cut-in of the generator to limit the cut-in current.
Automatic yawing of the nacelle in accordance with the wind direction.
Cut-in and cut-out of the power factor correction.
Monitoring of the utility grid.
Monitoring of the operation of the wind turbine.
Stop of the wind turbine in case of faults.
The generator and the power factor correction will be cut out if the voltage or
the frequency exceed the limits set forth below.
<TABLE>
<CAPTION>
==================================
Phase Voltage Grid Voltage
(400 V nominal) (690 V nominal)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
The voltage is 6% above the nominal voltage for 424 V 734 V
60 sec.
- -----------------------------------------------------------------------------------------
The voltage is 6% below the nominal voltage for 376 V 651 V
60 sec.
- -----------------------------------------------------------------------------------------
The frequency is above 62 Hz for 0.2 sec.
- -----------------------------------------------------------------------------------------
The frequency is below 57 Hz for 0.2 sec.
=========================================================================================
</TABLE>
The power factor correction will cut-out if:
<TABLE>
<CAPTION>
==================================
Phase Voltage Grid Voltage
(400 V nominal) (690 V nominal)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
The voltage is 10% above the nominal voltage for 440 V 762 V
0.2 sec.
=========================================================================================
</TABLE>
-9-
<PAGE>
The generator will cut-out if:
<TABLE>
<CAPTION>
==================================
Phase Voltage Grid Voltage
(400 V nominal) (690 V nominal)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
The voltage is 10% above the nominal voltage for 440 V 762 V
0.5 sec.
=========================================================================================
</TABLE>
If a fault on the grid interrupts the voltage supply to the VMP-controller, the
emergency stop circuit will be opened immediately, and the generator and power
factor correction will be cut out simultaneously.
-10-
<PAGE>
EXHIBIT 1.01
Page 8 of 9
(Revised Pursuant to Amendment No. 3)
Description of Renewable Resource Facility
Vestas V47 - 660 kW Wind Turbine Generator Specifications.
<TABLE>
===============================================================================
Specification Vestas V47 Turbine
<S> <C>
- -------------------------------------------------------------------------------
Generator Manufacturer ABB, Leroy Somer or Weier
- -------------------------------------------------------------------------------
Generator Type Asynchronous, variable slip
- -------------------------------------------------------------------------------
Degree of Protection IP54
- -------------------------------------------------------------------------------
Insulation classes (stator/rotor) F/H
- -------------------------------------------------------------------------------
Voltage 690 VAC
- -------------------------------------------------------------------------------
Frequency 60 Hz
- -------------------------------------------------------------------------------
Number of Poles 4
- -------------------------------------------------------------------------------
Winding Connection wye
- -------------------------------------------------------------------------------
Rated Power 660 kW
- -------------------------------------------------------------------------------
Slip Regulation Interval 1 - 10%
- -------------------------------------------------------------------------------
Rated Speed 1890
- -------------------------------------------------------------------------------
Rated Efficiency at 2% Slip 95.4%
- -------------------------------------------------------------------------------
Generator Power Factor (no correction):
- -------------------------------------------------------------------------------
1/1 load 0.89
- -------------------------------------------------------------------------------
3/4 load 0.89
- -------------------------------------------------------------------------------
1/2 load 0.86
- -------------------------------------------------------------------------------
1/4 load 0.72
- -------------------------------------------------------------------------------
Generator Current:
- -------------------------------------------------------------------------------
full load current (@ 690 V) 621 A
- -------------------------------------------------------------------------------
no load (@ 690 V) 130 A
- -------------------------------------------------------------------------------
Generator Reactive Power:
- -------------------------------------------------------------------------------
full load 338 kVAr
- -------------------------------------------------------------------------------
no load 155 kVAr
- -------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Power Factor Correction 225 kVAr
<S> <C>
- --------------------------------------------------------------------------------
Resulting Power Factor (grid side):
- --------------------------------------------------------------------------------
1/1 load 0.99
- --------------------------------------------------------------------------------
3/4 load 1.00
- --------------------------------------------------------------------------------
1/2 load 1.00
- --------------------------------------------------------------------------------
1/4 load 1.00
- --------------------------------------------------------------------------------
Resulting Full Load Current @ 690 V (grid side) 564 A
================================================================================
</TABLE>
-12-
<PAGE>
EXHIBIT 1.01
Page 9 of 9
(Revised Pursuant to Amendment No. 3)
Description of Renewal Resource Facility
Vestas V66 - 1,650 kW Wind Turbine Generator Specifications
<TABLE>
<CAPTION>
================================================================================
Specification 1,650 kW Generato 300 kW Generator
- --------------------------------------------------------------------------------
<S> <C> <C>
Generator Manufacturer ABB or similar ABB
- --------------------------------------------------------------------------------
Generator Type Asynchronous, Asynchronous,
variable slip constant slip (10%)
- --------------------------------------------------------------------------------
Degree of Protection IP54/IP20 IP54
- --------------------------------------------------------------------------------
Insulation classes (stator/rotor) F/F F/F
- --------------------------------------------------------------------------------
Voltage 690 VAC 690 VAC
- --------------------------------------------------------------------------------
Frequency 60 Hz 60 Hz
- --------------------------------------------------------------------------------
Number of Poles 4 4
- --------------------------------------------------------------------------------
Winding Connection delta wye
- --------------------------------------------------------------------------------
Rated Power 1,650 kW 300 kW
- --------------------------------------------------------------------------------
Slip Regulation Interval 1 - 10% N/A (fixed at 0.9%)
- --------------------------------------------------------------------------------
Rated Speed 1890 rpm 1816 rpm
- --------------------------------------------------------------------------------
Rated Efficiency at 2% Slip 95% 96%
- --------------------------------------------------------------------------------
Generator Power Factor (no
correction):
- --------------------------------------------------------------------------------
1/1 load 0.87 0.87
- --------------------------------------------------------------------------------
3/4 load 0.85
- --------------------------------------------------------------------------------
1/2 load 0.78
- --------------------------------------------------------------------------------
1/4 load 0.57
- --------------------------------------------------------------------------------
Generator Current:
- --------------------------------------------------------------------------------
full load current (@ 690 V) 1,585 A 290 A
- --------------------------------------------------------------------------------
no load (@ 690 V) 480 A 65 A
- --------------------------------------------------------------------------------
Generator Reactive Power:
- --------------------------------------------------------------------------------
full load 931 kVAr 170 kVAr
- --------------------------------------------------------------------------------
no load 580 kVAr 78 kVAr
- --------------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Power Factor Correction 600 kVAr 150 kVAr
<S> <C> <C>
- -------------------------------------------------------------------------------
Resulting Power Factor (grid side):
- -------------------------------------------------------------------------------
1/1 load 1.00 1.00
- -------------------------------------------------------------------------------
3/4 load 1.00
- -------------------------------------------------------------------------------
1/2 load 1.00
- -------------------------------------------------------------------------------
1/4 load 1.00
- -------------------------------------------------------------------------------
Resulting Full Load Current (grid side) 1,408 A 252 A
===============================================================================
</TABLE>
-14-
<PAGE>
Exhibit 3.01
(Revised Pursuant to Amendment No. 3)
Payment Schedule
Page 1 of 5
Monthly Payments
A. Payable to TU Electric by Producer. Producer shall pay a monthly charge
for meter reading, billing and administration of this Agreement based on
TU Electric's Rate LPP as is in effect from time to time. The applicable
customer charge for Rate LPP is currently $600.00 per month. The current
Rate LPP is attached to, and is part of, this Exhibit 3.01.
B. Payable to Producer by TU Electric. Trial Energy is:
1. All energy delivered to TU Electric at the Point of Interconnection
and produced by the Renewable Resource Facility before the Phase One
Partial Commercial Operation Date;
2. All energy delivered to TU Electric at the Point of Interconnection
and produced by portions of the Renewable Resource Facility other
than Phase One before the Phase Two Partial Commercial Operation
Date and on or after the Phase One Partial Commercial Operation
Date; and
3. All energy delivered to TU Electric at the Point of Interconnection
and produced by portiones of the Renewable Resource facility other
than Phase One and Phase Two before the Commercial Operation date
and on or after the Phase Two Partial Commercial Operation Date.
After the Phase One Commercial Operation Date, the amount of Trial energy in a
month is to be determined by reading Producer's meters.
-15-
<PAGE>
EXHIBIT 3.01
(Revised Pursuant to Amendment No. 3)
Payment Schedule
Page 2 of 5
TU Electric shall pay Producer for all Trial Energy at Rate LPP prices. During
Partial Commercial Operation, TU Electric shall pay Producer for all electric
energy other than Trial Energy delivered to TU Electric by Producer at the Point
of Interconnection and produced by the Renewable Resource Facility ("Delivered
Energy") at the Contract Price. Beginning on the Commercial Operation Date, TU
Electric shall pay Producer for all Delivered Energy at either the Contract
Price or Rate LPP according to the following descried methodology.
The "Contract Price" for a calendar year is the rate specified in the following
table:
Contract Payment Rate
<TABLE>
<CAPTION>
============================================================================
Calendar Year Payment Rate Calendar Year Payment Rate
(Cents/kWAr) (Cents/kWAr)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
1997 4.02 2010 5.90
- ----------------------------------------------------------------------------
1998 4.14 2011 6.08
- ----------------------------------------------------------------------------
1999 4.26 2012 6.11
- ----------------------------------------------------------------------------
2000 4.39 2013 6.14
- ----------------------------------------------------------------------------
2001 4.52 2014 6.17
- ----------------------------------------------------------------------------
2002 4.66 2015 6.20
- ----------------------------------------------------------------------------
2003 4.80 2016 6.23
- ----------------------------------------------------------------------------
2004 4.94 2017 6.26
- ----------------------------------------------------------------------------
2005 5.09 2018 6.30
- ----------------------------------------------------------------------------
2006 5.24 2019 6.33
- ----------------------------------------------------------------------------
2007 5.40 2020 6.36
- ----------------------------------------------------------------------------
2008 5.56 2021 6.39
- ----------------------------------------------------------------------------
2009 5.73 2022 6.42
- ----------------------------------------------------------------------------
2023 6.46
============================================================================
</TABLE>
-16-
<PAGE>
EXHIBIT 3.01
(Revised Pursuant to Amendment No. 3)
Payment Schedule
Page 3 of 5
The "Expected Energy" for a calendar month is the number of kWh specified for
that month in the following table, except that if the Commercial Operation Date
occurs on a date other than the first day of a month, the Expected Energy for
that month must be reduced prorata based on the number of days remaining in the
month compared to the total number of days in the month.
EXPECTED ENERGY
<TABLE>
<CAPTION>
===========================================================================
Month Expected Energy (kWh)
<S> <C>
- ---------------------------------------------------------------------------
January 9,925,000
- ---------------------------------------------------------------------------
February 9,350,000
- ---------------------------------------------------------------------------
March 12,275,000
- ---------------------------------------------------------------------------
April 12,850,000
- ---------------------------------------------------------------------------
May 13,450,000
- ---------------------------------------------------------------------------
June 9,925,000
- ---------------------------------------------------------------------------
July 8,175,000
- ---------------------------------------------------------------------------
August 7,025,000
- ---------------------------------------------------------------------------
September 7,650,000
- ---------------------------------------------------------------------------
October 8,750,000
- ---------------------------------------------------------------------------
November 9,350,000
- ---------------------------------------------------------------------------
December 8,175,000
===========================================================================
</TABLE>
Renewable Resource Energy Purchase Agreement
-17-
<PAGE>
EXHIBIT 3.01
(Revised Pursuant to Amendment No. 3)
Payment Schedule
Page 4 of 5
The "Allowable Energy" for a month is the Expected Energy for that month plus
the Balance Energy for the month immediately preceding that month, except that
for the first month of Commercial Operation the Allowable Energy equals the
Expected Energy. If the Commercial Operation Date occurs on a date other than
the first day of a month, the Allowable Energy for that month must be reduced
prorata based on the number of days remaining in the month compared to the total
number of days in the month.
The "Balance Energy" for a month is determined as follows: (1) if the Delivered
Energy for that month equals or exceeds the Allowable Energy for that month,
then the Balance Energy for that month is zero, and (2) if the Allowable Energy
for that month exceeds the Delivered Energy for that month, then the Balance
Energy for that month equals the Allowable Energy less the Delivered Energy.
If the Delivered Energy for a month exceeds the Allowable Energy for that month,
then TU Electric shall pay Producer the Contract Price for the portion of the
Delivered Energy equal to the Allowable Energy and shall pay Producer Rate LPP
prices for the remainder of the Delivered Energy for that month.
If the Allowable Energy for a month equals or exceeds the Delivered Energy for
that month, then TU Electric shall pay Producer the contract Price for all
Delivered Energy for that month. determined as follows: (1) if hte Delivered
Energy for that month equals or exceeds the Allowabel Energy for that month,
then the Balance of Energy for tha month is zero, and (2) if the Allowable
Energy for the Balnce Energy for that month equals the Allowable energy less the
deivered
-18-
<PAGE>
EXHIBIT 3.01
(Revised Pursuant to Amendment No. 3)
Payment Schedule
Page 5 of 5
The following example demonstrates the application of this methodology:
NewWorld Power Partnership Account Example
Showing 2 years Operation
<TABLE>
<CAPTION>
Month/Year Delivered Expected Allowable Contract Price Rate LPP Balance
Energy Energy Energy Portion Portion Energy
kWh kW kWh kWh kWh kWh
<S> <C> <C> <C> <C> <C> <C>
Dec 98 0
Jan 99 9,000,000 8,770,504 8,770,504 8,770,504 229,496 0
Feb 10,500,000 10,752,878 10,752,878 10,500,000 0 252,878
Mar 14,000,000 13,335,971 13,588,849 13,588,849 411,151 0
Apr 13,000,000 13,095,683 13,095,683 13,000,000 0 95,683
May 12,000,000 10,983,129 12,260,252 12,000,000 0 260,252
June 11,000,000 10,963,129 11,223,381 11,000,000 0 223,381
July 10,000,000 8,199,820 8,423,201 8,423,201 1,576,799 0
Aug 7,000,000 7,358,813 7,358,813 7,000,000 0 358,813
Sept 8,000,000 7,599,101 7,957,914 7,957,914 42,086 0
Oct 9,000,000 7,839,388 7,839,388 7,839,388 1,180,612 0
Nov 9,000,000 8,380,036 8,380,036 8,380,036 619,964 0
Dec 99 7,000,000 8,440,108 8,440,108 7,000,000 0 1,440,108
Jan 00 9,000,000 8,770,504 10,210,611 9,000,000 0 1,210,611
Feb 10,500,000 10,752,878 11,963,489 10,500,000 0 1,453,489
Mar 14,000,000 13,335,971 14,739,460 14,000,000 0 799,460
Apr 13,000,000 13,095,683 13,895,144 13,000,000 0 895,144
May 12,000,000 12,184,568 13,059,712 12,000,000 0 1,059,712
June 11,000,000 10,963,129 12,022,842 11,000,000 0 1,022,842
July 8,000,000 8,139,820 9,222,662 8,000,000 0 1,222,662
Aug 7,000,000 7,358,813 8,581,475 7,000,000 0 1,581,475
Sept 8,000,000 7,699,101 9,180,575 8,000,000 0 1,180,575
Oct 9,000,000 7,839,388 9,019,964 9,000,000 0 19,964
Nov 9,000,000 8,380,038 8,400,000 8,400,000 600,000 0
Dec 00 9,000,000 8,440,108 8,440,108 8,440,108 659,892 0
<CAPTION>
Delivered Expected Allowable Contact Rate LPP
Energy Energy Energy Portion Portion
kWh kWh kWh kWh kWh
<S> <C> <C> <C> <C> <C>
Total Year 1 119,500,000 116,900,000 118,091,007 115,459,892 4,040,108
Total Year 2 119,500,000 116,800,000 128,796,042 118,340,108 1,159,892
Two Year Total 238,000,000 233,800,000 245,887,048 233,800,000 6,200,000
</TABLE>
-19-
<PAGE>
EX-10(nn)
WIND TURBINE EQUIPMENT
SALES AND INSTALLATION CONTRACT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. DEFINITIONS OF TERMS.................................................-1-
2. SALE AND PURCHASE OF THE FACILITY AND PERFORMANCE OF THE WORK.......-10-
3. OTHER PROJECT WORK..................................................-11-
4. WTG AND EQUIPMENT SUPPLY AND DELIVERY...............................-12-
5. INSTALLATION OF THE FACILITY........................................-13-
6. OTHER RESPONSIBILITIES OF VESTAS-AMERICAN...........................-14-
7. OBLIGATIONS OF THE CORPORATION......................................-19-
8. TOWER FOUNDATIONS...................................................-23-
9. TIME FOR COMPLETION.................................................-23-
10. FACILITY PRICE......................................................-25-
11. PAYMENT OF FACILITY PRICE...........................................-27-
12. ACCEPTANCE TESTING AND SUBSTANTIAL COMPLETION.......................-30-
13. FINAL ACCEPTANCE....................................................-33-
14. RISK OF LOSS........................................................-34-
15. CHANGE ORDERS.......................................................-35-
16. SUBCONTRACTORS AND SUPPLIERS........................................-36-
17. ROYALTIES AND PATENTS...............................................-37-
18. TERMINATION AND SUSPENSION..........................................-37-
19. WARRANTIES..........................................................-40-
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
20. FORCE MAJEURE.......................................................-42-
21. INSURANCE...........................................................-43-
22. LIMITATION ON DAMAGES...............................................-48-
23. REPRESENTATIONS AND WARRANTIES......................................-48-
24. INDEMNITY...........................................................-51-
25. INTELLECTUAL PROPERTY RIGHTS........................................-53-
26. NOTICES.............................................................-54-
27. INSPECTION..........................................................-55-
28. MISCELLANEOUS.......................................................-56-
</TABLE>
-ii-
<PAGE>
-iii-
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit "A" Detailed Plan
Exhibit "B" Facility Description
Exhibit "C" Final Acceptance Certificate
Exhibit "D" General Design and Plans
Exhibit "E" Payment Schedule
Exhibit "F" Preliminary Acceptance Certificate
Exhibit "G" Project Site
Exhibit "H" Project Timeline
Exhibit "I" Test and Inspection Procedures
Exhibit "J" Tower Foundation Designs and Specifications
Exhibit "K" Access Requirements
Exhibit "L" Parent Guaranty
Exhibit "M" Form of Amendment
Exhibit "N" Standard Warranty
Exhibit "O" Payment Security (Form of Letter of Credit)
Exhibit "P" V47 Facility Price Breakdown
Exhibit "Q" V66 Facility Price Breakdown
</TABLE>
-iv-
<PAGE>
WIND TURBINE EQUIPMENT
SALES AND INSTALLATION CONTRACT
This WIND TURBINE EQUIPMENT SALES AND INSTALLATION CONTRACT (this
"Contract") is made and entered into this day of _____________, 1998 (the
"Effective Date") by and between York Research Corporation, a Delaware
corporation (the "Corporation"), and Vestas-American Wind Technology, Inc., a
California corporation ("Vestas-American" or "Contractor"), in light of the
following facts and circumstances:
A. The Corporation is developing a wind energy project located in Howard
County near the city of Big Spring, Texas consisting of forty-six (46) wind
turbine generators having an aggregate capacity of approximately thirty-four
(34) megawatts (the "Project"). The electricity generated by the Project will be
sold to TU Electric Company (the "Utility") pursuant to the Power Purchase
Agreement (defined in Section 1 below).
B. The Corporation wishes to retain Vestas-American to supply, deliver,
erect, install, start-up, test and commission the Wind Turbine Generators
(defined in Section 1 below), the Towers (defined in Section 1 below) and
certain other equipment.
C. Vestas-American wishes to sell such equipment and provide such
installation services on the terms and conditions set forth in this Contract.
NOW, THEREFORE, in consideration of the premises, the mutual promises and
covenants set forth herein, and for other good and valuable consideration,
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS OF TERMS.
Whenever used in this Contract, the following terms shall have the
following respective meanings:
1.1. Acceptance Testing: The testing of the WTGs and each of the Phases
as set forth in Section 12 to determine whether the WTGs, the Phases
and the Facility are fully operational to permit Substantial
Completion.
1.2. Affiliate: Any person or entity controlling, controlled by or under
direct common control with, the Corporation or Vestas-American, as
the case may be, and, in the case of Vestas-American, any entity
under direct control by the same person or entity directly
controlling Vestas-American.
1.3. Applicable Laws: All laws, treaties, ordinances, statutes, rules,
regulations, codes, orders and interpretations thereof of any
federal, state, county, municipal, regional,
<PAGE>
environmental or other governmental body, agency or authority of the
United States having jurisdiction over the Job Site, performance of
the Work or other services to be performed hereunder and
construction of the Facility.
1.4. Applicable Permits: Any valid waiver, exemption, variance,
franchise, permit, authorization, license or similar order of or
from any federal, state, county, municipal, regional, environmental
or other governmental body, agency or authority having jurisdiction
over the Job Site, performance of the Work or any other services to
be performed hereunder. Such Applicable Permits shall include any
necessary sign-offs, certifications or approvals required by the
applicable governmental body, agency or authority.
1.5. Approved by the Project Manager: With respect to any matter that
requires the approval of the Project Manager, the term "Approved by
the Project Manager" means that the Project Manager, on behalf of
the Corporation, has reviewed such matter and concurs that it
complies with the General Designs and Plans, which approval shall be
solely for the convenience of Vestas-American. However, such term
does not denote or connote that the Corporation or the Project
Manager in any way has assumed any responsibility for the
installation means or materials which are and will remain the
responsibility and liability of Vestas-American pursuant to the
terms and conditions of the Contract Documents.
1.6. As-Built Drawings: Final drawings of the installed WTGs (not to
include design and manufacturing drawings) and Towers.
1.7. Bankruptcy Event: Shall have the meaning set forth in Section 18.1
of this Contract.
1.8. Business Day: Any day other than a day on which banks located in
California or Texas are required or authorized by law or by
executive order to close.
1.9. Change in Law: (i) the enactment, adoption, promulgation,
modification or repeal after the date of this Contract of any
Applicable Law(s); or (ii) the imposition of any material conditions
on the issuance or renewal of any Applicable Permit after the date
of this Contract (notwithstanding the general requirements contained
in any Applicable Permit at the time of application or issue to
comply with future laws, ordinances, codes, rules, regulations or
similar legislation), which in the case of either (i) or (ii),
establishes requirements affecting the design, construction,
start-up, conduct of Acceptance Testing, Facility Price, Project
Timeline or Payment Schedule in respect of the Facility which make
them materially more burdensome than the requirements specified in
this Contract, provided that a change in federal, state, county or
any other income tax law after the date of the Contract shall not be
a Change in Law pursuant to this Contract.
-2-
<PAGE>
1.10. Change Order: A written order, issued under Sections 9 or 15 hereof,
signed by the Corporation and Vestas-American authorizing an
addition, deletion or revision of the Work and/or materials or
equipment within the general scope of the Contract Documents and, if
applicable, authorizing an adjustment in the Facility Price, and/or
a change in the Project Timeline.
1.11. Communication System: Either the Second Wind Inc. ("Second Wind")
communication system consisting of Second Wind's Advanced
Distributed Monitoring System comprised of an on-site supervisor
computer, off-line project analyst software, communicating turbine
monitors, meteorological stations and a system communication
network, or a communication system supplied by an entity reasonably
acceptable to Vestas-American and which is not a competitor of, or a
parent, subsidiary or affiliate of a competitor of Vestas-American
or Vestas Wind Systems.
1.12. Construction Financing: The binding loan or other credit support
documentation between a Lender and the Owner pursuant to which such
Lender agrees to finance in whole or in part the cost of the design,
engineering, procurement, construction, start-up, testing and
initial operation of the Project.
1.13. Construction Manager: The Person designated by the Contractor, and
approved by Corporation, prior to commencement of the Work, to be
its construction manager to carry out its responsibilities under
this Contract. The designated Construction Manager may not be
changed during the term of this Contract without the written consent
of the Corporation, which consent shall not be unreasonably
withheld.
1.14. Consulting Engineer: The Consulting Engineer (or Engineers)
designated by the Corporation for itself or on behalf of any Lender.
1.15. Contract: This Wind Turbine Equipment Sales and Installation
Contract, including all exhibits and schedules attached hereto, as
the same may be amended from time to time.
1.16. Contract Documents: The Change Orders, Contract, Detailed Plan,
Facility Description, General Design and Plans and Project Timeline,
each as the same may be amended from time to time.
1.17. Contractor: Shall mean Vestas-American Wind Technology, Inc.
1.18. Contractor's Tower Foundation Designs and Specifications: The
preliminary foundation designs and plans prepared by Contractor.
1.19. Dkk: Danish Kroner.
-3-
<PAGE>
1.20. Deposit: The $462,000 previously paid by the Corporation to
Vestas-American to secure WTG production space for the Vestas Model
V66-1650kW WTGs, which Deposit shall be credited against the
Subsequent Down Payment.
1.21. Detailed Plan: The plans prepared by Vestas-American and approved by
the Corporation which show in detail the equipment installation to
be performed, including, without limitation, the Tower and WTG
Specifications which are attached hereto as Exhibit "A".
1.22. Dollar(s): United States Dollars.
1.23. Down Payment: The Initial Down Payment and the Subsequent Down
Payment in the amounts set forth in Section 11.1 to be paid by the
Corporation as a Down Payment of the Facility Price.
1.24. Effective Date: The date on which this Contract is entered into by
the Corporation and Vestas-American, which date is the date first
above written.
1.25. Electrical Specifications: The WTG electrical data and electrical
diagrams, included in Exhibit "A".
1.26. Event of Default: The events set forth in Section 18.1.
1.27. Facility: That portion of the Project consisting of forty-six (46)
Wind Turbine Generators, and forty-six (46) Towers, as more
particularly described in Exhibit "B" attached hereto as the
Facility Description, to be installed on the Project Site in three
Phases pursuant to, and in accordance with, the terms of the
Contract Documents. The term "Facility" specifically does not
include (a) the Tower Foundations, Padmount Transformers,
connections from the WTG ground controllers to the Padmount
Transformers and the Communication System, (b) the electrical
infrastructure and interconnections from the Padmount Transformers
to the Interconnect Substation, cabling and wiring of the
Communication System, the Interconnect Substation and related
electrical infrastructure and other interconnections which will be
used by the Project, (c) rights to the Project Site, the Power
Purchase Agreement or any other leasehold rights or contractual
rights or authorizations necessary for the production, delivery and
sale of electrical power produced by the Wind Turbine Generators, or
(d) any other work or services being performed, or equipment being
supplied, by the Corporation or Owner, and other required
authorizations otherwise necessary or appropriate for the
construction and operation of the Project and which Vestas is not
specifically responsible for obtaining pursuant to this Contract.
-4-
<PAGE>
1.28. Facility Price: The amount payable to Vestas-American for the
Facility under this Contract pursuant to the provisions of Section
11, consisting of the V47 Facility Price and the V66 Facility Price,
as adjusted from time to time by Change Order(s).
1.29. Facility Rights: The royalties and fees described in Section 17,
required for the performance of the Work.
1.30. Field Order: A written order affecting a change in the Work not
involving an adjustment in the Facility Price or an extension of a
Scheduled Substantial Completion Date issued by the Corporation to
Vestas-American during the construction of the Facility under the
provisions of Section 15.
1.31. Final Acceptance: The Corporation's written acceptance provided in
the form of a Final Acceptance Certificate in the form attached
hereto as Exhibit "C" of the Facility and the Work, issued pursuant
to Section 13.2, acknowledging that all acceptance requirements for
the Facility contained in this Contract have been fulfilled.
1.32. Final Acceptance Date: The date on which Final Acceptance of the
Facility occurs.
1.33. Force Majeure: Shall have the meaning set forth in Section 20.
1.34. Foundation Template Rings: Template rings created from the bottom
flange ring of a Tower, used in the positioning of foundation anchor
bolts and construction of Tower Foundations.
1.35. General Design and Plans: The part of the Contract Documents
prepared by the Corporation that are attached as Exhibit "D" hereto,
and which show conceptually (a) the design of the Project, as a
whole and by Phase, and (b) the layout and siting of the WTGs and
Towers by Phase.
1.36. Initial Down Payment: The amount set forth in Section 11.1 as the
first portion of the Down Payment to be paid by the Corporation.
1.37. Installation Warranty: The warranty described in Section 19.2.
1.38. Intellectual Property Rights: Vestas-American's rights of ownership
and use set forth in Section 25.
1.39. Interconnect Substation: The Interconnect Substation, transformer,
meter and interconnection facilities to be owned by the Owner to
which electrical power produced by a Phase or Phases, or the
Facility, as the case may be, will be delivered and at which the
Utility will meter such deliveries.
-5-
<PAGE>
1.40. Interim Notice to Proceed: A written notice, issued prior to a
Notice to Proceed, by the Corporation, or a duly authorized agent or
designee on the Corporation's behalf, to Contractor directing
Contractor to commence and complete Work under this Contract.
1.41. Job Site: Those areas of the Project Site designated in writing by
the Corporation for performance of the Work and such additional
areas as may, from time to time, be designated in writing by the
Corporation for Contractor's use hereunder.
1.42. Lender: The Person or Persons that agree to provide Construction
Financing and/or term financing for the Project.
1.43. Notice to Proceed: A Written Notice issued by the Corporation, a
duly authorized agent or designee on the Corporation's behalf to
Contractor directing Contractor to commence and complete either the
V47 or V66 portion of the Work under this Contract.
1.44. Notice to Proceed Date: One or both of the Notice to Proceed Date(s)
set forth in Section 4.3.1 hereof.
1.45. Notice of Substantial Completion: Notice given by Vestas-American to
the Corporation that the requirements for Substantial Completion for
a given Phase have been met, as more particularly set forth in
Section 12.2.
1.46. Operator: The person or entity providing operations and maintenance
for a Phase or Phases, or the Facility, as the case may be, and
otherwise means the Corporation, unless otherwise specified in
writing.
1.47. Other Contractors: Persons or entities, other than Vestas-American,
with whom the Corporation or the Owner contracts or subcontracts,
including subcontractors, to supply equipment or perform services in
connection with the completion of the Project, which equipment and
services are not to be provided under this Contract by
Vestas-American as part of the Work and installation of the
Facility. The "Other Contractors" may include the Corporation or the
Owner in the event the Corporation or the Owner elects to supply
such other equipment or perform such other services itself.
1.48. Other Project Work: The work to be performed, services to be
provided and/or equipment to be supplied by the Other Contractors
for the construction of a fully completed Project, as more
particularly described in Section 3.
-6-
<PAGE>
1.49. Owner: New World Power Texas Renewable Energy Limited Partnership, a
Texas limited partnership, the general and limited partners of which
are wholly owned subsidiaries of the Corporation.
1.50. Padmount Transformer: A 690V/25kV three phase transformer through
which electrical power produced by a WTG will pass and will be
stepped up from 690V to 25kV.
1.51. Parent Guaranty: The guaranty provided by Vestas Wind Systems A/S
pursuant to Section 28.19 of this Contract.
1.52. Payment Events: Those events, described in Section 11.2 hereof,
following which interim payments on the Facility Price will be made.
1.53. Payment Schedule: The schedule for periodic payments to
Vestas-American by the Corporation as the delivery of equipment and
installation thereof progresses as set forth in Exhibit "E", as the
same may be amended from time to time in accordance with this
Contract.
1.54. Payment Security: An irrevocable, dual currency standby letter of
credit substantially in the form of Exhibit "O" attached hereto or
other form of liquid payment security for the benefit of
Vestas-American issued by a commercial bank or by an insurance or
surety bond company having an A.M. Best rating of A+15 or better,
respectively, and reasonably acceptable to Vestas-American, in the
amount of sixty-five percent (65%) of the Facility Price which
provides for payments in accordance with Section 11.3.
1.55. Person: Any individual, corporation, company, voluntary association,
partnership, incorporated organization or government (or any agency
or political subdivision thereof).
1.56. Phases: The three (3) distinct parts of the Facility (each comprised
of a number of WTGs, Towers and associated equipment) that will be
constructed and assembled in sequence according to the Project
Timeline and General Design and Plans, and which together constitute
the Facility.
1.57. Preliminary Acceptance: The Corporation's written acknowledgment
that a given Phase is Substantially Complete and that the acceptance
requirements set forth in Section 12.3 have been fulfilled to the
Corporation's satisfaction provided in the form of a Preliminary
Acceptance Certificate in the form attached hereto as Exhibit "F".
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1.58. Power Purchase Agreement: The Renewable Resource Energy Purchase
Agreement dated September 13, 1994 by and between the Owner and
Utility relating to the purchase by Utility of electricity produced
by the Facility, as amended by that certain Amendment No. 1 dated as
of November 25, 1996, and Amendment No. 2 dated as of February 19,
1997, and Amendment No. 3 dated as of September 8, 1997, as the same
may be amended from time to time.
1.59. Project: The term "Project" is defined in the Recitals to this
Contract and includes the Facility, the Work, the connection from
the Facility to the Interconnect Substation, the Interconnect
Substation, the Other Project Work and all contractual rights and
authorization necessary for the production, delivery and sale of
electrical power produced by the WTGs.
1.60. Project Manager: The authorized representative of the Corporation
who is assigned to the Project Site or any part thereof from time to
time to act as a liaison with Vestas- American.
1.61. Project Site: The real property located in Howard County, Texas,
more particularly described in Exhibit "G" attached hereto, on which
the Facility is to be installed and the Project constructed.
1.62. Project Timeline: The detailed chronology of all events significant
to the WTG and equipment procurement, installation, start-up,
testing and acceptance of each of the Phases and the Facility, and,
with respect to the Project, the Other Project Work, as the same may
be amended from time to time under the circumstances described in
Section 9.1 hereof, as more particularly described in Exhibit "H"
attached hereto.
1.63. Prudent Electrical Power Industry Practices: Those practices,
methods and equipment that are commonly used in prudent electric
utility engineering, construction and operations in the state of
Texas to operate equipment lawfully and with safety, dependability,
efficiency and economy.
1.64. Punchlist: A list prepared by the Contractor and delivered to and
approved by the Corporation describing items of Work which remain to
be completed. The Punchlist items shall not include any items that
affect the safety, reliability, or operability of the Facility or
the Work, and the cost of the remaining Work included on a Punchlist
shall not exceed $100,000.
1.65. Scheduled Facility Completion Date: The date set forth in the
Project Timeline by which the parties intend that the Facility will
be completed.
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1.66. Scheduled Substantial Completion Date: With respect to any Phase of
the Facility, the date set forth in the Project Timeline by which
the parties intend that such Phase will be Substantially Completed,
as adjusted from time to time as provided herein.
1.67. Standard Warranty: The warranty of parts and power curve described
in Section 19 hereof and more particularly described in Exhibit "N"
to this Contract.
1.68. Subsequent Down Payment: The amount set forth in Section 11.1 as the
second portion of the Down Payment to be paid by the Corporation in
two installments on April 15, 1998 and June 1, 1998.
1.69. Subcontractor: Any Person performing work on behalf of
Vestas-American or with any other Subcontractor regarding the
performance of any obligations undertaken by Vestas-American under
the Contract Documents.
1.70. Substantial Completion: A Phase has been installed in accordance
with the Contract Documents, is substantially complete, and has met
the requirements set forth in Section 12.2.
1.71. Supplier: Any Person who or which supplies materials or equipment
for the Work, including that fabricated to a special design, but who
or which does not perform labor at the Project Site.
1.72. Test and Inspection Procedures: The commission and start up testing
procedures, as more particularly described in Exhibit "I" attached
hereto.
1.73. Tower: A sixty-five (65) or eighty (80) meter steel tubular tower
(measured from the base of the Tower to the center of the WTG hub)
upon which WTGs will be mounted, more particularly described in
Exhibit "A" attached hereto.
1.74. Tower Foundation: The concrete foundation complete with embedment
rings and anchor bolts necessary for installation and erection of a
Tower.
1.75. Tower Foundation Designs and Specifications: The preliminary
foundation designs and plans for Tower Foundations to be provided by
Corporation.
1.76. Tower Specifications: The technical descriptions and specifications
for the Towers, included in Exhibit "A".
1.77. Utility: TU Electric Company and/or its successors and assigns.
1.78. V47 Dkk Amount: That portion of the V47 Facility Price set forth in
Section 10 hereof to be paid in Dkk.
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1.79. V47 Dollar Amount: That portion of the V47 Facility Price set forth
in Section 10 hereof to be paid in Dollars.
1.80. V66 Dkk Amount: That portion of the V66 Facility Price set forth in
Section 10 hereof to be paid in Dkk.
1.81. V66 Dollar Amount: That portion of the V66 Facility Price set forth
in Section 10 hereof to be paid in Dollars.
1.82. V47 Facility Price: That portion of the Facility Price set forth in
Section 10 hereof applicable to the V47 portion of the Work,
consisting of the V47 DKK Amount and the V47 Dollar Amount.
1.83. V66 Facility Price: That portion of the Facility Price set forth in
Section 10 hereof applicable to the V66 portion of the Work,
consisting of the V66 DKK Amount and the V66 Dollar Amount.
1.84. Warranty Period: The period of duration of the Installation Warranty
as set forth in Section 19.2 hereof and as deemed extended with
respect to any given item of equipment, material or device by any
specified rewarranty period.
1.85. Wind Turbine Generator or WTG: A complete Vestas model V47 660kW
wind turbine generator and control system or Vestas Model V66 1650kW
wind turbine generator and control system, as the case may be.
1.86. Work: All phases of this Contract, including obtaining all necessary
Applicable Permits required to be obtained by Vestas-American except
those Applicable Permits required to be obtained by the Owner,
engineering and design, procurement, causing to manufacture,
erection, installation, training, start-up (including calibration,
inspection and start-up operation), and testing with respect to the
Facility to be performed by Contractor pursuant to this Contract.
Work includes all or partial portions of the Facility, including
labor, materials, equipment, services, reports and other document
preparation and any other items to be used by Contractor or its
Subcontractors or Suppliers in the prosecution of this Contract,
wherever the same are being engineered, designed, procured, caused
to be manufactured, delivered, constructed, installed, trained,
erected, tested, started-up or operated during start-up and testing
and whether the same are on or off the Job Site.
1.87. Written Notice: Written notice to any party to this Contract which
is delivered to the other in accordance with the terms of Section 26
hereof.
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1.88. WTG Specifications: The technical descriptions and specifications
for the Wind Turbine Generators, included in Exhibit "A".
2. SALE AND PURCHASE OF THE FACILITY AND PERFORMANCE OF THE WORK.
Upon and subject to the terms and conditions contained herein and the
other Contract Documents, Vestas-American hereby agrees to procure and install
the WTGs, Towers and other equipment comprising the Facility, and to perform and
pay the cost of all the Work, for which the Corporation agrees to pay the
Facility Price.
3. OTHER PROJECT WORK.
Other work that will be performed by the Corporation or Other Contractors
(the "Other Project Work") includes but is not limited to the following:
3.1. design of the Project (exclusive of the Facility and the Work) and
selection of site layout for the WTGs;
3.2. all civil engineering and construction services for the Project
(exclusive of the Facility and the Work), including but not limited
to excavation for and construction of the Tower Foundations in
accordance with either the Contractor's Foundation Designs and
Specifications or the Tower Foundation Designs and Specifications,
as applicable, and excavation for and construction of foundations
for the Padmount Transformers and installation of the Padmount
Transformers. The excavation and construction services described in
this Section 3.2 to be performed by the Corporation or Other
Contractors include but are not limited to grouting between Tower
and Tower Foundations and the removal and disposal of any soil and
excess material.
3.3. design, construction and testing of the Interconnect Substation and
installation and testing of the cables and electrical infrastructure
necessary for the transmission of electrical energy from each WTG
ground controller to the Padmount Transformer, Interconnect
Substation and the Utility's facility;
3.4. supply, installation and testing of the Communication System and all
cabling and wiring necessary to interconnect any of the
Communication System component(s) or necessary to connect any
portion of the Communication System to the WTG ground controllers in
a manner which meets Vestas-American's standard specifications for
interconnection as contained in the Electrical Specifications.
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3.5. acquisition of all rights to use the Project Site and all necessary
consents and all other agreements regarding the land which provide
rights, including access, to the Project Site and the Interconnect
Substation; and
3.6. obtaining all Applicable Permits (other than those specifically
required by Applicable Law to be obtained by Contractor) necessary
for the construction and operation of the Project.
Except as specifically set forth in Section 5.3, it is agreed and
understood that Vestas-American shall have no responsibility or liability
whatsoever in connection with any of the Other Project Work.
4. WTG AND EQUIPMENT SUPPLY AND DELIVERY.
4.1. Conditions Precedent to Vestas-American's Obligations. All of the
obligations of Vestas-American under the Contract Documents,
including the obligation of Vestas-American to order and ship the
WTGs, to order, supply and deliver the Towers and other materials
and equipment that it is responsible for hereunder, and to meet the
Project Timeline or any other date herein specified or defined shall
be conditioned upon the satisfaction of the following conditions:
4.1.1. Vestas-American shall have received the Initial Down Payment
as required by Section 11.1 within two Business Days of the
Effective Date of this Contract; and
4.1.2. Vestas-American shall have received the Subsequent Down
Payment as required by Section 11.1 and the Payment Security
as required by Section 11.3.
The Corporation agrees that if all of the conditions precedent set forth
in Section 4.1. above have not been accomplished or waived in writing by
Vestas-American, then Vestas-American shall have the right to cancel this
Contract, upon which Vestas-American shall return the Subsequent Down Payment,
and thereafter shall have no further obligation or liability hereunder. The
Initial Down Payment and Deposit are non-refundable.
4.2. Conditions to Commencement of Work. The obligation of
Vestas-American to commence Work at the Job Site under the Contract
Documents and to meet the Project Timeline shall be conditioned upon
the satisfaction or waiver of the following conditions:
4.2.1. The Corporation shall have obtained any and all Applicable
Permits, licenses and other approvals required to be obtained
by the Corporation and necessary for commencement of the Work
at the Job Site to be performed by Vestas-
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American (other than Applicable Permits, licenses and other
approvals required by Applicable Law to be obtained by
Vestas-American or any Subcontractor or Supplier); and
4.2.2. With respect to any item of Work, all Other Project Work
necessary for Vestas-American to commence or proceed with such
Work shall have been timely completed in accordance with the
Project Timeline and the Corporation's obligations under this
Contract.
4.3. Commencement of the Work.
4.3.1. Subject to Sections 4.1.1 and 4.2, Contractor shall commence
and thereafter diligently prosecute the Work specified in the
Notice to Proceed on the Notice to Proceed Date. The Notice to
Proceed Date shall be May 1, 1998 for the V66 portion of the
Work and June 1, 1998 for the V47 portion of the Work.
4.3.2. Prior to the issuance of the Notice to Proceed, the
Corporation shall have the right to issue one or more Interim
Notices to Proceed directing Contractor to commence and
complete any portion of the Work specified in any such Interim
Notice to Proceed. If Contractor shall have received from the
Corporation financial assurances reasonably acceptable to
Contractor respecting the portion of the Work specified in
such Interim Notice to Proceed, Contractor shall commence such
Work on the date specified in the Interim Notice to Proceed.
4.3.3. Contractor understands and agrees that, subject to the
Corporation's timely completion of its obligations under this
Contract and performance of the Other Project Work, TIME IS OF
THE ESSENCE with respect to achieving Substantial Completion
by the Scheduled Completion Date.
5. INSTALLATION OF THE FACILITY.
Subject to the terms and conditions hereof, including Section 4.1, and of
the other Contract Documents, Vestas-American shall cause the delivery,
assembly, erection and installation of the WTGs and Towers at the Project Site,
in the Phases and at the sites specified in the General Designs and Plans, using
qualified competent personnel, in accordance with the Project Timeline, as
follows:
5.1. Installation of the Towers. Unload, erect and install the Towers on
the Tower Foundations in accordance with the Tower Foundation
Designs and Specifications. Install lights and safety wire inside
the Towers.
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5.2. Erection of the WTGs. Unload and assemble the WTGs at the Project
Site and erect the WTGs, with blades, on the Towers. Install WTG
safety cables, control panels, and controllers. Connect cables from
WTG nacelles to ground controllers.
5.3. Cooperate to Interconnect Electrical Infrastructure to the
Interconnect Substation. As reasonably requested by the Corporation
from time to time, take reasonable steps to cooperate with the Other
Contractors to permit interconnection of the WTG ground controllers
to the Padmount Transformers and Interconnect Substation and testing
of the same, such cooperation to include, by way of example,
providing necessary information to the Other Contractors prior to
the scheduled interconnection and making available technical
personnel at the time the Other Contractors will make the
interconnection; provided, that no such cooperation shall require
Vestas-American to incur any extraordinary out-of-pocket costs or
expenses above those that would have been incurred by
Vestas-American anyway in the course of performing its other duties
hereunder.
5.4. Testing. Upon completion of the installation of the Facility
Vestas-American shall perform certain tests and inspections of the
erected WTGs in accordance with, and as more particularly provided
in, the Test and Inspection Procedures.
5.5. Clean Up and Repair. Except as otherwise provided herein, on an
ongoing basis, and upon Final Acceptance, Vestas-American shall
remove and dispose of in accordance with Applicable Law all waste
materials, debris and rubbish from and about the Project Site
resulting from its Work, repair damage to the Project Site or the
Other Project Work resulting from Vestas-American's Work, and
restore the Project Site to substantially its original condition
(exclusive of normal wear and tear and changes to the Project Site
required by the Work or Other Project Work).
6. OTHER RESPONSIBILITIES OF VESTAS-AMERICAN.
Subject to the terms and conditions hereof and of the other Contract
Documents, Vestas-American shall do or cause to be done the following:
6.1. Training. Provide a training program at the Project Site for not
more than six (6) operational personnel of Operator or Utility (or
such other entity connected with the Project as may be designated by
the Corporation) with respect to the operation, start-up,
maintenance and shutdown of the Facility and the major equipment and
components comprising the Facility in accordance with
Vestas-American's standard maintenance and operations training
practices. Such training program shall be conducted for a period of
five (5) consecutive 8 hour days.
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6.2. Manuals. Deliver to the Corporation six (6) complete sets of
Vestas-American's standard instruction and operation manuals and
service and maintenance manuals for each type of WTG.
6.3. As-Built Drawings. Deliver to Corporation (in electronic form to the
extent available) three (3) sets of final As-Built Drawings.
6.4. Geotechnical Study. Review the proposed geotechnical study
commissioned by Corporation and confirm whether the scope of the
study to be performed is adequate to enable Contractor to prepare
the Contractor's Tower Foundation Designs and Specifications. Review
the results of the Geotechnical Study and confirm that they are
adequate to enable Contractor to prepare Contractor's Tower
Foundation Designs and Specifications.
6.5. Contractor's Tower Foundation Designs and Specifications. Deliver to
Corporation, in accordance with the Project Timeline, Contractor's
Tower Foundation Designs and Specifications, to be used by the
Corporation in its sole discretion in connection with the
construction of the Tower Foundations.
6.6. Tower Foundation Design Review. In the event the Corporation chooses
to utilize its own Tower Foundation Designs and Specifications,
review and confirm the compatibility of those Designs and
Specifications with the Tower Specifications.
6.7. Foundation Template Rings. Provide the Corporation with three (3)
Foundation Template Rings for the V47 WTGs and one (1) Foundation
Template Ring for the V66 WTGs, by the dates indicated in the
Project Timeline.
6.8. Mechanics' Liens. Pay when due all valid charges from any
Subcontractor or Supplier hired by Vestas-American and used in the
installation of the Facility. All amounts owed to any Subcontractor
or Supplier will be the sole responsibility of Vestas-American. The
Corporation shall be entitled to reimbursement from Vestas-American
for any such amounts paid by the Corporation.
6.9. Monitor Progress. Update Facility installation schedules, as
required, to show progress as compared to the Project Timeline;
recommend changes to the Work if and as deemed necessary; record the
progress of the Work, submit monthly progress reports to the
Corporation and following commencement of Work at the Job Site,
conduct monthly progress meetings at the Job Site.
6.10. Compliance with Laws. Comply with and conform to all Applicable Laws
and Applicable Permits relating to the performance of the Work.
Except as a result of the acts or omissions of the Owner,
Corporation and/or Other Contractors, and except as provided
elsewhere in this Contract, Contractor shall be responsible for all
damages,
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fines and penalties which may arise (including but not limited to
those that the Corporation pays or becomes liable to pay) because of
non-compliance with such requirements due to acts or omissions of
Contractor (including any requirements that are the subject of a
Change Order from and after the expiration date of the period
allowed to Contractor to effect such Change Order).
6.11. Subcontractors' Contracts. Engage, execute all contracts with and
manage its Subcontractors and Suppliers.
6.12. Local Suppliers. Use reasonable efforts to use the services of local
Subcontractors and Suppliers located within the Utility's service
area to the extent economically practical, and use reasonable
efforts to provide minority-owned and women-owned businesses with
the opportunity to participate as Subcontractors and Suppliers to
the extent economically practical, provided, however, that such
Subcontractors and Suppliers must be duly qualified to perform the
services being contracted for. At the Corporation's request,
Vestas-American will provide Corporation with a written statement of
all steps it undertook to assure reasonable efforts were made to use
the services of local contractors and suppliers, and to provide
minority-owned and women-owned businesses with the opportunity to
participate as subcontractors and suppliers.
6.13. Roads. Provide the Corporation with access and use requirements for
the Job Site, more particularly described in Exhibit "K" attached.
6.14. Interference. Coordinate with the Corporation in an effort to avoid
unreasonable interference with existing use of the Project Site and
common access to the Project Site.
6.15. Consumables. Provide initial fill of lubricating oil and provide all
start-up spare parts and other consumables for use during
construction, start-up and commissioning of the Facility.
6.16. Spare Parts List. Provide a complete list, with prices, of existing
Supplier recommended spare parts for the initial two (2) years of
operation.
6.17. Project Site Property Owner Requirements. Contractor will satisfy
and will cause its Subcontractors and Suppliers to satisfy the
following requirements with respect to following policies of the
Project Site property owners:
6.17.1. observe safe speed limits while driving on the Project Site.
The maximum allowable speed is 15 mph on sections 18 and 19 of
Block 31 and sections 23, 24 and 26 of Block 32, and 35 mph on
the remaining portions of the Project Site;
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6.17.2. refrain from hunting or discharging firearms on the Project
Site;
6.17.3. refrain from using the Project Site for any recreational
purpose including camping or fishing;
6.17.4. take reasonable precautions to avoid chemical and petroleum
hydrocarbon spills, and, in the event of a spill, to the
extent caused by Contractor, its Subcontractors and Suppliers,
excavate and dispose of dirt saturated with chemicals or
petroleum hydrocarbons and replace contaminated dirt with
native soil materials according to Applicable Law.
In the event the Corporation is required to pay fines or damages to the owners
of the Project Site for violations of the provisions of this Section 6.17 by
Contractor's employees, agents, invitees, Subcontractors and Suppliers,
Contractor shall, subject to Section 24.3 with respect to Section 6.17.4,
promptly reimburse the Corporation for such costs.
6.18. Quality Assurance. Develop and implement a quality assurance program
with adequate degrees of control (inspection audits, documentation)
to ensure that engineering, design fabrication and installation work
activity contribute to overall Facility reliability, availability
and safety. The program, at a minimum, shall include control for
engineering calculations; design drawing revision; inter-discipline
design review; Supplier material reviews; welding/welding control;
electrical termination; material control; safety health;
housekeeping; calibration and instrumentation; and test control.
6.19. Project Manual. Provide the Corporation, within ninety (90) days
after the effective date of the first Notice to Proceed, a project
manual which shall include the following responsibilities:
communications and distribution; project organizational management
plan; engineering and design plan/schedule; construction plan;
schedule control; and a safety plan for Work at the Job Site to be
implemented upon commencement of Work at the Job Site.
6.20. Construction Manager. No later than the commencement of construction
at the Project Site, designate a dedicated on-site Construction
Manager, to be approved by Corporation, and provide staff to
coordinate and supervise the work of the Subcontractors and
Suppliers on site.
6.21. Clear Job Site. Upon Final Acceptance, clear the Job Site of
temporary structures, surplus material, spare parts, equipment and
tools in connection with Contractor's performance of the Work;
provided, however, that prior to disposition of such items,
Contractor shall, prior to the Preliminary Acceptance of the third
Phase, offer to sell to the Corporation any surplus construction
materials and supplies remaining on the
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Job Site at the time of Final Acceptance. The Corporation shall, not
later than the date of Preliminary Acceptance of the third Phase,
notify Contractor of the Corporation's acceptance or rejection of
Contractor's offer to sell such surplus materials.
6.22. Materials Handling. Supervise and arrange for the handling of all
materials and equipment, including (but not limited to) inspection,
expediting, shipping, unloading, receiving, customs clearance and
claims in any matter related to the performance of the Work.
6.23. Temporary Construction Materials. Provide all temporary construction
materials, equipment, supplies, operating consumables, construction
utilities and temporary facilities, special tools, and commissioning
supplies reasonably necessary or appropriate for, and replace any
spare parts used during the construction, start-up, testing and
interim operation of, the Facility until achievement of Final
Acceptance and keep possession thereof until such items may be
purchased by the Corporation as provided in Section 6.21.
6.24. Contractor's Personnel. Take prompt action in response to the
Corporation's requests to replace any of Contractor's personnel
performing the Work for just cause or whom the Corporation
reasonably believes, based upon independent documentation provided
by the Corporation to Contractor, to be creating a substantial risk
of non-achievement of the Scheduled Facility Completion Date or
Final Acceptance, or a substantial risk of material non-performance
by Contractor in accordance with this Contract.
6.25. Job Site Entrance. Use only the entrance(s) to the Job Site
specified in writing by the Corporation for ingress and egress of
all personnel, equipment, vehicles, and materials.
6.26. Utility Cooperation. Prior to Final Acceptance, in addition to the
provisions of Section 5.3 provide such assistance as is reasonably
requested by the Corporation in dealing with the Utility and/or any
governmental body in any and all matters relating to the Work and
the Facility (including any interconnection facilities); provided,
that no such cooperation shall require Vestas-American to incur any
extraordinary out-of-pocket costs or expenses above those that would
have been incurred by Vestas-American anyway in the course of
performing its other duties hereunder.
6.27. Disclosure. Obtain the Corporation's prior written approval of the
text of any announcement, publication, photograph, or other type of
communication concerning the Work prior to the dissemination or
release thereof to the public or to any Person other than the
Contractor or its Subcontractors or Suppliers (but only to the
extent
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necessary to the performance of the Work) by Contractor or its
Subcontractors or Suppliers, which approval by the Corporation shall
not be unreasonably withheld.
6.28. Facility Project Manager. Designate a Facility Project Manager who
will have full responsibility for the prosecution of the Work and
will act as a single point of contact in all matters on behalf of
Contractor and designate all key members of Contractor's project
staff, in each case subject to the prior written consent of the
Corporation, which consent will not be unreasonably withheld. Any
replacement of the Facility Project Manager or replacement or
addition of any other key member of Contractor's project staff shall
be subject to the prior written consent of the Corporation, which
consent will not be unreasonably withheld or delayed.
6.29. Lender. Provide such existing data, reports, certifications,
opinions of counsel and other documents or assistance as may be
reasonably requested by the Corporation or Lenders with respect to
the financing of the Project, provided that Vestas-American shall
not be required to incur additional costs or expenses in the
performance of its obligations under the Contract Documents.
6.30. Assignable Subcontracts. Assure that all contracts and agreements
with, and all purchase orders of or to the extent practicable, to,
Subcontractors and Suppliers in excess of Fifty Thousand Dollars
($50,000) provide that warranties available to Contractor from said
Subcontractors and Suppliers shall be assignable to the Corporation
and its assigns.
6.31. WTG Production. Provide the Corporation with reasonable advance
notice of the dates for assembly and testing of the WTGs.
6.32. Tower Production. Provide Corporation with reasonable advance notice
of the dates of scheduled manufacturing and installation of the
Towers.
6.33. Lender Arrangements. Through the date of Substantial Completion, and
except as otherwise provided in this Contract, perform its
obligations under this Contract in such a manner as not to
materially interfere with or adversely affect Owner's financial
arrangements with the Lenders.
6.34. Ground Controller Protocol. Provide to Second Wind, or such other
entity providing the Communication System, a WTG ground controller
protocol, provided, however, that Second Wind, or such other entity
providing the Communication System first executes a confidentiality
and nondisclosure agreement in form and substance reasonably
satisfactory to Contractor.
7. OBLIGATIONS OF THE CORPORATION.
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The Corporation shall do or cause to be done the following, all in
accordance with the Project Timeline:
7.1. Permits. Except for those Applicable Permits to be obtained by
Vestas-American to perform its obligations under this Contract,
apply for and obtain any and all building, grading and other
Applicable Permits, approvals, variances and/or consents of
governmental authorities or third Persons so that installation Work
on the Project Site in the proper sequence can take place without
delay, and make any and all filings necessary for the installation
of the Facility on the Project Site and for the construction,
completion and operation of the Project.
7.2. Access and Use. Except where access is interrupted by actions taken
by Vestas-American, its Subcontractors or Suppliers, Corporation
will provide to Vestas-American and its Subcontractors and Suppliers
at all times during the performance of the Work complete and
uninterrupted access to the Project Site sufficient for
Vestas-American to perform its obligations under the Contract
Documents, which access shall be in accordance with the access and
use requirements set forth on Exhibit "K", which includes
mobilization, laydown and parking requirements, and Corporation will
provide documentation delineating and describing the boundaries of
the Project Site and the access roads and other rights-of-way
thereto. Access to and on the Project Site shall be limited to the
improved roads shown on the General Designs and Plans.
7.3. Map. Prepare or cause to be prepared and deliver to Vestas-American,
at least fifteen (15) days prior to commencement of construction
activities on site, a detailed map of the Project Site identifying
and plotting property lines of the Project Site, easements of
record, and known above-ground and underground pipelines, power and
communication lines, roads, and the location of areas containing
items of special sensitivity such as religious artifacts, cultural
burial grounds, archaeological concerns, protected flora or fauna.
Once completed, such map shall be added to Exhibit "G" hereof as
part of the Project Site. The Corporation will immediately notify
Contractor in writing of any of the above listed items not included
on the Map of which Corporation becomes aware after completion of
the Map.
7.4. Coordinate Other Contractors. Schedule and coordinate activities of
the Corporation, the Utility and the Other Contractors with the
installation and testing of the Facility and performance of the Work
by Vestas-American under the Contract Documents to facilitate a
smooth and coordinated work effort to avoid delays to the
commencement and completion of the Work and the Facility.
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7.5. Other Project Work. Complete or cause to be completed all Other
Project Work in accordance with the Project Timeline, the
correlating design and specification standards (including those
supplied by Vestas-American as applicable), Applicable Laws and
Prudent Electrical Power Industry Practices such that, to the extent
performance by Vestas-American of its obligations under the Contract
Documents is predicated on the proper completion of Other Project
Work, the Work may be commenced and completed in accordance with the
terms and conditions of this Contract.
7.6. Geotechnical Study. Arrange for the completion of a geotechnical
study of the Project Site and deliver to Contractor, in accordance
with the Project Timeline, the results of that geotechnical study.
7.7. WTG and Tower Specifications. Subject to Section 27.3, review and
approve the WTG and Tower Specifications set forth in Exhibit "A".
7.8. Coordinate with Utility. Coordinate with Other Contractors the
construction of the Interconnect Substation and interconnection with
the Utility's facilities without delay to the commencement and
completion by Vestas-American of the Work, the Phases and the
Facility; arrange for the Utility to accept deliveries of electrical
power produced by the Facility during the Acceptance Testing period;
cooperate with Vestas-American during preparation for and conducting
the Acceptance Testing.
7.9. Payment of Facility Price. Deliver the Payment Security and timely
pay to Vestas-American the Facility Price (including the Down
Payment) in accordance with Section 11.
7.10. Project Timeline. Prepare and update as necessary the Project
Timeline in cooperation with Vestas-American.
7.11. Security. Following commencement of the Work, provide security to
protect the Project Site; and take such measures as are appropriate,
in the reasonable judgment of the Corporation, to protect all
persons, equipment, materials or other property on the Project Site,
or the Work being undertaken thereon, against damage, theft, injury,
nuisance or interference. Such measures shall include, but are not
limited to, the use of warning signs and closed and locked gates.
The Corporation shall undertake necessary steps to coordinate
ranching operations of the owners of the Project Site to minimize
interference with performance of the Work and the Other Project
Work.
7.12. Sales and Use Taxes.
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7.12.1. For Texas sales and use tax purposes, this Contract is a
"separated contract" as that term is used and applied in Tex.
Tax Code Ann. ss. 151.056 and 34 TAC ss.3.291. Since
Contractor is treated as a Texas retailer under a separated
contract, Contractor agrees to apply for and obtain a Texas
Sales and Use Tax Permit from the Texas Comptroller of Public
Accounts as required by 34 TAC ss. 3.291(b)(4)(B) and file all
required sales/use tax reports.
7.12.2. Contractor shall issue a resale or exemption certificate in
lieu of sales/use tax to its vendor at the time it purchases
any taxable item, the charge for which is shown in either part
A.(1), A.(4), F.(1) or F.(3) of the Facility Price Breakdown
described in Section 10.3.
7.12.3. Corporation shall issue a resale certificate to Contractor
in lieu of sales/use tax on the amounts charged in parts A.(1)
and (4) of the Facility Price Breakdown described in Section
10.3. Corporation shall either pay to Contractor the amount of
Texas state and local sales tax shown in parts F.(2) and F.(4)
of the Facility Price Breakdown described in Section 10.3 on
the charges for items shown in parts F.(1) and F(3), or
Corporation shall issue a resale or exemption certificate in
lieu of such tax.
7.12.4. Contractor shall pay sales tax to its vendors or accrue and
remit use tax to the Texas Comptroller on the purchase of any
taxable item that is consumed by it and not conveyed to
Corporation, the cost of which is shown in part B, ofthe
Facility Price Breakdown described in Section 10.3.
Corporation shall, within fifteen (15) days of receipt of an
invoice from Contractor, reimburse Contractor for such sales
or use tax.
7.12.5. Contractor shall pay sales tax to its vendors or accrue and
remit use tax to the Texas Comptroller on all taxable items
purchased and used by it that are reflected in the lump-sum
combined labor and material charges for specified improvements
to realty shown in part D of the Facility Price Breakdown
described in Section 10.3. Corporation shall, within fifteen
(15) days of receipt of an invoice from Contractor, reimburse
Contractor for such sales or use tax.
7.12.6. New construction labor, lump-sum combined material and labor
charges for improvements to realty, and overhead/profit
charges are not subject to the Texas sales and use tax;
consequently, no amount of sales or use tax (other than
reimbursement of sales or use tax) shall be included in the
amounts shown in parts C, D or E of the Facility Price
Breakdown described in Section 10.3.
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7.12.7. Corporation shall, promptly upon Corporation's receipt of
same, provide Contractor with the appropriate Texas resale
certificate form for its use. Contractor shall cooperate with
Corporation, as may be reasonably requested, in any efforts by
Corporation to obtain exemption from, or to minimize, any
sales or use tax, or to provide sales/use tax exemption
information to Owner, and specifically covenants (i) to comply
with all reasonable requests by Corporation or Owner to
provide any non-proprietary technical information, expertise
or data considered necessary to support any sales tax
exemption claimed by Corporation or Owner, and (ii) not to
purchase any material on an installed basis that may qualify
for exemption as manufacturing equipment unless it is
purchased from a Subcontractor under a separated contract,
i.e., Contractor shall purchase all manufacturing equipment
and materials as tangible personal property.
7.12.8. Corporation's and Contractor's obligations under this
Section 7.12 also apply to any Change Orders and shall survive
the termination or expiration of this Contract and last so
long as is necessary to resolve any and all matters regarding
sales or use taxes attributable to the Facility.
7.13. Disclosure of Information. Provide Vestas-American with all
necessary, non-proprietary technical information, data and documents
in the Corporation's possession which Vestas-American reasonably
requests and pertain to the design, installation and/or operation of
the Facility, or the performance by Vestas-American of its
obligations hereunder.
7.14. Compliance with Laws. Comply with all Applicable Laws in performing
its obligations under this Contract.
7.15. Construction Manager. Within three (3) days of receiving Written
Notice of Contractor's designation of a Construction Manager,
provide Written Notice to Vestas-American of whether it approves or
disapproves said Construction Manager. Failure of Corporation to so
provide Written Notice shall be deemed approval of the Construction
Manager. The Corporation's approval shall not be unreasonably
withheld, conditioned or delayed.
8. TOWER FOUNDATIONS.
8.1. Tower Foundation Designs and Specifications. The Corporation shall
prepare the Tower Foundation Designs and Specifications and
Contractor shall prepare and deliver to Corporation alternate
designs and plans for Tower Foundations, referred to herein as
"Contractor's Tower Foundation Designs and Specifications", within
thirty (30) days of receipt of the results of the fully completed
geotechnical study referenced in Section 7.6 hereof. The Corporation
in its sole discretion shall
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determine which set of designs and specifications will be utilized
in the construction of the Tower Foundations which selected designs
and specifications shall be attached by Vestas-American and
Corporation as Exhibit "J" to this Contract. In the event
Corporation chooses to utilize Contractor's Tower Foundation Designs
and Specifications, Contractor will confirm the compatibility of
Contractor's Tower Foundation Designs and Specifications with the
Tower Specifications and confirm that the Tower Foundations, if
constructed in accordance with the Contractor's Tower Foundation
Designs and Specifications, are designed to support the WTGs and
Towers for a period of twenty (20) years under normal operating and
environmental conditions at the Project Site.
8.2. Tower Foundation Construction. The Corporation shall, after review
of both its Tower Foundation Designs and Specifications and
Contractor's Tower Foundation Designs and Specifications, and in
accordance with the Project Timeline, notify Contractor in writing
whether or not Corporation wishes to expand the scope of the Work to
have Contractor construct the Tower Foundations. If the Corporation
so elects, then within fifteen (15) days of receipt of said notice,
Corporation and Contractor will enter into an amendment to this
Contract in substantially the same form and substance as Exhibit "M"
attached hereto.
9. TIME FOR COMPLETION.
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9.1. Delays and Extensions of Time. If Contractor believes it has been
delayed at any time in the progress of the Work by any act or
neglect of the Owner, Corporation, or an Other Contractor, or by any
employee of the Owner, Corporation, or Other Contractor or by a
Change in Law, or by sustained winds in excess of thirty (30) miles
per hour for a period of four (4) consecutive hours or more during a
given day during erection of the WTGs or Towers, or by any other
cause, other than Change Order, Field Order or Force Majeure which
are separately addressed in Sections 15.1 and 20 hereof,
respectively, then Contractor shall within twenty-one (21) days of
becoming aware of any such event causing a delay, provide the
Corporation with written notification of an intent to submit a claim
for adjustment of the Project Timeline and, if applicable, a change
in the Facility Price for increased cost to Contractor and its
Subcontractors due to any such delay, provided, however, that the
number of days for which Contractor can claim delays due to
sustained winds is a maximum of five (5) days. In the event
Contractor fails to submit written notification of an intent to
submit a claim within the time set forth above, Contractor shall
have waived all rights to an adjustment in the Project Timeline or
Facility Price in relation thereto. Within sixty (60) days of giving
such notice, Contractor shall submit a fully documented claim, if
practicable, or alternatively, a claim documented to the extent
practicable, accompanied by a schedule of anticipated delivery of
additional relevant information. Corporation shall respond to
Contractor's claim within ten (10) days of receipt of such claim.
Such response shall set forth the revised Project Timeline to the
extent agreed to by the Corporation and any change in the Facility
Price agreed to pursuant to Section 15.2 hereof. In the event the
Corporation does not accept Contractor's claim for adjustment of the
Project Timeline, the Contractor may utilize the dispute resolution
procedures set forth in Section 28.
9.2. Liquidated Damages. In the event that a Phase is not Substantially
Completed as of its Scheduled Substantial Completion Date and such
delay is caused solely by Vestas-American or any of its
Subcontractors or Suppliers, then Vestas-American shall pay the
Corporation, as liquidated damages for any and all losses or damages
suffered by the Corporation as a result of the delay, for Phase 1
and Phase 2 the sum of Three Hundred and Sixty Dollars ($360.00) per
day per WTG comprising such Phase, and for Phase 3 the sum of Eight
Hundred and Forty Dollars ($840.00) per day per WTG. Such amounts
shall begin to accrue on the third day following such Scheduled
Substantial Completion Date, and shall continue for each day after
such Scheduled Substantial Completion Date that the Phase has not
achieved Substantial Completion, up to a maximum of twenty percent
(20%) of the Facility Price, in the aggregate for all Phases. The
Corporation and Vestas-American acknowledge that should
Vestas-American fail to Substantially Complete a Phase by its
Scheduled Substantial Completion Date the actual damages that the
Corporation will incur are uncertain and difficult to determine at
this time, and agree that the foregoing amount of liquidated damages
is a reasonable measure of damages in light of such
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uncertainty. Any sums payable under this Section 9.2 are in the
nature of liquidated damages, and are not a penalty. Sums payable
under this Section 9.2 are the sole and exclusive measure of damages
with respect to any such delay by Contractor. The Corporation shall
have the right to payment by Contractor for liquidated damages under
this Section 9.2 from time to time by delivery of a Written Notice
no earlier than five (5) days after the date damages begin to
accrue. Any such notice shall specify the amount of such damages,
and Contractor shall pay the amount so specified or the undisputed
portion thereof within ten (10) days of receipt of such Written
Notice. Late payments of such amounts will bear interest at the rate
set forth in Section 28.2. The Corporation will have the right to
offset any liability of Contractor under this Section 9.2 against
any amount due or to become due from the Corporation to Contractor
under this Contract.
10. FACILITY PRICE.
10.1. Price. The Facility Price payable by the Corporation to
Vestas-American for the Facility and the performance of the Work by
Vestas-American under this Contract shall be Thirty Million Eight
Hundred Thirty Thousand Dollars ($30,830,000), payable in Dkk and
Dollars in amounts set forth in Section 10.2 hereof, as such amounts
may be adjusted pursuant to a Change Order in accordance with the
terms and conditions hereof. The portion of the Facility Price
designated as the V47 Facility Price is Twenty Four Million Six
Hundred Eighty Nine Thousand Five Hundred Dollars ($24,689,500), a
portion of which is payable in Dkk and a portion of which is payable
in Dollars as set forth in Section 10.2. The portion of the Facility
Price designated as the V66 Facility Price is Six Million One
Hundred Forty Thousand Five Hundred Dollars ($6,140,500), a portion
of which is payable in Dkk and a portion of which is payable in
Dollars as set forth in Section 10.2. The Facility Price shall be
paid by the Corporation as set forth in Section 11.
10.2. Currency Breakdown. The V47 Facility Price and V66 Facility Price
shall be paid in Dkk and Dollars in the amounts set forth in this
Section 10.2.
10.2.1. V47 Facility Price. The portion of the V47 Facility Price
payable in Dkk, the V47 Dkk Amount, is One Hundred and
Eighteen Million Forty One Thousand Dkk (118,041,000 Dkk)
which is equal to Seventeen Million Eight Hundred and Eighty
Five Thousand Dollars ($17,885,000). The portion of the V47
Facility Price payable in Dollars, the V47 Dollar Amount, is
Six Million Eight Hundred and Four Thousand Five Hundred
Dollars ($6,804,500).
10.2.2. V66 Facility Price. The portion of the V66 Facility Price
payable in Dkk, the V66 Dkk Amount, is Twenty Eight Million
Six Hundred Eighty Three Thousand Six Hundred Dkk (28,683,600
Dkk) which is equal to Four Million Three Hundred Forty Six
Thousand Dollars ($4,346,000). The portion of the V66 Facility
Price payable in Dollars, the V66 Dollar Amount, is One
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Million Seven Hundred Ninety Four Thousand Five Hundred
Dollars ($1,794,500).
10.2.3. Each payment made pursuant to Section 11 hereof will be made
in Dkk and Dollars in proportion to the total Dkk amount and
total Dollar amount of the specific price referenced. However,
Corporation shall have the option to make the Dkk portion of
any such payment in Dollars based on the exchange rate
published on the date the payment is made.
10.3. Facility Price Breakdown. The V47 Facility Price and the V66
Facility Price shall be broken down on Exhibit "P" and Exhibit "Q"
respectively into the parts A-H described below.
A. Material charges for tangible personal property conveyed
and incorporated into realty as improvements.
(1) Each manufacturing item, listed separately, and
the delivery charge, if any, for each item;
(2) Applicable Texas state and local sales/use tax on
A.(1) amounts, the present rate of which is 6.25%;
(3) Reimbursement for insurance and customs duties
paid by Contractor on A.(1) items, listed
separately by item;
(4) Each non-manufacturing item, listed separately,
and the delivery charge, if any, for each item;
(5) Applicable Texas state and local sales/use tax on
A.(4) amounts, the present rate of which is 6.25%;
(6) Reimbursement for insurance and customs duties
paid by Contractor on A.(4) items listed
separately by item;
B. Reimbursement for separately listed items consumed by
Contractor, rather than incorporated into realty or
conveyed to Corporation, and reimbursement of Texas
sales/use tax paid by Contractor thereon;
C. Construction labor for items in A.;
D. Lump-sum combined material and labor charges for
specified improvements to realty and reimbursement of
Texas state and local sales/use tax paid by Contractor
on items consumed by Contractor in connection therewith;
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E. Overhead and profit;
F. Sale of taxable items conveyed to Corporation but not
incorporated into realty;
(1) Sale of tangible personal property not
incorporated into realty;
(2) Applicable Texas state and local sales/use tax on
F.(1) amounts, the present rate for which is
6.25%;
(3) Sale of taxable services;
(4) Applicable Texas state and local sales/use tax on
F.(3) amounts, the present rate for which is
6.25%;
G. Sale of non-taxable items conveyed to Corporation but
not incorporated into realty; and
H. Sale of non-taxable training conveyed to Corporation but
not incorporated into realty.
10.4. Price Inclusive. The Facility Price includes payment for all
equipment, materials, labor, services, storage fees and related
expenses relating to Contractor's performance of its obligations
under this Contract (including without limitation all work,
materials, equipment and services provided by Subcontractors and
Suppliers) and the Work (including any applicable right to use
intellectual property rights) to be provided hereunder by Contractor
or any Subcontractor or Supplier. Notwithstanding anything herein or
in the other Contract Documents to the contrary, the Facility Price
does not include any storage costs and related other expenses
(including packaging or repackaging, additional insurance costs and
servicing expenses, such as the cost of sending one or more
technicians to a storage area for periodic rotation of the WTGs)
that may be incurred once the WTGs, Towers and related equipment and
other materials have been shipped where such storage and other costs
are incurred and arise out of delays in the performance of the Other
Project Work, the Corporation's delays in or failure to perform its
obligations under the Contract Documents, a Change in Law, or events
of Force Majeure, as to which costs and expenses the Corporation
agrees to indemnify, defend and hold harmless Vestas-American.
10.5. Exchange Rate Assumption. The Dollar equivalents of the V47 Dkk
Amount and of the V66 Dkk Amount set forth in this Section 10 are
based on an assumed exchange rate of six and six tenths (6.6) Dkk to
one (1) Dollar.
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11. PAYMENT OF FACILITY PRICE.
11.1. Down Payment. Within two Business Days of the Effective Date of this
Contract, the Corporation shall pay Vestas-American an Initial Down
Payment in the amount of five percent (5%) of the total Facility
Price, in the form of a wire transfer pursuant to wire transfer
instructions to be provided by Vestas-American to the Corporation.
Not later than April 15, 1998, the Corporation shall pay
Vestas-American the first installment of the Subsequent Down Payment
in the amount of ten percent (10%) of the V66 Facility Price less
the amount of the Deposit previously paid, in the form of a wire
transfer pursuant to wire transfer instructions to be provided by
Vestas-American to the Corporation. Not later than June 1, 1998, the
Corporation shall pay Vestas-American the remainder of the
Subsequent Down Payment in the amount of ten percent (10%) of the
V47 Facility Price, in the form of a wire transfer pursuant to wire
transfer instructions to be provided by Vestas-American to the
Corporation. For payments being made under this Section 11.1,
Corporation shall give Vestas-American written notice of its intent
to make a payment five (5) Business Days prior to the date it
intends to make such payment and Vestas-American shall supply wire
instructions to Corporation within two (2) Business Days of receipt
of said notice.
11.2. Interim Payments. Interim payments totaling seventy-five percent
(75%) of the Facility Price shall be made by the Corporation in the
form of a wire transfer in the amounts, and upon the happening of
certain payment events, as indicated below.
11.2.1. Payment Events. Upon each of the following payment events,
Corporation shall pay to Contractor the percentage of the
Facility Price indicated.
(a) First V47 Shipment from Denmark. Upon shipment of the
first V47 WTG from a Danish port, and within five (5)
days of receipt of an invoice from Contractor,
accompanied by a standard on board bill of lading
evidencing the first shipment of V47 WTGs, Corporation
shall pay to Contractor an amount equal to fifteen
percent (15%) of the V47 Facility Price.
(b) Last V47 Shipment from Denmark. Upon shipment of the
last V47 WTG from a Danish port, and within five (5)
days of receipt of an invoice from Contractor,
accompanied by a standard on board bill of lading
evidencing the last shipment of V47 WTGs, Corporation
shall pay to Contractor an amount equal to fifteen
percent (15%) of the V47 Facility Price.
(c) Last V66 Shipment from Denmark. Upon shipment of the
last V66 WTG from a Danish port, and within five (5)
days of receipt of an invoice from Contractor,
accompanied by a standard on board bill of lading
evidencing the last shipment of V66 WTGs, Corporation
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shall pay to Contractor an amount equal to thirty
percent (30%) of the V66 Facility Price.
(d) All V47 WTGs at Project Site. Upon the arrival of all
V47 WTGs at the Project Site, and within five (5) days
of receipt of an invoice from Contractor, Corporation
shall pay to Contractor an amount equal to fifteen
percent (15%) of the V47 Facility Price.
(e) All V66 WTGs at Project Site. Upon the arrival of all
V66 WTGs at the Project Site, and within five (5) days
of receipt of an invoice from Contractor, Corporation
shall pay to Contractor an amount equal to twenty
percent (20%) of the V66 Facility Price.
(f) Phase I Preliminary Acceptance. Within five (5) days of
executing the Preliminary Acceptance Certificate for
Phase I, Corporation shall pay to Contractor an amount
equal to fifteen percent (15%) of the V47 Facility
Price.
(g) Phase II Preliminary Acceptance. Within five (5) days of
executing the Preliminary Acceptance Certificate for
Phase II, Corporation shall pay to Contractor an amount
equal to fifteen percent (15%) of the V47
Facility Price.
(h) Phase III Preliminary Acceptance. Within five (5) days
of executing the Preliminary Acceptance Certificate for
Phase III, Corporation shall pay to Contractor an amount
equal to twenty-five percent (25%) of the V66 Facility
Price.
The obligation of Vestas-American to initially ship the WTGs from
Denmark is expressly conditioned on the Corporation complying with
Section 11.1 and delivering the Payment Security in full compliance
with Section 11.3.
11.3. Payment Security. Not later than June 1, 1998, Corporation shall
provide Vestas-American with a Payment Security reasonably
acceptable to Vestas-American in an amount equal to sixty-five
percent (65%) of the Facility Price, to be drawn upon in the event
Corporation fails to make any payments due under Section 11.2 of
this Contract, following applicable notice and cure periods.
Following Corporation's payment of a given interim payment under
Section 11.2 hereof, the stated amount of the Payment Security shall
be reduced by an amount equal to eighty-six and sixty-seven
hundredths percent (86.67%) of the amount of said interim payment.
If the form of Payment Security provided is a standby letter of
credit, then payments under the letter of credit will be made in the
respective currencies applicable to the payments due under the terms
of this Contract. If the form of Payment Security provided is one
that does not provide for dual currency payments, then the payments
under the Payment Security will be made in Dollars in an amount
equal to the Dollar
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portion of the payment missed under Section 11.2, plus the Dollar
equivalent of the Dkk portion of the payment missed, determined at
the time a claim under the Payment Security is made. The Payment
Security shall be extended and replaced as necessary so that it
remains in place until all payments due under Section 11.2 of this
Contract have been paid in full.
11.4. Final Payment. Within five (5) days of executing the Final
Acceptance Certificate but no earlier than March 1, 1999,
Corporation shall pay to Contractor the balance of the Facility
Price and any and all other amounts owed to Vestas-American under
the Contract Documents, including, without limitation, any increase
in the Facility Price pursuant to Change Order(s) or the Amendment
regarding Tower Foundations.
12. ACCEPTANCE TESTING AND SUBSTANTIAL COMPLETION.
The installation of the WTGs, Towers and related equipment shall be
undertaken and completed in three (3) Phases, according to the attached General
Design and Plans, and Project Timeline. The location of, and the equipment
comprising, each Phase shall be set forth in the attached General Design and
Plans.
12.1. Substantial Completion Test. (a) At such time as Vestas-American
deems appropriate in accordance with the Project Timeline, it shall
notify the Corporation of its intention to commence start-up and
testing of the WTGs for a specified Phase, in accordance with the
terms and procedures specified in this Section 12.1 and the
requirements for Substantial Completion specified in Section 12.2.
Such notice shall be given at least ten (10) days prior to
Vestas-American's planned commencement of testing of such Phase and
shall include a Punchlist with respect to such Phase. Within two (2)
days of receipt of such notice, the Corporation shall confirm by
Written Notice to Vestas-American that the Punchlist is acceptable
and the interconnection of the Phase with the Interconnect
Substation has been completed, and shall arrange for the Utility to
accept deliveries of electrical power from such Phase during the
test period. Any delays with respect to the foregoing shall be added
to the time scheduled to achieve Substantial Completion with respect
to such Phase and determination of the date thereof. All initial
start-up and test procedures conducted by Vestas- American shall be
conducted in accordance with the Test and Inspection Procedures.
(b) The cost of all such testing shall be borne by Vestas-American.
Such costs shall include, but shall not be limited to, the cost for
Vestas-American's personnel, materials and/or equipment involved in
such testing, provided, however, that the costs and expenses to be
borne by Vestas-American shall exclude any and all costs and
expenses of the Corporation or any third party participating in or
monitoring such tests.
(c) Vestas-American shall provide all personnel and equipment
necessary to supervise such test operations and to provide all
necessary technical assistance and
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advice. Vestas-American shall at all times up to the date of
Preliminary Acceptance for any given Phase remain primarily
responsible for and in control of the operation of such Phase and
during such period shall provide all labor required to perform
functions related to such Phase, and will be responsible for the
costs and expenses related thereto.
12.2. Substantial Completion. With respect to each Phase:
(a) Substantial Completion shall occur when each of the following
requirements have been fulfilled:
(1) each WTG and all Work required for such Phase has been
installed and performs in accordance with the Contract Documents
except those activities included in the Punchlist;
(2) the results of the start-up testing of each WTG in such
Phase has met the requirements set forth in the Test and Inspection
Procedures;
(3) Vestas-American delivers to the Corporation copies of the
Substantial Completion test reports relating to such Phase;
(4) all components of the Facility comprising such Phase are
mechanically, electrically and structurally sound, operate as a
single unit capable of generating electrical energy for delivery to
the service breakers in the WTG ground controllers; and
(5) Vestas-American delivers to the Corporation a Written
Notice that items (1), (2) and (4) above have been accomplished
("Notice of Substantial Completion").
(b) In the event the WTGs (or a portion comprising a Phase) are
ready for start-up testing and start-up testing for a Phase is
delayed or interrupted for a period in excess of eight (8) or more
hours during a given day because of either (i) wind velocity in
excess of the WTG "cut-out" or below the WTG "cut-in" as set forth
in the WTG Specifications, or (ii) lack of interconnection to the
Interconnect Substation or to the Utility's interconnection
facilities, after the scheduled completion date for such
interconnection in accordance with the Project Timeline, which is
caused by any of the Corporation, the Other Contractors or the
Utility, the Scheduled Substantial Completion Date for such Phase
shall be extended one (1) day for each such delay or interruption in
excess of eight (8) hours.
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12.3. Preliminary Acceptance. Within five (5) days following receipt of
the Notice of Substantial Completion the Corporation shall execute
and provide to Vestas-American a Preliminary Acceptance Certificate
in the form attached as Exhibit "F" hereto ("Preliminary
Acceptance"); provided, however, that if the Corporation reasonably
believes that, notwithstanding the Notice of Substantial Completion
to the contrary, the Phase does not fulfill the requirements
specified in Section 12.2, then the Corporation may deliver its
Written Notice to that effect to Vestas-American. Such notice shall
(a) be delivered within five (5) days following the Corporation's
receipt of the Notice of Substantial Completion; and (b) state in
particular the deficiencies noticed relating to such Phase.
Contractor shall then perform, at Contractor's sole cost and
expense, corrective measures to remove such defects, deficiencies
and/or discrepancies and shall again notify the Corporation, in
accordance with Section 12.2 hereof, when the Phase is deemed
Substantially Complete by Contractor. The Corporation will have
three (3) days after each subsequent notification to advise
Contractor, in writing, of any additional or remaining defects,
deficiencies and/or discrepancies which must be corrected by
Contractor as a condition to Preliminary Acceptance. The occurrence
of the Substantial Completion of a Phase shall not serve as a waiver
of any rights of the Corporation to identify any defect, and/or
deficiencies in the Phase and to request corrective action by
Contractor subsequent to the Substantial Completion of such Phase
and prior to Final Acceptance of such Phase. Following the
Corporation's issuance of the first Preliminary Acceptance
Certificate, the Contractor shall use all reasonable efforts to
place the remaining Phases in service so that Final Acceptance of
the Facility can be achieved.
12.4. Custody of Facility. On the date of Preliminary Acceptance,
Vestas-American shall relinquish to the Corporation and the
Corporation shall assume full and exclusive custody and control of
the Phase, including responsibility for operation and maintenance,
insurance, and risk of loss for the Phase in accordance with Section
14.
12.4.1. Reservation of Title. Notwithstanding that custody and
risk of loss of a Phase or Phases will have been turned
over to the Corporation at the date(s) of Preliminary
Acceptance, legal title to the WTGs, Towers and related
equipment shall remain with Vestas-American until the
entire Facility Price has been paid in full. If and to
the extent the Corporation receives or shall be deemed
for any reason to have received title to any of such
equipment prior to payment in full of the amounts due
Vestas-American under this Contract, the Corporation
hereby grants to Vestas-American, and Vestas-American
hereby retains, a security interest in and to such WTGs,
Towers and related equipment as security for payment in
full of the amounts due Vestas-American under this
Contract, and hereby agrees to execute any documents
reasonably requested by Vestas-American in order to
perfect the security interest granted pursuant to this
Section 12.4.1, including, without limitation, financing
statements.
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12.4.2. Protection of Security Interest. The Corporation
agrees that until the Facility Price is paid in full to
Vestas-American that it will take all reasonable
measures and act in accordance with manufacturer's
procedures to preserve the value of and to protect the
WTGs, Towers and related equipment and any parts or
components thereof, from any damage or loss while
located on the Project Site or in the possession or
control of the Corporation. Upon Preliminary Acceptance
of each Phase the Corporation agrees, at its own
expense, to provide and maintain general liability,
property damage, and such other insurance, with
coverages and in amounts sufficient and appropriate to
cover the risk of loss or damage to any and all of the
WTGs, Towers and related equipment, or any parts or
components thereof, and to preserve and protect
Vestas-American's interest in the same until the
Facility Price is paid in full.
12.5. Right of Waiver. The Corporation, in its sole discretion, shall have
the right, but shall have no obligation, to waive, defer or reduce
any of the requirements stated in Section 12.2 at any time.
Likewise, the Corporation may deliver its acknowledgment pursuant to
Section 12.3 at any time, thereby causing Preliminary Acceptance to
occur as to a Phase in its then present condition. However, the
Corporation's exercise of any rights hereunder shall apply only to
such requirements as the Corporation may specify and shall in no
event relieve Vestas-American of any requirements or other
obligations not so specified.
13. FINAL ACCEPTANCE.
13.1. Submittals and Certification. Within ten (10) days following the
date of Preliminary Acceptance of the last of the Phases and
provided all Phases have achieved Preliminary Acceptance,
Vestas-American shall submit to the Corporation the following, or
shall cause the following to be accomplished, as applicable:
(a) final lien waivers and releases from Vestas-American;
(b) all test results, manuals and other documents required by the
Contract Documents and not previously submitted;
(c) all Contractor's, Subcontractors' and Suppliers' personnel,
supplies, equipment, waste materials, rubbish and temporary
facilities shall have been removed from the Job Site and the Project
Site;
(d) a certification by Contractor identifying all outstanding claims
of Contractor under this Contract with documentation sufficient to
support such claims;
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(e) Contractor shall have assigned or provided the Corporation with
all warranties or guarantees which Contractor received from
Subcontractors or Suppliers to the extent Contractor is obligated to
do so pursuant to Section 6.25 hereof;
(f) all training required to be provided by Vestas-American pursuant
to Section 6.1 shall have been completed and all training
documentation and manuals which Vestas-American is required to
provide to the Corporation have been provided;
(g) an invoice for final payment due Vestas-American;
(h) Contractor shall have delivered all consumables to the Project
Site pursuant to Section 6.15 hereof;
(i) Contractor shall have completed Work on all Punchlist items,
and
(j) a certificate that the foregoing items (a) through (i) have
been submitted or accomplished, as applicable.
13.2. Final Acceptance. Within seven (7) days, following receipt of all
such documents and completion of all such obligations described in
Section 13.1, subject to the completeness and accuracy of such
documents and completion of all such obligations, the Corporation
shall execute and provide to Vestas-American acknowledgment of the
Corporation's receipt of all such documents, and the Final
Acceptance Certificate in the form attached hereto as Exhibit "C"
stating that, to the best of the Corporation's knowledge, the
Punchlist items have been completed to the satisfaction of the
Corporation and all of Contractor's other obligations under this
Contract have been satisfied in full (except those obligations as
specified in this Contract that would otherwise be performed after
Final Acceptance), which shall constitute Final Acceptance of the
Facility. The Corporation shall then pay to Vestas-American all
remaining sums then due pursuant to Section 11 or otherwise due
under the Contract Documents. Such final payment from the
Corporation to Vestas-American shall constitute a release and waiver
of all claims by the Corporation against Vestas-American, or any of
its directors, officers, shareholders or employees, directly arising
from or relating to the Work, except those arising from unsettled
liens, claims for breach of any representation, warranty or covenant
set forth in the Contract Documents, including but not limited to,
the warranties contained in Section 19 and Exhibit "N", claims for
misrepresentation of any material fact set forth in the Contract
Documents, claims for indemnification, third party claims or any
breach of Vestas-American's other continuing obligations under the
Contract Documents. The foregoing provisions of this Section 13.2 do
not in any way limit Corporation's rights to pursue any claims it
may have against Persons other than Contractor.
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13.3. Vestas-American Acceptance and Waiver. Acceptance by Vestas-American
of the final payment made by the Corporation pursuant to Section
13.2 of this Contract shall constitute a release and waiver of any
and all claims which Vestas-American has or may have against the
Corporation directly arising from or relating to the Work except
those arising from claims for breach of any misrepresentation,
warranty or covenant set forth in the Contract Documents, claims for
misrepresentation of any material fact set forth in the Contract
Documents, claims for indemnification, third party claims or any
breach of the Corporation's other continuing obligations under the
Contract Documents. The foregoing provisions of this Section 13.3,
however, do not in any way limit Vestas-American's right to pursue
any claims it might have against Persons other than the Corporation.
14. RISK OF LOSS. The Corporation shall assume the risk of loss for all
materials and equipment incorporated in each Phase on the date of
Preliminary Acceptance of such Phase. Prior to such date, Vestas-American
shall maintain sufficient insurance against the loss of or damage to such
property in transit, in storage or as installed and shall bear the risk of
loss and responsibility of preserving, safeguarding and maintaining such
property until the date of Preliminary Acceptance. Any materials,
equipment or supplies comprising the Facility and which is
Vestas-American's responsibility under this Contract or that of its
Subcontractors or Suppliers, but is lost, damaged, stolen or impaired
before the date of Preliminary Acceptance, shall be timely replaced by
Vestas-American at its sole cost and expense; provided that such loss,
damage or theft is not due to (a) a breach by the Corporation of its
obligations under the Contract Documents, or (b) an act or omission of the
Other Contractors.
15. CHANGE ORDERS.
15.1. Changes in the Work.
(a) The Corporation may at any time, as the need may arise and
without invalidating this Contract, order reasonable changes within
the scope of the Work consisting of additions, deletions, or other
revisions to the Work; provided, however, that the Corporation shall
not be entitled to reduce or increase the number or change the type
of WTGs and Towers comprising the Facility. All such changes in the
Work shall be authorized by a Change Order. If such changes increase
or decrease the amount due Vestas- American under the Contract
Documents, or change a Scheduled Substantial Completion Date or the
Project Timeline, an equitable adjustment shall be authorized by a
Change Order.
(b) The Project Manager also may, at any time, by issuing a Field
Order, make changes in the details of the Work. Vestas-American
shall proceed with the performance of any changes in the Work so
ordered by the Project Manager unless Vestas-American believes that
such Field Order entitles Vestas-American to a change in the
Facility Price, a Scheduled Substantial Completion Date, the Project
Timeline
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or all of the foregoing, in which event Vestas-American shall give
the Project Manager Written Notice thereof within five (5) days
after the receipt of the Field Order. Within ten (10) days following
such Written Notice, Vestas-American shall document the basis for
the change in Facility Price, the date of a Scheduled Substantial
Completion or the Project Timeline, as applicable. Vestas-American
shall not execute any of the changes included in such Field Order
pending the receipt of an executed Change Order. In the event
Vestas-American executes any of the changes included in a Field
Order prior to receipt of an executed Change Order, the Corporation
shall have no obligation to pay for such changes unless and until a
Change Order is executed.
(c) Within five (5) days after Vestas-American receives a draft
Change Order from the Corporation, Vestas-American shall provide the
Corporation with a written statement specifying any suggested
modifications to the Change Order, any additional estimated costs to
be incurred by Vestas-American and any modifications to the Project
Timeline, including the date of a Scheduled Substantial Completion,
as a result of the Change Order. Within fifteen (15) days after the
Corporation receives such written statement, the Corporation shall
notify Vestas-American as to whether the Corporation agrees to such
additional estimated costs and/or modifications. If the Corporation
so agrees, the Change Order, Facility Price, date(s) of Scheduled
Substantial Completion for a Phase or Phase(s) and/or Project
Timeline shall be modified accordingly, and the Change Order
promptly signed by Corporation and delivered to Vestas-American.
(d) In the event that the Corporation does not agree to either the
proposed additional estimated costs or other modifications, the
disputed matter or matters shall be resolved pursuant to the dispute
resolution procedures set forth in Section 28. Pending the
resolution of any dispute, Vestas-American shall continue to perform
its obligations under the Contract Documents, as modified by those
aspects of the Change Order not in dispute, and the Corporation
shall pay to Vestas-American any amounts included in such Change
Order which are not in dispute. However, Vestas-American's continued
performance of the Work shall not prejudice its rights to effect a
modification to the Project Timeline or Change Order or to receive
additional compensation for any Work required by such Change Order.
Upon resolution of the disputed matters pursuant to the dispute
resolution provisions of Section 28, the Change Order, Facility
Price, the applicable Scheduled Substantial Completion Date(s)
and/or Project Timeline shall be modified accordingly.
15.2. Changes in Facility Price. The Facility Price may be changed only by
a Change Order. The value of any Work covered by a Change Order,
including, without limitation, any request for increase or decrease
in the Facility Price, shall be determined by one or more of the
following methods in the order of precedence listed below:
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(a) An agreed lump sum broken down as provided under Section 10.3 of
this Contract; or
(b) The actual cost for labor, direct overhead, materials, supplies,
equipment, and services provided by Subcontractors and Suppliers
necessary to complete the additional Work. In addition, there shall
be added an amount equal to five percent (5%) of the actual cost of
the additional Work, to cover the cost of general overhead,
supervision and profit. The actual cost plus five percent (5%) will
be broken down as provided under Section 10.3 of this Contract.
If Change Orders, when considered in the aggregate, increase or
decrease the Facility Price by more than $100,000, the Stated Amount
of the Payment Security referenced in Section 11.3 must be increased
or decreased, as appropriate, as promptly as practicable upon
request by Vestas-American in the event of an increase, or upon
request by Corporation in the event of a decrease, by Sixty Five
Percent (65%) of the total increase or decrease in Facility Price
resulting from the Change Orders.
16. SUBCONTRACTORS AND SUPPLIERS.
16.1. Subcontracts and Suppliers. Vestas-American may locate and procure
the services of such Subcontractors that in Vestas-American's
reasonable judgment may be necessary to complete the installation of
the Facility; provided, however, that any such contracting shall not
relieve Vestas-American of any of its obligations and duties
hereunder, and that to the extent practicable, agreements entered
into by Vestas-American with such Subcontractors where the contract
sum exceeds Fifty Thousand Dollars ($50,000) shall be assignable to
the Corporation. All Subcontractors and Suppliers shall be required
to maintain insurance in such amounts and forms as are customary.
16.2. Labor Relations. Contractor shall use reasonable commercial efforts,
in conjunction with the Corporation, to minimize the risk of labor
related delays by entering into any necessary agreement or
agreements with Subcontractors performing Work at the Job Site.
Contractor shall advise the Corporation promptly, in writing of any
actual, anticipated, or threatened labor dispute that might affect
the performance of the Work by Contractor or by any of its
Subcontractors. Contractor agrees and covenants that, in the
performance of this Contract, it shall not discriminate against any
person or group of persons on the grounds of race, creed, color,
ancestry, age, sex or marital status, or in any other manner
prohibited by the laws of the United States of America or the State
of Texas.
17. ROYALTIES AND PATENTS.
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17.1. Inventions. Vestas-American shall obtain all necessary patents,
trademarks, copyrights or licenses required for the performance of
the Work and shall pay all royalties and license fees necessary for
the performance of the Work and use of the WTGs, Towers, equipment
and material procured and installed by Vestas-American which
comprises the Facility (the "Facility Rights"). Vestas-American
shall defend, indemnify and hold harmless the Corporation from all
suits, claims, loss, damage and expense (including reasonable
attorneys' fees) relating solely to unauthorized disclosure or use
of any trade secrets, or of patent, copyright or trademark
infringement arising from Vestas-American's performance (or that of
its Subcontractors or Suppliers) under this Contract.
17.2. Licenses. Contractor shall grant to the Corporation a nonexclusive,
royalty-free license, for use solely in connection with operation,
maintenance or repair of the Facility, with respect to any invention
based wholly or in part on or derived from proprietary information
received from the Corporation. Contractor further agrees to grant
and hereby grants to the Corporation a royalty-free, nonexclusive
license to the Facility Rights now or hereafter owned or controlled
by Contractor, to the extent necessary for the operation,
maintenance or repair of the Facility or any unit or component
thereof designed, specified or constructed by Contractor under this
Contract.
18. TERMINATION AND SUSPENSION.
18.1. Default. If at any time prior to Final Acceptance and payment of all
amount due under the Contract Documents, one or more of the
following events (each such event called an "Event of Default")
shall occur:
(1) Any representation or warranty made by a party herein or
in any certificate given to the other party pursuant to the terms
hereof shall prove to be false, incorrect or materially misleading
as of the date on which it was made;
(2) Any party shall fail to make any payment when due
hereunder or default in any material respect in the observance or
performance of any covenant, condition, or agreement of such party
contained herein;
(3) A party shall file a petition commencing a voluntary case
under the applicable bankruptcy or insolvency laws (the "Bankruptcy
Law") or for liquidation, reorganization, or an arrangement pursuant
to any other federal or state bankruptcy law, or shall be
adjudicated a debtor or be declared bankrupt or insolvent under the
Bankruptcy Law, or any other federal or state law relating to
bankruptcy, insolvency, winding-up, or adjustment of debts, or shall
make an assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due,
or if a petition commencing an involuntary case under Bankruptcy Law
or an answer proposing the adjudication of a party as a debtor or a
bankrupt or proposing its liquidation or reorganization pursuant to
the Bankruptcy Law, any other
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federal or state bankruptcy law shall be filed in any court and such
party shall consent or acquiesce in the filing thereof, or such
petition or answer shall not be discharged or denied within ninety
(90) days after the filing thereof (the foregoing, collectively,
"Bankruptcy Event"); or
(4) A custodian, receiver, trustee or liquidator of a party or
of all or substantially all of a party's assets, or such party's
interest in the Contract Documents or the Facility, shall be
appointed in any proceeding brought against such party and shall not
be discharged within ninety (90) days after such appointment, or if
such party shall consent to or acquiesce in such appointment.
18.2. Remedies for Default. An Event of Default may be cured only in
accordance with Section 18.4 below. If an Event of Default occurs
which is not cured (or curable) pursuant to Section 18.4, then the
non-defaulting party shall have the right, in its sole discretion,
either to continue this Contract in full force and effect, or, by
Written Notice to the defaulting party, to terminate this Contract
and all obligations of the non-defaulting party hereunder. In either
event, the non- defaulting party shall continue to be entitled to
any and all legal and equitable remedies it may have against the
defaulting party under this Contract or otherwise, including rights
of offset.
18.3. Termination Not a Waiver. The termination of this Contract shall be
without prejudice to any other rights or remedies which a party may
have against the other, and no termination of this Contract shall
constitute a waiver, release or estoppel by either party of any
right, action or cause of action it may have against the other.
18.3.1. Termination by Contractor. In addition to the right to
terminate pursuant to Section 18.2 above, (a) Contractor shall
have the right to terminate this Contract if the Work is
stopped for a period of thirty (30) consecutive days as a
result of an order of any court or other public authority
having jurisdiction, or as a result of an act of government,
through no act or fault of Contractor or a Subcontractor or
Supplier, or their respective agents or employees, and (b) if
the Corporation's Event of Default is nonpayment, Contractor
shall have the right to terminate this Contract or to stop
performance of the Work until Contractor has been paid all
amounts due it, in which case a Change Order shall be issued
to increase the Facility Price or extend the Scheduled
Substantial Completion Dates, the Scheduled Facility
Completion Date and the Project Timeline and Payment Schedule,
or both, as compensation to Contractor for the costs and
delays attributable to the stoppage of the Work. In the event
of any termination by Contractor under this Contract, the
Corporation shall pay Contractor for all Work performed and
for Work in process on or off site through the date of
termination, the cost of that Work and the expense of setting
and paying termination costs under the terminated Subcontracts
and purchase orders, storage, transportation, and other costs
incurred which are reasonably necessary for the preservation,
protection, removal or disposition of the terminated Work
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(including unused equipment and the WTGs), and for any loss
sustained to or upon any equipment, materials, tools,
construction equipment and machinery, including reasonable
profit, and all costs of demobilization and re-employment of
personnel and equipment.
18.3.2. Termination by the Corporation. In the event of a
termination by the Corporation pursuant to Section 18.2
hereof, the Corporation (a) shall pay Contractor for all Work
performed through the date of termination, including all
equipment and materials delivered to the Project Site, and all
costs incurred by Contractor, if any, at the Corporation's
request after termination, (b) at the option of the
Corporation, pay the net cost (exclusive of overhead and
profit) of any unused or partially used materials at the Job
Site not already paid for as part of the Facility Price, and
(c) may take possession of the Job Site and of all materials,
equipment, construction equipment and machinery on site owned
by Contractor and may finish the Work and complete the
Facility. Corporation will take reasonable steps to mitigate
the cost for completion of such work. Any such Work performed
by or on behalf of the Corporation shall be excluded from the
Installation Warranties given hereunder.
18.4. Cure of an Event of Default. An Event of Default shall be deemed
cured only if such default shall be remedied within thirty (30) days
after Written Notice has been sent to the defaulting party from the
non-defaulting party specifying the default and demanding that the
same be remedied (provided that failure of a party to provide such
notice shall not be deemed a waiver of such default), provided,
however, that if such default is not reasonably capable of cure
within thirty (30) days of receipt of such notice, then the default
shall not be deemed an Event of Default if the defaulting party
commences to remedy the default within thirty (30) days of such
notice and thereafter diligently pursues such remedy until such
default is fully cured; provided, further, however, that in no event
shall either party be entitled to longer than ninety (90) days to an
Event of Default with respect to any payment obligation under this
Contract after receipt of Notice thereof.
19. WARRANTIES.
19.1. No Liens. Vestas-American warrants that, upon payment in full to
Vestas-American of the Facility Price and all amounts due
Vestas-American under the Contract Documents, title to the Facility
shall pass to Corporation or its nominee free and clear of any and
all liens, claims, security interests or other encumbrances.
19.2. Quality of Work. The Facility shall be installed in a workmanlike
manner using new materials. Work shall meet the requirements of this
Contract and the Work performed by Vestas-American or its
Subcontractors shall be and remain free from defects in materials
and workmanship for one (1) year following the date of Preliminary
Acceptance of the final Phase (the "Installation Warranty").
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19.2.1. Remedy for Breach. If the Installation Warranty is breached,
then the Corporation shall give Written Notice of the breach
with reasonable promptness following the Corporation's
discovery thereof and in no event after the expiration of the
Warranty Period, and Vestas-American shall promptly repair or
replace the defective materials, equipment, parts or defective
workmanship, including any damage to the surrounding Work and
Other Project Work, at the cost and expense of Vestas-
American. Any part of the Work so repaired, replaced or
corrected shall be similarly warranted for a period of one (1)
year from the completion date of such repair, replacement or
correction. The decision whether to repair or replace shall be
made in the sole discretion of Vestas-American. In the event
Vestas-American should fail to commence repairs, adjustments
or other work that may be made necessary by such defects,
after receipt of the Corporation's Written Notice and a
reasonable opportunity to commence such repairs or other work,
the Corporation may do so, and Vestas-American shall pay the
reasonable cost thereof upon request accompanied by reasonable
documentation evidencing the costs thereof.
19.2.2. Exclusions. THE WARRANTIES SET FORTH IN THIS CONTRACT ARE
EXCLUSIVE AND IN LIEU OF ALL WARRANTIES, EXPRESSED OR IMPLIED,
OF PERFORMANCE, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR UNDER THE TEXAS DECEPTIVE TRADE PRACTICES ACT OR
OTHERWISE. EXCEPT AS SET FORTH IN THIS CONTRACT, THERE ARE NO
OTHER WARRANTIES, AGREEMENTS OR UNDERSTANDINGS WITH RESPECT TO
THE WORK AND NO OTHER WARRANTY, ORAL OR WRITTEN, WHICH MIGHT
HAVE BEEN GIVEN BY AN EMPLOYEE, AGENT, OR REPRESENTATIVE OF
VESTAS-AMERICAN IS AUTHORIZED BY VESTAS-AMERICAN.
VESTAS-AMERICAN IS NOT AND SHALL NOT BE HELD LIABLE FOR BREACH
OF ANY WARRANTIES GIVEN IN THIS CONTRACT CAUSED BY OR ARISING
OUT OF:
a) MATERIAL NONCOSMETIC ALTERATIONS OR REPAIRS NOT
CARRIED OUT BY VESTAS-AMERICAN, ITS SUBCONTRACTORS
OR SUPPLIERS, OR PERSONS AUTHORIZED IN WRITING BY
VESTAS-AMERICAN, EXCEPT AS PERMITTED PURSUANT TO
SECTION 19.2.1.;
b) AFTER THE DATE OF THIS CONTRACT, THE USE OF
MATERIALS, EQUIPMENT, LAYOUTS, OR DESIGNS,
SUPPLIED OR STIPULATED, OR ANY SERVICES PROVIDED
BY, ANY PARTY OTHER THAN VESTAS-
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AMERICAN, ITS SUBCONTRACTORS OR SUPPLIERS IN
CONNECTION WITH THE WORK;
c) ANY DAMAGE TO THE WORK BY THE CORPORATION OR THIRD
PARTIES, INCLUDING WITHOUT LIMITATION, VANDALISM
AND MALICIOUS MISCHIEF, THEFT OR ATTEMPTED THEFT;
d) ANY LOSS A DEFECTIVE PART MAY CAUSE, INCLUDING
LOSS OF PRODUCTION, LOSS OF PROFIT AND OTHER
CONSEQUENTIAL OR INCIDENTAL LOSS; OR
e) OPERATION OF THE WTGs OR EQUIPMENT IN A MANNER
OTHER THAN THAT SPECIFIED IN THE VESTAS-AMERICAN
INSTRUCTIONS AND OPERATIONS MANUAL REFERENCED IN
SECTION 6.2 OF THIS CONTRACT.
f) ANY DELAY IN REMEDYING A BREACH OF VESTAS-
AMERICAN'S WARRANTY HEREUNDER DUE TO AN EVENT OF
FORCE MAJEURE.
19.3. Parts and Power Curve. Vestas-American warrants, as more
particularly set forth in the Standard Warranty attached hereto as
Exhibit "N", that the WTGs shall be free from defects in material
for a period of one (1) year from the date of expiration of the
Installation Warranty and will meet the power curve specified in the
Standard Warranty for a period of two (2) years from the date of
Preliminary Acceptance of the third Phase.
19.4. Assignment of Warranties and Guarantees. Vestas-American agrees
that, in order to secure the Construction Financing, the Corporation
may transfer and assign to Lender, without further consent by the
Subcontractor or Supplier, any and all warranties, guarantees and
remedies conveyed by Vestas-American or by the Subcontractors or
Suppliers pursuant to Section 6.25 or this Section 19.
19.5. No Limitation. The obligation of Vestas-American to satisfy the
warranties in this Section 19 shall not be limited or diminished by
any amounts paid by Vestas-American, if any, as liquidated damages
for failure to achieve Substantial Completion for any of the Phases
by the Scheduled Substantial Completion Date for such Phase.
20. FORCE MAJEURE.
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20.1. "Force Majeure," as used in this Contract, means any cause beyond
the control and not due to the negligence of the party affected, as
a result of which it is not reasonably possible for the party
affected to avoid a delay in performance of, or it is unable to
perform, its obligations under this Contract (other than any
obligation for the payment of money); including, but not limited to,
natural disasters, flood, extreme weather conditions, earthquake,
storm, fire, lightning, perils of sea, epidemic, war (whether
declared or undeclared), acts of god or the public enemy, riot,
explosions, civil disturbance, sabotage, explosions, strikes or
lockouts (except strikes which are limited to employees of
Contractor, any of its Subcontractors or Suppliers, or an Affiliate
of Contractor), vandalism, or any action of a court or other public
authority. Equipment failure due to wear and tear or defects in
manufacture, design or construction will not constitute an event of
Force Majeure.
20.2. If either party is rendered wholly or partially unable to perform
its obligations under this Contract because of an event of Force
Majeure, that party shall be excused from whatever performance is
affected by the event of Force Majeure to the extent, and for the
time period, so affected and shall not be considered to be in
default in respect of any obligation hereunder, if failure of
performance shall be due to an event of Force Majeure.
20.3. Within five (5) days after becoming aware of an event of Force
Majeure, the affected party shall give Written Notice to the other
party stating the nature of the event, its anticipated duration and
effect upon the performance of such party's obligations. The burden
of establishing the existence of an event of Force Majeure is on the
party claiming an event of Force Majeure.
20.4. Delay or failure of performance due to an event of Force Majeure
shall be excused for a period no longer than the delay or failure in
performance caused by such event. The excused party shall use all
reasonable efforts to continue to perform its obligations hereunder
which are not affected by the event of Force Majeure. Obligations of
a party which were required to have been performed in accordance
with the Project Timeline prior to the occurrence of an event of
Force Majeure causing the delay or failure of performance shall not
be excused as a result of such occurrence unless such occurrence
makes such performance impossible.
20.5. If, within a reasonable time after occurrence of a Force Majeure
event causing Contractor to suspend or delay performance of the
Work, reasonable action to be undertaken has been identified and
recommended in writing by the Corporation to Contractor (which
action shall be at the sole cost and expense of the Corporation if
the recommended action relates to the Other Project Work and at the
sole cost and expense of the Contractor if the recommended action
relates to the Work) (the "Recommendation"), and Contractor has
failed, within a reasonable time after receipt of such
Recommendation, to take such action as Contractor could lawfully and
reasonably initiate to remove or relieve either the Force Majeure
occurrence or its
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direct or indirect effects, then the Corporation may, after Written
Notice to Contractor, at Contractor's expense, initiate such
reasonable measures as will be designed to remove or relieve such
Force Majeure occurrence or its direct or indirect effects. The
Corporation shall invoice Contractor for any such amount and,
provided such amount is reasonable and is documented to Contractor's
reasonable satisfaction, Contractor shall pay such amount within
thirty (30) days of receipt of invoice.
20.6. If an event of Force Majeure occurs that affects Contractor's
performance, the Scheduled Substantial Completion Date, the
Scheduled Facility Completion Date, the Project Timeline and any
other schedule affected by such delay shall be adjusted and extended
by a period equal to the amount of time (including a period for
demobilization and remobilization) reasonably determined by the
Corporation and Contractor to be necessary for Contractor to make up
for the delay and a Change Order issued for an appropriate increase
in the Facility Price.
21. INSURANCE
21.1. Contractor's Insurance. Prior to the start of the Work at the Job
Site, Contractor will provide a certificate of insurance and
hereafter will maintain the following insurance with insurance
carriers reasonably acceptable to the Corporation, and permitted to
do business in the United States.
21.1.1. Workmen's Compensation. Workmen's compensation insurance as
required by law where the Work is performed and employer's
liability insurance with a limit of liability of $1,000,000
for each accident. Vestas-American shall require each
Subcontractor to provide such Workers' Compensation Insurance,
including occupational disease provisions, for all of the
Subcontractors' employees at the Project Site unless such
employees are covered by the protection afforded by
Vestas-American. In case any class of employees engaged in
hazardous work under the Contract Documents at the Project
Site is not protected under a Workers' Compensation statute,
Vestas-American will provide, and shall cause each
Subcontractor to provide, adequate and suitable insurance for
the protection of its employees not otherwise protected.
21.1.2. Comprehensive General Liability. Comprehensive general
liability insurance with a $1,000,000 combined single limit
for bodily injury and/or property damage for each occurrence
including broad form contractual liability insurance, personal
injury, products and completed operations insurance during the
term of the Work and for one (1) year after completion of the
Work.
21.1.3. Automobile Liability. Business auto liability insurance
covering owned, non-owned and hired automobiles in the amount
of $1,000,000 combined single limit for bodily injury and
property damage for each accident.
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21.1.4. Shipping Insurance. Prior to Shipping the WTGs or any
equipment to be supplied by Vestas-American hereunder,
Vestas-American will procure or cause to be procured shipping
insurance in an amount not less than full replacement costs of
the value of equipment being shipped. Such insurance shall
take affect prior to equipment departing the manufacturer's
premises and continue in full force until the shipment arrives
at the Project Site.
21.1.5. Excess Liability. Excess liability insurance covering
employer's liability; comprehensive general liability; and
business auto liability to a limit of $25,000,000 combined
single limit for bodily injury and property damage.
21.1.6. Requirements of Contractor's Insurance. Contractor shall be
responsible for the payment of all deductible amounts with
respect to the insurance required to be maintained by it under
this Section 21.1 (such insurance hereinafter referred to as
"Contractor Insurance"). All Contractor Insurance (other than
workmen's compensation insurance) shall:
(a) specify the Corporation, Owner and Lender as additional
insureds (only to the extent of Contractor's indemnity
obligation contained herein);
(b) provide that the Corporation, Owner and Lender shall
have the right, but not any obligation, to pay premiums
if Contractor shall fail to do so; and
(c) waive any right of subrogation against the Corporation,
Owner or Lender and waive any other right of the
insurers to any offset or counterclaim or any other
deduction, whether by attachment or otherwise, in
respect of any liability of the Corporation, Owner or
Lender.
21.1.7. Contractor's Policies. All policies of insurance required to
be maintained by the Contractor under Section 21.1 shall:
(a) provide a severability of interests or cross liability
clause;
(b) except in the case of Workmen's Compensation Insurance
and other statutory insurances where it would be
inappropriate, name Corporation, Lender, the Utility,
the Utility's parent corporation and Affiliates, and
their respective directors, officers, shareholders,
agents, servants, and employees ("TU Electric Group") as
additional insured for their respective interests to the
extent of the Contractor's indemnity obligations set
forth in Section 24; and
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(c) provide that they may not be canceled, or materially
changed, without thirty (30) days' prior written notice
sent by registered mail to the Corporation and other
insureds.
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21.2. Corporation's Insurance
21.2.1. Comprehensive General Liability. Comprehensive general
liability insurance with a $1,000,000 combined single limit
for bodily injury and/or property damage for each occurrence
including broad form contractual liability insurance, personal
injury, products and completed operations insurance during the
term of the Work and for one (1) year after completion of the
Work.
21.2.2. Builder's All Risk. A Builder's "All Risk" insurance policy
shall be purchased and maintained by the Corporation for the
Facility covering all work at the Project Site, and all
equipment at the Project Site intended for incorporation in
the Facility (including temporary buildings, site huts and
offices used for the purpose of the construction of the
Facility but not intended for in the Corporation therein, but
excluding Contractor's construction equipment) against the
risk of physical loss or damage from whatever cause (including
resultant loss or damage arising from faulty materials,
workmanship or design), other than risks specifically excluded
by the terms of the policy. The Builder's All Risk insurance
shall be on a "replacement cost" basis insuring the total cost
of the Facility and will also provide:
(a) coverage for removal of debris;
(b) off-Site storage coverage; and
(c) cold and hot (operational) testing coverage (at the
option of the Corporation).
The deductibles for all such insurance if economically
available in the Corporation's reasonable opinion shall not
exceed $100,000 for each single occurrence. The payment of the
deductible shall be the responsibility of the Corporation.
This policy shall name the Contractor and its Subcontractors
as additional insureds.
21.2.3. Permanent Property Insurance. Upon Preliminary Acceptance of
the first Phase and until Final Acceptance, the Corporation
shall procure and maintain at the Corporation's cost and
expense "all-risk" property insurance (including boiler and
machinery and business interruption insurance) subject to
normal policy exclusions for the Facility at full replacement
value with a deductible of no more than $100,000 and 45 days
for business interruption (or less if commercially
reasonable). The Corporation shall name Contractor and its
Subcontractors as additional insureds under such permanent
property insurance only until such time as their interest
ceases to exist.
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21.2.4. Corporation's Policies. All policies of insurance required
to be maintained by the Corporation under Section 21.2 shall
to the extent applicable:
(a) provide a severability of interests or cross liability
clause;
(b) name Contractor as an additional insured to the extent
of the Corporation's indemnity obligations set forth in
Section 24; and
(c) provide that they may not be canceled, or materially
changed, without thirty (30) days' prior written notice
sent by registered mail to the Contractor.
21.2.5. Primary Insurance. The policy of insurance referred to in
Section 21.2.2, shall be endorsed to specify that it is
primary to and not excess of or on a contributing basis with
any insurance or self-insurance maintained by the Corporation
and the Contractor (and their respective Affiliates) or any
Subcontractors in respect of losses arising out of or in
connection with the Work.
21.3. Certificates and Cancellations.
21.3.1. Certificates. Contractor and Corporation shall, no less than
20 days prior to commencement of the work, deliver to each
other certificates of insurance evidencing the coverages
specified in Sections 21.1 and 21.2 hereof.
21.3.2. Notice of Cancellation. All policies of insurance to be
secured and maintained hereunder shall provide, by
endorsement, that the other party and any additional insured
shall be provided thirty (30) days' prior written notice of
any material policy changes or cancellations, and that no such
cancellation or change shall be effective without such notice.
21.3.3. Failure to Pay. Irrespective of the requirements as to
insurance to be carried as provided for herein, the
insolvency, bankruptcy or failure of any insurance company
carrying insurance of a party, the failure of any insurance
company to pay claims accruing, shall not affect, negate or
waive any of the provisions of this Contract including,
without exception, the indemnity obligations of the party.
21.4. Nonwaiver. Failure of either party to comply with the foregoing
insurance requirements shall in no way waive its obligations or
liabilities under this Contract or the rights of Corporation
hereunder against Contractor, or the rights of Contractor hereunder
against the Corporation.
21.5. Right to Insure. Should either party fail to provide or maintain any
of the insurance coverage required under this Section 21, the other
party shall have the right to
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provide or maintain such coverage at the failing party's expense,
either by direct charge or set-off.
21.6. Ratings. All policies must be written with insurers licensed in the
State of Texas, with an A.M. Best rating of "B+, VIII" or better,
for insurers not rated by A.M. Best, the insurers must be of a
quality equivalent to that of an A.M. Best rating "B+, VII" or
better.
21.7. Occurrence. All liability policies must (i) be written on an
occurrence basis, unless an occurrence basis policy becomes
unavailable, in which case all policies provided for in this Section
21 must be maintained for four (4) years from Final Acceptance, (ii)
include the Contractor, the Corporation, the Owner, the TU Electric
Group and Lender, as their interests may appear, as additional
insureds, (iii) provide that each insured is provided coverage as
though a separate policy had been issued to each, except the
insurer's liability must not be increased beyond the amount or
amounts for which the insurer would have been liable had only one
insured been covered, and only one deductible applies per
occurrence, no matter the number of insureds, and (iv) provide that
the Utility and other additional insureds specified above are never
responsible for premium payment.
21.8. Endorsement. All policies other than Workers' Compensation insurance
and the policy required under Section 21.2.2 hereof, must contain
endorsement (if the terminology is not in the printed form) that
Vestas-American's policy is primary in all insurance despite like
coverages, if any, carried by the Corporation.
22. LIMITATION ON DAMAGES.
22.1. Consequential Damages. In no event shall the Corporation or
Vestas-American be liable for any special, indirect or consequential
damages even if such party has been advised of the possibility of
such damages.
22.2. Limitation. The liability of Vestas-American, its agents, employees,
Subcontractors and Suppliers, with respect to any and all claims and
costs arising out of or incurred by Vestas-American under any of the
warranty provisions of this Contract, or arising out of the
performance or non-performance of any other obligations of
Vestas-American in connection with the manufacture, sale, delivery,
storage, erection of the Facility or use of the Work or the
rendition of other services in connection therewith, whether based
on contract, warranty, tort (including negligence but excluding
gross negligence or willful misconduct), strict liability or
otherwise, shall not exceed in the aggregate the Facility Price. The
limitation of liability shall apply if loss or damage, irrespective
of cause or origin, results directly or indirectly to persons or
property from the negligence, active or otherwise, of
Vestas-American, its agents, employees, Subcontractors and
Suppliers, and shall prevail over any conflicting or inconsistent
provisions contained in any of the Contract Documents, except to the
extent such conflicting or inconsistent provisions further restrict
Vestas-American's liability.
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23. REPRESENTATIONS AND WARRANTIES.
23.1. Vestas-American. As of the Effective Date, Vestas-American hereby
represents and warrants to the Corporation that:
23.1.1. Due Incorporation and Good Standing. Vestas-American is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of California, and that
prior to the commencement of the Work it will be qualified to
do business as a foreign corporation, and in good standing, in
the State of Texas, and in each jurisdiction wherein the
nature of the business transacted by it makes such licensing
or qualification necessary to perform the Work;
23.1.2. Corporate Authorizations. The execution, delivery and
performance of the obligations of Vestas-American under the
Contract Documents have been duly authorized by all requisite
corporate action and in accordance with its charter documents.
Each Contract Document has been duly executed and delivered by
an officer of Vestas-American in accordance with such
authorization and constitutes a valid and binding obligation
of Vestas-American, enforceable against Vestas-American in
accordance with its terms;
23.1.3. No conflict. The execution and delivery of this Contract
will not conflict with any Applicable Laws or any covenant,
agreement or understanding to which Vestas-American is a party
or by which it or any of its properties or assets is bound or
affected;
23.1.4. Approvals. To its actual knowledge, no authorization,
approval, exemption or consent by any governmental or public
body or authority (other than the Applicable Permits which are
required by Applicable Law to be obtained by Vestas-American)
is required to be obtained by Vestas-American in connection
with the authorization, execution, delivery and performance of
its obligations pursuant to this Contract; provided, however,
that the Corporation recognizes that there may be approvals,
exemptions or consents by governmental or public bodies and
Applicable Permits to be obtained by the Corporation or the
Other Contractors necessary to perform the Other Work
sequenced in such a manner as to permit performance of the
Work by Vestas-American;
23.1.5. No Actions. To its actual knowledge, there are no actions,
suits, proceedings or investigations pending or threatened
against it at law or in equity before any court or before any
federal, state, municipal or other governmental department,
commission, board or agency which, individually or in the
aggregate, is reasonably likely to have a material adverse
effect on its ability to perform its obligations under this
Contract;
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23.1.6. Facility Rights. It owns or has the right to use all the
patents, trademarks, service marks, trade names, copyrights,
licenses, franchises, permits or rights with respect to the
foregoing necessary to perform the Work without conflict with
or infringement of the rights of others;
23.1.7. Site Approval. As of the Effective Date, Vestas-American has
visited the Project Site and determined that in its present
condition, the Project Site is suitable for the performance of
the Work, and that the access and use requirements set forth
on Exhibit "K" are adequate for the performance of the Work
except to the extent that Other Work needs to be performed as
provided under this Contract;
23.1.8. Manufacture Schedule. Provided the Corporation performs its
obligations hereunder in a timely manner and without delay,
that all Notices to Proceed are given by the time required in
Section 4.3.1 hereof, and that there are no Events of Force
Majeure, the WTGs, Towers and other equipment comprising the
Facility can be manufactured and delivered to the Project Site
in accordance with the Project Timeline; and
23.1.9. Qualifications. Vestas-American has:
(a) examined the Contract Documents thoroughly and has become
familiar with and understands their terms and prior to
commencement of the Work, it will have reviewed and examined
state and local laws applicable to the construction of the
Project;
(b) the experience and proper qualifications to perform the
Work and to install the Facility, and has the required
authority, ability, skills and capacity to perform the Work in
a manner consistent with Prudent Electric Power Industry
Practice.
23.2. The Corporation. As of the Effective Date, the Corporation hereby
represents and warrants to Vestas-American that:
23.2.1. Due Incorporation and Good Standing. The Corporation is a
Delaware corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware;
23.2.2. Qualification The Corporation has examined the Contract
Documents thoroughly and has become familiar with and
understands their terms and their relation to the Other
Project Work. Prior to Vestas-American commencing the Work,
the Corporation will have reviewed and examined state and
local laws applicable to the construction of the Project;
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23.2.3. Corporate Authorizations. The execution, delivery and
performance of the obligations of the Corporation under the
Contract Documents have been duly authorized by all requisite
corporate action and in accordance with the Articles of
Incorporation and Bylaws of the Corporation. Each Contract
Document has been duly executed and delivered by an officer of
the Corporation in accordance with such authorization and
constitutes a valid and binding obligation of the Corporation,
enforceable against the Corporation in accordance with its
terms;
23.2.4. Owner Authorization. Owner has authorized Corporation's
execution, delivery, and performance of the Contract Documents
and construction of the Facility contemplated thereunder.
23.2.5. No conflict. The execution and delivery of this Contract will
not conflict with any Applicable Laws or any covenant,
agreement or understanding to which the Corporation is a party
or by which it or any of its properties or assets is bound or
affected;
23.2.6. No Actions. To its actual knowledge, there are no actions,
suits, proceedings or investigations pending or threatened
against it at law or in equity before any court or before any
federal, state, municipal or other governmental department,
commission, board or agency which, individually or in the
aggregate, is reasonably likely to have a material adverse
effect on its ability to perform its obligations under this
Contract;
23.2.7. Project Schedule. Provided Vestas-American performs its
obligations hereunder in a timely manner and without delay and
that there are no Events of Force Majeure, the Other Project
Work can be sequenced and completed in accordance with the
Project Timeline to permit Vestas-American to perform the Work
in accordance with the Project Timeline and to achieve
Substantial Completion of the Facility by the Scheduled
Substantial Completion Date; and
23.2.8. Rights. The Corporation has obtained or shall obtain prior to
commencement of the Work all necessary authorizations,
approvals and rights which relate to the Project Site and
development of the Project, including, without limitation,
easements, access rights, the right to use all the patents,
trademarks, service marks, tradenames, copyrights, licenses,
franchises, permits or rights with respect to the foregoing
necessary to perform the Other Project Work without conflict
with the rights of others and has complied with all Applicable
Laws, regulations and ordinances which relate to the Project,
and the execution of and performance under this Contract does
not and will not violate any contract or agreement to which
the Corporation is a party.
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23.3. Survival of Representations and Warranties. The representations and
warranties of the parties set forth in this Section 23 shall survive
the expiration or termination of this Contract.
24. INDEMNITY. This Section 24 shall survive the expiration or termination of
this Contract.
24.1. By Vestas-American. To the fullest extent permitted by law,
Vestas-American shall indemnify and hold harmless the Corporation
and its agents and employees from and against all claims, damages,
losses and expenses, including but not limited to attorneys' fees
and court costs, arising out of or resulting from (a) the negligent
acts or omissions of Vestas-American, a Subcontractor, Supplier or
any Person directly or indirectly employed by any of them or any
Person for whose acts any of them may be liable (regardless of
whether or not such claim, damage, loss, expense, fine, penalty or
award is caused in part by a party indemnified hereunder) during the
performance of the Work or any curative action under any warranty
under this Contract following performance of the Work, provided that
any such claim, damage, loss or expense is attributable to bodily
injury, sickness, disease or death, or to injury to or destruction
of tangible property (other than the Work itself), (b) the failure
of Vestas-American to comply with Applicable Laws or the conditions
of Applicable Permits obtained by Vestas-American, or (c) hazardous
materials brought onto the Project Site by Vestas-American or any
Subcontractor or Supplier, unless such hazardous materials are
released as the result of a negligent act or omission of Owner,
Corporation, an Other Contractor, or any Person directly or
indirectly employed by Owner, Corporation or an Other Contractor.
24.2. Liens and Claims. To the extent that Contractor has been paid in
accordance with this Contract, Contractor shall indemnify, defend
and hold harmless the Corporation from and against any and all loss,
costs, damages and expense arising out of or in connection with any
and all liens filed in connection with the Work including, without
limitation, all expenses and attorneys' fees incurred by the
Corporation in discharging any liens or similar encumbrances. If
Contractor shall fail to discharge or bond over promptly any lien or
claim upon the Facility or upon any materials, equipment or
structures comprising the Facility or encompassed therein, or upon
the premises upon which they are located, the Corporation may so
notify Contractor in writing and Contractor shall then satisfy ,
bond over or defend any such liens or claims. If, within ten (10)
days following the Corporation's Written Notice, Contractor either
does not satisfy or bond over such liens or claims or does not give
the Corporation reasons in writing reasonably satisfactory to it for
not causing the release or bonding of such liens or paying such
claims, the Corporation shall have the right, at its option, after
Written Notice to Contractor, to cause the release, payment or
settlement of such liens or claims, and the Corporation at its sole
option may (i) require Contractor to pay, within ten (10) days of
request by the Corporation, or (ii) offset against amounts due or to
become due, including amounts held by the Corporation hereunder as
retainage, to Contractor all costs and expenses incurred by the
Corporation causing the release, paying or settling such liens or
claims, including,
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without limitation administrative costs, attorneys' fees and other
expenses. Contractor shall have the right to contest any such lien
provided it first provides to the Corporation a bond or other
assurances of payment reasonably satisfactory to the Corporation, in
the amount of such lien in form and substance satisfactory to the
Corporation.
24.3. By the Corporation. To the fullest extent permitted by law, the
Corporation shall indemnify and hold harmless Vestas-American and
its agents and employees from and against all claims, damages,
losses and expenses, including but not limited to attorneys' fees
and court costs, arising out of or resulting from (a) the negligent
acts or omissions of the Corporation, Owner, an Other Contractor,
any Person directly or indirectly employed by any of them or any
Person for whose acts any of them may be liable (regardless of
whether or not such claim, damage, loss, expense, fine, penalty or
award is caused in part by a party indemnified hereunder) during the
performance of its obligations under the Contract Documents, or
during the performance of the Other Project Work, and, following the
transfer of the risk of loss with respect thereto, all other
portions of the Project, provided that any such claim, damage, loss
or expense is attributable to bodily injury, sickness, disease or
death, or to injury to or destruction of tangible property (other
than the Other Project Work itself), (b) the failure of the
Corporation to comply with Applicable Laws or the conditions of
Applicable Permits, or (c) hazardous materials located at, on or
under the Project Site, except for hazardous materials brought onto
the Project Site by Vestas-American, its Subcontractors or Suppliers
unless such hazardous materials are released as the result of a
negligent act or omission of the Owner, Corporation, an Other
Contractor or any Person directly or indirectly employed by Owner,
Corporation or an Other Contractor.
25. INTELLECTUAL PROPERTY RIGHTS.
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25.1. Generally. The Corporation acknowledges that under the terms of the
Contract Documents it is being provided and will have access to
certain intellectual property rights owned, used or licensed by
Vestas-American, including but not limited to, corporate names,
trade names, trademarks, service marks, software, trade secrets,
patents, and other proprietary information relating to (i) the
specification, design, construction, installation, operation or
maintenance and repair of the WTGs, Tower Foundations and Towers, as
well as (ii) training processes, and the contents of service and
maintenance manuals, Test and Inspection Procedures, and the
Detailed Plan (collectively, "Intellectual Property Rights").
Without limiting any rights of Vestas-American with respect to the
Intellectual Property Rights under the Contract Documents, or
Applicable Laws, the Corporation acknowledges that such Intellectual
Property Rights are extremely valuable to the business of
Vestas-American, and agrees that: (i) the Contract Documents only
provide the Corporation, all representatives of the Corporation
(including Other Contractors), with the non-exclusive right to use
such Intellectual Property Rights in connection with the Project,
and that such parties will not disclose or use such Intellectual
Property Rights for any other purpose other than in connection with
this Project, (ii) the Corporation and all representatives of the
Corporation (including Other Contractors) will protect and maintain
the confidentiality of Intellectual Property Rights, and will cause
others who have access to Intellectual Property Rights to do the
same, and (iii) the Corporation, and all representatives of the
Corporation (including Other Contractors) will not disclose any
information constituting such Intellectual Property Rights to any
third-party, except (a) to the extent such information is generally
available to the public other than as a result of a disclosure by
the Corporation, (b) in connection with the construction,
development or operation of the Project on a need to know basis, (c)
upon the written consent of Vestas-American or a Vestas-American
representative, or (d) as expressly otherwise permitted by this
Contract.
25.2. Nondisclosure by the Corporation. If requested by Vestas-American,
the Corporation shall cause Operator and the Other Contractors to
agree in writing to be bound by and to adhere to the provisions of
Section 25.1 as if they were originally parties to this Contract. To
the extent any of the licensors or other owners of the Intellectual
Property Rights Work may require, the Corporation shall execute such
confidentiality and nondisclosure agreement or agreements as such
licensors or owners may reasonably require, and, shall cause the
Other Contractors and the Utility to do the same.
25.3. Mutual Confidentiality. Without limiting Sections 25.1 and 25.2
above, any information concerning the parties hereto which is
proprietary and disclosed to the other party incident to the
performance of Work by Vestas-American or incident to performance of
the Other Project Work or performance of the obligations of the
Corporation hereunder pursuant to this Contract is disclosed in
confidence and the transferee shall not publish or otherwise
disclose it to third parties without the written approval of the
transferor; provided, however, that nothing herein shall limit
either party's right to disclose any data provided by the other
party hereunder which (i) was
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furnished by such party prior to the execution of this Contract
without restrictions, (ii) becomes knowledge available within the
public domain, (iii) is received by either party from a third party
without restriction and without breach of this Contract or (iv) is
disclosed to any court, arbitrator or governmental authority having
jurisdiction and asserting a right to such information or disclosed
to third parties in compliance with an order of such court,
arbitrator or governmental body; and provided, further, that nothing
herein shall limit the right of the Corporation to provide any
information regarding Subcontractor, any Contractor and any Supplier
to any Lender (or advisors retained on their behalf) or their
successors and assigns.
26. NOTICES.
All notices, demands or other communications hereunder shall be given or
made in writing and shall be delivered personally or sent by registered or
certified airmail, postage prepaid, addressed to the party to whom they are
directed at the following addresses, or at such other address as may be
designated by notice from such party, or by telex (confirmed by letter as
aforesaid) or by telecopy:
If to Corporation: York Research Corporation
280 Park Avenue, Suite 2700 West
New York, NY 10017
Attn: Richard Nerzig
Telecopier No.: (212) 557-3131
With a copy to: York Research Corporation
6322 Corte Esparanza
Pleasanton, CA 94566
Attn.: Jerry Fuchs
Telecopier No.: (925) 426-4748
If to Vestas-American: Vestas-American Wind Technology, Inc.
19020 North Indian Avenue, Suite 4-C
P.O. Box 2010
Palm Springs, CA 92258
Attn.: Hans J0rn Rieks
Telecopier No.: (760) 329-5558
Any notice, demand or other communication given or made solely by mail in
the manner prescribed in this section shall be deemed to have been given and to
be effective three (3) days after the date of such mailing; if given by telex
(provided letter confirmation as aforesaid also be dispatched), shall be deemed
to have been given when properly dispatched, and if given by telecopy, shall be
deemed to have been given when properly dispatched.
27. INSPECTION.
27.1. Inspection. Either party shall have the right to timely inspect any
item of equipment, material, design, engineering, service or
workmanship to be provided as part of the
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Work or the Other Project Work hereunder, and the other party shall,
upon request, arrange for any such inspection of equipment or
material at the point of fabrication. Each party shall be
responsible for costs of its own personnel and their transportation
with respect to such inspections. Either party shall have the right
to timely reject any portion of the Work or the Other Project Work
which does not conform to the Contract or, with respect to the Other
Project Work, adversely affects the Work or is of inferior quality,
design or workmanship, or does not conform to Prudent Electric Power
Industry Practices. Upon such rejection, the other party shall
promptly remedy, at its sole cost and expense, any condition so
identified as giving rise to such rejection, and, in the case of the
Other Project Work, without causing delay to the Work.
27.2. Observation by Utility and Lender. Contractor understands that the
Utility and the Lender or their respective representatives have the
right, from time to time, to observe and inspect the Work and the
Facility and to observe all on-site tests of the Work and the
Facility. Upon reasonable Notice to Contractor, Contractor shall, at
no cost or expense to it, allow Utility and Lender and their
respective representatives reasonable access to the Work and the
Facility and to Contractor's non-proprietary technical records
pertaining thereto as reasonably requested by the Utility and/or
Lender, or their respective representatives. The Corporation shall
be responsible for compliance by such Person with the safety rules
and regulations of the Job Site.
27.3. Comment. Inspection, review and/or comment by the Corporation with
respect to plans, specifications, drawings, shop drawings, samples
or any other work or services performed by Contractor or any
Subcontractor or Supplier shall not in any way reduce Contractor's
obligations to perform the Work in accordance with the Contract
Documents or be deemed to be a warranty or acceptance by the
Corporation with respect to such work or services, except for
reasonable decisions at the Job Site in light of cost and time
considerations. The Corporation will complete its review and/or
comments concerning any materials submitted by Contractor for such
purpose within ten (10) days of its receipt of such materials or
other submission or sooner if priority handling is requested by
Contractor. Contractor shall not be required to delay the Work due
to an untimely exercise by the Corporation of its review and comment
rights under this Contract.
28. MISCELLANEOUS.
28.1. Successors and Assigns. This Contract shall be binding upon and
shall inure to the benefit of the successors and assigns of
Vestas-American and the Corporation. No party may assign or transfer
this Contract, in whole or in part, except upon the prior written
consent of the other party hereto which consent shall not be
unreasonably withheld or delayed, and, provided, further that such
consent to assignment of this Contract shall not be required with
respect to any assignment by the Corporation to any Lender in
connection with any financing or refinancing of the Project.
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<PAGE>
28.2. Late Interest. Any amounts due by either party under the Contract
Documents and not paid by a party when due shall bear interest at
the lesser of the rate of 10% per annum or the maximum legal rate
commencing on the first day after such payment is due and continuing
until paid to the party to whom it is due.
28.3. Governing Law. This Contract shall be governed by, interpreted
under, and construed and enforced in accordance with the laws of the
State of Texas applicable to agreements made and to be performed
wholly within the State of Texas.
28.4. Arbitration. Any controversy, claim or dispute between the parties
hereto arising out of or related to this Contract or the breach
hereof, which cannot be settled amicably by the parties, shall be
submitted for arbitration before a single arbitrator in accordance
with the provisions contained herein and in accordance with the
Construction Industry Arbitration Rules of the American Arbitration
Association in effect at the time of the arbitration ("Rules");
provided, however, that notwithstanding any provisions of such
Rules, the parties shall have the right to take depositions (up to
three (3) per party and which depositions shall conclude within
sixty (60) days following appointment of the arbitrator) and obtain
limited discovery regarding the subject matter of the arbitration.
Each party shall be required to exchange documents to be used in and
the names of witnesses that will appear in the arbitration
proceeding not less than twenty (20) days prior to the arbitration.
Judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction. The arbitrator shall determine all
questions of fact and law relating to any controversy, claim or
dispute hereunder. All arbitration will take place in the City and
County of Dallas, Texas.
Any party desiring arbitration shall serve on the other party and
the Dallas Office of the American Arbitration Association, in
accordance with the aforesaid Rules, its Notice of Intent to
Arbitrate ("Notice"). If the parties cannot agree upon an arbitrator
within ten (10) days of the filing of the Notice, then the
arbitrator shall be selected in accordance with the Rules. The
arbitration proceedings provided hereunder are hereby declared to be
self-executing, and it shall not be necessary to petition a court to
compel arbitration.
The Notice shall be filed in writing with the other party to this
Contract and with the Dallas Office of the American Arbitration
Association. The demand for arbitration shall be made within a
reasonable time after the claim, dispute or other matter in question
has arisen, and in no event shall it be made after the date when
institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the
applicable statutes of limitations.
28.5. Jurisdiction and Venue. To the fullest extent permitted by
Applicable Law, each party stipulates that the Dallas Office of the
American Arbitration Association, State and Federal District courts
located in Dallas, Texas, shall have in personam jurisdiction and
venue over each of them for purposes of arbitrating any dispute,
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<PAGE>
controversy or proceeding arising out of or related to this
Contract, and if any appeal is taken from the arbitration
proceeding, the appeal shall be heard in the State or Federal
District Court located in Dallas. Each party hereby authorizes and
accepts service of process sufficient for personal jurisdiction in
any action against it as contemplated by this paragraph by
registered or certified mail, return receipt requested, postage
prepaid, to its address for the giving of notices as set forth in
Section 26 of this Contract.
28.6. Attorneys' Fees. In any arbitration or litigation to enforce the
provisions of this Contract, the prevailing party in such action
shall be entitled to the recovery of its reasonable attorneys' fees
and expenses, fees of the arbitrator, costs and expenses such as
expert witness fees, as fixed by the arbitrator or court without
necessity of noticed motion.
28.7. Amendments. This Contract may be modified or amended only by an
instrument in writing signed by all of the parties hereto.
28.8. Severability. If for any reason a court of competent jurisdiction
finds any phrase, sentence, clause, section or provision of this
Contract to be unenforceable, that provision will be enforced to the
maximum extent permissible, and the remainder of this Contract will
continue in full force and effect.
28.9. Entire Agreement. The terms and conditions set forth herein,
together with those set forth on all exhibits attached hereto,
constitute the complete statement of the agreement between
Vestas-American and the Corporation relating to the sale and
installation of the Facility. No prior statement, correspondence or
writing shall modify or affect the terms and conditions hereof.
Prior representations, promises, warranties or statements by any
agent or employee of Vestas-American that differ in any way from the
terms and conditions hereof shall be given no effect.
28.10. Further Assurances. Each of the parties hereto agrees to execute
such documents and take such action as the other party shall
determine to be reasonably necessary or desirable to effectuate
fully the provisions of this Contract. The Contractor also agrees to
take such action reasonably requested by the Lender as a condition
to providing Construction Financing, provided such action does not
cause Vestas-American to incur any expense not already contemplated
by this Contract.
28.11. Waiver. No waiver of any provisions of this Contract will be valid
unless signed by a duly authorized representative of a party, and
waiver of any one provision will not constitute a waiver of any
other provision. No waiver of any breach or default under this
Contract will constitute a waiver of any other or subsequent breach
or default under this Contract. No delay or omission on the part of
a party in the exercise of any right or remedy, whether before or
after any breach or default, will operate as a waiver of such right
or remedy or impair such party's right to fully and strictly enforce
any such right or remedy.
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<PAGE>
28.12. Headings. Headings and captions are for the convenience of the
parties only, and will not affect the definition, construction, or
interpretation of this Contract.
28.13. Drafting Ambiguities . Each party to this Contract and its counsel
have reviewed and revised this Contract. The rule of construction
that any ambiguities are to be resolved against the drafting parties
shall not be employed in the interpretation of this Contract, or any
amendments or exhibits to this Contract.
28.14. Modifications Required by Lender. Vestas-American shall make such
modifications to the Contract Documents as may reasonably be
required by the Lender as a condition to providing Construction
Financing, provided, however, that any such modifications do not
adversely alter the rights or increase the duties or obligations of
Vestas-American under the Contract Documents or cause
Vestas-American to incur additional expense in the performance of
its obligations under the Contract Documents.
28.15. Expenses. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with
preparation of the Contract Documents and the transactions
contemplated hereby whether or not the transactions contemplated
hereby are consummated.
28.16. No Third Party Beneficiaries. The parties do not intend to confer
any benefit hereunder on any person, firm or corporation other than
the parties hereto.
28.17. Independent Contractor. Contractor is an independent contractor and
nothing contained herein shall be construed as constituting any
relationship with the Corporation other than that of independent
contractor, nor shall it be construed as creating any relationship
whatsoever between the Corporation and Contractor's employees.
Neither Contractor, nor any of its employees, is or shall be deemed
to be an employee of the Corporation.
28.18. Counterparts and Telefax Execution. This Contract may be executed by
the parties in one or more counterparts or duplicate originals, all
of which taken together shall constitute one and the same
instrument. The facsimile signatures of the parties shall be deemed
to constitute original signatures, and facsimile copies hereof shall
be deemed to constitute duplicate originals.
28.19. ParentGuaranty. To secure Contractor's obligations under this
Contract and in consideration of the benefits to be derived by
Contractor hereunder, Contractor shall deliver to the Corporation,
concurrently with the execution hereof, a Parent Guaranty, duly
executed by the Guarantor in the form attached as Exhibit "L"
hereto.
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<PAGE>
IN WITNESS WHEREOF, Vestas-American and the Corporation have caused this
Contract to be executed by their duly authorized representatives as of the date
first above written.
"Corporation" "Vestas-American"
YORK RESEARCH CORPORATION, VESTAS-AMERICAN WIND
a Delaware corporation TECHNOLOGY, INC.,
a California corporation
By: By:
-------------------------- --------------------------
Name: Name:
Title: Title:
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<PAGE>
EXHIBIT A
Detailed Plan
Detailed description and specifications for Wind Turbine
-1-
<PAGE>
EXHIBIT B
Facility Description
V47 Portion
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Quantity Description
<S> <C>
- --------------------------------------------------------------------------------
42 Vestas V47-660 kW Wind Turbine Generators (V47 WTG's)
- --------------------------------------------------------------------------------
42 Vestas V47-660 kW rotor blade sets
- --------------------------------------------------------------------------------
42 Top and ground control panels including interconnecting cables.
Ground control panels to be equipped with necessary hardware and
software necessary for interconnection with Second Wind
monitoring system.
- --------------------------------------------------------------------------------
42 65 meter hub-height tubular towers with ladders, lighting and
safety equipment
- --------------------------------------------------------------------------------
42 Power cables and mounting supports for FAA lights to be supplied
and installed by the Corporation
- --------------------------------------------------------------------------------
1 Customs Duty on equipment imported from Denmark
- --------------------------------------------------------------------------------
1 Delivery (including shipping insurance) of V47 WTG's, control
panels and Towers to Project Site
- --------------------------------------------------------------------------------
1 Installation of V47 WTG's, control panels and Towers to Project
Site
- --------------------------------------------------------------------------------
1 Start-up of V47 WTG's according to Vestas manuals
- --------------------------------------------------------------------------------
1 Commissioning and Acceptance Testing of WTG's, control panels
and Towers according to Vestas manuals and the Test and
Inspection Procedures
- --------------------------------------------------------------------------------
6 sets of standard V47 WTG Operations manuals and Service and
Maintenance manuals, including Vestas standard automatic
updating system for service and maintenance manuals during
warranty period.
3 V47 Foundation Template Rings
3 Sets As-Built Drawings
- --------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE>
Facility Description, Cont'd.
V66 Portion
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Quantity Description
<S> <C>
- --------------------------------------------------------------------------------
4 Vestas V66-1650 kW Wind Turbine Generators (V66 WTG's)
- --------------------------------------------------------------------------------
4 Vestas V66-1650 kW rotor blade sets
- --------------------------------------------------------------------------------
4 Top and ground control panels including interconnecting cables.
Ground control panels to be equipped with necessary hardware and
software necessary for interconnection with Second Wind
monitoring system.
- --------------------------------------------------------------------------------
4 Power cables and mounting supports for FAA lights to be supplied
and installed by the Corporation
- --------------------------------------------------------------------------------
3 80 meter hub-height tubular towers with ladders, lighting and
safety equipment
- --------------------------------------------------------------------------------
1 80 meter hub-height tubular towers with elevator, lighting and
safety equipment
- --------------------------------------------------------------------------------
1 Customs Duty on equipment imported from Denmark
- --------------------------------------------------------------------------------
1 Delivery (including shipping insurance) of V66 WTG's, control
panels and Towers to Project Site
- --------------------------------------------------------------------------------
1 Installation of V66 WTG's, control panels and Towers to Project
Site
- --------------------------------------------------------------------------------
1 Start-up of V66 WTG's according to Vestas manuals
- --------------------------------------------------------------------------------
1 Commissioning and Acceptance Testing of WTG's, control panels
and Towers according to Vestas manuals and the Test and
Inspection Procedures
- --------------------------------------------------------------------------------
6 sets of standard V66 WTG Operations manuals and Service and
Maintenance manuals, including Vestas standard automatic
updating system for service and maintenance manuals during
warranty period.
1 V66 Foundation Template Ring
3 Sets As-Built Drawings
- --------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
EXHIBIT C
Final Acceptance Certificate
York Research Corporation
280 Park Avenue
Suite 2700 West
New York, NY 10017
Vestas-American Wind Technology, Inc.
19020 North Indian Avenue, Suite 4-C
North Palm Springs, CA 92258
Subject: Final Acceptance Certificate
Reference is made to that certain Wind Turbine Equipment Sales and Installation
Contract dated ________, 1998 by and between Vestas-American Wind Technology,
Inc. ("Contractor") and York Research Corporation ("Corporation") (the "WTG
Installation Contract").
Pursuant to Section 13.2 of the WTG Installation Contract, by this certificate,
the Corporation certifies that:
1. Final lien waivers and releases from Contractor have been delivered by
Contractor to Corporation;
2. Contractor's obligations under the WTG Installation Contract have been
completed;
3. All test results, manuals and other documents required by the Contract
Documents have been received by the Corporation;
4. All Contractor's and Subcontractor's and Supplier's personnel, supplies,
equipment, waste materials, rubbish and temporary facilities have been
removed from the Job Site and Project Site;
5. A Certification by Contractor identifying all outstanding claims of
Contractor under this Contract with documentation sufficient to support
such claims, has been delivered by Contractor to Corporation;
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<PAGE>
6. Contractor has assigned or provided Corporation with all warranties or
guarantees which Contractor received from Subcontractors to the extent
Contractor is obligated to do so pursuant to Section 6.25 of the WTG
Installation Contract;
7. All training required under the Contract Documents has been provided and
Corporation has received all documentation related thereto;
8. The Invoice for final payment due Contractor has been delivered by
Contractor to Corporation;
9. All consumables required under the Contract Documents have been delivered
to the Project Site; and
10. All items on the Punchlist(s) have been completed.
11. Contractor has delivered to Corporation a certificate in compliance with
Section 13.1(j) of the Contract.
YORK RESEARCH CORPORATION
By:
--------------------------
Title:
Date:
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<PAGE>
EXHIBIT D
General Design and Plans
1. Site Map
Preliminary site plan re-issued December 23, 1997 showing the location of the
wind turbines, access roads, power lines (24.9 kV), substation and the operation
& maintenance yard.
The phases of the Work are as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Turbine Number of
Phase Section Turbine Type Numbers Turbines
<S> <C> <C> <C> <C>
---------------------------------------------------------------------
1 36 V47 27 and 28 2
---------------------------------------------------------------------
37 V47 29-42 14
---------------------------------------------------------------------
Total 16
---------------------------------------------------------------------
2 15 V47 1-13 13
---------------------------------------------------------------------
29 V47 14-26 13
---------------------------------------------------------------------
Total 26
---------------------------------------------------------------------
3 23 V66 A-D 4
---------------------------------------------------------------------
Total 4
---------------------------------------------------------------------
</TABLE>
2. Electrical Interconnect
Proposed Simplified 1-Line Diagram; Drawing Number E-1, Revision 2, dated
October 8, 1997, as same may be amended.
-1-
<PAGE>
EXHIBIT E
Payment Schedule
Down Payment: 5% of Total Facility Price as Initial Down Payment
10% of Total Facility Price as Subsequent Down Payment
(less credit for Deposit previously paid)
Interim Payments:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Payment Event V47 Facility V66 Facility
<S> <C> <C>
- --------------------------------------------------------------------------------
First V47 Shipment 15% of V47 Facility Price 0% of V66 Facility Price
- --------------------------------------------------------------------------------
Last V47 Shipment 15% of V47 Facility Price 0% of V66 Facility Price
- --------------------------------------------------------------------------------
Last V66 Shipment 0% of V47 Facility Price 30% of V66 Facility Price
- --------------------------------------------------------------------------------
All V47 WTGs on Site 15% of V47 Facility Price 0% of V66 Facility Price
- --------------------------------------------------------------------------------
All V66 WTGs on Site 0% of the V47 Facility 20% of the V66 Facility Price
Price
- --------------------------------------------------------------------------------
Phase 1 Preliminary 15% of V47 Facility Price 0% of V66 Facility Price
Acceptance
- --------------------------------------------------------------------------------
Phase 2 Preliminary 15% of V47 Facility Price 0% of V66 Facility Price
Acceptance
- --------------------------------------------------------------------------------
Phase 3 Preliminary 0% of V47 Facility Price 25% of V66 Facility Price
Acceptance
- --------------------------------------------------------------------------------
Final Acceptance 10% of V47 Facility Price 10% of V66 Facility Price
- --------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
EXHIBIT F
Preliminary Acceptance Certificate
York Research Corporation
280 Park Avenue
Suite 2700 West
New York, NY 10017
Vestas-American Wind Technology, Inc.
19020 North Indian Avenue, Suite 4-C
North Palm Springs, CA 92258
Subject: Preliminary Acceptance Certificate; Phase _____ (the "Phase")
Reference is made to that certain Wind Turbine Equipment Sales and Installation
Contract dated ________, 1998 by and between Vestas-American Wind Technology,
Inc. ("Contractor") and York Research Corporation ("Corporation") (the "WTG
Installation Contract").
Pursuant to Section 12.3 of the WTG Installation Contract, by this certificate,
the Corporation certifies that:
1. All WTGs and all Work related to Phase ____ of the Facility have been
installed and perform in accordance with the Contract Documents;
2. The results of the start-up of all the WTGs in such Phase have met the
requirements set forth in the Test and Inspection procedures as set forth
in Exhibit "I" of the WTG Installation Contract;
3. The Corporation has received copies of the Substantial Completion test
reports relating to the above-referenced Phase of the Facility;
4. All components of the Facility are mechanically, electrically and
structurally sound, operate as a single unit capable of generating
electrical energy for delivery to the WTG ground controller main breaker;
and
5. Contractor has prepared and submitted to the Corporation's satisfaction
the final Punch list for the Phase pursuant to the WTG Installation
Contract.
YORK RESEARCH CORPORATION
By:
----------------------------
Title:
Date:
-1-
<PAGE>
EXHIBIT G
Project Site Description
Block 31, Township 1 South, T&P Railroad Co. Survey, Howard County, Texas:
<TABLE>
<CAPTION>
Section No. Portion Restrictions
- ----------- ------- ------------
<S> <C> <C>
18 Per site map Easement for access roads only
19 Per site map Easement for access roads only
</TABLE>
Block 32, Township 1 South, T&P Railroad Co. Survey, Howard County, Texas:
<TABLE>
<CAPTION>
Section No. Portion Restrictions
<S> <C> <C>
- ----------- ------- ------------
14 Per site map Easement for access roads and power
lines only
15 All
23 N 1/2 of NW 1/4
3 ac. in E 1/2 of SE 1/4 O&M facility site
2 ac. in E 1/2 of SE 1/4 Substation site
Per site map Easement for access roads and power
lines
24 Per site map Easement for access roads only
26 Per site map Easement for access roads and power
lines only
27 S 1/2
28 S 1/2
29 All
32 N 1/2
33 All except NE 1/4
34 N 1/2
35 All
36 S 1/2
37 All
</TABLE>
-1-
<PAGE>
EXHIBIT H
Project Timeline
-1-
<PAGE>
EXHIBIT I
Test and Inspection Procedures
1. Start-up.
Initial start-up of the WTGs will be conducted in accordance with the
Vestas Standard Start-up Procedure No. 942258.R3, included in this Exhibit I.
2. Utility Test Performance.
Power Factor Test.
Vestas-American shall perform and prove that the Facility, including
Phases which have previously achieved substantial compliance, is able to operate
continuously under normal operating conditions with all available WTGs in
service and achieve a total power factor in a power factor range between .95
lagging and unity measured at the ground controllers for each WTG and calculated
based upon the average power factor achieved by all available WTGs.
Procedure.
Vestas-American will perform a power factor test on the Facility to verify
the ability to operate at a power factor within a power factor range of .95
lagging to unity for one (1) hour. The test will be performed under normal
operating conditions with all available WTGs in service. The written power
factor test report will include data sheets and results every 10 minutes listing
the Facility power factor, Facility total generation, Facility voltage, and the
number of WTGs in service.
3. 24 Hour Test.
Demonstrate 100% availability for each WTG in each Phase for a period of
twenty-four (24) consecutive hours, provided that such demonstration need not be
simultaneous for all WTGs in a Phase. In addition to being 100% available, each
WTG must generate electricity for at least six (6) hours during its twenty-four
(24) hour test period.
4. Wind Turbine Inspection Record Scheme.
The WTGs will be installed and tested according to Vestas Standard
Inspection Record Scheme No. 942278, as amended from time to time, included in
this Exhibit I.
5. Wind Turbine Standard Commissioning Certificate.
Upon commissioning, the Vestas Standard Commissioning Certificate, a form
of which is included in this Exhibit I, shall be duly filled out and signed by
both the Corporation and Vestas-American
-1-
<PAGE>
6. Availability Test
Demonstrate that all WTGs in the Phase simultaneously operate at greater
than a ninety percent (90%) aggregate availability for forty-eight (48) hours.
Start-up Procedures handbook.
Inspection Record Scheme.
Standard __________________ Certificate.
-2-
<PAGE>
EXHIBIT J
Tower Foundation Designs and Specifications
[TO BE PROVIDED]
-1-
<PAGE>
EXHIBIT K
Access and Use Requirements
Minimum road dimensions and turning radius for access roads during
construction for the V66 and V47.
Map to the staging area.
-1-
<PAGE>
EXHIBIT L
Parent Guaranty
-1-
<PAGE>
EXHIBIT M
First Amendment to Wind Turbine Equipment
Sales and Installation Contract
This First Amendment to Wind Turbine Equipment Sales and Installation
Contract (the "Amendment"), is made and entered into as of ___________, 1998 by
and between York Research Corporation, a Delaware Corporation (the
"Corporation"), and Vestas-American Wind Technology, Inc., a California
corporation (the "Contractor").
A. Whereas, Corporation and Contractor entered into that certain Wind
Turbine Equipment Sales and Installation Contract, dated as of __________, 1998
(the "Sales Agreement").
B. Whereas, Corporation desires that Contractor construct the Tower
Foundations for the Project; and
C. Whereas, Contractor is willing to construct the Tower Foundations
provided that the Sales Agreement is amended as provided herein.
NOW, THEREFORE, in consideration of the premises, the mutual promises and
covenants set forth herein, and for other good and valuable consideration,
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Definitions. Except as otherwise provided in this Amendment,
capitalized terms used herein shall have the meanings set forth in the Sales
Agreement.
Section 2. Amendments.
(a) Section 1.27 of the Sales Agreement is hereby amended (i) to insert
the phrase "and forty-six (46) Tower Foundations," in the second line of the
first sentence, immediately preceding the phrase "as more particularly described
herein," and (ii) to delete the phrase "Tower Foundations" from subsection (a).
(b) Section 1.86 of the Sales Agreement is hereby amended to insert the
phrase "construction and" in the fourth line of the first sentence, immediately
preceding the word "erection."
(c) Section 3.2 of the Sales Agreement is hereby amended to delete the
phrase "including but not limited to excavation for and construction of the
Tower Foundations in accordance with the Tower Foundation Designs and
Specifications, and" and to replace it with the phrase "other than construction
of the Tower Foundations, including but not limited to". In addition, the last
sentence of Section 3.2 is hereby deleted.
-1-
<PAGE>
(d) The Sales Agreement is hereby amended to add a new Section 5.6 as
follows:
"5.6. Tower Foundations. Install the Tower Foundations in accordance with
the Contractor's Tower Foundation Designs and Specifications. The
Tower Foundations shall include conduits for Communication System
cables and power cables. Contractor shall be responsible to regrade
the WTG pads after installation of the Tower Foundations and dispose
of excess material excavated during the installation of the Tower
Foundations, provided, however, that the disposal of any excess
materials so excavated that are contaminated with hazardous
materials, the presence of which are not the result of Contractor's
actions or omissions, shall be the sole responsibility of
Corporation, and Corporation will complete such disposal promptly
and without delay to the Work."
(e) The Sales Agreement is hereby amended to add a new Section 7.15 as
follows:
"7.15. Removal of Contaminated Soil. Remove and dispose of any soil and
excess material contaminated with hazardous materials excavated
during installation of the Tower Foundations."
(f) The Sales Agreement is hereby amended to add a new Section 8.3 as
follows:
"8.3. Subsurface Conditions. Corporation shall be solely responsible for
religious artifacts, biological matter, archeological items, and identifying the
location and condition of underground pipelines, tanks and conduits not shown on
the Project Site Map referenced in Section 7.3 of this Contract. In the event
any unidentified subsurface conditions result in delay or additional cost to
Contractor, Contractor shall be entitled to an increase in the Facility Price
and/or extension of the Scheduled Substantial Completion Date in accordance with
Section 9.1 of this Contract. In the event Contractor encounters any of the
above enumerated conditions when excavating, Contractor will promptly notify
Corporation of same. Contractor will use reasonable care and methods in
excavating for the Tower Foundations, including reasonable efforts, prior to
excavation, to notify operators of subsurface utilities of the proposed
excavation. Corporation shall assist and fully cooperate with Contractor in the
identification of said operators, and the appropriate contact person(s)
therefore. Contractor will be solely responsible for avoiding all items
accurately depicted on the Project Site Map.
(g) The Sales Agreement is hereby amended to insert a new Section 10.5 as
follows:
"10.5. Tower Foundations Price. The Facility Price is hereby increased by
the amount of the Tower Foundations Price. The "Tower Foundations
Price" payable by the Corporation to Vestas-American for the Tower
Foundations shall be made in Dollars and shall be an agreed upon
lump sum equal to the projected cost for labor, direct overhead,
materials, supplies, equipment and other services necessary for
performance of the Work with respect to construction of the Tower
Foundations, plus
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<PAGE>
a fee in the amount of five percent (5%) of the agreed upon lump
sum. The Corporation will pay the Tower Foundations Price in the
manner set forth below and such price will be broken down as
provided under Section 10.3 of this Contract.
10.5.1. Tower Foundation Down Payment. Prior to the commencement of any
work on the Tower Foundations, Corporation shall pay Contractor an
amount in Dollars equal to fifteen percent (15%) of the Tower
Foundations Price as a down payment.
10.5.2. Tower Foundation First Phase Installment. Within five (5) days of
the receipt of an invoice from Contractor, and a certificate from a
qualified third party confirming that all the Tower Foundations for
the first Phase of the Facility have been completed, cured and are
ready for Tower installation, Corporation shall pay Contractor an
amount in Dollars equal to thirty percent (30%) of the Tower
Foundations Price.
10.5.3. Tower Foundation Second Phase Installments. Within five (5) days
of receipt of an invoice from Contractor, and a certificate from a
qualified third party confirming that the Tower Foundations for
thirteen (13) of the twenty-six (26) Tower Foundations for the
second Phase of the Facility have been completed, cured and are
ready for Tower installation, Corporation shall pay Contractor an
amount in Dollars equal to twenty-three percent (23%) of the Tower
Foundations Price. Within five (5) days of receipt of an invoice
from Contractor, and a certificate from a qualified third party
confirming that the remainder of the twenty-six (26) Tower
Foundations for the second Phase of the Facility have been
completed, cured and are ready for Tower installation, Corporation
shall pay Contractor an amount in Dollars equal to twenty-three
percent (23%) of the Tower Foundation Price.
10.5.4. Tower Foundation Third Phase Installments. Within five (5) days of
receipt of an invoice from Contractor, and a certificate from a
qualified third party confirming that all the Tower Foundations for
the third Phase of the Facility have been completed, cured and are
ready for Tower installation, Corporation shall pay Contractor an
amount in Dollars equal to nine percent (9%) of the Tower
Foundations Price.
Section 3. Ratification. All other terms and conditions of the Sales
Agreement not amended by this Amendment are otherwise ratified and confirmed and
the Sales Agreement remains in full force and effect
Section 4. Miscellaneous.
(a) Governing Law. This Amendment shall be governed by, interpreted under,
and construed and enforced in accordance with the laws of the State of Texas
applicable to agreements made and to be performed wholly within the State of
Texas.
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<PAGE>
(b) Counterparts and Telefax Execution. This Amendment may be executed by
the parties in one or more counterparts or duplicate originals, all of which
taken together shall constitute one and the same instrument. The facsimile
signatures of the parties shall be deemed to constitute original signatures, and
facsimile copies hereof shall be deemed to constitute duplicate originals.
(c) Severability. If for any reason a court of competent jurisdiction
finds any phrase, sentence, clause, section or provision of this Amendment to be
unenforceable, that provision will be enforced to the maximum extent
permissible, and the remainder of this Contract will continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Sales Agreement to be duly executed as of the day and year first above written.
"Corporation" "Vestas-American"
YORK RESEARCH CORPORATION, VESTAS-AMERICAN WIND
a Delaware corporation TECHNOLOGY, INC.,
a California corporation
By: By:
----------------------- -------------------------
Name: Name:
Title: Title:
-4-
<PAGE>
EXHIBIT N
STANDARD WARRANTY
1. Standard Warranty. Vestas-American warrants that the WTGs shall be free from
defects in material (the "Parts Warranty") for a period of one (1) year
commencing upon expiration of the Installation Warranty provided under the terms
of the Contract (the "Parts Warranty Period"). The Parts Warranty and Power
Curve Warranty set forth in Section 7 in this Standard Warranty are hereafter
referred to as the Warranty ("Warranty").
2. Remedy. If there is a breach of the Parts Warranty, Vestas-American shall
supply replacements for the non-conforming part(s), at its cost and expense,
excluding transportation and travel expenses. Defective parts which have been
replaced shall be the property of Vestas-American. The Warranty Period on all
replacement parts or components shall be the greater of one (1) year from the
date of expiration of the Installation Warranty or one (1) year from the date of
replacement. The Parts Warranty covers parts and components, and does not
include labor.
3. Limitation of Remedy. Corporation shall provide Vestas-American with written
notice of any claim under the Warranty on or before expiration of the applicable
Warranty Period, and any claim for a non-conforming part must be accompanied by
a fully completed Vestas-American Service Report. Vestas-American will provide
blank Service Reports to Corporation for use as needed. The Warranty is limited
to defects which appear and of which Corporation notifies Vestas-American in
writing within the applicable Warranty Period. EXCEPT AS EXPRESSLY STATED IN
THIS STANDARD WARRANTY, THERE ARE NO OTHER WARRANTIES, AGREEMENTS OR
UNDERSTANDINGS, ORAL OR WRITTEN, WITH RESPECT TO THE WTGS AND EQUIPMENT OR ANY
SERVICES PROVIDED BY VESTAS-AMERICAN UNDER THIS AGREEMENT. THE WARRANTIES SET
FORTH IN THIS STANDARD WARRANTY ARE EXCLUSIVE AND IN LIEU OF ALL WARRANTIES,
EXPRESSED OR IMPLIED, (INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, DESIGN, CONDITION OR
PERFORMANCE OF THE WTGS AND EQUIPMENT OR UNDER THE TEXAS DECEPTIVE TRADE
PRACTICES ACT), ALL OF SUCH WARRANTIES BEING EXPRESSLY DISCLAIMED BY
VESTAS-AMERICAN. Without limiting the generality of the foregoing,
Vestas-American makes no warranty as to the availability or level of wind at the
Project Site.
4. Specific Exclusions. Notwithstanding anything to the contrary contained
herein, Vestas-American is not and shall not be liable for, and the Warranty
specifically excludes, any loss or damage caused by or arising out of:
a) material, noncosmetic alterations or repairs not carried out by
Vestas-American, its Subcontractors or Suppliers, or persons
authorized in writing by Vestas-American;
-1-
<PAGE>
b) after the Effective Date of the Contract, the use of materials,
equipment, layouts or designs, supplied or stipulated, or any
services provided by, any party other than Vestas-American, its
Subcontractors or Suppliers in connection with the WTGs, unless
approved in writing by Vestas-American;
c) damage to the WTGs by Corporation or third parties, including,
without limitation, vandalism or malicious mischief, theft or
attempted theft;
d) any loss caused by a defective part except as set forth in Section
7.2 below, including loss of production, loss of profit and other
consequential or incidental loss;
e) operation of the WTGs in a manner other than that specified in
Vestas-American's instructions and operation manual referenced in
Section 6.2 of the Contract;
f) any delay in remedying a breach of this Warranty due to an event
of Force Majeure.
In the event the WTGs are altered, modified or repaired in any manner whatsoever
without the prior written consent of Vestas-American, the Warranty shall
automatically terminate and be of no further force or effect.
5. Conditions. The Warranty and Vestas-American's obligations under this
Warranty are expressly conditioned on all routine and non-routine service and
maintenance (as per Vestas-American's standard service schedule) of the WTGs
being performed either by Vestas-American or by a service company approved in
writing by Vestas-American during the applicable Warranty Period.
6. Access. During the applicable Warranty Period, Corporation shall provide
Vestas-American with access to the Project Site sufficient to perform its
obligations under this Warranty and for any other relevant inspection of the
WTGs. Such access shall be in accordance with the access and use requirements
set forth in Section 7.2 of the Contract and on Exhibit "K" to the Contract.
7. Warranty of Performance.
7.1. Power Curve Warranty. Vestas-American warrants, that for a period of
two (2) years from Substantial Completion of the third phase of the Facility
(the "Power Curve Warranty Period"), the measured power output for the WTGs
("MPO") shall not be less than the figures for warranted power output as set
forth in Schedule 1 ("WPO") if measured in accordance with the requirements in
Subsection 7.1.1. hereof ("Power Curve Warranty").
7.1.1. Measurement of Power Curve. If the Corporation decides to
measure the power output of the WTGs, such measurement shall be performed during
the Power Curve Warranty Period, by a mutually agreed upon independent company,
to be used for all measurements contemplated under this Warranty, on behalf of
the Corporation, and for Corporation's account and at its sole cost and expense
(unless the measurement determines that MPO is below ninety-five percent (95%)
of WPO, in which case Contractor will reimburse Corporation for the cost of such
-2-
<PAGE>
measurement), and shall take place according to the standards and procedures set
forth in the ECN 217 Standard attached hereto as Schedule 2, as updated from
time to time ("Measurement").
If the measurement determines that MPO is at least ninety-five percent (95%) of
WPO, then the WPO has been proven and Vestas-American has no further obligation
or liability under the Power Curve Warranty for that testing period. The first
testing period shall commence on the date of preliminary acceptance of the third
Phase and end on the date of the initial Measurement. Any subsequent testing
periods shall commence on the date of the most recent previous Measurement and
end on the date of the then current Measurement. The MPO shall be deemed to be
equal to or greater than ninety-five percent (95%) of the WPO if the Power Curve
result in Section 7.2.2 is less than or equal to zero.
If the measurement determines that MPO is below ninety-five percent (95%) of
WPO, Vestas-American shall be allowed a ninety (90) day modification and
re-measuring period (the "Re-measurement") after the date of receipt by
Vestas-American of a notice from the Corporation to such extent . If at any time
prior to expiration of this ninety (90) day period, Vestas-American has taken
corrective action and the MPO is re-measured to be at least ninety-five percent
(95%) of the WPO, then the WPO has been proven or shall be deemed proven, and
Vestas-American has no further liability or obligation under this Power Curve
Warranty. Such Re-measurement shall be performed by the above described mutually
agreed upon independent company and any cost or expense related to
Re-measurement shall be for the account of Vestas-American.
7.1.2. Liability in Respect of Power Curve Warranty Following
Measurement. If, after the Measurement as set forth in Subsection 7.1.1., the
MPO is determined to be less than ninety-five percent (95%) of the WPO as
calculated under Section 7.2.2, Vestas-American shall, be liable to compensate
the Corporation in accordance with the provisions of Section 7.2.2, until such
time as Vestas-American has proven the MPO to be no less than ninety-five
percent (95%) or until Re-measurement, whichever is earlier.
7.1.3. Liability in Respect of Power Curve Warranty Following
Re-measurement. If, after the Measurement and Re-measurement set forth in
Subsection 7.1.1., the MPO is determined to be less than ninety-five percent
(95%) of the WPO as calculated under Section 7.2.2, Vestas-American shall
following an opportunity to cure pursuant to Section 7.3, be liable to pay the
Corporation liquidated damages in the amount of Six Hundred Three Thousand Eight
Hundred Dollars ($603,800) for each percentage point the MPO is determined to
fall below the WPO (using the results of the most recent measurement), to
include a proportionate fraction of such amount for any fraction of a percentage
point. The amount of liquidated damages payable under this Section 7.1.3 shall
be reduced by the amount of actual damages paid to Corporation under Section
7.1.2.
7.2. Compensation in Respect of Liability of Warranty Performance. The
Compensation, if any, to be paid by Vestas-American in consequence of a failure
to meet the Power Curve Warranty as described in Section 7.1.2 shall be
calculated as of the end of each testing period using the following formula:
-3-
<PAGE>
7.2.1. Definitions.
NWD = Nominal Wind Distribution (as set forth in Schedule 3)
WPO = Warranted Power Output
MPO = Measured Power Output
PE = A percentage expressing the electrical loss from the WTG to Interconnect
Substation (to be calculated as actual electricity sold divided by electricity
generated).
EP = Power Purchase Agreement price for electricity per kWh during the period in
question
PTC = Production Tax Credit (equal to 1.7(cents) per kWh for the first year of
the Power Curve Warranty and 1.75(cents) per kWh for the second year)
7.2.2. Subsection 7.1. Warranty: Power Curve.
(1) Nominal Yearly Energy WPO*95%*NWD*WTG number = kWh
Production:
(2) Measured Yearly Energy MPO*NWD*WTG number = kWh
Production
(3) Power Curve result (1) - (2) = kWh
7.2.3. Gross Compensation Calculation.
(4) Relevant Deviation ("RD") (3) * PE = kWh
(5) Gross Compensation ("GC") RD * (EP +PTC) = currency
7.2.4. Payable Compensation.
Vestas-American shall pay the Compensation within thirty (30) days after the
receipt by Vestas American of the relevant invoice and complete supporting
documentation, including but not limited to statements sent by the Utility
evidencing electricity sold, and documentation supporting the above
calculations.
Except as set forth in this Section 7, Vestas-American shall in no event
compensate for any loss caused by the defect including loss of production, loss
of profits and other consequential or incidental loss.
7.3 Opportunity to Cure Failure to Meet Measured Power Output.
If following completion of the Measurement and Re-measurement of power output
under Section 7.1.l the MPO is less than 95% of the WPO, Vestas-American may
request Corporation to approve the addition of one (1) or more additional WTG(s)
to the Facility in order to seek to increase the MPO; provided, that such
request is made not later than ten (10) Business Days following receipt of
notice of the results of the Re-measurement pursuant to Section 7.1.1.
-4-
<PAGE>
Within ten (10) Business Days of receipt of such request, Corporation will
approve or disapprove the addition of one (1) or more additional WTG(s). If
approved by Corporation, Vestas-American shall have the right, at its sole
expense, to take such actions as are necessary to install additional WTG(s) at
the Project Site in order to seek to increase the MPO above ninety-five percent
(95%).
-5-
<PAGE>
EXHIBIT O
PAYMENT SECURITY
(FORM OF LETTER OF CREDIT)
IRREVOCABLE STAND-BY LETTER OF CREDIT NO. _______________
Issuance Date:
Expiration Date:
Initial Stated Amount:
TO: Vestas-American Wind Technology, Inc.
19020 North Indian Avenue, Suite 4C
P.O. Box 2010
Palm Springs, CA 92258
Ladies and Gentlemen:
______________________________, ("Bank") hereby opens in favor of
Vestas-American Wind Technology, Inc. ("Beneficiary"), for the account of its
customer, York Research Corporation, a Delaware corporation ("Account Party"),
its irrevocable stand-by letter of credit no. ________________ ("Letter of
Credit") in the initial stated amount of _____________ U.S. Dollars (U.S.
$___________) and ___________ Danish Kroner (Dkk ________) (as reduced from time
to time in accordance with the terms hereof, the "Stated Amount").
Subject to the terms and conditions hereof, this Letter of Credit secures
Account Party's obligation to faithfully perform all of the terms of Section 11
of the Wind Turbine Equipment Sales and Installation Contact (the "Contract")
dated as of March ___, 1998 between Beneficiary and Account Party.
Amounts drawn under this Letter of Credit shall be available by
Beneficiary's drafts drawn at _______________, in the form of Annex A attached
hereto and accompanied by a Drawing Certificate in the form of Annex B (a
"Nonpayment Drawing"), or Annex C (an "Expiration Drawing") as appropriate,
attached hereto and executed by an officer of Beneficiary, as identified by
Beneficiary to Bank in writing from time to time.
Partial draws of this Letter of Credit are permitted. Drawings honored by
Bank under this Letter of Credit shall not, in the aggregate exceed the initial
Stated Amount. The Stated Amount shall be automatically reduced, without any
further action required by Beneficiary or Bank, immediately upon the honoring by
Bank of any draft drawn hereunder. The U.S. Dollar portion and Danish Kroner
portion of the Stated Amount will be reduced by the U.S. Dollar portion and the
Danish Kroner portion of the draft. Following notice to the Bank from
Beneficiary of Beneficiary's receipt from Account Party of an interim payment
under Section 11.2 of the
<PAGE>
Contract, the Stated Amount shall be automatically reduced by an amount equal to
eight-six and sixty-seven hundredths percent (86.67%) of the payment made,
without any further action required by Beneficiary or Bank. The U.S. Dollar
portion and Danish Kroner portion of the Stated Amount shall be reduced in
proportion to the U.S. Dollar portion and Danish Kroner portion of the payment
made. This Letter of Credit will automatically be extended for a period of one
(1) year from the Expiration Date if the Bank does not notify Account Party and
Beneficiary in writing more than thirty (30) days before the Expiration Date of
Bank's decision not to grant an extension.
This Letter of Credit shall automatically terminate at the earlier of (a)
____ p.m. on ___________, 199__, (b) the date that the entire Stated Amount has
been drawn in full, or (c) the date the Bank receives notice from beneficiary
that final payment of all monies due under the Contract has been made, whichever
is earlier.
Payment of any amount under this Letter of Credit by Bank shall be made as
the Beneficiary shall instruct on the next Business Day after the date the Bank
receives all documentation required hereunder, in immediately available funds on
such date.
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits, 1993 revision, International Chamber of Commerce
Publication No. 500, or by subsequent Uniform Customs and Practice fixed by
subsequent Congresses of the International Chamber of Commerce (the "UCP"), and
performance of Bank and Beneficiary shall be in accordance with the terms
thereof. If legal proceedings are initiated by any party with respect to the
payment of this Letter of Credit, Bank agrees that such proceedings shall be
subject to the jurisdiction of Texas courts and administrative agencies and
subject to Texas law, to the extent not inconsistent with the UCP.
Any draft drawn under this Letter of Credit must be presented at Bank's
__________ office in the manner provided for herein, must contain the number and
the date of the Letter of Credit and the name of Bank, and must be delivered
prior to the expiration of this Letter of Credit as set forth above. If Bank
receives Beneficiary's draft and certificate in strict conformity with the terms
and conditions of this Letter of Credit prior to the expiration of the Letter of
Credit, it will honor the same.
This Letter of Credit is negotiable and transferrable and consists of two
(2) pages and Annexes A, B and C.
Sincerely,
LETTER OF CREDIT BANK
By:
----------------------------
Name:
Title:
<PAGE>
ANNEX A
TO
IRREVOCABLE STAND-BY LETTER OF CREDIT
No. _______________
FORM OF DRAFT
[Bank Address] Place:____________________
Date: ______________, 19__
At sight, pay to the order of _____________________________ the amount of
_________________ Dollars ($_______) and ____________ Danish Kroner (Dkk
_________). This draft is drawn under Irrevocable Stand-by Letter of Credit No.
_______________, dated as of __________, 1998, issued by _________ Bank, for the
account of York Research Corporation, a Delaware corporation.
VESTAS-AMERICAN WIND TECHNOLOGY, INC.
By
--------------------------------------
Its:
<PAGE>
ANNEX B
TO
IRREVOCABLE STAND-BY
LETTER OF CREDIT No. _______________
FORM OF NONPAYMENT DRAWING CERTIFICATE
[Date]
[Bank Address]
Re: Irrevocable Stand-by Letter of Credit No. _______________
Ladies and Gentlemen:
The undersigned, the duly authorized officer of Beneficiary of the
above-referenced letter of credit (the "Letter of Credit"), hereby certifies to
you, as follows:
1. Beneficiary is making a drawing under the Letter of Credit in the
amount of ___________ Dollars ($_________) and _________ Danish Kroner (Dkk
__________) [insert amount of accompanying sight draft] (the "Draw Amount") in
accordance with the provisions of the Letter of Credit, as amended or
supplemented from time to time.
2. The undersigned deems Account Party has failed to pay Beneficiary as
provided under Section 11 of the Wind Turbine Equipment Sales and Installation
Contract referenced in the Letter of Credit (the "Contract").
Capitalized terms used herein and not otherwise defined have the meanings
provided therefor in the Letter of Credit or the Contract.
Beneficiary has executed and delivered this Certificate on this _______
day of _____________, 199_.
Sincerely,
VESTAS-AMERICAN WIND TECHNOLOGY, INC.
By
--------------------------------------
Its:
<PAGE>
ANNEX C
TO
IRREVOCABLE STAND-BY
LETTER OF CREDIT No. _______________
FORM OF EXPIRATION DRAWING CERTIFICATE
[Date]
[Bank Address]
Re: Irrevocable Stand-by Letter of Credit No. _______________
Ladies and Gentlemen:
The undersigned, the duly authorized Officer of Beneficiary of the
above-referenced letter of credit (the "Letter of Credit"), hereby certifies to
you, as follows:
1. Beneficiary is making a drawing under the Letter of Credit in the
amount of __________ Dollars ($________) and __________ Danish Kroner (Dkk
________) [insert amount of accompanying sight draft] (the "Draw Amount") in
accordance with the provisions of the Letter of Credit, as amended or
supplemented from time to time.
2. The Letter of Credit will expire on __________ __, 1998, a date which
is not more than thirty business days later than the date of this certificate,
and Beneficiary has not secured the extension of this Letter of Credit or
received a replacement letter of credit as required by the Contract between the
Account Party and the Beneficiary.
3. The Draw Amount represents the lesser of the Amount Stated available
under this Letter of Credit or the amount necessary to secure payment of all
obligations under Section 11 of the Contract.
Capitalized terms used herein and not otherwise defined have the meanings
provided therefor in the Letter of Credit or the Contract.
Beneficiary has executed and delivered this Certificate on this _______
day of _____________, 199_.
Sincerely,
VESTAS-AMERICAN WIND TECHNOLOGY, INC.
By
--------------------------------------
Its:
<PAGE>
EXHIBIT P
V47 Facility Price Breakdown
A. Material charges for tangible personal property conveyed and incorporated
into realty as improvements
Manufacturing Items:
<TABLE>
<CAPTION>
A (1) A (2) A (3)
----- ----- -----
Manufacturing Applicable Texas Reimbursement for
Item Cost ($) State & Local Tax Insurance and Customs
Manufacturing Item (incl. on A (1) Items @ Duties on A (1)
Description delivery) 6.25% ($) Items ($) Total
- ------------------------- --------------- ------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
42 ea. Vestas V47 WTG's 10,426,160 0 Exempt for Resale 293,694 10,719,854
- ------------------------- --------------- ------------------- ------------------------ ------------
42 ea. V47 rotor blade 5,787,210 0 Exempt for Resale 171,600 5,958,810
sets
- ------------------------- --------------- ------------------- ------------------------ ------------
42 ea. V47 top & bottom 1,113,630 31,369 1,144,999
control panels 0 Exempt for Resale
- ------------------------- --------------- ------------------- ------------------------ ------------
42 ea. sets control 21,000 591 21,591
cables between top and 0 Exempt for Resale
bottom control panels
- ------------------------- --------------- ------------------- ------------------------ ------------
42 ea. sets power cables 189,000 5,323 194,323
between top and bottom 0 Exempt for Resale
control panels
- ------------------------- --------------- ------------------- ------------------------ ------------
42 ea. 65 m. tubular 4,072,760 0 Exempt for Resale 4,072,760
towers
</TABLE>
<PAGE>
<TABLE>
- ------------------------- --------------- ------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
42 ea. sets of the
attached tubular tower
accessories:
ladders 376,000 0 Exempt for Resale 376,000
--------------- ------------------- ------------------------ ------------
lights 44,100 0 Exempt for Resale 44,100
--------------- ------------------- ------------------------ ------------
safety equipment 17,640 0 Exempt for Resale 17,640
--------------- ------------------- ------------------------ ------------
FAA light power
cables and mounting
hardware 2,000 0 Exempt for Resale 2,000
- ------------------------- --------------- ------------------- ------------------------ ------------
TOTAL 22,049,500 0 Exempt for Resale 502,577 22,552,077
- ------------------------- --------------- ------------------- ------------------------ ------------
</TABLE>
Non-Manufacturing Items:
<TABLE>
<CAPTION>
A (4) A (5) A (6)
----- ----- -----
Applicable Texas Reimbursement for
Non-manufacturing State & Local Tax Insurance and
Non-Manufacturing Item Cost ($) on A (4) Items @ Customs Duties on
Item Description (incl. delivery) 6.25% ($) A(4)Items ($) Total
- ------------------------- --------------- ------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
N/A
- ------------------------- --------------- ------------------- ------------------------ ------------
</TABLE>
<PAGE>
B. Reimbursement for separately listed items consumed by Contractor, rather
than incorporated into realty or conveyed to Corporation, and
reimbursement of Texas sales/use tax paid by Contractor thereon
<TABLE>
<CAPTION>
Reimbursement of
Applicable Texas
State & Local Tax
Item Cost ($) Paid ($) Total
- ------------------------------------------ ------------------- ------------------------ ----------
<S> <C> <C> <C>
Consumables & materials for assembly & 23,315 to be determined 23,315
installation
- ------------------------------------------ ------------------- ------------------------ ----------
</TABLE>
C. Construction Labor for items in A.
Item Cost ($)
- --------------------------------------------------------------- -------------
Installation, Start-up, commissioning and acceptance testing of 775,230
all items
- --------------------------------------------------------------- -------------
D. Lump-sum combined material and labor charges for specified improvements to
realty and reimbursement of Texas state and local sales/use tax paid by
Contractor on Items consumed by Contractor in connection therewith
Lump Sum Combined
Item Material & Labor ($)
- ------------------------------------- -------------------------
N/A
- ------------------------------------- -------------------------
E. Total overhead and profit
1,312,903
- -------------------------------------------------
<PAGE>
F. Sale of taxable items conveyed to Corporation but not incorporated into
realty
Tangible Personal Property:
<TABLE>
<CAPTION>
F (1) F (2)
----- -----
Applicable Texas State &
Tangible Personal Property Local Tax on F(1) items @
Item Description Item Cost ($) 6.25% ($) Total
- -------------------------- ------------------- -------------------------- ----------
<S> <C> <C> <C>
3 ea. Foundation template 8,550 534.38 $9,084.38
rings
- -------------------------- ------------------- -------------------------- ----------
</TABLE>
Taxable Services:
<TABLE>
<CAPTION>
F (3) F (4)
----- -----
Applicable Texas State &
Services Local Tax on F (3) Items @
Service Description Cost ($) 6.25% ($) Total
- -------------------------- ------------------- -------------------------- ----------
<S> <C> <C> <C>
N/A
- -------------------------- ------------------- -------------------------- ----------
</TABLE>
<PAGE>
G. Sale of non-taxable items conveyed to Corporation but not incorporated
into realty
<TABLE>
<CAPTION>
Item Cost ($)
<S> <C>
- --------------------------------------------------------------- -------------
3 sets As-built drawings 500
- --------------------------------------------------------------- -------------
6 sets operations and maintenance manuals 1,925
- --------------------------------------------------------------- -------------
TOTAL 2,425
- --------------------------------------------------------------- -------------
</TABLE>
H. Sale of non-taxable training conveyed to Corporation but not incorporated
into realty
<TABLE>
<CAPTION>
Item Cost ($)
<S> <C>
- --------------------------------------------------------------- -------------
Training in turbine operations 15,000
- --------------------------------------------------------------- -------------
</TABLE>
Note: Costs attributable to items procured from Denmark listed in section A.
assume an exchange rate of 6.6 DKK to 1 US$.
<PAGE>
EXHIBIT Q
V66 Facility Price Breakdown
A. Material charges for tangible personal property conveyed and incorporated
into realty as improvements
Manufacturing Items:
<TABLE>
<CAPTION>
A (1) A (2) A (3)
----- ----- -----
Manufacturing Applicable Texas Reimbursement for
Item Cost ($) State & Local Tax Insurance and Customs
Manufacturing Item (incl. on A (1) Items @ Duties on A (1)
Description delivery) 6.25% ($) Items ($) Total
- ------------------------- --------------- ------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
4 ea. Vestas V66 WTG's 2,831,119 0 Exempt for Resale 75,561 2,906,680
- ------------------------- --------------- ------------------- ------------------------ ------------
4 ea. V66 rotor blade 1,456,521 0 Exempt for Resale 40,920 1,497,441
sets
- ------------------------- --------------- ------------------- ------------------------ ------------
4 ea. V66 top & bottom 106,060 2,830 108,890
control panels w/ manuals 0 Exempt for Resale
- ------------------------- --------------- ------------------- ------------------------ ------------
4 ea. sets control 2,000 480 2,480
cables between top and 0 Exempt for Resale
bottom control panels
- ------------------------- --------------- ------------------- ------------------------ ------------
4 ea. sets power cables 18,000 55 18,055
between top and bottom 0 Exempt for Resale
control panels
- ------------------------- --------------- ------------------- ------------------------ ------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------- --------------- ------------------- ------------------------ ------------
<S> <C> <C> <C> <C>
4 ea. 80 m. tubular 931,870 0 Exempt for Resale 931,870
towers
- ------------------------- --------------- ------------------- ------------------------ ------------
4 ea. sets of the
attached tubular tower
accessories:
ladders (3); 35,500 0 Exempt for Resale 35,500
elevator (1)
--------------- ------------------- ------------------------ ------------
lights 4,200 0 Exempt for Resale 4,200
--------------- ------------------- ------------------------ ------------
safety equipment 1,680 0 Exempt for Resale 1,680
--------------- ------------------- ------------------------ ------------
FAA light power
cables and mounting 500 0 Exempt for Resale 500
hardware
- ------------------------- --------------- ------------------- ------------------------ ------------
TOTAL 5,387,450 0 Exempt for Resale 119,846 5,507,296
- ------------------------- --------------- ------------------- ------------------------ ------------
</TABLE>
Non-Manufacturing Items:
<TABLE>
<CAPTION>
A (4) A (5) A (6)
----- ----- -----
Applicable Texas Reimbursement for
Non-manufacturing State & Local Tax Insurance and
Non-Manufacturing Item Cost ($) on A (4) Items @ Customs Duties on A
Item Description (incl. delivery) 6.25% ($) (4)Items ($) Total
- ------------------------- --------------- ----------------- ------------------------ ------------
<S> <C> <C> <C> <C>
N/A
- ------------------------- --------------- ----------------- ------------------------ ------------
</TABLE>
<PAGE>
B. Reimbursement for separately listed items consumed by Contractor, rather
than incorporated into realty or conveyed to Corporation, and
reimbursement of Texas sales/use tax paid by Contractor thereon
<TABLE>
<CAPTION>
Reimbursement of
Applicable Texas
State & Local Tax
Item Cost ($) Paid ($) Total
- --------------------------------------- ------------- --------------------- ----------
<S> <C> <C> <C>
Consumables & materials for assembly & 9,500 to be determined 9,500
installation
- --------------------------------------- ------------- --------------------- ----------
</TABLE>
C. Construction Labor for items in A.
Item Cost ($)
- ---------------------------------------------------------------- ------------
Installation, Start-up, commissioning and acceptance testing of 293,550
all items
- ---------------------------------------------------------------- ------------
D. Lump-sum combined material and labor charges for specified improvements to
realty and reimbursement of Texas state and local sales/use tax paid by
Contractor on Items consumed by Contractor in connection therewith
Lump Sum Combined
Item Material & Labor ($)
- ------------------------------------------------ ------------------------
N/A
- ------------------------------------------------ ------------------------
E. Total overhead and profit
321,304
- -------------------------------------------------
<PAGE>
F. Sale of taxable items conveyed to Corporation but not incorporated into
realty
Tangible Personal Property:
<TABLE>
<CAPTION>
F (1) F (2)
----- -----
Applicable Texas State &
Tangible Personal Property Local Tax on F(1) items @
Item Description Item Cost ($) 6.25% ($) Total
- ---------------------------- --------------- --------------------------- --------------
<S> <C> <C> <C>
1 ea. Foundation template 2,850 178.13 $3,028.13
rings
- ---------------------------- --------------- --------------------------- --------------
</TABLE>
Taxable Services:
<TABLE>
<CAPTION>
F (3) F (4)
----- -----
Applicable Texas State &
Services Local Tax on F (3) Items @
Service Description Cost ($) 6.25% ($) Total
- ---------------------------- --------------- --------------------------- --------------
<S> <C> <C> <C>
N/A
- ---------------------------- --------------- --------------------------- --------------
</TABLE>
<PAGE>
G. Sale of non-taxable items conveyed to Corporation but not incorporated
into realty
<TABLE>
<CAPTION>
Item Cost ($)
<S> <C>
- --------------------------------------------------------------- -------------
3 sets As-built drawings 300
- --------------------------------------------------------------- -------------
6 sets operations and maintenance manuals 700
- --------------------------------------------------------------- -------------
TOTAL 1,000
- --------------------------------------------------------------- -------------
</TABLE>
H. Sale of non-taxable training conveyed to Corporation but not incorporated
into realty
<TABLE>
<CAPTION>
Item Cost ($)
<S> <C>
- --------------------------------------------------------------- -------------
Training in turbine operations 5,000
- --------------------------------------------------------------- -------------
</TABLE>
Note: Costs attributable to items procured from Denmark listed in section A.
assume an exchange rate of 6.6 DKK to 1 US$.
<PAGE>
EX-10(r)
================================================================================
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
by and between
MISSION ENERGY NEW YORK, INC.
a California corporation ("MENY")
and
B-41 ASSOCIATES, L.P.,
a Delaware limited partnership ("York Partners")
Made and Entered
into as of
November 1, 1997
================================================================================
<PAGE>
Brooklyn Navy Yard Cogeneration Partners, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PREAMBLE.............................................................-1-
RECITALS.............................................................-1-
ARTICLE I
DEFINED TERMS..................................................-2-
1.1 Specific Terms...........................................-2-
1.2 Additional Defined Terms................................-14-
1.3 Rules of Construction...................................-14-
ARTICLE II
ORGANIZATIONAL MATTERS........................................-14-
2.1 Formation...............................................-14-
2.2 Name....................................................-15-
2.3 Business Purpose........................................-15-
2.4 Place of Business.......................................-15-
2.5 Certificate of Limited Partnership......................-15-
2.6 Agent for Service of Process............................-15-
2.7 Term....................................................-15-
ARTICLE III
PARTNERS' CAPITAL AND FUNDING COMMITMENTS.....................-15-
3.1 General Partners........................................-15-
3.2 Limited Partners........................................-16-
3.3 Partnership Account.....................................-16-
3.4 Capital Accounts........................................-16-
3.5 No Interest on Capital Accounts.........................-16-
3.6 No Withdrawal from Capital Accounts.....................-16-
3.7 No Liability of Partners................................-16-
3.8 No Obligations..........................................-17-
3.9 Loans...................................................-17-
3.10 Security Agreement......................................-19-
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE IV
PAYMENTS AND DISTRIBUTIONS TO PARTNERS........................-19-
4.1 Distribution of Partnership Cash and Assets.............-19-
4.2 Payments to Partners....................................-20-
4.3 Loaned Employees; Reimbursement.........................-20-
4.4 Loans to Partners.......................................-21-
4.5 Amounts Withheld........................................-21-
ARTICLE V
ALLOCATIONS OF ITEMS OF
INCOME AND ITEMS OF DEDUCTION ...............................-21-
5.1 In General..............................................-21-
5.2 Items of Income and Items of Deduction..................-21-
5.3 Allocation Upon Liquidation.............................-22-
5.4 Regulatory Allocation Provisions........................-22-
5.5 Capital Accounts.......................................-25-
ARTICLE VI
RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNERS.............-27-
6.1 Management of the Partnership...........................-27-
6.2 Management Committee....................................-28-
6.3 Authority of General Partners to Deal with Partnership..-30-
6.4 Executive Director and Other Officers...................-30-
6.5 Operators...............................................-31-
6.6 EWG Approval............................................-31-
6.7 Certain Duties and Obligations of the General Partners..-31-
6.8 Other Business of Partners and Affiliates...............-32-
6.9 Limitation on Liability of General Partners.............-32-
6.10 Audit Rights............................................-33-
6.11 Partnership Obligations.................................-33-
6.12 Title to Partnership Assets.............................-33-
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PARTNERS......................................................-33-
7.1 Reciprocal Representations and Warranties...............-33-
7.2 Covenant Regarding Status...............................-34-
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII
ASSIGNMENTS AND TRANSFERS.....................................-34-
8.1 Transfers of General Partners Interests.................-34-
8.2 Transfers of Limited Partner Interests..................-35-
8.3 Limitations on Transfers of Interests...................-35-
8.4 Right of First Refusal..................................-36-
8.5 Effect of Transfers or Withdrawals......................-37-
8.6 Consent.................................................-38-
ARTICLE IX
WINDING UP AND LIQUIDATION OF THE PARTNERSHIP.................-38-
9.1 Events Causing Winding Up...............................-38-
9.2 Effect of Winding Up....................................-39-
9.3 Liquidation.............................................-39-
ARTICLE X
DEFAULTS AND REMEDIES.........................................-40-
10.1 Event of Default........................................-40-
10.2 Remedies Available to Nondefaulting Partner.............-40-
10.3 Nonexclusivity..........................................-41-
ARTICLE XI..........................................................-41-
BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS, ETC.
.............................................................-41-
11.1 Books and Records.......................................-41-
11.2 Accounting and Fiscal Year..............................-42-
11.3 Bank Accounts and Investments...........................-42-
11.4 Reports.................................................-42-
11.5 Depreciation and Elections..............................-43-
11.6 Designation of Tax Matters Partner......................-43-
11.7 Expenses of Adjustment..................................-43-
11.8 Budgets and Forecasts...................................-44-
ARTICLE XII.........................................................-45-
MEETINGS; VOTING RIGHTS OF LIMITED PARTNERS...................-45-
12.1 Meetings................................................-45-
12.2 Voting Rights of Limited Partners.......................-46-
12.3 Written Consent in Lieu of Meeting......................-46-
ARTICLE XIII........................................................-47-
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
OTHER PROVISIONS..............................................-47-
13.1 Appointment of General Partners as Attorneys-in-Fact....-47-
13.2 Amendments..............................................-48-
13.3 Right of Setoff.........................................-49-
13.4 Binding Provisions; Successors and Permitted Assigns....-49-
13.5 Applicable Law..........................................-49-
13.6 Counterparts............................................-49-
13.7 Separability of Provisions..............................-50-
13.8 Article and Section Titles..............................-50-
13.9 Addresses and Notices...................................-50-
13.10 Further Action..........................................-50-
13.11 No Third-Party Beneficiaries............................-50-
13.12 Waiver..................................................-50-
13.13 Integration.............................................-51-
13.14 Waiver of Action for Partition..........................-51-
13.15 No Recourse and Consequential Damages...................-51-
13.16 Maximum Lawful Rate.....................................-51-
13.17 No Bond Closing Date....................................-52-
ARTICLE XIV.........................................................-52-
DISPUTE RESOLUTION............................................-52-
14.1 Dispute Resolution......................................-52-
14.2 Mutual Release..........................................-52-
</TABLE>
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<PAGE>
TABLE OF EXHIBITS
<TABLE>
<CAPTION>
Section
-------
<S> <C> <C>
EXHIBIT A Partners' Names, Addresses and Interests Preamble
EXHIBIT B Form of Construction Loan Note 3.9.2
EXHIBIT C Form of Priority Loan Note 3.9.3
EXHIBIT D York Partners Security Agreement 3.10
</TABLE>
-v-
<PAGE>
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
PREAMBLE
This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (the
"Agreement") is made and entered into as of November 1, 1997, by and among MENY
and York Partners, individually as a "General Partner," and collectively, as the
"General Partners," and the Persons listed on Exhibit A to this Agreement as the
Limited Partners, and such other Partners as are admitted or substituted
pursuant to the terms hereof, for the purpose of forming a limited partner ship
under the laws of the State of Delaware. The Partners hereby amend and restate
the limited partnership, including the terms of the Initial Agreement, the
December Agreement, the Letter Agreement, the Amendment, the Supplemental
Agreement and the Second Supplemental Agreement (all as hereinafter defined),
subject to and effective as of the Bond Closing Date (as hereinafter defined) on
the terms and conditions stated herein.
RECITALS
A. The Partners formed a Partnership pursuant to a Limited
Partnership Agreement dated as of October 19, 1992 ("Initial Agreement") to
design, construct, develop, own, finance, manage and operate a power facility
located at Brooklyn, New York (the "Project").
B. The Partners have entered into an Agreement dated as of December
22, 1995 (the "December Agreement"), a Letter Agreement dated as of December 22,
1995 (the "Letter Agreement"), Amendment No. 1 to Limited Partnership Agreement
dated as of January 24, 1996 (the "Amendment"), a Supplemental Agreement dated
as of February 4, 1996 (the "Supplemental Agreement") and a Second Supplemental
Agreement dated as of February 13, 1996 (the "Second Supplemental Agreement")
for the purpose of amending, supplementing or modifying the terms of the Initial
Agreement.
-1-
<PAGE>
ARTICLE I
DEFINED TERMS
1.1 Specific Terms. The following definitions shall apply for
purposes of this Agreement:
1.1.1."Accountants" means a firm of nationally recognized
independent certified public accountants as may be engaged from time to time by
the Partnership.
1.1.2."Adjusted Capital Account Deficit" with respect to any
Partner means the deficit balance, if any, in such Partner's Capital Account at
the end of any Fiscal Year, with the following adjustments:
(i) credit to such Capital Account any amount that such
Partner is obligated to restore pursuant to any provision of this Agreement or
is deemed to be obligated to restore pursuant to Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5) after taking into account thereunder any changes
during such year in Partnership Minimum Gain and in the minimum gain
attributable to any Partner Nonrecourse Debt; and
(ii) debit to such Capital Account the items described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4) through (6).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Sections 1.704-1(b)(2)(ii)(c) and
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
1.1.3."Affiliate" means, when used with reference to a
specified Person, any Person who directly or indirectly controls, is controlled
by or is under common control with the specified Person; provided however, that
neither General Partner nor a General Partner's Affiliates shall be deemed to be
an Affiliate of the Partnership or the other General Partner or any Person
controlling, controlled by or under common control with such other Partner, or
any Person controlled by the Partnership or any officer, director, partner or
shareholder of such other Partner. In addition, "Affiliate", when used with
respect to York Partners or York, shall include Cogeneration Technologies, Inc.,
Haviland Partners L.P., R.V. Associates, L.P., York Cogen Partners, L.P., B-41
Associates, L.P., B-41 Management Corp., RRR'S Ventures Ltd., York Research
Corporation, any Affiliates thereof and any of their respective successors or
assigns.
1.1.4."Agreement" means this Amended and Restated Limited
Partnership Agreement, as amended, supplemented or modified from time to time.
-2-
<PAGE>
1.1.5."Agency" means the New York City Industrial Development
Agency and any body, board, authority, agency or other governmental agency or
instrumentality which shall hereafter succeed to the powers, duties, obligations
and functions thereof.
1.1.6."Amendment" has the meaning set forth in the Recitals.
1.1.7."Available Cash Flow" means, as of any Distribution
Date, the excess (if any) for the full calendar quarter next preceding such
Distribution Date of (a) the sum of all cash receipts received by the
Partnership including any reduction in Reserves established in prior calendar
quarters over (b) the Priority Amounts for such calendar quarters.
1.1.8."Bond Closing Date" means the date on which the New
Bonds are originally issued which date shall be no later than June 30, 1998.
1.1.9."Business Day" means any day other than a day on which
commercial banks in New York, New York are authorized or required to be closed.
1.1.10. "Capital Account" has the meaning set forth in Section
3.4
1.1.11. "Capital Contribution" means any direct or indirect
contribution by a Partner to the Partnership, including the total amount of
cash, the face amount of any guarantee of a Partnership obligation by a Partner
or Affiliate of a Partner, the face amount of any letter of credit posted by a
Partner or Affiliate of a Partner for a Partnership obligation or security
deposit posted by a Partner or Affiliate of a Partner for a Partnership
obligation of which a Partner has given Notice to the Management Committee (but
only to the extent that the Partner makes a payment pursuant to such guarantee,
or such letter of credit or the security deposit is drawn upon) the fees and
costs incurred by a Partner or Affiliate of a Partner in obtaining and
maintaining any such guarantee, letter of credit or security deposit of which a
Partner has given Notice to the Management Committee, and the fair market value
(as determined by the Management Committee) of any other property contributed to
the Partnership by any Partner (net of liabilities secured by that property
which are deemed assumed or taken subject to by the Partnership under Section
752(c) of the Code).
1.1.12. "Closing Date" means October 19, 1992.
1.1.13. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
1.1.14. "Con Ed" means Consolidated Edison Company of New
York, Inc.
-3-
<PAGE>
1.1.15. "Construction" means the design, engineering,
construction testing and start-up of the Project; the verb "Construct" shall
have a correlative meaning.
1.1.16. "Construction Loan" means a loan from MENY (in the
capacity as an independent lender to the Partnership, and not as a Partner) to
the Partnership made pursuant to Section 3.9.2.
1.1.17. "Construction Loan Rate" means a rate equal to the
rate per annum announced from time to time by Citibank, N.A. as its prime or
base rate plus six percent, compounded daily and calculated on the basis of a
year of 365/366 days and the number of days elapsed (but not greater than the
Maximum Lawful Rate) or such other lower rate as MENY may specify by written
notice to the Partnership.
1.1.18. "December Agreement" has the meaning set forth in the
Recitals.
1.1.19. "Debt" of any Person means, at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments (excluding "deposit only" or similar endorsements on
instruments payable to the order of such Person), (iii) all obligations of such
Person to pay the deferred purchase price of property or services (except trade
accounts payable arising and proposed to be paid in the ordinary course of
business), (iv) that portion of obligations of such person as lessee under
capital leases which is properly classified as a liability on a balance sheet in
conformity with generally accepted accounting principles, (v) all obligations
described in clauses (i) through (iv) of this definition of others guaranteed by
such Person, whether or not secured by a lien or other security interest on any
asset of such Person, (vi) all obligations described in clauses (i) through (iv)
of this definition of others, whether or not guaranteed by such Person, secured
by a lien or other security interest on any asset of such Person, and (vii) all
liabilities of such Person in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
1.1.20. "Debtor Relief Laws" means any applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar laws affecting the rights or remedies of creditors
generally, as in effect from time to time.
1.1.21. "Defaulting Partner" has the meaning set forth in
Section 10.1.
1.1.22. "Delaware Act" means the Delaware Revised Uniform
Limited Partnership Law (6 Del. C. ss. 17-101 et seq.) as from time to time in
effect in the State of Delaware, or any corresponding provision or provisions of
any succeeding or successor law of the State of Delaware.
-4-
<PAGE>
1.1.23. "Distribution Account" means, for each Partner, such
Partner's aggregate Capital Contributions reduced by the aggregate distributions
to such Partner.
1.1.24. "Distributable Amounts" means amounts available for
distribution to the Partners (including, without limitation, proceeds of any
Long-Term Credit Facility) in accordance with Section 4.1.
1.1.25. "Distribution Date" means the Bond Closing Date and
the Business Day immediately following each January 1, April 1, July 1, and
October 1 of each fiscal year commencing April 1, 1998.
1.1.26. "Economic Risk of Loss" has the meaning provided by
Regulations Section 1.752-2.
1.1.27. "Event of Default" has the meaning set forth in
Section 10.1.
1.1.28. "EWG Approval" has the meaning set forth in Section
6.6.
1.1.29. "Executive Director" means the Person in charge of the
day-to-day management of the Project as set forth in this Agreement selected in
accordance with Section 6.4.
1.1.30. "Exempt Wholesale Generator" or "EWG" has the meaning
set forth in Section 52 of the Public Utility Holding Company Act.
1.1.31. "General Partner" means any Person who is admitted to
the Partnership as a general partner and who is at the time of reference a
general partner, in such person's capacity as a general partner of the
Partnership (except as the context may otherwise require), and "General
Partners" means all of the General Partners or, if there is only one then
remaining, the General Partner.
1.1.32. "General Partner Management Fee" means a fee
calculated as a percentage of the gross revenues of the Partnership, payable in
accordance with the definition of Priority Amount.
1.1.33. "Gross Revenues" means revenues received for the sale
or transfer of electricity, thermal energy and fuel.
1.1.34. "Indemnified Person" has the meaning set forth in
Section 6.9.1.
-5-
<PAGE>
1.1.35. "Initial Agreement" has the meaning set forth in the
Recitals.
1.1.36. "Insurance Requirements" means, with respect to the
Project, policies of insurance maintained as to the Project by or on behalf of
the Partnership with insurance companies acceptable to MENY, and to any lenders
providing a Long-Term Credit Facility, of the following types, in amounts deemed
appropriate by the Management Committee (subject to the requirements set forth
below), and on the following terms (in each case to the extent obtainable at
commercially reasonable rates), unless the Management Committee otherwise
agrees:
(a) at all times, comprehensive general liability
insurance (including contractual liability, personal injury, property damage,
owner's protective liability, product liability and completed operations)
covering claims arising out of the ownership, operation, maintenance, condition
or use of the Project;
(b) as soon as practicable after such coverage becomes
appropriate in light of the evolution of the Project, all risk insurance (or,
prior to completion of construction and testing, builders' all risk insurance)
covering physical loss or damage, including coverage against fire and sprinkler
leakage, boiler and machinery coverage, for the Project and any and all
materials, equipment and machinery intended for the Project in an amount not
less than the replacement cost of the Project (including labor and installation
costs); and
(c) as soon as practicable after such coverage becomes
appropriate in light of the evolution of the Project, such other insurance
(including flood and earthquake) with respect to the Project in such amounts and
against such insurable hazards as is usually carried by businesses of
established reputation operating similar properties and as the lenders under any
related Long-Term Credit Facility may from time to time reasonably request.
Each policy may provide for reasonable deductibles and sublimits, and shall be
in all other respects satisfactory to the lenders under any Long-Term Credit
Facility and to MENY.
1.1.37. "Interest" means the entire ownership interest of a
Partner in the Partnership at any particular time as set forth herein. An
Interest of a Person in its capacity as a Limited Partner is at times referred
to herein as a "Limited Partner Interest"; the Interest of a Person in its
capacity as a General Partner is at times referred to herein as a "General
Partner Interest". The percentage Interest of the Partners is as set forth in
Sections 3.1 and 3.2.
1.1.38. "Interest Rate" means a rate per annum equal to the
rate announced from time to time by Citibank, N.A. as its prime or base rate
plus one percent (but not greater than the Maximum Lawful Rate).
-6-
<PAGE>
1.1.39. "Items of Deduction" means, for any fiscal year, the
Partnership's items of deduction as determined for Federal income tax purposes
(a) without adjustment for the Partnership's items of income as determined for
Federal income tax purposes, (b) without taking into account any items of
Partnership income, gain, loss or deduction specially allocated pursuant to
Section 5.4 and (c) as adjusted pursuant to Section 5.5.3.
1.1.40. "Items of Income" means, for any fiscal year, the
Partnership's items of income as determined for Federal income tax purposes, (a)
without adjustment for the Partnership's items of deduction or loss as
determined for Federal income tax purposes, (b) without taking into account any
items of Partnership income, gain, loss or deduction specifically allocated
pursuant to Section 5.4, and (c) as adjusted pursuant to Section 5.5.3.
1.1.41. "Letter Agreement" has the meaning as set forth in the
Recitals.
1.1.42. "Limited Partner" means any Person who is admitted to
the Partnership as a limited partner and who is at the time of reference a
limited partner.
1.1.43. "Long-Term Credit Facility" means, with respect to the
Project, any long-term credit or financing, including working capital loans and
letters of credit, for all or a portion of the costs of the Project evidenced by
a credit agreement providing for long-term credit or financing, including
working capital loans and letters of credit, at available market competitive
rates and terms constituting Nonrecourse Liability. The New Bonds, New Working
Capital Facility Loans and New Bonds Letters of Credit shall each constitute a
Long-Term Credit Facility.
1.1.44. "Long-Term Credit Facility Closing" means, with
respect to any Long-Term Credit Facility, the effective date of the closing of a
Long-Term Credit Facility.
1.1.45. "Majority of the Limited Partners" means the holders
of more than 50% of the outstanding percentage Interests of the Limited Partner
Interests; and "Majority of the General Partners" means the holders of more than
50% of the outstanding percentage Interests of the General Partner Interests.
1.1.46. "Management Committee" means the committee composed of
two representatives of each General Partner which shall manage the Partnership
in accordance with, and subject to, the provisions of this Agreement.
1.1.47. "Maximum Lawful Rate" has the meaning set forth in
Section 13.16.
-7-
<PAGE>
1.1.48. "MENY" means the corporation identified as such on
Exhibit A.
1.1.49. "MENY Affiliates" means Edison International, a
California corporation, and its Subsidiaries.
1.1.50. "New Bonds" means any taxable or tax exempt bonds
issued on or after the Bond Closing Date in an aggregate amount in excess of
$300,000,000, which New Bonds, together with the related instruments and
documents, as amended, supplemented or modified from time to time, shall be
deemed to constitute a Long-Term Credit Facility.
1.1.51. "New Bonds Letters of Credit" means letters of credit
issued or obligations incurred pursuant to reimbursement agreements or similar
agreements for the benefit of the Project, vendors and suppliers to the Project,
holders of the New Bonds or persons providing benefits to the Project.
1.1.52. "New Working Capital Facility Loans" means loans
advanced for the working capital requirements of the Partnership for the
Project.
1.1.53. "Nondefaulting Partners" has the meaning set forth in
Section 10.2.1.
1.1.54. "Nonrecourse Liability" means a liability to the
extent that no Partner nor any Affiliate of a Partner bears in respect thereof,
any Economic Risk of Loss.
1.1.55. "Notice" means a writing containing the information
required by this Agreement to be communicated to any Person and that is
delivered or sent in the manner specified in Section 13.9 or actually received
by such Person.
1.1.56. "Old Bonds" means the Industrial Development Revenue
Bonds (Brooklyn Navy Yard Cogeneration Project) Series 1995A in the aggregate
principal amount of $126,962,850 and the Industrial Development Revenue Bonds
(Brooklyn Navy Yard Cogeneration Project) Series 1995B in the aggregate
principal amount of $126,962,850 issued by the Agency, which Old Bonds, together
with the related instruments and documents, shall not constitute a Long-Term
Credit Facility.
1.1.57. "Operator" means the Person who, pursuant to an
operating agreement with the Partnership, performs or causes to be performed
operation, maintenance, and other functions of or related to the Project.
1.1.58. "Partner" means any Limited Partner or General
Partner.
-8-
<PAGE>
1.1.59. "Partner Loan" means a loan from a General Partner (in
the capacity as an independent lender to the Partnership, and not as a Partner)
to the Partnership pursuant to Section 3.9.1 and shall not include any
Construction Loan.
1.1.60. "Partner Nonrecourse Debt" has the same meaning as the
term "partner nonrecourse debt" set forth in Section 1.704-2(b)(4) of the
Regulations.
1.1.61. "Partnership" means the limited partnership formed
under this Agreement, as the partnership may from time to time be constituted.
1.1.62. "Partnership Account" means the segregated interest
bearing account in the Partnership's name referenced in Section 3.3 into which
the General Partners shall deposit certain receipts of the Partnership as set
forth therein.
1.1.63. "Partnership Minimum Gain" means the amount determined
by computing, with respect to each Nonrecourse Liability of the Partnership, the
amount of gain (of whatever character) that would be realized by the Partnership
if it disposed of the Partnership property subject to such liability in a
taxable transaction in full satisfaction of such liability (and for no other
consideration), and by then aggregating the amounts so computed. Partnership
Minimum Gain shall be determined in a manner consistent with the rules of
Regulations Section 1.704-2(d)(1), including the requirement that if the book
value of property subject to one or more Nonrecourse Liabilities (as determined
for purposes of adjusting the Partners' Capital Accounts) differs from its
adjusted tax basis, Partnership Minimum Gain shall be determined with reference
to such book value as provided in Regulations Section 1.704- 2(d)(3).
1.1.64. "Person" means a corporation, an association, a
partnership, a limited liability company, an organization, a business, an
individual, a government or a political subdivision thereof, a governmental
agency or any other juridical entity.
1.1.65. "Power Sales Agreement" means the Energy Sales
Agreement, dated as of October 31, 1996, between Con Ed and the Partnership, as
such agreement may be supplemented, amended, modified, consolidated or replaced
by a new agreement.
1.1.66. "Priority Amounts" means the application of the
Partnership's cash to the following uses in the following order of priority:
(a) maintenance, operating and other business expenses
and capital expenditures necessary for the continued safe and economic operation
of the Project, including payments under the agreement with the Operator,
-9-
<PAGE>
expenditures to meet governmental requirements and Reserves in anticipation of
such expenditures;
(b) principal, interest, fees, rent, costs and expenses
of the Partnership pursuant to any Long-Term Credit Facility and any and all
Reserves and deposits required by any Long-Term Credit Facility;
(c) a General Partner Management Fee equal to 2.5% of
the Gross Revenues of the Partnership for each month prior to and including the
month of the Bond Closing Date payable to each General Partner on the next
following Distribution Date;
(d) to the extent that payment of any General Partner
Management Fee or any Royalty Fee have, at the option of the General Partners,
been subordinated or deferred or there is insufficient cash on any prior
Distribution Date to pay the General Partner Management Fee or Royalty Fee, all
such subordinated, deferred or unpaid General Partner Management Fee and Royalty
Fee;
(e) a General Partner Management Fee equal to 0.5% of
the Gross Revenues of the Partnership calculated from the first day of the month
after the Bond Closing Date for a period of forty eight (48) calendar months
thereafter payable to York Partners on each Distribution Date;
(f) a Royalty Fee equal to 4.5% of the Gross Revenues of
the Partnership calculated from the first day of the month after the Bond
Closing Date for a period of forty-eight (48) calendar months thereafter payable
to York Partners on each Distribution Date;
(g) a General Partner Management Fee equal to 2.0% and
2.0% of the Gross Revenues of the Partnership calculated from the first day of
the month beginning forth-eight (48) months after the Bond Closing Date for a
period of sixty (60) calendar months thereafter payable to York Partners and
MENY, respectively, on each Distribution Date;
(h) a General Partner Management Fee equal to 1.5% and
1.5% of the Gross Revenues of the Partnership calculated from the first day of
the month beginning one hundred eight (108) months after the Bond Closing Date
for a period of sixty (60) calendar months thereafter payable to York Partners
and MENY, respectively, on each Distribution Date;
(i) a General Partner Management Fee equal to 1.0% and
1.0% of the Gross Revenues of the Partnership calculated from the first day of
the month beginning one hundred sixty-eight (168) months after the Bond Closing
Date for
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a period of sixty (60) calendar months thereafter payable to York Partners and
MENY, respectively, on each Distribution Date;
(j) a General Partner Management Fee equal to 0.5% and
0.5% of the Gross Revenues of the Partnership calculated from the first day of
the month beginning two hundred twenty-eight (228) months after the Bond Closing
Date for a period of two hundred forty (240) calendar months thereafter (but in
no event later than October 31, 2036) payable to York Partners and MENY,
respectively, on each Distribution Date;
(k) principal, interest, fees, costs and expenses due
under the Construction Loan;
(l) scheduled payments in that month of principal and
accrued interest on any subordinated loans, including any Partner Loans;
(m) any other Reserves or funds for capital expenditures
established in such amounts as the Management Committee determines in its
reasonable discretion to be necessary;
(n) distributions to the Partners pursuant to Article
IV.
1.1.67. "Priority Loan" means a loan from a Partner to another
Partner that is subject to the terms and conditions set forth in Section 3.9.
1.1.68. "Project" has the meaning set forth in the Recitals.
1.1.69. "Project Agreements" means, individually and
collectively, any and all agreements relating to the Project as each may be
amended, supplemented or modified from time to time.
1.1.70. "Property" means any parcel of real estate on which
the Project is or is to be located, together with all easements appurtenant
thereto, all improvements constructed thereon, and all personal property owned
or leased by the Partnership and used in connection therewith, including any
interest of the Partnership therein.
1.1.71. "Proportionate Share" means, as of the date of
calculation, a fraction the numerator of which is the percentage Interest of the
General Partner Interest held by that General Partner and the denominator of
which is the aggregate of percentage Interests of all General Partner Interests.
1.1.72. "PURPA" means the Public Utility Regulatory Policies
Act of 1978, as amended, and the regulations promulgated thereunder.
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1.1.73. "Regulations" means the Income Tax Regulations
(including temporary and proposed) promulgated under the Code by the Internal
Revenue Service, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
1.1.74. "Released Claim" has the meaning set forth in Section
14.2.
1.1.75. "Released Party" has the meaning set forth in Section
14.2.
1.1.76. "Releasing Parties" has the meaning set forth in
Section 14.2.
1.1.77. "Reserves" means provisions for contingencies in
accordance with prudent management practices relative to the type of business in
which the Partnership is engaged and the levels of insurance maintained by the
Partnership and generally accepted accounting principles.
1.1.78. "Royalty Fee" means a royalty calculated as a
percentage of the gross revenues of the Partnership, payable in accordance with
the definition of Priority Amount.
1.1.79. "Second Supplemental Agreement" has the meaning set
forth in the Recitals.
1.1.80. "Site Lease" means the Site Lease dated December 19,
1989, between Brooklyn Navy Yard Development Corporation and Cogeneration
Technologies, Inc., as amended and assigned.
1.1.81. "Subsidiary" means, when used with reference to a
specified Person, any Affiliate of the specified Person who directly or
indirectly is controlled by such specified Person.
1.1.82. "Substituted Partner" means any Partner admitted to
the Partnership as a General Partner or a Limited Partner, as the context
requires, pursuant to Article VIII, whether in lieu of or in addition to an
assigning Partner.
1.1.83. "Supplemental Agreement" has the meaning set forth in
the Recitals.
1.1.84. "Tax Matters Partner" has the meaning set forth in
Section 11.6.
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1.1.85. "Withdrawal" when used with reference to a Partner,
shall mean in lieu of other events of withdrawal specified in Section 17-402(4)
and (5) of the Delaware Act:
(a) the filing of a certificate of dissolution or its
equivalent for a General Partner that is a corporation or the revocation of a
charter of a General Partner that is a corporation;
(b) the dissolution and commencement of winding up or
liquidation of a General Partner that is a partnership;
(c) an attempt by a Partner to withdraw from or to
transfer any of its Interests in the Partnership, except as permitted by Article
VIII;
(d) the failure by a General Partner generally to pay
its Debts as they become due or the admission in writing by a General Partner of
its inability to pay its Debts or a general assignment by a General Partner for
the benefit of creditors;
(e) the commencement by a General Partner of any case,
proceeding or other action seeking for itself or its Debts any arrangement,
composition, readjustment, liquidation, dissolution or other reorganization or
similar relief under any Debtor Relief Law;
(f) in any involuntary case, proceeding or other action
commenced against a General Partner which seeks to have an order for relief
(injunctive or otherwise) entered against the General Partner, as debtor, or
seeks reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its Debts under any Debtor Relief Law, (i) a General
Partner fails to bond, discharge or obtain a dismissal of such case, proceeding
or other action within 60 days of its commencement, or (ii) a General Partner
converts the case from one chapter of the Bankruptcy Reform Act of 1978, as
amended, to another chapter, or (iii) a General Partner is the subject of an
order for relief which is not stayed within 30 days from the entry thereof;
(g) the filing by a General Partner of an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against it in any bankruptcy, insolvency or reorganization
proceeding; or
(h) the appointment of a trustee, receiver, custodian or
liquidator of a General Partner or of all or any part of its properties, if said
appointment has not been vacated or stayed within 90 days or the seeking,
consenting, or acquiescing of a General Partner to the appointment of a trustee,
receiver, custodian or liquidator of it or of all or any substantial part of its
properties.
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1.1.86. "York Affiliates" means York Research Corporation, a
Delaware corporation, and its Affiliates.
1.1.87. "York Partners" means the limited partnership
identified as such on Exhibit A.
1.1.88. "York Partners Security Agreement" has the meaning set
forth in Section 3.10.
1.1.89. "York Reimbursement Agreement" means the York Partners
Reimbursement Agreement (PMNC) dated as of the date hereof among York Partners,
the Partnership and Edison Mission Energy as amended, supplemented or modified
from time to time.
1.2 Additional Defined Terms. For the convenience of the parties, in
addition to the defined terms set forth in this Article I, certain other terms
are defined throughout this Agreement.
1.3 Rules of Construction. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
(i) the terms defined in this Article I have the meanings assigned to them in
this Article I and include the plural as well as the singular, (ii) all
accounting terms not otherwise defined have the meanings assigned under
generally accepted accounting principles, (iii) all references in this Agreement
to designated "Articles", "Sections," "Exhibits," "Schedules" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
the body of this Agreement, as it may be amended, (iv) pronouns of either gender
or neuter shall include, as appropriate, the other forms, (v) any references to
regulations or statutes shall be construed as including all provisions
consolidating, amending, succeeding or replacing the statute or regulation
referred to, (vi) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (vii) the words "include," "including"
and other words of similar import mean include or including without limitation.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. The parties hereby form a partnership as a limited
partnership under the laws of the State of Delaware. The rights and liabilities
of the Partners shall be as provided in the Delaware Act, except as otherwise
expressly provided herein.
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2.2 Name. The name of the Partnership shall be the name set forth on
the cover sheet hereof or such other name as the General Partners may hereafter
designate by Notice to the Limited Partners and by making any required filings
under the Delaware Act.
2.3 Business Purpose.
2.3.1.The primary business purpose of the Partnership shall be
to design, Construct, develop and operate for profit the Project in order to
provide a substantial and reliable resource of electric and thermal energy and
capacity for sale.
2.3.2.The Partnership may engage in any activities whatsoever
that the Partnership may deem proper, convenient or incidental in connection
with any of the foregoing purposes.
2.4 Place of Business. The principal place of business of the
Partnership shall be Building 41, Brooklyn Navy Yard, Flushing Avenue and
Cumberland Street, County of Kings, New York, or such other place as the General
Partners may hereafter designate by Notice to the Limited Partners. The
Partnership may maintain such other offices and places of business as the
General Partners may deem advisable.
2.5 Certificate of Limited Partnership. The General Partners have
executed a Certificate of Limited Partnership and filed it in the Office of the
Delaware Secretary of State as required by Section 17-206(a) of the Delaware
Act.
2.6 Agent for Service of Process. Unless changed by the Management
Committee, the name of the registered agent for service of process on the
Partnership in Delaware shall be United Corporate Services, Inc. The address of
the registered agent and the address of the registered office of the Partnership
in Delaware is 15 East North Street, Dover, Delaware 19901.
2.7 Term. The Partnership commenced upon the filing of the original
Certificate of Limited Partnership in accordance with the Delaware Act, and
(unless sooner terminated in accordance with any provisions of this Agreement)
shall continue in existence until December 31, 2051.
ARTICLE III
PARTNERS' CAPITAL AND FUNDING COMMITMENTS
3.1 General Partners. The names, addresses, and Interests of the
General Partners are set forth in Exhibit A attached hereto. On the Closing Date
and as
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of the date hereof, York Partners and MENY each had a General Partner Interest
with a percentage Interest equal to 5%.
3.2 Limited Partners. The names, addresses, and Interests of the
Limited Partners are set forth in Exhibit A. On the Closing Date and as of the
date hereof, York Partners and MENY each had a Limited Partner Interest with a
percentage Interest equal to 45%.
3.3 Partnership Account. A Partnership Account shall be established
and maintained on behalf of the Partnership. The General Partners shall deposit
the proceeds of all Capital Contributions, Construction Loans, and Partner Loans
and any other receipts of the Partnership with respect to the Project into the
Partnership Account promptly upon the receipt thereof by the Partnership or by
any General Partner on its behalf. The amounts held in the Partnership Account
shall be used by the Partnership in a manner consistent with this Agreement. All
disbursements from the Partnership Account shall be made (i) to comply with the
provisions of Section 4.1, (ii) at the direction of the Executive Director, to
pay or reimburse costs of the Project, or (iii) as the Management Committee may
otherwise direct.
3.4 Capital Accounts. The Partnership has established a separate
capital account on its books (each, a "Capital Account") for each Partner, which
has been and shall be maintained and adjusted in accordance with Section 5.5. As
of January 1, 1997, the Capital Account of each of York Partners and MENY was
$21,414 and ($26,872,446), respectively, after inclusion of all Capital
Contributions made by each Partner and all adjustments required by Section 5.5
through and including December 31, 1996.
3.5 No Interest on Capital Accounts. The Partnership shall not be
obligated to redeem or repurchase any Interest, and no Partner shall have the
right to withdraw, or receive any return of, its Capital Contribution or amounts
on deposit in its Capital Account, except as specifically provided herein. No
Partner shall be paid any interest on any Capital Contribution made by it to the
Partnership or on its Capital Account.
3.6 No Withdrawal from Capital Accounts. Partners shall not be
entitled to the withdrawal or return of any portion of their respective Capital
Accounts, except to the extent provided for in this Agreement.
3.7 No Liability of Partners.
3.7.1.Each General Partner may but shall not be obligated to
the Partnership or any Partner to make any loan or Capital Contribution to the
Partnership. No General Partner shall have personal liability for repayment to
the Limited Partners of their Capital Contributions, or for payments to the
Partnership of the negative amounts of the General Partners' Capital Account, if
any.
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3.7.2.No Limited Partner shall be liable for the debts,
liabilities, contracts or any other obligations of the Partnership, and a
Limited Partner shall not be required to lend any funds to the Partnership or to
make any further Capital Contribution to the Partnership. Limited Partners shall
have no liability under this Agreement except pursuant to this Agreement and as
provided by the Delaware Act. A Limited Partner may, under certain
circumstances, be required by applicable law to return to the Partnership, for
the benefit of Partnership creditors, amounts previously distributed to it. If
any Limited Partner is obligated to make any such payment, such obligation shall
be the obligation of such Limited Partner and not of the General Partners.
3.8 No Obligations. No reference to MENY Affiliates or York
Affiliates herein shall be deemed to imply that any MENY Affiliate (other than
MENY) or any York Affiliate (other than York Partners) has any obligation under
this Agreement.
3.9 Loans.
3.9.1.At any time after the Partnership has received all of
the funds available to it and all contributions and advances to the Partnership
pursuant to this Section 3.9.1, if requested by the Management Committee, either
General Partner may advance to the Partnership in cash or other consideration or
guarantee or otherwise endorse obligations of the Partnership, the amount so
agreed as a Partner Loan. Any Partner Loan shall be evidenced by a note (if
requested by the Partner making the loan), shall bear interest at the rate set
by the Management Committee, which in no event shall be less than the Interest
Rate, shall be nonrecourse to the Partners, and be subject to such other terms
as the Management Committee shall approve.
3.9.2.MENY advanced monies to the Partnership in the form of a
Construction Loan to pay Project costs. The principal amount outstanding of all
Construction Loans, including any applicable fees, as of the date hereof is
$128,622,022, without giving effect to the planned and actual utilization of the
proceeds of the sale of the New Bonds to repay a portion of the amount
outstanding of the Construction Loans. The amount of interest outstanding on all
Construction Loans as of the date hereof is $42,745,326. MENY may in its
discretion, after consultation with the Management Committee, from time to time
advance additional amounts. Each Construction Loan shall (i) be evidenced by
entry of the principal amount thereof, together with a fee equal to one percent
of the principal amount thereof, on a Construction Loan Note substantially in
the form of Exhibit B hereto established with respect to the Construction Loan,
(ii) bear interest from the date hereof (A) until the Bond Closing Date, at a
fixed rate of 10 percent per annum compounded daily and calculated on the basis
of a year of 365/366 days and the number of days elapsed, and (B) from and after
the Bond Closing Date, at a variable rate equal to the Construction Loan Rate,
and (iii) be subject to New York law. To the extent that MENY has received
payment of all or any portion of such Loan, the amount paid to the Partner
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shall be applied first to accrued but unpaid interest on such loan and
thereafter to reduce the principal amount outstanding under such loan. To the
extent the principal of and accrued interest on any Construction Loan is not
repaid from the proceeds of the New Bonds or other Long-Term Credit Facility as
provided in Section 4.1.2, they shall be repaid from the revenues of the
Partnership as a Priority Amount (after giving effect to other priority payments
set forth in the definition of Priority Amounts) based on an annual level debt
service payment amortization of principal and interest over five years
commencing on the Bond Closing Date assuming a fixed interest rate equal to the
Construction Loan Rate in effect on such date, with an adjustment to the fifth
year for variations in the actual accrued interest based on the actual
Construction Loan Rate in effect from time to time. Any unpaid principal or
accrued interest on a Construction Loan after five years from the Bond Closing
Date shall be payable in full from the first available Partnership cash flow
thereafter (after giving effect to other priority payments set forth in the
definition of Priority Amounts). MENY may in its discretion, reduce the rate of
interest charged for the Construction Loan or convert all or some portion of the
Construction Loan to a Capital Contribution by written notice to the Partnership
specifying the effective date and reduced rate of interest or amount of
conversion.
3.9.3.MENY has extended loans and advances to York Partners in
the form of a Priority Loan in connection with the Project. The amount
outstanding of the Priority Loan, including any applicable fees and interest, as
of the date hereof is $20,400,000. Such Priority Loan shall (i) be evidenced by
entry of the principal amount thereof, together with a fee equal to one percent
of the principal amount thereof, on a note in the form of Exhibit C hereto
established with respect to the Priority Loan, (ii) bear interest from the date
hereof (A) until the Bond Closing Date, at a fixed rate of 10 percent per annum
compounded daily and calculated on the basis of a year of 365/366 days and the
number of days elapsed, and (B) from and after the Bond Closing Date, at a
variable rate equal to the Construction Loan Rate, and (iii) be subject to New
York law. York Partners shall have the right to prepay all or any portion of the
principal and accrued interest of any Priority Loan. To the extent the principal
of and accrued interest on any Priority Loan has not been repaid from the
proceeds of any Long-Term Credit Facility as provided in Section 4.1.2, they
shall be repaid from York Partners' share of the Available Cash Flow (after
giving effect to priority payments set forth in the definition of Priority
Amounts) based on an annual level debt service payment amortization of principal
and interest of each Priority Loan over five years commencing on the Bond
Closing Date assuming a fixed interest rate equal to the Construction Loan Rate
in effect on such date, with an adjustment to the fifth payment for variations
in the actual accrued interest based on the actual Construction Loan Rate in
effect from time to time. Any unpaid principal or accrued interest on a Priority
Loan after five years from the Bond Closing Date shall be payable in full
thereafter only from the first available moneys arising from York Partners'
share of Available Cash Flow (after giving effect to priority payments set forth
in the definition of Priority Amounts).
3.10 Security Agreement. To secure the full repayment of the amounts
advanced to York Partners under the Priority Loan, York Partners, MENY and the
Partnership shall enter into a pledge and security agreement substantially in
the form of
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Exhibit D hereto (the "York Partners Security Agreement"), pursuant to which
York Partners (as evidenced by the consent of all partners of York Partners)
shall grant and pledge to MENY a portion of its Limited Partner Interest equal
to a 30% interest in the Partnership.
ARTICLE IV
PAYMENTS AND DISTRIBUTIONS TO PARTNERS
4.1 Distribution of Partnership Cash and Assets.
4.1.1.In the event of the winding up of the Partnership, all
Partnership cash and property shall be distributed pursuant to Article IX of
this Agreement.
4.1.2.As soon as practicable following a Long-Term Credit
Facility Closing, the Management Committee shall determine if any portion of the
proceeds of the Long-Term Credit Facility are available for distribution as
Distributable Amounts. The Management Committee shall apply those Distributable
Amounts to the following uses and in the following order of priority:
(i) Payment of the Old Bonds and any amounts due under
related instruments and documents including amounts due Edison Mission Energy
pursuant to the Reimbursement and Indemnity Agreement dated as of December 22,
1995.
(ii) Repayment of any principal, interest and fees with
respect to the Construction Loan.
(iii) Replacement with Partnership cash of any guarantee
of a Partnership obligation or a security deposit or letter of credit posted by
a Partner or an Affiliate of a Partner on behalf of the Partnership.
(iv) Payment of the remainder to the Partners to cause
their respective Distribution Account to be in proportion to the Partner's
respective percentage Interest and thereafter in proportion to their percentage
Interest, provided, however, that amounts otherwise distributable to York
Partners shall be paid to MENY for the payment of any Priority Loan.
4.1.3.The Partnership shall pay to the appropriate Persons the
Priority Amounts identified in clauses (a) and (b) of the definition thereof
when and as required to meet the Partnership's obligations. The Partnership
shall pay to the appropriate Persons all other Priority Amounts on each
Distribution Date, provided, however, that the Partnership shall pay to Edison
Mission Energy all or such portion of the General Partner Management Fee and
Royalty Fee as may be required pursuant to
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Article II of the York Reimbursement Agreement upon written notice from Edison
Mission Energy specifying the amounts due and payable to Edison Mission Energy.
4.1.4.The Management Committee shall distribute the Available
Cash Flow on each Distribution Date to the Partners to cause their respective
Distribution Accounts to be in proportion to the Partners' respective percentage
Interests and thereafter in proportion to their percentage Interests, provided,
however, that amounts otherwise distributable to York Partners shall be paid to
MENY for the payment of any Priority Loan.
4.2 Payments to Partners. Except as otherwise provided herein, or
hereafter approved by the Management Committee, no payment shall be made by the
Partnership to any Partner, or by any Partner to any other Partner,
respectively, for services of such Partner except that on the Bond Closing Date,
MENY shall pay to York Partners a development fee in the amount of $6 million by
wire transfer to the York Partners' account at Chemical Bank.
4.3 Loaned Employees; Reimbursement. York Partners and MENY each
agree to make or cause to be made available to the Partnership such of their
employees and those of their MENY Affiliates and York Affiliates as are
necessary, in the determination of the Executive Director, to conduct the
business of the Partnership. This obligation shall terminate at such time as (a)
the volume of business being conducted by the Partnership is such that the
Executive Director determines that the Partnership can support its own
autonomous organization with respect to any services theretofore caused to be so
provided to the Partnership or (b) the Partner has withdrawn in a manner
permitted by this Agreement. Each of York Partners, MENY, any York Affiliates
and any MENY Affiliates shall be entitled to be reimbursed by the Partnership
for (a) the portion of its employee expenses including employee expenses
incurred in connection with the satisfaction of General Partner obligations
under Article XI (except Section 11.7)) incurred and fairly attributable to the
operations of the Partnership which shall be deemed to be an amount equal to (i)
the portion of the base salaries of its professional personnel allocable to the
Partnership (determined by the Executive Director based on the proportion of
time spent on the Partnership's operations to all other business activities of
such Person), (ii) multiplied by 1.5; and (b) other reasonable out-of-pocket
expenses preapproved in writing by the Executive Director and incurred directly
by such entity in connection with the Partnership's operations (including
reasonable out-of-pocket expenses incurred in connection with the satisfaction
of General Partner obligations under Article XI (except Section 11.7)); provided
that the aggregate amount of such reimbursement does not exceed levels
authorized for such services and expenses in an authorized budget approved by
the Management Committee. Such payment shall be made by the Partnership at the
direction of the Executive Director (if within a Management Committee approved
budget or, if not, upon authorization by the Management Committee) upon
presentation of reasonably detailed statements describing the provision of such
services and payment of such salaries (and evidencing the payment of such
out-of-pocket expenses) by the
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Partner or MENY Affiliate or York Affiliate claiming such reimbursement. If the
Management Committee does not approve budgets including amounts reasonably
proposed in good faith by York Partners or MENY to cover the obligations of the
parties under this Section 4.3 and Article XI (except Section 11.7), the
Partners, to the extent of any shortfall, shall be relieved of such obligations.
Any employee of a Partner or its MENY Affiliate or York Affiliate who performs
services for or on behalf of the Partnership pursuant to the foregoing
provisions of this Section 4.3 shall be paid by and remain an employee of the
Partner or the York Affiliate or MENY Affiliate by whom they are employed and
not the Partnership. The York Affiliates and MENY Affiliates are hereby
constituted intended third party beneficiaries of this Section 4.3.
4.4 Loans to Partners. The Partnership shall not make any loans to
any Partner or to any other Persons without the consent of the General Partners
or, if the loan is to a General Partner or an Affiliate of a General Partner,
without the consent of the other General Partner.
4.5 Amounts Withheld. All amounts required to be withheld pursuant
to the Code or any applicable provision of any state, local or foreign tax law
with respect to any payment or distribution to the Partners and treated by the
Code (whether or not withheld pursuant to the Code) or any such tax law as
amounts payable by or in respect of any Partner or any Person owning an
interest, directly or indirectly, in such Partner shall be treated as amounts
distributed to the Partner with respect to which such amount was withheld
pursuant to this Article IV for all purposes under this Agreement. The
Management Committee is authorized to withhold from payments or distributions to
the Partners and to pay over to any federal, state, local or foreign government
any amounts required to be so withheld pursuant to the Code or any such tax.
ARTICLE V
ALLOCATIONS OF ITEMS OF
INCOME AND ITEMS OF DEDUCTION
5.1 In General. Items of Income, Items of Deduction and any other
items of income, gain, deduction and loss of the Partnership shall be determined
and allocated (pursuant to the provisions of this Article V) with respect to
each fiscal year of the Partnership as of the end of such year.
5.2 Items of Income and Items of Deduction. Subject to the special
allocations set forth in Section 5.4 and until such time as Items of Income and
Items of Deduction are to be allocated under Section 5.3, the Partnership's
Items of Income and Items of Deduction shall be allocated among the Partners in
the following manner:
5.2.1.For fiscal year 1996, Items of Income and Items of
Deduction shall be allocated 84.6% to MENY and 15.4% to York Partners.
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5.2.2.For each fiscal year thereafter, Items of Income and
Items of Deduction shall be allocated 95% to MENY and 5% to York Partners.
5.3 Allocation Upon Liquidation.
5.3.1.After giving effect to the special allocations set forth
in Section 5.4 below, the Partnership's remaining Items of Income realized in
the first fiscal year during which the Partnership commences a winding up of the
Partnership (and in any succeeding year) shall be allocated among the Partners
in the following manner:
(a) First, to each of the Partners to the extent of and
in proportion to the excess of the deficit balance in such Partner's Capital
Account over the sum of such Partner's allocable share of Partnership Minimum
Gain (as determined under Regulations Section 1.704-2(g)(2)) and minimum gain
attributable to a Partner Nonrecourse Debt (as determined under Regulations
Section 1.704-2(i)(5)) remaining after giving effect to the special allocations
of Section 5.4 (such sum being such Partner's "Allocable Share of Minimum
Gain").
(b) Second, to the Partners in the amounts required to
cause the respective balances of their Capital Accounts to be in proportion to
the amounts of cash each would receive if the remaining proceeds of liquidation
were distributed in accordance with Section 4.1.2(iv).
(c) Third, the balance to the Partners in proportion to
their percentage Interests.
5.4 Regulatory Allocation Provisions.
5.4.1.Notwithstanding any other provision of this Agreement,
if there is a net decrease in Partnership Minimum Gain during a Partnership
taxable year, each Partner shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, for subsequent years) equal to
such Partner's share of the net decrease in Partnership Minimum Gain (which
share of such net decrease shall be determined under Regulations Section
1.704-2(g)(2)). It is intended that this Section 5.4 shall constitute a "minimum
gain chargeback" as provided by Regulations Section 1.704-2(f). Such section of
the Regulations shall control in the event of a conflict between such section
and this Section 5.4.
5.4.2.Notwithstanding any other provision of this Agreement
other than Section 5.4.1, if there is a net decrease in minimum gain during a
Partnership taxable year attributable to a Partner Nonrecourse Debt, any Partner
with a share of minimum gain attributable to such debt at the beginning of such
year (as determined under Regulations Section 1.704-2(i)(5)) shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
for subsequent years)
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equal to that Partner's share of the net decrease in such minimum gain (which
share of such net decrease shall be determined under Regulations Sections
1.704-2(i)(4) and 1.704-2(g)(2)). It is intended that this Section 5.4.2 shall
constitute a chargeback of partner nonrecourse debt minimum gain as provided by
Regulations Section 1.704- 2(i)(4) and such section of the Regulations shall
control in the event of a conflict between such section and this Section 5.4.2.
5.4.3.No Items of Deduction or items of Partnership deduction
or loss shall be allocated to any Partner to the extent that such allocation
would result in such Partner having an Adjusted Capital Account Deficit. If any
Partner unexpectedly receives any adjustments, allocations or distributions
described in Regulations Section 1.704-1(b)(2) (ii)(d)(4) through (6) which
result in an Adjusted Capital Account Deficit, such Partner shall be allocated
items of Partnership income and gain in an amount and manner sufficient to
eliminate such Adjusted Capital Account Deficit as quickly as possible, provided
that an allocation pursuant to this Section 5.4.3 shall be made only if and to
the extent that such Partner would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Article V (other than Section
5.4.4) have been tentatively made as if this Section 5.4.3 were not in this
Agreement. It is intended that the second sentence of this Section 5.4.3 shall
constitute a "qualified income offset" as provided by Regulations section
1.704-1(b)(2)(ii)(d) and such section of the Regulations shall control in the
event of a conflict between such section and this Section 5.4.3.
5.4.4.In the event any Partner has an Adjusted Capital Account
Deficit at the end of any fiscal year, items of Partnership income and gain
shall be specially allocated to such Partner in an amount and manner sufficient
to eliminate such Adjusted Capital Account Deficit as quickly as possible,
provided that an allocation pursuant to this Section 5.4.4 shall be made only if
and to the extent that such Partner would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article V have been
tentatively made as if Section 5.4.3 and this Section 5.4.4 were not in this
Agreement.
5.4.5.Items of Partnership deduction and loss and Section
705(a)(2)(B) expenditures that are attributable to indebtedness constituting
Partner Nonrecourse Debt under the Regulations shall be allocated among the
Partners who bear the Economic Risk of Loss for such indebtedness constituting
Partner Nonrecourse Debt under the Regulations in the ratio in which they share
Economic Risk of Loss for such indebtedness. This provision is to be interpreted
in a manner consistent with the requirements of Regulations Section
1.704-2(i)(1).
5.4.6.The allocations set forth in Sections 5.4.1 through
5.4.5 hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Partners that, to the
extent possible and consistent with the Regulations, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of Partnership
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income, gain, loss, and deduction pursuant to this Section 5.4.6. Therefore,
notwithstanding any other provision of this Article V, other than the Regulatory
Allocations, the General Partners shall make such offsetting special allocations
in whatever manner they determine appropriate so that, after such offsetting
allocations are made, each Partner's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Partner would have had if
the Regulatory Allocations were not part of the Agreement and all items of
Partnership income, gain, loss or deduction were allocated pursuant to Sections
5.2 and 5.3. In exercising their discretion under this Section 5.4.6, the
General Partners shall take into account future Regulatory Allocations under
Sections 5.4.1 and 5.4.2 that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 5.4.5.
5.4.7. For purposes of allocating excess Nonrecourse
Liabilities under Regulations Section 1.752-3(a)(3) the Partners agree that the
Partners' interests in profits are 95% to MENY and 5% to York Partners.
5.4.8. In the event that any amount claimed by the Partnership
to constitute a deductible expense in any fiscal year is treated for Federal
income tax purposes as a distribution made to a Partner in its capacity as a
partner of the Partnership and not a guaranteed payment as defined in Section
707(c) of the Code or a payment to a Partner not acting in its capacity as a
partner under Section 707(a) of the Code, then the Partner who is deemed to have
received such distribution shall first be allocated an amount of Partnership
Items of Income, equal to such payment, its Capital Account shall be reduced to
reflect the distribution, and for purposes of this Article V, Items of Income
shall be determined after making the allocation required by this Section 5.4.8.
5.4.9. In the event an Interest is assigned by a Partner (or
by an assignee or successor in interest to a Partner) or a new Partner is
admitted to the Partnership, the Management Committee shall close the
Partnership's books on an interim basis, and determine and allocate all Items of
Income, Items of Deduction, and items of Partnership income, gain, deduction and
loss, as of such date. Items of Income, Items of Deduction and items of
Partnership income, gain, deduction and loss, for the remainder of the fiscal
year, shall be determined and allocated for the period from the date the books
are closed on an interim basis to the end of the fiscal year.
5.4.10. During each fiscal year, the General Partners,
collectively, shall be allocated no less than the percentage of each material
item of Partnership items of income, gain, deduction and loss as is consistent
with the provisions of Section 4.01 of Rev. Proc. 89-12, 1989-1 C.B. 22 or any
successor provision thereto. In the event that the General Partners' Capital
Accounts at the end of any Fiscal Year would be less than one percent (1%) of
the total positive Capital Accounts of the Partners, the General Partners shall
be specially allocated items of Partnership income and gain, pro rata, in an
amount so that the General Partners' Capital Account balances are equal to one
percent (1%) of the total positive Capital
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Account balances of the Partners, provided that an allocation pursuant to this
Section 5.4.10 shall be made only if and to the extent that the General
Partners' Capital Accounts would be less than one percent (1%) of the total
positive Capital Account balances of the Partners after all other allocations
provided for in this Article V have been tentatively made as if this Section
5.4.10 were not in this Agreement.
5.4.11. Notwithstanding the foregoing provisions of this
Article V, income, gain, loss and deduction with respect to property contributed
to the Partnership by a Partner and property which is revalued pursuant to
Section 5.5.3 shall be shared among the Partners, in the manner prescribed by
Section 704(c) of the Code and Regulations Section 1.704-1(b)(2)(iv)(f)(4), so
as to take account of the variation, if any, between the basis of the property
to the Partnership and its fair market value at the time of contribution or
revaluation.
5.4.12. In the event that the Code or any Regulations
promulgated thereunder or any applicable state or local income tax laws or
regulations require allocations of Items of Income, Items of Deduction, items of
Partnership income, gain, deduction, loss or credit different from those set
forth in this Agreement, upon the advice of the Partnership's Accountants, the
General Partners are hereby authorized to make new allocations in reliance upon
the Code, the Regulations, such applicable state and local income tax laws and
regulations and such advice of the Partnership's Accountants and such new
allocations shall be deemed to be made pursuant to the fiduciary obligations of
the General Partners to the Partnership and the Limited Partners, and no such
new allocation shall give rise to any claim or cause of action by any Limited
Partner.
5.5 Capital Accounts.
5.5.1.The Capital Account for each Partner shall reflect the
amount equal to (a) the sum of (i) such Partner's Capital Contributions, (ii)
such Partner's share of Items of Income and items of Partnership income and gain
that are specially allocated to such Partner pursuant to Sections 5.4.1, 5.4.2,
5.4.3, 5.4.4, 5.4.5, 5.4.6, 5.4.8 and 5.4.10, (iii) such Partner's share of
tax-exempt income of the Partnership and (iv) the amount of any Partnership
liabilities paid by such Partner or assumed by such Partner where the
Partnership is relieved of such liability, less (b) the sum of (1) such
Partner's share of Items of Deduction and items of Partnership deduction and
loss that are specially allocated to such Partner pursuant to Sections 5.4.5,
5.4.6 and 5.4.10, (2) such Partner's share of other Partnership expenditures
described in Section 705(a)(2)(B) of the Code, as determined under Regulation
Section 1.704-1(b)(2)(iv)(i), (3) the amount of money distributed to such
Partner by the Partnership, (4) the fair market value of property distributed to
such Partner by the Partnership (net of liabilities secured by such distributed
property which such Partner is deemed to assume or take subject to under Section
752 of the Code), and (5) the amount of any liabilities of such Partner paid by
the Partnership or assumed by the Partnership where the Partner is relieved of
such liability. Each Partner's Capital Account shall be
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maintained and adjusted in accordance with this Section 5.5. Items of
Partnership income described in clause (a)(iii) and expenditures described in
clause (b)(2) shall be allocated among the Partners in the same manner as Items
of Income, Items of Deduction and items of Partnership, income, gain, deduction
and loss.
5.5.2. It is intended that appropriate adjustments shall
thereby be made to Capital Accounts to give effect to any Items of Income, Items
of Deduction and any other items of Partnership income, gain, loss or deduction
that are specially allocated pursuant to this Agreement. A Partner who has more
than one interest in the Partnership shall have a single Capital Account that
reflects all such interests regardless of the class of interests owned by such
Partner and regardless of the time or manner in which such interests were
acquired.
5.5.3. The Capital Accounts of the Partners and the
determination of Items of Income and Items of Deduction shall be adjusted to
reflect a revaluation of Partnership property on the Partnership's books and
records (i) in connection with any contribution of money or other property
(other than an insignificant amount) to the Partnership by a Partner as
consideration for an interest in the Partnership or (ii) in connection with the
liquidation of the Partnership or any distribution of money or other property
(other than an insignificant amount) by the Partnership to a retiring or
continuing Partner as consideration for an interest in the Partnership. In
making such adjustments, the following conditions shall be satisfied:
(a) The adjustments shall be based on the fair market
value of Partnership property (taking Section 7701(g) of the Code into account)
as determined by the Management Committee on the date of adjustment;
(b) The adjustments shall reflect the manner in which
the unrealized income, gain, loss or deduction inherent in such property (that
has not been reflected in Capital Accounts previously) would be allocated among
the Partners under this Article V if there were a taxable disposition of such
property for such fair market value on such date; and
(c) As provided in Section 5.4.11, Items of Income and
Items of Deduction, as computed for tax purposes, with respect to such property
shall thereafter be determined so as to take account of the variation of the
adjusted tax basis and book value of such property in the same manner as under
Section 704(c) of the Code and the Regulations thereunder.
5.5.4. In the event that property other than cash is
distributed by the Partnership to any Partner, Capital Accounts shall first be
adjusted to reflect the manner in which the unrealized income, gain, loss and
deduction inherent in such property (that has not been previously reflected in
Capital Accounts) would be allocated, pursuant to this Article V, among the
Partners if there were a taxable disposition of such property for its fair
market value (taking Section 7701(g) of the
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Code into account) as determined by the Management Committee on the date of
distribution.
5.5.5. Upon the transfer of all or any part of an Interest,
the transferor's Capital Account that is attributable to the transferred
Interest shall carry over to the transferee Partner.
5.5.6. Income and loss for state and local income tax purposes
shall, to the extent permissible, be allocated among the Partners consistently
with the allocations for Federal income tax purposes. A separate accounting
shall be made of any item allocated for state or local income tax purposes in a
manner different from the allocation of the corresponding item under the Code
for Federal income tax purposes.
5.5.7. The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Section 1.704-1(b) of the Regulations, and shall be interpreted and
applied in a manner consistent with such Regulations.
ARTICLE VI
RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNERS
6.1 Management of the Partnership.
6.1.1. The General Partners shall have the exclusive power and
authority to direct and manage the affairs of the Partnership and shall possess
the powers and rights of general partners under the Delaware Act and this
Agreement. The General Partners, within the authority granted to them under this
Agreement, have determined to and hereby agree to exercise such powers and
manage the business of the Partnership through a Management Committee except as
otherwise expressly provided herein.
6.1.2. No Limited Partner (except one who is also a General
Partner, and then only in its capacity as a General Partner within the scope of
its authority hereunder) shall participate in the control of, or have any
control over the Partnership business or any authority or right to act for or
bind the Partnership. The Limited Partners hereby consent to the exercise by the
General Partners of the respective powers conferred on them by this Agreement.
6.2 Management Committee. The Management Committee shall be
constituted, conduct its affairs, exercise its delegated powers and be subject
to limitations thereon as follows:
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6.2.1. The Management Committee shall be comprised of two
representatives (who are also officers or Persons having similar
responsibilities and duties) of each General Partner (the "Management
Committee"). Subject to the provisions of Section 10.2, each General Partner
shall be entitled to one vote in Management Committee decisions for each
percentage of General Partner Interest it holds, except that if the Management
Committee is unable to reach a determination or is otherwise deadlocked on a
decision, subject to the rights of the General Partners pursuant to Section
6.2.4, MENY shall be entitled to cast a deciding or tie breaking vote. One of
the representatives of each General Partner shall cast the vote on behalf of
that General Partner. Each of MENY or York Partners upon appointing a member to
the Management Committee shall give Notice to the other General Partner of the
name of that member. A General Partner may remove and replace that member by
giving Notice to the other General Partner. MENY and York Partners will each
take such action as is internally required within that Partner to provide each
of its members on the Management Committee sufficient authorization to bind and
legally act on behalf of that Partner so long as his or her appointment remains
in effect. Subject to the provisions of Section 10.2, the presence of a
representative of each General Partner with voting powers shall be necessary to
constitute a quorum for the conduct of any meeting except where York Partners
fails to attend a meeting scheduled or fixed by the Management Committee
pursuant to Section 6.2.2. Except where MENY is entitled to cast a deciding or
tie breaking vote in decisions of the Management Committee, decisions of the
Management Committee shall be made by majority vote, evidenced by their votes or
the written consent of one of their respective representatives.
6.2.2. The Management Committee shall have regular periodic
meetings at such times as the Management Committee may fix, unless the
Management Committee shall determine otherwise. Any one representative may call
special meetings on at least two Business Days advance Notice. Members of the
Management Committee may participate in a meeting of the Management Committee by
means of conference telephone or similar communication equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to such equipment shall constitute presence
in person in such meeting. Any action required or permitted to be taken at a
meeting of the Management Committee may be taken without a meeting if all
members of the Management Committee consent thereto in writing and the writing
is filed with the minutes of proceedings of the Management Committee.
6.2.3. The Management Committee shall establish its rules of
procedure subject to the terms hereof. The Management Committee will cause
minutes of each meeting to be prepared and submitted to the members for
approval. Members of the Management Committee may attend meetings and vote
either in person or through duly authorized proxies.
6.2.4. The Management Committee shall be responsible for
action or determination on all matters affecting the Partnership, subject to and
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consistent with the terms of this Agreement, except (i) the General Partners
will jointly participate and keep the other advised with respect to meetings
with other Persons regarding the following actions and (ii) the General Partners
must unanimously consent to the following actions regardless of the rights any
General Partner has to Management Committee decisions if such actions would have
an adverse impact on the substantive rights of York Partners, including the
General Partner Management Fee and the Royalty Fee:
6.2.4.1. The sale or transfer of the Project or major
assets constituting a part of the Project.
6.2.4.2. The engagement in any business on behalf of the
Partnership other than the ownership, Construction and operation of the Project.
6.2.4.3. Making or revoking any of the elections
referred to in Section 48, 167, 168, 195, 263(c), 709, 732, 754 or 1017 of the
Code, or any similar provisions enacted in lieu thereof; provided, however, that
if such approval is not achieved, then all such elections and other tax
decisions shall be made in such a way as to reduce Partnership taxable income to
the maximum extent possible and take deductions in the earliest taxable year
possible and that an election under Section 754 of the Code will be made if
either General Partner so requests; provided, however, that any incremental
costs and expenses incurred by the Partnership in connection with the
administration of a Section 754 election, shall be borne ratably by the Partners
benefiting from such election.
6.2.4.4. The filing by the Partnership of a petition or
answer seeking for itself any arrangement, composition, readjustment,
liquidation, dissolution, or other reorganization or similar relief under any
Debtor Relief Law.
6.2.4.5. A change from the limited partnership
organizational structure or any combination or consolidation of the Partnership
with another Person.
6.2.4.6. The sale or transfer of the Power Sales
Agreement, a transaction between the Partnership and Con Ed constituting a
buyout or buydown of the rights of the Partnership pursuant to the Power Sales
Agreement or an amendment of the Powers Sales Agreement.
provided, however, if MENY determines to take any of the actions described in
this Section 6.2.4 in acting for the Management Committee by casting a deciding
or tie breaking vote, MENY will provide ten (10) Business Days prior written
notice to York Partners prior to taking such action.
6.3 Authority of General Partners to Deal with Partnership. The
entering into of any agreement, arrangement or transaction of the Partnership
with a
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Partner or any Affiliate of a Partner shall be governed solely by the provisions
of this Section 6.3, notwithstanding any other provision of this Agreement to
the contrary. Except as provided in Section 4.3, the Partnership shall not enter
into any agreement, arrangement or transaction with a Partner or any Affiliate
of a Partner, unless the terms of the agreement, arrangement or transaction are
no less favorable than those that the Partnership could obtain from unaffiliated
sources in the area rendering comparable goods or services.
6.4 Executive Director and Other Officers.
6.4.1. An executive director (the "Executive Director") shall
be appointed by the Management Committee to direct the day-to-day activities of
the Partnership and the Project, prepare the proposed agenda for Management
Committee meetings and perform such other duties as from time to time may be
specifically delegated and assigned by the Management Committee. The Executive
Director shall be an employee of MENY or a MENY Affiliate. The Executive
Director may also appoint additional officers, such as an assistant manager,
secretary and/or treasurer, and staff who shall include representatives of MENY,
as the Executive Director deems necessary and desirable, who shall perform such
functions and duties and report to such persons as the Executive Director may
from time to time direct. The Executive Director and any other officer may be
removed by MENY or the Management Committee at any time with or without cause,
but only in either case upon appointment of another Executive Director selected
in accordance with this Section 6.4.
6.4.2. The rights, duties and responsibilities of the
Executive Director shall include action on the following matters, subject to and
consistent with the terms of this Agreement:
6.4.2.1. The Executive Director shall select and remove
staff hired or discharged in connection with the Project.
6.4.2.2. The Executive Director shall approve capital or
other expenditures not covered in the operating and maintenance budgets or the
capital improvements budgets unless any expenditure would cause all expenditures
in any quarter to exceed 110% of the Project Costs for that quarter, in which
event the Executive Director shall seek Management Committee approval for the
expenditure.
6.4.2.3. The Executive Director at the expense of the
Partnership shall take or cause to be taken all actions which may be necessary
or appropriate to conduct the day-to-day operations of the Project to achieve
the acquisition, Construction, maintenance, preservation and operation of the
Project in accordance with the provisions of this Agreement and applicable laws
and regulations.
6.4.2.4. The Executive Director, at the expense of the
Partnership, shall take such action as may be necessary or appropriate in order
to form
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or qualify the Partnership under the laws of any jurisdiction in which the
Partnership does business or in order to continue in effect such formation or
qualification. The Executive Director, at the expense of the Partnership, shall
file or cause to be filed in the office of the appropriate authorities of the
States of Delaware and New York, and in each other jurisdiction in which the
Partnership is formed or qualified or doing business, such certificates
(including limited partnership and fictitious name certificates) and other
documents as are required by the statutes, rules or regulations of such
jurisdictions.
6.4.2.5. The Executive Director shall procure and
maintain, or cause to be procured and maintained, at the sole expense of the
Partnership, such policies of insurance, in such amounts, as are necessary to
comply with the Insurance Requirements as amended from time to time by the
Management Committee.
6.5 Operators. The operation and maintenance services for the
Project shall be performed by an Operator who shall be a Person acceptable to
the Management Committee based on the terms and conditions established by the
Management Committee with compensation and other terms based on competitive
industry rates. All such services shall be performed pursuant to a written
agreement with such Person approved by the Management Committee.
6.6 EWG Approval. The General Partners shall use their commercially
reasonable best efforts to cause the Partnership to obtain promptly any and all
permits, documents, instruments and orders to operate as an EWG as may be
necessary or desirable from the New York State Public Service Commission and the
Federal Energy Regulatory Commission and other third parties (the "EWG
Approval").
6.7 Certain Duties and Obligations of the General Partners.
6.7.1. Each General Partner shall use its best efforts to
assure that the Partnership will be classified for Federal income tax purposes
as a partnership and not as an association taxable as a corporation.
6.7.2. The General Partners shall use their best efforts to
preclude the classification of the Partnership as a "publicly traded
partnership" to which Section 7704(a) of the Code applies.
6.8 Other Business of Partners and Affiliates. Any Partner or its
Affiliates may engage independently or with others in other business ventures of
every nature and description, including the ownership of other properties and
the making or management of other investments. Nothing in this Agreement shall
be deemed to prohibit any Partner or any Affiliate of any Partner from dealing,
or otherwise engaging in business, with Persons transacting business with the
Partnership or from
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providing services related to the purchase, sale, financing, management,
development or operation of real or personal property, including other
competitive cogeneration facilities or other power plants, and receiving
compensation therefor. Without limiting the generality of the foregoing, the
General Partners will not be obligated to present to the Partnership any
particular investment opportunity which comes to the attention of either of
them, even if such opportunity is of a character which might be suitable for
investment by the Partnership. Neither the Partnership nor any Partner shall
have any right by virtue of this Agreement or the Partnership relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper.
6.9 Limitation on Liability of General Partners.
6.9.1. The General Partners and their respective Affiliates,
employees, officers, directors, and agents (collectively, the "Indemnified
Persons") shall not be liable, responsible or accountable in damages or
otherwise to the Partnership or to any of the Partners for any act or omission
performed or omitted by any of them after the Closing Date in good faith and
reasonably believed by the Indemnified Person acting or omitting to so act to be
within the scope of the authority granted to it by this Agreement; provided,
however, that no Indemnified Person shall be relieved of liability with respect
to any claim, issue or matter as to which (and to the extent) it shall have been
adjudged to be liable for gross negligence, willful misconduct, fraud or bad
faith. Except in the case (and to the extent) of any such judgment of liability,
the Partnership shall indemnify, defend and hold harmless each Indemnified
Person against any liability, loss, damage, cost, or expense (including
reasonable attorneys' fees and expenses and amounts paid in settlement) actually
and reasonably incurred by any Indemnified Person in connection with any such
act or omission or any claims relating thereto or the defense or settlement
thereof. The satisfaction of any obligation to indemnify and hold the
Indemnified Persons harmless shall be from and limited to Partnership assets,
and no Partner shall have any personal liability on account thereof.
6.9.2. All rights of an Indemnified Person to indemnification
hereunder shall survive the dissolution of the Partnership or cessation of
membership of a General Partner in the Partnership if, in accordance with and
not in violation of the terms hereof, a claim for indemnification hereunder is
made by or on behalf of the Person seeking indemnification prior to the time
distribution in liquidation of the assets of the Partnership is made.
6.10 Audit Rights. Each General Partner, at its own expense, shall
have the right to reasonably audit the books and records of the other General
Partner with respect to any transactions pertaining to this Agreement or the
Project. These audit rights shall expire two years after the close of the fiscal
year in which the
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transaction occurred. Each Partner may also take written exception to such
employee costs and other expenses within such two year period.
6.11 Partnership Obligations. To the extent not otherwise expressly
provided to the contrary herein, the Partnership shall pay all fees and expenses
of the Partnership incurred after the Closing Date.
6.12 Title to Partnership Assets. All Partnership assets, whether
real or personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, or one or more nominees, as the Management
Committee may determine. All Partnership assets shall be recorded as the
property of the Partnership on its books and records, irrespective of the name
in which legal title to such Partnership assets is held.
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARTNERS
7.1 Reciprocal Representations and Warranties. Each of MENY and York
Partners represents and warrants as to itself to the other party as of the date
hereof as follows:
7.1.1. MENY is a corporation duly organized, validly existing
and in good standing under the laws of the State of California. York Partners is
a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware. B-41 Management Corp. and R.V.
Associates, L.P. are the sole general partners of York Partners. York Partners
has delivered to MENY a true, correct and complete executed copy of each of York
Partners' Organization Documents. Each of MENY and York Partners has all
requisite corporate or partnership power and authority to carry on its business
as now conducted and proposed to be conducted, to enter into this Agreement and
to carry out the transactions contemplated hereby.
7.1.2. Its execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate or partnership
actions on its part, and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of this Agreement or of any
material agreement, lease, judgment, injunction, order, decree or other
instrument binding upon it or, in the case of MENY, any MENY Affiliate, or in
the case of York Partners, any York Affiliate, or (except as contemplated
hereby) result in the creation or imposition of any lien on any of its assets or
assets of, in the case of MENY, any MENY Affiliate, and in the case of York
Partners, any York Affiliate.
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7.1.3. Assuming due authorization, execution and delivery by
the other party hereto, this Agreement represents its legally valid and binding
agreement, enforceable in accordance with its terms except as enforceability may
be limited by any Debtor Relief Law or by equitable principles relating to
enforceability.
7.2 Covenant Regarding Status. Each of the original parties agrees
that so long as it is a Partner it will maintain its corporate or limited
partnership existence and (to the extent required under applicable laws)
authority and qualification to conduct business where the Partnership does so.
ARTICLE VIII
ASSIGNMENTS AND TRANSFERS
8.1 Transfers of General Partners Interests.
8.1.1. A General Partner may not sell, transfer, pledge,
encumber or otherwise assign its General Partner Interest, or designate a Person
to be its successor as a General Partner or to be an additional General Partner,
without the prior written consent of the other General Partner.
8.1.2. Any transfer of a General Partner Interest shall be a
transfer of a General Partner's entire General Partner Interest and any such
transfer shall be subject to the provisions of the Delaware Act. If there will
be no remaining General Partner after a transfer of a General Partner Interest,
no transfer will be permitted without the prior written consent of all of the
Limited Partners.
8.1.3. In the event of the occurrence of any withdrawal
(including without limitation any Withdrawal) of a General Partner (or the
occurrence of any other event resulting in a Person ceasing to be a General
Partner), the business of the Partnership shall be continued by any new and
remaining General Partner or Partners (pursuant to the right to do so which is
hereby granted to them) if (a) there remains at least one General Partner, or
(b) there is no remaining General Partner and all of the Limited Partners within
90 days after the date of such Withdrawal elect to continue the business of the
Partnership and to admit one or more successor General Partners. If the
remaining General Partner elects to continue the business of the Partnership as
permitted above it shall (a) give Notice to the Limited Partners of such
decision and (b) make such amendments to this Agreement and execute and file any
necessary amendments and other documents in connection therewith.
8.2 Transfers of Limited Partner Interests. A Limited Partner may,
without the consent of the General Partners, sell, transfer, pledge, convey or
otherwise assign all or any portion of its Interest in the Partnership, provided
that if such Limited Partner is the sole Limited Partner, it must retain at
least one percent of the Interests in the Partnership unless arrangements are
made for the admission of a Substituted Partner
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holding a Limited Partner Interest simultaneously with the transfer of such
Limited Partner's entire Interest.
8.3 Limitations on Transfers of Interests.
8.3.1. In no event may any Partner effect any sale, transfer,
exchange, pledge, encumbrance or other assignment of its Interest if, in the
opinion of counsel for the Partnership specializing in such matters, (a) (if it
occurs after the placement in service of the Project for Federal income tax
purposes) such an assignment, when considered with all other assignments of
Interests in the Partnership within the previous 12 months, would result in the
Partnership's being considered to have been terminated within the meaning of
Section 708 of the Code unless the General Partners shall determine that such a
termination would not be materially adverse to the General Partners or the
Limited Partners or otherwise have any material adverse Federal income tax
consequences to the Partnership or any of the Partners, (b) such an assignment
would violate any applicable federal or state securities laws (including any
investor suitability standards). Prior to any assignment, the assigning Partner
shall deliver to the Partnership an opinion of counsel knowledgeable in such
matters to the effect that none of the consequences described in clause (a) or
(b) will result from such assignment.
8.3.2. Each Partner covenants and agrees, for itself and its
Successors and assigns, that it will undertake no action to sell, transfer,
exchange, pledge, encumber or otherwise assign its Interest in the Partnership
or to facilitate trading in Interests if such action, when considered in the
context of all relevant facts and circumstances, might fairly result in the
classification of the Partnership as a "publicly traded partnership" within the
meaning of Section 7704(b) of the Code. The parties further acknowledge that
legal remedies are likely to be inadequate in the event of a breach of the
covenants under this Section 8.3.2 and, therefore, that equitable remedies
(including mandatory injunctive relief) shall be available to the Partnership or
any Partner in the event of any actual or threatened breach.
8.3.3. The Partnership need not recognize for any purpose any
assignment of all or any portion of the Interest of a Partner unless (a) there
shall have been filed with the Partnership a duly executed and acknowledged
counterpart of the instrument making such assignment, together with the opinion
of counsel described in Section 8.3.1, (b) such instrument (i) evidences the
written acceptance by the assignee of all of the terms and provisions of this
Agreement and if relating to an assignment of an entire Interest, includes a
request of the assignee to admission to the Partnership as a Substituted
Partner, as if the assignee were the assignor, (ii) represents that the
assignment was made in accordance with all applicable laws and regulations
(including any investor suitability standards) and (iii) in all other respects
is reasonably satisfactory in form and content to the General Partners or
remaining General Partner, (c) in the opinion of counsel to the Partnership,
none of the adverse consequences described in Sections 8.3.1 and 8.3.2 will
result from such assignment (and, in the case
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of a proposed substitution or addition of a Limited Partner, the admission of
such assignee as a Partner) and such assignment otherwise is in accordance with
the terms of this Agreement, and (d) the assignee or assignor shall have paid
all reasonable legal fees and filing costs incurred by the Partnership in
connection with the substitution of a Limited Partner. Assignees of Interests
shall be recognized as such on the first day of the calendar month following the
month in which the Partnership receives the instrument of assignment provided
for herein.
8.4 Right of First Refusal.
8.4.1. If any General Partner proposes to sell, transfer,
exchange or otherwise assign all or any portion of its General Partner Interest
in the Partnership, it shall give Notice thereof to the other General Partner.
The Notice shall include the name and identity of the prospective assignee, the
date upon which such assignment is proposed to be consummated, which shall not
be more than 180 days after the date of the Notice, and a written copy of the
offer upon which such prospective assignee proposes to acquire such Interest
specifying the price and all of the terms on which the Partner proposes to
assign its Interest. For a period of 30 days following receipt of the Notice,
the other General Partner or its designate shall have an option to purchase the
entire General Partner Interest offered at the price and on the terms set forth
in the Notice. The failure to exercise the option to acquire the entire General
Partner Interest offered shall constitute a waiver thereof with respect to the
transaction described in the Notice. Should the option be exercised, the sale
shall be consummated on or before the later of (a) 30 days after the date on
which the option was exercised or (b) the date specified in the Notice as the
date upon which the proposed assignment was to be consummated, for the price and
on the terms set forth in the Notice, and the General Partners shall execute and
deliver all documents necessary to effectuate the assignment of the General
Partner Interest to the acquiring General Partner. Should the option not be so
exercised or if an option to be exercised by a General Partner becomes
unenforceable by operation of law prior to its execution, then the assigning
General Partner may assign the General Partner Interest so offered, on or before
the date specified in the Notice, for the price and on substantially the terms
previously described to the assignee specified in the Notice. Should such an
assignment not be timely consummated as aforesaid, then the General Partner
Interest shall again become subject to the foregoing option.
8.4.2. If the option described in Section 8.4.1 is exercised,
then the costs of the transaction, including recording fees, escrow costs and
attorneys' fees reasonably incurred by the Partnership in connection with the
assignment, shall be shared equally by the acquiring General Partner and the
assigning General Partner. If the assigning General Partner conveys its General
Partner Interest to a Person that is not then a General Partner, all costs of
the transaction shall be borne by the assigning General Partner.
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8.4.3. The option described in this Section 8.4 is (a) in
addition to, and is not a limitation upon, the right to consent or withhold
consent to a proposed assignment and (b) shall remain in full force and effect
with respect to the General Partner Interests of any successor, assignee or
substitute General Partner hereunder to the same extent and in the same manner
as it was applicable to any predecessor General Partner, but shall not apply to
any transfer by a (direct or indirect) successor General Partner to an original
General Partner.
8.5 Effect of Transfers or Withdrawals.
8.5.1. Any General Partner who assigns all of its General
Partner Interest shall cease to have any of the rights or powers of a General
Partner. Any Limited Partner who sells, transfers, conveys or otherwise assigns
all of its Limited Partner Interest in the Partnership shall cease to be a
Limited Partner of the Partnership. The rights of an assignee of an Interest who
does not become a Substituted Partner shall be limited to the receipt of
distributions of its share of amounts distributable pursuant to Section 4.1,
distributions pursuant to Article IX and allocations of Items of Income and
Items of Deduction, as determined under this Agreement.
8.5.2. Notwithstanding the Withdrawal of a General Partner or
a transfer of its entire General Partner Interest consented to pursuant to
Section 8.1, such General Partner shall be and remain liable for all obligations
and liabilities incurred by it as a General Partner or by the Partnership prior
to or with respect to activities of the Partnership prior to the time that such
withdrawal, conversion or transfer becomes effective, but shall be free of any
obligation or liability as a General Partner incurred on account of the
activities of the Partnership from and after the time that such withdrawal,
conversion or transfer becomes effective. In the event of a Withdrawal in
violation of the terms of this Agreement, such Partner shall also be liable for
all damages resulting to the Partnership or any Partner as a direct or indirect
result of such breach and the Partnership, in addition to any remedies otherwise
available under applicable law, shall be entitled to offset any such amounts
against any amounts otherwise distributable to the withdrawing General Partner.
8.5.3. An assignee of Interests who does not become a
Substituted Partner and who desires to make a further assignment of all or any
portion of an Interest in the Partnership shall be subject to all of the
provisions of this Article VIII to the same extent and in the same manner as any
predecessor Partner desiring to make an assignment of its Interests.
8.5.4. All assignees and successors whether or not admitted as
Substituted Partners take any Interest subject to (but shall not be personally
liable for) all then existing or subsequent claims or rights of offset or
set-off against and other liabilities or obligations of their transferors or
predecessors under this Agreement.
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8.5.5. In the event of a withdrawal (including a Withdrawal)
of a General Partner, the withdrawing General Partner shall not be entitled to
receive any value with respect to its Interest in the Partnership or continue to
participate as a General Partner in the management and control of the
Partnership, unless such withdrawal results in the dissolution of the
Partnership pursuant to Article IX in which event the General Partner shall have
the rights provided therein; provided, however, that prior to such dissolution,
such Partner shall continue to be entitled to the benefits incident to its
Interest and to its rights as the provider of a Loan or Construction Loan,
subject to the provisions hereof and such Partner's obligations hereunder and
under applicable law.
8.6 Consent. Any consent required for the admission or substitution
of a Partner under the provisions of this Article may be withheld in the
absolute discretion of the Partner or Partners entitled to give such consent and
may be arbitrarily withheld by them or any of them.
ARTICLE IX
WINDING UP AND LIQUIDATION OF THE PARTNERSHIP
9.1 Events Causing Winding Up. The Partnership shall wind up only
upon the happening of any one of the following events:
9.1.1. The withdrawal of all of the General Partners and the
failure of the Limited Partners to elect to continue the business of the
Partnership and select at least one mutually acceptable replacement for the
General Partners as provided in Section 8.1.3.
9.1.2. The sale or other disposition of all or substantially
all of the Partnership assets.
9.1.3. The election by each General Partner and a Majority of
the Limited Partners to wind up the Partnership.
9.1.4. The expiration of the fixed term of the Partnership
provided in Section 2.7.
9.1.5. The Withdrawal of the last remaining General Partner
pursuant to clauses (e), (f), (g) or (h) of the definition of Withdrawal and the
failure of the Limited Partners to elect to continue the business of the
Partnership and select at least one mutually acceptable replacement for the
General Partner as provided in Section 8.1.3.
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9.1.6. The entry of a decree of judicial dissolution in
accordance with Section 17-802 of the Delaware Act.
9.2 Effect of Winding Up. The winding up of the Partnership shall be
effective on the day on which the event occurs giving rise to the winding up,
but the Partnership shall not terminate until this Agreement has been canceled
and the assets of the Partnership shall have been distributed as provided in
Section 9.4. Notwithstanding the winding up of the Partnership, prior to the
termination of the Partnership, the business of the Partnership and the affairs
of the Partners, as such, shall continue to be governed by this Agreement,
except as otherwise required by applicable law.
9.3 Liquidation.
9.3.1. Upon winding up of the Partnership, the General
Partners shall liquidate the assets of the Partnership and, after allocating
(pursuant to Article V of this Agreement) all income, gain, loss and deductions
resulting therefrom, shall apply and distribute the proceeds thereof in the
following order:
(i) first, to the expenses of liquidation, and to the
setting up of any Reserves which the Management Committee may consider necessary
or advisable;
(ii) second, to the payment of debts and obligations of
the Partnership to its secured creditors in accordance with their respective
security rights;
(iii) third, to the payment of the debts and obligations
of the Partnership to its unsecured creditors (including any Construction Loan);
(iv) fourth, to the payment or other satisfaction of any
obligations secured by guarantees of a Partnership obligation or a letter of
credit or security deposit posted by a Partner on behalf of the Partnership;
(v) fifth, to MENY an amount equal to the unpaid balance
of the Priority Loan; and
(vi) thereafter, to the Partners in proportion to their
respective positive Capital Accounts.
9.3.2. Notwithstanding Section 9.3.1, in the event that the
Management Committee determines that an immediate sale of all or any portion of
the Partnership's assets would cause undue loss to the Partners, the Management
Committee, in order to avoid such loss, may, after giving Notice to all of the
Limited Partners, to the extent not then prohibited by the Delaware Act or the
terms of a Long-Term Credit Facility, either defer liquidation of and withhold
from distribution for a
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reasonable time any assets of the Partnership except those necessary to satisfy
the Partnership's debts and obligations, or distribute the remaining assets to
the Partners in kind.
9.3.3. If any assets of the Partnership are to be distributed
in kind, such assets shall be distributed on the basis of the fair market value
thereof, and any Partner entitled to any interest in such assets shall receive
an interest therein as a tenant-in-common with all other Partners so entitled.
The fair market value of such assets shall be determined by an independent
appraiser to be selected by the General Partners. The Capital Accounts of all
Partners shall be adjusted as of the date of distribution in kind to reflect the
manner in which the unrealized income, gain, loss and deduction inherent in such
property (that has not been previously reflected in Capital Accounts) would be
allocated, pursuant to this Agreement, among the Partners if there were a
taxable disposition of such property for its fair market value (taking Section
7701(g) of the Code into account) on the date of distribution.
9.3.4. The General Partners or surviving General Partner shall
cause the cancellation of this Agreement following the liquidation and
distribution of all of the Partnership's assets.
ARTICLE X
DEFAULTS AND REMEDIES
10.1 Event of Default. The occurrence of an event of Withdrawal with
respect to a General Partner without the other General Partner's written consent
or a default by a General Partner of any material obligation of such Partner
pursuant to this Agreement shall constitute an event of default ("Event of
Default") hereunder on the part of the Partner with respect to whom such event
occurs (the "Defaulting Partner").
10.2 Remedies Available to Nondefaulting Partner.
10.2.1. Following an Event of Default, the Defaulting
Partner's Management Committee members shall not have any voting rights (but
shall have the right to attend all meetings) and the presence of the General
Partners which are not in default (the "Nondefaulting Partners") shall be
sufficient to constitute a quorum and the vote, consent or participation of the
Nondefaulting Partners shall be sufficient with regard to any matter requiring
the action of the Management Committee hereunder and the Defaulting Partner's
right to withdraw funds from any account of the Partnership from which the
Defaulting Partner could withdraw funds will be suspended.
10.2.2. In addition to the foregoing, the Nondefaulting
Partner may, at its option, at any time within one year following the uncured
Event of Default, cause the Partnership to terminate any contracts existing
between the Partnership and
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the Defaulting Partner or its Affiliates on not less than 90 days' written
Notice, without any further liability thereunder.
10.2.3. The Defaulting Partner shall be and remain liable to
the Partnership and to the Nondefaulting Partner for all losses, liabilities,
damages and expenses sustained or incurred by the Partnership and the
Nondefaulting Partner as a result of a Event of Default, including any
additional tax liabilities and interest thereon. The Partnership may elect to
set off against any amounts payable to a Defaulting Partner or any Affiliate the
amount of any of the foregoing losses, liabilities, damages and expenses owed by
the Defaulting Partner to the Partnership.
10.2.4. The Nondefaulting Partner shall have the right to
pursue any other remedies available at law.
10.3 Nonexclusivity. Notwithstanding the provisions of this Article
X, each Partner shall have the right to enforce the provisions of this Agreement
in accordance with the Delaware Act and any other applicable law.
ARTICLE XI
BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS, ETC.
11.1 Books and Records.
11.1.1. The books and records of the Partnership shall be
maintained in accordance with generally accepted accounting principles at the
offices of an MENY Affiliate and shall be available for examination there by any
Partner or its duly authorized representatives at any and all reasonable times
upon prior Notice to the General Partners for purposes reasonably related to
such Partner's Interest as a Partner. To the extent required by law, the General
Partners will permit Limited Partners and their assignees, at the expense of
such Limited Partners and assignees, to inspect and copy such books and records
for any purpose reasonably related to the Partner's Interest as a Partner. The
Partnership shall maintain such books and records and provide such financial or
other statements as the Management Committee reasonably deems advisable and as
may be required by the Delaware Act or other applicable law.
11.1.2. After the end of each fiscal year, the Tax Matters
Partner shall, at the expense of the Partnership, cause the preparation and
filing of all tax returns of the Partnership. Prior to the filing of a tax
return of the Partnership, the Tax Matters Partner shall provide a copy to the
General Partners for their review and comment.
11.1.3. Each General Partner shall have the right at its
expense to audit the books and records of the Partnership. This audit right with
respect to the
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books and records of the Partnership as to each Partnership fiscal year shall
expire two years after the close of that year.
11.2 Accounting and Fiscal Year. Subject to Section 448 of the Code,
the books of the Partnership shall be kept on methods of accounting for tax and
financial reporting purposes as required by generally accepted accounting
principles. The fiscal year of the Partnership shall end on December 31 of each
year, or on such other date permitted under the Code as the General Partners
shall determine.
11.3 Bank Accounts and Investments. The bank accounts of the
Partnership shall be maintained at such banking institutions as the Management
Committee shall determine, and withdrawals shall be made only in the regular
course of Partnership business on the signature of the Executive Director or
such signature or signatures as the Management Committee shall determine. All
deposits and other funds not needed in the operation of the business or not yet
invested may be invested by the Management Committee only in such investments as
the Management Committee may (consistent with the terms of any agreements of the
Partners) expressly authorize. The Management Committee may rely on the advice
of independent investment advisors. The funds of the Partnership shall not be
commingled with the funds of any other Person.
11.4 Reports.
11.4.1. Within 75 days after the end of each tax year, the Tax
Matters Partner, at the expense of the Partnership, shall send or cause to be
sent to each Partner or assignee at any time during the fiscal year ending
during such calendar year such tax information as shall be necessary for the
preparation by such Partner or assignee of its Federal income tax return, and
required state income and other tax returns with regard to jurisdictions in
which the Partnership is formed or qualified or owns Property. With the approval
of the Partners, such approval not to be unreasonably withheld or delayed, the
Tax Matters Partner may file any application for extensions for the filing of
the Partnership tax return.
11.4.2. As soon as possible and in any event within 75 days
after the end of each fiscal year of the Partnership (unless otherwise
determined by the Management Committee), MENY, at the expense of the
Partnership, shall send to each Partner or assignee at any time during the
fiscal year then ended (a) a balance sheet as of the end of such fiscal year,
and statements of income, Partners' equity and cash flow for such fiscal year,
all of which shall be prepared in accordance with generally accepted accounting
principles and accompanied by an auditor's report containing an opinion of the
Accountants setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on as to the fairness of the presentation and
generally accepted accounting principles, (b) a report summarizing the fees and
other remuneration and reimbursed expenses for such fiscal year from the
Partnership to the General Partners or any Affiliate of the General Partners and
(c) a statement showing
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the amounts distributed to each Person pursuant to Section 4.1 who was a Partner
or assignee at any time during such fiscal year with respect to such year.
11.4.3. As soon as possible and in any event within 45 days
after the end of each of its first three quarters of each fiscal year of the
Partnership, MENY, at the expense of the Partnership, shall send to each Partner
a balance sheet of the Partnership as of the end of such quarter and related
statements of operations and cash flow for such quarters and for a portion of
the Partnership's fiscal year ended at the end of such quarter, setting forth in
each case in comparative form the figures for the corresponding quarter and the
corresponding portion of the Partnership's previous fiscal year.
11.4.4. Promptly after the end of each month including the
last month of the fiscal year, MENY, at the expense of the Partnership, shall
prepare and distribute to the Partners a balance sheet showing the Partnership's
assets and liabilities as of the close of the month, and a statement of income
and a statement of cash flow showing the results of operations for the month.
11.4.5. Each General Partner shall have the right at
reasonable times, upon written Notice to the other General Partner, to obtain
such other information regarding the affairs of the Partnership as it shall
reasonably request.
11.5 Depreciation and Elections. With respect to any depreciable
assets of the Partnership, the Partnership may elect to use, so far as permitted
by the provisions of the Code, any depreciation method which is appropriate in
the opinion of the Management Committee. Subject to Section 6.2.4, the
Partnership may, in the discretion of the Management Committee, make or elect
not to make, and may revoke or elect not to revoke, any election permitted or
required to be made by the Partnership for Federal income or state tax purposes.
11.6 Designation of Tax Matters Partner. MENY is hereby designated
as the "Tax Matters Partner" of the Partnership under Section 6231(a)(7) of the
Code, to manage administrative and judicial tax proceedings conducted at the
Partnership level with respect to Partnership matters. Any Partner or assignee
may participate in such proceedings relating to the determination of Partnership
items at the Partnership level, to the extent permitted by the Code. Expenses of
such proceedings undertaken by the Tax Matters Partner shall be paid from
Partnership assets. Each Partner or assignee who elects to participate in such
proceedings shall be responsible for its own expenses incurred in connection
with such participation.
11.7 Expenses of Adjustment. The cost of any adjustments to a
Partner or assignee, and the cost of any resulting audits or adjustments of a
Partner's or assignee's tax return, will be borne solely by the affected Partner
or assignee.
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11.8 Budgets and Forecasts.
11.8.1. Preparation of the Annual Capital and Operating
Budgets. The Executive Director shall prepare and submit to the Management
Committee for discussion, modification and approval by November 1 of each year a
capital budget and operating budget for discussion, modification and approval
for the forthcoming year with respect to the Partnership and the Project. The
capital budget shall consist of a section on appropriations and a section on
expenditures:
(a) The appropriations section shall describe each capital
expenditure item estimated to cost more than $100,000 for which Management
Committee authorization is expected to be sought during the forthcoming
year with respect to the Project. At the request of a General Partner, the
Executive Director shall provide appropriate justification for each such
item. Capital expenditure items expected to cost less than $100,000 each,
which are anticipated to be committed to during the upcoming year, may be
combined and included up to a combined total of $500,000; and
(b) The expenditure section shall identify all capital
expenditure items which have been presented in the appropriation section
of prior capital budgets which are still ongoing, or are being presented
in the appropriation section of the current budget with respect to the
related Project. The expenditure section shall also indicate anticipated
expenditures for all such items by month during the upcoming year, and by
year for subsequent years. Such expenditures shall be listed individually
for capital expenditure items greater than $100,000 and may be combined
for items less than $100,000 with respect to the related Project.
The operating budget shall identify each category of operating expense. Such
categories shall include fuel costs, operations and maintenance expenses, and
aggregate labor costs (excluding salary figures for specific individuals,
provided that the Management Committee shall have access to detailed information
on any salary which the Partnership is, or is considering becoming, obligated to
pay, whether directly or by reimbursement pursuant to Section 4.3), and shall
otherwise be in accordance with generally accepted accounting principles as
consistently applied by the Partnership. In addition, any other category
requested by the Management Committee for such identification shall be
specifically identified.
11.8.2. Approval and Modification of the Budgets. The capital
and operating budgets with respect to the Project shall be reviewed and may be
modified before approval by the Management Committee; such approval may not be
unreasonably withheld. The Executive Director may submit to the Management
Committee for approval a modification of, or supplement to, an approved budget
at any time.
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11.8.3. Financial Forecasts. The Executive Director shall
prepare and submit a financial forecast with respect to the Project to the
Management Committee simultaneously with the budgets. The forecast shall include
estimates of operating expenses and capital expenditures (with items in excess
of $100,000 individually identified), throughputs of fuel, steam, water and
electricity volumes and estimated net income and cash flow by month for the
upcoming year and by quarter for the four years thereafter.
ARTICLE XII
MEETINGS; VOTING RIGHTS OF LIMITED PARTNERS
12.1 Meetings.
12.1.1. Meetings of the Partners for any matter on which the
Limited Partners are entitled to vote may be called by any General Partner, and
shall be called by the General Partners upon receipt of a request in writing
signed by a Majority of the Limited Partners in such capacity. Notice of any
such meeting shall be sent by the General Partners to the Limited Partners
within ten days after their receipt of such a request. Such a request shall
state the purpose of the proposed meeting and the matters proposed to be acted
upon thereat. The requested meeting shall be held at the principal office of the
Partnership or such other location as may be determined by the Management
Committee; provided, however, that with the consent of a majority in Interest of
the Partners, meetings may be held via telephone conference or similar
communication technology. In addition, the General Partners may submit any
matter (upon which the Limited Partners are entitled to act) to the Limited
Partners for a vote by written consent without a meeting, or upon receipt of a
request in writing signed by a Majority of the Limited Partners in such
capacity, shall submit any such matter (upon which the Limited Partners are
entitled to act) to the Limited Partners for a vote by written consent without a
meeting. Assignees which have not been recognized as Substituted Partners as to
any Interests held by them in such capacity shall not be entitled to vote.
12.1.2. Notice of any meeting called pursuant to Section 12.1
shall be given either personally or by mail, not less than 15 days nor more than
60 days before the date of the meeting, to each Limited Partner at its record
mailing address. Such Notice shall be in writing, shall state the place, date,
hour and purpose of the meeting, and shall indicate that it is being issued at
the direction of the Partner or Partners calling the meeting. If a meeting is
adjourned to another time or place, and if any announcement of the adjournment
of time and place is made at the meeting, it shall not be necessary to give
Notice of the adjourned meeting. If the adjournment is for more than 45 days or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of adjourned meeting shall be given to each Partner of record entitled to
vote at the meeting. The presence in person or by proxy of the
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holders of a Majority of the Limited Partners shall constitute a quorum at all
meetings of the Limited Partners; provided, however, that if there is no quorum,
the holders of a majority in Limited Partner Interests of the Limited Partners
who are present or represented by proxy may adjourn the meeting from time to
time without further Notice, until a quorum shall have been obtained. No Notice
of the time, place or purpose of any meeting of the Limited Partners need be
given to any Limited Partner who attends in person or is represented by proxy
(except for a Limited Partner who attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business on
the ground that the meeting is not lawfully called or convened), or to any
Limited Partner entitled to such Notice who, in a writing executed and filed
with the records of the meeting, either before or after the time thereof, waives
such Notice.
12.1.3. For the purpose of determining the Limited Partners
entitled to vote at any meeting of the Partnership or any adjournment thereof,
the General Partners or the Limited Partners requesting such meeting may fix, in
advance, a date as the record date for any such determination. The determination
date shall be not more than 60 days nor less than ten days before any such
meeting.
12.1.4. Each Limited Partner may authorize any Person to act
for it by proxy in all matters in which a Limited Partner is entitled to
participate, whether by waiving Notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited Partner or
its attorney-in-fact. No proxy shall be valid after the expiration of 11 months
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the Limited Partner executing it.
12.1.5. At each meeting of the Limited Partners, the General
Partners shall appoint such officers and adopt such rules for the conduct of
such meeting as the General Partners shall deem appropriate.
12.2 Voting Rights of Limited Partners. The Limited Partners shall
have the right to vote only on amendments to this Agreement approved by all
General Partners which affect in a materially adverse way the rights, powers or
duties of the Limited Partners, subject to the provisions of Section 13.2,
provided that such amendments (a) shall not allow the Limited Partners to take
part in the management or control of the Partnership's business, and (b) shall
not, without the written consent of the General Partners, alter the rights,
powers or duties of the General Partners as set forth herein.
12.3 Written Consent in Lieu of Meeting. In any matter on which
Limited Partners are entitled to vote or take action hereunder or under the
Delaware Act, the written consent or consents setting forth such action or
decision, without a meeting or prior notice, of holders of such Interests as are
so required to so authorize or act, shall suffice for all purposes once
delivered to the Partnership. Prompt notice of
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the taking of action without a meeting by less than unanimous consent shall be
given to those Partners who have not consented.
ARTICLE XIII
OTHER PROVISIONS
13.1 Appointment of General Partners as Attorneys-in-Fact.
13.1.1. Each Limited Partner, including each Substituted
Partner, by its execution of this Agreement, irrevocably constitutes and
appoints the General Partners and each of them as its true and lawful
attorneys-in-fact with full power and authority in its name, place and stead to
execute, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents as may be necessary or appropriate to carry out
the provisions of this Agreement, including but not limited to:
(a) All certificates and other instruments (including
counterparts of this Agreement), and all amendments thereto, which the
General Partners deem appropriate to form, qualify or continue the
Partnership as a limited partnership (or a partnership in which the
Limited Partners will have limited liability comparable to that provided
in the Act), in the jurisdictions in which the Partnership may conduct
business or in which such formation, qualification or continuation is, in
the opinion of either of the General Partners, necessary or desirable to
protect the limited liability of the Limited Partners;
(b) All amendments to this Agreement adopted in
accordance with the terms hereof, and all instruments which the General
Partners deem appropriate to reflect a change or modification of the
Partnership in accordance with the terms of this Agreement;
(c) All filings and other reports with respect to the
Partnership required to be made under the Federal laws of the United
States of America and applicable state laws within the United States of
America, in connection with the conduct of its business; and
(d) All conveyances of Property, and other instruments
which either of the General Partners reasonably deem necessary in order to
complete a dissolution and termination of the Partnership pursuant to this
Agreement.
13.1.2. The appointment by all Limited Partners of the General
Partners as attorneys-in-fact shall be deemed to be a power coupled with an
interest, in recognition of the fact that each of the Partners under this
Agreement will
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be relying upon the power of the General Partners to act as contemplated by,
this Agreement in any filing and other action by it on behalf of the
Partnership, shall survive the bankruptcy, death, adjudication of incompetence
or insanity, other dissolution of any Person hereby giving such power, and the
transfer or assignment of all or any portion of the Interests of such Person,
and shall not be affected by the subsequent incapacity of the principal;
provided, however, that in the event of the assignment by a Limited Partner of
all of its Interests, the foregoing power of attorney of an assignor Limited
Partner shall survive such assignment only until such time as the assignee shall
have been admitted to the Partnership as a Substituted Partner and all required
documents and instruments shall have been duly executed, filed and recorded to
effect such substitution.
13.2 Amendments.
13.2.1. Each Substituted Partner, additional General Partner
and successor General Partner shall become a signatory hereto by signing such
number of counterpart signature pages to this Agreement, a power of attorney to
the General Partners (in the case of a Substituted Partner holding Limited
Partner Interests), and such other instruments, in such manner, as the General
Partners shall determine. By so signing, each Substituted Partner, additional
General Partner or successor General Partner, as the case may be, shall be
deemed to have adopted and to have agreed to be bound by all of the provisions
of this Agreement.
13.2.2. This Agreement may not be amended without the consent
of all Partners, provided, however, MENY may amend this Agreement from time to
time, without the consent of any Partner, (a) to cure any ambiguity, to correct
or supplement any provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to matters or
questions arising under this Agreement that are not inconsistent with the
provisions of this Agreement; (b) to delete or add any provision of this
Agreement required to be so deleted or added by any Federal or state official,
which addition or deletion is deemed by such official to be for the benefit or
protection of the Partners; and (c) to take such actions as may be necessary (if
any) to insure that the Partnership will be treated as a partnership, and that
each Limited Partner will be treated as a limited partner, for Federal income
tax purposes; provided, however, further, that no amendment shall be adopted
pursuant to this Section 13.2.2 unless the adoption thereof (i) is for the
benefit of or not materially adverse to the interests of the other Partners,
(ii) does not affect the rights of Partners to distributions of amounts pursuant
to Article IV or Section 9.3, payment of the General Partner Management Fee or
Royalty Fee or the allocation of Items of Income, Items of Deduction or items of
Partnership income, gain, deduction or loss among the Partners or between the
Limited Partners as a class and the General Partners as a class and (iii) does
not affect the rights of any Person making a Loan to repayment, the limited
liability of the Limited Partners, or the status of the Partnership as a
partnership for Federal income tax purposes.
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13.2.3. If this Agreement is amended as a result of
substituting a Limited Partner, the amendment to this Agreement shall be
sufficient when it is signed by the General Partners and by the Person to be
substituted, and, if a Limited Partner is to be substituted, by the assigning
Limited Partner. If this Agreement is amended to reflect the designation of an
additional or successor General Partner, the amendment to this Agreement shall
be sufficient when it is signed by the other General Partner(s) and by the
additional or successor General Partner. If this Agreement is amended to reflect
the withdrawal of a General Partner and if the business of the Partnership is to
be continued, the amendment to this Agreement shall be sufficient when it is
signed by any remaining and successor or additional General Partners on their
own behalf and on behalf of the withdrawing General Partner, except that if the
withdrawing General Partner is the only remaining General Partner at the time of
withdrawal, the amendment shall also be signed by the Limited Partners or on
their behalf by a duly authorized new General Partner. Each General Partner
hereby consents to any execution of an amendment on its behalf pursuant to the
terms of this Section 13.2.3.
13.2.4. In making any amendments, there shall be prepared and
filed by the General Partners such documents and certificates as may be required
under the Delaware Act and under the laws of any other jurisdiction applicable
to the Partnership.
13.3 Right of Setoff. The Partnership shall have a right of setoff
against distributions of amounts pursuant to Article IV to a Partner in an
amount equal to any withholding tax and any other liability which the
Partnership would not have incurred except for the gross negligence, willful
misconduct or bad faith of such Partner and any other amount then due and
payable for which such Partner is then obligated to the Partnership hereunder.
13.4 Binding Provisions; Successors and Permitted Assigns. The
covenants and agreements contained herein shall be binding upon, and inure to
the benefit of, the permitted successors and permitted assigns of the respective
parties hereto to the extent provided herein. Notwithstanding any other
provision hereof, no General Partner shall be relieved of any obligations or
liabilities as a general partner as a result of the transfer of an Interest or
substitution of another General Partner except to the extent expressly provided
herein. For purposes of distributions under Articles IV and IX and allocations
under Articles V and IX, the term Partner shall be deemed to include such
Partner's assignees to the extent entitled to recognition hereunder.
13.5 Applicable Law. This Agreement (except as otherwise provided
herein) shall be construed and enforced in accordance with the laws of the State
of Delaware.
13.6 Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all of the parties have not signed the
same counterpart.
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<PAGE>
13.7 Separability of Provisions. If any provision of this Agreement
is declared illegal, invalid or unenforceable by a court it will be severed if
the remaining provisions of this Agreement can reasonably and fairly be given
effect without affecting the legal and economic substance of the transactions
contemplated by this Agreement in a manner adverse to any party.
13.8 Article and Section Titles. Article and Section titles are for
descriptive purposes only and shall not control or alter the meaning of this
Agreement as set forth in the text.
13.9 Addresses and Notices. The address of each Partner for all
purposes shall be the address set forth in Exhibit A or such other address of
which the Partnership and each General Partner has received Notice. Any notice,
demand, request or report required or permitted to be given or made to a Partner
under this Agreement shall be in writing and shall be deemed given or made when
delivered in person, or when sent by facsimile transmission or other means of
telecommunication when receipt is confirmed by operators thereof, or one
Business Day after sent to the Partner at such address by registered or
certified overnight mail.
13.10 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be reasonably necessary or appropriate to carry out the purposes of this
Agreement. The General Partners recognize that it may be necessary to amend and
restate this Agreement (including provision of maximum permissible voting rights
for any original Partner that is a Limited Partner), reconstitute the
Partnership under the laws of another State, restructure the Partnership or sell
or transfer the assets of the Project, leverage lease the Project or make other
arrangements or take other actions in order to achieve the purposes set forth in
Section 2.3 and each General Partner agrees to negotiate in good faith any
proposed action of the nature described above. Each General Partner will
negotiate in good faith any proposed amendments to this Agreement to alleviate
materially adverse regulatory, tax or other consequences to the Partner or an
Affiliate of the Partner proposing such amendment.
13.11 No Third-Party Beneficiaries. Except to the extent expressly
provided by name (generic or specific) elsewhere in this Agreement, none of the
provisions of this Agreement shall be for the benefit of or enforceable by any
other person not a party hereto, including but not limited to creditors of the
Partnership.
13.12 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other breach, covenant, duty,
agreement or condition, nor shall any delay or omission to seek a remedy for any
breach of this Agreement or to exercise the rights accruing to any Partner by
reason of such breach be deemed a waiver by such Partner of its remedies and
rights with respect to such breach.
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<PAGE>
13.13 Integration. This Agreement constitutes the entire agreement
among the Partners pertaining to the subject matter hereof and supersedes all
prior agreements and understandings between them pertaining to the Project or
the subject matter hereof, including the December Agreement, the Letter
Agreement, the Amendment, the Supplemental Agreement and the Second Supplemental
Agreement.
13.14 Waiver of Action for Partition. Each of the parties hereto
irrevocably waives during the term of the Partnership and during the period of
its liquidation following any dissolution, any right that it may have to
maintain any action for partition with respect to any of the assets of the
Partnership.
13.15 No Recourse and Consequential Damages.
13.15.1. York Partners and MENY hereby agree that all of the
statements, representations, covenants and agreements contained in this
Agreement are made and intended only for the purpose of binding MENY and York
Partners and establishing the existence of rights and remedies provided for in
this Agreement or in the other agreements referred to herein which can be
exercised and enforced against MENY or York Partners. Therefore, anything
contained in this Agreement or in any other document, agreement or instrument to
the contrary notwithstanding, no recourse shall be had with respect to
enforcement of this Agreement or the obligations of MENY or York Partners
hereunder or for the payment of any payment due under this Agreement or to be
paid or caused to be paid by MENY or York Partners under this Agreement or for
any claim based upon any provision of this Agreement or any of the documents,
agreements or instruments referred to herein, against any past, present or
future Affiliate, stockholder, direct or indirect parent or controlling
corporation, officer, director, employee, servant, partner, incorporator or
agent of MENY or York Partners or any predecessor or successor thereto in its
capacity as such.
13.15.2. Notwithstanding anything to the contrary elsewhere in
this Agreement, no Partner nor its Affiliates shall, in any event, be liable to
any other Partner or its Affiliates for any indirect, incidental, special or
consequential damages relating to an alleged breach of this Agreement, including
loss of revenue, cost of capital, loss of business reputation or opportunity
whether such liability arises out of contract, tort (including negligence),
strict liability or otherwise.
13.16 Maximum Lawful Rate. Notwithstanding anything to the contrary
set forth in this Agreement, if at any time until payment in full of all of the
obligations in respect of any Construction Loan or Priority Loan, the amount of
interest payable thereunder exceeds the amount payable under the highest rate of
interest permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable thereto (the "Maximum Lawful
Rate"), then in such event and so long as the amount payable under the Maximum
Lawful Rate would be so exceeded, the amount of interest payable thereunder
shall be equal to the amount payable under the Maximum Lawful Rate. In no event
shall the total interest payable in
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respect of any Construction Loan or Priority Loan exceed the amount payable
under the Maximum Lawful Rate. In the event that a court of competent
jurisdiction shall make a final determination that MENY, has received interest
under any Construction Loan or Priority Loan in excess of the amount payable
under the Maximum Lawful Rate, MENY shall, to the extent permitted by applicable
law, promptly apply such excess in the following order: (i) then due and payable
fees, expenses and other charges owed to MENY under this Agreement; (ii) then
due and payable interest payments owed to MENY; (iii) principal payments on any
Construction Loan or Priority Loan (whether or not due and payable); and (iv)
thereafter as a refund to the Partnership or York Partners, as the case may be,
or as a court of competent jurisdiction may otherwise order.
13.17 No Bond Closing Date. In the event the Bond Closing Date shall
not have occurred on or prior to June 30, 1998, this Agreement shall have no
force and effect and the Partnership shall be governed by the Initial Agreement
as amended, supplemented or modified, excluding this Agreement.
ARTICLE XIV
DISPUTE RESOLUTION
14.1 Dispute Resolution.
14.1.1. Any claim, controversy or dispute arising out of or
relating to this Agreement or the Project, including any claim, controversy or
dispute as to the arbitrability of any claim, controversy or dispute, shall be
settled by arbitration in New York, New York in accordance with the commercial
arbitration rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
14.1.2. The General Partners shall share equally the expense
of the arbitrator(s).
14.2 Mutual Release. MENY and York Partners each on behalf of itself
and its respective predecessors, successors, assigns, subsidiaries and other
Affiliates, and each of their respective officers, directors, shareholders,
partners, employees, attorneys, agents and servants, and their respective
predecessors, successors and assigns (collectively, the "Releasing Parties"), do
hereby forever release and discharge the other, the other Partners predecessors,
successors, assigns, parents, subsidiaries and other Affiliates, and each of
their respective officers, directors, shareholders, partners, employees,
attorneys, agents and servants, and their respective predecessors, successors,
successors and assigns (the "Released Parties"), from any and all claims
existing, owned, held or alleged, or which claims could, might, or may be
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claimed to exist, of whatever kind or name, on or prior to the date hereof,
whether direct or indirect, known or unknown, suspected or unsuspected,
liquidated or unliquidated, matured or unmatured, fixed or contingent,
irrespective of how, why, or by reason of what facts such claims arose (all such
claims are herein collectively referred to as "Released Claims") which in any
way relate to, arise out of or are connected with (a) this Agreement or the
Partnership and any liabilities or obligations hereunder or thereunder, and (b)
any and all other actions (or inaction), discussions, negotiations, agreements,
undertakings and other matters concerning the design, construction, development,
ownership, financing, management or operation of the Project in each case
allegedly occurring on or prior to the date hereof provided, however, that the
foregoing covenant and release shall not operate to discharge any loan, advance
or debt extended by any Person or any cost or expense evidenced by this
Agreement or the York Reimbursement Agreement, or to discharge either or both of
the Partners from any of their respective obligations hereafter arising under
this Agreement or any other agreement to which it is a party. Each Partner
hereby agrees, represents and warrants that it realizes and acknowledges that
the foregoing covenant and release has been negotiated and agreed upon in light
of the realization that factual matters now unknown to it may have given or may
hereafter give rise to Released Claims, and that it nevertheless hereby intends
to grant such release and to covenant and agree not to sue or take other action
against the other for any such known or unknown Released Claims.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first written above.
GENERAL PARTNERS:
MISSION ENERGY NEW YORK, INC.,
a California corporation
By:
-------------------------------------
Mary Ellen Olson
Vice President
B-41 ASSOCIATES, L.P.,
a Delaware limited partnership
By: B-41 Management Corp.,
its Managing General Partner
By:
-----------------------------
Michael Trachtenberg
Vice President
LIMITED PARTNERS:
MISSION ENERGY NEW YORK, INC.,
a California corporation
By:
-------------------------------------
Mary Ellen Olson
Vice President
B-41 ASSOCIATES, L.P.,
a Delaware limited partnership
By: B-41 Management Corp.,
its Managing General Partner
By:
---------------------------------
Michael Trachtenberg
Vice President
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EXHIBIT A
<TABLE>
<CAPTION>
GENERAL PARTNERS INTERESTS
- ---------------- ---------
<S> <C>
B-41 ASSOCIATES, L.P. 5%
280 Park Avenue
Suite 2700 West
New York, NY 10017
Attn: Robert M. Beningson
Telephone: 212 557-6200
Facsimile: 212 557-5678
EDISON MISSION ENERGY 5%
18101 Von Karman Avenue
Suite 1700
Irvine, CA 92715
Attn: General Counsel
Telephone: 714 752-5588
Facsimile: 714 752-6401
</TABLE>
<TABLE>
<CAPTION>
LIMITED PARTNERS INTERESTS
- ---------------- ---------
<S> <C>
B-41 ASSOCIATES, L.P. 45%
280 Park Avenue
Suite 2700 West
New York, NY 10017
Attn: Robert M. Beningson
Telephone: 212 557-6200
Facsimile: 212 557-5678
EDISON MISSION ENERGY 45%
18101 Von Karman Avenue
Suite 1700
Irvine, CA 92715
Attn: General Counsel
Telephone: 714 752-5588
Facsimile: 714 752-6401
</TABLE>
<PAGE>
EX-21
SUBSIDIARIES OF YORK RESEARCH CORPORATION
Set forth below are the names of all subsidiaries of York Research Corporation
("York") as of February 28, 1998 required to be listed on Exhibit 21 to York's
1998 Annual Report on Form 10-K. Indented companies are direct subsidiaries of
the company under which they are indented.
<TABLE>
<CAPTION>
Percentage
Owned by State of
Immediate Incorporation
Parent or Formation
------ ------------
<S> <C> <C>
York Research Corporation (Parent) N/A Delaware
B-41 Management Corporation 100% Delaware
B-41 Associates L.P. (1) Delaware
Cogeneration Technologies, Inc. 100% Delaware
B-41 Associates L.P. (2) Delaware
York Cogen Partners L.P. 90% Delaware
B-41 Associates L.P. (3) Delaware
FBL Medical Computer
Specialists, Inc. 100% New Jersey
York Internet Power Services, Inc. 100% New York
York Research Canada, Inc. 100% Canada
York Windowpower Corp. 100% Canada
North American Energy Conservation Inc. 85% Delaware
NAEC Energy Services Company, Inc. 100% Delaware
York Holdings (Caymans) L.L.C. 100% Cayman Islands
York Ex International S.R.L 100% Barbados, B.W.I.
York Holdings (Barbados) S.R.L. 100% Barbados, B.W.I.
InnCOGEN, Limited 100% Republic of
Trinidad & Tobago
Big Spring Holdings, Inc. 100% Delaware
Big Spring Texas Energy Management, Inc. 100% Delaware
New World Power Texas Renewable
Energy L.P. 100% Delaware
(1) 5% of Profits
9.8% of Losses
9.8% of Depreciation
(2) 22% of Profits
1% of Losses
1% of Depreciation
(3) 53% of Profits
1% of Losses
1% of Depreciation
</TABLE>
