<PAGE> 1
File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
(a registered holding company and
the parent of the other party)
CNG ENERGY COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
Names and addresses of agents for service:
S. E. WILLIAMS, Senior Vice President
and General Counsel
Consolidated Natural Gas Company
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
N. F. CHANDLER, General Attorney
Consolidated Natural Gas Service Company, Inc.
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
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File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
Item 1. Description of Proposed Transaction
___________________________________
(a) Furnish a reasonably detailed and precise description of the
proposed transaction, including a statement of the reasons why it is desired
to consummate the transaction and the anticipated effect thereof. If the
transaction is part of a general program, describe the program and its
relation to the proposed transaction.
Consolidated Natural Gas Company ("Consolidated") is a Delaware
corporation and a public utility holding company registered as such under the
Public Utility Holding Company Act of 1935 ("Act"). It is engaged solely in
the business of owning and holding all of the outstanding securities, with the
exception of certain minor long-term debt, of fifteen subsidiaries. These
subsidiary companies are primarily engaged in natural gas exploration,
production, purchasing, gathering, transmission, storage, distribution, by-
product operation, research and other activities related to the natural gas
business.
Proposed Investment in Bear Mountain
CNG Energy Company ("CNG Energy"), a wholly-owned subsidiary of
Consolidated, proposes to purchase partnership interests in a Texas limited
partnership, Bear Mountain Limited ("Partnership"), an owner of an independent
power project ("Facility") which is to be a qualified cogeneration facility
under the Public Utility Regulatory Policies Act of 1978. CNG Energy would
acquire a limited partnership interest in the Partnership, and proposes to
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incorporate and finance a new subsidiary, CNG Bear Mountain, Inc. ("CNG Bear,
Inc.") to acquire a general partnership interest in the Partnership.
The Facility is a 48.1 gross megawatt, natural gas turbine facility
which will provide thermal energy for enhanced oil recovery activities of
Shell Western E&P Inc. The Facility, which is located in Bakersfield,
California, is currently under construction and is scheduled to be completed
in April 1995. The total cost of the Facility is estimated to be
approximately $58,000,000. The Partnership has a long-term contract with
Pacific Gas & Electric Company for sale of electric power from the Facility.
The current ownership composition of the Partnership is as follows.
General Limited Total
Partnership Partnership Partnership
Interest Interest Interest
___________ ___________ ___________
Bear Mountain
CoGen, Inc.
("Bear, Inc.") 1% 49% 50%
Bear Claw CoGen,
Inc. ("Bear
Claw, Inc.") 1% 49% 50%
____
100%
====
Bear, Inc. is a Texas corporation, and Bear Claw, Inc. is a Delaware
corporation. Both Bear, Inc. and Bear Claw, Inc. are wholly-owned
subsidiaries of Destec Holdings, Inc., which, in turn, is a wholly-owned
subsidiary of Destec Energy, Inc. ("Destec"). Other affiliates of Destec have
entered into contracts with the Partnership for construction, maintenance,
operation and fuel management of the Facility.
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CNG Energy proposes to purchase the 49% limited partnership interest in
the Partnership currently held by Bear, Inc. for a consideration not to exceed
$6,860,000, and to have CNG Bear, Inc. buy the 1% general partnership interest
in the Partnership currently held by Bear Claw, Inc. for a consideration not
to exceed $140,000. The aggregate consideration to be paid by the two
Consolidated subsidiaries for all of such partnership interests will thus not
exceed $7,000,000. After such acquisition the ownership composition of the
Partnership will be as follow.
General Limited Total
Partnership Partnership Partnership
Interest Interest Interest
___________ ___________ ___________
Bear, Inc. 1% - 1%
Bear Claw, Inc. - 49% 49%
CNG Bear, Inc. 1% - 1%
CNG Energy - 49% 49%
____
100%
====
Financing of Bear Mountain
The Partnership has entered into a loan agreement ("Agreement") for the
financing of the Bear Mountain project with Union Bank ("Lender"). The
Agreement will be in place during a construction phase of approximately 1.5
years and a permanent phase not expected to last longer than 15 years. The
construction phase will be financed by a $57,225,000 non-recourse construction
loan made to the Partnership pursuant to the Agreement.
Following completion of the construction phase under the Agreement, (i)
that portion of the construction loan to be permanently financed will be
converted into a non-recourse long-term loan of up to $45,225,000 for a term
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not exceeding 15 years and will carry an annual interest rate of 9.3%.
Pursuant to the Agreement, the remainder of the construction loan will be
repaid from partner equity contributions aggregating $12,000,000. The Lender
will also make up to $3,000,000 in revolving credit loans available to the
Partnership for a period of 15 years following conversion to permanent
financing for the purpose of providing working capital. The revolving credit
loans will carry a variable interest rate based on CD rates, prime or
reference rates or Eurodollar rates, and may range from .25% to 1.387% over
the base rate in the early years to .75% to 1.87% over the base rate in the
later years of the 15 year term.
The construction, permanent and revolving loans under the Agreement have
variable interest rates based on current CD or Eurodollar rates. The
construction loan floating rate is estimated to be approximately 7% per annum
for the life of the loan. The annual interest rate on the permanent loan has
been fixed through an interest rate swap with Union Bank as the counterparty
for certain intervals over the life of the loan as follows: 9.3% for years 1
through 5; 9.5% for years 6 through 10; and 9.81% for years 11 through 15.
Pursuant to an equity contribution agreement ("ECA") with the Lender,
both Bear, Inc. and Bear Claw, Inc. have agreed to make equal equity
contributions to the Partnership in an aggregate amount of $12,000,000. The
Agreement requires each partner to support its respective percentage of
Partnership equity contribution commitment through a bank letter of credit.
Destec has also entered into an agreement ("Equity Guaranty") by which
it unconditionally guarantees to the Lender that the contributions and other
obligations of Bear, Inc. and Bear Claw, Inc. will be performed pursuant to
the ECA. The Equity Guaranty allows Destec, at its option, to replace the
guarantee with an irrevocable equity letter of credit for an amount equal to
the required equity contributions.
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CNG Energy and CNG Bear, Inc. will, upon becoming partners in the
Partnership, be required to provide the Lender with the same type of support
that Bear, Inc. and Bear Claw, Inc. have with regard to equity contribution
commitments. Thus, CNG Energy and CNG Bear, Inc. will enter into an equity
contribution agreement similar to the ECA, and will be required to obtain a
bank letter of credit ("LOC") to support their individual equity commitment
which will not exceed $6,860,000 and $140,000, respectively. Concomitantly,
Consolidated will guarantee the payment of the equity contribution commitments
of CNG Energy and CNG Bear, Inc., and will have the option to replace such
guarantee with a LOC. None of the LOCs to which Consolidated, CNG Energy or
CNG Bear, Inc. will be a party will have fees in excess of 1% of the amount of
commitment.
Use of Special Purpose Subsidiary
CNG Energy seeks to be authorized to create and capitalize CNG Bear,
Inc. as a wholly owned, special purpose subsidiary. CNG Bear, Inc. will be
incorporated in Delaware and will have authorized capital stock of $1,000,000,
consisting of 100 shares of common stock, $10,000 par value each.
CNG Energy through CNG Bear, Inc. would seek to better insulate the
Consolidated System, including its utility companies, from risks associated
with investing in an independent power producer. Such would particularly be
the case since CNG Bear, Inc.'s investment in the Partnership is to be a
general partnership interest.
Source of Funds
It is proposed for CNG Energy to raise funds for the purposes described
herein by (i) selling shares of its common stock, $1,000 par value, to
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Consolidated, (ii) open account advances as described below, or (iii)
long-term loans from Consolidated, in any combination thereof.
The open account advances and long-term loans will have the same
effective terms and interest rates as related borrowings of Consolidated in
the forms listed below:
(1) Open account advances may be made to CNG Energy to provide working
capital and to finance the activities authorized by the Securities
and Exchange Commission ("Commission"). Open account advances will
be made under letter agreement with CNG Energy and will be repaid
on or before a date not more than one year from the date of the
first advance with interest at the same effective rate of interest
as Consolidated's weighted average effective rate for commercial
paper and/or revolving credit borrowings. If no such borrowings
are outstanding, the interest rate shall be predicated on the
Federal Funds' effective rate of interest as quoted daily by the
Federal Reserve Bank of New York.
(2) Consolidated may make long-term loans to CNG Energy for the
financing of its activities. Loans to CNG Energy shall be
evidenced by long-term non-negotiable notes of CNG Energy
(documented by book entry only) maturing over a period of time (not
in excess of 30 years) to be determined by the officers of
Consolidated, with the interest predicated on and equal to
Consolidated's cost of funds for comparable borrowings. In the
event Consolidated has not had recent comparable borrowings, the
rates will be tied to the Salomon Brothers indicative rate for
comparable debt issuances published in Salomon Brothers Inc. Bond
Market Roundup or similar publication on the date nearest to the
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time of takedown. All loans may be prepaid at any time without
premium or penalty.
Consolidated will obtain the funds required for CNG Energy through
internal cash generation, issuance of long-term debt securities, borrowings
under credit agreements or through other authorizations approved by the
Commission subsequent to the effective date of this application-declaration.
Consolidated also seeks the authorization to make guarantees and /or
obtain LOCs, not exceeding $7,000,000 in the aggregate, with respect to the
obligations of CNG Energy and/or CNG Bear, Inc., as necessary to support debt
service and other obligations of the Partnership.
The CNG Bear, Inc. would engage in general partner investing and
financing transactions with respect to the Partnership in lieu of CNG Energy.
CNG Bear, Inc. would have mirror image authorizations and obligations of CNG
Energy under this filing as such relate to the acquisition of a 1% general
partner interest in the Partnership, with CNG Energy functioning as a
"pass-through" with regard to the indirect Consolidated financing of this
portion of the Partnership. CNG Energy would also have the authorization to
make guarantees and/or obtain LOCs, not exceeding $140,000 in the aggregate,
with respect to obligations of CNG Bear, Inc.
Authorizations Requested
The following authorizations for the period ending December 31, 1996 are
hereby requested. All funding by a parent company of its immediate subsidiary
would be in the form of (a) the sale of the subsidiary's common stock to the
parent, (b) open account advances from the parent to the subsidiary, and (c)
long-term loans from the parent to the subsidiary. Any providing of funds by
Consolidated to CNG Energy can be in any combination of these three forms of
financing; and any financing between CNG Energy and CNG
Bear, Inc. will be in
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the same combination of forms that exists between Consolidated and CNG Energy
in the transaction which causes CNG Energy to obtain funds to invest in CNG
Bear, Inc.
(1) For CNG Energy to obtain up to $7,000,000 from Consolidated for the
purpose of accomplishing its direct or indirect investment in the
Partnership.
(2) For CNG Energy to invest up to $6,860,000 in the Partnership
directly by purchasing a 49% limited partnership interest therein.
(3) For CNG Bear, Inc. to obtain up to $140,000 from CNG Energy needed
for CNG Bear, Inc. to complete its acquisition of a 1% general
partnership interest in the Partnership.
(4) For CNG Bear, Inc. to invest up to $140,000 in the Partnership by
purchasing a 1% general partnership interest therein.
(5) For Consolidated to make guarantees and/or obtain and deliver LOCs
with respect to Partnership obligations of CNG Energy and/or CNG
Bear, Inc., such guarantees and letters of credit not to be in
excess of $7,000,000.
(6) For CNG Energy to make guarantees and/or obtain and deliver LOCs
with respect to Partnership obligations of CNG Bear, Inc., such
guarantees and letters of credit not to be in excess of $140,000.
(7) For CNG Energy and/or CNG Bear, Inc. to obtain and deliver LOCs as
interim support of their respective equity contribution commitments
to the Partnership, such LOCs not to exceed $6,860,000 in the case
of CNG Energy and $140,000 in the case of CNG Bear, Inc.
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(b) Describe briefly, and where practicable, state the approximate
amount of any material interest in the proposed transaction, direct or
indirect, of any associate company or affiliate of the applicant or any
affiliate of any such associate company.
None, except as set forth in Item 1(a).
(c) If the proposed transaction involves the acquisition of securities
not issued by a registered holding company or a subsidiary thereof, describe
briefly the business and property, present or proposed, of the issuer of such
securities.
None, except as set forth in Item 1(a).
(d) If the proposed transaction involves the acquisition or disposition
of assets, described briefly such assets, setting forth original cost,
vendor's book cost (including the basis of determination) and applicable
valuation and qualifying reserves.
None, except as set forth in Item 1(a).
Item 2. Fees, Commissions and Expenses
______________________________
(a) State (i) the fees, commissions and expenses paid or incurred, or
to be paid or incurred, directly or indirectly, in connection with the
proposed transaction by the applicant or declarant or any associate company
thereof, and (ii) if the proposed transaction involves the sale of securities
at competitive bidding, the fees and expenses to be paid to counsel selected
by applicant or declarant to act for the successful bidder.
It is estimated that the fees, commissions and expenses ascertainable at
this time to be incurred by Consolidated and CNG Energy in connection with the
herein proposed transaction will not exceed $7,000, consisting of the $2,000
filing fee under the Act, $4,000 payable to Consolidated Natural Gas Service
Company, Inc. ("Service Company") for services on a cost basis (including
regularly employed counsel) for the preparation of this
application-declaration and other documents, and $1,000 for miscellaneous
other expenses.
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(b) If any person to whom fees or commissions have been or are to be
paid in connection with the proposed transaction is an associate company or an
affiliate of the applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
The charges of Service Company, a subsidiary service company, for
services on a cost basis (including regularly employed counsel) in connection
with the preparation of this application-declaration and other related
documents and papers required to consummate the proposed transactions are as
stated above.
Item 3. Applicable Statutory Provisions
_______________________________
(a) State the section of the Act and the rules thereunder believed to be
applicable to the proposed transaction. If any section or rule would be
applicable in the absence of a specific exemption, state the basis of
exemption.
Sections 6(a) and 7 and Rule 43 are deemed applicable to the issuance of
securities by CNG Energy and/or CNG Bear Mountain.
Sections 9(a) and 10 are deemed applicable to the acquisitions (i) by
Consolidated of the capital stock, open account advance debits and notes of
CNG Energy, (ii) by CNG Energy of the capital stock, open account advance
debits and notes of CNG Bear, Inc., and (iii) by CNG Energy and CNG Bear,
Inc., of partnership interests in the Partnership.
Sections 12(b) and Rule 45 are considered applicable to loan, guarantee
and LOC arrangements among Consolidated, CNG Energy and CNG Bear, Inc.
If the Commission considers the proposed future transactions to require
any authorization, approval or exemption, under any section of the Act for
Rule or Regulation other than those cited hereinabove, such authorization,
approval or exemption is hereby requested.
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(b) If an applicant is not a registered holding company or a subsidiary
thereof, state the name of each public utility company of which it is an
affiliate or of which it will become an affiliate as a result of the proposed
transaction, and the reasons why it is or will become such an affiliate.
Not applicable.
Item 4. Regulatory Approval
___________________
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the Securities and Exchange
Commission) over the proposed transactions.
The financing authorization sought herein is not subject to the
jurisdiction of any State or Federal Commission (other than the SEC).
(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection with
the proposed transaction.
Inapplicable.
Item 5. Procedure
_________
(a) State the date when Commission action is requested. If the date is
less than 40 days from the date of the original filing, set forth the reasons
for acceleration.
It is hereby requested that the Commission issue its order with respect
to the transaction proposed herein on or before December 31, 1994.
(b) State (i) whether there should be a recommended decision by a
hearing officer, (ii) whether there should be a recommended decision by any
other responsible officer of the Commission, (iii) whether the Division
Investment Management - Office of Public Utility Regulation may assist in the
preparation of the Commission's decision, and (iv) whether there should be a
30-day waiting period between the issuance of the Commission's order and the
date on which it is to become effective.
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It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed with respect to the
proposed transactions. The office of the Division of Investment Management -
Office of Public Utility Regulation may assist in the preparation of the
Commission's decision. There should be no waiting period between the issuance
of the Commission's order and the date on which it is to become effective.
Item 6. Exhibits and Financial Statements
_________________________________
The following exhibits and financial statements are made a part of this
statement:
(a) Exhibits
A-1 Certificate of Incorporation of CNG Energy.
(Incorporated by reference to Exhibit A-1 to Form U-1 of
Consolidated, File No. 70-7909).
A-2 By-Laws of CNG Energy.
(Incorporated by reference to Exhibit B to Form U5S of
Consolidated, File No. 30-203, for the year ended
December 31, 1990).
B-1 Form of Amended and Restated Limited Partnership Agreement
to be among Bear, Inc., Bear Claw, Inc., CNG Energy and CNG
Bear, Inc.
B-2 Form of Purchase Agreement to be among Bear, Inc., Bear
Claw, Inc., CNG Energy and CNG Bear, Inc.
F Opinion of counsel for Consolidated and CNG Energy.
(to be filed by amendment)
O Draft of Notice.
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(b) Financial Statements
Financial statements are deemed unnecessary with respect to
the authorizations herein sought due to the nature of the
matter proposed. However, Consolidated will furnish any
financial information that the Commission shall request.
Item 7. Information as to Environmental Effects
_______________________________________
(a) Describe briefly the environmental effects of the proposed
transaction in terms of the standards set forth in Section 102 (2) (C) of the
National Environmental Policy Act 42 U.S.C. 4232 (2) (C). If the response to
this item is a negative statement as to the applicability of Section 102(2)(C)
in connection with the proposed transaction, also briefly state the reasons or
that response.
The proposed transactions do not involve major federal action
having a significant effect on the human environment. See Item 1(a).
(b) State whether any other federal agency has prepared or is preparing
an environmental impact statement ("EIS") with respect to the proposed
transaction. If any other federal agency has prepared or is preparing an EIS,
state which agency or agencies and indicate the status of that EIS
preparation.
No federal agency has prepared or is preparing an environmental
impact statement with respect to the proposed transaction.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this amendment to be signed
on its behalf by the undersigned thereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
By L. D. Johnson
Executive Vice President
and Chief Financial Officer
CNG ENERGY COMPANY
By N. F. Chandler
Its Attorney
Date: November 17, 1994
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Exhibit B-1
BEAR MOUNTAIN LIMITED
SECOND AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
Dated
December ___, 1994
<PAGE> 2
TABLE OF CONTENTS
Page
I. Defined Terms 6
II. Formation of Partnership; Partnership Name 13
2.1 Formation 13
2.2 Certificates 13
2.3 Name 13
2.4 Qualification in Other States 13
III. Partnership Purpose 14
IV. Places of Business; Registered Agent; Registered
Office 14
V. Term 14
VI. Partners and Capital 14
6.1 Names and Addresses 14
6.2 The General Partners 15
6.3 The Limited Partners 15
6.4 Payment of Capital Contributions 15
6.5 Failure to Make Capital Contribution 16
6.6 Transfer of Delinquent Partner's Partnership
Interest 17
6.7 Capital Accounts 18
6.8 Adjustment of Carrying Values and Capital
Accounts 19
VII. Limited Partners 20
VIII. Rights, Powers and Duties of the Managing
General Partner 20
8.1 Management and Control of the Partnership 20
8.2 Partnership Budgets 23
8.3 Approval and Removal of Members of the
Management Committee 23
8.4 Meetings of the Management Committee 24
8.5 Procedural Matters of the Management
Committee 24
8.6 Management Fee, Reimbursement of Expenses 24
8.7 Authority to Act 25
8.8 Fiduciary Obligation 25
8.9 Other Business of Affiliates of the Partners;
Contracts with Affiliates 26
8.10 Indemnification 26
8.11 Insurance 27
IX. Allocations 27
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Page
9.1 Tax Allocations 27
9.2 Allocations for Capital Account Purposes 27
9.3 Transferor - Transferee Allocations 30
X. Distributions 30
XI. Fiscal Year-Accounting Basis; Tax Elections;
Bank Accounts 31
11.l Fiscal Year; Books and Records 31
11.2 Financial Statements and Reports 31
11.3 Tax Matters Partner 32
11.4 Bank Accounts 32
XII. Representations, Warranties and Covenants 33
12.1 Representations, Warranties and Covenants
of the General Partners 33
12.2 Representations, Warranties and Covenants
of the Limited Partners 33
XIII. Transfer of Interests by Partners 34
13.1 No Transfer Without Consent 34
13.2 Option of Certain Partners to Sell and
Purchase 34
XIV. Dissolution of the Partnership 34
14.1 Events of Dissolution 34
14.2 Dissolution or Bankruptcy of a Partner 35
14.3 Reconstitution 35
XV. Liquidation of the Partnership 35
15.1 Liquidator 35
15.2 Powers of the Liquidator 36
15.3 Liquidating Distributions 37
15.4 Final Accounting 38
15.5 Termination of Partnership 38
XVI. Dispute Resolution 38
16.1 Intention to Resolve 38
16.2 Institution of Proceeding 38
16.3 Panel 39
16.4 Briefs and Exhibits 39
16.5 Conduct of Panel Meeting 40
16.6 Negotiations Between Representatives 41
16.7 Confidentiality 41
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Page
16.8 Termination of Proceeding 41
16.9 Obligations of Neutral Advisor Upon
Termination; Enforceability of Decision 42
16.10 Miscellaneous 42
XVII. Miscellaneous 42
17.1 Amendment of Agreement 42
17.2 Applicable Law 42
17.3 Execution and Counterpart 42
17.4 Binding Provisions 42
17.5 Addresses and Notices 43
17.6 Construction of Agreement 43
17.7 Time, Entire Agreement 43
17.8 Partition 43
17.9 Further Action 43
17.10 Creditors 44
17.11 Waiver 44
<PAGE> 5
BEAR MOUNTAIN LIMITED
SECONDED AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP made and entered into as of the _____ day of
____________ 1994, by and between Bear Mountain CoGen, Inc., a
Texas corporation ("Managing General Partner"), Bear Claw CoGen,
Inc., a Delaware corporation ("BCC"), CNG Bear Mountain Inc., a
Delaware corporation ("CNG Bear"), and CNG Energy Company, a
Delaware corporation ("CNG Energy");
WHEREAS, on January 21, 1987, the Managing General Partner
and Guy Lyons (the "Organizational Limited Partner") executed and
entered into that certain Certificate and Articles of Limited
Partnership (the "Original Agreement") whereby the Partnership was
formed pursuant to the Texas Uniform Limited Partnership Act;
WHEREAS, on January 26, 1987, a copy of the Original
Agreement was filed with the Secretary of State of the State of
Texas; and
WHEREAS, on April 21, 1992, the Managing General Partner and
the Organizational Limited Partner executed and entered into that
certain Certificate of Amendment of Limited Partnership (the
"Certificate of Amendment") whereby the Partnership adopted the
Texas Revised Limited Partnership Act;
WHEREAS, on April 23, 1992, a copy of the Certificate of
Amendment was filed with the Secretary of State of the State of
Texas;
WHEREAS, on June 13, 1994, the Organizational Limited Partner
transferred his interest in the Partnership to BCC;
WHEREAS, by Amendment to the Agreement of Limited Partnership
of Bear Mountain Limited dated June 13, 1994, executed by the
Managing General Partner and BCC, the Managing General Partner
converted its 40% general partnership interest in the Partnership
to a 1% general partnership interest in the Partnership and a 49%
limited Partnership interest in the Partnership, and BCC converted
its 60% limited Partnership interest in the Partnership to a 1%
general Partnership interest in the Partnership and a 49% limited
Partnership interest in the Partnership;
WHEREAS, on June 13, 1994, a Certificate of Amendment
reflecting BCC as a new general partner of the Partnership was
filed with the Secretary of State of the State of Texas;
WHEREAS, on September 20, 1994, the Managing General Partner
and BCC, each as a general partner and a limited partner, executed
an Amended and Restated Agreement of Limited Partnership (the
"Amended and Restated Agreement) to effect certain amendments to
the Original Agreement, as amended;
<PAGE> 6
WHEREAS, the Managing General Partner, BCC, Destec Energy,
Inc., CNG Bear and CNG Energy have entered into a Purchase
Agreement dated November ___, 1994, pursuant to which the Managing
General Partner agrees to assign to CNG Energy a 49% limited
partnership interest and BCC agrees to assign to CNG Bear a 1%
general partnership interest in the Partnership;
WHEREAS, the Managing General Partner, by assignment
instrument of even date herewith, has conveyed its 49% limited
partnership interest to CNG Energy, and BCC, by assignment
instrument of even date herewith, has conveyed its 1% general
partnership interest to CNG Bear; and
WHEREAS, the parties hereto desire (i) to amend and restate
in its entirety the Amended and Restated Agreement in order to (a)
evidence the conveyance of Managing General Partner of its limited
partnership interest in the Partnership to CNG Energy and the
conveyance of BCC of its general partnership interest in the
Partnership to CNG Bear, (b) make CNG Bear a general partner of
the Partnership, (c) make CNG Energy a limited partner of the
Partnership, and (d) effect certain additional amendments to such
agreement; and (ii) to continue the Partnership under the laws of
the State of Texas;
NOW THEREFORE, in consideration of the mutual covenants,
conditions and agreements herein contained, the parties hereto
hereby agree that the Amended Agreement shall be amended and
restated in its entirety as follows:
I.
Defined Terms
_____________
Unless the content otherwise specifies or requires, the terms
defined in this Article I shall, for the purposes of this
Agreement, have the meanings herein specified.
"Act" shall mean the Texas Revised Limited Partnership Act as
it may be amended from time to time, and any successor to said
Act.
"Activities" shall have the meaning ascribed to it in Section
8.10.
"Adjusted Basis" shall mean the Partnership's adjusted basis
of the relevant property, as determined for Federal income tax
purposes, pursuant to Section 1011 of the Code.
"Adjusted Capital Account" shall mean with respect to any
Partner, the balance in such Partner's Capital account after
giving effect to the following adjustments:
<PAGE> 7
(i) such Capital Account shall be deemed to be increased
by any amounts that such Partner is obligated to restore to
the Partnership (pursuant to this Agreement or otherwise) or
is deemed to be obligated to restore pursuant to (A) the
penultimate sentence of Treasury Regulations Section 1.704-2
(g) (1), and (B) the penultimate sentence of Treasury
Regulations Section 1.704-2(i) (5); and
(ii) such Capital Account shall be deemed to be
decreased by the items described in Treasury Regulations
Sections 1.704-1(b) (2) (ii) (d) (4), (5) and (6).
The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulations Section
1.704-1(b) (2) (ii) (d) and shall be interpreted and applied
consistently therewith.
"Adjusted Property" shall mean a Partnership property the
Carrying Value of which has been adjusted pursuant to Section 6.8.
"Administrative Partner" shall have the meaning ascribed to
it in Section 6.6.
"Affiliate" of a Partner or of another Person means (i) any
Person directly or indirectly owning, controlling or holding power
to vote 10% or more of the outstanding voting securities of such
Person; (ii) any Person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held
with power to vote by such other Person; (iii) any Person directly
or indirectly controlling, controlled by or under common control
with such other Person; (iv) any officer, director or partner of
such other Person; and (v) if such Person is an officer, director
or partner, any company of which such Person acts in any such
capacity.
"Agreed Value" shall mean, in the case of any contributions
or distributions of property, the fair market value of such
property net of any indebtedness or other liability either assumed
or to which such property is subject, as such fair market value is
determined by the Management Committee using such reasonable
method of valuation as it may adopt.
"Agreement" shall mean this Amended and Restated Agreement of
Limited Partnership as the same may be amended, supplemented,
restated or otherwise modified from time to time.
"Allocation Regulations" shall have the meaning ascribed to
it in Section 9.2(d) (vi).
<PAGE> 8
"Built-In Gain" with respect to any Partnership property
shall mean (i) the excess of the Agreed Value of any Contributed
Property over its Adjusted Basis for federal income tax purposes
as of the time of contribution, and (ii) in the case of any
adjustment to the Carrying Value of any Partnership property
subject to depreciation, cost recovery or amortization pursuant to
Section 6.8 as a result of a contribution of cash for a
Partnership Interest, the Unrealized Gain with respect to such
property.
"Built-In Loss" with respect to any Partnership property
shall mean (i) the excess of the Adjusted Basis for federal income
tax purposes of any Contributed Property over its Agreed Value as
of the time of contribution, and (ii) in the case of any
adjustment to the Carrying Value of any Partnership property
subject to depreciation, cost recovery or amortization pursuant to
Section 6.8 as a result of a contribution of cash for a
Partnership Interest, the Unrealized Loss with respect to such
property.
"Capital Account" shall have the meaning ascribed to it in
Section 6.7.
"Capital Contribution" shall mean the amount of money and the
Agreed Value of any other property contributed to, or for the
benefit of, the Partnership by any Partner (net of liabilities
secured by such contributed property that the Partnership is
considered to assume or take subject to under section 752 of the
Code).
"Carrying Value" with respect to (a) any property contributed
to the Partnership shall mean the Agreed Value of such property,
and (b) any property other than contributed property shall mean
the Adjusted Basis of such property for Federal income tax
purposes, in both cases reduced (but not below zero) by all
depreciation and cost recovery deductions charged to the Partners'
Capital Accounts. The Carrying Value of the Partnership properties
shall be adjusted from time to time in accordance with Section
6.8.
"Code" shall mean the Internal Revenue Code of 1986, as
amended and in effect from time to time and the rules and
regulations adopted thereunder.
"Construction Contract" shall mean that certain Engineering,
Procurement and Construction Agreement entered into as of August
30, 1994, between the Partnership and Destec Engineering.
"Contributed Property" shall mean any Capital Contribution of
property other than cash.
"Contribution Date" shall have meaning provided in the Equity
Contribution Agreements.
<PAGE> 9
"Default Interest Rate" means a per annum rate of interest
equal to the lesser of (i) the maximum non-usurious rate of
interest Permitted by applicable law, or (ii) the Prime Rate plus
three percent.
"Delinquent Partner" shall have the meaning ascribed to it in
Section 6.5.
"Destec" shall mean Destec Energy, Inc., a Delaware
corporation.
"Destec Engineering ii shall mean Destec Engineering, Inc., a
Texas corporation.
"Destec Operating" shall mean Destec Operating Company, a
Texas corporation.
"Equity Contribution Agreements" shall mean the Equity
Contribution Agreements as defined in the Loan Agreement and in
form attached as Exhibits to the Loan Agreement.
"Gas Services Agreements" shall mean, collectively, the Gas
Supply Sideletter, the Gas Approval Sideletter, the DGS
Compensation Agreement and the Ratification Agreement and
Amendment to the Gas Supply Pooling Agreement to be entered into
between Destec Gas Services, Inc. and the Partnership, and others,
as applicable.
"General Partners" shall mean Bear Mountain CoGen, Inc., a
Texas corporation, and CNG Bear Mountain Inc., a Delaware
corporation, or their successors and assigns that have been
admitted to the Partnership as a general partner and any other
Person properly holding an interest pursuant to this Agreement as
a general partner of the Partnership; and "General Partner" shall
mean any one of the General Partners.
"Lender" shall mean the entity or entities providing
construction and term financing for the Project pursuant to the
Loan Agreement
"Limited Partners" shall mean Bear Claw CoGen, Inc., a
Delaware corporation and CNG Energy Company, a Delaware
corporation, or their successors or assigns that have been
admitted to the Partnership as a limited partner pursuant to
Section 13.1 hereof and any other Person properly holding an
interest pursuant to this Agreement as a limited partner of the
Partnership; and "Limited Partner" shall mean any one of the
Limited Partners.
"Loan Agreement shall mean that certain Loan Agreement dated
as of September 30, 1994, among the Partnership, the Lenders
referred to therein, and Union Bank, a California banking
<PAGE> 10
corporation, as Agent, setting forth terms and conditions for
"construction loan" and "term loan" financing of the Project and
shall include any substitute for such agreement should the
Partnership obtain financing from an alternative lender or
lenders.
"Loss" shall have the meaning ascribed to it in Section 8.10.
"Management Committee" shall mean the committee established
pursuant to Section 8.3.
"Managing General Partner" shall mean Bear Mountain CoGen,
Inc., or its successor as the managing general partner of the
Partnership.
"Non-Delinquent Partner" shall have the meaning ascribed to
it in Section 6.5.
"Nonrecourse Liability" shall mean any Partnership liability
(or portion thereof) for which no Partner or Related Person bears
the economic risk of loss for such liability under Treasury
Regulations Section 1.752-2.
"Operation and Maintenance Agreement" shall mean that certain
Operation and Maintenance Agreement dated as of July 29, 1994,
between Destec Operating and the Partnership.
"Partners" shall mean, collectively, the General Partners and
the Limited Partners; and "Partner" shall mean any one of the
Partners.
"Partner Minimum Gain" shall mean the aggregate amount of
gain (of whatever character), determined for each Partner
Nonrecourse Debt, that would be realized by the Partnership if it
disposed of the Partnership property subject to such Partner
Nonrecourse Debt in a taxable transaction in full satisfaction
thereof (and for no other consideration), determined in accordance
with the provisions of Treasury Regulations Sections 1.704-2(i)
(3) and (k) for determining a Partner's share of minimum gain
attributable to a Partner Nonrecourse Debt.
"Partner Nonrecourse Debt" shall mean the meaning specified
in Treasury Regulations Section 1.704-2(b) (4).
"Partner Nonrecourse Deductions" shall mean the excess, if
any, of (i) the net increase, if any, in the amount of Partner
Minimum Gain during any fiscal year over (ii) the aggregate amount
of any distributions during such fiscal year of proceeds of a
Partner Nonrecourse Debt that are allocable to an increase in
Partner Minimum Gain, determined after application of Treasury
Regulations Section 1.704-2(k).
<PAGE> 11
"Partnership" shall mean the limited partnership governed by
this Agreement as it may from time to time be constituted.
"Partnership Assets" shall mean all assets, whether tangible
or intangible and whether real, personal or mixed, at any time
owned by the Partnership.
"Partnership Interest" as to any Partner shall mean all of
the interests of that Partner in the Partnership, including,
without limitation, its (i) right to a distributive share of the
profits and losses of the Partnership, (ii) right to a
distributive share of Partnership Assets, and (iii) right, of the
General Partners, to participate in the management of the affairs
of the Partnership.
"Partnership Minimum Gain" shall mean the aggregate amount of
gain (of whatever character), determined for each Nonrecourse
Liability of the Partnership, 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
thereof (and for no other consideration) and by aggregating the
amounts so computed, determined in accordance with Treasury
Regulations Section 1.7O4-2(d) and (k).
"Person" shall mean any individual, Partnership, corporation,
trust, unincorporated association, joint venture or any other
entity.
"Plant" shall have the meaning ascribed to it in Article III.
"Prime Rate" shall mean the short-term base lending rate
announced from time to time by Union Bank, or the base or prime
rate announced by any successor thereto.
"Project" shall mean the Plant and the Property, and all
other property and interests of the Partnership associated
therewith.
"Property" shall have the meaning ascribed to it in Article
III.
"PUHCA" shall mean the Public Utility Holding Company Act of
1935, as amended, including all regulations promulgated
thereunder.
"PURPA" shall mean the Public Utility Regulatory Policies Act
of 1978, as heretofore and hereafter amended, and the regulations
now and hereafter promulgated by the Federal Energy Regulatory
Commission or such successor government agency as may be charged
with rule making authority thereunder, which regulations are
currently set forth at 18 C.F.R Section 292.
<PAGE> 12
"Qualifying Cogeneration Facility" shall have the meaning
assigned there to in PURPA.
"Ratification Agreement and Amendment to the Gas Supply
Pooling Agreement" shall mean that certain Ratification Agreement
and Amendment to the Gas Supply Pooling Agreement to be executed
by and among Destec Gas Services, Inc., the Partnership, Badger
Creek Limited, a Texas limited Partnership, Chalk Cliff Limited, a
Texas limited partnership, Double "C" Limited, a Texas limited
partnership, High Sierra Limited, a Texas limited Partnership,
Kern Front Limited, a Texas limited Partnership, McKittrick
Limited, a Texas limited partnership and Live Oak Limited, a Texas
limited Partnership.
"Recapture Income" shall mean any gain recognized by the
Partnership (computed without regard to any adjustment required by
Sections 734 or 743 of the Code) upon the disposition of any
property or asset of the Partnership, which gain is characterized
as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or
asset.
"Regulatory Allocations" shall mean the allocations of
Partnership income, gain, loss and deduction described in Section
9.2(d) (vi).
"Related Person" shall have the meaning specified in Treasury
Regulations Section 1.752-4(b).
"Required Capital Contribution" shall mean and include each
of the amounts required to be contributed by a Partner pursuant to
Sections 6.2 and 6.3.
"Sharing Ratio" shall mean the following percentages:
Partner Percentage
_______ __________
General
_______
Managing General Partner 1.0%
CNG Bear 1.0%
Limited
_______
BCC 49.0%
CNG Energy 49.0%
______
100.0%
"Steam Energy Agreement" shall mean that certain Steam Energy
Agreement between the Partnership and Shell Western E & P Inc., as
the same may be amended from time to time.
<PAGE> 13
"Transfer" shall have the meaning ascribed to it in Section
6.6.
"Unrealized Gain" shall mean the excess, if any, of the fair
market value of Partnership property as of the date of
determination over the Carrying Value of such property as of such
date of determination.
"Unrealized Loss" shall mean the excess, if any, of the
Carrying Value of Partnership property as of the date of
determination over the fair market value of such property as of
such date of determination.
"Utility" shall mean a person primarily engaged in the
generation or sale of electric power (other than electric power
solely from cogeneration facilities or small power production
facilities) within the meaning of 18 C.F.R. Section 292.206.
II.
Formation of Partnership; Partnership Name
__________________________________________
Section 2.1. Formation. The Managing General Partner and the
Organizational Limited Partner formed the Partnership pursuant to
the Texas Uniform Limited Partnership Act. The parties hereto
continue, in accordance with the provisions of this Agreement, the
Partnership as a limited partnership under and pursuant to the
Act, and the rights and obligations of the Partners shall be as
provided in the Act except as herein otherwise expressly provided.
Section 2.2. Certificates. The General Partners shall execute
all certificates or other documents and make all filings and
recordings and perform such acts as shall constitute compliance
with all requirements for the qualification of the Partnership as
a limited partnership under the Act and under the laws of any
other state in which the Partnership may elect to do business.
The Managing General Partner shall take all action that may be
necessary or appropriate for the continuation of the Partnership's
valid existence as a limited partnership under the laws of all
such states.
Section 2.3. Name. The name of the Partnership is "Bear
Mountain Limited" and all business of the Partnership shall be
conducted in such name or in any assumed or fictitious names
necessary for compliance with Section 2.4 hereof.
Section 2.4. Qualification in Other States. The Managing
General Partner shall use its best efforts to cause the
Partnership to be qualified to do business or registered under any
applicable assumed or fictitious name, statute or similar law in
the State of California and any other state in which the
Partnership then owns property or transacts business, if such
qualification or registration is necessary to protect the limited
liability of the Limited Partners or to permit the Partnership
lawfully to own property or transact business.
<PAGE> 14
III.
Partnership Purpose
___________________
The purpose of the Partnership shall be to design, finance,
construct, own and operate a facility in Kern County, California
for the generation of electric power and production of steam
through the sequential use of the heat energy in natural gas or
another fuel (the "Plant"), to lease or acquire interests in real
property as a site for the Plant (the "Property"), and to conduct
any activities incidental to the foregoing.
IV.
Places of Business; Registered Agent; Registered Office
_______________________________________________________
The location of the principal office of the Partnership where
the books and records of the Partnership shall be kept shall be
2500 CityWest Blvd., Suite 150, Houston, Texas 77042. The
location of its registered office, as required under the Act, and
the address of the Managing General Partner, its registered agent
under the Act, shall be 2500 CityWest Blvd., Suite 150, Houston,
Texas 77042. The location of the California office of the
Partnership shall be 34759 Lencioni Avenue, Bakersfield,
California 93308. The Managing General Partner may at any time
change the registered agent or the location of the Partnership's
principal office or registered office and may establish additional
offices.
V.
Term
____
The term of the Partnership commenced on January 26, 1987,
and shall continue until December 31, 2034, unless the Partnership
is sooner liquidated or dissolved as the result of an event
described in Section 14.1 without being reconstituted in
accordance with Section 14.3.
VI.
Partners and Capital
_____________________
Section 6.1. Names and Addresses. The respective names and
mailing address of the Partners are as follows:
Partner Mailing Address
_______ _______________
Managing General Partner Bear Mountain CoGen, Inc.
2500 CityWest Blvd.,
Suite 150
Houston, TX 77042
FAX: (713) 735-4169
Attention: Investment
Management
<PAGE> 15
BCC Bear Claw CoGen, Inc.
2500 CityWest Blvd.,
Suite 150
Houston, TX 77042
FAX: (713) 735-4169
Attention: Investment
Management
CNG Bear CNG Bear Mountain Inc.
One Park Ridge Center
P.O. Box 15746
Pittsburgh, PA 15244-0746
FAX: (412) 227-1421
Attention: Vice President
and General Manager
CNG Energy CNG Energy Company
One Park Ridge Center
P.O. Box 15746
Pittsburgh, PA 15244-0746
TAX: (412) 227-1421
Attention: Vice President
and General Manager
Section 6.2. The General Partners.
(a) The Managing General Partner and BCC each previously made
a Capital Contribution in the amount of $80. Upon the execution
of this Agreement, CNG Bear and CNG Energy each shall make a
Capital Contribution in the amount of $80.
(b) Each General Partner shall make a cash Capital
Contribution of 1.0% of the aggregate equity required to be
contributed by the Equity Contribution Agreements on the
Contribution Date.
Section 6.3. The Limited Partners. Each Limited Partner
shall make a cash Capital Contribution of 49.0% of the aggregate
equity required to be contributed by the Equity Contribution
Agreements on the Contribution Date.
Section 6.4. Payment of Capital Contributions.
(a) The Capital Contributions required by Sections 6.2 and
6.3 shall be made as provided in the Equity Contribution
Agreements. Any amount paid directly to the Lender as required
pursuant to the Equity Contribution Agreements shall be a Capital
Contribution.
(b) No additional Capital Contributions shall be required of
the Partners unless agreed to by the Partners and reflected as an
amendment to this Agreement.
<PAGE> 16
Section 6.5. Failure to Make Capital Contribution. In the
event any Partner (a "Delinquent Partner") fails to contribute
timely all or any portion of any amount that it has agreed to
contribute pursuant to the provisions of Sections 6.2 and 6.3 and
has not cured such failure on or before the fifth day following
the date on which such amount was due and payable as provided
herein, the Partnership, or the other Partners ("Non-Delinquent
Partners") voting in accordance with their Sharing Ratios, may
exercise any one or more of the following rights or remedies
against the Delinquent Partner:
(a) Take such action (including, without limitation, the
filing of a lawsuit on behalf of the Partnership) as the
Non-Delinquent Partners, voting in accordance with their Sharing
Ratios, deem appropriate to obtain payment by the Delinquent
Partner to the Partnership of that portion of its agreed Capital
Contribution that is in default, together with interest thereon at
the Default Interest Rate from the date that such contribution was
due until the date that such contribution is made, at the cost and
expense of the Delinquent Partner;
(b) One or more of the Non-Delinquent Partners may, but shall
not be obligated to, advance to the Partnership that portion of
the Delinquent Partner's Capital Contribution that is in default,
with the following results:
(i) The sum thus advanced shall be deemed to be a
loan from the Non-Delinquent Partner(s)
making such advance to the Delinquent Partner
and a contribution of such sum to the
Partnership by the Delinquent Partner;
(ii) The principal balance of such loan and all
accrued unpaid interest thereon shall be due
and payable in full ten days after written
demand there for has been given to the
Delinquent Partner by the Non-Delinquent
Partner(s);
(iii) Such loan shall bear interest at the Default
Interest Rate from the date that the loan was
made until the date that such loan, together
with all interest accrued thereon, is repaid
to the Non-Delinquent Partner(s);
(iv) All distributions from the Partnership that
would otherwise be made to the Delinquent
Partner (whether before or after dissolution
of the Partnership) shall be deemed to be
paid to the Delinquent Partner for purposes
of adjusting its Capital Account but shall,
instead, be paid to the Non-Delinquent
Partner(s) that made such advance until the
loan and all interest accrued thereon have
been repaid in full (with all such payments
being applied first to interest earned and
unpaid and then to principal); and
<PAGE> 17
(v) The Non-Delinquent Partner(s) shall have the
right, in addition to the other rights and
remedies granted to it pursuant to this
Agreement or available to it at law or in
equity, to take such action (including,
without limitation, the filing of a lawsuit)
as such Non-Delinquent Partner(s) deem
appropriate to obtain payment by the
Delinquent Partner of the principal balance
of such loan and all accrued and unpaid
interest thereon, at the cost and expense of
the Delinquent Partner;
(c) Exercising the right of Transfer set forth in Section
6.6;
(d) Dissolving the Partnership if a Partner has been a
Delinquent Partner for a period of at least thirty consecutive
days; or
(e) Exercising any other rights and remedies available at
law or in equity.
Section 6.6. Transfer of Delinquent Partner's Partnership
Interest. The Partnership Interest of a Delinquent Partner shall
be subject to sale, transfer, assignment, hypothecation, pledge or
other disposition (for purposes of this Section 6.6, a "Transfer",
and when used as a verb, "Transfer" shall have a correlative
meaning) as provided herein without the consent of the Delinquent
Partner. The Managing General Partner (provided that neither the
Managing General Partner nor BCC is the Delinquent Partner, in
which case CNG Bear or the Partner designated by CNG Bear shall
act pursuant to this sentence) (for purposes of this Section 6.6,
such Partner so acting is called "Administrative Partner") may,
subject to the provisions of this Section 6.6, on thirty days'
prior written notice to the Delinquent Partner (during which
period the Delinquent Partner shall have the opportunity to cure
such default), sell all or any part of such Delinquent Partner's
Partnership Interest for the benefit of the Partnership to any
Person (including the Administrative Partner, another Partner or
any Affiliate thereof) on the best terms reasonably obtainable.
Upon any sale of all of the Delinquent Partner's Partnership
Interest pursuant to the preceding sentence, such Delinquent
Partner shall have no further claim or recourse against any
Partnership Assets or any Partner, and such Delinquent Partner's
interest in the Partnership shall be reduced to zero. If such
Partnership Interest is sold at a price in excess of the
Delinquent Partner's remaining liabilities and all costs, direct
or indirect, associated with such default, the Administrative
Partner, after the payment of any loans (including any interest
due thereon) deemed to have been made to the Delinquent Partner
pursuant to Section 6.5 and any and all costs of sale and legal
fees associated with such sale, shall remit the excess to the
Delinquent Partner without interest. The Delinquent Partner shall
be immediately liable for any and all costs of sale or attempted
sale of such Partnership Interest as provided herein, whether or
not such interest is actually sold,
<PAGE> 18
and for all costs otherwise occasioned by its default. If such
Partnership Interest is sold at a price less than the Delinquent
Partner's remaining liabilities and costs (including the amounts
of any loans made to the Delinquent Partner pursuant to Section
6.5), the Delinquent Partner shall be liable for the difference;
provided, however, that the Delinquent Partner's obligations
hereunder shall be relieved to the extent of payments actually
made in the Delinquent Partner's stead by any purchaser of the
Delinquent Partner's Partnership Interest or any portion thereof.
The rights of the Partnership and the Administrative Partner
under this Section 6.6 are in addition to and not in limitation of
any rights that the Partnership or the Administrative Partner may
have under other provisions of this Agreement, the Act or
otherwise in respect of such Delinquent Partner's failure to make
such contribution or to repay any amount deemed to be a loan to it
pursuant to the provisions of Section 6.5.
Section 6.7. Capital Accounts.
(a) The Partnership shall maintain for each Partner a
separate capital account ("Capital Account") in accordance with
the rules of the Treasury Regulations promulgated from time to
time under Section 704(b) of the Code. Such Capital Account shall
be credited with (i) all contributions of capital made pursuant to
Sections 6.2 and 6.3 and all items of income and gain (including
income and gain exempt from tax) computed in accordance with
Section 6.7(b) and allocated pursuant to Article IX, and debited
by (ii) the cash distributions and the Agreed Value of all
distributions of property made with respect to a Partnership
Interest (net of any liabilities assumed by the Partner or to
which the property is subject) and all items of deduction and loss
computed in accordance with Section 6.7(b) and allocated pursuant
to Article IX.
(b) For purposes of computing the amount of each item of
income, gain, deduction or loss to be reflected in the Capital
Accounts of the Partners, the determination, recognition and
classification of such items shall be the same as its
determination, recognition and classification for federal income
tax purposes, provided that:
(i) Any deductions for depreciation, cost
recovery or amortization attributable to a
Contributed Property shall be determined as
if the Adjusted Basis of such property on the
date it was acquired by the Partnership was
equal to the Agreed Value of such property.
Upon an adjustment pursuant to Section 6.8 to
the Carrying Value of any Partnership
property subject to depreciation, cost
recovery or amortization, any further
deductions for such depreciation, cost
recovery or amortization attributable to such
property shall be determined as if the
Adjusted Basis of such
<PAGE> 19
property was equal to the Carrying Value of
such property immediately following such
adjustment.
(ii) Any item of income, gain, loss or deduction
attributable to the taxable disposition of
any Partnership Asset shall be determined by
the Partnership as if the Adjusted Basis of
such asset as of such date of disposition was
equal in amount to the Partnership's Carrying
Value for such asset as of such date.
(iii) All fees and other expenses incurred by the
Partnership to promote the sale of (or to
sell) a Partnership Interest that can neither
be deducted nor amortized under Section 709
of the Code shall be treated as items of
deduction.
(iv) The computation of all items of income, gain,
loss and deduction shall be made without
regard to any election which may be made by
the Partnership pursuant to Section 754 of
the Code (except to the extent required by
Section 1.704-1(b) (2) (iv) (m) of the
Allocation Regulations) and, as to those
items described in Section 705(a) (1) (B) or
Section 705(a) (2) (B) of the Code (including
items treated as Section 705(a) (2) (B)
expenditures under Section 1.704-1(b) (2)
(iv) (i) of the Allocation Regulations),
without regard to the fact that such items
are not includable in gross income, or are
neither currently deductible nor
capitalizable for federal income tax
purposes.
Section 6.8. Adjustment of Carrying Values and Capital
Accounts.
(a) Upon a Capital Contribution (other than pro rata by all
Partners in their Sharing Ratios or as provided in Sections 6.2
and 6.3), the Capital Accounts of all Partners (and the Carrying
Values of all Partnership Properties) shall be adjusted upwards or
downwards to reflect any Unrealized Gain or Unrealized Loss
attributable to the Partnership properties (as if such Unrealized
Gain or Unrealized Loss has been recognized upon an actual sale of
such properties immediately prior to such contribution and was
allocated to the Partners, at such time, pursuant to Article IX).
(b) Immediately prior to the distribution of cash or any
Partnership property in liquidation of the Partnership or any
Partner's interest in the Partnership, the Capital Accounts of all
Partners (and the Carrying Value of all Partnership
<PAGE> 20
Properties) shall, immediately prior to any such distribution, be
adjusted upwards or downwards to reflect any Unrealized Gain or
Unrealized Loss attributable to all Partnership properties (as if
such Unrealized Gain or Unrealized Loss has been recognized upon
an actual sale of such properties immediately prior to such
distribution and was allocated to the Partners, at such time,
pursuant to Article IX).
VII.
Limited Partners
_________________
Except as may be provided in the Act, the Limited Partners,
in their capacity as such, shall neither be personally liable to
the Partnership, to any other Partner nor to any creditor of the
Partnership, for any of the debts of the Partnership or any of the
losses thereof in excess of the amounts to be contributed by each
of them to the capital of the Partnership pursuant to Section 6.3.
Except to the extent such rights are expressly granted to the
Limited Partners in this Agreement and are permitted by the Act,
the Limited Partners shall not participate in the management or
control of the Partnership's business, transact any business for
the Partnership, or have the power to act for or bind the
Partnership, said powers being vested solely and exclusively in
the General Partners.
VIII.
Rights Powers and Duties
of the Managing General Partner
________________________________
Section 8.1. Management and Control of the Partnership.
(a) The Managing General Partner shall have full, exclusive
and complete discretion in the management and control of
Partnership affairs and business, except that the Managing General
Partner shall have no authority to take any of the following
actions unless the Management Committee either (i) consents to
such action, or (ii) establishes a Partnership procedure or
guideline (including procedures and guidelines contained in
budgets approved by the Management Committee) with respect to such
action:
(i) Make, terminate, amend, or modify any
agreement of the Partnership for the
purchase, sale, transportation or storage of
gas, the acquisition or disposal of water or
the sale of electricity or steam energy, or
any other agreement involving the receipt or
expenditure by the Partnership of more than
$50,000, including, but not limited to, the
Ratification Agreement and Amendment to the
Gas Supply Pooling Agreement, or enter into a
written waiver with respect thereto;
<PAGE> 21
(ii) Amend or modify the terms of the Loan
Agreement;
(iii) Terminate, liquidate and wind up the
Partnership, except upon the occurrence of an
event which under this Agreement or
applicable law, dissolves the Partnership;
(iv) Approve any Partnership budget or establish
procedures regarding the review of
Partnership budgets;
(v) Do any act which would make it impossible to
carry on the ordinary business of the
Partnership;
(vi) Commence or defend any litigation (including
arbitration or mediation) or confess a
judgment against the Partnership or approve
any settlement or consent to any judgment
entered into by the Partnership;
(vii) Admit any person as a Partner;
(viii) Make, terminate, amend, or modify any
contract by and between the Partnership and
an Affiliate of a Partner, or enter into a
written waiver with respect thereto
(including, without limitation, settling or
paying any disputed Extraordinary Repair and
Replacement claim or invoice submitted by
Destec Operating under the Operation and
Maintenance Agreement);
(ix) Other than advances contemplated pursuant to
the Loan Agreement or any approved budget,
cause the Partnership to borrow funds or
become obligated to make payments in excess
of $10,000;
(x) Sell, lease, mortgage, pledge, grant a
security interest in or dispose of any
material portion of the assets of the
Partnership;
(xi) Participate in any non-ministerial decision
contemplated by the Gas Services Agreements
or the Ratification Agreement and Amendment
to the Gas Supply Pooling Agreement; or
(xii) File a petition seeking to take advantage of
any law relating to bankruptcy, insolvency or
composition or readjustment of debts.
<PAGE> 22
Notwithstanding anything contained herein, the Managing
General Partner may, without any Management Committee or other
Partner approval being required, expend up to $100,000 in any
calendar year during the term hereof for Partnership purposes
(even if not identified in the budget for that year), subject to
the other terms and conditions set forth herein. (The $100,000
amount referred to in the preceding sentence shall be prorated for
any partial years during the term hereof). In addition, once a
Partnership budget is approved, the Managing General Partner may
expend Partnership funds in accordance with such budget without
any Management Committee or other Partnership approval being
required.
It is specifically agreed by the Partners that the
Partnership shall be obligated to make all payments due to Donald
R. Asher ("Asher") pursuant to that certain Participation
Agreement (the "Participation Agreement") dated December 1, 1987,
between Asher and PSE, Inc. (predecessor in interest of Destec
Holdings, Inc. ["DHI"], which is the parent corporation of the
Managing General Partner and BCC), that are payable to Asher under
the Participation Agreement with respect to the Project,
notwithstanding the fact that the Partnership is not a party to
the Participation Agreement, and the Partnership and DHI have
executed an Agreement of even date herewith pursuant to which the
Partnership agrees to make all payments due to Asher under the
Participation Agreement with respect to the Project. The Partners
further agree that such payments will be deemed pre-approved for
payment by the Partnership and may be paid by the Managing General
Partner even if such are not included in a Partnership budget for
the relevant period.
(b) The Managing General Partner shall take, or cause the
Partnership to take, the following actions:
(i) Execute and deliver the Loan Agreement and
take all other actions required of the
Partnership by the Loan Agreement;
(ii) Execute and deliver instruments and documents
necessary or desirable to ratify, enforce,
preserve and accept performance under the
Standard Offer #2 Power Purchase Agreement
between the Partnership and Pacific Gas and
Electric Company (and all other agreements
between those parties related to the subject
matter of such Agreement), and the Steam
Energy Agreement; and
(iii) Execute and deliver any instruments and
documents necessary or desirable to evidence
the transactions governed by the documents
described in subsections (i) and (ii) of this
subsection 8.1(b) as the act and deed of the
Partnership.
<PAGE> 23
(c) Except to the extent of its participation on the
Management Committee, neither Limited Partner shall, as a Limited
Partner, transact any business of the Partnership or have any
power to sign for or to bind the Partnership except (i) as
specifically authorized by the Management Committee, or (ii) as
specifically provided herein.
Section 8.2. Partnership Budgets. No later than October 10
of each calendar year during the term hereof, the Managing General
Partner shall prepare and submit to the Management Committee a
preliminary budget for the Partnership for the next succeeding
calendar year, which shall include a capital expenditure budget, a
budget for Partnership operations, a budget or other mechanism for
emergency expenditures and such other item or items required from
time to time by the Management Committee. The Management
Committee shall have thirty (30) days following the receipt of
such preliminary budget in which to review and propose any
changes. No later than December 15 of each such calendar year,
the Managing General Partner shall prepare and submit for
Management Committee approval the final budget for the Partnership
for the next succeeding calendar year.
If the Management Committee fails to approve a budget for any
calendar year, the Managing General Partner shall continue to
carry out the operations of the Partnership in accordance with the
most recently approved calendar year budget.
Section 8.3. Appointment and Rival of Members of the
Management Committee
(a) The Management Committee shall be composed of two
persons. Each General Partner shall have the right at all times to
designate one of the members.
(b) Each General Partner shall use its good faith efforts to
designate an individual who will normally be readily accessible
and available to attend Management Committee meetings as and when
scheduled. Any General Partner may at any time, by written notice
to the other General Partner (i) appoint an alternate member, and
(ii) remove its representative on the Management Committee, with
or without cause, and substitute a representative to serve in his
stead.
(c) The Managing General Partner and CNG Bear shall each be
reimbursed by the Partnership for any and all expenses incurred by
it and its representative on the Management Committee incident to
such representative's duties and responsibilities as such under
this Agreement, limited to amounts set forth in the applicable
budget, including, without limitation, any costs and expenses
incurred, including without limitation travel, lodging and
subsistence expenses of the Managing General Partner and CNG Bear
in connection with the participation in any Management Committee
meeting.
<PAGE> 24
Section 8.4. Meetings of the Management Committee.
(a) The Management Committee shall hold regular quarterly
meetings at such time as shall be determined by the Management
Committee. Special meetings of the Management Committee may be
called at any time by either member. Except as otherwise
determined by the Management Committee, all special and regular
meetings of the Management Committee shall be held at the
principal office of the Partnership. Special meetings of the
Management Committee may also be held by telephone conference if
both members so agree.
(b) No notice shall be required with respect to any regular
meeting of the Management Committee as to which a previous
announcement of the time and place of such meeting has been given.
Unless waived in writing by both members (before or after a
meetings), at least fifteen (15) days' prior notice of any special
meeting shall be given to each member. Such financial and other
information available to the Managing General Partner as is
reasonably required for participation in such meeting shall,
unless waived, be forwarded in the manner provided for notice at
least fifteen (15) days prior to any such meeting.
Section 8.5. Procedural Matters of the Management Committee.
(a) The affirmative vote of both members of the Management
Committee shall be required for any act or decision of the
Management Committee.
(b) Any action required or permitted to be taken by the
Management Committee may be taken without a meeting, if both of
the members consent in writing to such action. Such consent shall
have the same effect as the unanimous vote of the members.
(c) The Management Committee shall cause to be kept a book of
minutes of all of its meetings in which there shall be recorded
(i) the time and place of such meeting, (ii) whether regular or
special, and if special, however called, (iii) the notice thereof
given, and (iv) the proceedings thereof.
Section 8.6. Management Fee, Reimbursement of Expenses.
(a) In consideration of the services to be performed
hereunder the Managing General Partner shall be paid a quarterly
management fee of $92,500.00, with the first of such payments to
be for the quarter ending June 30, 1995, which amount shall
escalate annually on January 1st of each year at a rate equal to
the escalation, if any, from the December 31st in the calendar
year which is two years prior to the subject year to the December
31st of the calendar year which is immediately prior to the
subject year in the Consumer Price Index, All Urban Consumers
(CPI-U), U.S. City Average - All Items, that measures the
percentage change from December 31 of each year to December 31 of
the next, which index is published from time to time by the U.S.
Department of Labor, Bureau of Labor Statistics (or if such
<PAGE> 25
ceases to be published, its successor index), plus 1%. In the
event the index is not available for the prior year at the time
the first payment of the management fee is due in the subject
year, retroactive adjustment will be made once the index becomes
available. The management fee shall be payable within 30 days
after the end of each calendar quarter in accordance with the
terms of the Loan Agreement.
(b) The Managing General Partner shall be reimbursed promptly
by the Partnership for all reasonable out-of-pocket expenses
actually incurred by the Managing General Partner in connection
with its conduct of Partnership business.
Section 8.7. Authority to Act. In order to expedite the
handling of the Partnership's business, it is understood and
agreed that any document executed by the Managing General Partner
while acting in the name and on behalf of the Partnership shall be
deemed to be the action of the Partnership as to any third
parties. Further, any Person dealing with the Partnership or the
Managing General Partner may rely upon a certificate signed by the
Managing General Partner as to:
(i) The identity of the Partners;
(ii) The existence or nonexistence of any fact or facts
that constitute conditions precedent to acts by the
Partnership or are in any other manner related to
the affairs of the Partnership;
(iii) The Persons who are authorized to execute and
deliver any instrument or document of the
Partnership; or
(iv) Any act or failure to act by the Partnership.
Section 8.8. Fiduciary obligation. The General Partners shall
owe a fiduciary duty to conduct the affairs of the Partnership for
the exclusive benefit of the Partnership and to use Partnership
Assets in the best interest of the Partnership. Notwithstanding
the foregoing, neither a General Partner or any Affiliate thereof,
nor the partners, shareholders, directors, officers, employees or
agents thereof or of any Affiliate thereof (jointly and severally,
a "General Partner Group") shall be liable, responsible or
accountable in damages or otherwise to the Partnership or any
other Partner for any loss, damage or liability sustained by the
Partnership or any such other Partner, arising out of (a) any
error of judgment made, or an action taken or omitted, which such
Person in good faith reasonably believed to be in, or not opposed
to, the best interest of the Partnership unless the General
Partner Group's action or failure to act constituted fraud, gross
negligence or willful misconduct, or (b) any action taken or
omitted in good faith by any member of the General Partner Group
in accordance with the advice of legal counsel and accountants as
to matters that such Person reasonably believed to be within such
Person's professional competency; provided that nothing in this
Section 8.8 shall in any way limit
<PAGE> 26
the liability of any member of the General Partner Group under any
contract or agreement it has with the Partnership.
Section 8.9. Other Business of Affiliates of the Partners,
Contracts with Affiliates.
(a) It is further understood and agreed that the business
interests and activities of Affiliates of the Partners may be of
any nature or description, including, but not limited to, the
ownership, operation or management of cogeneration facilities
similar to the Plant, and may be engaged in by such Affiliates
independently or with others. Neither the Partnership nor any
Partner shall have any right, by virtue of this Agreement or the
partnership relationship created hereby, in or to the business
activities of such Affiliates or to the income or proceeds derived
therefrom, and the pursuit of such business activities, even if
competitive with the business of the Partnership, shall not be
deemed wrongful or improper. Any Affiliate of the Partners shall
have the right to take for its own account or to recommend to
others any investment opportunity without being required to offer
the same to the other Partners of the Partnership.
(b) Without limiting the provisions of Section 8.1, a General
Partner may execute and deliver such contracts with Affiliates of
a General Partner as may be authorized by the Management
Committee. The execution and delivery of contracts with Affiliates
of a General Partner in accordance with this Section 8.9(b) will
not be deemed or construed to be of improper personal benefit to
the affiliated General Partner.
Section 8.10. Indemnification. The Partnership shall
indemnify and hold harmless each Partner, its shareholders,
directors, officers, employees, agents and representatives (each
an "Indemnified Party") to the full extent permitted by applicable
law (including Section 11 of the Act) from and against any cost,
loss, expense, liability, damage or injury suffered or sustained
by an Indemnified Party, including, but not limited to, any
judgment, award, settlement, reasonable attorneys' and
accountants' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action,
proceeding or claim (a "Loss") by reason of or arising out of any
Loss by reason of any acts, omissions, or alleged acts of
omissions of an Indemnified Party on behalf of the Partnership
("Activities"), if the Activities of the Indemnified Party upon
which the Loss is based were for a purpose reasonably believed by
such Person to be in the best interest of the Partnership.
Notwithstanding the foregoing, an Indemnified Party shall not be
indemnified for Losses resulting from the fraud, gross negligence,
willful misconduct or breach of an express covenant of such
Indemnified Party contained herein. The foregoing shall be deemed
to make mandatory the indemnification permitted under Section
11.02 of the Act and to authorize advance payment of expenses to
the fullest extent permitted by applicable law.
<PAGE> 27
Section 8.11. Insurance. Unless the Management Committee
shall hereafter adopt a greater requirement, the Partnership will
carry and maintain insurance coverage in the minimum coverage and
amounts as required by the Loan Agreement so long as such Loan
Agreement is in effect and thereafter such coverage and amounts as
determined by the Management Committee.
IX.
Allocations
____________
Section 9.1. Tax Allocation. For Federal income tax
purposes, except as otherwise provided herein or required by
Section 704(c) of the Code or Treasury Regulations promulgated
from time to time under Section 704(b) of the Code, each item of
income, gain, loss, deduction and credit of the Partnership shall
be allocated among the Partners in the same manner as its
correlative item of income, gain, loss, deduction or credit is
allocated under Section 9.2. Any gain allocated to the Partners
upon the sale or other taxable disposition of any Partnership
asset shall, to the extent possible, be characterized as Recapture
Income in the same proportions and to the same extent as such
Partners have been allocated any deductions directly or indirectly
giving rise to the treatment of such gains as Recapture Income.
Section 9.2. Allocations for Capital Account Purposes.
(a) General. For purposes of maintaining the Capital
Accounts and determining the rights of the Partners among
themselves, the items of income, gain, loss and deduction shall be
computed as provided in Section 6.7(b) and, except as provided in
Sections 9.2(b) through 9.2(e) below, shall be allocated to the
Partners in accordance with their Sharing Ratios.
(b) Gain on Sale. Partnership gain from the sale, exchange,
abandonment, foreclosure or other taxable disposition (other than
by a lease) of the Plant shall be allocated among the Partners as
follows:
(i) First, gain shall be allocated to each of the
Partners having a negative balance in its Capital
Account to the extent and in the ratio that such
Partners have negative balances in their Capital
Accounts as adjusted to date;
(ii) Second, the remaining gain, if any, shall be
allocated as follows:
(A) First, gain (if any) shall be allocated
to the General Partners, or to the Limited
Partners, or both, in such amounts as will result
in the ratio between the aggregate balances in the
Partners' Capital Accounts being equal to the
ratio between their Sharing Ratios; and
<PAGE> 28
(B) Second, any gain not allocated pursuant
to (A) shall be allocated among the Partners in
accordance with their Sharing Ratios.
(c) Loss on Sale. Partnership loss from the sale, exchange,
abandonment, foreclosure or other taxable disposition (other than
by lease) of the Plant shall be allocated among the Partners:
(i) First, to the extent and in the ratio that
the Partners have positive balances in their Capital
Accounts; and
(ii) Second, to the General Partners in proportion
to their respective Sharing Ratios.
(d) Regulatory Allocations. Notwithstanding the general
allocation rules set forth above, the following special allocation
rules shall apply under the circumstances described.
(i) The losses and deductions allocated to any
Partner with respect to any fiscal year shall not
exceed the maximum amount of losses and deductions that
can be so allocated without causing such Partner to
have a deficit in its Adjusted Capital Account at the
end of such fiscal year. All losses and deductions in
excess of the limitation set forth in the preceding
sentence shall be allocated (1) first, to the maximum
extent permitted by the Code and the Treasury
Regulations, among the Partners having positive
balances in their Adjusted Capital Accounts (after
giving effect to the allocations required by Sections
9.2(a), (b) and (c)) in the ratio obtained by dividing
(x) each such Partner's Adjusted Capital Account
balance by (y) the sum of all such Partners' Adjusted
Capital Account balances and (2) second, any remaining
amount to the Partners in the manner required by the
Code and the Treasury Regulations.
(ii) If in any fiscal year a Partner unexpectedly
receives an adjustment, allocation or distribution
described in Treasury Regulations Sections 1.704-2(b)
(2) (ii) (d) (4)' (5) or (6), and such adjustment,
allocation or distribution causes or increases an
Adjusted Capital Account deficit for such Partner,
then, before any other allocations are made under this
Agreement or otherwise, such Partner shall be allocated
items of income and gain (consisting of a pro rata
portion of each item of Partnership income, including
gross income and gain) in an amount and manner
sufficient to eliminate such Adjusted Capital Account
deficit as quickly as possible.
<PAGE> 29
(iii) If there is a net decrease in Partnership
Minimum Gain during any fiscal year, each Partner shall
be allocated items of income and gain for such fiscal
year (and, if necessary, for subsequent fiscal years)
in proportion to, and to the extent of, an amount equal
to the portion of such Partner's share of the net
decrease in Partnership Minimum Gain during such fiscal
year, subject to the exceptions set forth in Treasury
Regulations Sections 1.704-2(f) (2), (3) and (5);
provided that, if the Partnership has any discretion as
to an exception set forth in Treasury Regulations
Section 1.704-2(f) (5)' the Tax Matters Partner (with
the consent of the other General Partner) shall
exercise such discretion on behalf of the Partnership.
The Tax Matters Partner shall, if the application of
this Section 9.2(d) (iii) would cause a distortion in
the economic arrangement among the Partners, ask the
Commissioner of Internal Revenue to waive the
Partnership Minimum Gain chargeback requirements
pursuant to Treasury Regulations Section 1.704-2(f)
(4). To the extent that this Section 9.2(d) (iii) is
inconsistent with Treasury Regulations Sections
1.704-2(f) or 1.704-2(k) or incomplete with respect to
such Sections of the Treasury Regulations, the
Partnership Minimum Gain chargeback provided for herein
shall be applied and interpreted in accordance with
such Sections of the Treasury Regulations.
(iv) If there is a net decrease in Partner Minimum
Gain during any fiscal year, each Partner shall be
allocated items of income and gain for such fiscal year
(and, if necessary, for subsequent fiscal years) in
proportion to, and to the extent of, an amount equal to
such Partner's share of the net decrease in Partner
Minimum Gain during such fiscal year, subject to the
exceptions set forth in Treasury Regulations Section
1.704-2(i) (4). The Tax Matters Partner shall, if the
application of this Section 9.2(d) (iv) would cause a
distortion in the economic arrangement among the
Partners, ask the Commissioner of Internal Revenue to
waive the Partner Minimum Gain chargeback requirement
pursuant to Treasury Regulations Section 1.704-2(i)
(4). To the extent that this Section 9.2(d) (iv) is
inconsistent with Treasury Regulations Sections
1.704-2(i) (4) or 1.704-2(k) or incomplete with respect
to such Sections of the Treasury Regulations, the
Partner Minimum Gain chargeback provided for herein
shall be applied and interpreted in accordance with
such Sections of the Treasury Regulations.
<PAGE> 30
(v) partner Nonrecourse Deductions shall be
allocated among the Partners in accordance with the
ratios in which the Partners share the economic risk of
loss for the Partner Nonrecourse Debt that gave rise to
those deductions as determined under Treasury
Regulations Section 1.752-2. This allocation is
intended to comply with the requirements of Treasury
Regulations Section 1.704-2(i) and shall be interpreted
and applied consistent therewith.
(vi) The special rules set forth in this Section
9.2(d) (the "Regulatory Allocations") shall be applied
only to the extent required by applicable Treasury
Regulations for the resulting allocations provided for
in Sections 9.2(a) through Cc), taking into account
such Regulatory Allocations, to be respected for
federal income tax purposes. The Regulatory
Allocations are intended to comply with the
requirements of Treasury Regulations Sections
1.704-1(b), 1.704-2 and 1.752-1 through 1.752-5 (the
"Allocation Regulations") and shall be interpreted and
applied consistently therewith.
(e) Curative Allocations. Notwithstanding any other
provision of this Section 9.2 other than the Regulatory
Allocations, the Regulatory Allocations shall be taken into
account in making the allocations under Sections 9.2(a) through
(c) (the "Agreed Allocations") so that, to the extent possible,
the net amount of items of income, gain, loss and deduction
allocated to each Partner pursuant to the Regulatory Allocations
and the Agreed Allocations, together, shall be equal to the net
amount of such items that would have been allocated to each
Partner under the Agreed Allocations had the Regulatory
Allocations and this curative allocation not otherwise been
provided in this Section 9.2.
Section 9.3. Transferor - Transferee Allocations. Income,
gain, loss, deduction or credit attributable to any interest in
the Partnership that has been transferred shall be allocated
between the transferor and the transferee in any method allowed
under Section 706 of the Code as agreed by the transferor and the
transferee. At the request of any Partner, the Partnership shall
make the election provided under section 754 of the Code and any
corresponding provision of applicable state law.
x.
Distributions
_____________
Except as provided in Section 15.3 and subject to the
provisions of the Loan Agreement, any Partnership cash which the
Management Committee determines should not be retained to pay
Partnership costs and expenses, including any reserves the
Management Committee deems appropriate, shall be distributed
semi-annually to the Partners in accordance with their Sharing
Ratios unless the Management Committee determines that such funds
should
be distributed more or less frequently.
<PAGE> 31
XI.
Fiscal Year-Accounting Basis;
Tax Elections; Bank Accounts
_____________________________
Section 11.1. Fiscal Year; Books and Records. The fiscal
period of the Partnership shall be the calendar year and the books
of the Partnership shall be kept on the accrual method of
accounting in accordance with generally accepted accounting
principles. All books, records, accounts, papers, and memoranda
in any manner relating to the Partnership (including those records
required by the Act) shall either be kept at the principal office
of the Partnership or made available at such location as required
by the Act, and each Partner, at all reasonable times during
regular office hours, shall have access thereto for a period of
two years from the end of the subject year for purposes of
inspecting and copying same, at such Partner' s expense (unless
otherwise required by the Act to be supplied without charge).
Section 11.2. Financial Statements and Reports. The Managing
General Partner shall cause to be delivered to each Partner the
following:
(a) Within 90 days after the end of each fiscal year, a
balance sheet and statement of operations, Partners' equity and
changes in financial position, all of which shall be prepared in
accordance with generally accepted accounting principles together
with an opinion thereon from the Partnership's independent public
accountants;
(b) Within 60 days after the end of each of the first three
fiscal quarters of each fiscal year, an unaudited balance sheet as
of the end of such period and related statements of operations
prepared in accordance with generally accepted accounting
principles;
(c) Within 15 days after the end of each calendar month, an
unaudited monthly statement of operations prepared in accordance
with generally accepted accounting Principles; and
(d) Within 120 days after the end of each fiscal year:
(i) U.S. Federal Income Tax Form K-1 and any
similar forms required by any state or
local tax authority; provided, however,
preliminary copies of the Partnership's
federal and state income tax returns shall
be submitted to CNG Bear for its review and
comment prior to the date when such return
is to be filed and, if reasonably possible,
no later than 30 days prior to such data;
<PAGE> 32
(ii) a reconciliation between the financial
figures included in the audited financial
statements and the financial information
used for Partnership's federal income tax
return; and
(iii) any other information concerning the
Partnership reasonably necessary for the
preparation of the Partners' federal and
state income tax returns.
(a) Within 10 days after the end of the first three calendar
quarters of each calendar year, an updated financial forecast of
the Partnership for such year; and
(f) Within 60 days after the end of each calendar year, an
updated financial forecast of the Partnership for the next five
years (inclusive of the calendar year in which the forecast is
provided).
Section 11.3. Tax Matters Partner.
(a) The Managing General Partner shall be the "Tax Matters
Partner" for federal income tax purposes.
(b) In the event of an audit of the Partnership's tax
returns, the Managing General Partner shall participate in such
audit but shall consult regularly with the Management Committee
and may, with the consent of the Management Committee, contest,
settle or compromise the auditing agent's assertions.
Section 11.4. Bank Accounts.
(a) All funds of every kind and nature received by the
Partnership, including Capital Contributions, loan proceeds and
operating receipts shall be deposited in such bank accounts as
shall be determined by the Management Committee. Signatories
shall be designated from time to time in writing by the Management
Committee.
(b) The Partnership may only make the following types of
investments:
(i) Cash in the form of U.S. currency;
(ii) Obligations of, or guaranteed as to
principal and interest by, the United
States of America, or any agency or
instrumentality thereof supported by the
full faith and credit of the United States
of America, none of which shall mature more
than one year after the date of issue;
<PAGE> 33
(iii) Commercial paper, certificates of deposit
and bankers' acceptances maturing not more
than one year after the date of issue,
issued by (a) commercial banking
institutions which are members of the
Federal Reserve System, and each having a
combined capital and surplus and undivided
profits of not less than Two Hundred Fifty
Million Dollars ($250,000,000); and (b)
other banking institutions, each having
combined capital and surplus and undivided
profits of not less than Five Hundred
Million Dollars ($500,000,000);
(iv) Commercial paper, maturing not more than
one year after the date of issue, issued by
a corporation (other than any Partner or
Affiliate thereof) with a rating of P-1
according to Moody's Investors Service,
Inc. or A-1 according to Standard and
Poor's Corporation; and
(v) Such other investments as may be "Permitted
Investments" pursuant to the Loan Agreement
or as the Management Committee may agree.
provided that such investments shall not preclude the timely
distribution of cash as set forth in Article X and provided
further that any investment of working capital shall not preclude
the timely payment of Partnership obligations when and as due.
XII.
Representations, Warranties and Covenants
_________________________________________
Section 12.1. Representations, Warranties and Covenants of
the General Partners. Each General Partner represents, warrants
and covenants to the other Partners that (i) during the term of
the Partnership, it shall take no action which would cause the
Partnership to be treated as a Utility or the Plant to fail to
qualify as a Qualifying Cogeneration Facility or fail to take any
action that would prevent the Partnership from being so treated or
the Plant from being so qualified; and (ii) it will not withdraw
as a general partner of the Partnership pursuant to Section 6.02
of the Act without the prior written consent of the Limited
Partners.
Section 12.2. Representations, Warranties and Covenants of
the Limited Partners. Each Limited Partner represents and
warrants to the other Partners that during the term of the
Partnership, it shall take no action which would cause the
Partnership to be treated as a Utility or the Plant to fail to
qualify as a Qualifying Cogeneration Facility or fail to take any
action that would prevent the Partnership from being so treated or
the Plant from being so qualified.
<PAGE> 34
XIII.
Transfer of Interests by Partners
_________________________________
Section 13.1. No Transfer Without Consent. No Partner may
sell, assign, or otherwise transfer (voluntarily or involuntarily,
by gift or otherwise) directly or indirectly (including any sale,
assignment or transfer of an ownership interest in such Partner)
all or any portion of its Partnership Interest unless the
Management Committee cons ants in writing to such transfer or
assignment.
Section 13.2. Option of Certain Partners to Sell and
Purchase. In the event a Partner determines with the advice of
its counsel that in order to allow the Partnership to maintain the
status of the Plant as a Qualifying Cogeneration Facility such
Partner must sell all or any portion of its interest in the
Partnership, such Partner shall make such sale and assignment to
such Person or Persons acceptable to the other Partners. In the
event that such required assignment and sale does not occur on or
before the date necessary to permit the Plant to remain a
Qualifying Cogeneration Facility or the Partner breaches any of
its covenants set forth in Section 12.1, the other Partners may
require such Partner to sell some or all of its interest in the
Partnership to the Person designated by such Partners for a note,
bearing interest at the Prime Rate plus 1 percent per annum.
Recourse for the payment of such note shall be limited to
Partnership distributions attributable to the acquired interest.
The purchase price for such interest (and principal amount of such
note) will equal the proportionate amount of the Capital
Contributions of the transferor funded, or to be funded, with
respect to its entire interest in the Partnership, less the amount
of all prior distributions of cash attributable to such
proportionate interest.
XIV.
Dissolution of the Partnership
______________________________
Section 14.1. Events of Dissolution. The happening of any
one of the following events shall work an immediate dissolution of
the Partnership:
(a) An event of withdrawal of a General Partner as described
in Section 4.02 of the Act except that any event described in
Subdivisions (4), (5), (7), (8) and (9) of Section 4.02 of the Act
shall not be an event of withdrawal;
(b) The sale (other than pursuant to a sale or exchange in
connection with the replacement or a sale/leaseback of the Plant)
of substantially all the assets of the Partnership, except in the
event of an installment sale in which event dissolution shall
occur upon full and final payment of all indebtedness owing to the
Partnership in respect of such sale;
(c) The agreement of all the Partners to dissolve;
<PAGE> 35
(d) The election of the Non-Delinquent Partners as provided
in Section 6.5(d); or
(a) The expiration of the term of the Partnership as stated
in Article V of this Agreement.
Section 14.2. Dissolution or Bankruptcy of a Partner.
(a) On dissolution or bankruptcy of any Partner, it and its
successors shall thereafter have only the interest of an assignee
of an interest in the Partnership and shall receive distributions
to which it is entitled.
(b) For purposes of this Agreement, the "bankruptcy" of a
Partner shall be deemed to have occurred upon the happening of any
event described in Subdivision (4) or (5) of Section 4.02 of the
Act.
Section 14.3. Reconstitution.
(a) Upon an event of dissolution described in paragraphs (a)
through (a) of Section 14.1, the Partnership shall terminate
unless all the Partners elect in writing to reconstitute and
continue the Partnership. Unless an election to reconstitute and
continue the Partnership is made within 90 days of the event of
dissolution, the Partnership shall conduct only activities
necessary to wind up its affairs.
(b) If an election to reconstitute and continue the
Partnership is made under this Section 14.3, then all necessary
steps shall be taken to amend this Agreement and the certificate
of limited partnership filed in accordance with the Act, and the
Partnership shall continue until the and of the term for which it
was formed unless otherwise provided in such amendment.
XV.
Liquidation of the Partnership
______________________________
Section 15.1. Liquidator.
(a) If the Partnership is dissolved, the Person selected by
the Partners, voting in accordance with their Sharing Ratios
(excluding any Delinquent Partner), acting as liquidator (the
"Liquidator") shall commence to wind up the affairs of the
Partnership and to liquidate and sell its properties. The
Partners shall continue to share operating profits and losses
during the period of liquidation. The Liquidator will proceed, as
promptly as practicable without undue sacrifice, to liquidate and
sell all remaining properties of the Partnership for the best
price obtainable in the judgment of the Liquidator. If required
by the Partners, voting in accordance with their Sharing Ratios
(excluding any Delinquent Partner), the Liquidator may be required
(at the expense of the Partnership) to give a bond to assure
faithful performance of the Liquidator's duties hereunder.
<PAGE> 36
The Liquidator shall be entitled to receive such compensation for
its services as shall be agreed upon by the Liquidator and the
Partners, voting in accordance with their Sharing Ratios
(excluding any Delinquent Partner), payable out of the properties
of the Partnership. The Liquidator may resign at any time by
giving thirty (30) days' written notice to the Partners. The
Liquidator may be removed at any time by written notice of removal
signed by all the Partners (other than any Delinquent Partner).
Upon the death, dissolution, removal or resignation of the
Liquidator, a successor and substitute Liquidator will, within
thirty (30) days thereafter, be appointed by the Partners, voting
in accordance with their Sharing Ratios (excluding any Delinquent
Partner), such appointment to be evidenced by a written
appointment and acceptance. The right to appoint a successor or
substitute Liquidator in the manner provided herein shall be
recurring and continuing for so long as the functions and services
of the Liquidator are authorized to continue under the provisions
hereof. Any successor or substitute Liquidator shall have all the
powers and duties of the Liquidator as the same are set forth in
this Article and every reference herein to Liquidator will be
deemed to refer also to any such successor or substitute
Liquidator appointed in the manner herein provided.
(b) If, within thirty (30) days following the dissolution of
the Partnership, no parson has agreed to serve as the Liquidator,
or, if within thirty (30) days after the need for a substitute or
successor Liquidator arises, such substitute or successor shall
not have bean appointed and accepted such appointment, any
interested party shall have the right to make application to the
Senior Judge of the United States District Court for the District
in which the City of Houston, Texas is than situated for
appointment of the Liquidator, or substitute or successor
Liquidator, as the case may be, and said Judge, acting as an
individual and not in his judicial capacity, shall be fully
authorized and empowered to appoint and designate such Liquidator
or substitute or successor Liquidator, who shall have all the
powers, duties, rights and authorities of the Liquidator herein
provided.
Section 15.2. Powers of the Liquidator. Subject to any
specific limitations imposed by Section 15.1 above, the Liquidator
appointed in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the
parties hereto or their legal representatives or successors in
interest, all the powers conferred upon the Partners under this
Agreement to the extent necessary or desirable in the good faith
judgment of the Liquidator to carry out the duties and functions
of the Liquidator hereunder for and during such period of time as
shall be reasonably required to complete the liquidation and
dissolution of the Partnership as provided for herein, including,
without limiting the generality of the foregoing, the following
specific powers:
<PAGE> 37
(a) The power to continue to manage and operate any business
of the Partnership during the period of such liquidation,
including also the power to make and enter into contracts covering
properties of the Partnership which contracts may extend beyond
the period of liquidation;
(b) The power to make sales, and incident thereto, to make
deeds, bills of sale, assignments, and transfers of assets and
properties of the Partnership, provided that the Liquidator may
not impose personal liability upon any of the Partners or their
legal representatives or successors in interest under any warranty
of title contained in any such instrument;
(c) The power to borrow funds as may, in the good faith
judgment of the Liquidator, be reasonably required to pay any
debts and obligations of the Partnership or operating expenses,
and to grant deeds of trust, mortgages, pledges, and collateral
assignments upon and encumbering any of the Partnership properties
as security for repayment of such loans or as security for payment
of any other indebtedness of the Partnership, provided that the
Liquidator shall not have the power to create any personal
obligation of any of the Partners or their successors in interest
to repay such loans or indebtednesses other than out of available
proceeds of foreclosure or sales of the properties or assets of
the Partnership as to which a lien is granted as security for
payment thereof;
(d) The power to settle, compromise, or adjust any claim
asserted to be owing by or to the Partnership, and the right to
file, prosecute, or defend lawsuits and legal proceedings in
connection with any such matters; and
(e) The power to make deeds, bills of sale, assignments and
transfers to the respective Partners incident to final
distribution of the remaining properties (if any) of the
Partnership, provided that the Liquidator may not impose personal
liability upon any of the Partners or their legal representatives
or successors in interest under any warranty of title contained in
any such instrument.
Section 15.3. Liquidating Distributions. After proper
adjustment to the Capital Accounts pursuant to this Agreement, the
net liquidation sales proceeds and all other funds of the
Partnership shall be distributed in the following order: (a) to
the payment and discharge of all of the Partnership's debts and
liabilities, other than those to any of the Partners, including
expenses of liquidation, (b) to the setting up of any reserves
which the Liquidator may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the
Partnership, (c) to the payment and discharge of any debts and
liabilities of the Partnership to any of the Partners, (d) to the
Partners to the extent of their positive Capital Accounts, and (a)
to the Partners, in proportion to their Sharing Ratios. No
Partner shall have any right to demand or receive property other
than cash upon dissolution and termination of the Partnership.
<PAGE> 38
Section 15.4. Final Accounting. Within a reasonable time
following the completion of the liquidation of the Partnership's
properties, the Liquidator shall supply to each Partner a
statement prepared by the Partnership's accountant which shall set
forth the assets and liabilities of the Partnership as of the date
of liquidation, each Partner's portion of distributions pursuant
to liquidation and the amount retained as reserves pursuant to
Section 15.3 above.
Section 15.5. Termination of Partnership. Upon the
completion of the liquidation of the Partnership and the
distribution of all Partnership funds and property, the
Partnership shall terminate and the Liquidator shall have the
authority to execute and record all documents required to
effectuate the dissolution and termination of the Partnership. No
Partner shall be required to restore any deficit that may exist in
its Capital Account upon the termination of the Partnership or the
liquidation of its interest in the Partnership.
XVI.
Dispute Resolution
___________________
Section 16.1. Intention to Resolve. Except where other
means of resolution are specifically provided herein, it is the
intention of the Partners to make a good faith effort to resolve,
without resort to litigation, any dispute arising under or related
to this Agreement according to the procedure set forth in this
Article.
Section 16.2 Institution of Proceeding.
(a) In the event of a dispute relating to any
provision of this Agreement (a "Dispute") each Partner may
cause a proceeding to be commenced by giving notice to the
other Partners that it desires to do so pursuant to Section
17.5 (the data of such notice is hereinafter referred to as
the "Notice Date"). Each Partner shall thereupon prepare a
written statement (the "Statement") briefly describing such
Partner's position on the matter in dispute. Each Statement
shall also designate an individual (the "Representative")
who shall represent such Partner and who shall have
appropriate authority to negotiate a settlement on behalf of
the party he or she represents. Each Statement shall be
prepared within 30 days of the Notice Date and be given to
all Partners hereto.
(b) The various time periods referred to in this
Agreement are measured from the thirtieth day after the
Notice Date, which hereafter is called the "Commencement
Date".
<PAGE> 39
Section 16.3 Panel.
(a) A panel shall be created with authority to
resolve the Dispute consisting of the Representative of each
Partner and a Neutral Advisor.
(b) The Partners shall attempt to select a Neutral
Advisor who is mutually acceptable to them. The functions
of the Neutral Advisor are those stated in this Article XVI.
(c) If the Partners have not agreed on a Neutral
Advisor within ten (10) days from the Commencement Date, any
Partner may request the Center for Public Resources, 680
Fifth Avenue, New York, New York ("CPR") to nominate
candidates, and shall request that, within ten (10) days of
receiving such request, CPR shall submit to the Partners the
names of not fewer than three nominees, together with the
brief statement of each nominee's qualifications. Each
Partner may in good faith strike from the list the names of
all persons who are unacceptable to it (but not all names)
and number the remaining names to indicate an order of
preference. Each Partner shall mail the list to CPR within
five (5) days of having receipt thereof. CPR will designate
the Neutral Advisor from the names acceptable to all
parties, in accordance with the designated order of mutual
preference. If a party does not return the list of nominees
within the said five (5) days, CPR shall assume that all of
the nominees are acceptable to that party and will choose
the Neutral Advisor pursuant to this Section 16.3 Cc). If
no name is acceptable to all of the parties, the parties
shall request CPR to submit another list of nominees
pursuant to this Section 16.3(c).
(d) Each party shall promptly disclose to the other
parties and CPR any circumstances known to it which would
cause reasonable doubt regarding the impartiality of an
individual under consideration or appointed as a Neutral
Advisor. The parties shall request CPR to ask each nominee
to promptly disclose any such circumstances to the parties.
If any such circumstances have bean disclosed, the
individual shall not serve as Neutral Advisor, unless all
parties agree.
Section 16.4 Briefs and Exhibits. No later than five (5)
days before the panel meeting, the parties shall exchange and
submit to the Neutral Advisor any additional documents, exhibits
and a list of witnesses on which the parties intend to rely during
the panel meeting. Each party may also submit to any other
Partner and to the Neutral Advisor a request for any document in
the possession of such other party on which the party making such
request in good faith believes it will relay. The parties agree
to comply with all reasonable requests to produce such documents.
<PAGE> 40
Section 16.5 Conduct of Panel Meeting.
(a) The panel meeting shall be held at a place
located in Houston, Texas, as agreed to by the parties, on a
date and at a time agreed to by the parties, or failing
agreement as designated by the Neutral Advisor within 15
days of appointment.
(b) At the panel meeting each party shall make a
presentation of its best case and each party shall be
entitled to a rebuttal. The order and permissible length of
presentations and rebuttal shall be determined by the
Neutral Advisor.
(c) The presentation and rebuttals of each party may
be made in any form, and by any individuals, as desired by
such party. Presentations by fact witnesses and expert
witnesses shall be permitted. All testimony shall be given
under oath.
(d) No rules of evidence, including rules of
relevance, will apply at the panel meeting, except that the
rules pertaining to privileged communications and attorney
work product will apply.
(e) The Neutral Advisor will moderate the panel
meeting.
(f) Presentations may not be interrupted, except that
during each party's presentation, and following such
presentation, any member of the panel may ask clarifying
questions of counsel or other parsons appearing on that
party's behalf. No member of the panel may limit the scope
or substance of a party's presentation. Each party may ask
questions of opposing counsel and witnesses during scheduled
open question and answer exchanges and during the party's
rebuttal time if the parties so agreed.
(g) The panel meeting shall not be recorded by any
means. However, subject to Section 16.7, persons attending
the panel meetings may take notes of the proceedings and the
Neutral Advisor shall be entitled to take notes in the event
that he or she is called upon to render a decision pursuant
to Section 16.9(a).
(h) In addition to counsel, each Representative may
have advisors in attendance at the panel meeting, provided
that each other party and the Neutral Advisor shall have
been notified of the identity of such advisors at least five
(5) days before commencement of the panel meeting.
<PAGE> 41
Section 16.6 Negotiations Between Representatives.
(a) At the conclusion of the panel meeting, the
Representatives shall meet by themselves and shall attempt to
agree on a resolution of the dispute. By agreement, other members
of their teams may be invited to participate in the meetings.
(b) At the request of any Representative, the Neutral Advisor
will render an oral opinion as to the hypothetical likely
resolution of each issue raised during the panel meeting.
Following that opinion, the Representatives will again attempt to
resolve the dispute.
Section 16.7 Confidentiality.
(a) The entire process is designed to be a compromise
negotiation, although, if such negotiation is unsuccessful,
the decision of the Neutral Advisor shall be binding. All
offers, promises, conduct and statements, whether oral or
written, made in the course of the panel meeting by any of
the parties, their agents, employees, experts and attorneys,
and by the Neutral Advisor, who is the parties' joint
counsel (or agent if not an attorney) for the purpose of
these compromise negotiations, are confidential. Such
offers, promises, conduct and statements are subject to
Federal Rules of Evidence Rule 408 and are inadmissible and
not discoverable for any purpose, including impeachment, in
litigation between the parties to the panel meeting or other
litigation to which any party is a party. However, evidence
that is otherwise admissible or discoverable shall not be
rendered inadmissible or nondiscoverable as a result of its
presentation or use at the panel meeting.
(b) The Neutral Advisor will be disqualified as a
trial witness, consultant, or expert for any party, and his
or her oral and written opinions will be inadmissible for
all purposes in this Dispute or any other Dispute.
(c) In the event that the Dispute involves
information which one party believes to be confidential, all
parties will consult with the Neutral Advisor so as to
prevent the unnecessary disclosure of such information to
third parties and, in appropriate cases, to any other party
if the Neutral Advisor is able to render a decision by being
accorded private access to such information.
Section 16.8 Termination of Proceeding. The panel meeting(s)
shall be deemed terminated if the parties have not reached a
settlement of their dispute on or before the sixtieth (60th) day
following the Commencement Date, unless the parties agree in
writing to continue the panel meeting(s).
<PAGE> 42
Section 16.9 Obligations of Neutral Advisor Upon
Termination; Enforceability of Decision.
(a) Upon termination in accordance with Section 16.8,
the Neutral Advisor shall render a written decision with
respect to the matter in dispute. Such decision shall be
based upon the facts developed in connection with the panel
and principles of Texas law. Such decision shall be binding
upon the parties and shall be treated as an arbitral award
for all statutory purposes; e.g., any party may apply to any
court for judgment upon such arbitral award, for judicial
confirmation of the award and/or an order of enforcement.
(b) In the event that the Dispute involves the rights
and obligations of the Partners, the Neutral Advisor shall
have no right (a) to terminate the Partnership; (b) to admit
or remove a Partner; or (c) to expand the liability of a
Partner to the Partnership or third parties beyond what is
specifically assented to in this Agreement.
Section 16.10 Miscellaneous.
(a) Except as specifically sat forth in this
Agreement, each party shall be responsible for its own costs
and expanses in connection any Dispute hereunder.
(b) To the extent not in conflict with the procedures
set out herein, the procedures set forth in this Article XVI
shall be subject to the provisions of 9 U.S.C. Subsection
1-16.
XVII.
Miscellaneous
_____________
Section 17.1. Amendment of Agreement. This Agreement may be
modified or amended at any time by a writing signed by the
Partners.
Section 17.2. Applicable Law. This Agreement and all rights
and liabilities of the parties hereto with reference to this
Partnership shall be governed by the Act and all other applicable
laws of the State of Texas.
Section 17.3. Execution and Counterparts. This Agreement
may be signed in any number of counterparts, each of which shall
be an original, but all of which taken together shall constitute
one agreement. It shall not be required that any single
counterpart hereof be signed by all the Partners so long as each
Partner signs a counterpart hereof.
Section 17.4. Binding Provisions. This Agreement shall be
binding upon and shall inure to the benefit of each of the parties
hereto and their respective heirs, legatees, devisees,
<PAGE> 43
successors, assigns and legal representatives, subject, however,
to the provisions and exceptions herein contained.
Section 17.5. Addresses and Notices. All notices, reports,
requests and statements required or permitted to be given
hereunder shall be in writing and shall be deemed to have been
properly given if delivered in hand to the party addressed, if
mailed from within the United States of America by first class
mail (registered or certified, return receipt requested), postage
prepaid, or if sent by facsimile transmission, addressed in each
case to the Partners entitled thereto at the addresses shown in
Section 6.1 or to such other address or addresses as any of the
Partners shall have designated in writing to the other Partners.
Any notice delivered by hand or mailed in accordance herewith
shall be effective upon the date of receipt; and any notice made
by facsimile transmission shall be effective upon issuance by the
transmitting machine of a confirmation slip indicating that the
number of pages included in the notice have been transmitted
without error.
Section 17.6. Construction of Agreement. If any provision of
this Agreement, or the application of such provision to any Person
or circumstance, shall be held invalid, the remainder of this
Agreement, or the application of such provision to person or
circumstances other than those to which it is held invalid, shall
not be affected thereby. All references herein to the masculine
gender shall include the feminine and neuter ganders, and all
singular forms of words shall also include the plural unless
context dictates otherwise. The captions used in this Agreement
are for convenience only and shall not be construed in
interpreting this Agreement. This Agreement shall not be
construed against either party notwithstanding the fact that the
drafting hereof may have originally originated with one of them,
it being agreed that this Agreement has been negotiated by the
parties hereto, all of whom have been represented by counsel of
their choice.
Section 17.7. Time, Entire Agreement. Time is of the essence
in this Agreement and the terms herein shall be so construed.
This Agreement contains the entire agreement among the parties
with respect to the matters herein sat forth and shall supersede
and govern all prior agreements written or oral with respect
thereto.
Section 17.8. Partition. Each party waives the benefit of
any provisions of law which may provide for partition of real or
personal property and agrees not to resort to any action at law or
equity to partition any property subject to this Agreement.
Section 17.9. Further Action. The parties hereto shall
execute and deliver all documents, provide all information and
take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
<PAGE> 44
Section 17.10. Creditors. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any
creditors of the Partnership except the provisions of Sections 6.2
and 6.3 in accordance with the Equity Contribution Agreement.
Section 17.11. 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 waiver of any
such breach or any other covenant, duty, agreement or condition.
WITNESS THE EXECUTION hereof as of the date first above written.
BEAR MOUNTAIN CoGEN, INC.
By:___________________________
Name:_____________________
Title:____________________
Managing General Partner
CNG BEAR MOUNTAIN INC.
By:___________________________
Name:_____________________
Title:____________________
General Partner
BEAR CLAW CoGEN, INC.
By:___________________________
Name:_____________________
Title:____________________
Limited Partner
CNG ENERGY COMPANY
By:___________________________
Name:______________________
Title:____________________
Limited Partner
<PAGE> 1
Exhibit B-2
PURCHASE AGREEMENT
by and between
BEAR MOUNTAIN CoGEN, INC. and
BEAR CLAW CoGEN, INC.
as Sellers
and DESTEC ENERGY, INC.
and
CNG ENERGY COMPANY and
CNG BEAR MOUNTAIN INC.
as Purchasers
Dated November ___, 1994
<PAGE> 2
Table of Contents
__________________
RECITALS Page
____
SECTION 1. SALE AND PURCHASE OF THE INTERESTS
1.1 Definitions..................................
1.2 Agreement of Sellers.........................
1.3 Agreement of Purchasers......................
1.4 Destec Equity Guaranty.......................
SECTION 2. THE CLOSING
2.1 Time and Place
2.2 Actions Taken at Closing by Sellers
a. Assignment of General
Partnership Interest...............
b. Assignment of Limited
Partnership Interest...............
c. Amended and Restated
Partnership Agreement..............
d. Opinion of Counsel.................
e. Good Standing Certificates.........
f. Corporate Resolutions..............
g. Certificate........................
h. Consents...........................
1. Additional Documents...............
2.3 Actions Taken at Closing by Purchasers........
a. Amended and Restated
Partnership Agreement..............
b. Good Standing Certificates.........
c. Corporate Resolutions..............
d. Opinion of Counsel.................
e. Equity Contribution................
f. Certificate........................
g. Consents...........................
h. Additional Documents...............
2.4 Condition Precedent
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS
AND DESTEC
3.1 Disclosure Schedules..........................
a. Qualification To do Business
Schedule...........................
b. Partnership Certificate and Partnership
Agreement Schedule
c. Certificate of Incorporation and Bylaws
Schedule....................
d. Financial Statements Schedule......
<PAGE> 3
e. Contracts Schedule.................
f. Loan and Guaranty Schedule.........
g. Insurance Schedule.................
h. Lien Schedule......................
i. Litigation Schedule................
j. Licenses and Permits Schedule......
k. Consent Schedule...................
l. Real Property Schedule.............
m. Environmental Reports Schedule
n. Technical Reports Schedule.........
0. Intellectual Property Schedule
p. Projections Schedule...............
q. Information Memorandum Schedule....
r. Capitalization Schedule............
3.2 Ownership of Interests........................
3.3 Authority.....................................
3.4 Organization, Standing and Power..............
3.5 Financial Statements; Capitalization..........
3.6 Developments..................................
3.7 Tax Matters...................................
3.8 Intellectual Property Rights..................
3.9 Leases and Contracts Valid....................
3.10 Indebtedness for Borrowed Money and Guaranties
3.11 Litigation....................................
3.12 Insurance.....................................
3.13 Compliance with Laws..........................
3.14 Environmental Matters.........................
3.15 Agreement Not in Breach of Other Instruments;
Consents and Notices..........................
3.16 Required License and Permits..................
3.17 Brokerage or Finder's Fees....................
3.18 Employees.....................................
3.19 PURPA.........................................
3.20 Budget and Transmission Facilities............
3.21 Partnership Matters...........................
3.22 Undisclosed Liabilities.......................
3.23 Disclosure....................................
3.24 Title to Assets...............................
3.25 Nature of Business............................
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASERS
4.1 Organization, Standing and Power..............
4.2 Authority.....................................
4.3 Agreement Not in Breach of Other Instruments;
Consents and Notices..........................
4.4 Status........................................
4.5 Purchase for Investment.......................
4.6 Brokerage or Finder's Fees....................
4.7 Security Interests; Encumbrances..............
<PAGE> 4
SECTION 5. INDEMNIFICATION...............................
5.1 Sellers' Indemnification Obligations..........
5.2 Purchasers' Indemnification Obligations.......
5.3 Procedure for Indemnification Claims..........
SECTION 6. MISCELLANEOUS.................................
6.1 Costs and Expenses...........................
6.2 Entire Agreement; Amendment; Waiver.........
6.3 Sellers' Knowledge...........................
6.4 Descriptive Headings.........................
6.5 Counterparts.................................
6.6 Notices......................................
6.7 Assignment; Successors and Assigns...........
6.8 Joint and Several Liability..................
6.9 Governing Law................................
6.10 Agreement Construction.......................
SCHEDULE 1.2(a) Liens, Claims, Encumbrances and Restrictions
SCHEDULE 1.2(b) Assumed Obligations
SCHEDULE 3.1(a) Qualification To do Business schedule
SCHEDULE 3.1(b) Partnership Certificate and Partnership
Agreement Schedule
SCHEDULE 3.1(c) Certificate of Incorporation and Bylaws
Schedule
SCHEDULE 3.1(d) Financial Statements Schedule
SCHEDULE 3.1(e) Contracts Schedule
SCHEDULE 3.1(f) Loan and Guaranty Schedule
SCHEDULE 3.1(g) Insurance Schedule
SCHEDULE 3.1(h) Lien Schedule
SCHEDULE 3.1(i) Litigation Schedule
SCHEDULE 3.1(j) Licenses and Permits Schedule
SCHEDULE 3.1(k) Consent Schedule
SCHEDULE 3.1(1) Real Property Schedule
SCHEDULE 3.1(m) Environmental Reports Schedule
SCHEDULE 3.1(n) Technical Reports Schedule
SCHEDULE 3.1(o) Intellectual Property Schedule
SCHEDULE 3.l(p) Projections Schedule
SCHEDULE 3.1(q) Information Memorandum Schedule
SCHEDULE 3.1(r) Capitalization Schedule
SCHEDULE 3.2 Voting Agreements
SCHEDULE 3.6 Developments
SCHEDULE 3.9(a) Defaults
SCHEDULE 3.9(b) Other Agreements
SCHEDULE 3.9(c) Events of Force Majeure
SCHEDULE 3.14 Environmental Matters
SCHEDULE 3.15 Consents
SCHEDULE 3.19 PURPA Exceptions
SCHEDULE 3.21(a) Current Contribution Requirements
SCHEDULE 3.21(b) Purchase Right Agreements
SCHEDULE 3.22 Liabilities
<PAGE> 5
EXHIBIT A Form of Assignment of General Partnership
Interest
EXHIBIT B Form of Assignment of Limited Partnership
Interest
EXHIBIT C Form of Partnership Agreement
EXHIBIT D Form of Opinion of Sellers' Counsel
EXHIBIT E Form of Opinion of Purchasers' Counsel
<PAGE> 6
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made and entered
into this _____ day of November, 1994, by and between BEAR
MOUNTAIN CoGEN, INC., a Texas corporation ("BMC"), and BEAR CLAW
CoGEN, INC., a Delaware corporation ("BCC;" BMC and BCC being
collectively referred to herein as "Sellers" and singularly as a
"Seller"), and DESTEC ENERGY, INC., a Delaware corporation
("Destec"), on the one hand, and CNG ENERGY COMPANY, a Delaware
corporation ("CNG Energy"), and CNG BEAR MOUNTAIN INC., a Delaware
corporation ("CNG Bear"); CNG Energy and CNG Bear being
collectively referred to herein as "Purchasers" and singularly as
a "Purchaser"), on the other hand.
W I T N E S S E T H:
WHEREAS, BMC is the owner of a 1% general partner interest
and a 49% limited partner interest in Bear Mountain Limited, a
Texas limited partnership (the "Partnership"); and
WHEREAS, BCC is the owner of a 1% general partner interest
and a 49% limited partner interest in the Partnership; and
WHEREAS, CNG Energy desires to purchase from BMC the 49%
limited partner interest in the Partnership held by BMC (the "LP
Interest") and CNG Bear desires to purchase from BCC the l%
general partner interest in the Partnership held by BCC (the "GP
Interest"), and BMC and BCC desire to sell to CNG Energy and CNG
Bear the LP Interest and the GP Interest, respectively, on the
terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants, agreements and
undertakings hereafter made, the parties hereto have agreed as
follows:
SECTION 1. SALE AND PURCHASE OF THE INTERESTS
1.1 Definitions. Unless otherwise stated in this Agreement,
the following terms shall have the following meanings, the
following definitions to be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"Affiliate": Means, with respect to any person, any
other person that directly or indirectly controls, is
controlled by, or is under common control with, the
person in question. As used herein, the term "control"
means the possession, directly or indirectly, of the
power to direct or cause the direction of the management
and policies of a person, whether through ownership of
voting securities, by contract or otherwise.
"Bank": Union Bank, a California banking corporation.
<PAGE> 7
"Bear Mountain Facility": The power plant and related
facilities being constructed by, or on behalf of, the
Partnership.
"CERCLA": The Comprehensive Environmental Response,
Compensation and Liability Act, as amended.
"Certificate of Incorporation and Bylaws Schedule": As
defined in Section 3.1(c).
"Closing": As defined in Section 2.1.
"Closing Date": As defined in Section 2.1.
"CNG Partnership Interests": The LP Interest and the GP
Interest.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral": As defined in Section 4.7.
"Consent Schedule": As defined in Section 3.1(k).
"Contracts Schedule": As defined in Section 3.1(e).
"Destec": Destec Energy, Inc., a Delaware corporation
that wholly owns Destec Holdings, Inc., a Delaware
corporation that wholly owns both of BMC and BCC.
"Disclosure Schedules": As defined in Section 3.1
"Environmental Laws": Any and all local, state and
federal laws, statutes, ordinances, rules, regulations,
orders, judicial or arbitral decisions, or
determinations of any governmental or judicial authority
pertaining to health, safety or the environment in
effect now or hereafter in any and all jurisdictions in
which the Partnership is doing or at any time has done
business or where the Partnership's property or
facilities are or will be located, including, without
limitation, the Clean Air Act, as amended, CERCLA, the
Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act, as amended, the
Resource Conservation and Recovery Act, as amended, the
Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund
Amendment and Reauthorization Act of 1986, as amended,
the Hazardous Materials Transportation Act, as amended,
California Proposition 65, other comparable state and
local laws and other environmental conservation and
environmental protection laws.
<PAGE> 8
"Environmental Reports Schedule": As defined in Section
3.1(m).
"Equity Partners Equity Contribution Agreement": As
defined in the Loan Agreement, in the form attached
thereto as Exhibit F-2.
"FERC": The Federal Energy Regulatory Commission.
"Financial Statements": As defined in Section 3.1(d).
"General Partners": Before the assignment of the CNG
Partnership Interests to CNG Energy and CNG Bear, BMC
and BCC.
"Hazardous Materials": Any pollutant, contaminant, solid
waste, asbestos, petroleum product, crude oil or a
fraction thereof, any toxic or hazardous substance,
material or waste, any flammable, explosive or
radioactive material, any chemical which causes cancer
or reproductive effects, or any other material or
substance not mentioned above which is regulated under
any Environmental Law.
"Insurance Schedule": As defined in Section 3.1(g).
"Licenses and Permits Schedule": As defined in Section
3.1(j).
"Lien Schedule": As Defined in Section 3.1(h).
"Litigation Schedule": As defined in Section 3.1(i).
"Loan Agreement": That certain Loan Agreement between
the Bank, the other Lenders referred to therein, and the
Partnership, dated as of September 30, 1994.
"Loan and Guaranty Schedule": As defined in Section
3.1(f).
"Material Contracts": As defined in Section 3.9.
"Partnership Agreement": That certain Amended and
Restated Agreement of Limited Partnership of Bear
Mountain Limited dated as of September 20, 1994.
"Partnership Certificate and Partnership Agreement
Schedule": As defined in Section 3.1(b).
"PG&E": Pacific Gas and Electric Company, an investor
owned utility.
<PAGE> 9
"PURPA": The Public Utilities Regulatory Policies Act of
1978, as heretofore and hereafter amended, and the
regulations now and hereafter promulgated by the FERC or
such successor governmental agency as may be charged
with rulemaking authority thereunder, which regulations
are currently set forth at 18 C.F.R. Section292.
"Qualification Schedule": As defined in Section 3.1(a).
"Qualifying Cogeneration Facility": As defined in PURPA.
"Real Property Schedule": As defined in Section 3.1(1).
"Schedule": As defined in Section 3.1.
"Special Facilities Agreement": That certain Agreement
for Installation or Allocation of Special Facilities for
Parallel Operation of Nonutility-Owned Generation and/or
Electrical Standby Service dated August 5, 1994 between
the Partnership and PG&E.
"Texas Act": As defined in Section 3.4.
1.2 Agreement of Sellers. (a) BCC, in reliance upon the
representations, warranties, covenants and agreements of
Purchasers set forth herein, and upon and subject to the terms,
conditions and provisions of this Agreement, hereby agrees to
sell, transfer, assign and deliver to CNG Bear at the Closing, the
GP Interest, free and clear of all liens, claims, charges,
limitations, encumbrances, agreements and restrictions other than
those described in Schedule 1.2(a), in consideration for (i) the
execution by CNG Bear on the Closing Date of the Equity Partner
Equity Contribution Agreement, and providing the Equity Partner
Equity Letter(s) of Credit and the sideletter regarding the
renewal of same, as more particularly described in Section 1.4
below, (ii) the assumption by CNG Bear of the obligations
described in paragraph 2 of Schedule 1.2(b), and (iii) the payment
by Purchasers (or either of them as they may elect) to BCC of
$6,000 in immediately available funds, upon the funding of the
Initial Advance of the Construction Loan (as defined in the Loan
Agreement), and (b) BMC, in reliance upon the representations,
warranties, covenants and agreements of Purchasers set forth
herein, and upon and subject to the terms, conditions and
provisions of this Agreement, hereby agrees to sell, transfer,
assign and deliver to CNG Energy the LP Interest, free and clear
of all liens, claims, charges, limitations, encumbrances,
agreements and restrictions other than those described in Schedule
1.2(a), in consideration for (i) the execution by CNG Energy on
the Closing Date of the Equity Partner Equity Contribution
Agreement, and providing the Equity Partner Equity Letter(s) of
Credit and the sideletter regarding the renewal of same, as more
particularly described in Section 1.4 below, (ii) the assumption
by CNG Energy of the obligations
<PAGE> 10
described in paragraph I of Schedule 1.2(b), and (iii) the payment
by Purchasers (or either of them, as they may elect) to BMC of
$294,000 in immediately available funds, upon the funding of the
Initial Advance of the Construction Loan.
1.3 Agreement of Purchasers. Purchasers, in reliance upon
the representations, warranties, covenants and agreements of
Destec, BMC and BCC set forth herein, and upon and subject to the
terms, conditions and provisions of this Agreement, hereby agree
to purchase the CNG Partnership Interests from BMC and BCC, as
applicable, at the Closing and to provide the consideration as
described in Section 1.2, and to assume the obligations described
in Schedule 1.2(b).
1.4 Destec Equity Guaranty. Destec has executed in favor
of the Bank the Equity Guaranty (as defined in the Loan Agreement)
to secure the obligations of BMC and BCC under the Bear Equity
Contribution Agreement (as defined in the Loan Agreement).
Purchasers have reviewed the Loan Agreement and the Loan Documents
(as defined in the Loan Agreement), and acknowledge that on the
Equity Closing Date (as defined in the Loan Agreement), the equity
contributions of BMC and BCC will be reduced as provided in the
Equity Contribution Agreement and Destec will replace the Equity
Guaranty with the Destec Equity Letter of Credit (as defined in
the Loan Agreement) to secure the equity contribution obligations
of BMC and BCC, as reduced as permitted in the Equity Contribution
Agreement and the Loan Agreement, and Purchasers further agree
that on the Closing Date, Purchasers shall execute the Equity
Partners Equity Contribution Agreement and provide the Equity
Partner Equity Letter(s) of Credit and the sideletters regarding
the renewal of same (all as defined in the Loan Agreement) and
shall use best efforts to provide and/or comply with, as
applicable, the conditions precedent set forth in Section 5.3 of
the Loan Agreement which are applicable to Purchasers and must be
satisfied for the Equity Closing Date to occur.
SECTION 2. THE CLOSING
2.1 Time and Place. The closing of the sale of the CNG
Partnership Interests by Sellers to Purchasers (the "Closing")
shall take place, at the offices of Destec in Houston, Texas, on
or before March 31, 1995. Nonetheless, Sellers and Purchasers
agree to use best efforts to cause the Closing to occur on or
before December 28, 1994 (which shall include Purchasers'
obtaining in advance of such date the approval for Purchasers'
ownership of the CNG Partnership Interests as described in
paragraph 5 of the letter agreement dated October 18, 1994 between
Destec and CNG Energy, pertaining to the acquisition of the CNG
Partnership Interests). The date of Closing is hereinafter
referred to as the "Closing Date."
2.2 Actions Taken at Closing by Sellers. At the Closing,
Sellers shall take the following actions, all of which shall
constitute conditions precedent to Purchasers' obligation to close
hereunder:
<PAGE> 11
(a) Assignment of General Partnership Interest. BCC
shall execute and deliver to CNG Bear an Assignment of
General Partnership Interest in the form attached hereto as
Exhibit A, which assigns to CNG Bear the GP Interest.
(b) Assignment of Limited Partnership Interest. BMC
shall execute and deliver to CNG Energy an Assignment of
Limited Partnership Interest in the form attached hereto as
Exhibit B, which assigns to CNG Energy the LP Interest.
(c) Amended and Restated Partnership Interest.
Sellers shall execute and deliver to Purchasers a Second
Amended and Restated Agreement of Limited Partnership of
Bear Mountain Limited in the form attached hereto as Exhibit
C (the "Second Amended and Restated Agreement of Limited
Partnership").
(d) Opinion of Counsel. Sellers shall deliver to
Purchasers the opinion of Alisa B. Speck, counsel to
Sellers, in the form attached hereto as Exhibit D.
(e) Good Standing Certificates. BMC and BCC shall
deliver to Purchasers certificates of good standing and
existence with respect to each of BMC and BCC, and with
respect to the Partnership.
(f) Corporate Resolutions. Each of BMC and BCC shall
deliver to Purchasers corporate resolutions in form and
substance acceptable to Purchasers authorizing the execution
and delivery of this Agreement and the taking of all actions
contemplated hereby.
(g) Certificate. Sellers shall deliver to Purchasers
a certificate of Sellers and Destec dated the Closing Date
stating that the representations and warranties of Sellers
and Destec set forth in this Agreement are true and correct
on and as of the Closing Date and that Sellers have
performed or complied with all agreements and conditions
required to be performed or complied with by them under this
Agreement prior to the Closing Date.
(h) Consents. Receive or deliver to Purchasers all
consents, approvals, waivers, notices and filings required
in connection with the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby.
(i) Additional documents. Sellers shall deliver to
Purchasers such other and further certificates, instruments,
documents and papers that Purchasers may reasonably request.
<PAGE> 12
2.3 Actions Taken at Closing by Purchasers. At the Closing,
Purchasers shall take the following actions, all of which shall
constitute conditions precedent to Sellers' obligation to close
hereunder:
(a) Amended and Restated Partnership Agreement.
Purchasers shall execute and deliver to Sellers the Second
Amended and Restated Agreement of Limited Partnership.
(b) Good Standing Certificates. Purchasers shall
deliver to Sellers certificates of good standing and
existence with respect to Purchasers from the State of
Delaware.
(c) Corporate Resolutions. Purchasers shall deliver
to Sellers corporate resolutions in form and substance
acceptable to Sellers authorizing the execution and delivery
of this Agreement and the taking of all actions contemplated
hereby.
(d) Opinion of Counsel. Purchasers shall deliver to
Sellers the opinion of Andrews & Kurth L.L.P., counsel to
Purchasers, in the form attached hereto as Exhibit E.
(e) Equity Contribution. Purchasers shall execute
and deliver to the Bank the Equity Partner Contribution
Agreement and provide to the Bank the Equity Partner Equity
Letter(s) of Credit and the sideletters described in Section
1.4 hereof, and execute and deliver all instruments, and do
all things, necessary and appropriate for the Equity Closing
Date (as defined in Section 5.3 of the Loan Agreement) to
occur as soon as reasonably practicable to the execution of
the Second Amended and Restated Agreement of Limited
Partnership.
(f) Certificate. Purchasers shall deliver a
certificate of each Purchaser to Sellers dated the Closing
Date stating that the representations and warranties of
Purchasers set forth in this Agreement are true and correct
on and as of the Closing Date and that Purchasers have
performed or complied with all agreements and conditions
required to be performed or complied with by them prior to
the Closing Date.
(g) Consents. Receive or deliver all consents,
approvals, waivers, notices and filings required in
connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated
hereby, including without limitation any approvals of the
Securities and Exchange Commission.
(h) Additional Documents. Purchasers shall deliver
to Sellers such other and further certificates, instruments,
documents and papers that Purchaser may reasonably request.
<PAGE> 13
2.4 Condition Precedent. Notwithstanding anything
contained herein, in the event that (a) Lenders (as defined in the
Loan Agreement) do not make the Initial Advance (as defined in the
Loan Agreement) on or before March 31, 1995, or (b) Purchasers
shall fail to obtain from the Securities and Exchange Commission
the required approval for the acquisition by Purchasers of the CNG
Partnership Interests on or before March ____, 1995, then this
Agreement shall terminate, and the parties shall have no liability
to each other with respect to this Agreement and the transactions
contemplated hereby (with the sole exception that BMC and BCC
and/or Destec shall pay Purchasers their documented third party
costs incurred in their negotiations and due diligence for the
acquisition of the CNG Partnership Interests, up to a total of
$85,000), including the obligation of Purchasers to provide the
consideration described in Section 1.2 hereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS AND DESTEC
Sellers and Destec represent and warrant to Purchasers as
follows:
3.1 Disclosure Schedules. Sellers have heretofore delivered
to Purchasers the following schedules and documents (herein
sometimes referred to individually as a "Schedule" or collectively
as the "Disclosure Schedules," which are by this reference
incorporated in and made a part of this Agreement for all
purposes):
(a) Qualification To Do Business Schedule. A list of
each jurisdiction in which the Partnership is qualified as a
foreign limited partnership to do business ("Qualification
Schedule").
(b) Partnership Certificate and Partnership Agreement
Schedule. A copy of the Partnership Certificate and the
Partnership Agreement, each as amended to date, of the
Partnership ("Partnership Certificate and Partnership
Agreement Schedule").
(c) Certificate of Incorporation and Bylaws Schedule.
A copy of the certificate of incorporation and the bylaws,
each as amended to date, of each of BMC and BCC
("Certificate of Incorporation and Bylaws Schedule").
(d) Financial Statements Schedule. A copy of the
most recent audited and unaudited financial statements for
the Partnership, BMC and BCC (collectively referred to
hereinafter as the "Financial Statements").
(e) Contracts Schedule. A list of the following
contracts or other agreements to which the Partnership is a
party or by which the Partnership is bound ("Contracts
Schedule"):
<PAGE> 14
(i) engineering, construction or equipment
procurement contracts with respect to any substantial
part of the Bear Mountain Facility;
(ii) contracts for the sale or wheeling of
electricity generated by the Bear Mountain Facility or
for electricity interconnections;
(iii) contracts for the operation and maintenance of
the Bear Mountain Facility;
(iv) fuel supply or transportation agreements;
(v) contracts to supply thermal energy;
(vi) water supply and wastewater disposal contracts
with respect to the operations of the Bear Mountain
Facility;
(vii) to the extent not otherwise listed in the
Contracts Schedule or any other disclosure Schedule,
indemnification agreements; and
(viii) to the extent not otherwise listed in the
Contracts Schedule or any other Disclosure Schedule,
any other contract involving more than $100,000.
(f) Loan and Guaranty Schedule. A list of all
agreements, notes or instruments which provide for the
creation of, or evidence outstanding indebtedness of, the
Partnership for the repayment of borrowed money, or by which
the Partnership guarantees the repayment of borrowed money,
in each case involving an amount in excess of $100,000
("Loan and Guaranty Schedule").
(g) Insurance Schedule. A list and brief description
of policies of insurance maintained by the Partnership
insuring its assets, operations and business ("Insurance
Schedule").
(h) Lien Schedule. A list of all mortgages, liens
and security interests created by the Partnership, which
encumber property owned or leased by the Partnership to
secure indebtedness of the Partnership exceeding $100,000 in
any case ("Lien Schedule")
(i) Litigation Schedule. A list and general
description of all governmental investigations, and all
civil, criminal, administrative, arbitration or other
proceedings pending or, to the knowledge of Sellers,
threatened against the Partnership ("Litigation Schedule").
<PAGE> 15
(j) Licenses and Permits Schedule. A list of
material governmental licenses, permits, registrations,
notifications and other approvals and authorizations held by
the Partnership or, to the knowledge of Sellers, required
for the conduct of the Partnerships' business including,
without limitation, those required for the ownership,
financing, construction, and operation and maintenance of
the Bear Mountain Facility, and the sale of electricity or
thermal energy by the Partnership ("Licenses and Permits
Schedule"), together with a copy of the FERC order
certifying the Bear Mountain Facility as a Qualifying
Cogeneration Facility, and a recertification of the FERC
regarding same, as well as all filings by the Partnership
with the FERC in connection with such orders.
(k) Consent Schedule. a list of (i) agreements to
which the Partnership, BMC or BCC is a party wherein consent
to the transactions herein contemplated is required to avoid
a default thereunder or to effect an assignment of an
interest in, a substitution of any person as a partner of,
or an election under Section 754 of the Code with respect
to, the Partnership, and (ii) elections to be filed with,
notices to or consents of governmental authorities required
in connection with such transactions ("Consent Schedule").
(l) Real Property Schedule. A list of all deeds to
and leases of real property held by the Partnership, and
easements and other real property rights granted to or by
the Partnership, together with the following, to the extent
heretofore furnished to Sellers or otherwise reasonably
available to Sellers: (i) title insurance policies issued
with respect to such real property and (ii) surveys of such
real property ("Real Property Schedule").
(m) Environmental Reports Schedule. A list and copy
of all reports, audits or other documents in the Possession
of Sellers or their Affiliates, or of which any officer of
either Seller is aware, regarding the condition of any
property owned, leased or used by the Partnership or of any
property adjacent to any such property, environmental permit
requirements, or other environmental matters affecting the
Bear Mountain Facility or the business of the Partnership
("Environmental Reports Schedule").
(n) Technical Reports Schedule. A list and copy of
any engineering reports, feasibility studies or other
consultants' reports with respect to the Bear Mountain
Facility or its fuel or water supply or the sale of
electricity ("Technical Reports Schedule").
(o) Intellectual Property Schedule. A list of patent
rights, trademarks, service marks, tradenames, copyrights
and applications for or licenses to use, any of the
foregoing ("Intellectual Property Schedule").
<PAGE> 16
(p) Projections Schedule. The most recent pro forma
financial projections for the Partnership ("Projections
Schedule").
(q) Information Memorandum Schedule. A copy of the
Partnership Financial Information Memorandum which was
prepared in connection with the Loan Agreement ("Financial
Information Memorandum Schedule").
(r) Capitalization Schedule. A list of all property
and cash contributed to the Partnership and current capital
account balances of all partners in the Partnership
("Capitalization Schedule").
Sellers have heretofore provided Purchasers with true, correct and
complete copies of all agreements, instruments and other documents
listed in such Schedules; provided, however, that Sellers shall
have no obligation to provide Purchasers with environmental
reports, audits and other documents which are not in Sellers' or
their Affiliates' possession.
3.2 Ownership of Interests. Sellers are the legal and
beneficial owners of the respective CNG Partnership Interests,
which interests are as reflected in the Partnership Agreement, and
hold the CNG Partnership Interests free and clear of any mortgage,
lien, claim charge, pledge or encumbrance whatsoever other than
those listed on Schedule 1.2(a) attached hereto. Upon the
transfer of the CNG Partnership Interests to Purchasers title to
the CNG Partnership Interests will be vested in Purchasers free
and clear of any mortgage, lien, claims, charge, pledge or
encumbrance other than those listed on Schedule 1.2(a) attached
hereto. Except as disclosed in Schedule 3.2 attached hereto,
neither of the CNG Partnership Interests is subject to any
agreement with respect to the voting thereof, nor have Sellers
granted any proxy which is presently in existence with respect to
any of the CNG Partnership Interests.
3.3 Authority. The execution and delivery of this
Agreement and consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary action on
the part of Sellers, and this Agreement is a legal, valid and
binding obligation of Sellers enforceable in accordance with its
terms except only as such enforcement may be limited by
bankruptcy, insolvency and other laws relating to protection from
creditors or general equitable principles.
3.4 Organization. Standing and Power. Each of the BMC and
BCC is a corporation duly organized, validly existing and in good
standing under the laws of its state of organization and has all
requisite corporate power and authority to own, lease and operate
its properties and to conduct the business presently being
conducted by it and proposed to be conducted by it, and is duly
qualified and in good standing to do business as a foreign
corporation in each of the jurisdictions listed on the
Qualification Schedule, which are the only jurisdictions wherein
the character of the property owned or leased by Sellers, BMC or
<PAGE> 17
BCC, or the nature of the business conducted by Sellers, makes
such qualification necessary; the Partnership has been duly formed
and is validly existing as a limited partnership under the Texas
Revised Limited Partnership Act (the "Texas Act") and has all
requisite partnership power and authority to own, lease and
operate its properties and to conduct the business presently being
conducted by it and proposed to be conducted by it, and the
Partnership is duly qualified or registered as a foreign limited
partnership for the transaction of business in each of the
jurisdictions listed on the Qualification Schedule, which are the
only jurisdictions wherein the character of the property owned or
leased by the Partnership, or the nature of the business conducted
by the Partnership, makes such qualification or registration
necessary.
3.5 Financial Statements; Capitalization. (a) The
Financial Statements, together with the related notes thereto,
were prepared in conformity with generally accepted accounting
principles consistently applied (except as may otherwise be
disclosed in the notes or report thereto) and present fairly the
financial position of the Partnership and each Seller as at the
dates indicated and the results of operations and changes in
financial position for the periods specified.
(b) The partnership interests in the Partnership have been
duly authorized and validly issued. The partnership interests in
the Partnership consist of two l% general partnership interests
which as of the Closing Date will be held one by BMC and the other
by CNG Bear, and two 49% limited partnership interests which as of
the Closing Date will be held one by BCC and the other by CNG
Energy.
3.6 Developments. Except as reflected in the Disclosure
Schedules and in Schedule 3.6 and except for the transactions
contemplated by this Agreement:
(a) Neither the Partnership, nor either Seller has,
since the date of the Financial Statements with respect
thereto contained in the Disclosure Schedules, had any
change in its financial condition, operations (present or
prospective), business (present or prospective), properties,
assets, or liabilities, which has been materially adverse;
(b) The Partnership has not, since the date of the
Financial Statements contained in the Disclosure Schedules:
(i) paid or obligated itself to pay for any fixed
assets aggregating in excess of $50,000, other than
pursuant to the contracts listed on the Contracts
Schedule;
<PAGE> 18
(ii) sold, transferred or otherwise disposed of, or
agreed to sell, transfer or otherwise dispose of, any
assets, or cancel.led, or agreed to cancel, any debts
or claims, aggregating in excess of $100,000, other
than in the ordinary course of business;
(iii) redeemed, purchased or otherwise acquired, or
agreed to redeem, purchase or otherwise acquire, any of
its partnership interests;
(iv) experienced any shortage of raw material which
would materially impair the operations or business of
the Bear Mountain Facility; and
(v) made any change in its accounting methods or
practices with respect to its condition, operations,
business, properties, assets or liabilities;
(vi) had any change in its financial condition,
business, operations, prospects, properties, assets or
liabilities which has been materially adverse;
(c) The development, acquisition, construction, and
installation of the Bear Mountain Facility is proceeding in
accordance with the Projections Schedule; and
(d) as of the Closing Date, the Partnership has no
invoiced payables which are more than 60 days old.
3.7 Tax Matters. Prior to the date of this Agreement, the
Partnership has not filed or been required to file any tax or
information returns with any governmental agency, board, bureau,
body, department or authority of any federal, state, local or
foreign jurisdiction. [May be revised prior to execution if state
franchise tax return baa been filed.] The provisions in the
Financial Statements of the Partnership are sufficient for all
unpaid state and local taxes owed by the Partnership, whether or
not disputed, in respect of its businesses and operations for the
period then ended and all prior periods. No asset of the
Partnership has been considered (i) placed in service or (ii)
placed in a condition or state of readiness and availability for a
specifically assigned function, both within the meaning of
Treasury Regulation Section 1.46-3(d) (1), prior to the Closing
Date. The Partnership is, and following consummation of the
transactions contemplated hereby will be, treated as a partnership
for federal income tax purposes as defined in Sections 761(a) and
7701(a) (2) of the Code.
3.8 Intellectual Property Rights. The Partnership
possesses all patents, copyrights, trademarks, trade names,
know-how, trade secrets or other proprietary rights necessary for
the Partnership to conduct its operations and businesses.
<PAGE> 19
3.9 Leases and Contracts Valid. Except as set forth in the
Disclosure Schedules, all leases, contracts, promissory notes,
licenses and other agreements listed or described on the Loan and
Guaranty Schedule and Contracts Schedule (the "Material
Contracts") are legal, valid and binding and in full force and
effect and enforceable by the Partnership in accordance with their
terms, and the Partnership is not, or will not be upon the
conveyance of the CNG Partnership Interests, in default under or
in breach of in any material respect the terms of any Material
Contract, and Sellers have no reason to believe that any party to
any Material Contract shall be unwilling or unable to perform its
obligations thereunder. The representations and warranties
contained in the Material Contracts are true and complete in all
material respects. The Purchasers have received a true and
complete copy of each Material Contract. Except as set forth on
Schedule 3.9(a), to the best of Sellers' knowledge, no other
person is in default in the observance or the Performance of any
material term or obligation to be performed by it under any
Material Contract. Except as set forth in Schedule 3.9(b) and
other than those agreements the failure of which to obtain would
not have a material adverse effect on the Partnership, to the best
of Sellers' knowledge, the Partnership is party to all agreements
and has, or will obtain in the ordinary course of business, all
rights (including easements and rights of way) required by it in
the current and prospective operation of its business. Except as
disclosed in Schedule 3.9(c), no force majeure event exists under
any Material Contract.
3.10 Indebtedness for Borrowed Money and Guaranties. The
Partnership has no indebtedness for borrowed money or guaranties
of any such indebtedness except (a) as shown on the Financial
Statements or the Loan and Guaranty Schedule, or pursuant to
agreements listed on the Loan and Guaranty Schedule, and (b) for
any such indebtedness or guaranties created in the ordinary course
of business which is not subsumed within or covered by the
indebtedness described in the Loan and Guaranty Schedule and which
in the aggregate may reasonably be anticipated to involve payments
by the Partnership, absent breach or default on its part, of
$100,000 or less. There exists no default or event of default or
event which with the passage of time or the giving of notice could
become a default or event of default under any indebtedness of the
Partnership which default or event of default could have a
material adverse effect on the Partnership.
3.11 Litigation. Except as described on the Litigation
Schedule, there is no governmental investigation, and no civil,
criminal, administrative, arbitration or other proceeding pending,
or to the best of Sellers' knowledge threatened, against the
Partnership which could have a material adverse effect on the
Partnership. Neither the Partnership, nor any of its properties
or assets, is subject to any judicial or administrative judgment,
order, decree or restraint, except as disclosed in the Disclosure
Schedules.
<PAGE> 20
3.12 Insurance. All insurance coverage listed in the
Insurance Schedule is in force and effect on the date hereof.
3.13 Compliance with Laws. The Partnership has not violated
or is in violation of or in default with respect to any applicable
law, regulation, ordinance, rule, permit, judgment, order, writ or
decree of any court or any governmental commission, board, bureau,
agency or instrumentality which violation or default could have a
material adverse effect on the Partnership, and except for matters
specifically described in the Disclosure Schedules as constituting
a basis for such claim, to the best of Sellers' knowledge, there
does not exist any basis for any claim of default under or
violation of any such law, regulation, ordinance, rule, permit,
judgment, order, writ or decree which violation or default could
have a material adverse effect on the Partnership.
3.14 Environmental Matters. To the best of Sellers'
knowledge, the reports, audits and other documents set forth on
the Environmental Reports Schedule comprise all material
information heretofore delivered to or obtained by the Partnership
regarding the condition of any real property owned, leased or used
by the Partnership and/or any real property contiguous thereto, in
each case with respect to the location thereon, therein or
thereunder of any Hazardous Materials. Without limiting Section
3.13, (i) the Partnership has complied with and is in compliance
with all applicable Environmental Laws, (ii) the Partnership has
obtained and is in compliance with all permits and other approvals
required under all applicable Environmental Laws with respect to
the construction and operation of the Bear Mountain Facility
(except as set forth on Schedule 3.14), and (iii) to the best of
Sellers' knowledge, the Bear Mountain Facility, as designed, when
completed and operating will comply with all applicable
Environmental Laws, as currently in effect; except, however, in
the case of clauses (i), (ii) and (iii), any Environmental Laws,
or permits and other approvals required under Environmental Laws
(as described above), the failure to comply with which would not
have a material adverse effect on the Partnership or the
operations of the Bear Mountain Facility.
3.15 Agreement Not in Breach of Other Instruments; Consents
and Notices. The execution and delivery of this Agreement by
Sellers does not, and the consummation by Sellers of the
transactions contemplated hereby will not, conflict with or result
in a breach of or a default under, or in an occurrence which with
the lapse of time could result in a default under, or give rise to
any right of termination, cancellation, acceleration or other
right with respect to, or any lien, claim, charge, restriction or
encumbrance under, any of the terms, conditions or provisions of
any note, debenture, bond, mortgage or indenture, or any contract,
agreement, license, lease or other instrument to which either
Seller or the Partnership is a party or by which any of their
properties or assets are bound or violate any statute or any
order, rule or regulation of any court or governmental agency or
body having jurisdiction over either Seller or the Partnership
<PAGE> 21
or any of their respective properties, or conflict with or violate
any provisions of (a) the certificate of incorporation or bylaws
of either Seller or (b) the certificate of limited partnership or
partnership agreement of the Partnership; and, assuming the
representation and warranty of Purchasers set forth in Section 4.4
is true and correct, no consent or approval by, or registration,
qualification or filing with, any governmental authority or other
person is required in connection with the execution and delivery
by Sellers of this Agreement or for the consummation by Sellers of
the transactions contemplated hereby, except (a) for such consents
and approvals as have been previously obtained and such
registrationg, qualifications and filings as have been previously
made, (b) for any filings that may be required to be made with the
FERC (and, with respect to Purchaser, the Securities and Exchange
Commission) with respect to ownership changes and (c) as disclosed
in Schedule 3.15 attached hereto.
3.16 Required Licenses and Permits. The licenses, permits
and other authorizations listed in the Licenses and Permits
Schedule are the only material licenses, franchises, permits or
other authorizations of governmental authorities which are
required under current law by the Partnership in the current and
prospective operation of its businesses. Except as indicated on
the Licenses and Permits Schedule or set forth in the Litigation
Schedule, (a) such licenses, franchises, permits and other
governmental authorizations are valid and in full force and
effect, and neither Seller nor the Partnership has received any
notice that any governmental authority intends to cancel,
terminate or not renew any such license, franchise, permit or
other governmental authorization and (b) assuming the
representation and warranty of Purchasers set forth in Section 4.4
is true and correct and that any filings required to be made with
the FERC and the Securities and Exchange Commission with respect
to ownership changes are duly made as required, the transfer of
the CNG Partnership Interests will not have any material adverse
effect on any such license, franchise, permit or other
governmental approval or authorization.
3.17 Brokerage or Finder's Fees. Neither Seller nor any of
their officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions
contemplated herein.
3.18 Employees. The Partnership has not and does not employ
any persons.
3.19 PURPA. Except as set forth in Schedule 3.19, the Bear
Mountain Facility has been duly certified as a Qualifying
Cogeneration Facility and has been duly certified by the FERC as
such. After giving effect to the consummation of the transactions
contemplated hereby, and upon completion of construction of the
Bear Mountain Facility, and assuming that the
<PAGE> 22
representation and warranty of Purchasers set forth in Section 4.4
is true and correct, the Bear Mountain Facility shall continue to
be a Qualifying Cogeneration Facility. Except as disclosed in
Schedule 3.19, no filing or approval from the FERC is needed to
maintain the status of the Bear Mountain Facility as a Qualifying
Cogeneration Facility.
3.20 Budget and Transmission Facilities. As of the date
hereof, to the best of Sellers' knowledge, the expected "Project
costs" (as defined in the Loan Agreement) of the Bear Mountain
Facility will not exceed $57,225,000.00. As of the date hereof,
to the best of Sellers' knowledge, PG&E is capable of and is
intending to construct, install and complete construction of the
transmission facilities for the Bear Mountain Facility to be
provided by PG&E pursuant to the Special Facilities Agreement
prior to February 15, 1995.
3.21 Partnership Matters. The LP Interest and the GP
Interest are duly authorized by the Partnership Agreement. The LP
Interest represents a limited partner interest in the Partnership
as is reflected in the Partnership Agreement and the GP Interest
represents a general partner interest in the Partnership as is
reflected in the Partnership Agreement. Sellers have made all
contributions to the Partnership required to be made by them prior
to the Closing with respect to the CNG Partnership Interests.
Schedule 3.21(a) sets forth all current requirements for
contributions to the Partnership following the Closing, by date
and amount, with respect to the CNG Partnership Interests. Since
the date of its formation, the Partnership has made no
distributions in respect of its partnership interests. Except as
disclosed in Schedule 3.21(b), the Partnership is not party to or
bound by any agreement, other than the Partnership Agreement, that
grants to any person the right to purchase or otherwise receive
any interest in the Partnership.
3.22 Undisclosed Liabilities. Except as set forth in
Schedule 3.22, to the best of Sellers' knowledge, the Partnership
has no liabilities of any kind whatsoever relating to its
properties or assets or its business in general, other than as
disclosed in the Disclosure Schedules, which could have a material
adverse effect on the Partnership.
3.23 Disclosure. No representation or warranty by Sellers
in this Agreement, and no information or statement given or made
by Sellers contained in any other document (including the
Disclosure Schedule) delivered by or on behalf of either Seller,
contains any untrue statement of material fact or omits to state
any material fact necessary to make the statements herein or
therein, in light of the circumstances under which it was made,
not misleading. Except as disclosed in the Disclosure Schedules,
Sellers are not aware of any matter, other than those matters
generally affecting the business of gas-fired cogeneration in the
State of California, which materially adversely affects or (so far
as Sellers can reasonably foresee) has a reasonable possibility in
the future of materially adversely affecting the Partnership.
<PAGE> 23
3.24 Title to Assets. Except as set forth in the Disclosure
Schedules, the Partnership owns its properties free and clear of
all liens, security interests, claims and encumbrances.
3.25 Nature of Business. The Partnership has not and is not
conducting any business other than with respect to the Bear
Mountain Facility.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers represent and warrant to Sellers as follows:
4.1 Organization, Standing and Power. Each Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its
properties and to conduct the businesses presently conducted by
it.
4.2 Authority. The execution and delivery by each Purchaser
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of each Purchaser, and this
Agreement is a valid and binding obligation of each Purchaser
enforceable in accordance with its terms except only as such
enforcement may be limited by bankruptcy, insolvency and other
laws relating to protection from creditors or general equitable
principles.
4.3 Agreement Not in Breach of Other Instruments; Consents
and Notices. The execution and delivery of this Agreement by
Purchasers does not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in a breach
of or constitute a default under, or in an occurrence which with
the lapse of time could constitute a default under, or give rise
to any right of termination, cancellation or acceleration with
respect to, any of the terms, conditions or provisions of any
note, debenture, bond, mortgage or indenture, or any contract,
agreement, license, lease or other instrument, to which either
Purchaser is a party or is subject or by which any of its
properties or assets are bound, or violate any statute or any
order, rule or regulation of any court or governmental agency or
body having jurisdiction over either Purchaser or any of their
properties, which breach, default, termination, cancellation,
acceleration or violation could reasonably be expected to have a
material adverse effect upon the transactions contemplated by this
Agreement, or conflict with or result in a default under any
provisions of its certificate of incorporation or bylaws; and no
consent or approval by, or registration, qualification or filing
with, any governmental authority or any other person is required
in connection with the execution and delivery by Purchasers of
this Agreement or for the consummation by each Purchaser of the
transactions contemplated hereby, except (a) for such consents as
have been previously
<PAGE> 24
obtained and (b) for any filings that may be required to be made
with the FERC and the Securities and Exchange Commission with
respect to ownership changes.
4.4 Status. Neither Purchaser is an "electric utility" or
an "electric utility holding company" or a "wholly or partially
owned subsidiary" of an "electric utility" or an "electric utility
holding company" within the meaning of such terms under 18 C.F.R.
Section292.206(b); the ownership of the CNG Partnership Interests
by Purchasers will not cause the Bear Mountain Facility to fail to
meet the qualifying cogeneration facility requirements under PURPA
or to lose its status as a Qualifying Cogeneration Facility; any
assignment by either Purchaser of the CNG Partnership Interests to
an Affiliate of such Purchaser will not cause the Bear Mountain
Facility to fail to meet the qualifying cogeneration facility
requirements under PURPA or to lose its status as a Qualifying
Cogeneration Facility, assuming in each case that any filings
required to be made with the FERC and the Securities and Exchange
Commission with respect to ownership changes are duly made as
required and that the ownership by BMC of its general partner
interest in the Partnership will not cause the Bear Mountain
Facility to fail to meet the qualifying cogeneration facility
requirements under PURPA or to lose its status as a Qualifying
Cogeneration Facility.
4.5 Purchase for Investment. Purchasers are acquiring the
CNG Partnership Interests for their own account for the purpose of
investment and not with a view to or for resale in connection with
any distribution thereof within the meaning of such terms under
the Securities Act of 1933, as amended.
4.6 Brokerage or Finder's Fees. Purchasers will pay and
fully discharge any and all brokerage fees, commissions or
finder's fees and all related costs and expenses which may be or
become due and owing to any person or entity in connection with
consummation of the transactions contemplated by this Agreement
which were incurred or arise based upon any understanding or
agreement between either Purchaser, or any officer, director,
employee or agent of such Purchaser, and the person or entity
claiming entitlement to such brokerage fees, commissions or
finder's fees.
4.7 Security Interests; Encumbrances. Except for the
encumbrances and security interests subject to which Purchasers
are accepting the CNG Partnership Interests which are set forth in
the Lien Schedule, Purchasers' rights in and to the CNG
Partnership Interests hereunder are free and clear of any adverse
claim, security interest or encumbrance created by, through or
under Purchaser. Neither Purchaser has heretofore signed any
financing statement and no financing statement signed by either
Purchaser is now on file or will be on file as of the Closing Date
in any public office with respect to the CNG Partnership Interests
or any "Collateral" with respect to the CNG Partnership Interests
(as such collateral is defined in the Security Agreement, as
defined in the Loan Agreement).
<PAGE> 25
SECTION 5. INDEMNIFICATION
5.1 Sellers' Indemnification Obligations. Sellers agree to
indemnify and hold harmless Purchasers and their officers,
directors, stockholders, affiliates, employees, successors and
lenders from and against any and all damages, liabilities,
penalties, fines, losses, costs, response costs and expenses
(including, without limitation, reasonable legal fees) and all
actions, suits, demands, assessments or judgments with respect to
any claim, arising out of or relating to: (a) any
misrepresentation or breach of any warranty of Sellers contained
in this Agreement or in any Schedule of Sellers or any certificate
delivered by or on behalf of either Seller at the Closing (whether
or not prepared by such Seller); and (b) any breach of any
covenant of Sellers contained in this Agreement.
5.2 Purchasers' Indemnification Obligations. Purchasers
agree to indemnify and hold harmless Sellers and their officers,
directors, stockholders, affiliates, employees, successors and
lenders from and against any and all damages, liabilities,
penalties, fines, losses, costs and expenses (including, without
limitation, reasonable legal fees) and all actions, suits,
demands, assessments or judgments with respect to any claim,
arising out of or relating to: (a) any misrepresentation or breach
of warranty of Purchasers contained in this Agreement or in any
certificate delivered by or on behalf of either Purchaser at the
Closing (whether or not prepared by Purchaser); and (b) any breach
of any covenant of Purchasers contained in this Agreement.
5.3 Procedure for Indemnification Claims. In the event
that, from and after the Closing, a claim shall be made or
threatened, or an action or proceeding shall be commenced or
threatened, against a party hereto which could result in liability
of the other party/ies under its/their indemnification obligations
hereunder, the party/ies against whom the claim is made or
threatened, or the action or proceeding is commenced or threatened
(the "Indemnified Party") shall give prompt written notice to the
other party/ies (the "Indemnifying Party"), and the Indemnifying
Party shall have the right, at its election, to take over the
defense or settlement of such claim, action or proceeding at its
own expense by giving prompt written notice to the Indemnified
Party; provided, however, that (a) the Indemnified Party shall at
all times have the right, at its option and expense, to
participate fully therein and (b) if the Indemnifying Party does
not give such notice and does not proceed diligently to defend the
claim, action or proceeding within 30 days after receipt of such
notice of the claim, action or proceeding, the Indemnified Party
shall have the right, but not the obligation, to undertake the
defense of any such claim, action or proceeding for the account of
and at the risk of the Indemnifying Party and the Indemnifying
Party shall be bound by any defense or settlement that the
Indemnified Party may make as to such claim, action or Proceeding.
The parties shall cooperate in defending any such claim, action or
proceeding, and the
<PAGE> 26
defending party shall have reasonable access to the books and
records, and personnel in the Possession or control of the other
party that are pertinent to the defense. The Indemnifying Party
shall not, in the defense of such claim, action or proceeding,
consent to the entry of any judgment or award, or enter into any
settlement, except in either event with the prior written consent
of the Indemnified Party. The parties agree that any Indemnified
Party may join any Indemnifying Party in any claim, action or
proceeding as to which any right of indemnity granted to such
Indemnified Party pursuant to this Agreement would or might apply,
for the purpose of enforcing such right of indemnity.
SECTION 6. MISCELLANEOUS
6.1 Costs and Expenses. Each party will pay all costs and
expenses of its performance of and compliance with all agreements
and conditions contained herein on its part to be performed or
complied with, including, without limitation, fees, expenses and
disbursements of its attorneys, accountants and experts.
6.2 Entire Agreement; Amendment; Waiver. This Agreement
and all documents specifically referenced herein, attached hereto
or executed and delivered concurrently herewith constitute the
entire agreement between Sellers and Purchasers pertaining to the
subject matter hereof and supersede all prior agreements,
correspondence, memoranda, representations and understandings of
Sellers and Purchasers, except that certain letter agreement dated
October 18, 1994, between Destec and CNG Energy, of which
provisions therein contained shall survive the execution of this
Agreement (provided that to the extent of a conflict between the
terms thereof and the terms of this Agreement, the terms of this
Agreement shall govern). This Agreement may not be 5upplemented,
modified or amended except by a written instrument executed by
Sellers and Purchasers. Except as may be otherwise provided in
this Agreement, no waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any
other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver, and no waiver shall be binding
unless evidenced by an instrument in writing executed by the party
against whom such waiver is sought to be enforced.
6.3 Sellers' Knowledge. Whenever any representation or
warranty of Sellers contained in this Agreement shall be "to
Sellers' knowledge," "to the knowledge of Sellers," "to the best
of Sellers' knowledge," "of which Sellers are aware" or words of
similar import, Sellers will be deemed to have the knowledge of
all of its affiliates; provided, however, nothing herein contained
shall be deemed to create any liability on the part of any such
Affiliate with respect to any representation or warranty or
indemnity made by Sellers hereunder.
6.4 Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
<PAGE> 27
6.5 Counterparts. For the convenience of the parties, any
number of counterparts to this Agreement may be executed by one or
more parties hereto, and each such executed counterpart shall be,
and shall be deemed to be, an original.
6.6 Notices. All notices, consents, requests,
instructions, approvals and other communications provided for
herein shall be validly given, made or served, if in writing and
delivered Personally or sent by United States first class mail,
registered or certified, postage prepaid, addressed:
If to Sellers:
Bear Mountain CoGen, Inc.
2500 CityWest Boulevard
Suite 150
Houston, Texas 77042
Attention: Business Management
Bear Claw CoGen, Inc.
2500 CityWest Boulevard
Suite 150
Houston, Texas 77042
Attention: Business Management
If to Destec:
Destec Energy, Inc.
2500 CityWest Boulevard
Suite 150
Houston, Texas 77042
Attention: ________________
If to Purchasers:
CNG Energy Company
One Park Ridge Center
P.O.Box 15746
Pittsburgh, Pennsylvania 15244-0746
Attention: _________________
CNG Bear Mountain Inc.
One Park Ridge Center
P.O. Box 15746
Pittsburgh, Pennsylvania 15244-0746
Attention: ________________
or to such other address as either party may from time to time
designate to the other by notice. Notice given by mail as set out
above shall be deemed delivered three (3) days after the date same
is postmarked.
<PAGE> 28
6.7 Assignment: Successors and Assigns. Neither Sellers
nor Purchasers shall assign their rights or obligations under this
Agreement, in whole or part, without the written consent of the
other party hereto. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of and be
enforceable by the parties hereto, their respective successors and
permitted assigns.
6.8 Joint and Several Liability. Notwithstanding anything
contained herein, the obligations hereunder of BMC, BCC and Destec
(the "Destec Group") on the one hand, and the obligations
hereunder of CNG Bear and CNG Energy (the "CNG Group"), on the
other hand, shall be joint and several, and each member of the
Destec Group shall be liable for the obligations under this
Agreement of each and every other member of the Destec Group, and
each member of the CNG Group shall be liable for the obligations
of the other under this Agreement.
6.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
6.10 Agreement Construction. Each party hereto has been
represented by counsel in the negotiation of this Agreement, and
the rule that documents shall be construed against the drafter
shall not apply.
IN WITNESS WHEREOF, Sellers, Destec and Purchasers have
caused this Agreement to be duly executed on their respective
behalf as of the date and year first above written.
SELLERS:
BEAR MOUNTAIN CoGEN, INC.
By:___________________________________
Name:______________________________
Title:_____________________________
BEAR CLAW CoGEN, INC.
By:___________________________________
Name:______________________________
Title:_____________________________
<PAGE> 29
DESTEC:
DESTEC ENERGY, INC.
By:___________________________________
Name:______________________________
Title:_____________________________
PURCHASERS:
CNG BEAR MOUNTAIN INC.
By:___________________________________
Name:______________________________
Title:_____________________________
CNG ENERGY COMPANY
By:___________________________________
Name:______________________________
Title:_____________________________
<PAGE> 30
EXHIBIT A
FORM OF ASSIGNMENT OF GENERAL PARTNERSHIP INTEREST
This Assignment of General Partnership Interest
("Assignment"), made, entered into and effective as of this _____
day of _________________, 1994, from Bear Claw CoGen, Inc., a
Delaware corporation ("Assignor"), to CNG Bear Mountain Inc., a
Delaware corporation ("Assignee").
W I T N E $ $ E T H:
WHEREAS, Assignor and its affiliate, Bear Mountain CoGen,
Inc., have entered into a Purchase Agreement with Assignee dated
___________________ 1994 (the "Purchase Agreement") providing,
among other things, for the sale by Assignor and the purchase by
Assignee of the GP Interest (as defined in the Purchase Agreement;
capitalized terms used but not defined herein shall have the
meanings given them in the Purchase Agreement); and
WHEREAS, in order to effectuate the sale and purchase of the
GP Interest as aforesaid, Assignor is executing and delivering
this Assignment.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained in the Purchase Agreement and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Assignor hereby acts and agrees
as follows:
1. Conveyance of Assigned Interests. Assignor hereby
grants, conveys, assigns, transfers, bargains and delivers
unto assignee and its successors and assigns, forever, the GP
Interest.
2. Encumbrances, Security Interests. The assignment of
the GP Interest by Assignor to Assignee hereunder is subject
to the relevant rights, duties, obligations and rights to
purchase set forth in the Partnership Agreement. The GP
Interest is further subject to a security interest and
assignment in favor of the Bank, as Collateral Agent, as
contained in the Security Agreement, as defined in the Loan
Agreement. Such security interest shall not be affected by
the grant, conveyance, assignment and transfer unto Assignee
herein set forth, and in furtherance thereof, Assignee
expressly recognizes, ratifies and confirms such security
interests and assignments and grants, pledges and assigns
unto the Bank, as Collateral Agent, the GP Interest and the
"Collateral" related thereto, subject to the terms and
conditions of the Security Agreement.
<PAGE> 31
3. Assignor's Warranties. Assignor does hereby bind
itself and its successors and assigns to warrant and forever
defend all and singular the GP Interest unto Assignee, its
successors and assigns, against every person whomsoever
lawfully claiming or to claim the GP Interest or any part
thereof; subject, however, to the encumbrances and other
security interests and assignments hereinabove described
which cover and affect the GP Interest.
4. Counterparts. This Assignment may be executed in
any number of counterparts, and each counterpart hereof shall
be deemed to be an original instrument, but all such
counterparts shall constitute but one assignment.
5. Further Assurances. Assignor agrees to take all
such further actions and execute and deliver all such further
documents that are necessary or useful in carrying out the
purposes of this Assignment. Without limitation of the
foregoing, Assignor agrees to execute and deliver to Assignee
all such other additional instruments, notices and other
documents and to do all such other and further acts and
things as may be necessary to more fully and effectively
grant, convey and assign to Assignee the LP Interest conveyed
hereby and intended so to be.
6. Governing Law. This Assignment shall be governed
by and construed in accordance with the laws of the State of
Texas, excluding any conflicts-of-law rule or principle which
might refer same to another jurisdiction.
7. Successors and Assigns. This Assignment shall bind
Assignor and its successors and assigns and inure to the
benefit of Assignee and its successors and assigns.
8. Descriptive Headings. The descriptive headings of
the several paragraphs of this Assignment are for convenience
only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, Bear Claw CoGen, Inc. and CNG Bear
Mountain Inc. have caused this Assignment to be duly executed on
their respective behalf as of the date and year first above
written.
BEAR CLAW CoGEN, INC.
By:_______________________________
Name:__________________________
Title:_________________________
<PAGE> 32
CNG BEAR MOUNTAIN INC.
By:_______________________________
Name:__________________________
Title:_________________________
<PAGE> 33
EXHIBIT B
FORM OF ASSIGNMENT OF LIMITED PARTNERSHIP INTEREST
This Assignment of Limited Partnership Interest
("Assignment"), made, entered into and effective as of this ______
day of _________________, 1994, from Bear Mountain CoGen, Inc., a
Texas corporation ("Assignor"), to CNG Energy Company, a Delaware
corporation ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor and its affiliate, Bear Claw CoGen, Inc.,
have entered into a Purchase Agreement with Assignee dated
___________________ 1994 (the "Purchase Agreement") providing,
among other things, for the sale by Assignor and the purchase by
Assignee of the LP Interest (as defined in the Purchase Agreement;
capitalized terms used but not defined herein shall have the
meanings given them in the Purchase Agreement); and
WHEREAS, in order to effectuate the sale and purchase of the
LP Interest as aforesaid, Assignor is executing and delivering
this Assignment.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained in the Purchase Agreement and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Assignor hereby acts and agrees
as follows:
1. Conveyance of Assigned Interests. Assignor hereby
grants, conveys, assigns, transfers, bargains and delivers
unto assignee and its successors and assigns, forever, the LP
Interest.
2. Encumbrances Security Interests. The assignment of
the LP Interest by Assignor to Assignee hereunder is subject
to the relevant rights, duties, obligations and rights to
purchase set forth in the Partnership Agreement. The LP
Interest is further subject to a security interest and
assignment in favor of the Bank, as Collateral Agent, as
contained in the Security Agreement, as defined in the Loan
Agreement Such security interest shall not be affected by the
grant, conveyance, assignment and transfer unto Assignee
herein set forth, and in furtherance thereof, Assignee
expressly recognizes, ratifies and confirms such security
interests and assignments and grants, pledges and assigns
unto the Bank, as Collateral Agent, the LP Interest and the
"Collateral" related thereto, subject to the terms and
conditions of the Security Agreement.
<PAGE> 34
3. Assignor's Warranties. Assignor does hereby bind
itself and its successors and assigns to warrant and forever
defend all and singular the LP Interest unto Assignee, its
successors and assigns, against every person whomsoever
lawfully claiming or to claim the LP Interest or any part
thereof; subject, however, to the encumbrances and other
security interests and assignments hereinabove described
which cover and affect the LP Interest.
4. Counterparts. This Assignment may be executed in
any number of counterparts, and each counterpart hereof shall
be deemed to be an original instrument, but all such
counterparts shall constitute but one assignment.
5. Further Assurances. Assignor agrees to take all
such further actions and execute and deliver all such further
documents that are necessary or useful in carrying out the
purposes of this Assignment. Without limitation of the
foregoing, Assignor agrees to execute and deliver to Assignee
all such other additional instruments, notices and other
documents and to do all such other and further acts and
things as may be necessary to more fully and effectively
grant, convey and assign to Assignee the GP Interest conveyed
hereby and intended so to be.
6. Governing Law. This Assignment shall be governed
by and construed in accordance with the laws of the State of
Texas, excluding any conflicts-of-law rule or principle which
might refer same to another jurisdiction.
7. Successors and Assigns. This Assignment shall bind
Assignor and its successors and assigns and inure to the
benefit of Assignee and its successors and assigns.
a. Descriptive Headings. The descriptive headings of
the several paragraphs of this Assignment are for convenience
only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, Bear Mountain CoGen, Inc. and CNG Energy
Company have caused this Assignment to be duly executed on their
respective behalf as of the date and year first above written.
BEAR MOUNTAIN CoGEN, INC.
By:_______________________________
Name:__________________________
Title:_________________________
<PAGE> 35
CNG ENERGY COMPANY
By:_______________________________
Name:__________________________
Title:_________________________
<PAGE> 36
EXHIBIT C
FORM OF OPINION OF SELLERS' COUNSEL
_________________, 1994
CNG Bear Mountain Inc.
One Park Ridge Center
P.O. Box 15746
Pittsburgh, PA 15244-0746
CNG Energy Company
One Park Ridge Center
P.O. Box 15746
Pittsburgh, PA 15244-0746
Gentlemen:
I have acted as counsel for Bear Mountain CoGen, Inc., a
Texas corporation ("BMC"), Bear Claw CoGen, Inc., a Delaware
corporation ("BCC;" BCC and BMC are collectively hereinafter
referred to as "Sellers"), and Destec Energy, Inc., a Delaware
corporation ("Destec"), in connection with the Purchase Agreement
dated ____________ 1994 (the "Purchase Agreement"), between
Sellers and Destec, on the one hand, and CNG Bear Mountain Inc., a
Delaware corporation ("CNG Bear") and CNG Energy Company, a
Delaware corporation ("CNG Energy;" CNG Bear and CNG Energy are
collectively hereinafter referred to as "Purchasers"), on the
other hand, pursuant to which BMC and BCC agree to sell to CNG
Energy and CNG Bear and CNG Energy and CNG Bear agree to purchase
from BMC and BCC the LP Interest and the GP Interest,
respectively, on the terms and conditions set forth therein. This
opinion is being delivered pursuant to Section 2.2(d) of the
Purchase Agreement. Capitalized terms which are defined in the
Purchase Agreement are used herein as defined therein.
In connection with the transactions contemplated by the
Purchase Agreement, I have examined originals, or photostatic or
certified copies, of all such corporate records of Sellers and
Destec, and partnership records of the Partnership, and of all
such agreements, communications and other instruments,
certificates of public officials, certificates of corporate
officers, and such other documents as I have deemed relevant and
necessary for the opinions hereinafter expressed. In such
examination I have assumed the genuineness of all signatures and
the authenticity of all documents submitted to us as originals,
and the conformity to original documents of all documents
submitted to me as certified or photostatic copies. As to
questions of fact material to this opinion, I have, to the extent
I deemed appropriate, relied on certificates of public officials
and of officers of Sellers.
<PAGE> 37
Based upon the foregoing, and having regard for such legal
considerations as we have deemed relevant, I am of the opinion
that:
(a) The Partnership has been duly formed and is validly
existing as a limited partnership under the Texas Act, with
partnership power and authority to own, lease and operate its
properties and to conduct the business presently being
conducted by it; and the Partnership is duly qualified or
registered as a foreign limited partnership for the
transaction of business under the laws of the State of
California;
(b) Each of BMC and BCC has been duly incorporated and
is validly existing as a corporation in good standing under
the laws of the jurisdiction of its formation, with corporate
power and authority to own, lease and operate its properties
and to conduct the business presently being conducted by it;
and each of BMC and BCC is duly qualified or registered as a
foreign corporation for the transaction of business and is in
good standing under the laws of the State of California;
(c) The CNG Partnership Interests are duly authorized,
validly issued, fully paid and nonassessable, except as such
nonassessability may be affected by the provisions of the
Texas Act and the Partnership Agreement; and prior to the
consummation of the transactions contemplated by the Purchase
Agreement, except for the lien of the Bank, the CNG
Partnership Interests are owned of record by BMC and BCC, as
applicable, free and clear of all liens, encumbrances,
charges or claims of record known to us other than (i) those
created by or arising under the Texas Act or the Partnership
Agreement, and (ii) those listed on Schedule 1.2(a) to the
Purchase Agreement;
(d) The Purchase Agreement has been duly authorized,
executed and delivered by Sellers and Destec and, assuming
due authorization, execution and delivery of the Purchase
Agreement by Purchasers, constitutes a legal, valid and
binding agreement of Sellers and Destec, enforceable against
Sellers and Destec in accordance with its terms except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, or other laws affecting the
enforcement of creditors' rights and by general equitable
principles including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether
endorsement is sought in a proceeding at law or in equity);
and
<PAGE> 38
(e) Neither the execution and delivery of the Purchase
Agreement by Sellers nor the consummation by Sellers of the
transactions contemplated thereby will conflict with or
result in a breach of or a default under any agreement set
forth on the Contracts Schedule or violate any statute or any
rule or regulation of any governmental agency or body having
jurisdiction over Sellers or either of them, or the
Partnership, or any of their respective properties, or
conflict with or violate any provisions of (i) the articles
of incorporation or bylaws of either Seller or (ii) the
certificate of limited partnership or Partnership Agreement
of the Partnership (assuming that neither Purchaser is an
"electric utility" or an "electric utility holding company"
or a "wholly or partially owned subsidiary" of an "electric
utility" or an "electric utility holding company" within the
meaning of such terms under 18 C.F.R. Section292.206); and
no consent or approval by or registration, qualification or
filing with any governmental authority or other person is
required in connection with the execution and delivery by
Sellers of the Purchase Agreement or for the consummation by
Sellers of the transactions contemplated thereby, except (i)
for such consents and approvals as have been previously
obtained and such registrations, qualifications and filings
as have been previously made and (ii) any filings required to
be made with the Federal Energy Regulatory Commission (or,
with respect to Purchasers, the Securities and Exchange
Commission) with respect to ownership changes.
The opinion set forth in paragraph (c) with respect to liens,
encumbrances, charges or claims of record (other than those
created by or arising under the Texas Act or the Partnership
Agreement) is lifted to liens, encumbrances, charges or claims
which may be perfected by the filing of a financing statement in
the offices of the Secretary of State of the State of Texas or the
Secretary of State of the State of California.
This opinion is limited to federal law and the laws of the
State of Texas. This opinion is for the sole benefit of, and may
only be relied upon by, you.
Very truly yours,
Alisa B. Speck
<PAGE> 39
EXHIBIT D
FORM OF OPINION OF PURCHASERS' COUNSEL
___________________ 1994
Bear Mountain CoGen, Inc.
2500 CityWest Blvd., Suite 150
Houston, Texas 77042
Bear Claw CoGen, Inc.
2500 CityWest Blvd., Suite 150
Houston, Texas 77042
Destec Energy, Inc.
2500 CityWest Blvd., Suite 150
Houston, Texas 77042
Gentlemen:
We have acted as counsel for CNG Bear Mountain Inc., a
Delaware corporation ("CNG Bear") and CNG Energy Company, a
Delaware corporation ("CNG Energy;" CNG Bear and CNG Energy are
collectively hereinafter referred to as "Purchasers"), in
connection with the Purchase Agreement dated _______________, 1994
(the "Purchase Agreement") between Purchasers, on the one hand,
and Bear Mountain CoGen, Inc., a Texas corporation ("BMC"), Bear
Claw CoGen, Inc., a Delaware corporation ("BCC;" BCC and BMC are
collectively hereinafter referred to as "Sellers"), and Destec
Energy, Inc., a Delaware corporation ("Destec"), on the other
hand. This opinion is being delivered pursuant to Section 2.3(d)
of the Purchase Agreement. Capitalized terms which are defined in
the Purchase Agreement are used herein as defined therein.
In connection with the transactions contemplated by the
Purchase Agreement, I have examined originals, or photostatic or
certified copies of all such corporate records of Purchasers, and
of all such agreements, communications and other instruments,
certificates of public officials, certificates of corporate
officers, and such other documents as I have deemed relevant and
necessary for the opinions hereinafter expressed. In such
examination, I have assumed the genuineness of all signatures and
the authenticity of all documents submitted to me as originals,
and the conformity to original documents of all documents
submitted to me as certified or photostatic copies. As to
questions of fact material to this opinion, I have, to the extent
I deemed appropriate, relied on certificates of public 0fficials
and of officers of Purchasers.
<PAGE> 40
Based upon the foregoing, and having due regard for such
legal considerations as I have deemed relevant, but subject to the
assumptions, qualifications and limitations set forth below, I am
of the opinion that:
(a) Each Purchaser has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with corporate power and
authority to own, lease and operate its properties and to
conduct the business presently being conducted by it;
(b) The Purchase Agreement has been duly authorized,
executed and delivered by Purchasers;
(c) Assuming due authorization, execution and delivery
of the Purchase Agreement by Sellers and Destec, the Purchase
Agreement constitutes a legal, valid and binding agreement of
Purchasers enforceable against Purchasers in accordance with
its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganizations, moratorium,
fraudulent transfer laws and other laws affecting the
enforcement of creditors' rights and by general equitable
principles, including principles of commercial
reasonableness, good faith and fair dealing (regardless of
whether endorsement is sought in a proceeding at law or in
equity);
(d) Neither the execution and delivery of the Purchase
Agreement by Purchasers nor the consummation by Purchasers of
the transactions contemplated by the Purchase Agreement will
conflict with or result in a breach of or constitute a
default under any material agreement known to me to which
either Purchaser is a party or by which any of the properties
or assets of either Purchaser are bound or violate any
statute or any order, rule or regulation of any court, or
government agency or body having jurisdiction over either
Purchaser or any of its properties, which conflict, breach,
default or violation, in my reasonable judgment, could be
expected to have a material adverse effect upon the
transactions contemplated by the Purchase Agreement, or
conflict with or violate any provisions of either Purchaser's
certificate of incorporation or bylaws; and no consent or
approval by, or registration, qualification or filing with,
any governmental authority or any person is required in
connection with the execution and delivery by Purchasers of
the Purchase Agreement or for the consummation by Purchasers
of the transactions contemplated by the Purchase Agreement,
except for (i) such consents and approvals as have been
Previously obtained and such registrations, qualifications
and filings as have been previously made and (ii) any filings
required to be made with the Federal Energy Regulatory
Commission or the Securities and Exchange Commission with
respect to ownership changes; and
<PAGE> 41
(e) Neither Purchaser is an "electric utility" or an
"electric utility holding company" or a "wholly or partially
owned subsidiary" of an "electric utility" or an "electric
utility holding company" within the meaning of such terms
under 18 C.F.R. Section292.206(b).
This opinion is limited to federal law, the General
Corporation Law of the State of Delaware, [the laws of the
Commonwealth of Pennsylvania?] and solely with respect to the
opinion set forth in paragraph (c) the laws of the State of Texas.
This opinion is for the sole benefit of, and may only be relied
upon by, you.
Very truly yours,
Andrews & Kurth L.L.P.
<PAGE> 42
EXHIBIT E
FORM OF PARTNERSHIP AGREEMENT
<PAGE> 43
Liens, Claims, Encumbrances and Restrictions
Schedule 1.2(a)
(1) Loan Agreement dated as of September 30, 1994 among Bear
Mountain Limited, the Lenders referred to therein and Union
Bank, as Agent, and the Loan Documents as defined therein.
(2) Amended and Restated Partnership Agreement of Bear Mountain
Limited dated as of September 20, 1994.
<PAGE> 44
Assumed Obligations
Schedule 1.2(b)
(1) BMC's obligation, as a 49% limited partner in the
Partnership, to contribute to the capital of the Partnership
pursuant to Section 6.3 of the Partnership Agreement, but in
no event shall such obligation exceed $5,880,000.
(2) BCC's obligation, as a 1% general partner in the Partnership,
to contribute to the capital of the Partnership pursuant to
Section 6.2 of the Partnership Agreement, but in no event
shall such obligation exceed $120,00, and other obligations
incurred by virtue of being a general partner in the
Partnership.
<PAGE> 45
Qualification to do Business Schedule
Schedule 3.1(a)
Date of
State Qualification File No. Agent
_____ _____________ _________ ______
California April 21, 1992 921180004 C.T.Corporation
(Amended by Amendment to Application for Registration as a
Foreign Limited Partnership filed on July 21, 1994 in the
Office of the Secretary of State of the State of California,
to show Bear Claw CoGen, Inc., as an additional general
partner).
<PAGE> 46
Partnership Certificate and Partnership Agreement Schedule
Schedule 3.1(b)
Index
_____
1. Certificate and Articles of Limited Partnership dated January
21, 1987, executed by Bear Mountain CoGen, Inc., as General
Partner and Guy M. Lyons, as Limited Partner, filed on
January 26, 1987, File No. 48808, with the Office of the
Secretary of State of the State of Texas.
2. Certificate of Amendment of Limited Partnership Adopting the
Texas Revised Limited Partnership Act, filed on April 23,
1992, File No. 48808-10, with the Office of the Secretary of
State of the State of Texas.
3. Assignment of Partnership Interest from Guy M. Lyons to Bear
Claw CoGen, Inc., dated June 13, 1994.
4. Amendment to the Agreement of Limited Partnership of Bear
Mountain Limited, dated June 13, 1994.
5. Certificate of Amendment of Bear Mountain Limited, filed June
13, 1994, File No. 48808-10, with the Office of the Secretary
of State of the State of Texas (evidencing Bear Claw CoGen,
Inc. as a general partner of the Partnership)
6. Bear Mountain Limited Amended and Restated Agreement of
Limited Partnership dated September 20, 1994.
<PAGE> 47
Certificate of Incorporation and Bylaws Schedule
Schedule 3.1(c)
1. Articles of Incorporation of Bear Mountain CoGen, Inc. as
filed with The Secretary of the State of Texas on February
19, 1986.
2. Bylaws of Bear Mountain CoGen, Inc.
3. Articles of Incorporation of Bear Claw CoGen, Inc. as filed
with The Secretary of the State of Delaware on October 29,
1993.
4. Bylaws of Bear Claw CoGen, Inc.
<PAGE> 48
Financial Statements Schedule
Schedule 3.1(d)
<PAGE> 49
Audited Financial Statements of Bear Mountain Limited--None
Audited Financial Statements of Bear Mountain CoGen, Inc.--None
Audited Financial Statements of Bear Claw CoGen, Inc.None
Financial Statements (unaudited) for the following entities:
Bear Mountain CoGen, Inc.--September 30, 1994
Bear Claw CoGen, Inc.--September 30, 1994
Bear Mountain Limited--September 30, 1994
<PAGE> 50
BEAR MOUNTAIN LIMITED
(A Texas Limited Partnership)
_____________________________
BALANCE SHEET (Unaudited)
AS OF SEPTEMBER 30,1994
ASSETS
______
CURRENT ASSETS:
Receivables from affiliates $ 280
___________
TOTAL ASSETS $ 280
===========
PARTNERS' CAPITAL
_________________
PARTNERS' CAPITAL $ 280
___________
TOTAL PARTNERS' CAPITAL $ 280
===========
<PAGE> 51
<TABLE>
BEAR MOUNTAIN LIMITED
(A Texas Limited Partnership)
_____________________________
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
<CAPTION>
BALANCE TRANSFER CONVERSION CAPITAL BALANCE
AS OF OF INTEREST OF INTERESTS CONTRIBUTION AS OF
DECEMBER 31, JUNE 13, JUNE 13, JUNE 13, SEPTEMBER 30,
1993 1994 1994 1994 1993
____________ ___________ ___________ ____________ ____________
<S> <S> <S> <S> <S> <S>
GENERAL PARTNERS:
Bear Mountain
CoGen, Inc. $ 80.00 $ $ (78.40) $ $ 1.60
Bear Claw
CoGen, Inc. 2.40 1.60 4.00
_______ _________ _________ ________ _______
Total 80.00 $ $ (76.00) $ 1.60 $ 5.60
======= ========= ========= ======== =======
LIMITED PARTNERS:
Guy M. Lyons 120.00 (120.00) $ $ $
Bear Mountain
CoGen, Inc. 78.40 $ $ 78.40
Bear Claw
CoGen, Inc. 120.00 120.00 $ (2.40) $ 78.40 $196.00
_______ _________ _________ ________ _______
Total $120.00 $ $ 76.00 $ 78.40 $274.40
_______ _________ _________ ________ _______
TOTAL $200.00 $ $ $ 80.00 $280.00
======= ========= ========= ======== =======
</TABLE>
<PAGE> 52
BEAR MOUNTAIN COGEN. INC.
(A Texas Corporation)
_____________________
BALANCE SHEET (Unaudited)
AS OF SEPTEMBER 30,1994
ASSETS
______
CURRENT ASSET:
Receivable from affiliate $ 560
________
EQUITY INVESTMENT 80
________
TOTAL ASSETS $ 640
=========
LIABILITY AND STOCKHOLDER'S EQUITY
__________________________________
CURRENT LIABILITY:
Payable to affiliate $ 80
________
STOCKHOLDER'S EQUITY:
Common stock, $1.00 par value; 100,000 shares
authorized, 1,000 issued 1,000
Accumulated deficit (440)
________
Total stockholder's equity 560
________
TOTAL LIABILITY AND STOCKHOLDER'S EQUITY $ 640
=========
<PAGE> 53
BEAR CLAW COGEN, INC.
(A Delaware Corporation)
________________________
BALANCE SHEET (Unaudited)
AS OF SEPTEMBER 30,1994
ASSETS
______
CURRENT ASSET:
Receivable from affiliate $ 32
________
EQUITY INVESTMENT 200
________
TOTAL ASSETS $ 232
========
LIABILITY AND STOCKHOLDER'S EQUITY
__________________________________
CURRENT LIABILITY:
Payable to affiliate $ 200
________
STOCKHOLDER'S EQUITY:
Common stock, $.10 par value; 10,000 shares
authorized, 1,000 issued 100
Accumulated deficit (68)
________
Total stockholder's equity 32
________
TOTAL LIABILITY AND STOCKHOLDER'S EQUITY $ 232
========
<PAGE> 54
BEAR CLAW COGEN, INC.
(A Delaware Corporation)
________________________
STATEMENT OF OPERATIONS (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
GENERAL AND ADMINISTRATIVE EXPENSES $ (68)
_________
NET LOSS $ (68)
=========
<PAGE> 55
Contracts Schedule
Schedule 3.1(e)
(1) Engineering, Procurement and Construction Agreement between
Bear Mountain Limited and Destec Engineering, Inc. dated
August 30, 1994.
(2) Standard Offer #2 Power Purchase Agreement for Firm Capacity
and Energy between Bear Mountain CoGen, Inc. and Pacific Gas
and Electric Company ("PG&E") effective as of May 29, 1987,
assigned by Bear Mountain CoGen, Inc. to Bear Mountain
Limited pursuant to a Consent to Assignment and Agreement
executed by PG&E on August 27, 1987, and amended by First
Amendment to Power Purchase Agreement dated August 28, 1992
and by letter agreements dated March 5, 1993, April 15, 1993,
May 26, 1993, June 18, 1993 and July 27, 1993.
(3) Operation and Maintenance Agreement between Bear Mountain
Limited and Destec Operating Company, dated July 29, 1994.
(4) Gas Transportation Agreement between Bear Mountain Limited
and Pacific Gas and Electric Company, dated as of May 25,
1988.
(5) Qualifying Facility Standard Operating Agreement, Special
Facilities Agreement and Special Agreement for Electrical
Standby Service between PG&E and Bear Mountain Limited, each
effective as of August 5, 1994.
(6) Agreement executed as of September 4, 1987 between PG&E and
Bear Mountain Limited to establish a Letter of Credit for the
Project Fee for the Facility.
(7) Steam Energy Agreement between Bear Mountain Limited and
Shell Western E&P Inc. dated June 27, 1994.
(8) ISDA Master Agreement between Bear Mountain Limited and Union
Bank, dated as of September 30, 1994.
[(9) Agreements (2) between Bear Mountain Limited and California
Water Service Company.]
(10) Wastewater Disposal Agreement between Bear Mountain Limited
and Shell Western E & P Inc. dated August 26, 1994.
[(11) Ratification Agreement and Amendment to the Gas Supply
Pooling Agreement dated as of September 30, 1994 by and among
Bear Mountain Limited, Badger Creek Limited, Chalk Cliff
Limited, Double "C" Limited, High Sierra Limited, Kern Front
Limited, Live Oak Limited, McKittrick Limited, and Destec Gas
Services, Inc.]
<PAGE> 56
[(12) Letter agreements (3) dated as of September 30, 1994
between Bear Mountain and Destec Gas Services, Inc. (called
the Gas Approval Sideletter, the Gas Supply Sideletter and
the DGS Compensation Agreement in the Loan Agreement).]
(13) Facilities Construction and Reimbursement Agreement dated
April 15, 1994 between Bear Mountain Limited and Kern River
Gas Transmission Company.
(14) Agreement for Purchase and Sale of NOx Emission Reduction
Credits between Bear Mountain Limited and Shell Western E&P
Inc. effective as of February 21, 1994.
<PAGE> 57
Loan and Guaranty Schedule
Schedule 3.1(f)
(1) Loan Agreement dated as of September 30, 1994 among Bear
Mountain Limited, the Lenders referred to therein, and Union
Bank as Agent, and the Loan Documents as defined therein.
(2) ISDA Master Agreement dated as of September 30, 1994 by and
between Bear Mountain Limited as swap buyer, and Union Bank,
as swap counterparty.
<PAGE> 58
Insurance Schedule
Schedule 3.1(g)
(A) Builder's Risk. All-risk builder's risk insurance,
covering physical loss or damage to the Bear Mountain Facility
including fire and extended coverage, earthquake, flood, water
damage, theft, removal of debris and demolition and increased cost
of construction and collapse. Coverage shall be written on a
replacement cost basis, except for expediting expenses, flood and
earthquake where sublimits shall be written with limits as
commercially available and economically feasible. Such builder's
risk policy shall contain a valid agreed amount endorsement
waiving any coinsurance penalty. The policies shall be subject to
deductibles at commercially reasonable terms.
(B) Delayed Opening. As an extension of the policy described
in subsection (A) above or as a separate policy, "delayed opening"
insurance in an amount equal to 12 months of projected gross
revenue less non-continuing expenses, including coverage for
delays resulting from direct physical loss to the Bear Mountain
Facility as covered under the builder's risk insurance referred to
in subsection (A) above.
(C) Commercial General Liability. Commercial general
liability insurance written on an occurrence basis and with a
combined single limit of not less than $1,000,000 per occurrence,
$1,000,000 aggregate, as applicable. Such coverage shall include
premises/operations- explosion, collapse and underground hazards,
broad form contractual, independent contractors,
products/completed operations including coverage for two years
after Substantial Completion, broad form property damage and
personal injury.
(D) Workers' Compensation and Employer's Liability. (x)
Workers' compensation insurance with statutory limits and (y)
employer's liability insurance with limits of not less than
$1,000,000 per accident; $1,000,000 per employee- occupational
disease/$1,000,000 policy limit - occupational disease.
(E) Business Automobile Liability. Business automobile
liability insurance for owned (if any), nonowned and hired
vehicles with combined single limits of not less than $1,000,000.
(F) Umbrella Liability. Excess (or umbrella) liability
insurance written on an occurrence basis providing limits in
excess of the respective amounts set forth in (C), (D) (y) and (E)
above. The limits of the insurance referred to in such Sections
and such excess (or umbrella) coverage, when combined, shall not
be less than $10,000,000 per occurrence, $10,000,000
annual aggregate, as applicable.
<PAGE> 59
Lien Schedule
Schedule 3.1(h)
(1) Construction and Term Deed of Trust Assignment of Rents and
Fixture Filing from Bear Mountain Limited to First American
Title Insurance Company for the benefit of Union Bank as
Collateral Agent, dated as of September 30, 1994.
(2) Security Agreement executed by Bear Mountain Limited in favor
of Union Bank, as Collateral Agent, dated as of September 30,
1994.
<PAGE> 60
Litigation Schedule
Schedule 3.1(i)
None
<PAGE> 61
Licenses and Permits Schedule
Schedule 3.1(j)
<PAGE> 62
Licenses and Permits Schedule
Schedule 3.1 6)
PERMIT/APPROVAL AGENCY STATUS DATE RECEIVED
1. FERC Certification] Issued 9-Sept-94
Federal Energy Regulatory Commission
2. Authority to Construct Issued 19-Aug-94
San Joaquin Valley Unified Air Pollution
Control District
3. Prevention of Significant Issued 13-Jul-94
Deterioration/
U.S. Environmental Protection Agency
4. Determination of No Jurisdiction/ Issued 11-May-94
California Energy Commission
5. Negative Declaration Approval Approved 19-May-94
(GPA/ZC/CUP) City of Bakersfield
6. General Plan Amendment/ Approved 19-May- 94
City of Bakersfield
7. Zone Change and Negative Approved 19-May-94
Declaration City of Bakersfield
8. Conditional Use Permit/ Approved 2-Jul-94
City of Bakersfield (Board of Zoning
Adjustment)
9. Conditional Use Permit (Appeal Approved 10-Aug-94
Denial) City of Bakersfield
10. Negative Declaration (Parcel Map)/ Issued 21-Jul-94
City of Bakersfield
11. Tentative Parcel Map] Approved 21-Jul-94
City of Bakersfield
<PAGE> 63
Licenses and Permits Schedule
(Schedule 3.1 6) (con't)
PERMIT/APPROVAL AGENCY STATUS DATE RECEIVED
12. Improvement Agreements/ Approved 24-Aug-94
City of Bakersfield
13. Recordation of Parcel Map/ Filed 02-Sept-94
City of Bakersfield
14. Grading Permit/ Issued 11-Aug-94
City of Bakersfield
15. 2081 Management Authorization/ Issued 13-Jul-94
California Department of Fish
and Game
16. Letter of Concurrence/ Issued 28-Jul-94
U.S. Fish and Wildlife Service
17. Storm Water Permit (Construction) Issued 19-Aug-94
California State Water Resources
Control Board
18. Modification of Wastewater Issued 06-Jun-94
Injection Well Program/California
Division of Oil & Gas
19. Emission Reduction Credit Issued 22-Jul-94
Certificates
20. 2081 Management Authorization Issued 04-Oct-94
Addendum/California Department of
Fish and Game
<PAGE> 64
Licenses and Permits Schedule
Schedule 3.1 (j) (con't)
PERMIT/APPROVAL AGENCY STATUS DATE
EXPECTED
1. Permit to Operate/ To Be Issued 01-Jul-95
San Joaquin Valley Unified Air
Pollution
Control District
2. Certificate of Occupancy] To Be Issued 01-Apr-95
City of Bakersfield
3. Risk Management and To Be Submitted to 01-Apr95
Prevention Plan City of
Bakersfield CBFD
Fire Department
4. Letter of Concurrence
(Addendum)/ To Be Issued 01-Dec-94
U.S. Fish and Wildlife Service
5. Storm Water Permit Will Be Incorporated 01-Apr-95
(Operations) California State
Water Resources Control Board
6. Hazardous Materials Business To Be Submitted To 01-Apr-95
Plan]City of Bakersfield CBFD
Fire Department
<PAGE> 65
Consent Schedule
Schedule 3.1(k)
(1) Amended and Restated Agreement of Limited Partnership of
Bear Mountain Limited dated September 20, 1994.
(2) Loan Agreement dated as of September 30, 1994 among Bear
Mountain Limited, the Lenders referred to therein, and Union
Bank, as Agent.
<PAGE> 66
Real Property Schedule
Schedule 3.1(l)
(1) Agreement of Sale and Purchase dated November 18, 1993,
between OXY USA Inc., as Seller, and Destec Energy, Inc., as
Buyer.
(2) Limited Warranty Deed to Bear Mountain Limited from OXY USA
Inc., dated December 16, 1993 and recorded December 20, 1993.
(3) Limited Warranty Deed to OXY USA Inc. from Bear Mountain
Limited, dated September 16, 1994, and recorded _______ 1994.
(4) Policy of Title Insurance dated September 22, 1994, issued
by First American Title Insurance Company, insuring Bear
Mountain Limited in the amount of $400,000, with respect to
the Bear Mountain Facility site and the Easements described
in (5) and (6) below.
(5) General Utility and Access Easement from OXY USA Inc. to
Bear Mountain Limited, dated September 19, 1994 and recorded
September 22, 1994.
(6) Alternate Access, General Utility and Steam and Waste Water
Line Easement from OXY USA Inc. to Bear Mountain Limited,
dated September 19, 1994 and recorded September 22, 1994.
(7) Easement and Right-of-Way from Arthur F. Easton,
individually and as Executor of the Estate of Terry J.
Easton, deceased, and Florence Giumarra, to Bear Mountain
Limited, dated September 27, 1994 and recorded October 10,
1994.
(8) Right-of-Way Agreement between Shell Western E & P Inc. and
Bear Mountain Limited, dated September 28, 1994 and recorded
October 10, 1994.
[Easements to be added as they are obtained and recorded]
<PAGE> 67
Environmental Reports Schedule
Schedule 3.1(m)
1. "Bear Mountain Limited Supplemental Information Facility
Design Features in Support of Conditional Use Permit
Application, General Plan Amendment Application, and Zone
Change Application", December, 1993
2. "Blunt-nosed Leopard Lizard and Special Status Plant Survey
for Pipeline Routes", July 20, 1993; The Planning Center
3. "Bear Mountain Limited Class II Injection Well Feasibility
Study", December, 1993; WZI Inc.
4. "Bear Mountain Limited Cogeneration Project Phase I/Phase II
Site Assessment", November, 1993; WZI Inc.
5. "Bear Mountain Limited Health Risk Assessment in Support of
Authority to Construct Application", April, 1994; WZI Inc.
6. "Bear Mountain Facility Environmental Noise Analysis",
September 20, 1994; Vibranalysis Engineering Corporation
7. "Analysis of Socioeconomic Impacts of the Proposed Bear
Mountain Cogeneration Facility", March 2, 1994; Weaver Hawley
Mills Consultants
8. "An Analysis of the Fiscal and Economic Impact of the Bear
Mountain Cogeneration Plant", December 14, 1993; Frank
Falero, Ph.D., Consulting Economist
9. "Noise Information"; Summarized in Letter to Mr. Marc
Gautheir, City of Bakersfield Planning Department, June 1,
1994
10. "Bear Mountain Limited Cogeneration Project Hydrocarbon
Contaminated Soil Cleanup Report", September, 1994; WZI Inc.
11. Bear Mountain Limited Cogeneration Facility Air Quality
Modeling Addendum", February, 1994; WZI Inc.
<PAGE> 68
Technical Reports Schedule
Schedule 3.1(n)
[To be furnished]
<PAGE> 69
Intellectual Property Schedule
Schedule 3.1(o)
None
<PAGE> 70
Projections Schedule
Schedule 3.1(p)
<PAGE> 71
Information Memorandum Schedule
Schedule 3.1(q)
<PAGE> 72
Capitalization Schedule
Schedule 3.1(r)
<PAGE> 73
Voting Agreements
Schedule 3.2
(1) Amended and Restated Agreement of Limited Partnership of
Bear Mountain Limited dated as of September 20, 1994.
<PAGE> 74
Developments
Schedule 3.6
None
<PAGE> 75
Defaults
Schedule 3.9(a)
None
<PAGE> 76
Other Agreements
Schedule 3.9(b)
[Water Agreements with California Water Service Company]
[Ratification Agreement and Amendment to Gas Supply Pooling
Agreement and 3 related DGS Agreements]
See items 9, 11 and 12 of Schedule 3.1(e)
<PAGE> 77
Events of Force Majeure
Schedule 3.9(c)
None
<PAGE> 78
Environmental Matters
Schedule 3.14
Reference is hereby made to the Licenses and Permits Schedule
for those Permits shown as "To Be Issued," "To Be Obtained" or "To
Be Submitted" rather than received, and such schedule to such
extent is hereby incorporated by reference and made a part hereof.
<PAGE> 79
Consents
Schedule 3.15
None
<PAGE> 80
PURPA Exceptions
Schedule 3.19
If the Managing General Partner determines that the change in
ownership in the Partnership because of the conveyance to CNG of
the CNG Partnership Interests may be deemed a "substantial
alteration or modification" of the statements contained in
previous filings with FERC, an application for recertification of
the Bear Mountain Facility will be made.
<PAGE> 81
Current Contribution Requirements
Schedule 3.21(a)
The obligation to contribute to the capital of the Partnership
pursuant to Sections 6.2 and 6.3 of the Partnership Agreement, but
in no event shall such obligation exceed $6,000,000 in the
aggregate for the CNG Partnership Interests. Contributions are
due upon call pursuant to the Partnership Agreement or the Loan
Documents, as defined in the Loan Agreement.
<PAGE> 82
Purchase Right Agreements
Schedule 3.21(b)
None
<PAGE> 1
EXHIBIT O
Proposed Notice
Pursuant to Rule 22(f)
(Release No. 35- )
FILINGS UNDER THE PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935 ("ACT")
November , 1994
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and rules
promulgated thereunder. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the
proposed transaction(s) summarized below. The application(s) and/or
declaration(s) and any amendments thereto is/are available for public
inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing
by December , 1994 to the Secretary, Securities and Exchange
Commission, Washington, DC 20549, and serve a copy on the relevant
applicant(s) and/or declarant(s) at the address(es) specified below.
Proof of service (by affidavit or, in case of an attorney at law, by
certificate) should be filed with the request. Any request for hearing
shall identify specifically the issues of fact or law that are disputed.
A person who so requests will be notified of any hearing, if ordered, and
will receive a copy of any notice or order issued in the matter. After
said date, the application(s) and/or declaration(s), as filed or as
amended, may be granted and/or permitted to become effective.
____________________________________
<PAGE> 2
Consolidated Natural Gas Company, et. al. (70- )
___________________________________________________
Consolidated Natural Gas Company ("Consolidated"), a registered
holding company, and its wholly-owned, nonutility subsidiary, CNG Energy
Company ("CNG Energy"), both at the CNG Tower, 625 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3199, have filed an
application-declaration under Sections 2(a)(8), 6(a), 7, 9(a), 10 and
12(b) of the Act and Rules 43, 45 and 50(a)(5) thereunder.
CNG Energy proposes to purchase partnership interests in a Texas limited
partnership, Bear Mountain Limited ("Partnership"), an owner of an independent
power project ("Facility") which is to be a qualified cogeneration facility
under the Public Utility Regulatory Policies Act of 1978. CNG Energy would
acquire a limited partnership interest in the Partnership, and proposes to
incorporate and finance a new subsidiary, CNG Bear Mountain, Inc. ("CNG Bear,
Inc.") to acquire a general partnership interest in the Partnership. CNG
Bear, Inc., will be incorporated in Texas and will have authorized capital
stock of $1,000,000, consisting of 100 shares of common stock, $10,000 par
value each.
The Facility is a 48.1 gross megawatt, natural gas turbine facility
which will provide thermal energy for enhanced oil recovery activities of
Shell Western E&P Inc. The Facility, which is located in Bakersfield,
California, is currently under construction and is scheduled to be completed
in April 1995. The total cost of the Facility is estimated to be
approximately $58,000,000. The Partnership has a long-term contract with
Pacific Gas & Electric Company for sale of electric power from the Facility.
<PAGE> 3
CNG Energy proposes to purchase a 49% limited partnership interest in
the Partnership for a consideration not to exceed $6,860,000, and to have CNG
Bear, Inc. buy a 1% general partnership interest in the Partnership for a
consideration not to exceed $140,000. The aggregate consideration to be paid
by the two Consolidated subsidiaries for all of such partnership interests
will thus not exceed $7,000,000.
The Partnership has entered into a loan agreement ("Agreement") for the
financing of the Bear Mountain project with Union Bank and a group of lenders
(collectively "Lenders"). The Agreement will be in place during a
construction phase estimated not to exceed 1.5 years and a permanent phase of
up to 15 years. The construction phase will be financed by a $57,225,000
non-recourse construction loan made to the Partnership pursuant to the
Agreement.
This loan has a floating annual interest rate expected to be 7% for the life
of the loan.
Following completion of the construction phase under the Agreement, (i)
that portion of the construction loan to be permanently financed will be
converted into a non-recourse long-term loan of up to $45,225,000 for a term
not exceeding 15 years and will carry an annual interest rate of 9.3% to 9.8%.
Pursuant to the Agreement, the remainder of the construction loan will be
repaid from partner equity contributions aggregating $12,000,000. The Lender
will also make up to $3,000,000 in revolving credit loans available to the
Partnership for per period of 15 years following conversion to permanent
financing for the purpose of providing working capital. The revolving credit
loan interest rate will vary from .25% to 1.875% over a base market rate
depending on the base rate selected and the time the loans were made.
CNG Energy and CNG Bear, Inc. will, upon becoming partners in the
Partnership, be required to provide the Lenders with the same type of support
<PAGE> 4
that the other Partnership investors have with regard to equity contribution
commitments. Thus, each of CNG Energy and CNG Bear, Inc. will enter into an
equity contribution agreement with the Lenders, and will be required to obtain
a bank letter of credit ("LOC") to support their individual equity commitment
which will not exceed $6,860,000 and $140,000, respectively. Concomitantly,
Consolidated will guarantee the payment of the equity contribution commitments
of CNG Energy and CNG Bear, Inc., and will have the option to replace such
guarantee with a LOC. None of the LOCs to which Consolidated, CNG Energy or
CNG Bear, Inc. will be a party will have fees in excess of 1% of the amount of
commitment.
It is proposed for CNG Energy to raise funds for the purposes described
herein by (i) selling shares of its common stock, $1,000 par value, to
Consolidated, (ii) open account advances as described below, or (iii)
long-term loans from Consolidated, in any combination thereof.
The open account advances and long-term loans will have the same
effective terms and interest rates as related borrowings of Consolidated in
the forms listed below:
(1) Open Account Advances may be made to CNG Energy to provide working
capital and to finance the activities authorized by the SEC. Open
account advances will be made under letter agreement with CNG
Energy and will be repaid on or before a date not more than one
year from the date of the first advance with interest at the same
effective rate of interest as Consolidated's weighted average
effective rate for commercial paper and/or revolving credit
borrowings. If no such borrowings are outstanding, the interest
rate shall be predicated on the Federal Funds' effective rate of
interest as quoted daily by the Federal Reserve Bank of New York.
<PAGE> 5
(2) Consolidated may make long-term loans to CNG Energy for the
financing of its activities. Loans to CNG Energy shall be
evidenced by long-term non-negotiable notes of CNG Energy
(documented by book entry only) maturing over a period of time
(not in excess of 30 years) to be determined by the officers of
Consolidated, with the interest predicated on and equal to
Consolidated's cost of funds for comparative borrowings. In the
event Consolidated has not had recent comparable borrowings, the
rates will be tied to the Salomon Brothers indicative rate for
comparable debt issuances published in Salomon Brothers Inc. Bond
Market Roundup or similar publication on the date nearest to the
time of takedown. All loans may be prepaid at any time without
premium or penalty.
Consolidated will obtain the funds required for CNG Energy through
internal cash generation, issuance of long-term debt securities, borrowings
under credit agreements or through other authorizations approved by the SEC
subsequent to the effective date of this application-declaration.
Consolidated also seeks the authorization to make guarantees and /or
obtain LOCs, not exceeding $7,000,000 in the aggregate, with respect to the
obligations of CNG Energy and/or CNG Bear, Inc., as necessary to support debt
service and other obligations of the Partnership.
The CNG Bear, Inc. would engage in general partner investing and
financing transactions with respect to the Partnership in lieu of CNG Energy.
CNG Bear, Inc. would have mirror image authorizations and obligations of CNG
Energy under this filing as such relate to the acquisition of a 1% general
<PAGE> 6
partner interest in the Partnership, with CNG Energy functioning as a
"pass-through" with regard to the indirect Consolidated financing of this
portion of the Partnership. CNG Energy would also have the authorization to
make guarantees and/or obtain LOCs, not exceeding $140,000 in the aggregate,
with respect to obligations of CNG Bear, Inc.
____________________________________
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
