SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
______________________
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended
September 30, 1996
Commission File No. 1-9874
CALENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 South 36th Street, Suite 400, Omaha, NE 68131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 341-4500
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Former name, former address and former fiscal year, if changed
since last report. N/A
63,655,333 shares of Common Stock, $0.0675 par value were
outstanding as of October 31, 1996.
CALENERGY COMPANY, INC.
Form 10-Q
September 30, 1996
_____________
C O N T E N T S
PART I: FINANCIAL INFORMATION Page
Item 1. Financial Statements
Report of Independent Accountants 3
Consolidated Balance Sheets, September 30, 1996
and December 31, 1995 4
Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 1996 and 1995 5
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 29
Item 2. Changes in Securities 29
Item 3. Defaults on Senior Securities 29
Item 4. Submission of Matters to a Vote of
Security Holders 29
Item 5. Other Information 29
Item 6. Exhibits and Reports on Form 8-K 29
Signatures 31
Exhibit Index 32
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
CalEnergy Company, Inc.
Omaha, Nebraska
We have reviewed the accompanying consolidated balance sheet of
CalEnergy Company, Inc. and subsidiaries as of September 30,
1996, and the related consolidated statements of operations for
the three and nine month periods ended September 30, 1996 and
1995 and the related consolidated statements of cash flows for
the nine month periods ended September 30, 1996 and 1995. These
financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and of making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such consolidated financial
statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of CalEnergy
Company, Inc. and subsidiaries as of December 31, 1995, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for the year then ended (not presented
herein), and in our report dated January 26, 1996, we expressed
an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of December 31, 1995
is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
October 22, 1996
CALENERGY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
________________________________
September 30 December 31
1996 1995
(unaudited)
ASSETS
Cash and investments $334,335 $ 72,114
Joint venture cash and investments 37,092 77,590
Restricted cash 94,392 149,227
Short-term investments 2,864 34,190
Accounts receivable 109,453 57,909
Due from joint ventures 18,211 27,273
Properties, plants, contracts and
equipment, net (Note 3) 2,223,770 1,781,255
Notes receivable - joint ventures 11,250 14,254
Excess of cost over fair value of
net assets acquired, net 393,763 302,288
Equity investments 200,408 60,815
Deferred charges and other assets 122,904 77,123
Total assets $3,548,442 $2,654,038
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 7,118 $ 6,638
Other accrued liabilities 103,160 87,892
Project loans 284,779 257,933
Construction loans 351,923 211,198
Senior discount notes 514,626 477,355
Senior notes (Note 9) 224,137 -
Salton Sea notes and bonds 563,035 452,088
Limited recourse senior secured notes 200,000 200,000
Convertible subordinated
debentures (Note 7) 73,755 100,000
Revolving loan (Note 10) 35,000 -
Convertible debt (Note 7) - 64,850
Deferred income taxes 339,923 226,520
Total liabilities 2,697,456 2,084,474
Deferred income 25,244 26,032
Convertible preferred securities
of subsidiary (Note 8) 103,930 -
Commitments and contingencies (Notes 8, 9, 10 and 11)
Stockholders' equity:
Preferred stock - authorized 2,000
shares, no par value - -
Common stock - par value $0.0675 per
share, authorized 80,000 shares,
issued 57,066 and 50,680 shares,
outstanding 57,066 and 50,593 at
September 30, 1996 and December 31,
1995, respectively 3,853 3,421
Additional paid in capital 447,467 343,406
Retained earnings 276,346 205,059
Treasury stock - 0 and 87 common
shares at September 30, 1996 and
December 31, 1995, respectively, at cost (1) (1,348)
Unearned compensation - restricted stock (5,853) (7,006)
Total stockholders' equity 721,812 543,532
Total liabilities and stockholders'
equity $3,548,442 $2,654,038
The accompanying notes are an integral part of these financial statements.
CALENERGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Three Months Nine Months
Ended Ended
September 30 September 30
1996 1995 1996 1995
(unaudited) (unaudited)
Revenues:
Sales of electricity and steam $165,487 $102,423 $346,166 $257,157
Income on equity investments 2,998 - 2,998 -
Royalty income 980 5,372 5,995 14,201
Interest and other income 9,583 11,922 30,039 32,140
Total revenues 179,048 119,717 385,198 303,498
Costs and expenses:
Plant operations 32,159 22,458 73,546 61,331
General and administration 6,518 4,600 15,814 15,877
Royalty expense 8,023 7,913 18,294 18,249
Depreciation and amortization 36,587 17,210 80,300 47,034
Loss on equity investment
in Casecnan 1,192 - 3,966 -
Interest expense 45,017 34,229 116,521 99,524
Less interest capitalized (7,951) (6,512) (31,459) (16,633)
Dividends on convertible preferred
securities of subsidiary (Note 8) 1,624 - 3,067 -
Total costs and expenses 123,169 79,898 280,049 225,382
Income before income taxes 55,879 39,819 105,149 78,116
Provision for income taxes 18,325 12,457 33,862 24,245
Income before minority interest 37,554 27,362 71,287 53,871
Minority interest - - - 3,005
Net income 37,554 27,362 71,287 50,866
Preferred dividends
(paid in kin - - - 1,080
Net income available for
common shareholders $37,554 $27,362 $71,287 $49,786
Net income per share - primary $ .67 $ .52 $ 1.29 $ 1.02
Net income per share - fully
diluted (Note 5) $ .59 $ .48 $ 1.18 $ .96
Average number of common and
common equivalent shares
outstanding 56,296 53,080 55,362 48,861
Fully diluted shares (Note 5) 67,740 61,518 66,397 56,829
The accompanying notes are an integral part of these financial statements.
CALENERGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
________________________________
Nine Months Ended
September 30
1996 1995
Cash flows from operating activities: (unaudited)
Net income $ 71,287 $ 50,866
Adjustments to reconcile net cash flow
from operating activities:
Depreciation and amortization 73,873 41,948
Amortization of excess of cost over
fair value of net assets acquired 6,427 5,086
Amortization of original issue discount 37,272 33,727
Amortization of deferred financing costs 6,900 6,671
Amortization of deferred compensation 1,153 -
Provision for deferred income taxes 16,188 16,823
Loss on equity investments 968 -
Changes in other items:
Accounts receivable (34,372) (23,133)
Accounts payable and accrued liabilities 1,833 383
Deferred income (788) (31)
Income tax payable 2,091 -
Net cash flows from operating activities 182,832 132,340
Cash flows from investing activities:
Purchase of Falcon, net of cash acquired (206,577) -
Purchase of Partnership Interest, net of
cash acquired (58,044) -
Malitbog construction (95,047) (56,110)
Upper Mahiao construction (26,265) (118,737)
Mahanagdong construction (36,903) (33,961)
Salton Sea Unit IV construction (57,513) (38,894)
Indonesian and other development (48,721) (6,189)
Pacific Northwest, Nevada and Utah (3,746) (3,703)
Capital expenditures relating to
operating projects (23,913) (14,879)
Decrease in short-term investments 31,326 73,163
Decrease (increase) in restricted cash 75,926 (52,344)
Decrease in other investments and assets 9,371 10,118
Purchase of Magma, net of cash acquired - (906,226)
Net cash flows from investing activities (440,106) (1,147,762)
Cash flows from financing activities:
Proceeds from convertible preferred
securities of subsidiary 103,930 -
Proceeds from Salton Sea notes and bonds 135,000 475,000
Proceeds from issuance of senior notes 224,136 -
Proceeds from revolver 35,000 -
Repayment of Salton Sea notes and bonds (24,053) -
Proceeds and net benefits from sale of common
and treasury stock and exercise of options 13,950 299,269
Repayment of project finance loans (140,924) (153,763)
Construction loans 140,725 123,316
Decrease (increase) in amounts due from
joint ventures 8,666 (8,678)
Deferred financing costs (14,212) (34,733)
Purchase of treasury stock (3,221) (1,590)
Proceeds from limited recourse senior
secured notes - 200,000
Proceeds from merger loan - 500,000
Repayment of merger loan - (500,000)
Net cash flows from financing activities 478,997 898,821
Net increase (decrease) in cash and
cash equivalents 221,723 (116,601)
Cash and cash equivalents at beginning
of period 149,704 308,091
Cash and cash equivalents at end of period $ 371,427 $ 191,490
Supplemental disclosures:
Interest paid, net of amount capitalized $ 48,477 $ 53,025
Income taxes paid $ 17,790 $ 6,359
Supplemental schedule of non-cash financing activities:
Additional common stock was issued upon the conversion of $64,850
of convertible debt and the conversion of $26,245 of the
convertible subordinated debentures.
The accompanying notes are an integral part of these financial statements.
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
1. General:
In the opinion of management of CalEnergy Company, Inc. (the
"Company"), the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial
position as of September 30, 1996 and the results of operations
for the three and nine months ended September 30, 1996 and 1995,
and cash flows for the nine months ended September 30, 1996 and
1995.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, and its proportionate
share of the accounts of the partnerships and joint ventures in
which it has invested except for CE Casecnan Water and Energy
Company, Inc. and Saranac Power Partners, L.P. and NorCon Power
Partners, L.P., two projects acquired by the Company on August 7,
1996 (see Note 6), which are accounted for under the equity
method.
The results of operations for the three and nine months ended
September 30, 1996 and 1995 are not necessarily indicative of the
results to be expected for the full year.
Certain amounts in the 1995 financial statements and supporting
footnote disclosures have been reclassified to conform to the
1996 presentation. Such reclassification did not impact
previously reported net income or retained earnings.
2. Other Footnote Information:
Reference is made to the Company's most recently issued annual
report that included information necessary or useful to the
understanding of the Company's business and financial statement
presentations. In particular, the Company's significant
accounting policies and practices were presented as Note 2 to the
consolidated financial statements included in that report.
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
3. Properties, Plants, Contracts and Equipment:
Properties, plants, contracts and equipment comprise the
following:
September 30, December 31,
1996 1995
(unaudited)
Operating project costs:
Power plants $1,260,962 $ 623,778
Wells, resource, and development 395,109 329,414
Power sales agreements 233,030 188,415
Licenses, equipment and other 58,244 58,052
Wells and resource development
in progress 130 465
Total operating facilities 1,947,475 1,200,124
Less accumulated depreciation
and amortization (237,903) (164,184)
Net operating facilities 1,709,572 1,035,940
Mineral and resource reserves 203,409 212,929
Construction in progress:
Malitbog 142,611 146,735
Mahanagdong 113,463 76,560
Indonesian and other development 54,715 11,418
Upper Mahiao - 188,904
Salton Sea Unit IV - 108,769
Total $2,223,770 $1,781,255
4. Income Taxes:
The Company's effective tax rate continues to be less than the
statutory rate primarily due to the depletion deduction and the
generation of energy tax credits in 1996. The significant
components of the deferred tax liability are the temporary
differences between the financial reporting basis and
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
4. Income Taxes: (continued)
income tax basis of the power plants and the well and resource
development costs, and in addition, the offsetting benefits of
operating loss carryforwards and investment and geothermal energy
tax credits.
5. Net Income Per Common Share:
Fully diluted earnings per common share assumes the conversion at
the beginning of the year of the convertible debt into 3,529
common shares at a conversion price of $18.375 per share, the
conversion at the beginning of the year of the convertible
subordinated debentures into 4,444 common shares at a conversion
price of $22.50 per share, the conversion of the convertible
preferred securities of subsidiary into 3,477 common shares at a
conversion price of $29.89 per share and the exercise of all
dilutive stock options outstanding at their option prices, with
the option exercise proceeds used to repurchase shares of common
stock at the ending market price.
6.Purchase of Falcon Seaboard Resources, Inc. and Edison Mission
Energy's Partnership Interests:
On August 7, 1996 the Company completed the acquisition of Falcon
Seaboard Resources, Inc. (the "Falcon Acquisition") for a cash
price of $226,000. Through the acquisition, the Company
indirectly acquired significant ownership interests in three
operating gas-fired cogeneration facilities and a related natural-
gas pipeline. The acquisition is accounted for as a purchase.
The plants are located in Texas, Pennsylvania and New York and
total 520 MW in capacity.
On April 17, 1996 the Company completed the acquisition of Edison
Mission Energy's partnership interests (the "Partnership Interest
Acquisition") in four geothermal operating facilities in
California for a cash purchase price of $70,000. The acquisition
is accounted for as a purchase.
The four projects, Vulcan, Hoch (Del Ranch), Leathers and Elmore,
are located in the Imperial Valley of California. The Company
operates the facilities and sells power to Southern California
Edison ("Edison") under long-term SO4 contracts. Prior to this
transaction, the Company was a 50% owner of these facilities.
The Partnership Interest Acquisition results in CalEnergy owning
an additional 74 net MW of generating capacity.
Unaudited proforma combined revenue, net income and primary
earnings per share of the Company, Falcon Acquisition and the
Partnership Interest Acquisition (including the issuance of
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
6. Purchase of Falcon Seaboard Resources, Inc. and Edison
Mission Energy's Partnership Interest: (continued)
Salton Sea Funding Corporation Senior Secured Series D Notes and
Series E Bonds described in Note 8) for the nine months ended
September 30, 1996 as if the acquisition had occurred at the
beginning of the periods presented were $455,328, $74,499 and
$1.35, respectively, compared to $430,692, $59,049 and $1.12 for
the same period last year.
7. Conversion of Debt to Equity:
On September 20, 1996, the Company converted the $64,850
convertible debt and associated accrued interest into 3,620
common shares at a conversion price of $18.375 per share. Also
in September, the Company converted $26,245 of convertible
subordinated debentures into 1,166 common shares at a conversion
price of $22.50 per share. Substantially all of the remaining
$73,755 convertible subordinated debentures converted into 3,277
common shares in October, 1996.
8. Issuance of Convertible Preferred Securities:
On April 12, 1996, CalEnergy Capital Trust, a special purpose
Delaware business trust organized by the Company (the "Trust"),
completed a private placement (with certain shelf registration
rights) of $100,000 of convertible preferred securities
("TIDES"). In addition, an option to purchase an additional 78.6
TIDES, or $3,930, was exercised by the underwriters to cover over-
allotments.
The Trust has issued 2,078.6 of 6 1/4% TIDES with a liquidation
preference of fifty dollars each. The Company owns all of the
common securities of the Trust. The TIDES and the common
securities represent undivided beneficial ownership interests in
the Trust. The assets of the Trust consist solely of the
Company's 6 1/4% Convertible Junior Subordinated Debentures due
2016 in an outstanding aggregate principal amount of $103,930
("Junior Debentures"). Each TIDES will be convertible at the
option of the holder thereof at any time into 1.6728 shares of
CalEnergy Common Stock (equivalent to a conversion price of
$29.89 per share of the Company's Common Stock), subject to
customary anti-dilution adjustments.
Until converted into the Company's Common Stock, the TIDES will
have no voting rights with respect to the Company and, except
under certain limited circumstances, will have no voting rights
with respect to the Trust. Distributions on the TIDES (and
Junior Debentures) are cumulative, accrue from the date of
initial issuance and are payable quarterly in arrears, commencing
June 15, 1996. The Junior Debentures are subordinated in right
of payment to all senior indebtedness of the Company and the
Junior Debentures are subject to certain covenants, events of
default and optional and mandatory redemption provisions, all as
described in the Junior Debenture Indenture.
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
9. Debt Offerings:
On September 20, 1996 the Company completed a sale to
institutional investors of $225,000 aggregate principal amount of
9 1/2% Senior Notes due 2006. The proceeds of the offering are
available to make equity investments in future domestic and
international energy projects, to fund possible project or
company acquisitions, and for other general corporate purposes.
On June 20, 1996 the Salton Sea Funding Corporation, a wholly
owned indirect subsidiary of the Company (the "Funding
Corporation"), completed a sale to institutional investors of
$135,000 aggregate amount of Senior Secured Series D Notes and
Series E Bonds ("the Notes and Bonds") which are nonrecourse to
the Company. The Funding Corporation Notes and Bonds which
mature in May 2000 and May 2011 respectively, bear an interest
rate of 7.02% and 8.30% respectively. The Funding Corporation
Notes and Bonds are rated BBB- by Standard & Poor's Corporation
and Baa3 by Moody's Investors Service, Inc. The proceeds of the
offering were used by the Funding Corporation to refinance
$96,584 of existing project level indebtedness, to fund a portion
of the purchase price for the Partnership Interest Acquisition
and for certain capital improvements at the Imperial Valley
Project.
10. Revolving Credit Facility:
On July 8, 1996 the Company obtained a $100,000 three year
revolving credit facility. The facility is unsecured and is
available to fund general operating capital requirements and
finance future business opportunities.
11. Subsequent Events:
On October 28, 1996 the Company announced that CE Electric UK
plc, which is indirectly owned on a 70% basis by the Company and
a 30% basis by Peter Kiewit Sons', Inc., has offered to pay
approximately $1,225,000 cash in an unsolicited offer to acquire
all of the ordinary shares and preference shares of Northern
Electric plc ("Northern"), a regional electricity distribution
and supply company in the United Kingdom. The offer is not being
made, directly or indirectly, in or into the United States or by
use of the mails or any means or instrumentality (including,
without limitation, facsimile transmission, telex and telephone)
of interstate or foreign commerce of, or any facilities of a
national securities exchange of, the United States and the offer
cannot be accepted by any such use, means, instrumentality or
from within the United States.
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
11. Subsequent Events: (continued)
Northern is one of the twelve UK regional electricity companies
which came into existence as a result of the restructuring and
subsequent privatization of the U.K. electricity industry in
1990. Its main business is the distribution and supply of
electricity to approximately 1.5 million customers in the North
East of England. For its fiscal year ended March 31, 1996,
Northern had a profit before tax of approximately $241,000 on
revenues of approximately $1,440,000. As of November 8, 1996, CE
Electric UK plc owned approximately 29.5% of the outstanding
ordinary shares of Northern.
On October 4, 1996 the Company closed the $120,000 project
financing for the Dieng Unit 1 55 net MW geothermal project
located in Indonesia. Dieng Unit 1 is already under construction
and is currently expected to begin commercial operation by late
1997.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
________________________________
Results of Operations:
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
condition and results of operations during the periods included
in the accompanying statements of operations.
For purposes of consistent financial presentation, plant capacity
factors for Navy I, Navy II, and BLM (collectively the Coso
Project) are based upon a capacity amount of 80 net MW for each
plant. Plant capacity factors for Vulcan, Hoch (Del Ranch),
Elmore and Leathers (collectively the Partnership Project) are
based on capacity amounts of 34, 38, 38, and 38 net MW
respectively, and for Salton Sea I, Salton Sea II, Salton Sea III
and Salton Sea IV plants (collectively the Salton Sea Project)
are based on capacity amounts of 10, 20, 49.8 and 39.6 net MW
respectively (the Partnership Project and the Salton Sea Project
are collectively referred to as the Imperial Valley Project).
Plant capacity factors for Saranac, Power Resources, Inc., NorCon
and Yuma (collectively the Gas Plants) are based on capacity
amounts of 240, 200, 80, and 50 net MW, respectively. Each plant
possesses an operating margin which periodically allows for
production in excess of the amount listed above. Utilization of
this operating margin is based upon a variety of factors and can
be expected to vary between calendar quarters, under normal
operating conditions.
The Coso Project and the Partnership Project sell all electricity
generated by the respective plants pursuant to seven long-term
SO4 Agreements between the projects and Southern California
Edison Company ("Edison"). These SO4 Agreements provide for
capacity payments, capacity bonus payments and energy payments.
Edison makes fixed annual capacity payments to the projects, and
to the extent that capacity factors exceed certain benchmarks is
required to make capacity bonus payments. The price for capacity
and capacity bonus payments is fixed for the life of the SO4
Agreements and the capacity payment is significantly higher in
the months of June through September. Energy is sold at
increasing fixed rates for the first ten years of each contract
and thereafter at Edison's Avoided Cost of Energy.
The fixed energy price periods of the Coso Project SO4 Agreements
extend until at least August 1997, March 1999 and January 2000
for each of the units operated by the Navy I, BLM and Navy II
Partnerships, respectively.
The fixed energy price periods of the Partnership Project SO4
Agreements extended until February 1996 for the Vulcan
Partnership and extend until December 1998, December 1998, and
December 1999 for each of the Hoch (Del Ranch), Elmore and
Leathers Partnerships, respectively.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Results of Operations: (continued)
The Company's SO4 Agreements provide for scheduled price period
energy rates ranging from 12.7 cents per kWh in 1996 to 15.6 cents
per kWh in 1999.
The Salton Sea I Project sells electricity to Edison pursuant to
a 30 year negotiated power purchase agreement, as amended (the
"Salton Sea I PPA"), which provides for capacity and energy
payments. The initial contract capacity and contract nameplate
are each 10 MW. The energy payment is calculated using a Base
Price which is subject to quarterly adjustments based on a basket
of indices. The time period weighted average energy payment for
Unit 1 was 4.99 cents per kWh during 1995. As the Salton Sea I PPA
is not an SO4 Agreement, the energy payments do not revert to
Edison's Avoided Cost of Energy.
The Salton Sea II and Salton Sea III Projects sell electricity to
Edison pursuant to 30 year modified SO4 Agreements. The contract
capacities and contract nameplates are 15 MW and 20 MW for Salton
Sea II and 47.5 MW and 49.8 MW for Salton Sea III, respectively.
The contracts require Edison to make capacity payments, capacity
bonus payments and energy payments. The price for contract
capacity and contract capacity bonus payments is fixed for the
life of the modified SO4 Agreements. The energy payments for the
first ten year period, which expires April 4, 2000, are levelized
at a time period weighted average of 10.6 cents per kWh and 9.8
cents per kWh for Salton Sea II and Salton Sea III, respectively.
Thereafter, the monthly energy payments will be at Edison's
Avoided Cost of Energy. For Salton Sea II only, Edison is
entitled to receive, at no cost, 5% of all energy delivered in
excess of 80% of contract capacity for the period April 1, 1994
through September 30, 2004.
The Salton Sea IV Project sells electricity to Edison pursuant to
a modified SO4 agreement which provides for contract capacity
payments on 34 MW of capacity at two different rates based on the
respective contract capacities deemed attributable to the
original Salton Sea PPA option (20 MW) and to the original Fish
Lake PPA (14 MW). The capacity payment price for the 20 MW
portion adjusts quarterly based upon specified indices and the
capacity payment price for the 14 MW portion is a fixed levelized
rate. The energy payment (for deliveries up to a rate of 39.6
MW) is at a fixed price for 55.6% of the total energy delivered
by Salton Sea IV and is based on an energy payment schedule for
44.4% of the total energy delivered by Salton Sea IV. The
contract has a 30-year term but Edison is not required to
purchase the 20 MW of capacity and energy originally attributable
to the Salton Sea I PPA option after September 30, 2017, the
original termination date of the Salton Sea I PPA.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Results of Operations: (continued)
For the nine months ended September 30, 1996, Edison's average
Avoided Cost of Energy was 2.3 cents per kWh which is substantially
below the contract energy prices earned for the nine months ended
September 30, 1996. Estimates of Edison's future Avoided Cost of
Energy vary substantially from year to year. The Company cannot
predict the likely level of Avoided Cost of Energy prices under
the SO4 Agreements and the modified SO4 Agreements at the
expiration of the scheduled payment periods. The revenues
generated by each of the projects operating under SO4 Agreements
could decline significantly after the expiration of the
respective scheduled energy payment periods.
The Upper Mahiao project was deemed complete in June, 1996 and
began receiving capacity payments pursuant to the Upper Mahiao
Energy Conversion Agreement ("ECA") in July of 1996. The project
is structured as a ten year build-own-operate-transfer ("BOOT"),
in which the Company's subsidiary CE Cebu Geothermal Power
Company, Inc. ("CE Cebu"), the project company, was responsible
for implementing construction of the geothermal power plant and,
as owner, for providing operations and maintenance during the ten
year BOOT period. The electricity generated by the Upper Mahiao
geothermal power plant is sold to the PNOC - Energy Development
Corporation ("PNOC-EDC"), which is also responsible for supplying
the facility with the geothermal steam. After the ten year
cooperation period, and the recovery by the Company of its
capital investment plus incremental return, the plant will be
transferred to PNOC-EDC at no cost.
PNOC-EDC is obligated to pay for electric capacity that is
nominated each year by CE Cebu, irrespective of whether PNOC-EDC
is willing or able to accept delivery of such capacity. PNOC-EDC
pays to CE Cebu a fee (the "Capacity Fee") based on the plant
capacity nominated to PNOC-EDC in any year (which, at the plant's
design capacity, is approximately 95% of total contract revenues)
and a fee (the "Energy Fee") based on the electricity actually
delivered to PNOC-EDC (approximately 5% of total contract
revenues). The Capacity Fee serves to recover the capital costs
of the project, to recover fixed operating costs and to cover
return on investment. The Energy Fee is designed to cover all
variable operating and maintenance costs of the power plant.
Payments under the Upper Mahiao ECA are denominated in U.S.
dollars, or computed in U.S. dollars and paid in Philippine pesos
at the then-current exchange rate, except for the Energy Fee,
which will be used to pay Philippine peso-denominated expenses.
Significant portions of the Capacity Fee and Energy Fee are
indexed to U.S. and Philippine inflation rates, respectively.
PNOC-EDC's payment requirements, and its other obligations under
the Upper Mahiao ECA are supported by the Government of the
Philippines through a performance undertaking.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Results of Operations: (continued)
Unit I of the Malitbog project was deemed complete in July 1996.
The Malitbog Project is being built, owned and operated by
Visayas Geothermal Power Company ("VGPC"), a Philippine general
partnership that is wholly owned, indirectly, by the Company.
VGPC is selling 100% of its capacity on substantially the same
basis as described above for the Upper Mahiao Project to PNOC-
EDC, which will in turn sell the power to the National Power
Corporation of the Philippines.
As with the Upper Mahiao project, the Malitbog project is
structured as a ten year BOOT, in which the Company will be
responsible for implementing construction of the geothermal power
plant and, as owner, for providing operations and maintenance for
the ten year BOOT period. After a ten year cooperation period,
and the recovery by the Company of its capital investment plus
incremental return, the plant will be transferred to PNOC-EDC at
no cost.
The Saranac Project sells electricity to New York State Electric
& Gas pursuant to a 15 year negotiated power purchase agreement
(the "Saranac PPA"), which provides for capacity and energy
payments. Capacity payments, which in 1996 total 2.1 cents per kWh,
are received for electricity produced during "peak hours" as
defined in the Saranac PPA and escalate at approximately 4.1%
annually for the remaining term of the contract. Energy payments,
which average 6.3 cents per kWh in 1996, escalate at approximately
4.4% annually for the remaining term of the contract. The
Saranac PPA expires in June of 2009.
The Power Resources Project sells electricity to Texas Utilities
Electric Company ("TUEC") pursuant to a 15 year negotiated power
purchase agreement (the "Power Resources PPA"), which provides
for capacity and energy payments. Capacity payments and energy
payments, which in 1996 are $2,930 per month and 2.86 cents per kWh,
respectively, escalate at 3.5% annually for the remaining term of
the contract. The Power Resources PPA expires in September 2003.
The NorCon Project sells electricity to Niagara Mohawk Power
Corporation ("Niagara") pursuant to a 25 year negotiated power
purchase agreement (the "NorCon PPA") which provides for energy
payments calculated pursuant to an adjusting formula based on
Niagara's ongoing Tariff Avoided Cost and the contractual Long-
Run Avoided Cost. The NorCon PPA term extends through December
2017. The Company and Niagara are currently engaged in
discussions regarding a potential restructuring or buyout and
termination of the NorCon PPA.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Results of Operations: (continued)
The Yuma Project sells electricity to San Diego Gas & Electric
Company ("SDG&E") under an existing 30-year power purchase
contract. The energy is sold at SDG&E's Avoided Cost of Energy
and the capacity is sold to SDG&E at a fixed price for the life
of the power purchase contract. The contract term extends
through May 2024.
The following operating data represent the aggregate capacity and
electricity production of the Coso Project:
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
Overall capacity factor 111.5% 112.2% 109.9% 109.5%
kWh produced
(in thousands) 590,600 594,700 1,734,600 1,721,600
Installed capacity
NMW (average) 240 240 240 240
The capacity factor for the three and nine months ended September
30, 1996 compared to the same periods in 1995 reflects the
relatively consistent production at all three plants.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Results of Operations: (continued)
The following operating data represent the aggregate capacity and
electricity production of the Partnership Project:
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
Overall capacity Factor106.4% 108.0% 104.4% 106.0%
kWh produced
(in thousands) 347,700 352,970 1,016,300 1,027,620
Installed capacity
NMW (average) 148 148 148 148
The overall capacity factor for the Partnership Project decreased
for the third quarter of 1996 compared to the third quarter of
1995 due to decreased production at the Vulcan plant. The
overall capacity factor decreased for the nine months ended
September 30, 1996 compared to the same period in 1995 primarily
due to scheduled turbine overhauls at Leathers and Elmore in the
first quarter of 1996.
The following operating data represent the aggregate capacity and
electricity production of the Salton Sea Project:
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
Overall capacity factor 97.9% 93.9% 89.6% 86.3%
kWh produced
(in thousands) 258,000 165,400 573,900 451,400
Installed capacity NMW
(weighted average)* 119.4 79.8 97.4 79.8
*The nine months ended September 30, 1996 is a weighted average
for the commencement of operations at the Salton Sea Unit IV
project.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Results of Operations: (continued)
The overall capacity factor for the Salton Sea Project has
increased for the three and nine months ended September 30, 1996
compared to the same periods in 1995 primarily as a result of the
commencement of operations at the Salton Sea IV project.
The following operating data represents the aggregate capacity
and electricity production of the Gas Plants:
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
Overall capacity factor 87.1% 88.8% 88.7% 88.3%
kWh produced
(in thousands) 1,095,982 1,117,481 3,323,287 3,309,260
Installed capacity NMW 570 570 570 570
The capacity factor of the Gas Plants reflects certain
contractual curtailments. The capacity factors adjusted for
these contractual curtailments are 100.7% and 100.1% for the
three and nine months ended September 30, 1996 and 100.5% and
96.9% for the three and nine months ended September 30, 1995.
Roosevelt Hot Springs steam field supplied 100% of customer power
plant steam requirements in the third quarter of 1996. The
Company has an approximate 70% interest in the Roosevelt Hot
Springs field. The Desert Peak power plant operated at 81% of
its nine net megawatt capacity in the third quarter of 1996.
Sales of electricity and steam increased in the third quarter of
1996 to $165,487 from $102,423 for the same period in 1995, a
61.6% increase. For the nine month period ended September 30,
1996, sales of electricity and steam increased to $346,166 from
$257,157 in 1995, a 34.6% increase. These increases are primarily
the result of the Partnership Interest Acquisition, the Falcon
Acquisition, revenue from the Philippine facilities and the
commencement of commercial operations at the Salton Sea Unit IV
Project.
Income on equity investments reflects the Company's share of
equity income primarily from the Saranac Project.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Result of Operations: (continued)
Royalty income decreased in the third quarter of 1996 to $980
from $5,372 in the same period in 1995, an 81.8% decrease. For
the nine months ended September 30, 1996 royalty income decreased
to $5,995 from $14,201, a 57.8% decrease. These decreases are a
result of the Company no longer recognizing royalty income
received from the Partnership Project as the Partnership Project
is now owned 100% by the Company due to the Partnership Interest
Acquisition. The Company continues to receive royalty income
from other projects not owned by the Company.
Interest and other income decreased in the third quarter of 1996
to $9,583 from $11,922 for the same period in 1995, a 19.6%
decrease. For the nine months ended September 30, 1996, interest
and other income decreased to $30,039 from $32,140, a 6.5%
decrease. These decreases are primarily a result of the Company
no longer recognizing management services income received from
the Partnership Project as the Partnership Project is now owned
100% by the Company due to the Partnership Interest Acquisition.
The Company's expenses as a percentage of sales of electricity
and steam were as follows:
Three Months Ended Nine Months Ended
September 30 September 30
1996* 1995 1996* 1995
Plant operations (net of the
Company's management fees) 19.4% 20.4% 20.9% 22.4%
General and administration 3.9% 4.5% 4.6% 6.2%
Royalties 4.8% 7.7% 5.3% 7.1%
Depreciation and amortization 22.1% 16.8% 23.2% 18.3%
Interest (less amounts
capitalized) 22.4% 27.1% 24.6% 32.2%
72.6% 76.5% 78.6% 86.2%
*Excludes loss on equity investment in Casecnan (currently in
construction) and dividends on convertible preferred securities
of subsidiary.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Result of Operations: (continued)
Plant operations increased in the third quarter of 1996 to
$32,159 from $22,458 for the same period in 1995, a 43.2%
increase. For the nine months ended September 30, 1996, plant
operations increased to $73,546 from $61,331 in 1995, a 19.9%
increase. These increases are primarily due to the Partnership
Interest Acquisition, the Falcon Acquisition and the commencement
of operations at the Salton Sea Unit IV Project.
General and administration costs increased in the third quarter
of 1996 to $6,518 from $4,600 for the same period in 1995, a
41.7% increase. For the nine months ended September 30, 1996,
corporate administration marginally decreased to $15,814 from
$15,877 in 1995, a .4% decrease. General and administration costs
continue to decrease as a percentage of revenue.
Royalty costs marginally increased in the third quarter of 1996
to $8,023 from $7,913 for the same period in 1995, a 1.4%
increase. For the nine months ended September 30, 1996, royalty
expense marginally increased to $18,294 from $18,249 in 1995, a
.2% increase.
Depreciation and amortization increased in the third quarter of
1996 to $36,587 from $17,210 for the same period in 1995, a
112.6% increase. For the nine months ended September 30, 1996,
depreciation and amortization increased to $80,300 from $47,034
in 1995, a 70.7% increase. These increases are primarily due to
the amortization of the allocated purchase price and goodwill
related to the Magma, Partnership Interest and Falcon
acquisitions, the Philippine projects and the commencement of
operations at the Salton Sea Unit IV Project.
Loss on equity investment in Casecnan reflects the Company's
interim construction period share of interest expense in excess
of capitalized interest and interest income at the Casecnan
project, which is currently in construction.
Interest expense, less amounts capitalized, increased in the
third quarter of 1996 to $37,066 from $27,717 for the same period
in 1995, a 33.7% increase. For the nine months ended September
30, 1996, interest expense, less amounts capitalized increased to
$85,062 from $82,891 in 1995, a 2.6% increase. These increases
are due to greater average outstanding debt offset by the
increase in capitalized interest on the Company's international
and domestic projects in construction.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Results of Operations: (continued)
Dividends on convertible preferred securities reflect financial
expense related to these securities which were issued in April,
1996.
The provision for income taxes increased in the third quarter of
1996 to $18,325 from $12,457, for the same period in 1995, a
47.1% increase. For the nine months ended September 30, 1996,
provisions for income taxes increased to $33,862 from $24,245 in
1995, a 39.7% increase. These increases are due to higher income
before taxes and a marginal increase in the effective tax rate.
Net income available for common shareholders increased in the
third quarter of 1996 to $37,554 or $.67 per share from $27,362
or $.52 per share for the same period in 1995. For the nine
months ended September 30, 1996, net income available to common
shareholders increased to $71,287 or $1.29 per share from $49,786
or $1.02 per share.
Liquidity and Capital Resources:
The Company's cash and investments were $334,335 at September 30,
1996 as compared to $72,114 at December 31, 1995. In addition,
the Company's share of joint venture cash and investments
retained in project control accounts at September 30, 1996 was
$37,092. At December 31, 1995 the Company's share of the Coso
Project and the Partnership Project cash and investments retained
in project control accounts was $77,590. Distributions out of the
Coso project control accounts are made monthly to the Company for
operations and maintenance and capital costs and semiannually to
each Coso Project partner for profit sharing under a prescribed
calculation subject to mutual agreement by the partners. The
Company recorded separately restricted cash of $94,392 and
$149,227 at September 30, 1996 and December 31, 1995,
respectively. The restricted cash balance as of September 30,
1996 is comprised primarily of amounts deposited in restricted
accounts from which the Company will source its equity
contribution requirements relating to the Mahanagdong Project,
fund certain capital improvements at the Imperial Valley Project,
and the Company's proportionate share of Coso Project, Power
Resources, Upper Mahiao and Malitbog cash reserves for debt
service reserve funds. Also, the Company had $2,864 and $34,190
of short term investments as of September 30, 1996 and December
31, 1995, respectively.
On October 28, 1996 the Company announced that CE Electric UK
plc, which is indirectly owned on a 70% basis by the Company and
a 30% basis by Peter Kiewit Sons', Inc., has offered to pay
approximately $1,225,000 cash in an unsolicited offer to acquire
all of the ordinary shares and preference shares of Northern
Electric plc ("Northern"), a regional electricity distribution
and supply company in the United Kingdom. The proposed purchase
price would be financed from existing cash and the proceeds from
debt financing.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Liquidity and Capital Resources: (continued)
Northern is one of the twelve UK regional electricity companies
which came into existence as a result of the restructuring and
subsequent privatization of the U.K. electricity industry in
1990. Its main business is the distribution and supply of
electricity to approximately 1.5 million customers in the North
East of England. For its fiscal year ended March 31, 1996,
Northern had a profit before tax of approximately $241,000 on
revenues of approximately $1,440,000. The offer is not being
made, directly or indirectly, in or into the United States or by
use of the mails or any means or instrumentality (including,
without limitation, facsimile transmission, telex and telephone)
of interstate or foreign commerce of, or any facilities of a
national securities exchange of, the United States and the offer
cannot be accepted by any such use, means, instrumentality or
from within the United States. As of November 8, 1996, CE
Electric UK plc owned approximately 29.5% of the outstanding
ordinary shares of Northern.
On October 4, 1996 the Company closed the $120,000 project
financing for the Dieng Unit 1 55 net MW geothermal project
located in Indonesia. Dieng Unit 1 is already under construction
and is currently expected to begin commercial operation by late
1997.
On September 20, 1996 the Company completed a sale to
institutional investors of $225,000 aggregate principal amount of
9 1/2% Senior Notes due 2006. The proceeds of the offering are
available to make equity investments in future domestic and
international energy projects, to fund possible project or
company acquisitions, for the repayment of debt and for other
general corporate purposes.
Also September 20, 1996, the Company converted the $64,850
convertible debt and associated accrued interest into 3,620
common shares at a conversion price of $18,375 per share. Also
in September, the Company converted $26,245 of convertible
subordinated debentures into 1,166 common shares at a conversion
price of $22.50 per share. Substantially all of the remaining
$73,755 convertible subordinated debentures converted into 3,277
common shares in October, 1996.
On July 8, 1996 the Company obtained a $100,000 three year
revolving credit facility of which the Company has drawn $95,000
as of October 31, 1996. The facility is unsecured and is
available to fund general operating capital requirements and
finance future business opportunities.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Liquidity and Capital Resources: (continued)
On June 20, 1996 the Salton Sea Funding Corporation, a wholly
owned indirect subsidiary of the Company, (the "Funding
Corporation"), completed a sale to institutional investors of
$135,000 aggregate amount of Senior Secured Notes and Bonds ("the
Notes and Bonds") which are nonrecourse to the Company. The
Funding Corporation Notes and Bonds which mature in May 2000 and
May 2011 respectively, bear an interest rate of 7.02% and 8.30%
respectively. The Funding Corporation Notes and Bonds are rated
BBB- by Standard & Poor's Corporation and Baa3 by Moody's
Investors Service, Inc. The proceeds of the offering were used
by Funding Corporation to refinance $96,584 of existing project
level indebtedness at the Partnership Project, to fund a portion
of the Partnership Interest Acquisition and for certain capital
improvements at the Imperial Valley.
On April 12, 1996, CalEnergy Capital Trust, a special purpose
Delaware business trust organized by the Company (the "Trust")
completed a private placement (with certain shelf registration
rights) of $100,000 of convertible preferred securities
("TIDES"). In addition, an option to purchase an additional 78.6
TIDES, or $3,930, was exercised by the underwriters to cover over-
allotments.
The Trust has issued 2,078.6 of 6 1/4% TIDES with a liquidation
preference of fifty dollars each. The Company owns all of the
common securities of the Trust. The TIDES and the common
securities represent undivided beneficial ownership interests in
the Trust. The assets of the Trust consist solely of the
Company's 6 1/4% Convertible Junior Subordinated Debentures due
2016 in an outstanding aggregate principal amount of $103,930
("Junior Debentures"). Each TIDES will be convertible at the
option of the holder thereof at any time into 1.6728 shares of
CalEnergy Common Stock (equivalent to a conversion price of
$29.89 per share of the Company's Common Stock), subject to
customary anti-dilution adjustments. Until converted into the
Company's Common Stock, the TIDES will have no voting rights with
respect to the Company and, except under certain limited
circumstances, will have no voting rights with respect to the
Trust. Distributions on the TIDES (and Junior Debentures) are
cumulative, accrue from the date of initial issuance and are
payable quarterly in arrears, commencing June 15, 1996. The
Junior Debentures are subordinated in right of payment to all
senior indebtedness of the Company and the Junior Debentures are
subject to certain covenants, events of default and optional and
mandatory redemption provisions, all as described in the Junior
Debenture Indenture.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Liquidity and Capital Resources: (continued)
In 1995, the Company commenced development of and obtained
financing for the Casecnan Project, a multipurpose irrigation and
hydroelectric power facility with a rated capacity of
approximately 150 net MW located on the island of Luzon in the
Philippines. The total project cost for the facility is
approximately $495,000. The current capital structure consists
of term loans of $371,500 and $123,836 in equity contributions.
The Company's portion of the contributed equity is approximately
$61,918. The Overseas Private Investment Corporation ("OPIC") is
providing political risk insurance on the equity investment.
The project is structured as a 20 year build-own-operate-transfer
("BOOT"), in which the Company's indirect subsidiary CE Casecnan
Water and Energy Company, Inc., a Philippine corporation, will be
responsible as the BOOT operator. The fixed price, date-certain
turnkey contractor is Hanbo Corporation of South Korea.
In 1996, the Company signed an agreement with an international
mining company which provides for the extraction of minerals by
this Company at the Imperial Valley Project and among other
things, for the Company, at its option, to deliver power for the
mineral extraction process. The initial phase of the project
would require at least 15 MW. To date the pilot plant has
successfully produced zinc at the Company's Imperial Valley
Project. The mining company is presently completing construction
of its larger demonstration plant. If successfully developed,
the mineral extraction process will provide an environmentally
compatible and low cost minerals recovery methodology.
In August 1994, the Company closed the financing for the 165 net
MW Mahanagdong project located in the Philippines. The total
project cost for the facility is approximately $320,000. The
capital structure consists of a term loan of $240,000 and
approximately $80,000 in equity contributions. OPIC and a
consortium of international commercial lenders are providing the
construction debt financing facility. The debt provided by the
commercial lenders is insured against political risk by the Ex-Im
Bank. Ten year term debt financing (which will replace the
construction debt) will be provided by Ex-Im Bank and by OPIC.
The Mahanagdong project has commenced construction and as of
September 30, 1996, the Company's proportionate share of draws on
the construction loan totaled $72,272, equity investments made by
a subsidiary of the Company totaled $31,580 and advances by
subsidiaries of the Company totaled $2,899. These advances will
be repaid by draws on the construction loan. OPIC is providing
political risk insurance on the equity. The Mahanagdong project
is targeted for service in July, 1997. As with the Upper Mahiao
project, the Mahanagdong project is structured as a ten year
BOOT, in which the Company will be responsible for implementing
construction of the geothermal power plant and, as owner, for
providing operations and maintenance for the ten year BOOT
period. After a
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Liquidity and Capital Resources: (continued)
ten year cooperation period, and the recovery by the Company of
its capital investment plus incremental return, the plant will be
transferred to PNOC-EDC at no cost.
The electricity generated by the Mahanagdong project will be sold
to PNOC-EDC, on a "take or pay" basis, which is also responsible
for supplying the facility with the geothermal steam. The terms
of the Mahanagdong ECA are substantially similar to those of the
Upper Mahiao ECA. All of PNOC-EDC's obligations under the
Mahanagdong ECA are supported by the Government of the
Philippines through a performance undertaking. The Capacity Fees
are expected to be approximately 97% of total revenues at the
design capacity levels and the Energy Fees are expected to be
approximately 3% of such total revenues. The Mahanagdong project
will be built, owned and operated by CE Luzon Geothermal Power
Company, a Philippine corporation, that is expected to be owned
post-completion as follows: 45% by the Company, 45% by Kiewit,
and up to 10% by another industrial company. The turnkey
contractor consortium consists of Kiewit Construction Group, Inc.
(with an 80% interest) and CE Holt Co., a wholly owned subsidiary
of the Company (with a 20% interest).
In December 1994, financing was closed and construction commenced
on the Malitbog Project, a 216 net MW geothermal project, located
on the island of Leyte. The Malitbog Project will be built,
owned and operated by Visayas Geothermal Power Company ("VGPC"),
a Philippine general partnership that is wholly owned,
indirectly, by the Company. VGPC will sell 100% of its capacity
on substantially the same basis as described above for the Upper
Mahiao Project to PNOC-EDC, which will in turn sell the power to
the National Power Corporation of the Philippines.
The Malitbog Project has a total project cost of approximately
$280,000, including interest during construction and project
contingency costs. A consortium of international lenders and
OPIC have provided a total of $210,000 of construction and term
loan facilities, the $135,000 international commercial bank
portion of which is supported by political risk insurance from
OPIC. As of September 30, 1996, draws on the construction loan
totalled $132,242, the equity investments made by subsidiaries of
the Company totalled $70,000 and advances by subsidiaries of the
Company totalled $2,694. The advances will be repaid by draws on
the construction loan. The Company's equity contribution to VGPC
of $70,000 is covered by political risk insurance from OPIC and
the Multilateral Investment Guarantee Agency ("MIGA"). As with
the Upper Mahiao project, the Malitbog project is structured as a
ten year BOOT, in which the Company will be responsible for
implementing construction of the geothermal power plant and, as
owner, for providing operations and maintenance for the ten year
BOOT period. After a ten year cooperation period, and the
recovery by the Company of its capital investment plus
incremental return, the plant will be transferred to PNOC-EDC at
no cost.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Liquidity and Capital Resources: (continued)
The Malitbog Project is being constructed by Sumitomo Corporation
pursuant to a fixed-price, date-certain, turnkey supply and
construction contract. Unit 1 was deemed complete in late July
1996 and the Company has commenced receiving capacity payments
under the contract. Commercial operation of Unit 2 and Unit 3 is
scheduled to commence in July 1997.
Magma is seeking new long-term final SO4 power purchase
agreements in southern California through the bidding process
adopted by the CPUC under its 1992 Biennial Resource Plan Update
("BRPU"). In its 1992 BRPU, the CPUC cited the need for an
additional 9,600 MW of power production through 1999 among
California's three investor-owned utilities, Edison, SDG&E and
Pacific Gas and Electric Company (collectively, the "IOUs"). Of
this amount, 275 MW was set aside for bidding by independent
power producers (such as Magma) utilizing renewable resources.
Pursuant to an order of the CPUC dated June 22, 1994 (confirmed
on December 21, 1994), Magma was awarded a total of 163 MW for
sale to Edison (69 net MW) and SDG&E (94 net MW), with in-service
dates in 1997 and 1998. However, the IOUs have to date
challenged and may continue to challenge the order and there can
be no assurance that power sales contracts will be executed or
that any such projects will be completed.
In light of the regulatory uncertainty concerning the BRPU awards
resulting from such IOU challenges, in March 1995 Magma entered
into a settlement agreement with Edison relating to the 69 net MW
of capacity awarded to Magma as a winning bidder in the BRPU
solicitation. The agreement (which is subject to CPUC approval)
provides for three lump sum termination payments in lieu of
signing a power sales contract with Edison for the 69 net MW of
BRPU capacity. The amount of the termination payments is subject
to a confidentiality agreement but provides Edison's ratepayers
with very significant savings when compared to payments that
would otherwise be made to Magma over the life of the proposed
BRPU power sales contract.
The agreement also provides Edison with an option, which can be
exercised at any time prior to February 1, 2002, to negotiate a
power sales contract for 69 net MW of geothermal capacity and
energy on commercially reasonable prices and terms, without
giving effect to termination payments previously paid.
The Company is actively seeking to develop, construct, own and
operate new power projects and infrastructure projects utilizing
geothermal and other technologies, both domestically and
internationally, the completion of any of which is subject to
substantial risk. Development can require the Company to expend
significant sums for preliminary engineering, field development,
permitting, legal and other financing related costs. The
Company's future growth is dependent, in large part, upon the
demand for significant amounts of additional electrical
generating capacity and the Company's ability to obtain contracts
to supply portions of this capacity. There can be no
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Liquidity and Capital Resources: (continued)
assurance that development, financing or construction efforts on
any particular project, or the Company's efforts generally, will
be successful.
The Company believes the international independent power market
holds the majority of new opportunities for financially
attractive private power development in the next several years.
The financing, construction and development of projects outside
the United States entail significant political and financial
risks (including, without limitation, uncertainties associated
with first time privatization efforts in the countries involved,
currency exchange rate fluctuations, currency repatriation
restrictions, political instability, civil unrest and
expropriation) and other structuring issues that have the
potential to cause substantial delays or material impairment of
value to the project being developed, which the Company may not
be fully capable of insuring against. The uncertainty of the
legal environment in certain foreign countries in which the
Company may develop or acquire projects could make it more
difficult for the Company to enforce its rights under agreements
relating to such projects. In addition, the laws and regulations
of certain countries may limit the ability of the Company to
hold a majority interest in some of the projects that it may
develop or acquire. The Company's international projects may, in
certain cases, be terminated by a government.
Projects in operation, construction and development are subject
to a number of uncertainties more specifically described in the
Company's Form 8-K, dated August 21, 1996, filed with the
Securities Exchange Commission.
CALENERGY COMPANY, INC.
PART II - OTHER INFORMATION
Item 1 - Legal proceedings.
As of September 30, 1996, there are no material
outstanding lawsuits.
Item 2 - Changes in Securities.
Not applicable.
Item 3 - Defaults on Senior Securities.
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 11 - Calculation of earnings per share.
Exhibit 15 - Awareness letter of Independent Accountants.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter ended September 30, 1996, the Company
filed the following:
(i) Form 8-K/A dated July 1, 1996 amending
form 8-K dated April 17, 1996 and includes the
financial statements thereto.
(ii) Form 8-K dated July 8, 1996 announcing
the definitive Purchase Agreement between CE/FS
Holding Company, Inc. and the stockholders of
Falcon Seaboard Resources Inc..
(iii) Form 8-K dated August 7, 1996
announcing the Falcon Acquisition.
(iv) Form 8-K dated August 21, 1996
announcing the Registrant is filing cautionary
statements identifying important factors that
could cause the Registrant's actual results to
differ materially from those projected in forward-
looking statements.
(v) Form 8-K/A dated August 27, 1996
amending the 8-K dated August 7, 1996 and includes
the financial statements thereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CALENERGY COMPANY, INC.
Date: November 14, 1996 /s/Gregory E. Abel
Gregory E. Abel
Executive Vice President and
Chief Accounting Officer
/s/John G. Sylvia
John G. Sylvia
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit
No.
10.1 Agreement between New York State Electric & Gas
Corporation and Saranac Energy Company, Inc. dated as of
April 27, 1990 and Amendment No. 1 to Power Purchase
Agreement between New York State Electric & Gas
Corporation and Saranac Energy Company, Inc. dated
August 29, 1991.
10.2 Second Amended and Restated Agreement of Limited
Partnership of Saranac Power Partners, L.P. by and among
Saranac Energy Company, Inc. general partners and TPC
Saranac Partners One, Inc. TPC Saranac Partners Two,
Inc. and Saranac Energy Company, Inc., as Limited
Partners, dated as of May 13, 1994 and First Amendment
to Second Amended and Restated Agreement of Limited
Partnership by and among Saranac Energy Company, Inc.,
TPC Saranac Partner One, Inc., TPC Saranac Partner Two,
Inc. and General Electric Capital Corporation, dated as
of September 30, 1994.
11.0 Calculation of Earnings Per Share
15.0 Awareness Letter of Independent Accountants
27.0 Financial Data Schedule
AGREEMENT BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION
AND
SARANAC ENERGY COMPANY, INC.
Dated as of April 27, 1990
TABLE OF CONTENTS
Article Page
I. Representations, Warranties and Covenants 2
II. Term 7
III. Delivery and Purchase 8
IV. Payment 9
V. Price For Electricity Sold To Buyer 11
VI. Interest 11
VII. Metering and Telemetry 12
VIII. Procedures for Interconnection and Installation of
Interconnection Facilities 17
IX. Rearrangement, Relocation, Retirement or
Abandonment of Buyer's Facilities 22
X. Suspension of Buyer's Obligations and Disconnection
of Plant from Buyer's System 25
XI. Coordination of Plant and System Maintenance 28
XII. Purchase of Plant; Extension of Agreement 30
XIII. Breach; Cure; Dispute Resolution 31
XIV. Indemnification and Insurance 42
XV. Access to Seller's Property 44
XVI. Force Majeure 45
XVII. Assignment or Transfer 48
XVIII.Approval of Agreement 49
XIX. Amendments, Approval of Amendments 50
XX. Applicable Avoided Cost Payments Upon Termination 52
XXI. Miscellaneous Provisions 53
Exhibit A -Site Plan, Project Description, and Wheeling Charge
Exhibit B -Rates and Related Provisions
Exhibit C -Assignment and Assumption Agreement
Exhibit D -Assignee Opinion of Counsel
Exhibit E -Parent Guarantee
Exhibit F -Opinion of Seller's Counsel
Exhibit G -Opinion of Buyer's Counsel
Exhibit H -Calculation of Avoided Cost
AGREEMENT
WHEREAS, New York State Electric & Gas Corporation
("Buyer"), is a corporation organized under the Transportation
Corporations Law of the State of New York and is authorized by
its Certificate of Incorporation and by the State of New York to
engage in the production, transmission, sale and distribution of
electricity for heat, light and power to the public; and
WHEREAS, Saranac Energy Company, Inc., (or its Assignee
pursuant to Article XVII of this Agreement) ("Seller"), proposes
to construct, own, and operate a natural gas fired cogeneration
plant and appurtenant facilities located in Clinton County, New
York as more specifically defined in Exhibit A "site plan" (the
"Plant"), which is designed to generate nominally 75 MW but not
to exceed 79.99 MW of capacity (net of station uses) and to
generate approximately 657,000 MWH of electric energy annually
(individually and collectively referred to as "electricity") for
delivery to the electric system of Buyer with which the Plant
will be physically interconnected to the extent committed under
Article III of this Agreement; and
WHEREAS, the Plant will be a qualifying facility under
the Public Utility Regulatory Policies Act of 1978 ("PURPA"), as
defined as of the date of this Agreement in 16 U.S.C. Section
796, and will be a "co-generation facility," as defined as of the
date of this Agreement in Section 2, subdivision 2-a of the New
York Public Service Law; and
WHEREAS, Seller desires to sell electricity generated
by the Plant to Buyer; and
WHEREAS, Buyer agrees to purchase electricity generated
by the Plant on the terms and conditions set forth herein and
therefore is willing to enter into this Agreement with Seller;
NOW, THEREFORE, in consideration of the promises and
other good and valuable consideration given one party to the
other, the sufficiency of which each party acknowledges, Buyer
and Seller agree as follows:
Article I. Representations, Warranties and Covenants
1.1 Seller makes the following representations,
warranties and covenants as the basis for the benefits and
obligations contained in this Agreement:
(a) Seller represents and warrants that it is a
corporation, duly organized, validly existing and in good
standing under the laws of the State of Texas and qualified to do
business under the laws of the State of New York, and has the
corporate power and authority to own, lease or otherwise have a
possessory interest in its properties, to carry on its business
as now being conducted and to enter into this Agreement and carry
out the transactions contemplated hereby and to perform and carry
out all covenants and obligations on its part to be performed
under and pursuant to this Agreement.
(b) Seller represents, covenants and warrants that if
the Plant is constructed, Seller shall own and operate the Plant
during the term of this Agreement and that the Plant will have a
nominal rated capacity of 75 MW and in no event will exceed 79.99
MW of capacity net of station uses (independent of any
consideration of the Plant's Status as a "co-generation facility"
as defined in Section 2, subdivision 2-a of the New York Public
Service Law) and is projected to generate approximately 657,000
MWH of electric energy annually, and that this Agreement shall be
binding for the term hereof on Seller. Seller represents and
further warrants that at the time of the Commercial Operation
Date (as herein defined) of the Plant and at all times thereafter
during the term of this Agreement, (i) the Plant will be a
qualifying facility under the Federal Power Act, as amended by
PURPA and the Regulations promulgated thereunder; and the Plant
will be a "co-generation facility" as defined in Section 2,
subdivision 2-a of the New York Public Service Law, as in effect
on the date of this Agreement, except that the Plant shall be
required to comply with amendments to those laws and regulations
specifically made retroactive to the Plant.
(c) Seller represents, covenants and warrants that, to
the best of Seller's knowledge, information and belief then
available at the time of commencement of commercial operation of
the Plant, Seller will be in material compliance with, or will
have acted in good faith to be in compliance with, all laws,
judicial and administrative orders, rules and regulations, with
respect to the ownership and operation of the Plant, including
but not limited to the following: all requirements to obtain and
comply with the conditions of any applicable certificates,
licenses, permits, governmental approvals; the filing of all
applicable environmental impact analyses; and, if applicable and
required by law, the mitigation of demonstrable environmental
impacts.
(d) Seller represents and warrants that it is not
prohibited from entering into this Agreement and discharging and
performing all covenants and obligations on its part to be
performed under and pursuant to this Agreement, and the execution
and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the fulfillment of and
compliance with the provisions of this Agreement will not
materially conflict with or constitute a material breach of or a
material default under, any of the terms, conditions or
provisions of any law, any order of any court or other agency of
government, any certificate of incorporation or by-laws of the
Seller or any contractual limitation, corporate restriction or
outstanding trust indenture, deed of trust, mortgage, loan
agreement, other evidence of indebtedness or any other agreement
or instrument to which the Seller is a party or by which it or
any of its property is bound, or result in a material breach of
or a material default under any of the foregoing, and this
Agreement is the legal, valid and binding obligation of the
Seller enforceable in accordance with its terms, except as it may
be rendered unenforceable by reason of bankruptcy or other
similar laws affecting creditors' rights.
(e) Seller represents and warrants that all corporate
consents and authorizations required for Seller to execute and
deliver this Agreement have been obtained.
1.2 Buyer makes the following representations,
warranties and covenants as the basis for the benefits and
obligations contained in this Agreement:
(a) Buyer represents and warrants that it is a
corporation duly organized, validly existing and qualified to do
business under the laws of the State of New York, is in good
standing under its certificate of incorporation and the laws of
the State of New York, has the corporate power and authority to
own its properties, to carry on its electric utility business as
now being conducted and to enter into this Agreement and the
transactions contemplated hereby and perform and carry out all
covenants and obligations on its part to be performed under and
pursuant to this Agreement.
(b) Buyer represents and warrants that it is not
prohibited from entering into this Agreement and discharging and
performing all covenants and obligations on its part to be
performed under and pursuant to this Agreement, and the execution
and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the fulfillment of and
compliance with the provisions of this Agreement will not
materially conflict with or constitute a material breach of or a
material default under, any of the terms, conditions, or
provisions of any law, any order of any court or other agency of
government, the certificate of incorporation or By-laws of Buyer,
or any contractual limitation, corporate restriction or
outstanding trust indenture, deed of trust, mortgage, loan
agreement, other evidence of indebtedness or any other agreement
or instrument to which Buyer is a party or by which it or any of
its property is bound or result in a material breach of or
material default under any of the foregoing, and this Agreement
is the legal, valid and binding obligation of Buyer enforceable
in accordance with its terms, except as it may be rendered
unenforceable by reason of bankruptcy or other similar laws
affecting creditors' rights.
(c) Buyer represents and warrants that it has adequate
means and net worth to self-insure for the purposes of Article
XIV of this Agreement.
(d) Buyer represents and warrants that all corporate
action required on its part to execute and deliver this Agreement
has been completed.
1.3 Contemporaneously with the delivery of this
Agreement, each party shall furnish the other a favorable opinion
of its counsel, in the form of Exhibits F and G hereto,
respecting certain representations made by the party furnishing
the opinion.
Article II. Term
This Agreement shall become effective when approved by
the New York State Public Service Commission ("Commission")
pursuant to the provisions of Article XVIII and shall remain in
full force and effect for a period of fifteen (15) years
determined from the Commercial Operation Date (as defined below),
subject to termination as provided herein. For purposes of this
Agreement, the Commencement Date will occur when the Plant is
synchronized to Buyer's electrical system and electricity is
first delivered to Buyer; and the Commercial Operation Date will
occur when the Seller so declares, but not more than 120 days
after the Commencement Date. Notwithstanding the above, neither
the Commencement Date nor the Commercial Operation Date shall
occur until Seller shall provide Buyer with at least ten (10)
days' prior written notice of each date. Applicable provisions
of this Agreement shall continue in effect after termination to
the extent necessary to provide for final billings and
adjustments related to the period prior to termination. Buyer
shall pay Seller the energy portion of its filed buyback tariff
for electric energy delivered to Buyer during the period between
the Commencement Date and the Commercial Operation Date, if
applicable.
Article III. Delivery and Purchase
During the term of this Agreement, Seller shall deliver
and sell to Buyer and Buyer shall accept and purchase from
Seller, subject to the terms and conditions of this Agreement,
all of the electricity produced by the Plant, net of that
electricity used, from time to time, to operate the Plant.
No change in the amount of capacity committed hereunder
shall be permitted without the written consent of Buyer and
Seller; provided, however, that all the dependable maximum net
capability ("DMNC") of the Plant determined by a capability test
conducted, following the Commercial Operation Date of the Plant,
in the manner and according to the standards provided in the
performance guarantee made part of Exhibit B herein to determine
the DMNC of the Plant, will constitute the amount of capacity
committed to Buyer pursuant to this Article without the consent
of the parties to this Agreement; except, that if there is a
failure of equipment to operate during any test, the test will be
disregarded for purposes of this paragraph, provided that Seller
shall provide Buyer with written documentation of such failure
within two weeks of the occurrence. Within four (4) months of
the initial completed test, Seller may conduct an additional
capability test and may designate the result as the DMNC.
For purposes of this Agreement, "deliver" shall mean to
make available for sale to Buyer at the delivery point, which for
purposes of this Agreement shall be the point at which Buyer's
and Seller's electric facilities are interconnected. Electricity
delivered to Buyer shall be of a type known as three-phase
alternating current with a nominal frequency of sixty (60) hertz
and a nominal voltage of 115 kV volts phase to phase.
Article IV. Payment
Buyer shall pay Seller via wire transfer or such other
agreed upon payment method to Seller's account at such bank as
Seller may from time to time designate in writing on or before
the twenty-fifth (25th) day of each month for the electricity
delivered to Buyer during the preceding calendar month, applying
the price terms set forth in Article V; provided that Seller
shall notify Buyer in writing, at least thirty (30) days in
advance of a required payment hereunder, of any change in the
account to which such payment is to be directed. Along with this
payment, Buyer shall enclose a statement explaining how the
payment amount was calculated.
Upon receipt of each payment, Seller shall examine the
accompanying statement to ensure that it has been calculated
correctly, and shall promptly notify Buyer of any errors therein
which Seller in good faith believes have been made along with the
facts providing the basis for such belief. Buyer will promptly
review Seller's complaint.
If the parties are unable to agree upon a settlement of
the contested portion of any statement after the parties have
availed themselves of their rights to meter testing as provided
in Article VII and after Seller has had an opportunity to review
Buyer's records bearing on the disputed matter, the dispute shall
be settled in accordance with the procedures of the Public
Service Commission similar to those set forth in 16 NYCRR Part
12, for the resolution of disputes, subject to judicial review.
Article V. Price For Electricity Sold To Buyer
Buyer will pay Seller for each kilowatt hour of
electricity delivered the prices specified in the rate schedule
contained in Exhibit B of this Agreement, subject to the security
provisions and performance guarantee made part of Exhibit B to
this Agreement.
Article VI. Interest
If either party shall fail to make any payment required
by this Agreement when due, including contested portions of bills
as provided under Article IV, or if either party makes an
overpayment requiring a refund by the other party, the amount due
shall bear interest at the rate prescribed for late payment
charges in Buyer's retail tariff on the unpaid balance until date
of payment, provided that in the event of such an overpayment,
interest shall accrue on the overpayment from the date that such
overpayment was made. Remittance received by mail, when
permitted, will be accepted without interest charges if such
payment was mailed on or before the due date. If the due date of
any payment falls on a Sunday or holiday, the next business day
shall be the last day on which payment can be mailed or paid
without interest charges being assessed.
Article VII. Metering and Telemetry
Except as may be otherwise specifically provided for
herein, electricity delivered by Seller to Buyer will be measured
by electric meters and associated equipment of a type approved by
the Commission, which meters and equipment shall be installed on
Seller's premises and owned, installed, operated and maintained
by Buyer at Seller's expense. Seller shall, at its own expense,
furnish, install and maintain mounting facilities for such meters
and associated devices.
The metering equipment shall be sealed by Buyer and the
seals shall be broken only upon occasions when the meters are to
be inspected, tested or adjusted, and representatives of Seller
shall be afforded reasonable opportunity to be present upon such
occasions. Periodic tests of such metering equipment, at
intervals not to exceed those prescribed by the Commission's
regulations for comparable meters will be made by Buyer at
Seller's expense, and additional tests will be made at any
reasonable time upon request therefor by Seller at Seller's
expense. If, as a result of such tests, the metering equipment
is found to be defective or inaccurate, it will be restored to a
condition of accuracy or replaced at Seller's expense. If a test
of the metering equipment is made at the request of Seller with
the result that said metering equipment is found to be
registering correctly or within two percent (2%) plus or minus of
one hundred percent (100%), Seller shall bear the expense of such
test; provided that if such test shows an error greater than two
percent (2%) plus or minus of one hundred percent (100%), then
Buyer shall bear the expense of such test. All meters shall be
adjusted as close as practical to one hundred percent (100%) at
time of installation and testing.
If any of the metering equipment tests provided for
herein disclose that the error for such equipment exceeds two
percent (2%) Plus or minus of one hundred percent (100%), then
the actual meter readings for the second, or more recent, half of
the period between the date of the last test on such equipment
and the date of the correction of the malfunction will be
adjusted, either upward or downward, to correct for such error,
unless there is verifiable information upon which an accurate
adjustment can be made for part or all of the period, including
readings from Seller-installed meters. Any correction in billing
resulting from such correction in meter records shall be made
with interest at the rate specified in Article VI in the next
monthly payment made by Buyer after the inaccuracy is verified,
and such correction when made shall, in the absence of bad faith,
fraud, or intentional wrongdoing, constitute a complete and final
settlement of any claim arising between the parties hereto out of
such inaccuracy of the metering equipment.
Seller shall have the right to install its own meters
and shall maintain them according to standards prescribed by Part
92 of the Commission's regulations. Should any metering
equipment installed by Buyer fail to register the electricity
delivered during any period of time, or if Seller and Buyer agree
that the meter registration is invalid, the amount of electricity
delivered during such period will be estimated by the parties
according to the amounts previously delivered during similar
periods under substantially similar conditions, unless meter
readings are available from Seller-installed meter equipment,
subject to a test of its accuracy conducted in accordance with
the procedure provided in this Article. In the event Seller's
meters are used and said metering point is on the low-voltage
side of the main transformer, an adjustment for transmission and
transformation losses will be made to such meter readings.
At Seller's expense, Seller shall, prior to the
Commencement Date, install to specifications, procedures, and/or
instructions relating to the installation of telemetry equipment,
adequate metering and communication equipment ("Telemetering
Equipment") to transmit information to Buyer to monitor Seller's
generation of electricity. The specifications, procedures,
and/or instructions to be provided by Buyer pursuant to this
paragraph shall be in such detail as is reasonably necessary for
Seller to develop final cost estimates for the telemetry
equipment and shall be furnished on or before the later of (a)
December 1, 1990, (b) two (2) months after Buyer receives all
single line drawings required from Seller under this Agreement,
or (c) such other time as is mutually agreed upon by both parties
in writing. Seller may, within thirty (30) days of the later of
such dates, petition the Commission for a determination that such
telemetry should not be required. Telemetry of information
required for operation of Buyer's system, including but not
limited to real power, shall be provided to Buyer continuously
(every two (2) seconds). The required installation shall include
such communication channel or channels required to transmit this
data to Buyer's Power Supply Department. Buyer shall install and
Seller shall pay for receiving equipment at Buyer's end of the
required communication channel(s). Seller shall pay the monthly
charges associated with said communication channel(s). The
procedures for establishing schedules and time deadlines for the
telemetry arrangements including, without exclusion, Buyer's
acceptance of Seller's design and construction of such
facilities, shall be governed by Article VIII.
Buyer, at Seller's expense, shall maintain the
telemetry equipment and repair same in the event of a failure of
said equipment. From the time Seller or Buyer first becomes
aware of such failure and until operations can be restored,
Seller shall (absent a waiver in whole or part by Buyer) provide
Buyer by telephone or facsimile information concerning current
and expected unit output every half hour; concerning changes in
unit output (plus or minus) of five (5) MW from the last reported
output or more as they occur: and concerning changes in the
status of equipment as they occur or as soon thereafter as they
are recognized by Seller. If the Seller fails to provide the
data required by this Article VII, Buyer may direct that the
generating facility of the Plant be disconnected from Buyer's
system. Buyer shall give advance notice, as circumstances
permit, of the need for such disconnection to employees of Seller
designated from time to time by Seller to receive such notice
directing such disconnection. Upon receipt of notice directing
such disconnection, Seller shall carry out the required action
without undue delay. Where circumstances do not reasonably
permit such advance notice to Seller or Seller's employees,
including but not limited to circumstances in which Seller's
facility is unstaffed, Buyer may disconnect the generating
facility of the Plant from Buyer's system until Seller provides
the required data to Buyer.
Article VIII. Procedures for Interconnection and Installation of
Interconnection Facilities
Interconnection of the Seller's facilities with Buyer's
electric system shall be governed by the requirements and
conditions contained in Buyer's New York State Electric & Gas
Corporation Bulletin 86-01 Guide to NYSEG's Requirement For Any
Independent Power Producer, Revised March 1989 ("Bulletin") which
is incorporated herein by reference and with which terms and
conditions the parties hereby agree to be bound. Such Bulletin
shall at a minimum specify procedures for the establishment of
schedules and time deadlines. In the event of conflict between
this Agreement and the Buyer's Bulletin, this Agreement is
controlling.
If Seller and Buyer are unable to agree on application
procedures, information requirements, schedules and deadlines, or
interconnection costs, equipment or procedures, or compliance
with the foregoing, either party may petition the Commission to
resolve the dispute, subject to judicial review.
Seller shall, at its cost and expense, construct and
install the interconnection facilities set forth in Exhibit A-1
(as it may be amended from time by mutual agreement of the
parties), as required for Buyer to receive electricity from
Seller's facilities, including telemetry equipment. All such
interconnection facilities after construction and installation by
Seller shall thereupon become the property of and shall be owned
and maintained by Buyer at Buyer's expense, except for those
items listed in Exhibit A-2 (as it may be amended from time by
mutual agreement of the parties), which shall be operated and
maintained by Buyer at Seller's expense, subject to the
provisions of Article VII. In the event it is necessary for
Buyer, in its sole discretion subject to the dispute resolution
procedure in Article XIII(c), to continue facilities in service
that were scheduled to be retired, or to install additional
facilities or to extend or reinforce or modify its system, in
each case for the receipt of electricity under this Agreement
(hereinafter referred to as "Dedicated Facilities"), Buyer shall
provide Seller with as much advance notice as reasonably
practicable and Seller shall reimburse Buyer for the incremental
costs and expenses incurred in connection with the continuation
in service, installation, extension or reinforcement of the
Dedicated Facilities. Such payment to Buyer respecting Dedicated
Facilities shall include any taxes due on account of such
reimbursement appropriately reduced by the present value of
depreciation deductions and any other tax benefits applicable to
the Dedicated Facilities over their tax life. All Dedicated
Facilities shall remain the property of Buyer, and Buyer shall be
responsible for any taxes due on account of its ownership and use
of the Dedicated Facilities after termination of this Agreement,
whether such taxes arise out of Seller's prior reimbursement or
otherwise. To the extent that the capital costs or expenses of
the Dedicated Facilities are recovered or are to be recovered
from other rates or charges assessed by Buyer, including charges
for facilities employed by Buyer to sell electricity to Seller,
and to the extent that the capital costs of the Dedicated
Faci1ities were previously paid by Seller, such costs and
expenses shall not be included in any of the payments due under
this Article.
Buyer, at the expiration of the term of this Agreement
and at the request of Seller, agrees to execute a new agreement
concerning the Dedicated Facilities and containing the same
provisions set out herein if use of such Dedicated Facilities is
necessary or desirable to Seller in order to carry out a
successor transaction for sale of the output of the Plant to
Buyer or someone other than Buyer, whether by contract, tariff,
or otherwise (subject, however, to the provisions in this
Agreement concerning the requirement to continue the
interconnection based on the suitability of such facilities for
such use); and this obligation shall survive the expiration of
this Agreement for all other purposes. Nothing contained in this
Agreement with respect to the continuing availability of the
Dedicated Facilities for the receipt of the Plant's electric
output obligates or requires the Buyer to offer to provide and/or
arrange for general transmission services utilizing facilities
other than the Dedicated Facilities to facilitate such a
successor transaction involving a sale to someone other than the
Buyer; and, to the extent that the Dedicated Facilities are
utilized to carry out a successor transaction for sale of the
output of the Plant to someone other than Buyer, Buyer may charge
Seller for some or all of the cost of operating and maintaining
the Dedicated Facilities, as appropriate under the circumstances,
as well as a return on and of any investment made for the
replacement or improvement of the Dedicated Facilities to the
extent necessary for the continued acceptance of Seller's Power.
In addition, Buyer may charge its conventional rates for services
involving facilities other than the Dedicated Facilities.
For Dedicated Facilities estimated to cost less than
$10,000, the estimated incremental costs and expenses to be
incurred by Buyer in connection with the continuation in service,
installation, extension or reinforcement of the Dedicated
Facilities shall be paid in a lump sum amount to Buyer prior to
ordering or constructing such facilities. For Dedicated
Facilities estimated to cost $10,000 or more, Seller shall prepay
to Buyer the cost of any such facilities that Buyer must order
and shall make payments in advance each month for all other
estimated costs and expenses scheduled to be incurred by Buyer
during the next succeeding month in connection with the
continuation in service, installation, extension or reinforcement
of the Dedicated Facilities, less ten percent (10%) retainage
until completion of the Dedicated Facilities. Upon completion of
the Dedicated Facilities, the actual and estimated costs and
expenses incurred in connection with the Dedicated Facilities
shall be compared and the difference between them shall be
promptly paid by or reimbursed to Seller as appropriate.
Each month during the term of this Agreement, Seller
shall reimburse Buyer for expenses incurred by Buyer for the
operation and Maintenance of the Dedicated Facilities listed in
Exhibit A-2 at one-twelfth (1/12) of the annual rate specified in
Buyer's applicable tariff. An explanation of such expenses shall
accompany each bill submitted by Buyer. Said reimbursable
expenses shall include but are not limited to the cost for time
spent by Buyer's in-house engineers on matters arising under
Articles VIII and IX. Either party may petition the Commission
to resolve disputes relating to said bills, subject to judicial
review. Bills for sums due under this Article VIII shall be
rendered monthly. All bills shall be due and payable within
thirty (30) days after the date thereof.
The question of the allocation of responsibility for
payment of wheeling charges that may be incurred in connection
with the operation of this Agreement is before the Commission.
Exhibit A-3 sets out the terms of the resolution of this issue.
Article IX. Rearrangement, Relocation, Retirement or Abandonment
of Buyer's Facilities
If, at some future time, Buyer determines it is
necessary to relocate or rearrange its system to which the Plant
is connected, Buyer shall advise Seller one (1) year in advance
in writing, explaining the proposed relocation or rearrangement
of Buyer's system, or as promptly as possible after Buyer becomes
aware of such need if such relocation or rearrangement will occur
less than one (1) year from such awareness. If such relocation
or rearrangement is ordered or required by governmental
authority, Buyer shall give prior notice to Seller equal in time
to the notice given Buyer by such governmental authority, to the
extent possible. Buyer will indicate the investment required for
new facilities proposed to reestablish the connection which the
utility would not have incurred but for Seller's connection to
Buyer's electric system. Seller will have the option of
reimbursing Buyer for the cost of these new facilities (which
shall be Dedicated Facilities) or of providing its own reasonable
alternative interconnection to Buyer's system, provided that such
alternative interconnection is subject to Buyer's approval, which
approval shall not be withheld unreasonably. The procedure for
submission and approval of such alternative interconnection plans
shall be set forth in Buyer's Bulletin described in Article VIII.
In the event that Seller demonstrates to Buyer's
satisfaction that both of the aforesaid options would render
operation of the Plant uneconomic for the balance of this
Agreement, then Seller may elect to terminate this Agreement upon
sixty (60) days' prior written notice to Buyer, provided that
Seller either (a) has returned any payments made by Buyer in
excess of the Commission's 1988 estimate of Buyer's long-run
avoided cost, in Case 28962, has paid all other amounts due Buyer
under this Agreement, or (b) agrees to reimburse Buyer monthly
the amount by which Buyer's actual reasonably incurred cost for
replacement electricity exceeds the amount that Buyer would have
paid to Seller under this Agreement for such electricity,
adequately secures such reimbursement payments for the remaining
term of this Agreement in a reasonable and mutually satisfactory
manner, and has paid all other amounts due to Buyer under this
Agreement.
If at some future time, Buyer determines it is
necessary to retire or abandon any facilities to which the Plant
is connected, and which are necessary to accommodate the output
of the Plant in a manner consistent with prudent utility
practices, Buyer shall advise Seller, at least one year in
advance, in writing, indicating Buyer's annual cost of facilities
required exclusively to accommodate the output of the Plant.
Seller shall then have the option of paying Buyer for these
annual costs or of providing alternate interconnection to Buyer's
system acceptable to Buyer. Such an alternative may be the
purchase by Seller of Buyer's existing facilities, which would
have been retired in place, at the fair market value negotiated
by the parties, taking into consideration without excluding other
factors, Buyer's desire to retire or abandon the facilities less
any amount previously paid by Seller for the purchase,
construction or improvement of such facilities. In the event
Seller elects to pay Buyer the annual charges associated with
these facilities, said charges shall be recomputed as of January
lst of every year.
In the event the interconnection shall be discontinued
or abandoned due to causes beyond the control of Buyer, Buyer
will not be liable therefor.
Article X. Suspension of Buyer's Obligations and Disconnection of
Plant from Buyer's System
Buyer, recognizing Seller's representation that
electric sales to Buyer over the interconnection represent
Seller's primary source of revenues, shall at all times during
the term of this Agreement, or any extension or renewal thereof,
endeavor to maintain the interconnection between the Plant and
Buyer's facilities, consistent with its obligations to its
customers and with prudent utility practices. In the event this
interconnection shall be interrupted or defective or shall fail
from causes beyond the control of Buyer or because of the
ordinary negligence of Buyer, its officers, agents and employees,
Buyer will not be liable therefor.
Buyer's acceptance of and obligation to pay for
electricity generated by the Plant shall be suspended for any
periods of time during which Buyer's system is physically unable
to accept such electricity for reasons of repair, connection of
other customers or generators of electricity, system emergency,
safety, temporary outage of facilities, and/or actions taken
pursuant to Article IX; provided, however, that Buyer shall use
all reasonable efforts to coordinate any scheduled outage under
this paragraph with Seller.
In such circumstances, Buyer shall notify Seller of
such suspension and of the reason therefore as soon as is
reasonably possible under the circumstances (whether before or
after the suspension), and shall thereafter keep Seller apprised
of the estimated duration of the suspension, as such estimate may
change from time to time. During any period of suspension, Buyer
and Seller shall endeavor to end the suspension as promptly as is
reasonably possible. Buyer's acceptance of and obligation to pay
for electricity generated by the Plant shall also be suspended
for any period of time during which Seller fails to maintain the
insurance policies required by this Agreement; provided, however,
that electricity accepted by Buyer shall be paid for at the rate
specified in Exhibit B to this Agreement.
If necessary, and solely for reasons set forth above,
Buyer may direct that the generating facility of the Plant be
disconnected from Buyer's system. Buyer shall give advance
notice, as circumstances permit, of the need for such
disconnection to employees of Seller designated from time to time
by Seller to receive such notice. Upon receipt of notice
directing disconnection, Seller shall carry out the required
action without undue delay. Where circumstances do not permit
such advance notice to Seller or Seller's employees, including
but not limited to circumstances in which Seller's facility is
unstaffed, Buyer may disconnect the generating facility of the
Plant from Buyer's system. In such circumstances, Buyer shall
notify Seller of such disconnection and of the reason therefor as
soon as is reasonably possible following the disconnection, and
shall thereafter keep Seller apprised of the estimated duration
of the disconnection, as such estimate may change from time to
time.
During any period of disconnection, Buyer and Seller
shall endeavor to restore the interconnection as promptly as is
reasonably possible.
Seller shall bear any extraordinary cost reasonably
incurred by Buyer as a result of any such disconnection or re-
connection, except that Buyer shall bear such costs with respect
to facilities it owns or controls if the disconnection is due to
its negligence. An extraordinary cost is a cost that would not
be incurred by Buyer absent the existence of the Plant; provided,
however, that such extraordinary cost shall not include any
incremental expenses incurred by Buyer for the operation and
maintenance of Dedicated Facilities which are reimbursed by
Seller pursuant to Article VIII.
It is further agreed that Buyer, subject to any law or
regulatory or governmental order requiring otherwise, upon notice
to the Seller sufficient to allow Seller to cease deliveries of
electricity, shall not be obligated to purchase electricity from
the Seller during any period during which, due to operational
circumstances, purchases from Seller would result in costs
greater than those which Buyer would incur if it did not make
such purchases but instead generated an equivalent amount of
energy itself (the term "operational circumstances" to be defined
for the purposes set forth in this paragraph in the manner
described in the FERC's rules and regulations in effect on the
date of this Agreement, as further clarified in the Commission's
discussion in its Order Rejecting Curtailment Clauses, issued
June 27, 1989, and its Order Denying Rehearing and Clarifying
Prior Order, issued December 12, 1989, both in Case 88E-081)
("the Curtailment Orders"). The Buyer's claim that such a period
has occurred, is occurring, or will occur is subject to such
verification by the Commission as it determines necessary or
appropriate before, during, or after the occurrence in accordance
with the Curtailment Orders and the procedures set out therein.
Article XI. Coordination of Plant and System Maintenance
Other than unscheduled maintenance, Seller shall use
best efforts to coordinate with Buyer the maintenance of the
Plant required in order to ensure the sound operation of the
Plant and Buyer's system. Except in cases of emergency or
repairs that cannot be deferred, maintenance shall not be
scheduled or performed during the months of November through
march inclusive without the prior written consent of Buyer, which
consent shall not unreasonably be withheld.
Buyer shall endeavor to coordinate with Seller the
scheduling of any planned maintenance or repair outages of
facilities to which the Plant is interconnected by scheduling
such outages during times when Seller has scheduled maintenance
of the Plant, by giving advance notice to Seller, or by other
reasonable means of coordination.
Seller shall use its best efforts to provide, prior to
commercial operation, a schedule of maintenance outages for the
Plant's first twelve months of commercial operation. After the
first twelve months of commercial operation, Seller shall provide
a schedule of expected maintenance outage periods, including the
expected duration and desired time, on or before September 1 of
each year for the three (3) succeeding calendar years. The
schedule for the first such succeeding year shall not be changed
without the consent of Buyer, which consent shall not be
unreasonably withheld. In addition, Seller shall provide the
expected duration of a forced outage within forty-eight (48)
hours after the start of the outage.
Article XII. Purchase of Plant; Extension of Agreement
In the event Seller proposes to sell, or receives an
acceptable offer to purchase, the Plant or any part thereof
during the term of this Agreement, or during any extension
thereof, Seller shall first notify Buyer, in writing, of its
intention to sell (which sale will be subject to the condition
established in Article XVII of this Agreement that the purchaser
shall assume this Agreement) and of the proposed price.
Following receipt of such notice, Buyer shall have, for a sixty
(60) day period, the option to purchase the Plant or such part
thereof, together will all improvements, lands, and rights
associate therewith, at such price. If Buyer does not exercise
its option to purchase within sixty days, then Seller may sell
the plant or such part thereof to a third party at the same or a
higher price. This provision shall not apply to any transfer or
assignment by Seller for the sole purpose of financing the Plant.
If it is Seller's intention to continue to operate the
Plant after the end of the term of this Agreement, Seller shall,
no later then one (1) year before the expiration of the term of
this Agreement, initiate discussions with Buyer concerning the
terms of an extension of this Agreement. Seller and Buyer shall
negotiate such an extension in good faith, and Seller shall not
offer the Plant output to, or open negotiations with, any other
potential buyer until the earlier of (a) an impasse in such
negotiations, (b) a decision by Buyer not to continue
negotiations, or (c) five (5) months prior to the expiration of
the Agreement.
If it is Seller's intention to sell any of its
interests in the Plant at the conclusion of the term of this
Agreement, Seller shall, no later than one (1) year before the
expiration of the term of this Agreement, initiate discussions
with Buyer concerning the terms of a purchase of such interests
by Buyer. Seller and Buyer shall negotiate such a purchase and
sale in good faith, and Seller shall not offer to sell such
interests in the Plant to any other potential buyer until the
earlier of (a) an impasse in such negotiations, (b) a decision by
Buyer not to continue negotiations, or (c) five (5) months prior
to the expiration of the Agreement.
Article XIII. Breach; Cure; Dispute Resolution
This Article describes certain occurrences which can
result in a breach of the contract and the rights of the parties
in such an event. This Article does not describe all possible
events which could constitute a breach nor all the rights of the
parties in the event of a breach.
(a) The sale by Seller to a third party, or diversion
by Seller for any use, of electricity committed to Buyer, by
Seller under Article III without the written approval of Buyer,
shall constitute a breach, as a result of which breach Buyer may
in its discretion, upon sixty (60) days' written notice to Seller
specifying the reason(s) and the basis for terminating the
Agreement, treat the Agreement as terminated and all obligations
to purchase and pay for electricity (other than electricity
delivered prior to the date of termination) extinguished;
provided, however, that such notice must be sent within one (1)
year after actual discovery by Buyer of the facts giving rise to
the claim of breach; provided further, however, that during this
sixty (60) day period, if an outstanding dispute remains
concerning the breach, either party may bring such dispute to the
Commission for resolution according to the Commission's Rules of
Procedure, subject to judicial review, and this Agreement shall
not be terminated by the party claiming the breach prior to such
resolution or final disposition by the Commission and final
judicial review thereof; provided, however, that the party
claiming the breach may petition the Commission for summary
dismissal of the petition to resolve the dispute on the ground
that the dispute is not bona fide. In the event the party
alleged to be in breach does not commence a proceeding on a
dispute with the Commission within the time period described,
this Agreement may be terminated by the party alleging the
breach; provided, further, that this Agreement may be suspended
by Buyer (except those obligations of Seller relating to metering
and telemetry necessary to allow Buyer to determine if Seller is
generating and delivering electricity during the suspension
period) prior to judicial review if the Commission determines
that continued operation of the Plant or Seller's related
electric facilities, if any, presents a danger to life or
property. Such suspension shall remain in effect until such time
as the Commission determines that operation of the Plant,
including Seller's related electric facilities, if any, no longer
presents a danger to life or property. The rights of lenders to
Seller to cure such a breach and/or to forestall termination
pursuant to this paragraph are addressed in the Security exhibit
to this Agreement.
(b) Upon a determination by the Commission, on its own
motion or pursuant to a petition by a party, subject to final
judicial review, either that a material, factual representation
made in this Agreement by one party as a basis for the other
party's willingness to enter into this Agreement, or made by such
party's assignee, has been falsely made and the falsehood was
made willfully, knowingly or with a reckless disregard for its
truth or falsity, or that a material warranty given under Article
I of this Agreement has been willfully and knowingly breached,
the other party may terminate this Agreement; provided, however,
that the party seeking to terminate the Agreement must file said
petition within one (1) year after actual discovery by said party
of the facts giving rise to the claim herein. Termination of
this Agreement may not occur until final judicial review has been
completed or the time therefor has expired, but this Agreement
may be suspended by Buyer (except those obligations of Seller
relating to metering and telemetry necessary to allow Buyer to
determine if Seller is generating and delivering electricity
during the suspension period) prior to judicial review if the
Commission determines that continued operation of the Plant or
Seller's related electric facilities, if any, presents a danger
to life or property. Such suspension shall remain in effect
until such time as the Commission determines that operation of
the Plant, including Seller's related electric facilities, if
any, no longer presents a danger to life or property. The rights
of lenders to Seller to cure such a breach and/or to forestall
termination pursuant to this paragraph are addressed in the
Security exhibit to this Agreement.
(c) Under events 1-7 enumerated below, the identified
act, failure or omission by Seller or Buyer will constitute a
breach of this Agreement. Seller or Buyer shall notify the other
party in writing, which notice shall specify the nature of the
act, failure or omission and the evidence supporting the claim;
provided, however, that such notice must be sent within one (1)
year after actual discovery by the party seeking to terminate
this Agreement of the facts giving rise to the claim herein.
Following such notice, the other party and, in the case of breach
by Seller, Seller's secured lenders shall have a sixty (60) day
period in which to cure the act, failure or omission, or, if the
breach cannot be cured through diligent action within the sixty
(60) day period, begin diligently to work to cure the breach. In
the latter event, the breaching party shall notify the party
alleging the breach of the additional period necessary to cure
the breach, and the party alleging the breach shall either agree
or disagree in writing with the additional necessary period,
within seven (7) working days of receipt of notice from the party
alleged to be in breach; during the initial sixty (60) days
following notice of the alleged breach, if an outstanding dispute
remains concerning the breach, the cure, or the additional time
necessary for the cure, either party may bring such dispute to
the Commission for resolution according to the Commission's Rules
of Procedure, subject to judicial review, and this Agreement
shall not be terminated by the party claiming the breach prior to
such resolution or final disposition by the Commission and final
judicial review thereof; provided, however, that the party
claiming the breach may petition the Commission for summary
dismissal of the petition to resolve the dispute on the ground
that the dispute is not bona fide. In the event the party
alleged to be in breach fails to care and a proceeding on a bona
fide dispute has not been brought to the Commission within sixty
(60) days, or in the event of a breach that cannot be cured
within sixty (60) days, within seven (7) working days of receipt
by the party alleged to be in breach of notice from the non-
breaching party that the non-breaching party does not accept the
extension of the cured period claimed to be necessary by the
party alleged to be in breach, this Agreement may be terminated
by the party alleging the breach. Upon such termination, all
further obligations of the non-breaching party (other than the
obligations to pay any amounts previously owed to the other
party) shall be extinguished:
1. An assignment of this Agreement or any rights
created by it is made in violation of the provisions of Article
XVII;
2. A failure to comply with any material provision of
either Article XI or the Buyer's Bulletin described in Article
VIII.
3. A failure to grant or obtain rights-of-way or
easements or to execute documents as required by this Agreement.
4. A failure by one party to make payments when due,
when such payments due reach a level which cannot be offset by
any payments due and owing that party by the other party for
services rendered, equipment supplied or electricity purchased in
any one month.
5. A failure to maintain, or an intentional or
knowing material impairment of, any security which is provided to
secure payments for electricity, including but not limited to any
refusal to surrender possession of the Plant pursuant to a
security provision granting Buyer a right to possession.
6. A failure by Seller for a Period of sixty (60)
days to use good faith efforts to resume the delivery of
electricity pursuant to this Agreement after the Plant has ceased
operating.
7. A failure by Seller to deliver to Buyer an
accurately executed "Independent Power Producer Generator
Notice," Buyer's Form NB 232, within ninety (90) days from the
date of execution of the Agreement.
The rights of lenders to Seller to cure such a breach
and/or to forestall termination pursuant to this paragraph (c)
are addressed in the Security exhibit to this Agreement.
(d) In the event that the Plant loses its status as a
qualifying facility under PURPA, pursuant to regulations in
effect on the date of the execution of this Agreement and as may
be amended to have retroactive effect to this facility, this
Agreement may at the option of Buyer be terminated immediately
without liability of any description, kind or nature whatsoever
by Buyer to Seller. Upon such termination, all further
obligations of both parties (other than the obligations to pay
any amounts previously owed to the other party) shall be
extinguished.
(e)(i) In the event that and for so long as the Plant
fails to meet the New York Pub. Serv. Law Section 2-a definition
of a "co-generation facility" as in effect on the date of
execution of this Agreement, or (ii) in the event that the Plant
loses such status by virtue of the electric output from the Plant
having exceeded 80 megawatts for any quarter hour period two (2)
times within any five (5) year period, Seller shall receive the
following revised pricing: (1) for such remaining portion of
Period A during which six (6) cents exceeds the 1988 long-run
avoided costs, Buyer's current short-run avoided costs; (2) for
the remainder of Period A, the 1988 long-run avoided costs per
kilowatt hour less amounts (the "reductions") sufficient to repay
the Buyer the difference between six cents and the 1988 long-run
avoided costs for the period from the Commercial Operation Date
until the loss of status as a "co-generation facility", adjusted
for the value of money over time at the rate of eleven-twelfths
(11/12) of a percent per month ("the front-load") (the reductions
to be calculated as a uniform monthly payment that will
completely amortize the front-load at the end of Period A); and
(3) for Period B, the prices set out in Exhibit B without
alteration.
The pricing shall revert to the original pricing (with
the adjustment described in the next paragraph if either the
Plant again meets the definition of a "co-generation facility" as
described in (e)(i) of this Article or, within ninety (90) days
of the institution of revised pricing, Seller provides firm
security in cash or a letter of credit in an amount that will
equal the product of (A) the Plant's DMNC, (B) ninety percent
(.90), (C) the number of hours remaining in the calendar year at
the time revised pricing was instituted, and (D) any positive
difference between the price established by the contract for
electricity delivered during that calendar year and the
Commission's most recent estimate of Buyer's long-run avoided
costs for such year. When such security is posted, Buyer shall
pay Seller the difference between the contract price and the
revised pricing for the period the Seller received the revised
pricing. Thereafter, unless the Plant again meets the definition
of a "co-generation facility" as described in e(i) of this
Article, such firm security shall be posted no later than
January 1 each year in an amount that, together with such value,
if any, as the Commission shall accord to the subordinated
mortgage held by Buyer, will equal any positive number resulting
from the following calculations: (1)(A) total payments received
by Seller to date from Buyer for electricity provided from the
time of the loss of "co-generation facility" status pursuant to
this Agreement until December 31 of the preceding year (allowing
for the use of estimates for the month of December) less (B) the
total payments that Seller would have received over the same
period for such electricity at rates equal to Buyer's short-run
avoided costs adjusted for the value of money over time (at the
rate of eleven (11) percent per annum); plus, (2) for the year
beginning on such January 1, the product of (A) the Plant's DMNC,
(B) ninety percent (.90), (C) 8760, and (D) any positive
difference between the price established by the contract for
electricity delivered during the next year and the Commission's
most recent estimate of Buyer's long-run avoided costs for such
year.
In the event that the Seller, having lost status as a
"co-generation facility" as described in e(i) of this Article and
having elected not to provide security as described above,
regains such status during the period that the Seller would have
received six (6) cents but for the loss of cogeneration facility
status, the contract pricing will go back into effect
immediately. Further, during the period that the contract
pricing is six cents and the 1988 long-run avoided costs exceed
six cents, Seller shall receive in addition to the six cents per
kilowatt hour, an amount (the "make-up charge") sufficient to pay
the Seller the difference between the contract price and the
revised pricing for the period that Seller was receiving the
revised pricing, adjusted for the value of money over time at the
rate of eleven-twelfths (11/12) of a percent per month (the
"short-fall") (the make-up charge to be calculated as a uniform
monthly payment that will completely amortize the shortfall at
the end of Period A).
The rights of lenders to Seller to cure a breach of any
obligation of Seller not enumerated in this Article XIII and/or
to forestall termination of this Agreement by Buyer for a
material breach of this Agreement by Seller not enumerated in
this Article XIII are addressed in the Security exhibit to this
Agreement.
Article XIV. Indemnification and Insurance
Each party shall indemnify, save harmless and defend
the other its directors, trustees, agents, officers, and
employees, against all claims, demands, judgments and associated
costs and expenses, related to property damage, bodily injuries
or death suffered by third parties resulting from any act or
failure to act by such party related to this Agreement.
Buyer, at its cost and expense, shall maintain and keep
in full force and effect:
(a) Commercial general liability insurance in the
amount of at least $1,000,000 per occurrence for bodily injury
and property damage resulting from the operations of Buyer; and
(b) Statutory workers' compensation insurance and
employer's liability insurance.
Buyer reserves the right to self-insure either all or
any portion of the foregoing coverages.
Seller, at its cost and expense, shall maintain and
keep in full force and effect the following insurance with
respect to the Plant:
(a) Commercial general liability insurance in the
amount of at least $1,000,000 per occurrence for bodily injury
and property damage resulting from the operations of Seller's
facilities; and
(b) Statutory workers' compensation insurance and
employer's liability insurance.
Upon a showing satisfactory to Buyer that Seller has
sufficient net worth to self-insure for purposes of this Article,
Seller shall have the right to self-insure either all or any
portion of the foregoing coverages so long as there is no
material decrease in said net worth, or means, which renders the
same insufficient for purposes of self-insurance. Seller shall
arrange to have its insurance carriers send Buyer a copy of all
notices affecting Seller's insurance coverages required under
this Article.
Seller, if not self-insured, shall be required to
provide annually to Buyer certificates of insurance demonstrating
that the required coverage has been obtained for the ensuing
year. Buyer, if not self-insured, shall notify Seller of this
fact, states in such notice whether it has the insurance
coverages required under this Article, and shall promptly notify
Seller of any reductions in such coverage. Each party, if self-
insured, shall be required to provide the other party with annual
reports of its financial condition and to notify the other party
immediately of any material adverse changes, and to purchase
insurance from outside carriers, if and to the extent that its
net worth or means becomes insufficient for purposes of self-
insurance.
Article XV. Access to Seller's Property
Seller shall grant to Buyer, for no additional
consideration, for the term of this Agreement all rights,
privileges, rights-of-way and easements to construct, install,
operate, maintain, repair, replace, inspect and remove Buyer's
equipment and facilities as are necessary solely for the purpose
of receiving electricity under this Agreement, including adequate
and continuing access rights on property of Seller, and Seller
agrees to execute such other grants, deeds or customary documents
as may reasonably be required to enable Buyer to record such
rights-of-way and easements and to record notice, if and to the
extent permissible under New York law, that this Agreement must
be assigned to and assumed by any purchaser of the Plant as a
condition of transfer of legal title to the Plant.
In the event the parties agree that it is necessary
that any part of the Buyer's facilities solely for the purpose of
receiving electricity under this Agreement is to be installed on
property owned by other than Seller or Buyer, Seller shall, at
its cost and expense, procure from the owner thereof all
necessary rights-of-way and easements for the construction,
operation, maintenance, replacement and removal of Buyer's
facilities upon such property in a recordable form reasonably
satisfactory to Buyer. Buyer shall cooperate with Seller with
respect to Seller's acquisition of such rights-of-way and
easements.
The parties' duly authorized agents or representatives
shall, at all reasonable hours, have access to the premises of
Seller or Buyer for the purpose of (i) inspecting the operation
of the Plant, and (ii) inspection all records and documents
relating to the energy generated by Seller at the Plant delivered
to Buyer's system.
The parties agree that they will not construct any
facilities or structures or engage in any activities that will
materially interfere with the rights granted to the parties under
this Agreement, subject to the provisions of Article IX.
Article XVI. Force Majeure
The term "force majeure" as used herein, shall include,
but not be limited to, acts of God, defects in the design or
manufacture of the gas turbine generator rotor and stator, steam
turbine rotor, steam turbine generator rotor and stator, and main
transformers of the Plant (but only where such defect was not
reasonably discoverable by the party claiming force majeure and
Seller provides supporting documentation to Buyer regarding such
defect), fires, floods, storms, strikes, labor disputes, riots,
insurrections, acts of war (whether declared or otherwise), acts
of governmental, regulatory, or judicial bodies, or any other
causes beyond the reasonable control of and without the fault or
negligence of the party claiming force majeure.
Except as otherwise provided, if because of force
majeure either party is rendered wholly or partly unable to
perform its obligations under this Agreement, except for the
obligation to make payments of money, that party shall be excused
from whatever performance is affected by the force majeure to the
extent so affected, provided, however, that such event shall not
affect the rates applicable to Seller under Article V; provided
further that:
(a) The non-performing party, within fourteen (14)
days after it becomes aware or should have become aware that it
would be unable to perform, gives the other party written notice
describing the particulars of the occurrence;
(b) The suspension of performance is of no greater
scope and of no longer duration than is required by the force
majeure;
(c) No obligations of either party which arose before
the occurrence causing the suspension of performance are excused
as a result of the occurrence; and
(d) The non-performing party endeavors to remedy its
inability to perform. This subparagraph shall not require the
settlement of any strike, walkout, lockout or other labor dispute
on terms which, in the sole judgment of the party involved in the
dispute, are contrary to its interest. It is understood and
agreed that the settlement of strikes, walkouts, lockouts or
other labor disputes shall be entirely within the discretion of
the party having the difficulty.
Article XVII. Assignment or Transfer
Neither this Agreement nor any rights hereunder may be
assigned or transferred, by operation of law or otherwise, by
Seller without the prior written consent of Buyer, which consent
shall not be unreasonably withheld, except as provided
hereinafter. Other than for collateral security purposes in
connection with the financing or refinancing of the Plant, if the
Plant is to be sold, assigned or transferred to any entity, this
Agreement shall be assigned to and assumed by the purchaser,
assignee or transferee in accordance with this Article as a
condition to the effectiveness of the sale, assignment or
transfer.
Upon fifteen (15) days' prior written notice to Buyer,
Seller may, without the consent of Buyer, assign this Agreement
for collateral security purposes in connection with the financing
or refinancing of the Plant. Such prior notice to Buyer shall
specify the entity to whom payments under Article IV are to be
made subsequent to the effective date of the assignment.
If Seller has not been notified in writing by Buyer
that Seller is in breach of this Agreement under Article XIII,
Seller may also assign this Agreement without the consent of
Buyer, subject to the following conditions. Seller shall provide
at least thirty (30) days' prior to the effective date of the
proposed assignment: (1) an assignment and assumption agreement
duly executed by Seller and the assignee in the form of Exhibit C
hereto, providing that the assignee unconditionally assumes, and
agrees to be bound by, all of the terms and conditions of this
Agreement, and whereby the assignee makes certain additional
representations, warranties and covenants, and, upon request, (2)
a favorable opinion of counsel for the assignee respecting the
matters set forth in item (1) above in the form of Exhibit D
hereto.
Article XVIII. Approval of Agreement
Each party to this Agreement acknowledges that the
effectiveness of this Agreement, other than the provisions of
Article XXI, paragraph (k), is conditioned upon approval by the
Commission.
After execution of this Agreement by the parties, Buyer
promptly shall submit this Agreement to the Commission for its
approval and for authorization to recover all payments to Seller
by Buyer hereunder through Buyer's fuel adjustment clause.
In the event that the Commission conditions its
approval of this Agreement on any change to this Agreement
(including the Exhibits thereto), this Agreement shall become
effective only upon agreement of the parties to the change or
changes required by the Commission. In the event the Commission
disapproves this Agreement or conditions its approval of this
Agreement to provide for less than full recovery by Buyer,
through its fuel adjustment clause, of any payments made by Buyer
to Seller under this Agreement, then this Agreement shall become
null and void without either party becoming liable to the other;
provided, however, that this provision does not constitute a
waiver by Seller of the right to appeal or challenge any order
disapproving or conditionally approving this Agreement or of its
right to have this Agreement become effective if such appeal or
challenge is successful.
Article XIX. Amendments, Approval of Amendments
This Agreement shall not be amended unless such
amendment shall be in writing and signed by the parties. Any
such amendment shall not become effective as to the parties or
their successors unless and until such amendment is approved by
the Commission.
In the event that the Commission conditions its
approval of any amendment on any change to such an amendment or
to this Agreement, the proposed amendment shall become effective
only upon agreement of the parties to the changes required by the
Commission. In the event the Commission disapproves the
amendment, such amendment shall become null and void without
either party becoming liable to the other; provided, however,
that this provision does not constitute a waiver by Seller of the
right to appeal or challenge any order disapproving or
conditionally approving such an amendment, or of its right to
have the amendment become effective if such challenge or appeal
is successful.
Approval of any amendment by the Commission pursuant to
this Article must be accompanied by authorization by the
Commission of the full recovery through Buyer's fuel adjustment
clause of all payments to Seller by Buyer under this Agreement
relating to such amendment.
Article XX. Applicable Avoided Cost Payments Upon Termination
In the circumstances described below, Seller shall pay
to Buyer the cumulative positive difference, with interest at the
contract interest rate specified in Article VI, of (A) the
payments made by Buyer to purchase Seller's electricity, minus
(B) the amount Buyer would have paid to Seller if the same amount
of electricity had been purchased at a rate equal to Buyer's
applicable avoided cost:
(a) If, after the Commercial Operation Date, Buyer
shall terminate this Agreement pursuant to Article XIII. Breach;
Cure; Dispute Resolution, or due to any other material breach of
this Agreement by Seller giving rise to a right of Buyer to
terminate this Agreement, the above stated payment shall be made
after such termination and the applicable avoided cost shall be
Buyer's short-run avoided costs as defined in Exhibit H at the
time the electricity was delivered.
(b) If Seller shall terminate this Agreement pursuant
to Article IX. Rearrangement, Relocation, Retirement or
Abandonment of Buyer's Facilities, the above stated payment shall
be made after such termination and the applicable avoided cost
shall be Buyer's long-run avoided cost as estimated by the
Commission in its 1988 Order in Case 28962.
Article XXI. Miscellaneous Provisions
(a) Binding Effect. This Agreement and any extension
shall inure to the benefit of and, other than assigns pursuant to
an assignment for collateral security related purposes in
connection with financing or refinancing the Plant pursuant to
Article XVII, shall be binding upon the parties and their
respective successors and assigns.
(b) Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all
of which shall constitute but one and the same instrument.
(c) Notices. Where written notice is required by this
Agreement, all notices, certificates or other communications
hereunder shall be in writing and shall be deemed given when
mailed by United States registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
(1) To Seller:
President
Saranac Energy Company, Inc.
Five Post Oak Park
Suite 1400
Houston, Texas 77027
(2) To Buyer:
Vice President Marketing Services
New York State Electric & Gas Corporation
4500 Vestal Parkway East
P.O. Box 3607
Binghamton, New York 13902-3607
or to such other and different address as may be designated by
the parties.
(d) Prior Agreements Superseded. This Agreement shall
completely and fully supersede all other prior understandings or
agreements, both written and oral, between the parties relating
to the subject matter hereof.
(e) Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York.
(f) Waiver. No delay or omission in the exercise of
any right under this Agreement shall impair any such right or
shall be taken, construed or considered as a waiver or
relinquishment thereof, but any such right may be exercised from
time to time and as often as may be deemed expedient. In the
event that any agreement or covenant herein shall be breached and
thereafter waived, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other
breach hereunder.
(g) Fuel Supply Contract. Within six (6) months from
the date of Commission approval of this Agreement pursuant to
Article XVII, or within six (6) months from the date of approval
of the application of Seller or its affiliate for authorization
to construct the natural gas pipeline from the United States-
Canada border to the Plant pursuant to Article VII of the New
York Public Service Law ("Gas Pipeline Approval"), whichever is
later but in no event less than six (6) months prior to the
Commencement Date, Seller shall provide Buyer with the material
terms proposed for the fuel supply and transmission contracts for
the Plant. As soon as reasonably possible after receipt of the
contract terms, Buyer shall advise Seller of the date, not to
exceed ninety (90) days, after receipt by Buyer of such
contracts, by which Buyer shall determine whether Seller's fuel
supply and transmission contract terms demonstrate that Buyer can
reasonably expect that Seller will operate the Plant for the term
of this Agreement. Buyer shall make this determination based on
various factors which shall include, but not be limited to, the
following:
(a) term of fuel supply and transmission contracts;
(b) price of fuel supply;
(c) quantity/quality of fuel supply;
(d) availability of fuel supply;
(e) transmission/curtailment of fuel deliveries; and
(f) assumability/assignment of fuel supply and
transmission contracts by Buyer.
Prior to the date of the closing of construction
financing, Seller shall supply Buyer with copies of the
unexecuted fuel supply and transmission contracts for the Plant.
Within thirty (30) days of receiving such contracts, Buyer shall
notify Seller (1) whether the terms of such contracts are, in any
respect material to the above determination, different from the
terms that Buyer previously reviewed pursuant to this paragraph
(g) and (2) which provisions are different, and (3) in what
respect those provisions are different.
If Buyer fails to provide its assessment of the
proposed contract terms within ninety (90) days of receipt of
such proposed terms, or if Buyer fails to notify Seller whether
the unexecuted final contracts are different in any material
respect from the proposed terms within thirty (30) days of
receipt of such contracts, then the proposed terms or actual
contracts, as the case may be, shall be deemed sufficient. If
Buyer reasonably determines that the unexecuted contracts do
differ in some material respect from the proposed contract terms,
Buyer shall have an additional ninety (90) days to complete its
assessment of such different terms. Buyer agrees that if the
terms of the actual contracts are not in any material respect
inferior to or different from the proposed contract terms
previously deemed sufficient by Buyer, the Buyer shall have no
right to object to such actual fuel supply and transmission
contracts.
The parties contemplate that the submission of proposed
contract terms may be piecemeal, and may be repeated by the
submission of new and different proposed contract terms, in whole
or in part, prior to submission of unexecuted contracts. In such
event, Buyer will assess such partial or substitute proposed
contract terms in the manner and on the schedule set out above.
Seller hereby agrees to reimburse Buyer for the costs
of engaging consultants selected by Buyer if use of such
consultants to assess proposed contract terms or review
unexecuted contracts is necessary to expedite the assessment and
review process. In the event of a dispute regarding Buyer's
evaluation of Seller's fuel supply and transmission contracts
pursuant to this paragraph (g), such disputes shall be subject to
Commission review.
On or before seven (7) days after the date of the
closing of construction financing, Seller shall supply Buyer with
copies of the fully executed fuel supply and transmission
contracts for the Plant. Notwithstanding any other provision of
this Agreement, Buyer may object to the fully executed fuel
supply and transmission contracts under the same standards
established for the proposed terms originally provided to Buyer,
if and only if such executed contracts are not in all material
respects comparable to the unexecuted contracts previously
provided to Buyer. Seller shall also provide Buyer promptly with
any and all amendments, modifications and/or revisions to such
contracts.
In the event that the Seller is unable to comply with
the requirement of this Paragraph, this Agreement shall at the
option of the Buyer become null and void without liability or any
description, kind or nature whatsoever by either party to the
other.
All fuel supply and transportation contract
information, specifically designated as confidential and
proprietary at the time it is provided, shall remain the property
of and shall be returned to the providing party when this
Agreement is terminated. Any such confidential or proprietary
information disclosed by either of the parties to the other party
shall be regarded as strictly confidential and shall not, without
the specific prior written consent of the providing party in each
instance, be disclosed to any third party.
Confidentiality or proprietary status shall not apply
to such information if a party can show that:
(1) At any time of disclosure such information was
readily available to the public; or
(2) Subsequent to the time of disclosure such
information became readily available to the public
through no fault of the receiving party; or
(3) Such information has been made known to the
receiving party by a third party in accordance
with such third party's rights without any
restriction on disclosing; or
(4) Such information was in the receiving party's
possession prior to disclosure thereof to the
receiving party by the providing party.
Further, such information may be disclosed as required
by law or regulatory authority exercising jurisdiction over the
receiving party; provided, however, the receiving party shall use
its best efforts to preserve the privileged status of the
confidential and proprietary information through any lawful means
available.
(h) Construction and Commercial Operations. The
Seller must commence construction of the Plant no later than
thirty-six (36) months after the later of (1) Commission approval
of this Agreement pursuant to Article XVIII or (2) Gas Pipeline
Approval. The Commencement Date must occur no later than sixty
(60) months after Commission approval of this Agreement pursuant
to Article XVIII. Seller's obligation to commence construction
and achieve the Commencement Date no later than the
aforementioned milestones shall not be suspended due to force
majeure pursuant to Article XVI. In the event that the Seller is
unable to comply with the requirements of this Paragraph, this
Agreement shall at the option of the Buyer become null and void
without liability of any description, kind or nature whatsoever
by one party to the other.
(i) Deposit. Within six (6) months from the date of
commission approval of this Agreement pursuant to Article XVIII,
the Seller shall post with the Buyer a deposit of $4 for each KW
of Plant capacity -- 79,800 KW ($319,200). Within eighteen (18)
months from the date of approval of this Agreement pursuant to
Article XVIII, the Seller shall post with the Buyer an additional
deposit of $6 for each KW of Plant capacity ($478,800). Not
later than the last day for commencement of construction
specified by Article XXI(h), and in no event later than the last
day of the fifty-second (52nd) month following Commission
approval of this Agreement, the Seller shall post an additional
deposit of $5 for each KW of Plant capacity ($399,000). All such
deposits shall hereinafter be referred to collectively as the
"Deposit." The Deposit shall be in the form of cash or an
irrevocable letter of credit, mutually satisfactory in form and
content to Buyer and Seller under the standards of the
Commission's Opinion and Order Establishing Milestone and
Contract Conversion Procedures (Opinion No. 88-28 issued
November 10, 1988), from a financial institution rated at least
AA for a term that extends ten days beyond the scheduled
Commercial Operation Date of the Plant. If the Deposit is in
cash, the Buyer will hold the Deposit in escrow and invest it in
the Certificate of Deposit or U.S. Treasury Bill of the Seller's
choice; provided, however, the instrument must mature on or
before the Commercial Operation Date of the Plant. The Deposit
will be refunded, with interest, when the Plant achieves the
Commercial Operation Date. In the event that the Seller is
unable to comply with the requirement of this Paragraph, this
Agreement shall at the option of the Buyer become null and void
without liability of any description, kind or nature whatsoever
by Buyer to Seller. Buyer understands that Seller will seek from
the Commission the right to a refund of the deposit in the event
that Gas Pipeline Approval is denied.
(j) Usury Savings Clause. If any provision of this
Agreement or the Exhibits hereto calling for the payment of
interest shall require the payment of an amount of interest that
would be in excess of the maximum amount allowed by applicable
law, then the provision shall be interpreted and applied,
automatically and without further action by the parties thereto,
to require payment of not more than the maximum amount permitted
by applicable law.
(k) Interconnection Costs Reimbursement. In the event
Seller requests Buyer to perform any work, studies or analysis
for purposes of determining the interconnection or other
requirements necessary for the parties to perform their
obligations under this Agreement, Buyer shall perform such work,
studies or analysis and shall be reimbursed by Seller for costs
incurred therewith. The parties agree that this provision shall
be binding and effective without regard to any other provision of
this Agreement.
IN WITNESS WHEREOF, the Seller and Buyer have caused
this Agreement to be executed by their proper officers thereunto
duly authorized and their respective corporate seals to be
hereunto affixed and attested as of the date first above written.
IN WITNESS WHEREOF, the Seller and Buyer have caused
this Agreement to be executed by their proper officers thereunto
duly authorized and their respective corporate seals to be
hereunto affixed and attested as of the date first above written.
SARANAC ENERGY COMPANY, INC.
Attest:
By: __/s/ Melanie Gooch______ By: _/s/ David H. Dewhurst____
Name:Mwlanie Gooch Name: David H. Dewhurst
Title: Corporate Secretary Title: President
NEW YORK STATE ELECTRIC & GAS
CORPORATION
Attest:
By: /s/ D.W. Farley By: _/s/ B. M. Rider______
Name: D.W. Farley Name: B. M. Rider
Title: Corporate Secretary Title: Senior Vice President
STATE OF TEXAS )
) ss:
COUNTY OF HARRIS )
On this 26th day of April, 1990, before me personally
came David H. Dewhurst, to me personally known, who, being by me
duly sworn, did depose and say that he resides at 1121 H Post Oak
Park, Houston, Texas, and that he is the President of SARANAC
ENERGY COMPANY, INC. the corporation named in and which executed
the foregoing instrument; that he knows the corporate seal of
said corporation; that the seal affixed to said instrument is the
corporate seal of said corporation; that said seal was affixed to
said instrument on behalf of said corporation by authority of its
Board of Directors or By-Laws; and that he signed his name
thereto by like authority.
__/s/________________________
STATE OF NEW YORK )
) ss:
COUNTY OF BROOME )
On this 27th day of April, 1990, before me personally
came Bernard M. Rider, to me personally known, who, being by me
duly sworn, did depose and say that he resides at 23 Crescent
Drive, Apalachin, N.Y., and that he is a Senior Vice President of
NEW YORK STATE ELECTRIC & GAS CORPORATION, the corporation named
in and which executed the foregoing instrument; that he knows the
corporate seal of said corporation; that the seal affixed to said
instrument is the corporate seal of said corporation; that said
seal was affixed to said instrument on behalf of said corporation
by authority of its Board of Directors or By-Laws; and that he
signed his name thereto by like authority.
_/s/ Jeanette F. Holbert__
AMENDMENT NO. 1 TO
POWER PURCHASE AGREEMENT
BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION
AND
SARANAC ENERGY COMPANY, INC.
This Amendment No. 1 made the 29th day of August, 1991
by and between New York State Electric & Gas Corporation
("Buyer"), a corporation organized under the Transportation
Corporations Law of the State of New York, and Saranac Energy
Company, Inc. ("Seller"), a corporation organized under the law
of the State of Texas, hereby amends that certain power purchase
agreement between Buyer and Seller, dated as of April 27, 1990
(the "Agreement").
WITNESSETH:
WHEREAS, Buyer and Seller entered into the Agreement
and, pursuant to the terms thereof, submitted the Agreement to
the Public Service Commission ("Commission") for approval and for
authority to recover all direct power purchase costs incurred
under the Agreement pursuant to the Buyer's fuel adjustment
clause; and
WHEREAS, the Commission, by an Order Approving
Contracts Subject to Conditions, dated March 5, 1991 ("Order"),
approved the Agreement contingent upon certain conditions and
subsequently issued an Order Granting Rehearing in Part and
Directing Filing of a Contract Supplement, dated July 12, 1991
("Rehearing Order"), which, among other things, directed the
filing of a contract supplement within forty-five (45) days of
the Rehearing Order that would implement the Commission's
directives in the Rehearing Order and Order (to the extent
consistent with the Rehearing Order); and
WHEREAS, the Order and Rehearing Order state that Buyer
shall be permitted to recover all direct purchase costs incurred
pursuant to the Agreement, as modified pursuant to the Order and
Rehearing Order; and
WHEREAS, Buyer and Seller desire to amend the Agreement
in order to comply with the directives of the Order and Rehearing
Order.
NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration given one party to the
other, the sufficiency of which each party acknowledges, Buyer
and Seller agree as follows:
1. In order to reflect Seller's decision to develop a
single, consolidated project at the site of the Georgia-Pacific
Corporation in Plattsburgh, N.Y. in accordance with the Rehearing
Order, the following modifications are made to the Agreement:
a. The second WHEREAS clause on page 1 of the
Agreement is deleted in its entirety and replaced with the
following:
WHEREAS, Saranac Energy Company, Inc., (or
its assignee pursuant to Article XVII of this
Agreement) ("Seller"), proposes to construct, own,
and operate a natural gas fired cogeneration plant
and appurtenant facilities located in Clinton
County, New York as more specifically defined in
exhibit A "site plan" (the "Plant"), which is
designed to generate nominally 225 MW but not to
exceed 240 MW of capacity (net of station uses)
and to generate approximately 1,971,000 MWH of
electric energy annually (individually and
collectively referred to as "electricity") for
delivery to the electric system of Buyer with
which the Plant will be physically interconnected
to the extent committed under Article III of this
Agreement; and
b. The WHEREAS clause carrying over from page 1 to
page 2 of the Agreement is deleted in its entirety and replaced
with the following:
WHEREAS, the Plant will be a qualifying
facility under the Federal Power Act, as amended
by the Public Utility Regulatory Policies Act of
1978 ("PURPA"), as defined in 16 U.S.C. Section
796, and the regulations promulgated thereunder as
in effect on the date of this Agreement, except
that the Plant shall be required to comply with
amendments to said law and regulations
specifically made retroactive to the Plant; and
c. The last WHEREAS clause on page 2 of the Agreement
is revised to read as follows:
WHEREAS, Buyer, pursuant to the Order and
Rehearing Order, agrees to purchase electricity
generated by the Plant on the terms and conditions
set forth herein and therefore is willing to enter
into this Agreement with Seller.
d. Subparagraph (b) of Section 1.1 of Article I of the
Agreement is deleted in its entirety and replaced with the
following:
(b) Seller represents, covenants and
warrants that if the Plant is constructed, Seller
shall own and operate the Plant during the term of
this Agreement and that the Plant will have a
nominal rated capacity of approximately 225 MW and
in no event will exceed 240 MW of capacity (net of
station uses) and is projected to generate
approximately 1,971,000 MWH of electric energy
annually, and that this Agreement shall be binding
for the term hereof on Seller. Seller represents
and further warrants that, at the time of the
Commercial Operation Date (as herein defined) of
the Plant and at all times hereafter during the
term of this Agreement, the Plant will be a
qualifying facility under the Federal Power Act,
as amended by PURPA, and the regulations
promulgated thereunder as in effect on the date of
this Agreement, except that the Plant shall be
required to comply with amendments to said law and
regulations specifically made retroactive to the
Plant.
e. Subparagraph (e) of Article XIII of the Agreement
is deleted in its entirety and replaced with the following:
(e) The rights of lenders to Seller to cure
a breach of any obligation of Seller not
enumerated in this Article XIII and/or to
forestall termination of this Agreement by Buyer
for a material breach of this Agreement by Seller
not enumerated in this Article XIII are addressed
in the Security exhibit to this Agreement.
2. Subparagraph (c) of Section 1.1 of Article I of the
Agreement is deleted in its entirety and replaced with the
following:
(c) Seller represents, covenants and
warrants that, to the best of Seller's knowledge,
information and belief then available at the time
of the Commercial Operation Data of the Plant.
Seller will be in material compliance with, all
laws, judicial and administrative orders, rules
and regulations, with respect to the ownership and
operation of the Plant, including but not limited
to the following: all requirements to obtain and
comply with the conditions of any applicable
certificates, licenses, permits, and governmental
approvals; the requirements of the Order and
Rehearing Order; the filing of all applicable
environmental impact analyses; and, if applicable
and required by law, the mitigation of
demonstrable environmental impacts.
3. Section 1.3 of Article I of the Agreement is
deleted in its entirety and replaced with the following:
On or before October 10, 1991, each party
shall furnish the other a favorable opinion of its
counsel, in the form of Exhibits F and G, and
otherwise in compliance with the Commission's
"Order Approving Contracts Subject to Conditions,"
issued March 5, 1991, and "Order Granting
Rehearing in Part and Directing Filing of a
Contract Supplement," issued July 12, 1991,
respecting certain representations made by the
party furnishing the opinion.
4. In order to comply with the Commission's directive
that language providing that the Commission will arbitrate
contract breach disputes and fuel supply/transportation disputes
be deleted, the following modifications are made to the
Agreement:
a. The phrase "subject to the dispute resolution
procedure in Article XIII(c)" is deleted from the carry over
sentence on the bottom of page 17 of the Agreement and is
replaced with the phrase "subject to the Seller's right to
petition the Commission for a determination that such facts are
necessary."
b. Subparagraph (a) of Article XIII of the
Agreement is deleted in its entirety and replaced with the
following:
(a) The sale by Seller to a party, or diversion
by Seller for electricity committed to Buyer by
under Article III without the approval of Buyer,
shall constitute a breach, as a result of which
breach Buyer may, in its discretion, upon sixty
(60) days' written notice to Seller specifying the
reason(s) and the basis for terminating the
Agreement, treat the Agreement as terminated and
all obligations to purchase and pay for
electricity (other than electricity provided prior
to the date of termination) extinguished;
provided, however, that such notice must be sent
within (1) year after actual discovery by Buyer of
the facts giving rise to the claim of breach. The
rights of lenders to Seller to cure such a breach
and/or to forestall termination by Buyer pursuant
to this paragraph are addressed in the Security
exhibit to this Agreement.
c. Subparagraph (b) of Article XIII of the Agreement
is deleted in its entirety and replaced with the following:
(b) Upon the discovery, by a party either
that a material, factual representation made in
this Agreement by the other party as a basis for
the party's willingness to enter into this
Agreement, or made by such other party's assignee,
has been falsely made and the falsehood was made
wilfully, knowingly or with a reckless disregard
for its truth or falsity, or that a material
warranty under Article I of this Agreement has
been wilfully and knowingly breached, the party
may terminate this Agreement; provided, however,
that the party seeking to terminate the Agreement
must terminate the Agreement within one (1) year
after actual discovery by that party of the facts
giving rise to the claim herein. The rights of
lenders to Seller to cure such breach and/or to
forestall termination by Buyer pursuant to this
paragraph are addressed in the Security exhibit to
this Agreement.
d. Subparagraph (c) of Article XIII of the Agreement
is deleted in its entirety and replaced with the following:
(c) Under events 1-7 enumerated below, the
identified act, failure or omission by Seller or
Buyer will constitute a breach of this Agreement.
Seller or Buyer shall notify the other party in
writing, which notice shall specify the nature of
the act, failure or omission and the evidence
supporting the claim; provided, however, that such
notice must be sent within one (1) year after
actual discovery by the party seeking to terminate
this Agreement of the facts giving rise to the
claim herein. Following such notice, the other
party and, in the case of breach by Seller,
Seller's secured lenders, shall have a sixty (60)
day period in which to cure the act, failure or
omission, or, if the breach cannot be cured
through diligent action within the sixty (60) day
period, to work diligently to cure the breach. In
the latter event, the breaching party shall notify
the party alleging the breach of the additional
period necessary to cure the breach, and the party
alleging the breach shall either agree with such
additional period as the non-breaching party
believes is reasonable or disagree in writing with
the additional requested period within seven (7)
working days of receipt of notice from the party
alleged to be in breach. In the event the party
alleged to be in breach fails to cure either
within (a) said sixty (60) day period, (b) seven
(7) working days of receipt by the party alleged
to be in breach of written notice from the non-
breaching party that the non-breaching party does
not accept the extension of the cure period
claimed to be necessary by the party alleged to be
in breach, or (c) the additional necessary period
agreed to in writing by the non-breaching party,
this Agreement may be terminated by the party
alleging the breach. Upon such termination, all
further obligations to pay any amounts previously
owed to the other party) shall be extinguished:
1. An assignment of this Agreement or any rights
created by it is made in violation of the
provisions of Article XVII.
2. A failure to Comply with any material
provision of either Article XI or the Buyer's
Bulletin described in Article VIII.
3. A failure to grant or obtain rights-of-way or
easements or to execute documents as required
by this Agreement.
4. A failure by one party to make payments when
due, when such payments due reach a level
which cannot be offset by any payments due
and owing that party by the other party for
services rendered, equipment supplied or
electricity purchased in any one month.
5. A failure to maintain, or an intentional or
knowing material impairment of, any security
which is provided to secure payments for
electricity, including, but not limited to,
any refusal to surrender possession of the
Plant pursuant to a security provision
granting Buyer a right to possession.
6. A failure by Seller for a period of sixty
(60) days to use good faith efforts to resume
the delivery of electricity pursuant to this
Agreement after the Plant has ceased
operating.
7. A failure by Seller to deliver to Buyer an
accurately executed "Independent Power
Producer Generator Notice," Buyer's Form NB
232, within ninety (90) days from the date of
execution of the Agreement.
The rights of lenders to Seller to cure such
a breach and/or to forestall termination
pursuant to this paragraph (c) are addressed
in the Security exhibit to this Agreement.
5. In order to comply with the Commission's
directives relative to the timing of the submission of a fuel
supply contract and relative to the settlement of disputes
regarding the adequacy of fuel supply and transmission
arrangements, the texts of the first six paragraphs of
subparagraph (g) of Article XXI of the Agreement are deleted in
their entirety and replaced with the following:
(g) At any time after the execution hereof,
seller may provide Buyer with the material terms
or unexecuted contracts proposed for the fuel
supply and transmission contracts for the Plant.
As soon as reasonably possible after receipt of
such contracts or terms, Buyer shall advise Seller
of the date, not to exceed ninety (90) days after
receipt by Buyer of such contracts or terms, by
which Buyer shall determine whether Seller's fuel
supply and transmission contracts or terms
demonstrate that Buyer can reasonably expect that
Seller will operate the Plant for the term of this
Agreement. Buyer shall make this determination
based on various factors which shall include, but
not be limited to, the following:
(a) term of fuel supply and transmission
contracts;
(b) price of fuel supply;
(c) quantity/quality of fuel supply;
(d) availability of fuel supply;
(e) transmission/curtailment of fuel deliveries;
and
(f) assumability/assignment of fuel supply and
transmission contracts by Buyer.
Prior to the last day on which Seller is
permitted to commence construction under Article
XXI(h), hereof, Seller shall supply Buyer with
copies of the executed fuel supply and
transmission contracts for the Plant. Provided
Buyer has previously reviewed material terms or
unexecuted contracts, then within thirty (30) days
of receiving such executed contracts, Buyer shall
notify Seller (1) whether the terms of such
contracts are, in any respect material to the
above determination, different from the contracts
or terms that Buyer previously reviewed pursuant
to this paragraph (g), (2) which provisions are
different, and (3) in, what respect those
provisions are different.
If Buyer fails to provide its assessment of
the proposed contracts or terms within ninety (90)
days of receipt of such proposed contracts or
terms, or if Buyer has previously reviewed
material terms or unexecuted contracts and Buyer
fails to notify Seller whether the executed final
contracts are different in any material respect
from the proposed terms within thirty (30) days of
receipt of such executed contracts, then the
proposed terms or executed contracts, as the case
may be, shall be deemed sufficient. If Buyer
reasonably determines that the executed contracts
do differ in some material respect from the
proposed contracts or terms, Buyer shall have an
additional ninety (90) days to complete its
assessment of such different terms. Buyer agrees
that if the terms of the executed contracts are
not in any material respect inferior to or
different from the proposed contracts or terms
previously deemed sufficient by Buyer, the Buyer
shall have no right to object to such executed
fuel supply and transmission contracts.
The parties contemplate that the submission
of proposed contracts or terms may be piecemeal,
and may be repeated by the submission of new and
different proposed contracts or terms, in whole or
in part, prior to submission of executed
contracts. In such event, Buyer will assess such
partial or substitute proposed contracts or terms
in the manner and on the schedule set out above.
Seller hereby agrees to reimburse Buyer for
the costs of engaging consultants selected by
Buyer if use of such consultants to assess
proposed contract terms or review contracts is
necessary to expedite the assessment and review
process.
On or before the last day on which Seller is
permitted to commence construction under Article
XXI(h), hereof, Seller shall supply Buyer with
copies of the fully executed fuel supply and
transmission contracts for the Plant.
Notwithstanding any other provision of this
Agreement, Buyer may object to the fully executed
fuel supply and transmission contracts under the
same standards established for the proposed terms
originally provided to Buyer, if and only if such
executed contracts are not in all material
respects comparable to the material terms or
unexecuted contracts previously provided to Buyer.
Seller shall also provide Buyer promptly with
any and all amendments, modifications and/or
revisions to such contracts.
6. Subparagraph (a) of Article XIV on page 42 of the
Agreement is deleted in its entirety and replaced with the
following:
(a) Commercial general liability
insurance in the amount of at least
$5,000,000 per occurrence for bodily
injury and property damage resulting
from the operation of Seller's
facilities; and
7. The text of Article XIX of the Agreement shall be
deleted in its entirety and shall be replaced with the following:
Any amendment of this Agreement shall
not be effective unless such amendment
shall be in writing and executed by
Seller and Buyer.
8. In order to comply with the Commission's directive
relative to the commencement of construction and commercial
operation milestones, the following modifications are made to the
Agreement:
a. The text of subparagraph (h) of Article
XXI of the Agreement is deleted in its entirety and replaced with
the following:
(h) Construction and Commercial Operation
Seller must commence construction of the Plant no
later than March 5, 1994 and the Plant must
commence commercial operation no later than March
5, 1996. Seller's obligation to commence
construction and commercial operation of the Plant
no later than the aforementioned milestone dates
shall not be suspended due to force majeure
pursuant to Article XVI. Seller may extend the
commencement of construction date of March 5, 1994
by posting additional deposits as provided by
subparagraph (i) of this Article XXI. Seller may
extend the commencement of commercial operation
date of March 5, 1996 by forfeiting portion of the
Deposits posted, as provided by subparagraph (i)
of this Article XXI. In the event Seller is
unable to comply with either milestone date
established herein, as said milestone date may be
extended pursuant to the terms of this Article
XXI, this Agreement shall, at the option of Buyer,
become null and void without liability of any
description, kind, or nature whatsoever by one
party to the other, and any Deposit posted shall
be deemed forfeited to Buyer, and Buyer may retain
any cash and enforce collection upon any letter of
credit.
b. The text of subparagraph (i) of Article
XXI of the Agreement is deleted in its entirety and replaced with
the following:
(i) Deposit
On or before September .5, 1991, the Seller shall
post with the Buyer a deposit of $4 for each KW of
Plant capacity - 240 MW ($960,000). On or before
September 5, 1992, the Seller shall post with the
Buyer an additional deposit of $6 for each KW of
Plant capacity - 240 MW ($1,440,000). On or
before March 5, 1994, the Seller shall post a
final deposit of $5 for each KW of Plant capacity-
240,000 MW ($1,200,000).
All such deposits posted pursuant to the terms of
this subparaqraph(i) shall hereinafter be referred
to collectively as the "Deposit." The Deposit
shall be in the form of cash or an irrevocable
letter of credit, mutually satisfactory in form
and content to Buyer and Seller under the
standards of the Commission's Opinion and Order
Establishing Milestone and Contract Conversion
Procedures (Opinion No. 88-28, issued November 10,
1988), from a financial institution rated at least
AA for a term that extends at least ten (10) days
beyond the commercial operation milestone date of
March 5, 1996, or ten (10) days beyond any
extension of said commercial operation milestone
date pursuant to the provisions of this
subparagraph (i).
If the Deposit is in cash, the Buyer will hold the
Deposit in escrow and invest it in the Certificate
of Deposit or U.S. Treasury Bill of the Seller's
choice; provided, however, the instrument must
mature on that date that is at least ten (10) days
after the commercial operation milestone date of
March 5, 1996, as that date may be extended
pursuant to the provisions of this subparagraph
(i).
If Seller fails to post any Deposit as required by
the terms of this subparagraph (i), this Agreement
shall at the option of Buyer become null and void
without any liability of any description, kind or
nature whatsoever by Buyer to Seller, and any
Deposit posted shall be deemed forfeited to Buyer,
and Buyer may retain any cash, exclusive of
accrued interest which shall be returned to Seller
on demand, and enforce and collect upon any letter
of credit. Seller's Deposit obligations under
this subparagraph (i) shall not be suspended due
to force majeure pursuant to Article XVI of this
Agreement.
Except for amounts forfeited to obtain an
extension of the commercial operation milestone
date, any Deposits will be refunded, with accrued
interest, and any letter of credit withdrawn, if
the Plant commences commercial operation on or
before the commercial operation milestone date, as
that date may be extended pursuant to the
provisions of this subparagraph (i).
In the event Seller fails to commence construction
of the Plant on or before March 5, 1994, Seller
may elect to secure monthly extensions of that
milestone date, up to a maximum of six (6)
additional months, by posting within seven (7)
business days after March 5, 1994, and within
seven (7) business days of the commencement of
construction milestone date as it is extended by
the prior monthly deposit, additional refundable
deposits in the form of (a) cash, or (b)
irrevocable letter(s) of credit from a financial
institution rated at least AA and in form and
substance satisfactory to Buyer, in an amount
equal to $1 for each kw of Plant capacity - 240 MW
($240,000), for each additional month.
equal to $1 for each kw of Plant capacity - 240 MW
($240,000), for each additional month.
If Seller fails to commence commercial operation
of the Plant on or before March 5, 1996, Seller
may elect to secure monthly extensions of the
commercial operation milestone date, up to a
maximum of twelve (12) additional months, by
forfeiting irrevocably to Buyer a portion of the
Deposit posted in an amount equal to $1 for each
kw of Plant capacity - 240 MW ($240,000) for each
monthly extension of the commercial operation
milestone date.
9. The text of Exhibit A - Project Description to the
Agreement is deleted and replaced with the revised Exhibit A
attached hereto as Appendix I.
10. Exhibit A-3 to the Agreement is deleted in its
entirety and replaced with the following:
Buyer having the responsibility to arrange
for the transmission or wheeling of electricity
generated by the Plant (which will produce
approximately 225 MW of electricity, not to exceed
240 MW net of station uses) to the extent
necessary or desirable for the operation of
Buyer's system after such electricity is delivered
to Buyer pursuant to this Agreement, but both the
probable amount of costs for such transmission and
the responsibility therefor being in dispute
between Buyer and Seller; and Seller requiring a
predetermined liability for such costs in order to
permit financing of the Facility, Buyer and Seller
hereby agree as follows:
1. The terms and conditions set forth in
this Exhibit shall be treated confidentially by
the parties, consistent with applicable legal
requirements, and the parties shall request the
Commission to afford these terms and conditions
trade secret status.
2. If and for so long as Seller is
providing electricity from the Plant to Buyer with
Buyer having the responsibility to arrange and pay
for transmission of up to all of such power to
points outside Buyer's Clinton County service
territory, Seller shall pay to Buyer a Wheeling
Fee calculated in accordance with the following:
If and for so long as Seller is delivering
electricity as described above, one-twelfth of
$4,250,000 per month for the first twelve months
following the Commercial Operation Date.
For each subsequent twelve-month period,
Seller shall pay monthly 105% of the final monthly
payment for the previous twelve-month period. The
monthly payments are illustrated in the following
table:
TABLE A-3
Wheeling Fee
Year Following
Commercial Operation Date Monthly Payment
1 $354,167
2 $371,875
3 $390,469
4 $409,992
5 $430,492
6 $452,016
7 $474,617
8 $498,348
9 $523,265
10 $549,429
11 $576,900
12 $605,745
13 $636,032
14 $667,834
15 $701,226
3. Each monthly payment by Seller shall be
made, in arrears, on or before the first business
day of the following month; and at Buyer's
discretion, if payment has not been received by
Buyer at the time of Buyer's payment to Seller for
power received during the previous billing month,
such monthly payment with interest pursuant to
Article VI of the Agreement from that first
business day may be offset against Buyer's said
monthly payment to Seller. Once begun, payments
under this exhibit, shall be made for a minimum of
two years (twenty-four consecutive months). If
Seller shall fail to make any required payment of
the wheeling Fee to Buyer, Buyer shall notify
lenders to Seller and Seller's parent corporation,
and extend a thirty (30) day grace period to such
entities. Payment of due amounts by any of such
entities shall cure Seller's breach of the
agreement contained in this exhibit and thereby
preserve this agreement concerning transmission
cost payments for Seller; but failure of all such
entities to cure such breach shall not release
Seller from its obligations under the preceding
sentence, and such obligation of Seller shall be
subject to the Security provisions in Exhibit B to
the Agreement.
4. The terms and conditions of this exhibit
are subject to the receipt by Buyer of written
approval by the Commission of the Agreement,
including this exhibit, and assurance from the
Commission that Buyer will be allowed full
recovery of all prudently-incurred transmission or
wheeling costs incurred for transmission or
wheeling of electricity generated by the Plant
during the term of this Agreement over and above
the current Wheeling Fee through Buyer's fuel
adjustment clause; and if such prior rate recovery
authorization is not so received, then this
Agreement, including the terms and conditions set
forth in this exhibit, shall be null and void, in
the same manner as is set forth in Article XVIII.
5. Upon execution of this Agreement, Seller
shall request the Commission to suspend action on
its petition in Case 89-E-171 until Commission
action on this Agreement as a whole, including the
exhibits thereto, and Buyer shall support this
request. Seller shall, upon Commission approval
of the Agreement and this transmission cost
agreement, withdraw its petition pending before
the Commission in Case 89-E-171.
11. The amount of Thirty-Five million dollars
($35,000,000) appearing on pages B-6 and B-8 of the Agreement is
replaced with Thirty Million Five Hundred Thousand Dollars
($30,500,000) dollars.
12. The carry-over paragraph on page B-6 and B-7 of
the Agreement is deleted in its entirety and replaced with the
following:
The above notwithstanding, Seller may refinance
the debt and/or incur additional debt for the
Plant, provided that the principal balance of the
debt resulting from such refinancing and/or
additional financing which has a security interest
in the Plant superior to Buyer's pledge is no
greater than the sum of (i) the principal balance
of the debt for the Plant outstanding at the time
of refinancing (the "Refinancing" portion), and
(ii) such amount as is reasonably required, in the
opinion of an independent engineer, to cause such
repair alterations, modifications or improvements
to the Plant as necessary for the continued
operation of the Plant in compliance with this
Agreement and with changes in the law subsequent
to the Construction Closing Date (any debt
incurred pursuant to clause(ii) above hereinafter
referred to as the "Increased Financing"); and
provided further that, the amortization of the
aggregate amount of principal (a) under such
Refinancing does not extend beyond the original
date for the full amortization of principal for
the debt being refinanced and (b) under such
Increased Financing does not extend beyond the
date on which the term of this Agreement expires.
13. In order to reflect Seller's revised pricing
proposal, the Agreement is modified as follows:
a. The text of the carry over paragraph on page
22 and 23 of the Agreement is deleted in its entirety and
replaced with the following:
In the event that Seller demonstrates to Buyer's
satisfaction that both of the aforesaid options
would render operation of the Plant uneconomic for
the balance of this Agreement, then Seller may
elect to terminate this Agreement upon sixty (60)
days' prior written notice to Buyer, provided that
Seller either (a) has paid to Buyer any positive
balance in the LC Tracking Account and all other
amounts due Buyer under this Agreement, or (b)
agrees to reimburse Buyer monthly the amount by
which Buyer's actual reasonably incurred cost for
replacement electricity exceeds the amount that
Buyer would have paid to Seller under this
Agreement in a reasonable and mutually
satisfactory manner, and has paid all other
amounts due to Buyer under this Agreement.
b. The text of Article XX shall be deleted in
its entirety, and the following shall be added to Article XIII of
the Agreement:
(f) If Buyer shall terminate this Agreement
pursuant to Article XIII, or due to any other
material breach of this Agreement by Seller
giving rise to a right of Buyer to terminate
this Agreement, Seller shall pay to Buyer the
cumulative positive difference, with interest
at the contract interest rate specified in
Article VII, of (A) the payments made by
Buyer to purchase Seller's electricity, minus
(B) the amount Buyer would have paid to
Seller if the same amount of electricity had
been purchased at a rate equal to Buyer's
short-run avoided cost as defined in Exhibit
H at the time the electricity was delivered.
c. Pages B-29 through and including B-32 are
deleted and replaced with the text attached hereto as Appendix
II.
d. A new paragraph 8, which appears as Appendix
III attached hereto, shall be inserted on page B-20 of the
Agreement.
e. References to Article XX throughout this
Agreement shall be deemed to refer to the new subparagraph (f) of
Article XIII.
f. Article XXI of the Agreement shall be
renumbered as Article XX and any references to Article XXI shall
be read as a reference to the renumbered Article XX.
14. This Amendment No. 1 to the Agreement shall
be submitted to the Commission for its approval. The Agreement,
as modified by Amendment No. 1, shall become effective as to the
Seller and Buyer, in accordance with the provisions of Article
XVIII of the Agreement.
15. Pursuant to ordering clause 2 of the
Rehearing Order, Seller waives all of its right to appeal the
decisions of the Albany County Supreme Court, dated June 12, 1991
in Falcon Seaboard Oil Co. v. Public Service Commission, Slip.
Op. No. 01-90-ST2731.
IN WITNESS WHEREOF, the Seller and Buyer have caused
this Amendment No. 1 to be executed by their proper officers
thereunto duly authorized and their respective corporate seals to
be hereunto affixed and attested as of the date first above
written.
ATTEST: SARANAC ENERGY COMPANY, INC.
By: /s/ Doug Divine By:: /s/ David H. Dewhurst
David H. Dewhurst
President
Name: Doug Divine
Title: Senior Manager
Regulatory Relations
ATTEST: NEW YORK STATE ELECTRIC & GAS
CORPORATION
By: /s/ Delores R. Hix By:: /s/ Jack H. Roskoz
Jack H. Roskoz
Senior Vice President
Name: Dolores R. Hix
Title: ASSISTANT SECRETARY
STATE OF Texas )
) ss.:
COUNTY OF Harris)
On this 29th day of August, 1991, before me personally
came David H. Dewhurst to me personally known, who, being by me
duly sworn, did depose and say that he resides in Houston, Texas,
that he is President of Saranac Energy Company, Inc. the
corporation named in and which executed the foregoing instrument;
that he knows the corporate seal of said corporation; that said
seal was affixed to said instrument on behalf of said corporation
by authority of its Board of Directors or By-Laws; and that he
signed his name thereto by like authority.
/s/ Marty Sutkin
STATE OF NEW YORK)
) ss.:
COUNTY OF BROOME )
On this 30th day of August, 1991, before me personally
came Jack H. Roskoz, to me personally known, who, being by me
duly sworn, did depose and say that he resides in the State of
New York, County of Broome, that he is the Senior Vice President
of New York State Electric & Gas Corporation, the corporation
named in and which executed the foregoing instrument; that he
knows the corporate seal of said corporation; that said seal was
affixed to said instrument on behalf of said corporation by
authority of its Board of Directors or By-Laws; and that he
signed his name thereto by like authority.
/s/ Jeanette F. Fendick
JEANETTE F. FENDICK
Notary Public, State of New York
No. 4648976
Resident in Broome County
My commission expires August 31, 1993
SECOND AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
SARANAC POWER PARTNERS, L.P.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP (the "Agreement") of SARANAC POWER PARTNERS, L.P.
(the "Partnership") is made and entered into as of the 13th day
of May, 1994, by and among SARANAC ENERGY COMPANY, INC., a
Delaware corporation ("SECI"), TPC SARANAC PARTNER ONE, INC., a
Delaware corporation ("TPC One"), TPC SARANAC PARTNER TWO, INC.,
a Delaware corporation ("TPC Two"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation ("GE Capital" or the "GE
Capital Limited Partner").
W I T N E S S E T H:
WHEREAS, SECI is the sole general partner and SECI, TPC
One and TPC Two are the limited partners of the Partnership, a
limited partnership continued pursuant to the Amended and
Restated Agreement of Limited Partnership dated as of
December 29, 1992 (as heretofore amended, supplemented, restated
or otherwise modified, the "Original Partnership Agreement") and
SECI, TPC One and TPC Two desire to amend and restate in its
entirety the Original Partnership Agreement in order to admit GE
Capital as a limited partner of the Partnership; and
WHEREAS, (i) SECI has received distributions pursuant
to the Original Partnership Agreement equal to its capital
contributions, if any, so that its current Capital Account
balance equals the amount of the cash contributions, if any, made
pursuant to Section 8.4 and (ii) TPC One and TPC Two currently
have Capital Account balances in a total aggregate amount of
$20,000 plus the amount of any cash contributions, if any, made
pursuant to Section 3.3 of the Original Partnership Agreement;
and
WHEREAS, pursuant to the Capital Contribution
Agreement, GE Capital shall make a capital contribution to the
Partnership on the Initial Capital Contribution Date in exchange
for the GE Capital Limited Partnership Interest, and agrees,
subject to the terms and conditions set forth therein, to make
additional capital contributions to the Partnership on or before
the Second Capital Contribution Date in respect of the GE Capital
Limited Partnership Interest; and
WHEREAS, pursuant to the Capital Contribution
Agreement, TPC One agrees to make additional capital
contributions to the Partnership on the Initial Capital
Contribution Date and on or before the Tomen Equity Contribution
Date in respect of the TPC One Limited Partnership Interest; and
WHEREAS, pursuant to the Capital Contribution
Agreement, TPC Two agrees to make additional capital
contributions to the Partnership on the Initial Capital
Contribution Date and on or before the Tomen Equity Contribution
Date in respect of the TPC Two Limited Partnership Interest;
NOW, THEREFORE, in consideration of the premises and
the mutual undertakings contained herein, the parties hereto
hereby agree that as of the Initial Capital Contribution Date,
the Partnership shall be continued among SECI, the GE Capital
Limited Partner, TPC One and TPC Two and the Original Partnership
Agreement shall be amended and restated in its entirety as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. (a) Unless otherwise defined
herein, all terms used herein which are defined in Appendix A
shall have the meanings therein assigned to such terms.
(b) All terms defined in this Agreement or in Appendix
A shall have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto.
(c) As used herein and in any certificate or other
document made or delivered pursuant hereto, accounting terms not
defined in Appendix A and accounting terms partly defined in
Appendix A to the extent not defined, shall have the respective
meanings given to them under GAAP.
(d) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and section, appendix, schedule and exhibit
references are to this Agreement unless otherwise specified.
(e) References to agreements defined herein or in
Appendix A shall include such agreements as they may be amended,
supplemented or otherwise modified from time to time in
accordance with the provisions of the Basic Documents.
(f) Terms defined in this Agreement or in Appendix A
by reference to any other agreement, document or instrument shall
have the meanings assigned to them in such agreement, document or
instrument whether or not such agreement, document or instrument
is then in effect.
(g) Notwithstanding the manner in which "Loan
Documents" is defined in Appendix A hereto, when used herein,
Loan Documents shall not include this Agreement.
ARTICLE II
FORMATION AND CONTINUATION OF PARTNERSHIP
2.1 Formation of Partnership; Name. The Partnership
was formed on May 11, 1992 by the filing, pursuant to the
Partnership Act, of the Certificate of Limited Partnership in the
office of the Secretary of the State of Delaware. The name of
the Partnership is "Saranac Power Partners, L.P."
2.2 Purpose; Business of the Partnership. The
Partnership was formed and is hereby continued for the purpose of
developing, financing, constructing, owning, operating,
maintaining, repairing and disposing of the Project or any part
thereof; constructing, installing, leasing or otherwise
acquiring, maintaining, repairing and disposing of any additional
improvements to the Project of any kind necessary or desirable in
connection therewith and, by means thereof, producing and selling
steam and electricity; owning all of the issued and outstanding
capital stock of North Country and any other purpose necessary,
incidental or ancillary to any of the foregoing. The foregoing
purposes, as effectuated pursuant to the provisions of Section
2.3, are herein referred to as the "Partnership Business".
2.3 Authorizations. (a) The Partnership is hereby
authorized to engage in all activities and transactions and to do
all things and to hold all interests in real, personal and mixed
property, contract rights and other property, necessary,
appropriate, proper, advisable or desirable for, or incidental or
convenient to, the Partnership Business, including, but not
limited to, the power to enter into, make and perform any
agreement, contract, commitment, arrangement or undertaking
(including, without limitation, the other Basic Documents), to
acquire, hold, purchase, lease, dispose of, mortgage, pledge,
hypothecate or assign, and to exercise all rights, powers,
privileges and other incidents of ownership or possession with
respect to, any property, whether real, personal or mixed.
(b) In furtherance of the Partnership's objects and
purposes, the Partnership shall have any and all powers
necessary, convenient or incidental to or for the accomplishment
of its objects and purposes, alone or with others, including,
without limitation, the following:
(i) to design, plan, finance, construct, own, develop,
maintain, operate, lease and dispose of the Project, or any
part thereof, and to engage in any and all activities
necessary or incidental to the foregoing;
(ii) to negotiate and enter into, and make, execute,
deliver and perform, all contracts, agreements and other
undertakings, as the same may be amended, restated,
supplemented or otherwise modified from time to time, and to
grant Liens on, in and against the Partnership's properties,
all as may be necessary, convenient or incidental to carry
out its objects and purposes, including, but not limited to,
the following:
(1) construction and term loan agreements;
(2) notes, including, but not limited to,
construction notes and term notes;
(3) capital contribution agreements;
(4) indemnity agreements;
(5) collateral security documents, including, but
not limited to, mortgages, security agreements,
security deposit agreements, assignments regarding
contracts and consents to assignments regarding
contracts;
(6) power purchase contracts;
(7) steam supply agreements;
(8) construction contracts;
(9) reimbursement agreements;
(10) recognition agreements;
(11) Additional Contracts, including, but not
limited to, subordinated mortgages, gas purchase and
transportation agreements, operation and maintenance
agreements, and easement agreements;
(12) any (a) assignment, (b) consent to
assignment, (c) consent and agreement, and (d) consent
and/or recognition agreement relating to the types of
contracts, agreements, commitments, arrangements or
other undertakings set forth in this Section 2.3(b);
(13) certificates and notices, including, but not
limited to, construction loan borrowing certificates,
term loan borrowing certificates, completion
certificates, cost certificates and notices of
borrowing;
(14) collateral agency agreements;
(15) tax indemnity agreements;
(16) Project Contracts;
(17) other Basic Documents;
(18) letter agreements;
(19) success fee agreements; and
(iii) to have letters of credit issued for its account
and on its behalf.
2.4 Principal Office; Offices; Addresses. (a) The
principal office and place of business of the Partnership shall
be located at the offices of the Managing General Partner at Five
Post Oak Park, Suite 1400, Houston, Texas 77027, and the
registered office of the Partnership in the State of Delaware
shall be the Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801; subject to Section
7.2(c), either office may be changed to such other place as the
Managing General Partner may from time to time designate. The
registered agent of the Partnership for service of process on the
Partnership at such address in Delaware is The Corporation Trust
Company.
(b) The Managing General Partner may also maintain
solely for the conduct of the Partnership Business an office or
offices at another location or locations and in connection
therewith rent or acquire office space, engage personnel, whether
part-time or full-time, and do such other acts as it deems
necessary or advisable in connection with the maintenance and
administration of any such office. Any costs and expenses
expected to be incurred in connection with any such office shall
be set forth in the Partnership Operating Budget delivered and
approved by the GE Capital Limited Partner pursuant to Section
6.6(c) or by the Other Limited Partners pursuant to Section
6.6(e), as the case may be.
(c) The name and business or residence address of each
Partner are set forth in Schedule 1, as the same may be amended
from time to time.
2.5 Further Filings. If at any time necessary or
advisable, the Managing General Partner shall promptly
(a) register the Partnership under any assumed, trade or
fictitious name under the Partnership Act, or similar law, if
any, in force and effect in the State of Delaware and (b) qualify
the Partnership to do business in any jurisdiction in which the
conduct of its business or the ownership or leasing of its assets
requires it to be so qualified. The Managing General Partner
shall make all filings and do all other things reasonably
possible (including publication or periodic filings of any
certificate) that may now or hereafter be required for the
perfection and continued maintenance of the Partnership as a
limited partnership, or to protect the limited liability of the
Limited Partners as limited partners, under the laws of the State
of Delaware.
2.6 Term. The term of the Partnership commenced on
the date of filing of the Certificate of Limited Partnership in
the Office of the Secretary of State of the State of Delaware and
shall continue until dissolution of the Partnership in accordance
with Article XIII.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Partners and Contributions. Subject to the terms
and conditions of the Capital Contribution Agreement, the initial
capital contribution of the GE Capital Limited Partner specified
in Section 2(a)(i) thereof shall be made on the Initial Capital
Contribution Date. Subject to the terms and conditions of the
Capital Contribution Agreement, the GE Capital Limited Partner
shall make the additional capital contributions specified in
Section 2(a)(ii) thereof on or prior to the Second Capital
Contribution Date. Pursuant to the Capital Contribution
Agreement, TPC One and TPC Two shall make the capital
contributions specified in Section 3(a) thereof on or prior to
the Tomen Equity Contribution Date. Prior to the Second Capital
Contribution Date, SECI shall have no Capital Account balance
attributable to any contributions to the Partnership other than
in respect of cash contributions, if any, to fund Cost Overruns
pursuant to Section 3.3 of the Original Partnership Agreement and
Section 8.4. On the Second Capital Contribution Date, the
Capital Account balance of SECI General and SECI Limited will be
increased by the amount required to result in SECI General and
SECI Limited having an aggregate Capital Account balance equal to
the sum of the Capital Account balances of SECI General, SECI
Limited, TPC One and TPC Two multiplied by the sum of the Initial
Allocation Percentages of SECI General and SECI Limited. Such
increase in the aggregate Capital Account balances of SECI
General and SECI Limited shall be attributable to the agreed fair
market value as of the Second Capital Contribution Date of the
Contributed Assets and the Gross Asset Value of such Contributed
Assets shall be adjusted accordingly.
3.2 No Withdrawal of Capital. Except as specifically
provided in this Agreement, no Partner shall have the right to
withdraw from the Partnership all or any part of its Capital
Contribution, nor shall any Partner have any right to demand and
receive property or cash of the Partnership in return of its
Capital Contribution. No Partner shall have the right to receive
interest on its Capital Contribution. In connection with any
distribution, whether upon winding up of the Partnership or
otherwise and whether or not it shall constitute a return of
capital, no Partner shall have the right to demand or receive
property other than cash. Except as otherwise expressly provided
in Articles IV, V, X and XIII hereof, no Partner shall have
priority over any other Partner as to the return of its Capital
Contribution.
3.3 Separate Capital Accounts. A separate Capital
Account shall be maintained for each Partner. Capital Account
balances as of the date hereof are set forth in Schedule 1.
3.4 Determination and Adjustment of Allocation
Percentages.
(a) Allocation Percentages; Tomen Flip IRR. Using the
procedures set forth in Section 3.4(c) below, on the earlier of
the Second Capital Contribution Date and the Tomen Equity
Contribution Date, the Initial Allocation Percentages and the
Tomen Flip IRR shall be set in the manner set forth in Exhibit B
attached hereto, taking into account any adjustment for
Curtailment required pursuant to Section 3.4(b) below.
(b) Curtailment. (i) If prior to the Tomen Equity
Contribution Date the PSC has not determined in PSC Case No.
92-E-0814 that no Curtailment is permissible and dismissed PSC
Case No. 92-E-0814 with prejudice, then on and after the Tomen
Equity Contribution Date until the Second Tomen Flip Date, at the
times provided in Section 3.4(c) below, the Expected Case shall
be recalculated as provided in (ii) below, and the Allocation
Percentages (and, until the First Tomen Flip Date, the Tomen Flip
IRR) shall be adjusted as provided in (iii) below (together, the
recalculated Expected Case and the adjusted Allocation
Percentages (and, until the First Tomen Flip Date, the Tomen Flip
IRR) being a "Revised Expected Case") for Curtailment so as to
demonstrate the projected receipt by the Tomen Limited Partners
of a 20% After Tax Internal Rate of Return on the Second Tomen
Flip Date based on such Revised Expected Case.
(ii) The rules for calculating the initial Revised
Expected Case for projected Curtailment shall be as provided in
subsection (A) below, and the rules for calculating each
subsequent Revised Expected Case for actual Curtailment shall be
as provided in subsection (B) below.
(A) The initial Revised Expected Case for projected
Curtailment shall assume that Curtailment commences on the first
date Curtailment is authorized to occur, and that Curtailment
continues at the same level through the Second Tomen Flip Date,
and shall be calculated based on the Expected Case with only the
following adjustments:
(1) Reduce the output of the Facility by the number of
kilowatt hours of Curtailment authorized by the Curtailment
Order, or, if the Curtailment Order does not authorize a
specific number of kilowatt hours of Curtailment, by
agreement of the parties;
(2) No scheduled maintenance shall be assumed to occur
during hours of Curtailment, and maintenance expenses for
the Facility shall be assumed to increase by $500 for each
hour of Curtailment applicable during such year in the
Expected Case, such amounts to be increased from the Second
Capital Contribution Date or the Tomen Equity Contribution
Date, as applicable, by the inflation assumption used in the
Expected Case;
(3) Curtailment will be deemed to occur 10 percent
during Peak Hours (as defined in the Power Purchase
Agreement) and 90 percent during Off-Peak Hours (as defined
in the Power Purchase Agreement);
(4) The fuel usage of the Facility shall be adjusted
to reflect the net difference in fuel projected to be
consumed when the Auxiliary Boiler is operated and one or
both of the gas turbines in the Facility are not (assuming a
constant heat rate of 8275 Btu/KWh(HHV)), in each case
solely to the extent resulting from Curtailment; in
connection therewith, all natural gas the Partnership is
required to purchase under the Gas Purchase Agreement that
is not consumed by the Facility solely to the extent
resulting from Curtailment shall be assumed to have been
resold by the Partnership for 80% of its cost to the
Partnership; and
(5) All other assumptions used in the Expected Case
shall be continued unchanged in each Revised Expected Case.
(B) Each subsequent Revised Expected Case for actual
Curtailment shall include a true-up for Curtailment experienced
during the just ending semi-annual period and shall assume that
Curtailment continues at the same level as the actual curtailment
experienced during the just ending semi-annual period and the
immediately preceding semi-annual period through the Second Tomen
Flip Date, and shall be calculated based on the preceding Revised
Expected Case with only the following adjustments:
(1) With respect to the just ending semi-annual
period, adjust the output of the Facility for the actual
Curtailment experienced during such semi-annual period, and
assume that the number of hours of Curtailment experienced
during such semi-annual period and the immediately preceding
semi-annual period continues during each succeeding annual
period through the Second Tomen Flip Date;
(2) With respect to the just ending semi-annual
period, do not adjust for the hours during which maintenance
was actually performed or for actual maintenance expenses,
and for each succeeding annual period through the Second
Tomen Flip Date, no scheduled maintenance shall be assumed
to occur during hours of Curtailment, and maintenance
expenses associated with the Facility shall be assumed to
increase by $500 for each hour of Curtailment applicable
during such year in the Expected Case based on the actual
Curtailment experienced during the just ending semi-annual
period and the immediately preceding semi-annual period,
such amounts to be increased by the inflation assumptions
used in the Expected Case from the Second Capital
Contribution Date or the Tomen Equity Contribution Date, as
applicable;
(3) With respect to the just ending semi-annual
period, adjust for the actual Peak Hour/Off-Peak Hour split
of hours of Curtailment, and assume the same mix of Peak
Hour/Off-Peak Hour hours of Curtailment as were experienced
during the just ending semi-annual period and the
immediately preceding semi-annual period continues during
each succeeding annual period through the Second Tomen Flip
Date;
(4) With respect to the just ending semi-annual
period, adjust for the actual net difference in fuel
consumed when the Auxiliary Boiler was operated and one or
both of the gas turbines in the Facility were not (assuming
a constant heat rate of 8275 Btu/KWh(HHV)), solely to the
extent resulting from Curtailment, and for the actual gains
or losses on gas resales due to Curtailment, and assume that
the level of fuel consumption and gas resales amounts
experienced during such semi-annual period and the
immediately preceding semi-annual period continue during
each succeeding annual period through the Second Tomen Flip
Date; and
(5) With respect to the just ending semi-annual
period, adjust for actual changes to any of the other
material assumptions (other than those addressed in (1)-(4)
above) used in the Revised Expected Case effective during
such semi-annual period, which changes were caused solely by
Curtailment, and assume that such changes continue during
each succeeding annual period through the Second Tomen Flip
Date.
(iii) The hierarchy to adjust the Allocation Percentages
for Curtailment is as follows:
(A) First, if the Tomen Limited Partners' Initial
Allocation Percentage then in effect is less than 42%, the
Tomen Limited Partners' Initial Allocation Percentage shall
be increased up to a maximum Initial Allocation Percentage
equal to 42% and the SECI Limited Partners' Initial
Allocation Percentage shall be decreased by a corresponding
amount;
(B) Second, the Tomen Flip IRR shall be increased so
as to cause Notional Period One to end on a date no later
than the 10th anniversary of the Second Capital Contribution
Date;
(C) Third, the Tomen Limited Partners' Middle
Allocation Percentage shall be increased up to a maximum
Middle Allocation Percentage equal to 30% and the SECI
Limited Partners' Middle Allocation Percentage shall be
decreased by a corresponding amount;
(D) Fourth, subject to clause (F) below, the Tomen
Limited Partners' Initial Allocation Percentage and the
Tomen Limited Partners' Middle Allocation Percentage shall
be increased simultaneously by the same fraction until the
Initial Allocation Percentage of the Tomen Limited Partners
equals the Capped Tomen Allocation Percentage, and the SECI
Limited Partners' Initial Allocation Percentage and the SECI
Limited Partners' Middle Allocation Percentage shall be
decreased by a corresponding amount;
(E) Fifth, subject to clause (F) below, the Tomen
Limited Partners' Middle Allocation Percentage shall be
increased up to a maximum Middle Allocation Percentage equal
to the Capped Tomen Allocation Percentage and the SECI
Limited Partners' Middle Allocation Percentage shall be
decreased by a corresponding amount;
(F) If no adjustment for Curtailment is made under
Section 3.4(b) within four years and three months following
the Second Capital Contribution Date, then during any
Quarterly Period thereafter during which an SECI Term Loan
is outstanding, the Tomen Limited Partners' Allocation
Percentages may not be adjusted upward to exceed the greater
of (i) the Tomen Limited Partners' Initial Allocation
Percentage as determined on the Second Capital Contribution
Date, and (ii) 42%, to the extent that such adjustment would
cause SECI to receive Distributable Cash in an amount less
than the scheduled principal and interest payments on the
SECI Term Loan, and any amounts not paid to the Tomen
Limited Partners as a result of the limitations on the
Allocation Percentages set forth in this clause (F) shall
earn a 20% After Tax Internal Rate of Return on the same
basis as the Tomen Total Equity (as defined in Exhibit B
hereto) and be taken into account in subsequent Revised
Expected Cases; and
(G) If an adjustment for actual Curtailment is
downward, i.e., so that Curtailment for an upcoming period
is less than Curtailment for the current period, the last
upward adjustment made pursuant to Section 3.4(b)(iii)
(A)-(F) shall first be reversed, and each next previous
adjustment shall be reversed, until adequate reversals of
previous adjustments are achieved.
(c) Procedures.
(i) Expected Case/Initial Allocation Percentages
on Second Capital Contribution Date. (A) No later than the
earlier of 60 days prior to the anticipated (x) Second Capital
Contribution Date, and (y) the Tomen Equity Contribution Date,
SECI shall deliver to TPC One and TPC Two SECI's proposed
Expected Case ("SECI's Proposed Expected Case") and proposed
Initial Allocation Percentages ("SECI's Proposed Initial
Allocation Percentages"), which shall take into account any
required adjustment for Curtailment as contemplated in
Section 3.4(c)(ii) below.
(B) Within 30 days of receipt of SECI's Proposed
Expected Case and SECI's Proposed Initial Allocation Percentages,
TPC One and TPC Two may deliver to SECI proposed changes to
SECI's Proposed Expected Case ("TPC's Proposed Expected Case")
and/or SECI's Proposed Initial Allocation Percentages ("TPC's
Proposed Initial Allocation Percentages").
(C) If within 15 days of delivery by TPC One and TPC
Two of TPC's Proposed Expected Case and/or TPC's Proposed Initial
Allocation Percentages, SECI, on the one hand, and TPC One and
TPC Two, on the other hand, are unable to agree on the Expected
Case and/or the Initial Allocation Percentages, either shall have
the right to submit the dispute to the Arbitration Procedure,
which shall determine the Expected Case and/or the Initial
Allocation Percentages. Pending completion of the Arbitration
Procedure, TPC's Proposed Expected Case shall be the Expected
Case and TPC's Proposed Initial Allocation Percentages shall be
the Initial Allocation Percentages.
(D) Not less frequently than once each ten days
following delivery of SECI's Proposed Expected Case and SECI's
Proposed Initial Allocation Percentages, until the earlier to
occur of the Second Capital Contribution Date and the Tomen
Equity Contribution Date, SECI shall deliver to TPC One and TPC
Two updates thereof to take into account changes in the
assumptions that occur after delivery of such documents or
updates thereof.
(ii) Curtailment at Second Capital Contribution Date.
(A) SECI's Proposed Expected Case shall include
assumptions regarding Curtailment, as follows: (A) if the PSC has
issued a Curtailment Order, the Expected Case shall include the
amount of Curtailment provided in Section 3.4(b)(ii)(A)(1) above;
(B) if the PSC has determined in Case No. 92-E-0814 that no
Curtailment is currently warranted, the Expected Case shall
assume zero Curtailment; and (C) if the PSC has not yet reached
any decision in Case No. 92-E-0814, the Expected Case shall
assume zero Curtailment.
(iii) Subsequent Determination of Curtailment.
(A) If no adjustment for Curtailment is included in
the Expected Case determined pursuant to clause (i) above, and if
at any time prior to the 10th anniversary of the Second Capital
Contribution Date a Curtailment Order is issued, then the
Expected Case and Allocation Percentages shall be adjusted as
provided in Section 3.4(b) above effective on the third
Distribution Date to occur following the date the Curtailment
Order permits Curtailment to occur. Within 30 days following the
authorization of curtailment by the PSC, SECI shall deliver to
TPC One and TPC Two a proposed revised Expected Case (the "SECI
Proposed Revised Expected Case") and proposed revised Allocation
Percentages (the "SECI Proposed Revised Allocation Percentages").
(B) Within 30 days of receipt of SECI's Proposed
Revised Expected Case and SECI's Proposed Revised Allocation
Percentages, TPC One and TPC Two may deliver to SECI proposed
changes to SECI's Proposed Revised Expected Case ("TPC's Proposed
Revised Expected Case") and SECI's Proposed Revised Allocation
Percentages ("TPC's Proposed Revised Allocation Percentages").
If TPC One or TPC Two does not deliver TPC's Proposed Revised
Expected Case and TPC's Proposed Revised Allocation Percentages
to SECI within such 30 day period, SECI's Proposed Revised
Expected Case and Proposed Revised Allocation Percentages shall
be the Revised Expected Case and the Allocation Percentages,
respectively, effective as of the third Distribution Date
following the date the Curtailment Order permits Curtailment to
occur.
(C) If within 15 days of delivery by TPC One and TPC
Two of TPC's Proposed Revised Expected Case and TPC's Proposed
Revised Allocation Percentages, SECI, on the one hand, and TPC
One and TPC Two, on the other hand, are unable to agree on the
Revised Expected Case and/or the Revised Allocation Percentages,
either shall have the right to submit the dispute to the
Arbitration Procedure, which shall determine the Revised Expected
Case and/or the Revised Allocation Percentages. Pending
completion of the Arbitration Procedure, effective as of the
third Distribution Date following the date the Curtailment Order
permits Curtailment to occur, TPC's Proposed Revised Expected
Case and TPC's Proposed Allocation Percentages shall be the
Revised Expected Case and the Allocation Percentages,
respectively.
(D) If SECI fails to deliver SECI's Proposed Revised
Expected Case and SECI's Proposed Revised Allocation Percentages
within the time provided in Section 3.4(c)(iii)(A) above, TPC One
and TPC Two shall have the right to deliver TPC's Proposed
Revised Expected Case and TPC's Proposed Revised Allocation
Percentages, which shall indicate TPC's proposed revisions to the
Expected Case and Allocation Percentages based on Curtailment
authorized by the PSC, and the Revised Expected Case and Revised
Allocation Percentages shall thereafter be determined as provided
in Section 3.4(c)(iii)(B) and (C) above.
(iv) Adjustments for Actual Curtailment.
(A) Effective on the earlier of the sixth Distribution
Date following the first Distribution Date which includes any
assumption for Curtailment and the third Distribution Date in
respect of a Quarterly Period during which the Project
experiences Curtailment, and effective on each sixth Distribution
Date thereafter, the Expected Case or Revised Expected Case, as
applicable, and the Allocation Percentages shall be adjusted as
provided in Section 3.4(b) above. Not less than 60 days prior to
any Distribution Date on which an adjustment will be made for
actual Curtailment, SECI shall deliver to TPC One and TPC Two
SECI's Proposed Revised Expected Case and Proposed Revised
Allocation Percentages (the "SECI Proposed Curtailment
Adjustments").
(B) Within 30 days of receipt of SECI's Proposed
Curtailment Adjustments, TPC One and TPC Two may deliver to SECI
proposed changes to SECI's Proposed Curtailment Adjustments
("TPC's Proposed Curtailment Adjustments"). If TPC One or TPC
Two does not deliver TPC's Proposed Curtailment Adjustments
within such 30 day period, SECI's Proposed Curtailment
Adjustments shall be incorporated into the Expected Case or
Revised Expected Case, as applicable, and the Allocation
Percentages, and the resulting Expected Case and the Allocation
Percentages shall become the Revised Expected Case and Allocation
Percentages, respectively.
(C) If within 15 days of delivery by TPC One and TPC
Two of TPC's Proposed Curtailment Adjustments, SECI, on the one
hand, and TPC One and TPC Two, on the other hand, are unable to
agree on the adjustments to the Expected Case and Allocation
Percentages required pursuant to Section 3.4(c)(iv)(B) above,
either shall have the right to submit the dispute to the
Arbitration Procedure, which shall determine the Revised Expected
Case and the Revised Allocation Percentages. Pending completion
of the Arbitration Procedure, TPC's Proposed Curtailment
Adjustments shall be incorporated into the Expected Case or
Revised Expected Case, as applicable, and the Allocation
Percentages, and the resulting Expected Case and Allocation
Percentages shall become the Revised Expected Case and Allocation
Percentages, respectively.
(v) Each document delivered by SECI to TPC One and TPC
Two pursuant to this Section 3.4(c) shall be prepared in good
faith on the basis of sound financial planning practice, and the
assumptions and methods of calculation employed by SECI in
connection with any thereof shall be applied consistently.
(d) Re-set of Expected Case. In the event that the
Tomen Equity Contribution Date occurs prior to the Second Capital
Contribution Date, upon the earlier to occur of the Second
Capital Contribution Date and the date that the Construction Loan
is repaid in full, each of the Expected Case (taking into account
the Project's economics at the time and any adjustments for
Curtailment required pursuant to Section 3.4(b)), the Allocation
Percentages, and the Tomen Flip IRR shall be recalculated using
the procedures set forth in Section 3.4(c) so as to demonstrate
the projected receipt by the Tomen Limited Partners of a 20%
After Tax Internal Rate of Return on the Second Tomen Flip Date.
(e) Adjustment of Final Allocation Percentages. (i)
If, as of the Second Tomen Flip Date, the Tomen Limited Partners
shall not have received the After Tax Internal Rate of Return on
the Tomen Total Equity (as defined in Exhibit B hereto) that
would have been received had there been no Curtailment, the Final
Allocation Percentage of the Tomen Limited Partners shall be the
greater of (A) the Final Allocation Percentage applicable for the
Tomen Limited Partners in the absence of this Section 3.4(e) and
(B) the Tomen Limited Partners' Middle Allocation Percentage in
effect on the day preceding the Second Tomen Flip Date, and the
SECI Limited Partners' Final Allocation Percentage shall be 99%
minus the Tomen Limited Partners' Final Allocation Percentage
determined above, which Final Allocation Percentages shall remain
in effect until the Tomen Limit Partners shall have received the
After Tax Internal Rate of Return that would have been received
had there been no Curtailment. Thereafter, the Final Allocation
Percentages shall be as otherwise provided in this Agreement.
(ii) Any dispute regarding the subject matter of
Subsection (e)(i) above shall be submitted to the Arbitration
Procedure.
(f) Limitation on Certain Adjustments. So long as the
SECI Term Loan shall be outstanding, no adjustment pursuant to
Section 3.4(b) to the Allocation Percentages after the Second
Capital Contribution Date shall result in an increase to the
Allocation Percentages of the Tomen Limited Partners to a
percentage greater than the Capped Tomen Allocation Percentage.
ARTICLE IV
DISTRIBUTIONS
4.1 Distributable Cash. The Managing General Partner
shall distribute Distributable Cash to the Partners on each
Distribution Date in the manner provided in this Article IV.
4.2 Distributions Prior to the Second Capital
Contribution Date. (a) Except as provided in Section 4.2(b),
there shall be no distributions of Distributable Cash prior to
the Second Capital Contribution Date. On the Second Capital
Contribution Date, Distributable Cash shall be used to pay, in
part, the accrued interest on, and principal of, the Construction
Loans as provided in Section 4.3 of the Security Deposit
Agreement.
(b) If the Second Capital Contribution Date shall not
occur on or prior to the Tomen Equity Contribution Date, after
the satisfaction in full of all of the obligations of the
Partnership under the Loan Documents, Distributable Cash
thereafter shall be distributed on each Distribution Date to the
GE Capital Limited Partner in the amounts determined pursuant to
Section 4.16 and to the Other Partners in accordance with their
Allocation Percentages and otherwise pursuant to this Agreement.
4.3 Distributions After the Second Capital
Contribution Date and Prior to the First GE Capital Flip Date.
Except as provided in Sections 4.7, 4.9(c), 4.11, 4.12, 4.13,
4.14 and 13.4(c), Distributable Cash for each calendar month
after the Second Capital Contribution Date (commencing with the
first calendar month or part thereof to end after the Second
Capital Contribution Date), on and prior to the First GE Capital
Flip Date, shall (after application to the payment of the
Deducted Payments) be distributed on the Distribution Date in
respect of such calendar month as follows:
(a) First, 99% to the GE Capital Limited Partner, and
1% to the Other Partners in accordance with their Allocation
Percentages, until the Partners have received pursuant to
this Section 4.3(a) an aggregate amount of cash in respect
of such calendar month equal to the amount set forth in
Schedule 5 (the "Level 1 Distribution"); provided, however,
that the amount of Distributable Cash distributable to the
GE Capital Limited Partner pursuant to this Section 4.3(a)
shall be (i) decreased by (A) amounts transferred by the
Partnership to the Senior Debt Service Account on such
Distribution Date pursuant to the provisions of Sections
4.2(a) and (b) of the Amended and Restated Security Deposit
Agreement and (B) without duplication of amounts referred to
in the preceding clause (A) and to the extent not paid from
amounts transferred to the Senior Debt Service Account on
such Distribution Date pursuant to the provisions of
Sections 4.2(a) and (b) of the Amended and Restated Security
Deposit Agreement or from drawings under any Senior Debt
Service Letter of Credit (as such term is defined in the
Amended and Restated Security Deposit Agreement) substituted
for such transferred amounts pursuant to the provisions of
Section 4.2(a) or (b) of the Amended and Restated Security
Deposit Agreement, all amounts paid and not previously
deducted pursuant to this Section 4.3(a) in respect of the
Deducted Payments since the preceding Distribution Date and
(ii) increased by amounts paid by the Swap Counterparty
pursuant to the Swap Agreement since the preceding
Distribution Date; and
(b) Second, 1% to the GE Capital Limited Partner and
99% to the Other Partners in accordance with their
Allocation Percentages.
4.4 Distributions Subsequent to the First GE Capital
Flip Date and Prior to the Second GE Capital Flip Date. Except
as provided in Sections 4.7, 4.9(c), 4.11, 4.12, 4.13, 4.14 and
13.4(c), after the First GE Capital Flip Date to and including
the Second GE Capital Flip Date, Distributable Cash for each
calendar month shall be distributed on the Distribution Date in
respect of such calendar month as follows:
(a) 15% to the GE Capital Limited Partner (but in
respect of the Second GE Capital Flip Date, only that amount
required for the GE Capital Limited Partner to achieve the
Base Term Return plus 52 basis points); and
(b) 85% to the Other Partners in accordance with their
Allocation Percentages.
4.5 Distributions Subsequent to the Second GE Capital
Flip Date. Except as provided in Sections 4.7, 4.9(c), 4.11,
4.12, 4.13, 4.14 and 13.4(c), after the Second GE Capital Flip
Date, Distributable Cash for each calendar month shall be
distributed on the Distribution Date in respect of such calendar
month as follows:
(a) 5% to the GE Capital Limited Partner; and
(b) 95% to the Other Partners in accordance with their
Allocation Percentages.
4.6 Net Cash From Sales or Refinancing. (a) Any Net
Cash from Refinancing which results from the refinancing
described in Section 10 of the Capital Contribution Agreement
shall be distributed 100% to the GE Capital Limited Partner;
provided, however, that in determining the amount of Net Cash
from Sales or Refinancing to be distributed to the GE Capital
Limited Partner, (i) there shall be deducted from such cash
proceeds (x) the portion thereof applied by the Partnership to
the repayment of the principal of, and (without duplication of
amounts deemed deducted from Level 1 Distributions distributed to
the GE Capital Limited Partner pursuant to Section 4.3(a)) the
payment of accrued interest on and fees and other amounts in
respect of, the Term Loan and any Refinancing Loan and/or
Subordinated Refinancing Loan repaid in such refinancing, and (y)
any amounts payable to the Swap Counterparty under the Swap
Agreement in connection with such refinancing and (ii) there
shall be added to such cash proceeds all amounts paid by the Swap
Counterparty to the Partnership under the Swap Agreement in
connection with such refinancing;
(b) Except as provided in Sections 4.7, 4.9(c), 4.12,
4.13 and 4.14 and 13.4(c), any Net Cash from Sales or Refinancing
(other than pursuant to the refinancing referred to in Section
4.6(a) above) shall be distributed (i) 99% to the GE Capital
Limited Partner and 1% to the Other Partners in accordance with
their Allocation Percentages until the GE Capital Limited Partner
shall have achieved its Base Term Return; (ii) any Net Cash from
Sales or Refinancing in excess of the amount referred to above in
clause (i) shall be distributed 15% to the GE Capital Limited
Partner and 85% to the Other Partners in accordance with their
Allocation Percentages until the Second GE Capital Flip Date
shall have occurred; and (iii) any Net Cash from Sales or
Refinancing in excess of the amount referred to above in clause
(ii) shall be distributed 5% to the GE Capital Limited Partner
and 95% to the Other Partners in accordance with their Allocation
Percentages, provided, however, that in determining the amount of
Net Cash from Sales or Refinancing to be distributed to the GE
Capital Limited Partner, (x) there shall be deducted from such
cash proceeds (A) the portion thereof applied by the Partnership
to the repayment of the principal of, and (without duplication of
amounts deemed deducted from Level 1 Distributions distributed to
the GE Capital Limited Partner pursuant to Section 4.3(a)) the
payment of accrued interest on and fees and other amounts in
respect of, the Term Loan and any Refinancing Loan and/or
Subordinated Refinancing Loan repaid in connection with such Net
Cash from Sales or Refinancing, and (B) any amounts payable to
the Swap Counterparty under the Swap Agreement (other than
amounts payable pursuant to Section 6(e) of the Swap Agreement)
in connection with such Net Cash from Sales or Refinancing and
(y) there shall be added to such cash proceeds all amounts paid
by the Swap Counterparty to the Partnership under the Swap
Agreement in connection with such Net Cash from Sales or
Refinancing.
4.7 Special Event. Notwithstanding anything else
contained in this Article IV (but subject to 13.4(c)), if a
Special Event occurs and is continuing, Distributable Cash and
Net Cash from Sales or Refinancing shall be distributed in
accordance with Section 13.2(c).
4.8 Determination of First GE Capital Flip Date and
Second GE Capital Flip Date. (a) If the GE Capital Limited
Partner shall receive the full amount of its distributable share
of each of the scheduled Level 1 Distributions pursuant to
Section 4.3(a) on each of the scheduled Distribution Dates
therefor, and not receive any Distributable Cash pursuant to
Sections 4.11(b) or 13.2(c) or Net Cash From Sales or Refinancing
pursuant to Section 4.6(b), the First GE Capital Flip Date shall
occur upon the distribution to the GE Capital Limited Partner of
the full amount of the last scheduled Level 1 Distribution. If
the GE Capital Limited Partner shall not receive the full amount
of its distributable share of any Level 1 Distribution on the
scheduled Distribution Date therefor, or shall receive
distributions of Distributable Cash pursuant to Sections 4.11(b)
or 13.2(c) or shall receive Net Cash from Sales or Refinancing
pursuant to Section 4.6(b), the achievement of Base Term Return
and occurrence of the First GE Capital Flip Date shall be deemed
to have occurred when the GE Capital Limited Partner shall have
received Distributable Cash pursuant to Sections 4.3(a), 4.6(b)
and 13.2(c) which, taking into account the timing and amount of
each such distribution, but making no other adjustments to the
assumptions used to determine the Level 1 Distributions,
demonstrates the achievement of the Base Term Return.
Notwithstanding the foregoing, for purposes of determining the
First GE Capital Flip Date, payments made by the Swap
Counterparty under the Swap Agreement shall not be taken into
account.
(b) The Second GE Capital Flip Date shall occur when
the GE Capital Limited Partner shall have received Distributable
Cash pursuant to Sections 4.3(a), 4.4, 4.6(b), 4.11 and 13.2(c)
which, taking into account the timing and amount of each such
distribution, disregarding any write-off of any portion of the GE
Capital Limited Partner's investment assumed for purposes of
determining the achievement of the Base Term Return but making no
other adjustments to the assumptions used to determine the Level
1 Distributions (including, without limitation, the calculation
of such distributions on a quarterly basis), demonstrates the
achievement of the Base Term Return plus 52 basis points.
Notwithstanding the foregoing, for purposes of determining the
Second GE Capital Flip Date, payments made by the Swap
Counterparty under the Swap Agreement shall not be taken into
account.
(c) If the Managing General Partner shall assert that
the First GE Capital Flip Date or the Second GE Capital Flip Date
shall have occurred and the GE Capital Limited Partner shall
dispute such assertion, the Managing General Partner may request
(and at the direction of any Tomen Limited Partner shall request)
that the non-occurrence of the First GE Capital Flip Date or the
Second GE Capital Flip Date, as the case may be, be verified by
GE Capital's independent certified public accountants, which
verification shall be at the expense of the Partnership unless GE
Capital's independent certified public accountants shall verify
that the First GE Capital Flip Date or Second GE Capital Flip
Date, as the case may be, has occurred, in which case
verification shall be at the expense of the GE Capital Limited
Partner. Each of the GE Capital Limited Partner, SECI, TPC One
and TPC Two may confer with such accountants in connection with
the verification of the occurrence or non-occurrence of the First
GE Capital Flip Date and the Second GE Capital Flip Date.
Pending the outcome of the verification by GE Capital's
accountants, the First GE Capital Flip Date or the Second GE
Capital Flip Date, as applicable, shall be deemed not to have
occurred. If GE Capital's accountants determine that the First
GE Capital Flip Date or the Second GE Capital Flip Date, as
applicable, has occurred, amounts distributed to the GE Capital
Limited Partner in excess of the amounts necessary to cause the
First GE Capital Flip Date or the Second GE Capital Flip Date to
occur, as the case may be, shall be credited against amounts
subsequently distributable to the GE Capital Limited Partner
hereunder.
4.9 Determination of First Tomen Flip Date. (a) (i)
SECI General shall reasonably determine whether and when the
First Tomen Flip Date occurs. If SECI General determines that
the First Tomen Flip Date has occurred (such date, the
"Determination Date"), SECI General shall promptly notify the
Tomen Limited Partners thereof and within 60 days of the end of
the calendar year in which the Determination Date occurs SECI
General shall provide the Tomen Limited Partners with a written
report describing any true-up required (calculated using Final
Tax Figures and as provided in paragraph (c) below) and providing
the calculations by which the Determination Date and any true-up
were determined, which report shall separately state the
following:
(A) the amount of Capital Contributions made by the
Tomen Limited Partners and the dates of such Capital
Contributions;
(B) the amount and timing of all distributions of
Distributable Cash (with such timing being determined
pursuant to the definition of After-Tax Cash Flow);
(C) the amount and timing of the Tomen Limited
Partners' Imputed Tax Benefits;
(D) the amount and timing of the Tomen Limited
Partners' Imputed Tax Costs; and
(E) the Tomen Limited Partners' After-Tax Cash Flow
and the Tomen Limited Partners' After-Tax Internal Rate of
Return as of such date.
(ii) If the Determination Date occurs before July 1st
of a calendar year, then within 30 days after the Determination
Date, SECI General shall also provide a report, substantially
similar to the report required in Section 4.9(a)(i) above showing
any true-up required (calculated using taxes estimated pursuant
to the Tax Assumptions and as provided in paragraph (c) below).
(iii) Any such notice and report from SECI General
pursuant to this Section 4.9 shall be signed by an officer of
SECI General who shall certify that SECI General's calculations
have been made pursuant to and in compliance with this Agreement
based upon information in the possession of SECI General at such
time. Except as otherwise provided in Section 4.9(b), SECI
General's determination of the First Tomen Flip Date shall be
presumed to be correct.
(b) If, after receiving any report required by Section
4.9(a), TPC One or TPC Two, on behalf of the Tomen Limited
Partners, reasonably and in good faith disagrees with the
conclusion of SECI General with respect to the Determination Date
or any proposed true-up, and so notifies SECI General in writing
within 60 days of receipt of such report, management personnel of
each of SECI General and TPC One or TPC Two, on behalf of the
Tomen Limited Partners, shall promptly confer and attempt in good
faith to expeditiously resolve such dispute. If SECI General and
TPC One or TPC Two, are unable to resolve such dispute in a
mutually satisfactory manner within 30 days of the receipt by
SECI General of TPC One's or TPC Two's notice of disagreement,
the parties shall submit (together with their respective
calculations relating thereto) the matter to an independent
nationally recognized certified public accounting firm or such
other Person, in either case as shall be selected by SECI General
and reasonably acceptable to TPC One and TPC Two (the "Arbiter"),
and the Arbiter shall determine the amount of the true-up then
due. Each party shall promptly provide the Arbiter with all
information necessary to make such determination and each of SECI
General and the Tomen Limited Partners agree to be bound by the
determination of the Arbiter. Absent other agreement by the
parties, the arbitration shall be conducted according to the
rules of the American Arbitration Association. If a final
determination with respect to the true-up has not been made by
the Arbiter within 30 days of submission of the matter to the
Arbiter, such portion of the Distributable Cash thereafter
distributed to the SECI Limited Partners on account of the
purported occurrence of the First Tomen Flip Date shall be placed
in an escrow account upon terms and conditions mutually
acceptable to the SECI Limited Partners and TPC One and TPC Two
until such final determination shall be made. SECI General and
the Tomen Limited Partners agree to make every reasonable effort
to facilitate the final determination of the Arbiter within 30
days of submission. The costs (including reasonable legal and
accounting fees and the costs of the Arbiter) of such arbitration
shall be allocated by the Arbiter in accordance with the
respective merits of each party's position.
(c) The "true-up" referred to in this Section shall be
a distribution to the Tomen Limited Partners or to the SECI
Limited Partners of Distributable Cash that would otherwise be
distributed to one or the other of them under Section 4.3 without
giving effect to this Section 4.9(c). The amount so distributed
will be treated as a guaranteed payment pursuant to Section
707(c) of the Code and as taxable income to the recipient(s) with
a corresponding deduction in the same amount to the Partnership,
allocated to the non-recipient Other Partner(s). Such
distribution or distributions shall be made as quickly as
possible after the Arbiter determines that a true-up is required,
provided, that any true-up specified in the SECI General report
or otherwise agreed by SECI General to be owed shall be paid
pending resolution of any dispute. In the case of a true-up in
favor of the Tomen Limited Partners, the amount of such
distribution or distributions shall be the amount of cash that
would have been required to have been paid to the Tomen Limited
Partners on the Determination Date to cause the First Tomen Flip
Date actually to have occurred on such date, assuming all other
factors remain unchanged including the allocation of Operating
Profits and Operating Losses. In the case of a true-up in favor
of the SECI Limited Partners, the amount of such distribution or
distributions shall be the amount of Distributable Cash
distributed to the Tomen Limited Partners at the Initial
Allocation Percentages on or before the Determination Date in
excess of the amount that the Tomen Limited Partners would have
received if the Determination Date had actually occurred on the
First Tomen Flip Date. For purposes of calculating the true-up
and allocating Operating Profits and Operating Losses for the
calendar year in which the Determination occurs, Operating
Profits and Operating Losses shall be allocated among the Other
Partners in the same proportion as Distributable Cash was
allocated for the entire such year. For purposes of calculating
the true-up and the Tomen Flip IRR, it shall be assumed that
Imputed Tax Costs and Imputed Tax Benefits, as determined based
on Final Tax Figures, accrued ratably over the calendar year in
which the Determination Date occurred and were recognized by the
Tomen Limited Partners at the end of each fiscal quarter during
such year. The amount determined pursuant to the preceding
sentences shall be increased by (i) interest, in the case of a
true-up in favor of the Tomen Limited Partners, at a pre-tax rate
of 20 percent compounded semi-annually, and in the case of a
true-up in favor of the SECI Limited Partners, at a pre-tax rate
of 10 percent compounded semi-annually, calculated from the
Determination Date to the date actually paid and (ii) a tax
gross-up so as to provide the recipient Partner with such amount
including interest after the deemed payment of federal income
taxes in respect of such amount including interest and the tax
gross-up at the rate provided in the Tax Assumptions.
4.10 Tomen Audit Adjustments. If the IRS proposes an
audit adjustment (via a 30-day letter or other similar document)
with respect to the Partnership or the Tomen Limited Partners
that would increase the Imputed Tax Costs or decrease the Imputed
Tax Benefits of the Tomen Limited Partners, SECI General shall
seek to obtain an opinion from independent tax counsel selected
by SECI General and reasonably acceptable to the Tomen Limited
Partners that the basis in law and fact in favor of the
Partnership's position with respect to the item proposed to be
adjusted outweighs the basis in law and fact to the contrary. If
an opinion to such effect is obtained within 25 days of such
proposal, then the Allocation Percentages of the Other Partners
shall continue to be determined in accordance with the other
provisions of this Agreement until such time as the matter
proposed to be adjusted shall be finally determined. At the time
of such final determination, a calculation shall be made with
respect to the Tomen Limited Partners After-Tax Internal Rate of
Return (taking into account the Imputed Tax Benefits or Imputed
Tax Costs arising as a result of the determination) and, if such
calculation shall establish that the Tomen Limited Partners'
After-Tax Internal Rate of Return is less than that which was
necessary to have caused the First Tomen Flip Date to occur, the
Allocation Percentage of each Tomen Limited Partner shall revert
to such Partner's Initial Allocation Percentage. If SECI General
shall fail to obtain, within such 25-day period, an opinion from
independent tax counsel selected by SECI General and reasonably
acceptable to the Tomen Limited Partners that the basis in law
and fact in favor of the Partnership's position with respect to
the item proposed to be adjusted outweighs the basis in law and
fact to the contrary, then on such date a calculation shall be
made with respect to the Tomen Limited Partners' After-Tax
Internal Rate of Return (taking into account the Imputed Tax Cost
or Imputed Tax Benefits arising as a result of the proposed
adjustment, and assuming for this purpose that the item proposed
to be adjusted was so adjusted on the date of the proposal) and,
if such calculation shall establish that the Tomen Limited
Partners' After-Tax Internal Rate of Return is less than that
which was necessary to cause the First Tomen Flip Rate to occur,
the Allocation Percentage of each Tomen Limited Partner shall
revert to such Partner's Initial Allocation Percentage; provided,
however, that at such time as the matter proposed to be adjusted
is finally determined, a calculation shall be made with respect
to the Tomen Limited Partners' After-Tax Internal Rate of Return
(taking into account the Imputed Tax Benefits or Imputed Tax
Costs arising as a result of the proposed adjustment) and the
interests of the Other Partners in Distributable Cash, Operating
Profits, and Operating Losses shall revert or advance, as
applicable, depending on whether the First Tomen Flip Date has
occurred.
4.11 Retention of Certain Distributions. (a) Subject
to the provisions of Section 4.13, on each Distribution Date
occurring after the Second Capital Contribution Date, until the
Base Reserve Amount shall be on deposit in the Base Reserve
Account or unless the Reserve Letter of Credit shall be issued
and in full force and effect, there shall be deposited in the
Base Reserve Account an amount equal to 23.7% of the
Distributable Cash otherwise distributable to each Other Partner
on such Distribution Date pursuant to Section 4.3(b). In the
event of any withdrawal from the Base Reserve Account (other than
withdrawals of income or gain in excess of the Base Reserve
Amount), on each Distribution Date, until the Base Reserve
Account shall have been replenished by the amount of such
withdrawal, there shall be deposited in the Base Reserve Account
an amount equal to 98% of the Distributable Cash distributable to
each Other Partner on such Distribution Date pursuant to Section
4.3(b).
(b) Subject to the provisions of Section 4.13, in the
event that the Ratio for any Quarterly Period ending prior to the
First GE Capital Flip Date shall be less than the respective
ratios set forth below, a portion of the Distributable Cash
otherwise distributable to each Other Partner pursuant to Section
4.3(b) in respect of each of the third Distribution Date in such
Quarterly Period and the first and second Distribution Dates in
the immediately succeeding Quarterly Period, in each case
corresponding to the percentage set forth opposite each such
ratio shall not be distributed to such Other Partner on each such
Distribution Date but shall instead be transferred to and
retained in the Distribution Reserve Account and applied in the
manner set forth in the Amended and Restated Security Deposit
Agreement:
Percentage of
Distributable
Ratio Cash Retained
1.40 to 1.00 20%
1.30 to 1.00 25%
1.20 to 1.00 98%
(c) Subject to the provisions of Section 4.13, until,
as of any Distribution Date occurring on or after the date twelve
years after the Date of Commercial Operation, the amount on
deposit in the Letters of Credit Reserve Account is equal to or
greater than the Letters of Credit Required Balance as of such
Distribution Date, 98% of the amount of Distributable Cash to be
distributed to each Other Partner pursuant to Section 4.3(b) on
such Distribution Date that corresponds to each such Other
Partner's allocable share of the Letters of Credit Required
Contribution (determined by multiplying the Letters of Credit
Required Contribution by the Allocation Percentage of each Other
Partner in such Distributable Cash) shall not be distributed to
each such Other Partner on such Distribution Date but shall
instead be transferred to and retained in the Letters of Credit
Reserve Account and applied as provided in the Amended and
Restated Security Deposit Agreement.
(d) In the event that, but for the provisos to any of
Sections 13.1(b), (c), (d), (f) or (m), or, in the case of clause
(ii) of Section 13.1(t), but for the lapse of either the 180 day
or 30 day periods referred to therein, a Special Event would
occur and be continuing, 98% of the Distributable Cash otherwise
distributable to such Other Partner pursuant to Section 4.3(b) on
each Distribution Date shall not be currently distributed to such
Other Partner but shall be transferred to and retained in the
Retention Account and applied in the manner set forth in the
Amended and Restated Security Deposit Agreement.
4.12 Tax Indemnity. Notwithstanding anything else
contained herein, if a Tax Indemnity Event occurs with respect to
a taxable year that ends on or prior to, or that includes, the
First GE Capital Flip Date, then an amount of Distributable Cash
that would otherwise have been distributed to SECI General and
the SECI Limited Partners under this Article IV for any calendar
month after application of Distributable Cash in accordance with
Section 4.11 shall instead be distributed to the GE Capital
Limited Partner until the balance of the Tax Indemnity Amount
equals zero.
4.13 Distributions in Respect of Additional Capital
Contributions Made Pursuant to Section 8.3. If one or more
Limited Partners shall have made Capital Contributions pursuant
to Section 8.3, 100% of the Distributable Cash distributable to
the Other Partners pursuant to Sections 4.3, 4.4 and 4.5 shall be
(after distribution of any Distributable Cash pursuant to Section
4.14) distributed as follows:
(a) If a SECI Term Loan is outstanding, (i) first, to
the Other Limited Partners who made Capital Contributions
pursuant to Section 8.3, an amount equal to the amount of
such Capital Contributions, up to an aggregate maximum
amount of distributions under this Section 4.13(a)(i) equal
to $32,000,000, pro rata in accordance with their funding of
such Capital Contributions, (ii) second, to the Other
Partners in accordance with Section 4.3, 4.4 and 4.5 until
SECI shall have received an amount sufficient to enable SECI
to pay all amounts then currently due in connection with the
SECI Term Loan, whether such amounts are due by acceleration
or otherwise, and to deposit all amounts then currently
required to be deposited in the SECI Debt Service Account
pursuant to the Amended and Restated Security Deposit
Agreement, (iii) third, to the Other Limited Partners who
made Capital Contributions pursuant to Section 8.3, an
amount equal to the amount of such Capital Contributions in
excess of the amount distributed pursuant to Section
4.13(a)(i), together with the return on the amount of the
Capital Contributions under Section 4.13, calculated as
provided in Section 8.3, pro rata in accordance with the
total amount then due to each such Other Limited Partner,
and (iv) fourth, to the Other Partners in accordance with
Sections 4.3, 4.4 and 4.5; and
(b) if no SECI Term Loan is outstanding, (i) first, to
the Other Limited Partners who made Capital Contributions
pursuant to Section 8.3, an amount equal to the amount of
such Capital Contributions together with the return thereon
calculated as provided in Section 8.3, pro rata in
accordance with the amount then due to each such Other
Limited Partner, and (ii) second, to the Other Partners in
accordance with Sections 4.3, 4.4 and 4.5.
4.14 Distributions in Respect of Section 8.5. If any
Tomen Limited Partner shall be entitled to receive distributions
pursuant to Section 8.5, 50% of the Distributable Cash
distributable to the Other Partners pursuant to Sections 4.3, 4.4
and 4.5 shall not be distributed to the Other Partners in
accordance with Sections 4.3, 4.4 and 4.5, but instead (and prior
to the distribution of any Distributable Cash pursuant to Section
4.13) shall be distributed to such Tomen Limited Partner(s) until
such Partner(s) shall have received distributions of
Distributable Cash pursuant to this Section 4.14 in an amount
equal to the amount due pursuant to Section 8.5.
4.15 Optional Prepayments of the Term Loan or any
Refinancing Loan. In the event that the GE Capital Limited
Partner shall be entitled to receive amounts of Distributable
Cash, from time to time, pursuant to Section 4.11(b) or 13.2(c)
in excess of the scheduled Level 1 Distributions or any Net Cash
From Sales or Refinancings pursuant to Section 4.6(b) or 13.2(c)
(an "Excess Distribution"), the Excess Distribution shall be
distributed to the GE Capital Limited Partner unless the Excess
Distribution would cause any of the notional amounts set forth on
Schedule 10, as adjusted to take into account the distribution of
the Excess Distribution to the GE Capital Limited Partner, to be
less than the outstanding principal balance of the Term Loan and
any Refinancing Loan or Subordinated Refinancing Loan on any such
date, in which case the Excess Distribution shall not be
distributed to the GE Capital Limited Partner, but instead shall
be applied to the optional prepayment of the Term Loan and/or any
Refinancing Loan or Subordinated Refinancing Loan. Any amount
distributed to the GE Capital Limited Partner pursuant to Section
4.11 with respect to which Operating Profits were allocated to
the Other Partners pursuant to Section 5.1 shall be treated as a
guaranteed payment pursuant to Section 707 of the Code, and as
taxable income to the GE Capital Limited Partner with a
corresponding deduction in the same amount allocated to the Other
Partners.
4.16 Failure to Make Second Capital Contribution. If
the GE Capital Limited Partner shall not make the additional
capital contributions specified in Section 2(a)(ii) of the
Capital Contribution Agreement on or prior to the Construction
Loan Maturity Date, the Limited Partnership Interest held by the
GE Capital Limited Partner after the Construction Loan Maturity
Date shall be converted into an interest that is entitled to
9/334ths (or such greater numerator over the sum of the GE
Capital Limited Partner's cash capital contributions and the
Tomen Limited Partners' cash capital contributions if the GE
Capital Limited Partner has at such time contributed more than
$900,000 to the Partnership) and the Other Partners shall be
entitled to a fraction equal to 1 minus such fraction of the
entitlements to Distributable Cash, items of taxable income,
gain, loss and deductions under this Agreement.
4.17 Treatment of Amounts Distributed To GE Capital
Limited Partner Pursuant to Amended and Restated Security Deposit
Agreement. The parties agree that any amounts withdrawn by the
GE Capital Limited Partner pursuant to Section 4.2(a) or (b) of
the Amended and Restated Security Deposit Agreement that are
later drawn under the Senior Debt Service Letter of Credit shall
be treated for income tax purposes as an interest free loan from
the Partnership to the GE Capital Limited Partner that is repaid
to the Partnership by the GE Capital Limited Partner upon the
making of such drawing under the Senior Debt Service Letter of
Credit and then paid by the Partnership to the Lenders under the
Loan Agreement.
4.18 Treatment of Amounts Transferred to SECI Reserve
Account and SECI Debt Service Account. For all purposes of this
Agreement, amounts which are transferred into the SECI Reserve
Account or the SECI Debt Service Account shall be deemed
distributed to the General Partner.
4.19 Treatment of Amounts Transferred to Steam Reserve
Account. For purposes of Article V of this Agreement, amounts
which are transferred into the Steam Reserve Account and not
distributed in the same tax year shall be deemed distributed to
the Partners in such proportion as such amounts would have been
distributed if no such transfer to such Account occurred.
ARTICLE V
ALLOCATION OF CERTAIN PROFITS AND LOSSES
FOR BOOK AND TAX PURPOSES
5.1 Operating Profits. Except as provided in Section
13.2(c), Operating Profits of the Partnership shall be allocated
between the GE Capital Limited Partner and the Other Partners as
follows:
(a) First, to the GE Capital Limited Partner and the
Other Partners so as to match Distributable Cash received by
such Partners over the term of the Partnership pursuant to
Sections 4.3(a), 4.7 and 13.2(c) (treating (i) any amounts
treated as guaranteed payments to the GE Capital Limited
Partner under the last sentence of Section 4.15 and (ii) any
amounts transferred to the GE Capital Limited Partner
pursuant to Section 4.2(a) or (b) of the Amended and
Restated Security Deposit Agreement as other than
distributions of Distributable Cash, which are not to be
matched with allocations of Operating Profits). The ratio
in which Operating Profits are allocated pursuant to this
Section 5.1(a) for any given year shall equal the ratio of
the excesses, with respect to the GE Capital Limited Partner
and the Other Partners, of Distributable Cash received
during the term of the Partnership pursuant to such Sections
over Operating Profits previously allocated pursuant to this
Section 5.1(a) during the term of the Partnership.
(b) Second, 100% to the GE Capital Limited Partner,
out of Operating Profits that would otherwise have been
allocated to the Other Partners, until it has been allocated
on a cumulative basis an amount of Operating Profits
pursuant to this Section 5.1(b) equal to the aggregate
amount of Distributable Cash it has received over the term
of the Partnership pursuant to Section 4.12.
(c) Third, 99% to the Other Partners and 1% to the GE
Capital Limited Partner until the Partners have been
allocated on a cumulative basis an amount of Operating
Profits equal to the aggregate amount of Distributable Cash
received over the term of the Partnership pursuant to
Section 4.3(b) and to Sections 4.11, 4.13 and 4.14 (to the
extent they relate to distributions that would otherwise be
made pursuant to Section 4.3(b)), for this purpose treating
any Distributable Cash deposited (and not distributed in the
same year) in the Senior Debt Service Account, the Base
Reserve Account, the Letters of Credit Reserve Account, the
Distribution Reserve Account and the Retention Account from
amounts otherwise distributable pursuant to Section 4.3(b)
as having been distributed to the Other Partners in the
proportions such amounts would have been distributed to the
Other Partners if actually distributed.
(d) Fourth, 85% to the Other Partners and 15% to the
GE Capital Limited Partner until the Partners have been
allocated on a cumulative basis pursuant to this Section
5.1(d) an amount of Operating Profits equal to the aggregate
amount of Distributable Cash received over the term of the
Partnership pursuant to Section 4.4 and Sections 4.13 and
4.14 (to the extent they relate to distributions that would
otherwise be made pursuant to Section 4.4).
(e) Fifth, 95% to the Other Partners and 5% to the GE
Capital Limited Partner until the Partners have been
allocated on a cumulative basis an amount of Operating
Profits equal to the aggregate amount of Distributable Cash
received over the term of the Partnership pursuant to
Section 4.5 and Sections 4.13 and 4.14 (to the extent they
relate to distributions that would otherwise be made
pursuant to Section 4.5).
(f) Sixth, prior to the Second Capital Contribution
Date, 73% to the GE Capital Limited Partner and 27% to the
Other Partners, and thereafter, until the earlier of the
taxable year that includes the First GE Capital Flip Date
and the taxable year that includes the fourteenth
anniversary of the Second Capital Contribution Date, to the
extent Operating Profits in any taxable year exceed the
amounts to be allocated pursuant to paragraphs (a) through
(f) above, the excess to the GE Capital Limited Partner and
the Other Partners in accordance with the relative Capital
Contributions of the GE Capital Limited Partner and the
Tomen Limited Partners (reducing the GE Capital Limited
Partner's Capital Contribution by any amount received as a
distribution pursuant to Section 4.6(a) and ignoring any
Capital Contribution of SECI); provided, however, that,
subject to the succeeding proviso, the allocation of such
excess Operating Profits shall not be less than 73% to the
GE Capital Limited Partner or more than 27% to the Other
Partners, and provided further that notwithstanding the
73%/27% limitation the Other Partners will be allocated an
amount of such Operating Profits that would otherwise be
allocated to the GE Capital Limited Partner in an amount, on
a cumulative basis pursuant to this Section 5.1(f), equal to
the amount, if any, of Depreciation with respect to the
Noncontributed Assets that has been allocated to the Other
Partners pursuant to Section 5.3(c), in the first year or
years that the amount of Operating Profits in excess of
Distributable Cash allocated to the GE Capital Limited
Partner pursuant to this paragraph (f) would exceed the
amount necessary for the GE Capital Limited Partner to have
sufficient Capital Account to utilize the Depreciation to be
allocated to the GE Capital Limited Partner for such year or
years pursuant to Section 5.3(b)(i).
(g) Seventh, notwithstanding paragraphs (a) through
(f) hereof, beginning in the earlier of the taxable year
that includes the First GE Capital Flip Date and the taxable
year that includes the fourteenth anniversary of the Second
Capital Contribution Date, Operating Profits, to the extent
necessary after taking into account the allocation of
Depreciation pursuant to Section 5.3(d), shall be allocated
to the GE Capital Limited Partner and the Other Partners so
that, if the Partnership were to liquidate at the end of the
year with respect to which the allocations are being made,
to the extent possible, the Capital Accounts of the GE
Capital Limited Partner and the Other Partners would be in
ratios that correspond to the relative amounts to which the
GE Capital Limited Partner and the Other Partners would be
entitled if the remaining assets of the Partnership were
distributed in payment of (i) any amounts not distributed
pursuant to Section 4.3(a) and then (ii) the amounts
described in Section 4.4 and then (iii) the amounts
described in Section 4.5.
5.2 Operating Losses. Operating Losses of the
Partnership shall be allocated among the Partners in the same
manner as Depreciation with respect to the Noncontributed Assets
described in Section 5.3.
5.3 Depreciation. (a) If a taxable year of the
Partnership ends after the Initial Capital Contribution Date and
before the Second Capital Contribution Date, Depreciation with
respect to the Noncontributed Assets for such taxable year shall
be allocated 73% to the GE Capital Limited Partner and 27% to the
Other Partners; provided that any Depreciation which if allocated
pursuant to such ratio would reduce the Capital Accounts of the
Other Partners below zero while the Capital Account of the GE
Capital Limited Partner is positive will be reallocated to the GE
Capital Limited Partner until its Capital Account equals zero.
(b) Except as provided in Section 5.3(a), 5.3(c) or
5.3(d), Depreciation with respect to the Noncontributed Assets
shall be allocated as follows:
(i) First, so long as the Other Partners and the GE
Capital Limited Partner have positive Capital Account
balances, to the Other Partners and the GE Capital Limited
Partner so that, to the extent possible, cumulative
Depreciation with respect to the Noncontributed Assets
(including for this purpose Depreciation allocated pursuant
to paragraph (a), but assuming that any allocations made
pursuant to paragraph (c) were in fact not made) is
allocated in accordance with the ratios of the relative
Capital Contributions of the Tomen Limited Partners and the
GE Capital Limited Partner (reducing the GE Capital Limited
Partner's Capital Contribution by any amount received as a
distribution pursuant to Section 4.6(a) and ignoring any
Capital Contribution by SECI); provided, however, that,
subject to paragraphs (c) and (d), the allocation of such
cumulative Depreciation shall not be less than 73% to the GE
Capital Limited Partner or more than 27% to the Other
Partners.
(ii) Second, any Partner Nonrecourse Deductions for any
taxable period shall be allocated to the Partner who bears
the economic risk of loss with respect to the liability to
which such Partner Nonrecourse Deductions are attributable
in accordance with Treas. Reg. Sec. 1.704-2(j).
(iii) Third, to the extent of the Nonrecourse
Deductions, to the Other Partners and the GE Capital Limited
Partner in accordance with the ratios of their actual total
cash investments (debt and equity) in the Partnership as of
the Second Capital Contribution Date (as adjusted by any
refinancing pursuant to Section 4.6(a)).
(c) Notwithstanding Section 5.3(b)(i), any
Depreciation in any year which if allocated pursuant to Section
5.3(b)(i) would reduce the Adjusted Capital Account of the GE
Capital Limited Partner below zero without regard to any possible
allocation pursuant to Section 5.12(b) while the Capital Accounts
of the Other Partners are positive will be reallocated to the
Other Partners until their Capital Accounts equal zero.
(d) Beginning in the earlier of the taxable year that
includes the First GE Capital Flip Date and the taxable year that
includes the fourteenth anniversary of the Second Capital
Contribution Date, Depreciation with respect to the
Noncontributed Assets, and, to the extent necessary, Operating
Profits pursuant to Section 5.1(g), shall be allocated to the GE
Capital Limited Partner and the Other Partners so that, if the
Partnership were to liquidate at the end of the year with respect
to which the allocations are being made, to the extent possible,
the Capital Accounts of the GE Capital Limited Partner and the
Other Partners would be in ratios that correspond to the relative
amounts to which the GE Capital Limited Partner and the Other
Partners would be entitled if the remaining assets of the
Partnership were distributed in payment of (i) any amounts not
distributed pursuant to Section 4.3(a) and then (ii) the amounts
described in Section 4.4 and then (iii) the amounts described in
Section 4.5.
(e) Any Depreciation with respect to the Contributed
Assets shall be allocated 100% to the Other Partners unless such
Depreciation constitutes a Partner Nonrecourse Deduction, in
which case such Partner Nonrecourse Deduction shall be allocated
to the Partner who bears the economic risk of loss with respect
to the liability to which such Partner Nonrecourse Deductions are
attributable in accordance with Treas. Reg. Sec. 1.704-2(j).
5.4 Gains and Losses. Upon the sale, transfer or
other disposition of any property, any Gain or Loss realized by
the Partnership shall be allocated so that, to the extent
possible, if there were an immediate liquidation of the
Partnership, proceeds would be distributed in accordance with the
Partners' Capital Account balances, as follows:
(a) First, 99% to the GE Capital Limited Partner and
1% to the Other Partners until the GE Capital Limited
Partner would have received the amount required for the
First GE Capital Flip Date to have occurred.
(b) Second, 85% to the Other Partners and 15% to the
GE Capital Limited Partner until the GE Capital Limited
Partner would have received the amount required for the
Second GE Capital Flip Date to have occurred.
(c) Third, 95% to the Other Partners and 5% to the GE
Capital Limited Partner.
5.5 Allocation Among the Other Partners. For purposes
of this Article V, items to be allocated among the Other Partners
shall be allocated as follows:
(a) Depreciation with respect to the Noncontributed
Assets shall be initially allocated to the Tomen Limited Partners
and Depreciation with respect to the Contributed Assets shall be
initially allocated to SECI; provided, however, that if such
allocations would result in Capital Account balances that differ
from those provided for pursuant to paragraph (b), after taking
into account the allocations made pursuant to paragraph (b), then
an amount of Depreciation with respect to the Contributed Assets
shall instead be allocated to the Tomen Limited Partners, or an
amount of Depreciation with respect to the Noncontributed Assets
shall instead be allocated to SECI, so that the Capital Accounts
of the Other Partners satisfy the requirements of paragraph (b).
(b) Operating Income, Operating Loss, Gain and Loss
shall be allocated among the Other Partners so that after taking
into account the initial allocations of Depreciation pursuant to
paragraph (a) above then, to the extent possible, their Adjusted
Capital Accounts remain at all times in the ratios of relative
Initial Allocation Percentages, provided however, that if SECI
has an Adjusted Capital Account balance at least equal to the
lesser of (x) the greater of (i) the outstanding amount of the
SECI Term Loan (plus any amounts that SECI may draw on the SECI
Term Loan) and (ii) the principal amount of the SECI Term Loan
that would have been outstanding pursuant to the Expected Case or
(y) SECI's Initial Allocation Percentage times the total SECI and
Tomen Adjusted Capital Amount balances, then items will be
allocated so that, to the extent possible, and subject at all
times to the requirement that SECI's Adjusted Capital Account at
least equals the lesser of (x) and (y) above, the Tomen Limited
Partners adjusted Capital Account balance will equal the sum of
the amount necessary to provide the Tomen Limited Partners their
base return plus the product of Tomen's Final Allocation
Percentage times the Excess SECI/Tomen Adjusted Capital Account.
5.6 Qualified Income Offset. Notwithstanding anything
herein to the contrary, in the event any Partner unexpectedly
receives any adjustments, allocations or distributions described
in paragraphs (b)(2)(ii)(d)(4), (5) or (6) of Regulations Section
1.704-1, there shall be specially allocated to such Partner such
items of Partnership income and gain, at such times and in such
amounts as will eliminate as quickly as possible that portion of
any deficit in its Adjusted Capital Account caused or increased
by such adjustments, allocations or distributions.
5.7 Minimum Gain Chargeback. Notwithstanding any
other provision in this Article V, if there is a net decrease in
Partnership minimum gain or partner nonrecourse debt minimum gain
(determined in accordance with the principles of Regulation
Sections 1.704-2(d) and 1.704-2(i)) during any Partnership
taxable year, the Partners shall be specially allocated items of
Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to their respective shares
of such net decrease during such year, determined pursuant to
Regulation Sections 1.704-2(g) and 1.704-2(i)(5). The items to
be so allocated shall be determined in accordance with
Regulations Section 1.704-2(f). This Section 5.7 is intended to
comply with the minimum gain chargeback requirements in such
Regulation Sections and shall be interpreted consistently
therewith; including that no chargeback shall be required to the
extent of the exceptions provided in Regulations Sections 1.704-
2(f) and 1.704-2(i)(4).
5.8 Curative Allocations. The allocations set forth
in Sections 5.6, 5.7 and 5.12(b) are intended to comply with
certain requirements of Regulations Section 1.704-1(b).
Notwithstanding any other provisions of this Article V (other
than Sections 5.6, 5.7 and 5.12(b)), allocations that have taken
place pursuant to Sections 5.6, 5.7 and 5.12(b) shall be taken
into account in allocating other Operating Profits, Operating
Losses, Depreciation and other items, so that, to the extent
possible, the net amount of such other allocations and the
Sections 5.6, 5.7 and 5.12(b) allocations to each Partner shall
equal the net amount that would have been allocated to each
Partner if the Sections 5.6, 5.7 and 5.12(b) allocations had not
occurred.
5.9 Section 754 Adjustments. (a) To the extent an
adjustment to the adjusted tax basis of any property of the
Partnership pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Treas. Reg 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases such
a basis) and such gain or loss shall be specially allocated to
the General Partner and Limited Partners in a manner consistent
with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Regulations. If an
adjustment is not required to be taken into account in
determining Capital Accounts, the effect of the adjustment on the
Partner's share of items of taxable income, gain, loss and
deduction similarly shall not be taken into account in
determining Capital Accounts.
(b) With respect to its first taxable year, and
thereafter at any time at the request of any Partner if the
initial election is revoked or rendered ineffective for any
reason, the Partnership shall make the election described in
Section 754 of the Code to adjust the basis of the partnership
property. Each Partner will furnish to the Partnership all
information necessary to give effect to such elections.
5.10 Tax Allocations. Except as provided in Section
5.11, for income tax purposes each item of income, gain, loss and
deduction shall be allocated in the same manner as the
corresponding book item is allocated for Capital Account
purposes.
5.11 Property Subject to 704(c) and 704(b). In the
case of any Partnership asset the Gross Asset Value of which
differs from its adjusted tax basis, income, gain, loss and
deduction with respect to such asset shall, solely for tax
purposes, be allocated in accordance with the principles of Code
Sections 704(b) and 704(c) to take account of such difference.
5.12 Gross Income Allocation. (a) To the extent all
or any portion of any payment by the Partnership to any payee
that is deducted or capitalized by the Partnership for tax
purposes is treated as a non-deductible distribution, such payee
will be allocated an amount of gross income in the period the
deduction would have been taken, or in the case of a capitalized
payment, in the periods in which depreciation or amortization
deductions would have been taken with respect to such capitalized
amount (or in the next succeeding periods to the extent there is
insufficient gross income in any such period) equal to the amount
of the deduction.
(b) Except as provided in Section 5.3(c), in the event
any Partner has a deficit Capital Account at the end of any
Partnership taxable year that is in excess of the sum of (i) the
amount the Partner is deemed to be obligated to restore pursuant
to the penultimate sentence of Regulations Section 1.704-
1(b)(4)(iv)(f) and (ii) the amount the Partner would be deemed to
be obligated to restore if Partner Nonrecourse Deductions were
treated as Nonrecourse Deductions, the Partner shall be specially
allocated items of Partnership income and gain in the amount of
such excess as quickly as possible, provided that an allocation
pursuant to this paragraph (b) shall be made only if and to the
extent that the Partner would have a deficit Capital Account in
excess of such sum after all other allocations provided for in
this Article V have been tentatively made.
5.13 Limitations. Notwithstanding anything to the
contrary in this Article V, no allocation under this Article V
shall be made to a Partner that would cause such Partner to have,
or that would increase, a deficit in its Adjusted Capital
Account.
5.14 SECI General's Share. It is the intent of the
Partners that SECI General shall be allocated 1% of each item of
Partnership income, gain, loss, deduction and credit (other than
Depreciation with respect to the Noncontributed Assets). To the
extent that SECI General would not otherwise be allocated 1% of
such items in any year pursuant to the terms of this Article V,
an amount of such items shall be reallocated from first, the SECI
Limited Partner, and then, if necessary, the Other Limited
Partners, to SECI General in an amount sufficient to give SECI
General a 1% allocation.
5.15 Distributions and Allocations Among Partners. If
a Partnership Interest has been transferred during a taxable year
as permitted under this Agreement, allocations shall be made
among the transferor(s) and transferee(s) as follows:
(i) Operating Profits or Operating Losses for such
year allocable to such Limited Partnership Interest shall be
shared by the transferor(s) and transferee(s) in proportion
to the number of days during such year that each Person held
the Limited Partnership Interest; and
(ii) Gain or Loss, if any, during such year allocable
to such Limited Partnership Interest shall be allocated to
the Person that holds the Limited Partnership Interest on
the day that the disposition of the property occurs.
For purposes of this Section 5.15, a Partnership
Interest shall be deemed to be held by the transferor for the day
of transfer.
5.16 Special Allocation. Any Partner that is treated
as paying interest to the Partnership pursuant to the terms of
Section 7872 of the Code shall be specially allocated the
corresponding interest income.
ARTICLE VI
BOOKS OF ACCOUNT, RECORDS, REPORTS AND TAX MATTERS
6.1 Books and Records. Proper and complete records
and books of account for the Partnership shall be kept by the
Managing General Partner in which shall be appropriately entered
all transactions and other matters related to the Partnership's
business as are usually entered into records and books of account
maintained by partnerships engaged in businesses of like
character. The books and records shall at all times be made
available at the principal office of the Partnership and shall be
open to the inspection and examination of any Partner or its duly
authorized representatives at all reasonable times. The
Partnership will be on the accrual method for both tax and
accounting purposes.
6.2 Information Kept by Managing General Partner. The
Managing General Partner shall keep at the principal office of
the Partnership all the following:
(a) A current list of the full name and last known
business or residence address of each Partner together with
the Capital Contribution of each Partner;
(b) a copy of the original Certificate of Limited
Partnership and all certificates of amendment thereto and
restatements thereof, together with executed copies of any
powers of attorney pursuant to which any such certificate
has been executed;
(c) copies of the Partnership's federal, state and
local income tax or information returns and reports, if any,
for the six most recent taxable years;
(d) copies of this Agreement and all amendments hereto
and restatements hereof;
(e) financial statements of the Partnership for the
six most recent fiscal years;
(f) the Partnership's books and records as they relate
to the internal affairs of the Partnership for at least the
current and past three fiscal years including, without
limitation, true and full information regarding the amount
of cash and a description and statement of the agreed value
of any other property or services contributed by each
Partner and which each Partner has agreed to contribute in
the future, and the date on which each Partner became a
partner of the Partnership; and
(g) all other material information received by the
Managing General Partner from or with respect to the
Partnership.
6.3 Fiscal Year. The fiscal and taxable year of the
Partnership shall end on December 31st of each year.
6.4 Partnership Funds. (a) For so long as the
Security Deposit Agreement is in effect, the funds of the
Partnership shall be deposited in the relevant accounts
maintained by the Security Agent pursuant to the Security Deposit
Agreement, and be invested in such interest-bearing or non-
interest-bearing investments as are specified therein. All
withdrawals from any such accounts shall be made in accordance
with the terms of the Security Deposit Agreement. Any funds
withdrawn from the Revenue Account (as defined in the Security
Deposit Agreement) pursuant to Section 4.1(a) of the Security
Deposit Agreement shall be deposited in a separate bank account
of the Partnership, be invested from time to time only in such
Permitted Investments as may be determined by the Managing
General Partner and be used solely for the payment of expenses
set forth in the then-effective Operating Budget.
(b) Partnership funds shall not be commingled with
those of any other Person.
6.5 Tax Accounting Matters. The Partnership's Capital
Accounts and its books and records related thereto shall be
maintained in accordance with the accounting methods used in
preparing the Partnership's Federal income tax return
notwithstanding the fact that the Partnership shall also maintain
books and records in accordance with GAAP.
6.6 Financial Statements. (a) The Managing General
Partner shall furnish or cause to be furnished to each other
Partner:
(i) as soon as available, but in any event within 120
days after the end of each fiscal year of each Reporting
Participant, a copy of the balance sheet of such Reporting
Participant as of the end of such fiscal year and the
related statements of income, retained earnings (or
partners' capital) and changes in cash flows of such
Reporting Participant for such fiscal year, setting forth in
each case in comparative form the figures for the previous
fiscal year, certified without qualification or exception as
to the scope of its audit by Deloitte & Touche or other
independent public accountants of national standing selected
by the Managing General Partner reasonably acceptable to the
GE Capital Limited Partner; and
(ii) as soon as available, but in any event within 60
days after the end of each quarterly period of each fiscal
year (other than the last quarterly period of each such
fiscal year) of each Reporting Participant, the unaudited
balance sheet of such Reporting Participant as of the end of
such quarterly period and the related unaudited statements
of income and retained earnings (or partners' capital) and
changes in cash flows of such Reporting Participant for such
quarterly period and for the portion of the fiscal year then
ended, setting forth in each case in comparative form the
figures for the previous period, certified by a Responsible
Officer of such Reporting Participant (subject to normal
year-end audit adjustments).
All such financial statements shall be complete and correct in
all material respects and shall be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout the
periods reflected therein (except for changes approved or
required by the independent public accountants certifying such
statements and disclosed therein).
(b) Certificates; Other Information. The Managing
General Partner shall furnish or cause to be furnished:
(i) to the GE Capital Limited Partner (with respect to
periods ending prior to the First GE Capital Flip Date) and
to the Tomen Limited Partners (with respect to periods
ending prior to the later of the First GE Capital Flip Date
and the Second Tomen Flip Date) concurrently with the
delivery of the financial statements referred to in Section
6.6(a)(i), a certificate of the independent public
accountants which certified such financial statements
stating that (i) their examination was made in accordance
with generally accepted auditing standards and, in their
opinion, such financial statements fairly present the
financial position, financial results of operations, and
changes in Partners' capital and cash flow in accordance
with GAAP consistently applied and (ii) in making the
examination and reporting on the financial statements
described above, nothing came to their attention that caused
them to believe that (A) the income and revenues were not
paid or credited in accordance with the financial and
accounting provisions of this Agreement, (B) the costs and
expenses were not charged in accordance with the financial
and accounting provisions of this Agreement, or (C) a
Special Event or of any event which, with the passage of
time or the giving of notice or both, would constitute a
Special Event had occurred, except as specified in such
certificate;
(ii) to the GE Capital Limited Partner (with respect to
periods ending prior to the First GE Capital Flip Date) and
to the Tomen Limited Partners (with respect to periods
ending prior to the later of the First GE Capital Flip Date
and the Second Tomen Flip Date) concurrently with the
delivery of the financial statements referred to in Sections
6.6(a)(i) and (ii) a certificate of a Responsible Officer of
the Managing General Partner stating that, to the best of
such officer's knowledge, the Managing General Partner,
during the period covered by such financial statements, has
observed or performed all of its covenants and other
agreements, and satisfied every condition contained in this
Agreement to be observed, performed or satisfied by it, and
caused the Partnership to observe and perform all of its
covenants and other agreements, and satisfied every
condition in the other Basic Documents to be observed,
performed or satisfied by the Partnership and that such
officer has obtained no knowledge of any Special Event or of
any event which, with the passage of time or the giving of
notice or both, would constitute a Special Event at any time
during such period or on the date of such certificate and no
knowledge of any default or event which, with the passage of
time or the giving of notice or both, would constitute a
default under any of the other Basic Documents at any time
during such period or on the date of such certificate (or,
if any such Special Event or default or event shall have
occurred, a statement setting forth the nature thereof and
the steps being taken by the Managing General Partner or the
Partnership to remedy the same);
(iii) to the GE Capital Limited Partner (with respect to
periods ending prior to the First GE Capital Flip Date) and
to the Tomen Limited Partners (with respect to periods
ending prior to the later of the First GE Capital Flip Date
and the Second Tomen Flip Date) promptly after becoming
available, but in any event within 30 days after the end of
each calendar month (except the last month of each quarter),
a report setting forth the power production and the revenues
of the Project during such month and setting forth any
extraordinary items incurred in connection with the Project
but not included in the Partnership Operating Budget
delivered pursuant to Section 6.6(c), together with a
comparison of the projected power production and revenues of
the Project for such month;
(iv) to the GE Capital Limited Partner (with respect to
periods ending prior to the First GE Capital Flip Date) and
to the Tomen Limited Partners (with respect to periods
ending prior to the later of the First GE Capital Flip Date
and the Second Tomen Flip Date) promptly after becoming
available, but in any event within 30 days after the end of
each calendar quarter, a report setting forth the year-to-
date revenues, operating expenses, general and
administrative expenses and capital expenditures of the
Partnership, together with a comparison of the Partnership
Operating Budget for such period, and a projection of
revenues and expenses for the remainder of the Partnership's
fiscal year;
(v) within 75 days after the end of each fiscal year,
the Managing General Partner shall deliver or cause to be
delivered to each Person who was a Partner at any time
during such fiscal year all information necessary for the
preparation of such Person's Federal income tax return,
including a statement showing such Person's share of
Operating Profits, Operating Losses or credits for such year
for Federal income tax purposes and the amount of any
distribution made to or for the account of such Person
pursuant to this Agreement, and, upon the written request of
any such Person made not later than 30 days after the end of
each fiscal year, any information necessary for the
preparation of any state and local income tax returns which
must be filed by such Person;
(vi) promptly after the filing thereof, the "Annual
Returns" (Form 5500 series) and attachments filed annually
with the Internal Revenue Service with respect to each
Single Employer Plan, if any, of the Partnership;
(vii) with respect to any Single Employer Plan adopted
or amended by the Partnership or SECI or any Commonly
Controlled Entity on or after the Initial Capital
Contribution Date, any determination letters received from
the Internal Revenue Service with respect to the
qualification of such Plan, as initially adopted or amended
under Section 401(a) of the Code;
(viii) promptly after delivery or receipt thereof, a copy
of each material notice, demand or other communication
delivered by or received by the Partnership pursuant to any
Basic Document;
(ix) with respect to periods ending prior to the First
GE Capital Flip Date, copies of each Governmental Approval
or other consent or approval obtained or made by the
Partnership; and
(x) with respect to periods ending prior to the First
GE Capital Flip Date, promptly, such additional financial
and other information as any Partner may from time to time
reasonably request for a purpose which is reasonably related
to the interest of such Partner as a partner in the
Partnership.
(c) (i) No later than November 1 of each year
commencing prior to the First GE Capital Flip Date, the Managing
General Partner shall submit to the GE Capital Limited Partner,
its proposed operating budget for the next succeeding year. Such
proposed operating budget shall be substantially in the form of
Schedule 9A (with any deviations from such form indicated by the
Managing General Partner) (the "Partnership Operating Budget")
and shall include, in each case, on a cash basis a budget for
such operating year specifying on a monthly basis for such
operating year the principal items of (x) revenue anticipated to
be received in respect of the Facility, including, without
limitation, the estimated energy and steam sales, rates and
revenues pursuant to the Steam Supply Agreement and the estimated
power sales, rates and revenues pursuant to the Power Purchase
Agreement and (y) costs and expenses anticipated to be incurred
in connection with the operation, maintenance and administration
of the Facility, including, without limitation, taxes, premiums
for insurance policies required to be maintained pursuant to this
Agreement and any fees and expenses payable to the Lenders
pursuant to the Loan Documents, together with a manpower forecast
and periodic inspection, maintenance and repair schedule and any
other items necessary to calculate "operating income" in the
proposed Partnership Operating Budget and (z) a revised estimate
(and related schedule) of costs to be incurred by the Partnership
in respect of major maintenance items during the next six year
period. Such proposed Partnership Operating Budget shall be
accompanied by (i) a forecasted Partnership Operating Budget for
the next succeeding operating year specifying, in the same
format, on an annual basis the items described in clauses (x),
(y) and (z) above for each such operating year, (ii) a discussion
of any significant changes from the approved Partnership
Operating Budget for the previous year, (iii) a discussion of any
anticipated changes to the terms and conditions, coverages,
policies or carriers of the insurance described in Section 1 of
Schedule 8, (iv) a discussion of whether the funding of the Major
Maintenance Reserve Account then contemplated by the Security
Deposit Agreement will be sufficient to pay costs of all
forecasted major maintenance items and, if not, a proposed
schedule of increases in such funding, and (v) a discussion of
any contemplated changes to agreements or elections covering the
supply and transmission of fuel to the Facility and the other
Assigned Contracts.
(ii) Such Partnership Operating Budget shall be subject
to the written approval of the GE Capital Limited Partner (which
approval shall not be unreasonably withheld or delayed). In the
event the GE Capital Limited Partner disapproves the proposed
Partnership Operating Budget, the GE Capital Limited Partner
shall indicate objections thereto in writing to the Managing
General Partner. The Managing General Partner shall revise the
proposed Operating Budget to reflect the revisions proposed by
the GE Capital Limited Partner or, if the Managing General
Partner disagrees with the GE Capital Limited Partner's
objections, the item(s) in dispute shall be submitted to, and
resolved by, a mutually agreeable independent engineering firm of
national standing.
(iii) If, for any reason, the Partnership Operating
Budget shall not have been approved by the GE Capital Limited
Partner on or prior to the commencement of the applicable
operating year, the Partnership Operating Budget for the prior
operating year shall remain in effect, with such adjustments
thereto as shall be required in respect of (x) any increase in
fuel prices, (y) all contractual payment requirements then
binding on the Partnership, and (z) an increase of 5% of all
Project Expenses other than as provided under the foregoing
clauses (x) and (y). Upon any subsequent approval of the
proposed Partnership Operating Budget, such Partnership Operating
Budget shall become effective for such operating year.
(iv) During the operating year, the Managing General
Partner shall promptly advise the GE Capital Limited Partner of
any circumstance that, in the reasonable judgment of the Managing
General Partner, makes necessary or advisable any revision to the
effective Partnership Operating Budget (including, without
limitation, any allocation of savings in one item of the
Partnership Operating Budget to other items thereof) and shall
promptly furnish to the GE Capital Limited Partner all
information reasonably requested by the GE Capital Limited
Partner in connection with its review of the proposed revision.
The GE Capital Limited Partner shall approve or disapprove such
proposed revision in accordance with the procedures outlined in
paragraph (ii) above. No such revision to the Partnership
Operating Budget may be made without such required approval;
provided, however, that the Managing General Partner may allocate
savings in one such item to other items in the Operating Budget
up to ten percent (10%) of the item from which the allocation is
made; and provided, further, that no item in the Partnership
Operating Budget may be increased as a result of the allocation
of savings by an amount greater than ten percent (10%) of the
original amount of such item. During the existence of any
emergency or event of force majeure affecting the Facility, the
Managing General Partner may in good faith take such actions as
may be reasonably required by such emergency or event of force
majeure; provided, that the Managing General Partner shall
promptly notify the GE Capital Limited Partner of such actions
and any effect such actions may have had on the amounts allocated
in the Partnership Operating Budget and shall promptly consider
in good faith any further reallocations in the Partnership
Operating Budget which may be recommended in writing by the GE
Capital Limited Partner.
(d) (i) No later than November 1 of each year commencing
prior to the First GE Capital Flip Date the Managing General
Partner shall cause North Country to submit to the GE Capital
Limited Partner the proposed operating budget of North Country
for the next succeeding year. Such proposed operating budget
shall be substantially in the form of Schedule 9B (with any
deviations from such form indicated by North Country) (the "North
Country Operating Budget") and shall include, in each case, on a
cash basis a budget for such operating year specifying on a
monthly basis for such operating year the principal items of (x)
revenue anticipated to be received in respect of the North
Country Project, including, without limitation, the estimated gas
sales, rates and revenues pursuant to the North Country Gas
Agreements and (y) costs and expenses anticipated to be incurred
in connection with the operation, maintenance and administration
of the North Country Project, including, without limitation,
taxes, premiums for insurance policies required to be maintained
pursuant to this Agreement and any fees and expenses payable to
any Lender pursuant to the Loan Documents, together with a
manpower forecast and periodic inspection, maintenance and repair
schedule and any other items necessary to calculate "operating
income" in the proposed North Country Operating Budget and (z) a
revised estimate (and related schedule) of costs to be incurred
by North Country in respect of major maintenance items during the
next six year period. Such proposed North Country Operating
Budget shall be accompanied by (A) a forecasted North Country
Operating Budget for the next succeeding operating year
specifying, in the same format, on an annual basis the items
described in clauses (x), (y) and (z) above for each such
operating year, (B) a discussion of any significant changes from
the approved North Country Operating Budget for the previous
year, (C) a discussion of any anticipated changes to the terms
and conditions, coverages, policies or carriers of the insurance
described in Section 2 of Schedule 8, and (D) a discussion of the
costs of maintaining the Pipeline;
(ii) such North Country Operating Budget shall be
subject to the written approval of the GE Capital Limited Partner
(which approval shall not be unreasonably withheld or delayed).
In the event the GE Capital Limited Partner disapproves the
proposed North Country Operating Budget, the GE Capital Limited
Partner shall indicate objections thereto in writing to North
Country. North Country shall revise the proposed North Country
Operating Budget to reflect the revisions proposed by the GE
Capital Limited Partner or, if North Country disagrees with the
GE Capital Limited Partner's objections, the item(s) in dispute
shall be submitted to, and resolved by, a mutually agreeable
independent engineering firm of national standing;
(iii) if, for any reason, the North Country Operating
Budget shall not have been approved by the GE Capital Limited
Partner on or prior to the commencement of the applicable
operating year, the North Country Operating Budget for the prior
operating year shall remain in effect, with such adjustments
thereto as shall be required in respect of (x) all contractual
payment requirements then binding on the North Country, and (y)
an increase of 5% of all North Country Project Expenses other
than as provided under the foregoing clause (x). Upon any
subsequent approval of the proposed North Country Operating
Budget, such North Country Operating Budget shall become
effective for such operating year; and
(iv) during the operating year, North Country shall
promptly advise the GE Capital Limited Partner of any
circumstance that, in the reasonable judgment of North Country,
makes necessary or advisable any revision to the effective North
Country Operating Budget (including, without limitation, any
allocation of savings in one item of the North Country Operating
Budget to other items thereof) and shall promptly furnish to the
GE Capital Limited Partner all information reasonably requested
by the GE Capital Limited Partner in connection with its review
of the proposed revision. The GE Capital Limited Partner shall
approve or disapprove such proposed revision in accordance with
the procedures outlined in paragraph (ii) above. No such
revision to the North Country Operating Budget may be made
without such required approval; provided, however, that North
Country may allocate savings in one such item to other items in
the North Country Operating Budget up to ten percent (10%) of the
item from which the allocation is made; and provided, further,
that no item in the North Country Operating Budget may be
increased as a result of the allocation of savings by an amount
greater than ten percent (10%) of the original amount of such
item. During the existence of any emergency or event of force
majeure affecting the North Country Project, North Country may in
good faith take such actions as may be reasonably required by
such emergency or event of force majeure; provided, that North
Country shall promptly notify the GE Capital Limited Partner of
such actions and any effect such actions may have had on the
amounts allocated in the North Country Operating Budget and shall
promptly consider in good faith any further reallocations in the
North Country Operating Budget which may be recommended in
writing by the GE Capital Limited Partner.
(e) With respect to any year commencing on or before
the First GE Capital Flip Date, the Managing General Partner
shall provide a copy of the approved Partnership Operating Budget
and North Country Operating Budget to the Limited Partners. With
respect to any year commencing after the First GE Capital Flip
Date, the Managing General Partner shall deliver to the Limited
Partners the proposed Partnership Operating Budget and North
Country Operating Budget for the next succeeding year. Within
thirty days after receipt of a proposed Partnership Operating
Budget or any proposed amendment thereto, a Majority in Interest
of the Other Limited Partners shall either approve the proposed
Partnership Operating Budget and North Country Operating Budget
or amendment thereto, as the case may be, or make such revisions
as they reasonably deemed necessary and proper but not in
violation of any Basic Document then in effect; provided,
however, that the proposed Partnership Operating Budget and North
Country Operating Budget or amendment thereto, as the case may
be, shall be deemed approved by a Majority in Interest of the
Other Limited Partners if a Majority in Interest of the Other
Limited Partners do not respond to the Managing General Partner's
proposal within such thirty day period; and provided, further
that once either approved or revised by a Majority in Interest of
the Limited Partners, the Partnership Operating Budget and North
Country Operating Budget shall become the binding Partnership
Operating Budget and North Country Operating Budget for the
applicable fiscal year.
6.7 Tax Matters Partner. (a) The Managing General
Partner shall not make any income tax elections affecting
interest expenses or affecting the depreciation deductions with
respect to the Contributed Assets or the Noncontributed Assets
with respect to the Partnership shown on Schedule 2 or any other
item that may affect the GE Capital Limited Partner, or extend
the statute of limitations for assessment of tax deficiencies,
unless it has received the prior written consent of the GE
Capital Limited Partner (such consent not to be unreasonably
withheld or delayed). The Managing General shall make any income
tax election reasonably requested by the GE Capital Limited
Partner, subject to applicable laws.
(b) The Managing General Partner shall cause to be
prepared all tax returns and statements, if any, which must be
filed on behalf of the Partnership with any taxing governmental
authority. With respect to each fiscal year or portion thereof,
the Managing General Partner shall submit a draft of the Federal
information tax return of the Partnership (with accompanying
schedules) for such fiscal year or portion thereof no later than
90 days prior to the required filing date (including extensions),
to the GE Capital Limited Partner for its consent, and when
consented to by the GE Capital Limited Partner, shall promptly
and timely file the return. If the GE Capital Limited Partner
disagrees with the proposed treatment of any Partnership item on
a tax return of the Partnership, then the GE Capital Limited
Partner shall give written notice to the Managing General Partner
within 30 days of the receipt of the return. If, after good
faith consultation, an agreement regarding the treatment of the
item cannot be reached within 10 days after the Managing General
Partner's receipt of such notice, the Partnership shall treat
such item in the manner prescribed by the GE Capital Limited
Partner, provided, that, if the Managing General Partner so
requests in writing, the GE Capital Limited Partner shall provide
a written opinion from independent tax counsel selected by the GE
Capital Limited Partner (and reasonably acceptable to the
Managing General Partner) to the effect that there is substantial
authority for such treatment or to the effect that there is a
reasonable basis for such treatment and that there is more
support for such treatment than the treatment proposed by the
Managing General Partner. Each of the GE Capital Limited Partner
and the Managing General Partner hereby agrees to use its best
efforts to resolve any disputes with respect to the Partnership
under this Section prior to the required filing date therefor.
On or before the required filing date (including extensions) of
the Partnership information tax return, the Managing General
Partner shall furnish to each Person who was a Partner at any
time during such Fiscal Year (x) a Schedule K-1 or any similar
form as may be required by the Code or the IRS and (y) such other
information with respect to the Partnership as is reasonably
necessary to fulfill such Partner's Federal, state, local and
foreign tax obligations.
(c) The Managing General Partner is hereby designated
as the "tax matters partner" for purposes of Section 6231(a)(7)
of the Code (the "Tax Matters Partner" or "TMP") with respect to
all taxable years of the Partnership. Additionally, the Tax
Matters Partner covenants to notify the Limited Partners promptly
as to the beginning of any audit or administrative or judicial
proceedings with respect to Partnership tax matters and as to all
material developments in such matters, and to provide the Limited
Partners with copies of all reports, notices and correspondence
relating to such matters. In connection with any administrative
or judicial proceeding with respect to the Partnership, the Tax
Matters Partner shall control the contest relating to such
adjustment; provided, however, that (i) with respect to any issue
that may affect the GE Capital Limited Partner, the Tax Matters
Partner shall take no actions without the consent of the GE
Capital Limited Partner, (ii) the GE Capital Limited Partner may
at any time at its option and at the expense of the Partnership,
assume control of all or any portion of such proceedings, and
(iii) with respect to any issue that may affect TPC One or TPC
Two, the Tax Matters Partner shall take no action without the
consent of TPC One and TPC Two unless the GE Capital Limited
Partner has consented to such action. Each Partner agrees that,
notwithstanding the rights afforded the Tax Matters Partner under
the Code, it will not pursue any administrative adjustment with
the Internal Revenue Service or judicial review of any such
adjustment other than in the manner detailed in this Section.
(d) The Managing General Partner shall not take any
position for income tax reporting purposes that is inconsistent
with any of the assumptions in Section 6.7(f)(iii) or in
paragraphs (a) or (h) (disregarding the assumption in paragraph
(h) concerning the write-off of basis) of the Assumptions in Part
1 of Schedule 2, except to the extent that (i) such assumption is
inconsistent with a final determination pursuant to a contest
conducted in accordance with Section 6.7(c) or (ii) if the
General Partner requests, due to a change in law, resulting from
a change to the Code, a change to the Regulations, a court case
or a published revenue ruling, that affects such an assumption, a
written opinion that there is a reasonable basis for taking a
position for income tax reporting purposes consistent with such
assumption, independent tax counsel, selected by the GE Capital
Limited Partner, is unable to provide such opinion. In either
such event, the Managing General Partner shall use reasonable
efforts to report the matter so as to result in tax consequences
as close as possible to the assumptions. No Partner shall take a
position on its tax returns that is inconsistent with the
positions taken on the Partnership tax returns with respect to
such assumptions.
(e) The GE Capital Limited Partner's rights under this
Section 6.7(a) through (d) apply only with respect to all taxable
years that end on or before, or that include, the First GE
Capital Flip Date and shall terminate on the earlier to occur of
(i) the expiration of the statute of limitations with respect to
all such years and (ii) the date the GE Capital Limited Partner
ceases to be a Partner.
(f) (i) For years beginning after the First GE
Capital Flip Date, the Managing General Partner shall cause to be
prepared all tax returns and statements, if any, which must be
filed on behalf of the Partnership with any taxing governmental
authority. With respect to each fiscal year or portion thereof
the General Partner shall submit a draft of the Federal
information tax return of the Partnership (with accompanying
schedules) for such fiscal year or portion thereof no later than
90 days prior to the required filing date (including extensions),
to the Other Limited Partners for their consent, and, when
consented to by a Majority in Interest of the Other Limited
Partners, shall promptly and timely file the return. If a
Majority in Interest of the Other Limited Partners disagrees with
the proposed treatment of any Partnership item on a tax return of
the Partnership, then any Other Limited Partner may give written
notice to such effect to the Managing General Partner within 30
days of the receipt of the return. If, after good faith
consultation, an agreement regarding the treatment of the item
cannot be reached within 10 days after the Managing General
Partner's receipt of such notice, the Partnership shall treat
such item in the manner prescribed by a Majority in Interest of
the Other Limited Partners, provided that if the Managing General
Partner so requests in writing to the Other Limited Partners, a
written opinion from independent tax counsel selected by a
Majority in Interest of the Other Limited Partners, and
reasonably acceptable to the General Partner shall be provided to
the Managing General Partner to the effect that (A) there exists
substantial authority for such treatment and that there is a
stronger basis for the treatment proposed by a Majority in
Interest of the Other Limited Partners than that proposed by the
Managing General Partner and (B) to the extent that the treatment
proposed by the Managing General Partner is consistent with the
tax assumptions set forth in (iii) below, there is no substantial
authority for the treatment proposed by the Managing General
Partner. If such opinion cannot be obtained, then the
Partnership return shall be prepared in accordance with the
treatment of such item prescribed by the Managing General
Partner, provided that, if the Majority in Interest of the Other
Limited Partners so requests, the Managing General Partner
provides an opinion of the independent counsel selected by the
Managing General Partner and reasonably acceptable to the
Majority in Interest of the Other Limited Partners to the effect
that there exists substantial authority for such treatment. If
no such opinion can be obtained, then the item shall be reported
in accordance with the manner prescribed by the Majority in
Interest of the Other Limited Partners if the Managing General
Partner shall have been provided with a written opinion of
independent tax counsel selected by the Majority in Interest of
the Other Limited Partners and reasonably satisfactory to the
Managing General Partner to the effect that there is a reasonable
basis for treating the item in such manner and that there is a
stronger basis for the treatment proposed by the Majority in
Interest of the Other Limited Partners than that proposed by the
Managing General Partner. If no such opinion can be obtained,
then the item shall be reported in accordance with the manner
prescribed by the Managing General Partner. Each of the Limited
Partners and the Managing General Partner hereby agrees to use
its reasonable best efforts to resolve any disputes with respect
to the Partnership under this Section prior to the required
filing date therefor. On or before the required filing date
(including extensions) of the Partnership information tax return,
the Managing General Partner shall furnish to such Person who was
a Partner at any time during such Fiscal Year (x) a Schedule K-1
or any similar form as may be required by the Code or the IRS and
(y) such other information with respect to the Partnership as is
reasonably necessary to fulfill such Partner's Federal, state,
local and foreign tax obligations.
(ii) In connection with any audit of the Partnership
with respect to taxable years ending after the taxable year in
which the First GE Capital Flip Date occurs, (A) for so long as
such audit shall be conducted at the level of the Internal
Revenue Service (rather than at the judicial level) the Tax
Matters Partner shall control the contest relating to such
adjustment; provided, however, that the Tomen Limited Partners
and the GE Capital Limited Partner shall be permitted to
participate in the contest if and to the extent that either so
desires (subject to the control of such contest by the Tax
Matters Partner), and provided further, that the Tax Matters
Partner shall not (W) select counsel or other tax advisors to
represent the Partnership in connection with the contest without
the consent of a Majority in Interest of Other Limited Partners
(which consent shall not be unreasonably denied), (X) contest any
adjustment for a fiscal year, without the consent of a Majority
in Interest of Other Limited Partners (which consent may not be
unreasonably denied) where the amount of such adjustment shall be
in excess of $250,000 or where the counsel selected by the Tax
Matters Partner pursuant to (A) (W) above shall have failed to
opine that there is, at minimum, a reasonable basis for
contesting the proposed adjustment, (Y) settle any such contest
without the consent of a Majority in Interest of the Other
Limited Partners (which consent shall not be unreasonably
denied), or (Z) enter into any extension of the period of
limitations for making assessments with respect to the
Partnership or any Partner without the consent of a Majority in
Interest of the Other Limited Partners (which consent shall not
be unreasonably denied); and (B) for so long as such audit shall
be conducted at the judicial level, a Majority in Interest of the
Other Limited Partners shall control the contest relating to such
adjustment, including choice of forum and the decision as to
whether or not a judicial contest shall be undertaken (with the
Tax Matters Partner, and each other Partner of the Partnership,
following the instructions of the Majority in Interest of the
Other Limited Partners); provided, however, that the Tax Matters
Partner shall be permitted to participate in the judicial contest
if and to the extent that it so desires (subject to the control
of such contest by a Majority in Interest of the Other Limited
Partners) and, provided further, that the Majority in Interest of
the Other Limited Partners shall not (W) select counsel to
represent the Partnership in connection with the contest without
the consent of the Tax Matters Partner (which consent shall not
be unreasonably denied), (X) decline to judicially contest any
adjustment for a fiscal year without the consent of the Tax
Matters Partner (which consent may not be unreasonably denied) if
the counsel selected by the Majority in Interest of the Other
Limited Partners pursuant to (B)(W) shall have opined that the
basis in law and fact in favor of allowance of the item proposed
to be adjusted outweighs the basis in law and fact to the
contrary, (Y) settle any such contest without the consent of the
Tax Matters Partner (which consent shall not be unreasonably
denied), or (Z) appeal any matter to the Supreme Court of the
United States. Both the Tax Matters Partners shall be entitled
to rely on the advice of such legal and accounting firms as they
may employ with respect to matters set forth in this Section and
shall be reimbursed by the Partnership for any costs and expenses
incurred in connection therewith. Each Partner agrees that,
notwithstanding the rights afforded such Partner under the Code,
it will not pursue any administrative adjustment with the
Internal Revenue Service or judicial review of any such
adjustment other than in the manner detailed in this Section.
The rights of the Other Limited Partners under this Section
6.7(f)(ii) shall terminate on the earlier to occur of (A) the
Second Tomen Flip Date, and (B) the date TPC One and TPC Two
cease to be Partners.
(iii) The Managing General Partner shall not take any
position for income tax reporting purposes that is inconsistent
with any of the tax assumptions below or the assumptions in
paragraphs (a) and (h) of the Assumptions in Part 1 of Schedule 2
(disregarding the assumption in paragraph (h) concerning the
write-off of basis), except to the extent that (A) such
assumption is inconsistent with a final determination pursuant to
a contest conducted in accordance with Section 6.7(f)(ii) or (B)
if the General Partner requests, due to a change in law,
resulting from a change to the Code, a change to the Regulations,
a court case or a published revenue ruling, that affects such an
assumption, a written opinion that there is a reasonable basis
for taking a position for income tax reporting purposes
consistent with such assumption, independent tax counsel selected
by a Majority in Interest of Other Limited Partners and
reasonably satisfactory to the Managing General Partner is unable
to provide such opinion the assumptions described in this Section
6.7(f)(iii) are:
(A) Each of the Partners has made its Capital
Contribution;
(B) Each of the Partners will be recognized as a
Partner of the Partnership and treated as owning its
interest in the Partnership as of the date hereof:
(C) The Project was placed in service for Federal
income tax purposes on the date reasonably determined by the
Managing General Partner and the GE Capital Limited Partner.
(D) The Organization Expenses will be deducted ratably
over a sixty-month period as provided in Sections 195 and
709 of the Code;
(E) The allocations set forth in this Agreement will
be respected for Federal income tax purposes; and
(F) The Partnership constitutes a "partnership" under
Section 7701(a)(2) of the Code.
6.8 Inspection; Reports to Regulatory Authorities.
The Partners and their respective authorized representatives may
inspect the Project and the books and records of the Managing
General Partner relating to the Project during normal business
hours for any purpose reasonably related to the interest of the
Partners as partners of the Partnership and make copies and
extracts therefrom, and may discuss the Partnership's affairs,
finances and accounts with the employees and accountants of the
Managing General Partner and the Partnership (and by this
provision the Managing General Partner authorizes such
accountants to discuss with each of the Partners and their
respective authorized representatives the affairs, finances and
accounts of the Partnership), all at such times and as often as
may be reasonably requested. The Managing General Partner shall
furnish each of the Partners statements accurate in all material
respects regarding the condition and state of repair of the
Project, all at such times and as often as may be reasonably
requested. None of the Partners shall have any duty to make any
such inspection or inquiry or incur any liability or obligation
by reason of not making any such inspection or inquiry. To the
extent permitted by Applicable Law, the Managing General Partner
shall prepare and file in timely fashion or, where any Partner
shall be required to file, on reasonable notice, the Managing
General Partner shall prepare and deliver to such Partner within
a reasonable time prior to the date for filing, any report with
respect to the Project that shall be required to be filed with
any Governmental Authority. Each of the Partners shall notify
the Managing General Partner at least 30 days prior to any filing
deadline if any such notice, application or document is necessary
on its behalf. Notwithstanding anything in Section 17-305(b) of
the Partnership Act to the contrary, the General Partner shall
not have the right to keep confidential from the Limited Partners
any information relating to the Partnership.
ARTICLE VII
MANAGEMENT
7.1 Appointment; Powers of the Managing General
Partner. (a) SECI is hereby appointed as the initial Managing
General Partner. SECI shall serve as the Managing General
Partner until it shall cease to be a General Partner or the
Managing General Partner pursuant to Section 13.2 or as provided
in Article X or XII.
(b) The Managing General Partner, acting as such and
subject to Section 7.3 and to any other specific limitations
contained in this Agreement, shall have full and exclusive power
and discretion to manage the day-to-day business and affairs of
the Partnership, including the construction, equipping,
management, control, operation, maintenance and repair of the
Project, and to engage in all activities and transactions and all
other acts and things that in its reasonable judgment are
necessary, appropriate, proper, advisable or desirable to effect
the furtherance of the Partnership Business, including, but not
limited to, the power to:
and records of the Partnership, and have charge and
supervision over and care and custody of all moneys,
securities, and disbursements of the Partnership;
(ii) Contracts. Negotiate the terms of and make, enter
into, execute, deliver and perform any and all agreements,
contracts, commitments, arrangements and undertakings, and
amendments thereto, all as may be necessary, proper,
advisable or desirable to carry out the Partnership's
objects and purposes, including, but not limited to, the
following:
(1) construction and term loan agreements;
(2) notes, including, but not limited to,
construction notes and term notes;
(3) capital contribution agreements;
(4) indemnity agreements;
(5) collateral security documents, including, but
not limited to, mortgages, security agreements,
security deposit agreements, assignments regarding
contracts and consents to assignments regarding
contracts;
(6) power purchase contracts;
(7) steam supply agreements;
(8) construction contracts;
(9) reimbursement agreements;
(10) recognition agreements;
(11) additional contracts, including, but not
limited to, subordinated mortgages, gas purchase and
transportation agreements, operation and maintenance
agreements, and easement agreements;
(12) any (a) assignment, (b) consent to
assignment, (c) consent and agreement, and (d) consent
and/or recognition agreement relating to the types of
contracts, agreements, commitments, arrangements or
other undertakings set forth in this Section 7.1(b);
(13) certificates and notices, including, but not
limited to, construction loan borrowing certificates,
term loan borrowing certificates, completion
certificates, cost certificates and notices of
borrowing;
(14) collateral agency agreements;
(15) tax indemnity agreements;
(16) Project Contracts;
(17) Basic Documents;
(18) letter agreements; and
(19) success fee agreements; and
to have letters of credit issued for its account and on its
behalf.
(iii) Authorization. Grant special or limited authority
to employees and agents of the Partnership to make, execute,
deliver and perform the agreements generally described in
paragraph (ii) of this Section 7.1(b);
(iv) Investments. Invest and reinvest available funds
of the Partnership in Cash Equivalents in accordance with
the terms of the Security Deposit Agreement and Section 6.4;
(v) Proceedings. Pursue or defend any claim, action,
proceeding or debt due to, owned by or asserted against the
Partnership, by litigation or otherwise; provided, however,
that (1) until the First GE Capital Flip Date, the Managing
General Partner shall permit any Partner, at such Partner's
sole option, to take part with the Managing General Partner
in any arbitration proceeding under any Project Contract and
(2) until the First GE Capital Flip Date, without the
approval of the GE Capital Limited Partner, the Managing
General Partner shall not initiate any lawsuit except to
collect debts or to enforce contractual obligations in the
ordinary course of business;
(vi) Accounts. Open, maintain and close depositories
and bank accounts for the deposit and withdrawal of money
and give signatory powers to designated Persons in
accordance with the terms of the Security Deposit Agreement
and Section 6.4;
(vii) Advisors. Select, retain, direct, consult and
discharge attorneys, accountants, engineers, financial
advisors, consultants and other experts, agents and advisors
for the Partnership and determine their compensation and the
terms of their engagement on behalf of the Partnership in
accordance with the Partnership Operating Budget;
(viii) Reports. Prepare and file any reports, returns,
requests, applications or other filings relating to taxes,
legal requirements or governmental regulations pertaining to
the Partnership or the business or activities of the
Partnership, and act as TMP;
(ix) Borrowing Money and Pledging Assets. Borrow money
and, as security therefor, mortgage, pledge or otherwise
encumber any and all assets of the Partnership, including
the rights of the Partnership under any agreements
(including, without limitation, transactions pursuant to the
Loan Documents);
(x) Expenditures. Pay any and all fees and make any
and all expenditures which the Managing General Partner
deems necessary or appropriate in connection with the
organization of the Partnership, the transfer of interests
in the Partnership, the management of the affairs of the
Partnership, and the carrying out of its obligations and
responsibilities under this Agreement and the Partnership
Act, and to enforce all rights of the Partnership;
(xi) Admission of Limited Partners. Admit an assignee
of a Limited Partnership Interest as a substitute Limited
Partner, pursuant to and subject to the terms of Article 10;
(xii) Intellectual Property. Subject to paragraph (v)
above, prosecute, protect and defend or cause to be
protected and defended all patents, patent rights, trade
names, trademarks and service marks, and all applications
with respect thereto, which may be held by the Partnership
and take all reasonable and necessary actions to protect the
secrecy of and the proprietary rights with respect to any
trade secrets, know-how, secret processes or other
proprietary information and prosecute and defend all rights
of the Partnership in connection therewith;
(xiii) Payments and Collections. Cause to be paid all
amounts due and payable by the Partnership to any Person and
to collect all amounts due to the Partnership;
(xiv) Reserves. Establish and maintain reserves in
accordance with the provisions of this Agreement and the
Loan Documents;
(xv) Distributions. Make periodic distributions to the
Partners in accordance with the provisions of this
Agreement; and
(xvi) Necessary Activities. Engage in any kind of
activity necessary or incidental to the accomplishment of
the purpose of the Partnership, so long as such activities
may be lawfully carried on or performed by a partnership
under applicable law.
7.2 Certain Management Duties and Responsibilities of
the Managing General Partner. The Managing General Partner shall
do the following:
(a) Payment of Obligations. (i) Cause the
Partnership and North Country to pay, discharge or otherwise
satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations and
liabilities of whatever nature under the Basic Documents;
(ii) Cause the Partnership and North Country to pay,
discharge or otherwise satisfy at or before maturity or
before they become delinquent, all of its Indebtedness and
other obligations of whatever nature (other than under the
Basic Documents) except where any such failure could not
reasonably be expected, in the sole discretion of, until the
First GE Capital Flip Date, the GE Capital Limited Partner,
and thereafter, the Managing General Partner, to have a
Material Adverse Effect;
(b) Taxes; Charges; Laws. (i) Promptly cause the
Partnership and North Country to pay and discharge all
taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its
property prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might
become a Lien upon its property (including for this purpose,
property title to which is held by the IDA), provided, that,
if no Special Event shall have occurred and is continuing,
the Partnership and North Country shall have the right, or
if a Special Event shall have occurred and be continuing,
with the prior written consent of the GE Capital Limited
Partner, the Partnership and North Country shall have the
right, however, to contest in good faith the validity or
amount of any such tax, assessment, charge, levy or claim by
proper proceedings timely instituted, and may permit the
taxes, assessments, charges, levies or claims so contested
to remain unpaid during the period of such contest if: (A)
the Partnership or North Country, as the case may be,
diligently prosecutes such contest, (B) the Partnership or
North Country, as the case may be, sets aside on its books
adequate reserves with respect to the contested items, (C)
during the period of such contest the enforcement of any
contested item is effectively stayed, and (D) the outcome of
which, if adversely determined, could not reasonably be
expected to have a Material Adverse Effect, and promptly pay
or cause to be paid any valid, final judgment enforcing any
such tax, assessment, charge, levy or claim and cause the
same to be satisfied of record; and (ii) comply and cause
the Partnership to comply with all Applicable Laws, and from
time to time obtain and comply with and cause the
Partnership and North Country to obtain, maintain and comply
with Governmental Approvals as shall now or hereafter be
necessary under all Applicable Laws, in connection with the
construction, ownership, operation or maintenance of the
Project or the making and performance by the Partnership or
North Country, as the case may be, of any of the Basic
Documents to which it is a party except any thereof the
failure with which to comply or of which to obtain would not
reasonably be expected, in the sole discretion of, until the
First GE Capital Flip Date, the GE Capital Limited Partner,
and thereafter, the Managing General Partner, to have a
Material Adverse Effect.
(c) Principal Place of Business. So long as SECI
shall be the Managing General Partner: (i) cause each of
the Partnership and North Country to maintain its principal
place of business at Five Post Oak Park, Houston, Texas;
(ii) not permit the Partnership or North Country to keep any
place of business outside of the States of New York and
Texas; (iii) not permit the Partnership to keep any assets
outside of the States of New York and Texas; (iv) not change
its name or the name of the Partnership or North Country;
and (v) in the case of the Partnership, not do business
under any name other than Saranac Power Partners, L.P. or
Saranac Energy Company, Inc., and in the case of North
Country, not do any business under any name other than
"North Country Gas Pipeline Corporation", without, in each
case, the prior written consent of each of the Partners,
which consent shall not be unreasonably withheld.
(d) Performance of Obligations; Enforcement of Rights.
Fully and faithfully carry out all of its obligations, and
cause each of the Partnership and North Country to fully and
faithfully carry out all of its obligations, from time to
time under or in respect of the Basic Documents, and,
without limiting the generality of the foregoing, cause the
Partnership and North Country to pay all amounts payable by
the Partnership or North Country thereunder. The Managing
General Partner will take any and all such action as may be
necessary to enforce its, the Partnership's and North
Country's rights and to collect any and all sums due it, the
Partnership or North Country under the Project Contracts and
will obtain all necessary Governmental Approvals to keep
such Project Contracts in full force and effect. Without
limiting the generality of the foregoing, it will:
(i) do or cause to be done all things necessary
to preserve and keep unimpaired its, the Partnership's
and North Country's rights and those of its assignees
under the Project Contracts and to prevent any default
under any thereof or any termination, surrender,
cancellation, forfeiture or impairment in any material
respect of any thereof, including, without limitation,
all things necessary to defend any appeal of the FERC
Order; and
(ii) not receive or collect or permit North
Country to receive or collect any payments under the
Project Contracts in advance of the time when the same
become due and payable thereunder unless such money is
held by the Security Agent pursuant to the Security
Deposit Agreement until due and payable.
(e) Maintenance of Existence. (i) Engage solely in
(A) the business of being the managing general partner of
the Partnership, except that the Managing General Partner
may enter into the SECI Term Loan Agreement as in effect on
the Conformed Agreement Date and to perform its obligations
thereunder and (B) the performance of the Partnership's
obligations pursuant to the Basic Documents and preserve and
maintain its existence as a corporation under the laws of
the State of Delaware and its qualification to do business
in the States of Texas and New York and in each other
jurisdiction in which the conduct of its business requires
such qualification except where the failure to qualify would
not have a Material Adverse Effect; (ii) not permit North
Country to engage in any business other than the operation
of the North Country Project and the performance of its
obligations pursuant to the Basic Documents to which it is a
party; and (iii) cause North Country to preserve and
maintain its existence as a corporation under the laws of
the State of New York and its qualification to do business
in the States of Texas and New York and in each other
jurisdiction in which the conduct of its business requires
such qualification except where the failure to qualify would
not have a Material Adverse Effect.
(f) Maintenance of Property; Insurance. Keep all of
the Partnership's and cause North Country to keep all of its
material property useful and necessary in its business in
good working order and condition except for normal wear and
tear; maintain and cause North Country to maintain insurance
on all the property of the Partnership or North Country, as
the case may be, in accordance with the provisions of
Schedule 8, naming each Partner as an additional insured if
requested by the GE Capital Limited Partner or a Majority in
Interest of the Other Limited Partners; comply and cause the
Partnership and North Country to comply with all warranties,
covenants and agreements made, given or undertaken by the
Partnership or North Country in favor of insurers in
connection with such insurance policies; and furnish to the
Limited Partners, upon written request, full information as
to the insurance carried for any purpose reasonably related
to the interest of such Partner as a partner in the
Partnership.
(g) Further Assurances. Promptly and duly execute and
deliver and cause North Country to promptly and duly execute
and deliver to each Partner such documents and assurances
and to take such further action as any Partner may from time
to time reasonably request in order to carry out more
effectively the intent and purpose of the Basic Documents
and to establish, protect and perfect the right and remedies
created or intended to be created in favor of each Partner.
(h) Governmental Regulation. (i) Take all actions and
cause North Country to take all actions as may from time to
time be necessary so that none of the Partners, their
respective Affiliates (other than North Country) or the
Partnership will, as a result of the construction, ownership
or operation of the Facility, the supply of fuel or water
thereto or the sale of steam or electricity therefrom, the
construction, ownership or operation of the Pipeline by
North Country or the entering into or performance of any
Basic Document or any transaction contemplated hereby or
thereby, become subject to the jurisdiction of any Federal,
state or local Governmental Authority or regulatory
commission or group to whose jurisdiction the same would not
otherwise be subject (including, without limitation, the
Securities and Exchange Commission, FERC and the public
utility commission, public service commission or analogous
Governmental Authority of any state (a "PUC")) or be deemed
to be, or be subject to regulation as, a public utility, an
electric utility, an electric company, a gas utility company
or a public utility holding company under any Applicable Law
(including, without limitation, the PUHCA, the FPA and the
laws under which any PUC is empowered to act) other than, in
each case, as an owner or operator of a Qualifying Facility;
and (ii) promptly and duly, and cause North Country to
promptly and duly, prepare and, if necessary, execute and
file, and prepare for execution and filing by any Partner,
any of its Affiliates or the Partnership, such notices,
applications and other documents as shall be necessary so
that the construction, ownership or operation of the
Facility, the supply of fuel and water thereto and the sale
of steam and electricity therefrom, the construction,
ownership or operation of the Pipeline by North Country and
the entering into and performance of any Basic Document
shall not subject any such Partner, its Affiliates or the
Partnership to any such regulation.
(i) Compliance with FERC Order, etc. At all times
cause the Partnership to comply with the terms and
conditions of the FERC Order and of each other license
required for the ownership or operation of the Project; not,
and not permit North Country to, amend or modify in any
material respect, terminate, transfer, pledge or otherwise
dispose of, or forfeit, surrender, permit or consent to the
amendment or modification in any material respect,
termination, transfer, pledge, other disposition,
forfeiture, or surrender of, any such license; and not take,
and not permit North Country to take, any other action under
any such license having a material adverse effect on any
Partner;
(j) Notices. Promptly and, in any event, within five
days of obtaining knowledge of any of the following, give
notice to each Partner:
(i) of the occurrence of (x) any Special Event or
(y) any event which, with the passage of time or the
giving of notice or both, would constitute a Special
Event;
(ii) of any default or event of default under any
Indebtedness, Guarantee Obligation or other Contractual
Obligation of the Managing General Partner, the
Partnership or North Country;
(iii) of any litigation, investigation or
proceeding which may exist at any time between SECI or
the Partnership or North Country and any Governmental
Authority including, without limitation, any
litigation, investigation or proceeding to revoke or
modify the FERC Order or any other license or
Governmental Approval required for the ownership or
operation of the Project;
(iv) of any litigation or proceeding affecting the
Partnership, the Managing General Partner, North
Country or the Project in which the amount involved is
$100,000 or more or in which injunctive or similar
relief is sought;
(v) of any litigation, investigation or
proceeding affecting any Project Participant other than
the Partnership which if adversely determined could
reasonably be expected to have a Material Adverse
Effect;
(vi) of discovery of any Hazardous Materials at
the Site, or of any litigation or proceeding relating
to environmental matters concerning the Partnership,
North Country or the Project (including receipt by the
Partnership or North Country of any notice of any
proceeding involving a Relevant Environmental Law or
any discharge of Hazardous Materials);
(vii) of the following events, as soon as possible
and in any event within 30 days after the Managing
General Partner knows or has reason to know thereof:
(A) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, or (B) the
institution of proceedings or the taking or expected
taking of any other action by PBGC or SECI (if it shall
be a General Partner) or the Partnership to terminate,
withdraw or partially withdraw from any Plan, or (C)
the reorganization or insolvency of any Multiemployer
Plan, and, in addition to such notice, deliver to each
Limited Partner whichever of the following may be
applicable: (1) any notice delivered by PBGC
evidencing its intent to institute such proceedings or
any notice to PBGC that such Plan is to be terminated,
or (2) any notice of the reorganization or insolvency
of a Multiemployer Plan received by the Partnership or
SECI (if it shall be a General Partner);
(viii) of any Material Adverse Effect or any event
which could reasonably be expected to result in a
Material Adverse Effect;
(ix) of any loss or damage to the Project in
excess of $100,000;
(x) of any unscheduled shutdown or material
reduction in operation of the Facility, in each case
for a period in excess of 24 hours, or of any
substantial labor dispute which could lead to such a
reduction or shutdown;
(xi) of the execution and delivery of any
Additional Contract;
(xii) of any event constituting force majeure under
any of the Basic Documents or any claim by any party to
any Basic Document alleging that a force majeure event
thereunder has occurred;
(xiii) of (A) a complete copy of any new Basic
Document or Additional Contract entered into by the
Partnership and (B) any proposed amendment or
supplement to or waiver (together with a copy thereof)
of any provision of any Basic Document, or any proposal
with respect thereto;
(xiv) of the receipt by the Managing General
Partner, the Partnership or North Country of any
material notice, demand or declaration from any other
party to any of the Project Contracts relating to any
default or event of default thereunder (including,
without limitation, Article II, Section 3 of the Steam
Supply Agreement), the termination thereof or the
renewal or nonrenewal thereof;
(xv) of any request by a party to a Project
Contract for an arbitration proceeding under and
pursuant to the provisions of such Project Contract;
and
(xvi) of the receipt by the Managing General
Partner, the Partnership or North Country of any notice
or declaration by any Governmental Authority which
relates to, or could result in, Public Utility Status
with respect to the Partnership, the Managing General
Partner, North Country, any Limited Partner or any of
their respective Affiliates.
Each notice pursuant to this paragraph (j) shall be
accompanied by a statement of the Responsible Officer of the
Managing General Partner setting forth details of the
occurrence referred to therein and stating what action the
Managing General Partner proposes to take with respect
thereto. For all purposes of clause (vii) of this Section,
the Partnership shall be deemed to have all knowledge or
knowledge of all facts attributable to the administrator of
such Plan.
(k) Operation and Maintenance. (i) Cause the
Facility to be maintained in such condition that the
Facility will have the capacity and functional ability to
perform, on a continuing basis (ordinary wear and tear
excepted), in normal commercial operation, the functions and
ratings for which it was specifically designed in accordance
with the Plans and Specifications; and operate, service,
maintain and repair all necessary or useful components
thereof so that the condition and operating efficiency
thereof will be maintained and preserved (ordinary wear and
tear excepted) in accordance with (A) Prudent Utility
Practice and good commercial practice for items of a similar
size and nature, (B) such operating standards as shall be
required to enforce any material warranty claims against
dealers, manufacturers, vendors, contractors and
subcontractors and (C) the terms and conditions of all
insurance policies maintained by the Partnership or the
Managing General Partner in effect at any time with respect
thereto; and (ii) cause North Country to cause the North
Country Project to be maintained in such condition that the
Pipeline will have the capacity and functional ability to
perform, on a continuing basis (ordinary wear and tear
excepted), in normal commercial operation, the functions and
ratings for which it was specifically designed in accordance
with the Plans and Specifications; and cause North Country
to operate, service, maintain and repair all necessary or
useful components thereof so that the condition and
operating efficiency thereof will be maintained and
preserved (ordinary wear and tear excepted) in accordance
with (A) prudent pipeline practices and good commercial
practice for items of a similar size and nature, (B) such
operating standards as shall be required to enforce any
material warranty claims against dealers, manufacturers,
vendors, contractors and subcontractors and (C) the terms
and conditions of all insurance policies maintained by North
Country in effect at any time with respect thereto.
VF Liens. Protect and defend the Partnership's, and
cause North Country to protect and defend its, interest in
the Project against any Lien for the performance of work or
the supply of materials filed against the Project, and
remove any such Lien, except to the extent that (i) the
claim giving rise to such Lien is being diligently contested
in good faith, by appropriate proceedings timely instituted,
(ii) the Partnership or North Country has posted a bond or
established a cash reserve in an amount at least equal to
such claim on the books of the Partnership or North Country,
(iii) during the period of such contest the enforcement of
any contested item is effectively stayed and (iv) such
contest does not involve any substantial danger of the sale,
forfeiture or loss of any part of the Project, title thereto
or any interest therein and does not interfere with the
operation of the Facility or the Pipeline.
(m) North Country. The Managing General Partner shall
cause North Country, and shall prepare, execute and file any
and all documents necessary to permit North Country, to
declare and distribute to the Partnership (for distribution
in accordance with the terms of this Agreement and the
Security Deposit Agreement) promptly following the end of
each fiscal quarter of North Country any and all dividends
that North Country may declare in compliance with Applicable
Law.
(n) Non-cash receipts. The Managing General Partner
shall promptly liquidate in a commercially reasonable manner
all distributable non-cash receipts that it receives on
behalf of the Partnership but which it determines are not
necessary or desirable for the business of the Partnership
and deposit the proceeds in the Revenue Account for
distribution to the Partners as cash in accordance with
Article IV.
(o) Alternative Steam Plan. If during the Base Term
the GE Capital Limited Partner shall determine, in its
reasonable judgment, that the Steam Host will cease for any
reason to purchase steam from the Facility in sufficient
quantities so as to maintain the Facility's status as a
Qualifying Facility and SECI shall not have undertaken an
alternative to the operation of the Substitute Facility,
which the GE Capital Limited Partner shall have determined,
in its reasonable judgment, to be a viable and not
economically disadvantageous means to preserve the
Facility's status as a Qualifying Facility, upon the request
of the GE Capital Limited Partner, so long as SECI shall be
the Managing General Partner, the Managing General Partner
shall provide to the GE Capital Limited Partner, as soon as
possible but in any event within 60 days after receipt by
the Managing General Partner of written notice from the GE
Capital Limited Partner to such effect, an Alternative Steam
Plan; and the Managing General Partner shall cause the
substitute facility described in such Alternative Steam Plan
to be constructed and completed and become operational in
compliance with Applicable Law and the Alternative Steam
Plan by no later than the date one year after the date of
such request or, if the FERC shall have granted an exemption
from the requirement that the Facility be a Qualifying
Facility, such longer period not later than the date of the
expiration of such exemption, so long as during such period
NYSEG shall have taken no action to terminate the Power
Purchase Agreement.
7.3 Restrictions on Powers of the Managing General
Partner. (a) Until the First GE Capital Flip Date, whereupon
all of the provisions of this Section 7.3(a) (other than Section
7.3(a)(ii) which shall remain in full force and effect) shall
cease to be effective, the Managing General Partner shall not do
any of the following unless it shall have the prior written
approval of the GE Capital Limited Partner:
(i) Certain Contracts. Enter, or permit the
Partnership to enter, into any Additional Contract requiring
payments by the Partnership in excess of $1,500,000 during
the term of such Additional Contract or if the payments by
the Partnership under such Additional Contract during the
twelve month period commencing with the effectiveness of
such Additional Contract, when aggregated with the payments
by the Partnership under all other Additional Contracts then
in effect during such twelve month period, would exceed
$250,000; or appoint, or permit, the Partnership to appoint,
any operator of the Facility other than the Falcon Power
Operating Company;
(ii) Contracts with Affiliates. Approve the terms of
any agreement, contract, instrument or other transaction
between the Partnership and any Partner, or between the
Managing General Partner or the Partnership and any
Affiliate of the Partnership or the Managing General
Partner, except as explicitly provided for herein, in the
other Basic Documents or in the SECI Term Loan Agreement,
such consent not to be unreasonably withheld if entered on
terms no less favorable to the Partnership than would be
available in a bona fide arm's length transaction with a
Person which is not an Affiliate;
(iii) Merger; Sale of Assets. Authorize or permit the
merger or consolidation of the Partnership with any other
Person, any change to the form of the organization of the
Partnership or the sale, lease, exchange, transfer or other
disposition of the Project or any other assets of the
Partnership in a single transaction or a related series of
transactions, in each case with a value in excess of
$250,000 per year;
(iv) Indebtedness. Authorize the incurrence,
assumption or guaranty by the Partnership of, or suffer the
existence by the Partnership of, any Indebtedness, except
Partnership Permitted Indebtedness;
(v) Acquisition of Assets; Capital Expenditures.
Acquire assets or otherwise make capital expenditures except
in accordance with the Partnership Operating Budget;
(vi) No Other Business. Engage, or cause the
Partnership to engage at any time, in any activity other
than the activities contemplated to be engaged in by it
under the Basic Documents or enter into, or permit the
Partnership to enter into, any contract or agreement other
than the SECI Term Loan Agreement as in effect on the
Conformed Agreement Date, and as explicitly provided for
herein, in the other Basic Documents;
(vii) Liens. Create or otherwise allow any Lien to be
on or otherwise to affect any property included in the
Project, except Partnership Permitted Liens;
(viii) No Amendments or Assignments. Amend in any
material respect, modify in any material respect, waive
compliance with any material provision of, terminate, assign
any rights the Partnership may have under, consent to or
permit the assignment by any other Person of any right such
Person may have under, give consents or exercise rights
under or agree to any such amendment, modification,
termination, consent or waiver of compliance with any
material provision of, or any such assignment or exercise of
any rights under, any Project Contract or Governmental
Approval;
(ix) Private Placement. Take, or permit any of its
Affiliates to take, any action which would subject any
interest in the Partnership to the provisions of Section 5
of the Securities Act;
(x) Settlement of Proceedings. Compromise, settle or
abandon any claim, action, proceeding or debt due to, owned
by or asserted against the Partnership, in each case, in an
amount equal to $500,000 or more;
(xi) Investments. Make any investment of Partnership
funds other than in Permitted Investments;
(xii) Prepayment of Term Notes. Make any prepayment of
the principal of the Term Notes other than mandatory
prepayments in accordance with the express terms of the Term
Notes;
(xiii) Bankruptcy Filing. Take any action of the type
referred to in Section 13.1(g); and
(xiv) Liability to Third Parties. Perform or omit to
perform any act which (1) would cause any Person reasonably
to believe that the GE Capital Limited Partner is a general
partner of the Partnership, (2) would cause Persons with
which the Partnership transacts business reasonably to
believe that the GE Capital Limited Partner participates in
the control of the business of the Partnership or (3) would
otherwise cause the GE Capital Limited Partner to be liable
for the obligations of the Partnership under any
jurisdiction in which the Partnership is deemed to transact
business.
(b) Without limiting the force or effect of Section
7.3(a), unless the Managing General Partner has given at least 30
days' prior written notice to all of the Other Limited Partners
of its intention to take any of the following actions and all of
the Other Limited Partners have approved in writing the proposed
action, the Managing General Partner shall not have the authority
to:
(i) perform any act that would subject the Limited
Partners to liability as general partners in any
jurisdiction in which the Partnership transacts business;
(ii) knowingly refrain from performing any act if such
failure would subject the Limited Partners to liability as
general partners in any jurisdiction in which the
Partnership transacts business;
(iii) cause the Partnership to make a loan to a General
Partner or an Affiliate thereof;
(iv) act in a way that would cause the loss of the
Qualifying Facility status of the Facility;
(v) cause the Partnership to merge or consolidate with
or into any Person;
(vi) take any action or cause the Partnership to take
action that could cause the Partnership not to be recognized
as a partnership for Federal income tax purposes; or
(vii) change the nature of the Partnership's business,
conduct or carry on the business of the Partnership through
any business entity other than the Partnership, or cause any
action to be taken by the Partnership to engage in any
business other than as set forth in Section 2.2 of this
Agreement.
(c) Without limiting the force or effect of Section
7.3(a) and, other than with respect to Sections 7.3(c)(iv)(D),
(E), (F), (G) or (I), so long as no Special Event shall have
occurred and be continuing, unless the Managing General Partner
has given at least 30 days' prior written notice to all of the
Other Limited Partners of its intention to take any of the
following actions and a Supermajority in Interest of the Other
Limited Partners (except in the case of (i) below) has approved
in writing the proposed action, the Managing General Partner
shall not have the authority to:
(i) transact any business (including any amendment of
any then-existing business arrangement) with any Partner or
any Affiliate thereof for goods or services in connection
with the conduct of the Partnership's business (except
pursuant to the Operation and Maintenance Agreement and
agreements for the transportation of natural gas between the
Partnership and North Country, as in effect on the date
hereof); provided, however, that so long as the transaction
is effectuated on terms no less favorable to the Partnership
than would be available in a bona fide arm's-length
transaction with an unaffiliated Person, the approval of the
Limited Partners may not be unreasonably withheld; and
provided, further, that in the case of this subsection only,
such action by the Managing General Partner must be approved
in writing by more than fifty percent (50%) of the Non-SECI
Limited Partners;
(ii) incur indebtedness for borrowed money (including
the assumption or guaranty of a third-party obligation) by
the Partnership other than in the ordinary course of
business and other than pursuant to the Loan Agreement,
Section 10 of the Capital Contribution Agreement and
Sections 7.2(o) and 13.2(e) of this Agreement, if the
aggregate amount outstanding of all Indebtedness of the
Partnership (other than pursuant to the Loan Agreement,
Section 10 of the Capital Contribution Agreement and
Sections 7.2(o) and 13.2(e) of this Agreement) would exceed
$1,000,000.00;
(iii) act in a way contrary to the provisions of this
Agreement;
(iv) from the Initial Capital Contribution Date to and
including the First Tomen Flip Date,
(A) sell, lease, abandon, mortgage or pledge, or
otherwise dispose of, in a transaction or series of
transactions, all or any substantial portion of the
assets of the Partnership (excluding, however, the
liens and encumbrances granted pursuant to the
Collateral Security Documents), other than replacement
of assets in the ordinary course of business;
(B) elect to terminate or dissolve or wind up the
Partnership;
(C) commence or permit to occur a Bankruptcy of
the Partnership;
(D) possess any assets of the Partnership, or
assign rights in specific assets of the Partnership,
for other than a Partnership purpose;
(E) confess a judgment or settle a claim or
lawsuit against the Partnership which makes it
impossible to carry on the business of the Partnership;
(F) admit a Substituted Limited Partner except in
accordance with the provisions of Section 10.2 or admit
a successor General Partner except in accordance with
Article X or Article XII or Section 13.2(b);
except in the ordinary course of business of the
Partnership or of North Country;
(H) acquire assets for or otherwise make a
capital expenditure, expansion or modification of the
Project at a cost of more than $5,000,000 for any
single acquisition, expenditure or modification or
$5,000,000 in the aggregate for any series of
acquisitions, expenditures or modifications in respect
of the same matter, unless such acquisition,
expenditure or modification constitutes a replacement
or repair in the ordinary course of business;
(I) elect to be governed by any amendment to the
Partnership Act or by a succeeding or successor statute
of the State of Delaware governing limited
partnerships;
(J) enter into, amend in any material respect,
refinance or replace the GE Capital Equity
Contribution, the Term Loan or any Refinancing Loan
except in accordance with Section 10.10 or 13.2(g)
hereof or Section 10 of the Capital Contribution
Agreement;
(K) enter into, terminate or materially amend any
Project Contract; provided, however, that the Managing
General Partner shall not be required to seek the
consent of the Other Limited Partners as to any
contract for the supply of goods and services entered
into in the ordinary course of business and (i) under
which the Partnership would pay in the aggregate not
more than $1,500,000; or (ii) which is permitted under
the Loan Documents;
(L) after a damage or loss to the Project (other
than in the case of a Partnership Event of Loss), elect
not to rebuild or repair any material portion of the
Project;
(M) remove or change Falcon Power Operating
Company as the Project operator; provided, however,
that if the Managing General Partner obtains an
acceptable replacement Project operator, the approval
of the Other Limited Partners under this provision
shall not be unreasonably withheld;
(N) make any material modification to the
electric and steam generating capacity of the Project
(other than pursuant to Section 7.2(o));
(O) prepay any indebtedness of the Partnership
unless in the ordinary course of business or pursuant
to a mandatory or, with respect to Distributable Cash
applied pursuant to Section 4.11 or 4.15 hereof or in
connection with a refinancing pursuant to Section 10 of
the Capital Contribution Agreement, optional prepayment
under the Loan Documents; or
(P) distribute any property other than cash to a
Partner;
provided, however, that if a Supermajority in Interest of the
Other Limited Partners have not responded in writing to the
written notice of proposed action given by the Managing General
Partner pursuant to this Section 7.3(c) within 30 days of receipt
of such notice, such proposed action shall be deemed to be
approved by a Supermajority in Interest of the Other Limited
Partners; and provided, further, that the failure of SECI
Limited, alone, to respond to such notice shall not result in a
deemed approval for the purposes of this Section 7.3(c).
(d) Without limiting the force or effect of Section
7.3(a) and, other than with respect to Sections 7.3(d)(iv), (v),
(vi), (vii) or (ix), so long as no Special Event shall have
occurred and be continuing, after the First Tomen Flip Date,
unless the Managing General Partner has given at least 30 days'
prior written notice to all of the Other Limited Partners of its
intention to take any of the following actions and a Majority in
Interest of the Other Limited Partners has approved in writing
the proposed action, the Managing General Partner shall not have
the authority to:
(i) sell, lease, abandon, mortgage or pledge, or
otherwise dispose of, in a transaction or series of
transactions, all or any substantial portion of the assets
of the Partnership (excluding, however, the liens and
encumbrances granted pursuant to the Loan Documents), other
than replacement of assets in the ordinary course of
business;
(ii) elect to terminate or dissolve or wind up the
Partnership;
(iii) commence or permit to occur a Bankruptcy of the
Partnership;
(iv) possess any assets of the Partnership, or assign
rights in specific assets of the Partnership, for other than
a Partnership purpose;
(v) confess a judgment or settle a claim or lawsuit
against the Partnership which makes it impossible to carry
on the business of the Partnership;
(vi) admit a Substituted Limited Partner except in
accordance with the provisions of Section 10.2 or admit a
successor General Partner except in accordance with Article
X or Article XII or Section 13.2(b);
(vii) make any loans or extensions of credit, except in
the ordinary course of business of the Partnership or of
North Country;
(viii) acquire assets for or otherwise make a capital
expenditure, expansion or modification of the Project at a
cost of more than $5,000,000 for any single acquisition,
expenditure or modification or $5,000,000 in the aggregate
for any series of acquisitions, expenditures or
modifications in respect of the same matter, unless such
acquisition, expenditure or modification constitutes a
replacement or repair in the ordinary course of business or
is made pursuant to Section 7.2(o);
(ix) elect to be governed by any amendment to the
Partnership Act or by a succeeding or successor statute of
the State of Delaware governing limited partnerships;
(x) enter into, amend in any material respect,
refinance or replace the GE Capital Equity Contribution or
the Term Loan except in accordance with Section 10.10 or
13.2(g) hereof or Section 10 of the Capital Contribution
Agreement;
(xi) after a damage or loss to the Project (other than
in the case of a Partnership Event of Loss), elect not to
rebuild or repair any material portion of the Project;
(xii) remove or change Falcon Power Operating Company as
the Project operator; provided, however, that if the
Managing General Partner obtains an acceptable replacement
Project operator, the approval of the Other Limited Partners
under this provision shall not be unreasonably withheld;
(xiii) make any material modification to the electric and
steam generating capacity of the Project other than pursuant
to Section 7.2(o);
(xiv) prepay any indebtedness of the Partnership unless
in the ordinary course of business or pursuant to a
mandatory or, with respect to Distributable Cash applied
pursuant to Section 4.11 or 4.15 hereof or in connection
with a refinancing pursuant to Section 10 of the Capital
Contribution Agreement, optional prepayment under the Loan
Documents; or
(xv) distribute any property other than cash to a
Partner;
provided, however, that if a Majority in Interest of the Other
Limited Partners have not responded in writing to the written
notice of proposed action given by the Managing General Partner
pursuant to this Section 7.3(d) within 30 days of receipt of such
notice, such proposed action shall be deemed to be approved by a
Majority in Interest of the Other Limited Partners; provided,
further, that the failure of SECI Limited alone, to respond to
such notice shall not result in a deemed approval for the
purposes of this Section 7.3(d).
(e) The Managing General Partner shall be prohibited
from taking any action in connection with the governance of the
Partnership which is inconsistent with the express provisions of
this Agreement. Neither the Managing General Partner, nor the
SECI Limited Partners or the Tomen Limited Partners, after the
Second Capital Contribution Date and prior to the First GE
Capital Flip Date, shall make any loans or capital contributions
to the Partnership without the express prior written consent of
the GE Capital Limited Partner other than capital contributions
made pursuant to Article VIII.
7.4 Limitations on Liability of General Partner. (a)
The General Partner shall not 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, or any successor, assignee
or transferee thereof for any act or omission performed or
omitted by it in good faith pursuant to authority granted to it
by this Agreement and in a manner reasonably believed by it to be
within the scope of authority granted to it by this Agreement and
in the best interests of the Partnership and the Limited
Partners, unless such act or omission constitutes bad faith,
fraud, gross negligence, recklessness or intentional misconduct.
The General Partner shall be under a fiduciary duty and
obligation to conduct the affairs of the Partnership in the best
interests of the Partnership.
(b) The General Partner does not guarantee, and shall
not be personally liable for, the return of all or any portion of
the Capital Contribution of any Partner or the payment of any
distributions to any Partner (or any assignee, successor or
transferee thereof), including, without limitation, distributions
pursuant to Article IV, it being expressly agreed that any such
return of capital or payment of distributions shall be made
solely from the assets of the Partnership (which shall not
include any right of contribution from the General Partner) in
accordance with this Agreement. Each Partner acknowledges that
the General Partner has not guaranteed that the development and
operation of the Project will be economically successful, that
any Partner's participation in the Partnership will be
economically beneficial or that any Partner will be entitled to
any particular deduction or credit for Federal, state or local
income tax purposes.
7.5 Partnership Information Meetings. The Managing
General Partner shall once each calendar quarter, with the first
such meeting to be held during the first calendar quarter after
the date hereof, call a meeting with the Limited Partners to
discuss and report on Facility operations.
7.6 Limitations on the Partners. No Partner other
than the Managing General Partner shall have any right or
authority to act on behalf of or in the name of the Partnership
or to bind the Partnership in any manner except with the prior
written consent of the Managing General Partner, as provided in
Article XIII, as provided in any Recognition Agreement or as
provided pursuant to a contract approved as required under
Section 7.3. No Partner shall have any right or authority to act
for or bind the Partnership except as expressly set forth herein.
No Partner shall take any action in conflict with the foregoing
provisions of this Section 7.6 or represent, directly or by
course of conduct, that it has any right, power or authority to
take any such action. Notwithstanding anything in this Agreement
to the contrary, the Limited Partners are hereby authorized to
enter into any agreement under which the Limited Partners have
rights, duties or obligations relating to contracts entered into
by the Partnership, including any such agreement denominated as a
"Recognition Agreement," all without affecting the Limited
Partners' limited liability as limited partners of the
Partnership. The Managing General Partner shall use its best
efforts to cause the Partnership to cooperate to the fullest
extent necessary to assure each Limited Partner's ability to
perform under any recognition agreement relating to contracts
entered into by the Partnership.
7.7 Cooperation Regarding Governmental Approvals and
Power Purchase Agreement. SECI General agrees to cooperate fully
with the Partnership and with the Managing General Partner (if
the Managing General Partner shall not be SECI General) so as to
keep the Governmental Approvals (including, without limitation,
the FERC Order) and the Power Purchase Agreement in full force
and effect. As promptly as practicable after it is permitted by
Applicable Law, agreement or contract, as the case may be, the
General Partner shall cause the Partnership (and shall cooperate
with the Partnership and the Managing General Partner, to the
extent necessary) to apply for a renewal of the Governmental
Approvals and a renewal or replacement of the Power Purchase
Agreement for the periods available and to actively prosecute
such application.
7.8 Time Devoted to Partnership. The Managing General
Partner shall devote whatever time and attention to the business,
affairs and operations of the Partnership as are required,
appropriate or desirable for Partnership purposes and to carry
out the provisions of this Agreement. If SECI is the Managing
General Partner, it shall devote its full time to the
Partnership; provided that SECI's directors, officers and
employees (other than full-time employees, if any) shall not be
expected to devote their full time to the performance of such
duties unless necessary from time to time for the proper
performance of the Managing General Partner's duties hereunder.
7.9 Other Business Activities. (a) Except as
expressly provided herein, nothing in this Agreement shall be
deemed to restrict in any way the right of any Partner to manage,
conduct, be employed by, operate, participate in or have an
interest in any other business, activity, venture or organization
of any nature or description independently or with others,
without accountability to the Partnership or any other
Partner(s); provided, that each Partner shall conduct its
business in a manner so as to avoid Public Utility Status as
described in Section 10.10. Each Partner shall be entitled to
receive and hold, without being accountable to the Partnership or
to any other Partner, any fees, compensation, salary, income,
dividends, share of profits or other distribution, gain or income
which it may receive from any other business, activity, venture
or organization.
(b) No General Partner shall engage in any business or
activity other than as required or permitted hereby with respect
to the Project.
(c) Notwithstanding any other provision of this
Agreement, any opportunity to expand or enhance the Project at
the Site or within a one-mile radius thereof shall be presented
to the Partnership.
7.10 Meetings. (a) Meetings of the Other Limited
Partners for the purpose of acting upon any matter upon which the
Other Limited Partners are entitled to vote may be called by the
Managing General Partner at any time and shall be called by the
Managing General Partner not more than 15 days after receipt of a
written request for such a meeting signed by one or more of the
Other Limited Partners representing in the aggregate at least ten
percent (10%) of the Percentage Interest of the Other Limited
Partners. Meetings of the Other Limited Partners shall be held
at such location as from time to time shall be reasonably
determined by the Managing General Partner. The Managing General
Partner shall give written notice of any such meetings to all
Other Limited Partners and such meeting shall be held not less
than 15 days nor more than 60 days after the Managing General
Partner sends such notice to the Other Limited Partners.
(b) The presence in person or by proxy of a Majority
in Interest of the Other Limited Partners entitled to vote shall
constitute a quorum at all meetings of the Other Limited
Partners; provided, that if there shall be no such quorum, a
Majority in Interest of the Other Limited Partners so present or
so represented may adjourn the meeting from time to time without
further notice until a quorum shall have been obtained. No
notice of the time, place or purpose of any meeting of Other
Limited Partners need be given to any Other Limited Partner
entitled to such notice who, in writing, executes and files with
the records of the meeting, either before or after the time
thereof, a waiver of such notice. Any Other Limited Partners who
attend a meeting in person or are represented by proxy, except
for Other Limited Partners attending a meeting for the express
purpose of objecting at the beginning of the meeting to the
transaction of any business on the ground that the meeting is not
lawfully called or convened, shall be deemed to have waived
notice of such meeting. Each Other Limited Partner may authorize
any Person to act for it by proxy with respect to any matter in
which such Other Limited Partner is entitled to participate,
including waiving notice of any meeting and voting or
participating in a meeting. Every proxy must be signed by such
Other Limited Partner or its attorney-in-fact. No proxy shall be
valid after the expiration of 12 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Other Limited Partner executing
it.
(c) If the Managing General Partner elects to seek the
written consent of the Other Limited Partners, the Managing
General Partner shall notify the Other Limited Partners in
writing of the nature of the proposed matter being submitted for
action and the Managing General Partner's recommendation with
respect to approval or disapproval thereof. The Managing General
Partner shall include with each such notification a current list
of the names and addresses of the Other Limited Partners. For
purposes of obtaining such consent, the Managing General Partner
may require a response within a specified time, which may be not
less than 15 days nor more than 60 days from the date of the
notice.
Special Rights of the Other Limited Partners.
Notwithstanding any provision to the contrary herein, and subject
to the provisions set forth in this Section 7.11 and in the
Partnership Act, with, until the First GE Capital Flip Date, the
prior written consent of the GE Capital Limited Partner, Other
Limited Partners holding at least 75 percent of the Percentage
Interests of all NonSECI Limited Partners may (a) remove the
Managing General Partner in the event the Managing General
Partner takes or omits or refuses to take action which amounts to
a breach of Section 7.4(a) or if there is a breach of Section
7.2(n) and (b) appoint a successor thereto. Any removal or
withdrawal of the Managing General Partner pursuant to this
Section 7.11 shall be effective immediately following the
admission to the Partnership of a successor general partner of
the Partnership. In addition, if at any time the sum of the
Percentage Interest owned by the Managing General Partner and all
Affiliates of the Managing General Partner is less than 10
percent, with, until the First GE Capital Flip Date, the prior
written consent of the GE Capital Limited Partner, a Majority in
Interest of the Other Limited Partners shall have the right to
remove the Managing General Partner at will and without cause.
Immediately upon the removal or withdrawal of the Managing
General Partner it shall deliver to the Partnership all books and
records relating to the affairs of the Partnership.
7.12 Partnership Expenses. To the extent not
otherwise expressly provided to the contrary herein, the
Partnership shall pay all fees, costs and expenses of the
Partnership and the Managing General Partner acting as such.
7.13 Liability of the General Partner After
Withdrawal. Upon the General Partner's ceasing to be a general
partner of the Partnership, whether voluntarily or involuntarily,
the General Partner shall remain liable for all liabilities and
obligations hereunder incurred on or prior to the date and time
of its withdrawal or retirement and, if its ceasing to be a
general partner violates this Agreement or the Partnership Act,
it shall be liable for any loss or damage which the Partnership
or any of its Partners may incur as a result of such ceasing to
be a general partner. The General Partner shall not have any
liability for any liabilities or obligations hereunder incurred
after the date and time of its ceasing to be a general partner.
7.14 No Compensation; Reimbursement. The Managing
General Partner shall receive no compensation for performing its
duties as the Managing General Partner under this Agreement,
provided, that this Section 7.14 shall not be interpreted so as
to affect the rights of SECI General or an Affiliate thereof (a)
to receive its share of distributions and allocations as set
forth in Articles IV and V, (b) to receive compensation for
providing goods and services in independent capacities outside
its capacity as the Managing General Partner or (c) to receive
payments and reimbursements permitted under this Agreement.
7.15 North Country. The Managing General Partner
shall be relieved of any obligation to cause North Country to
take any action, or refrain from taking any action, to the extent
that the performance of such obligation could subject the
Partnership or any Partner to regulation as a "gas corporation"
under the Public Service Law of the State of New York.
ARTICLE VIII
CALLS FOR AND PAYMENT OF FUNDS
8.1 Calls for and Payment of Funds. Except as set
forth in Articles III, VIII, X or XIII, the Capital Contribution
Agreement and the Loan Agreement, or as otherwise mutually agreed
by the Partners, no Partner shall make (or be required to make) a
capital contribution or loan of funds to the Partnership.
8.2 Partner Loans; Additional Capital Contributions.
(a) After the First GE Capital Flip Date, in the event that the
Partnership is unable to borrow money necessary to further the
Partnership's business on terms reasonably acceptable to the
Managing General Partner, prior to making any call for Additional
Capital Contributions (as hereinafter defined) the Managing
General Partner shall, subject to Section 7.3(c)(ii), seek to
borrow the necessary money from the Limited Partners and the
Limited Partners shall have the right but not the obligation to
loan money to the Partnership (a "Partner Loan"). Partner Loans
shall bear interest at the lesser of (i) the maximum rate
permitted by law, and (ii) the Prime Rate plus 2% per annum, and
shall be repayable prior to any distributions pursuant to Article
IV; provided, however, that the total amount of each repayment as
a percentage of Distributable Cash shall not exceed fifty percent
(50%). If more than one Limited Partner desires to make a
Partner Loan pursuant to this Section 8.2, each shall be entitled
to make a Partner Loan pro rata in the same proportion that its
Percentage Interest bears to the total Percentage Interests of
all Partners desiring to make such Partner Loans. Partner Loans
shall not be treated as Capital Contributions. In accordance
with this Agreement, a Limited Partner may lend money to and
transact other business with the Partnership and, subject to
applicable law, shall have the same rights and obligations with
respect thereto as a Person who is not a partner of the
Partnership. If a Limited Partner is a lender, in exercising its
rights as a lender, including in making its decision on whether
to foreclose on property of the Partnership, such lender will
have no duty to consider (i) its status as a partner of the
Partnership, (ii) the interests of the Partnership, or (iii) any
duty (including fiduciary duties, if any) it may have to any
Partner or the Partnership.
(b) After the First GE Capital Flip Date, upon notice
from the chief financial officer of the Managing General Partner
pursuant to paragraph (c) of this Section 8.2 that a
determination has been made that additional Capital Contributions
to the Partnership are required, any Partner may, but shall not
be required to, make additional Capital Contributions of cash to
the Partnership in excess of its required Capital Contributions
under Section 3.1 ("Additional Capital Contribution(s)"), which
Additional Capital Contributions may be made by each Partner in
an amount equal to the product of (x) such Partner's Percentage
Interest at the time such Additional Capital Contributions are
called for and (y) the aggregate amount of the call.
(c) After the First GE Capital Flip Date, a call for
Additional Capital Contributions to the Partnership shall be
issued by or on behalf of the chief financial officer of the
Managing General Partner by notice, which shall specify the
amount to be contributed in the aggregate and the amount the
Partner to which the call is directed may contribute, and which
shall be sent to all Partners and shall be executed by the chief
financial officer or a designated representative of the chief
financial officer. To satisfy a call for Additional Capital
Contributions, a Partner shall have paid into the Partnership
cash funds in the full amount of its proportionate share of the
aggregate amount of such call for Additional Capital
Contributions on or before a date thirty (30) days following the
date of the notice, which date shall be the "Contribution Date"
for such contributions. All Additional Capital Contributions
shall be credited to the respective Capital Accounts of the
Partners as of the Contribution Date.
(d) After the First GE Capital Flip Date, should a
Partner not have contributed by the Contribution Date the full
amount of an Additional Capital Contribution called for as
provided in this Section 8.2, the Percentage Interest and
Allocation Percentage of each Partner, effective as of the
Contribution Date, shall be the fraction (expressed as a
percentage) determined by dividing the Deemed Contribution Amount
(as defined hereinbelow) with respect to such Partner by the
aggregate amount of all Capital Contributions made to the
Partnership by the Partners, and credited to the Capital Accounts
of such Partners, on or prior to the Contribution Date (including
any Additional Capital Contributions made by the Partners in
response to the call); provided, however, that no downward
adjustment of the Percentage Interest or the Allocation
Percentage of the Tomen Limited Partners under this Section 8.2
shall be effective prior to the Second Tomen Flip Date and no
downward adjustment of the percentage interest of the GE Capital
Limited Partner under this Section 8.2 shall be effective prior
to the Second GE Capital Flip Date. For purposes of this Section
8.2(d), the "Deemed Contribution Amount" shall mean, with respect
to each Partner, an amount determined by (i) multiplying the
aggregate amount of all Capital Contributions made to the
Partnership by all Partners and credited to the Capital Accounts
of the Partners prior to the Contribution Date (but excluding any
Additional Capital Contributions made by the Partners in response
to the call in question) by such Partner's Percentage Interest or
Allocation Percentage, as the case may be (as in effect
immediately prior to the Contribution Date), and (ii) adding to
the product determined in clause (i) above any Additional Capital
Contribution made by such Partner in response to the call in
question. The Deemed Contribution Amount shall be applied solely
for purposes of making the adjustments to the Partners'
Percentage Interests or Allocation Percentage, as the case may
be, pursuant to this Section 8.2(d) and shall not affect, or be
taken into account in determining, the Partners' Capital Accounts
or other rights to the capital of the Partnership.
(e) In the event that a call for Additional Capital
Contributions shall be issued as provided herein and any Partner
shall not have made its Additional Capital Contribution in
response to such call on or before the Contribution Date, a
Partner who has made its Additional Capital Contribution in
response to such call may make all or any portion of the unmade
Additional Capital Contribution of any noncontributing Partner,
whereupon the Percentage Interests and Allocation Percentages
shall be adjusted as provided for hereinabove.
8.3 Cure Rights; Additional Capital Contributions.
(a) General. This Section 8.3 establishes the procedures for
the Other Limited Partners to cure payment defaults pursuant to
the provisions of Sections 13.1(e) and 13.1(r).
(b) Notice. Upon the earlier of the Managing General
Partner's (i) receipt of notice constituting or evidencing a
Special Event under Section 13.1(e) or 13.1(r), and (ii)
awareness of the reasonable likelihood of a Special Event under
Section 13.1(e) or 13.1(r), the Managing General Partner shall
notify each of the Limited Partners thereof, specifying the
nature of the actual or anticipated Special Event and the
aggregate amount necessary or anticipated to be necessary to cure
such Special Event (the "Cure Amount").
(c) Rights to Fund Cure. Each of the Other Limited
Partners shall have the right, but not the obligation, to make an
additional Capital Contribution to the Partnership to fund the
portion of the Cure Amount equal to the product of its then
applicable Percentage Interests times the Cure Amount. In the
event that one or more of the Other Limited Partners does not
fund all or any portion of the Cure Amount it has the right to
fund as calculated according to the preceding sentence (the "Cure
Amount Deficiency"), the Other Limited Partners desiring to fund
the Cure Amount Deficiency shall have the right to do so
according to the ratio of their then applicable Percentage
Interests to one another.
(d) Return on Section 8.3 Capital Contributions.
Capital Contributions made pursuant to this Section 8.3 shall be
repaid to the Other Limited Partners making such additional
Capital Contributions, together with a cash on cash return equal
to LIBOR plus 500 basis points per annum, as provided in Section
4.13.
(e) The Managing General Partner shall use reasonable
efforts to coordinate the process for the exercise of the rights
of the Other Limited Partners under this Section 8.3.
8.4 Cost Overruns. (a) General. On or before the
Second Capital Contribution Date, in the event that (i) Certified
Construction Costs exceed the Construction Budget, or (ii) the
actual cost of or expense associated with any item designated in
the Construction Budget exceeds the amount set forth in the
Construction Budget with respect to such item after application
of any remaining Construction Budget contingency or other amounts
available under the Loan Documents for the payment of such item
(in each case, such excess a "Cost Overrun"), SECI shall seek to
obtain the money necessary to pay for the Cost Overrun, as
follows:
(i) first, SECI shall have the right, but not the
obligation, to contribute capital to the Partnership up
to the amount of the Cost Overrun; and
(ii) second, to the extent not provided by SECI,
the Tomen Limited Partners shall have the right, but
not the obligation, to contribute capital to the
Partnership up to the amount of the Cost Overrun.
(b) Delivery of Overrun Notice. Immediately upon the
earliest of (i) the date on which a Cost Overrun has occurred,
(ii) the date SECI expects a Cost Overrun to occur, and (iii) the
date SECI receives any notice under the Loan Documents indicating
a Cost Overrun, SECI shall provide the Tomen Limited Partners
with written notice of such Cost Overrun, specifying the amount
of and reason(s) for such Cost Overrun (the "Overrun Notice").
(c) Funding by SECI. As soon as possible and in any
event within 5 days after the date of the Overrun Notice, SECI
shall (i) deliver a notice (the "SECI Notice") to the Tomen
Limited Partners setting forth the amount of capital
contributions SECI will make pursuant to Section 8.4(a)(i) above,
and (ii) fund such capital contributions, in immediately
available funds, to the Partnership. The Partnership shall
credit the amount of the capital contribution to SECI's Capital
Account.
(d) Funding by the Tomen Limited Partners. Within 5
days after receipt of the SECI Notice, the Tomen Limited Partners
shall (i) deliver a notice to SECI and the Managing General
Partner setting forth the amount of the capital contribution the
Tomen Limited Partners will make pursuant to Section 8.4(a)(ii)
above, and (ii) fund such capital contribution, in immediately
available funds, to the Partnership. The Partnership shall
credit the Tomen Limited Partners' capital contribution in the
amount of the capital contribution to the Tomen Limited Partners'
Capital Account.
(e) Distributions in Respect of Capital Contributions.
On or prior to the Second Capital Contribution Date, prior to
payment to SECI of any Success Fee and after payment to any
Affiliate of the Tomen Limited Partners of any amount due such
Affiliate under the Joint Development Agreement, SECI shall use
all amounts otherwise available to pay the Success Fee or the
proceeds of Construction Loans, if any, made for the purpose of
reimbursing the Partnership for such Cost Overruns to make
distributions in respect of capital contributions made pursuant
to this Section 8.4 in the following order of priority:
(i) first, to the Tomen Limited Partners in return of their
capital contributions, (together with a return thereon as
provided in Section 8.4(f)), and (ii) second, to SECI in return
of its capital contributions.
(f) Return on Tomen Limited Partners' Capital
Contributions. A Tomen Limited Partner shall be entitled to earn
a 20% After-Tax Internal Rate of Return on the amount of any
Capital Contribution contributed by such Tomen Limited Partner
under this Section 8.4 and shall be included in the calculation
to determine the Initial Allocation Percentage of such Tomen
Limited Partner under Section 3.4(a) and Exhibit A.
(g) Unreturned Capital Contributions. On the Second
Capital Contribution Date, the amount of any Capital Contribution
contributed by the Tomen Limited Partners pursuant to Section
8.4(d) will be added to any Capital Contribution made by the
Tomen Limited Partners on the Second Capital Contribution Date.
8.5 Unpaid Tomen Fees. On the Second Capital
Contribution Date, if there exist any unpaid Tomen Fees and Delay
Interest thereon (both as defined in the Joint Development
Agreement) the Tomen Limited Partners shall be entitled to
distributions in an amount equal to the amount of such unpaid
Tomen Fees or Delay Interest thereon, and on the amount of any
return, calculated pursuant to Section 8.4(f), on any Capital
Contribution contributed by the Tomen Limited Partners pursuant
to Section 8.4(d), to the extent such return has not been
returned pursuant to Section 8.4(e) together with a 30% pre-tax
(cash on cash) per annum return thereon. Such distributions
shall be payable from Distributable Cash as provided in Section
4.14. At any time any amount shall be distributable to either
Tomen Limited Partner under Section 4.14, SECI shall not borrow
any amount under the SECI Term Loan Agreement, unless such
borrowing is used, in whole or in part, to make capital
contributions to be used by the Partnership to make distributions
provided under Section 4.14.
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to the Contributions on the Initial
Capital Contribution Date. The obligation of GE Capital to make
a capital contribution to the Partnership on the Initial Capital
Contribution Date is subject to the satisfaction or waiver
immediately prior to or concurrently with the making of such
contribution of the conditions precedent set forth in Section
2(b) of the Capital Contribution Agreement.
9.2 Conditions to the Contributions on or Prior to the
Second Capital Contribution Date. The obligation of GE Capital
to make additional capital contributions to the Partnership in
respect of its Limited Partnership Interest on or prior to the
Second Capital Contribution Date is subject to the satisfaction
or waiver immediately prior to or concurrently with the making of
such contributions of the conditions precedent set forth in
Section 2(c) of the Capital Contribution Agreement.
ARTICLE X
TRANSFER AND ENCUMBRANCE
10.1 Limited Partner Transfer Restrictions. (a) Each
Limited Partner, subject to and after compliance with the
provisions of Sections 10.3, 10.4, 10.6, 10.12, 10.13 and 10.14
applicable to such Limited Partner, may sell, assign, transfer,
mortgage, pledge or otherwise (directly or indirectly, including
entering into or consenting to any transaction that constitutes a
transfer for tax purposes) dispose of ("Transfer") its Limited
Partnership Interest, except if:
(i) the assignee is not a Permitted LP Transferee;
(ii) the Transfer would cause the number of Persons
which acquired Limited Partnership Interests directly or
indirectly from in the case of each of SECI, the Tomen
Limited Partners and the GE Capital Limited Partner, to
exceed ten;
(iii) such Transfer would violate any Governmental
Approval;
(iv) such Transfer would cause the Facility to lose its
status as a Qualifying Facility;
(v) such Transfer would violate the terms of any
agreement binding upon the Partnership;
(vi) such Transfer would violate any Applicable Law,
including, without limitation, applicable Federal or state
securities laws or require any registration under such
securities laws;
(vii) such Transfer would cause the Partnership to be
classified otherwise than as a partnership for Federal
income tax purposes;
(viii) the transferee has not agreed in writing to be
bound by this Agreement;
(ix) such Transfer would cause a termination of the
Partnership for Federal income tax purposes;
(x) such Transfer would cause a dissolution of the
Partnership under the Partnership Act; or
(xi) the transferee is an incompetent or a minor.
(b) Any transfer made by any Partner which violates
any provision of this Agreement shall be ab initio null and void
and of no effect.
(c) An assignee pursuant to this Section 10.1 of a
Limited Partnership Interest shall be entitled to receive all
distributions and allocations otherwise distributable or
allocable to the Limited Partner with respect to the Limited
Partnership Interest assigned to such assignee but shall not have
the right to vote such Limited Partnership Interest (or part
thereof) until such time as the assignee becomes a substitute
Limited Partner as provided herein. The "effective date" of an
assignment under this Section 10.1 shall be the date specified in
a notice delivered by the assigning Limited Partner to the
Managing General Partner, which date shall be no earlier than the
date of receipt of such notice as provided in Section 11.1.
10.2 Substitute Limited Partners; Additional Limited
Partners. (a) No transferee of any Limited Partner shall become
a substitute Limited Partner without the prior written consent of
the Managing General Partner and, in the case of a transferee
from SECI, a Majority in Interest of all Partners (excluding, for
this purpose, SECI), in each case, which consent may be granted
or withheld in the Managing General Partner's or each Partner's,
as applicable, sole and absolute discretion.
(b) Except as may be permitted by Section 10.2(a) or
13.2 of this Agreement, no additional Partners may be admitted to
the Partnership, except upon the prior written consent of each
Partner, acting in its sole discretion, and after compliance with
the conditions set forth in Sections 10.1(a)(i) through (xi).
10.3 Additional SECI Limited Transfer Restrictions.
Except as security for the Obligations and the obligations of
SECI under the SECI Term Loan Agreement, SECI may not Transfer
its interest as a limited partner in the Partnership until after
the Second Capital Contribution Date. From and after the Second
Capital Contribution Date until the fifth anniversary of the
Second Capital Contribution Date, SECI may Transfer its interest
as a limited partner in the Partnership; provided that, after
giving effect to such Transfer, SECI shall continue to own a
Limited Partnership interest equal to not less than 60% of the
Limited Partnership Interest owned by it on the Second Capital
Contribution Date after giving effect to the transactions
consummated on such date. From and after the fifth anniversary
of the Second Capital Contribution Date, the provisions of this
Section 10.3 shall no longer be applicable.
10.4 Tomen Rights to Transfer. (a) Notwithstanding
the provisions of Section 10.2 (but subject to the provisions of
Section 10.13 in the case of the Transfer to a limited
partnership the general partner of which is Tomen and one or more
limited partners of which are not Affiliates of Tomen), TPC One
and TPC Two shall have the right from time to time to Transfer
all or any part of their Limited Partnership Interests to an
Affiliate (including without limitation to a limited partnership
the general partner of which is Tomen), which Affiliate shall,
upon execution of this Agreement be admitted to the Partnership
as a limited partner of the Partnership, subject to such Transfer
meeting the conditions set forth in Sections 10.1(a)(i) through
(xi); provided, however, that if the Partnership would otherwise
not satisfy the requirements of Revenue Procedure 92-33 (or any
successor thereto) solely on the basis of the transfer
restrictions applicable to SECI and the GE Capital Limited
Partner, the transferee of Limited Partnership Interests of any
of the Tomen Limited Partners shall be admitted as a substitute
Limited Partner only in accordance with Section 10.2(a).
(b) If (i) an Event of Default under the Loan
Agreement shall have occurred and be continuing, (ii) the
Substitute Term Loan shall not have been made as provided in
Section 8 of the Capital Contribution Agreement, (iii) the
Construction Loans shall not have been refinanced as provided in
Section 9 of the Capital Contribution Agreement, and (iv) the
Limited Partnership Interest of the GE Capital Limited Partner
shall have been converted as provided in Section 4.16, then (x)
notwithstanding any other provision (other than Sections
10.1(a)(iii) through (xi)), TPC One and TPC Two may transfer
their Limited Partnership Interests to a Person that does not
compete directly with Falcon in the development, ownership or
operation of non-utility generation projects, and (y) at the
request of TPC One or TPC Two, such transferee shall, subject to
Section 10.2(a), be admitted as a substitute Limited Partner.
10.5 Pledges, Security Interest. Notwithstanding
anything else in this Agreement to the contrary, upon any
Transfer which is a grant of any pledge, security interest,
hypothecation, lien or other encumbrance by a Partner against
such Partner's interest in the Partnership, such Partner shall
continue to be a partner of the Partnership.
10.6 Ownership by SECI, TPC One and TPC Two.
Notwithstanding anything to the contrary contained in this
Agreement, SECI shall retain the beneficial ownership of not less
than a nine percent (9%) Limited Partnership Interest, and TPC
One and TPC Two, collectively, shall retain the beneficial
ownership of not less than a two percent (2%) Limited Partnership
Interest, in each case for five years from the Second Capital
Contribution Date.
10.7 Revisions to this Agreement Upon Transfer or
Encumbrance. If pursuant to the provisions of Section 10.1, the
Limited Partners are permitted to Transfer any of their interests
in the Partnership, or, if additional Partners are admitted
pursuant to Section 10.2(b) or otherwise, then contemporaneously
with such Transfer or admission, the Capital Accounts, Percentage
Interests and Allocation Percentages of the Partners shall be
adjusted to accurately reflect the interests of each and every
Partner.
10.8 Transfer of the General Partner Interest. Except
as security for the Obligations and the obligations of SECI under
the SECI Term Loan Agreement, SECI may not Transfer its General
Partner Interest until after the Second Capital Contribution
Date. Thereafter, SECI may Transfer its General Partner Interest
if (i) the GE Capital Limited Partner shall have expressly
consented in writing to such Transfer (which consent may be
granted or withheld in the sole discretion of the GE Capital
Limited Partner); (ii) SECI has provided one or more successor
General Partners reasonably satisfactory to the GE Capital
Limited Partner and a Majority in Interest of the Other Limited
Partners, (iii) such transferee meets the requirements to be a
Permitted LP Transferee, and (iv) such transferee meets the
conditions set forth in Sections 10.1(a)(i) through (xi). Any
purported assignment by SECI in violation of this Section shall
be deemed a withdrawal by SECI under Section 12.1 hereof.
10.9 Amendment to Certificate of Limited Partnership.
If a Person has otherwise qualified under this Agreement to
become a substitute or new General Partner, such Person shall
become a General Partner upon the filing with the Secretary of
State of the State of Delaware of an amendment to the Certificate
of Limited Partnership in proper form, duly executed by such
Person. Any such admission shall be deemed to have occurred
immediately prior to the withdrawal of any General Partner who is
withdrawing from the Partnership in connection with the admission
of a new General Partner.
10.10 Voluntary Withdrawal by the GE Capital Limited
Partner. (a) (i) If at any time, the GE Capital Limited
Partner or any Affiliate of the GE Capital Limited Partner,
solely by reason of its interest in the Partnership or any
transaction contemplated by this Agreement or any other Basic
Document and not as a result of any other interest or activity of
the GE Capital Limited Partner or such Affiliate, shall be deemed
by any Governmental Authority having jurisdiction to be an
"electric utility" or an "electric utility holding company" as
such terms are used in PURPA and the regulations thereunder (18
C.F.R. Part 292), or any wholly or partially owned direct or
indirect subsidiary of any "electric utility", "gas utility" or
"electric utility holding company", as such terms are so used, or
any similar entity (including without limitation a "public
utility" as such term is defined in the FPA, or a "holding
company," a "subsidiary company," an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company" as such
terms are defined in the PUHCA) subject to regulation under the
FPA, the PUHCA, or any other comparable federal, state or local
law or regulation (any such classification being called "Public
Utility Status"), then, upon demand made by such Limited Partner
to the Managing General Partner, the Partnership shall forthwith
redeem the GE Capital Limited Partner's right, title and interest
in the Partnership for a redemption price equal to the Stipulated
Termination Value of its interest plus the Termination Payment.
(ii) The redemption price shall be paid in cash, or at
the option of the Partnership, with the proceeds of a loan to be
made by the GE Capital Limited Partner to the Partnership on the
proposed purchase date. Such loan will be evidenced by a note
(the "Redemption Note") which will mature on the last scheduled
Level 1 Distribution Date, bear interest at a rate equal to the
lesser of (i) the maximum rate permitted by law and (ii) the
Treasury Index Rate plus 4.40%, be payable in consecutive
quarterly installments of principal and interest for the period
commencing with the first Distribution Date after the date of
such note (each such installment to be in an amount not greater
than the maximum amount of Level 1 Distributions that, but for
the consummation of the purchase referred to in this Section
10.10, would have been payable to the GE Capital Limited Partner
on each Distribution Date) and have other terms and conditions
which are not more onerous, in any material respect, than those
contained in the Loan Agreement. If the Redemption Note is not
paid in full on or prior to the date fifteen years after the Date
of Commercial Operation, principal and interest will continue to
be payable thereon until the Redemption Note is paid in full, but
such payments will be made only in amounts and at times that, but
for the consummation of the purchase referred to in this Section
10.10, distribution would have been payable to the GE Capital
Limited Partner pursuant to Sections 4.4 and 4.5. The Redemption
Note will be secured by a first (second so long as the Loan
Agreement is in effect) pledge of (i) the interests of SECI in
the Partnership and (ii) the stock of SECI and SECI Holdings
pursuant to pledge agreements in form and substance reasonably
satisfactory to the GE Capital Limited Partner and by a first
(second so long as the Loan Agreement or any refinancing thereof
is in effect) priority lien on the assets of the Partnership
(including, without limitation, the Project) pursuant to a
security agreement and a mortgage, each in form and substance
reasonably satisfactory to the GE Capital Limited Partner.
10.11 Tomen's Rights Following Regulatory Events. (a)
Notwithstanding anything to the contrary herein, in the event
that a Tomen Event of Regulation (other than a North Country
Event of Regulation) has occurred, each Tomen Limited Partner
shall have the right to require that SECI purchase its Limited
Partnership Interests for an amount equal to the Fair Market
Sales Value thereof (the "Tomen Purchase Price"). The Tomen
Purchase Price, together with all other amounts then due Tomen
from the Partnership under this Agreement, shall be payable in
cash, or at the option of SECI by means of a non-recourse note or
notes payable out of future distributions from the Partnership
that such Tomen Limited Partner otherwise would have been
entitled to had it retained its Limited Partnership Interest and
shall contain subordination provisions in form and substance
satisfactory to the GE Capital Limited Partner. Unpaid amounts
shall accrue interest at an interest rate equal to the lesser of
(i) the maximum rate permitted by law and (ii) 30% per annum.
(b) Notwithstanding anything to the contrary herein,
in the event that a North Country Event of Regulation has
occurred, a Majority in Interest of the Other Limited Partners
shall have the right to require that the Partnership sell (in
compliance with Applicable Law) all of its right, title and
interest in the stock or assets, held directly or indirectly, of
North Country within 30 days of such North Country Event of
Regulation (or as soon as possible thereafter in compliance with
Applicable Law) to an entity, and on terms and conditions,
reasonably acceptable to the Managing General Partner; provided,
however, that if the Partnership has not sold all of its right,
title and interest in the stock or assets of North Country as set
forth hereinabove in this Section 10.11(b), then each Tomen
Limited Partner shall have the right to require that the
Partnership purchase its Limited Partnership Interests pursuant
to the terms of Section 10.11(a). The purchase price for the
stock or assets of North Country (or its immediate parent) shall
be reasonably acceptable to the Managing General Partner and may
be payable out of cash flow of North Country (or its immediate
parent).
10.12 Right of First Offer in Respect of the GE
Capital Limited Partnership Interests. Prior to offering for
sale the GE Capital Limited Partnership Interest or any portion
thereof to Persons other than Affiliates of SECI, Tomen or GE
Capital, or soliciting offers to purchase the GE Capital Limited
Partnership Interest or any portion thereof from Persons other
than Affiliates of SECI, Tomen or GE Capital, GE Capital shall
solicit an offer to purchase the GE Capital Limited Partnership
Interest or portion thereof to be sold from SECI and TPC One and
TPC Two. Upon receipt of such a solicitation from the GE Capital
Limited Partner, SECI and TPC One and TPC Two shall have 60 days
in which to make an offer to purchase the GE Capital Limited
Partnership Interest or portion thereof to be sold. If neither
SECI nor TPC One and TPC Two makes an offer to purchase the GE
Capital Limited Partnership Interest or portion thereof to be
sold prior to the end of such 60 day period, then the GE Capital
Limited Partner may thereafter offer to sell, solicit offers to
purchase and sell the GE Capital Limited Partnership Interest or
portion thereof to be sold to any Person (other than the Persons
listed on Schedule 2 to the Letter Agreement) on such terms and
conditions as the GE Capital Limited Partner deems appropriate,
in its sole discretion. If either SECI or TPC One and TPC Two
makes an offer to purchase the GE Capital Limited Partnership
Interest or portion thereof to be sold and the GE Capital Limited
Partner rejects such offer, then the GE Capital Limited Partner,
during the 270 day period following the rejection of such offer,
may offer to sell, solicit offers to purchase and sell the GE
Capital Limited Partnership Interest or portion thereof to be
sold to any Person on terms and conditions which are more
favorable to the GE Capital Limited Partner than the terms and
conditions offered by SECI and/or TPC One and TPC Two. If the GE
Capital Limited Partner shall not enter into a binding commitment
to sell the GE Capital Limited Partnership Interest or portion
thereof to be sold prior to the end of such 270 day period, then
the procedure set forth in the foregoing provisions of this
Section 10.12 shall be reinstated. Following the admission of a
Limited Partner to the Partnership in respect of the transfer of
less than all of the GE Capital Limited Partnership Interest, any
actions that may be taken by the GE Capital under this Agreement
may be taken by holders of more than 50% of the GE Capital
Limited Partnership Interest. Upon any transfer of the GE
Capital Limited Partnership Interest pursuant to the provisions
of this Section 10.12, the provisions of this Section 10.12 shall
lapse and be of no further force or effect with respect to the
portion of the GE Capital Limited Partnership Interest so
transferred.
10.13 Right of First Offer in Respect of the Tomen
Limited Partnership Interests. Prior to offering for sale the
Tomen Limited Partnership Interests or any portion thereof to
Persons other than Affiliates of SECI, Tomen or GE Capital, or
soliciting offers to purchase the Tomen Limited Partnership
Interests or any portion thereof from Persons other than
Affiliates of SECI, Tomen or GE Capital, the Tomen Limited
Partners shall solicit an offer to purchase the Tomen Limited
Partnership Interests or portion thereof to be sold from SECI and
the GE Capital Limited Partner. Upon receipt of such a
solicitation from the Tomen Limited Partners, SECI and the GE
Capital Limited Partner shall have 60 days in which to make an
offer to purchase the Tomen Limited Partnership Interests or
portion thereof to be sold. If neither SECI nor the GE Capital
Limited Partner makes an offer to purchase the Tomen Limited
Partnership Interests or portion thereof to be sold prior to the
end of such 60 day period, then the Tomen Limited Partners may
thereafter offer to sell, solicit offers to purchase and sell the
Tomen Limited Partnership Interests or portion thereof to be sold
to any Person (other than the Persons listed on Schedule 2 to the
Letter Agreement) on such terms and conditions as the Tomen
Limited Partners deem appropriate, in their sole discretion. If
either SECI or the GE Capital Limited Partner makes an offer to
purchase the Tomen Limited Partnership Interests or portion
thereof to be sold and the Tomen Limited Partners reject such
offer, then the Tomen Limited Partners, during the 270 day period
following the rejection of such offer, may offer to sell, solicit
offers to purchase and sell the Tomen Limited Partnership
Interests or portion thereof to be sold to any Person (other than
the Persons listed on Schedule 2 to the Letter Agreement) on
terms and conditions which are more favorable to the Tomen
Limited Partners than the terms and conditions offered by SECI
and/or the GE Capital Limited Partner. If the Tomen Limited
Partners shall not sell the Tomen Limited Partnership Interests
or portion thereof to be sold prior to the end of such 270 day
period, then the procedure set forth in the foregoing provisions
of this Section 10.13 shall be reinstated. Following the
admission of a Limited Partner to the Partnership in respect of
the transfer of less than all of the Tomen Limited Partnership
Interests, any actions that may be taken by TPC One or TPC Two,
as the case may be, under this Agreement may be taken by holders
of more than 50% of the Tomen Limited Partnership Interests.
Upon any transfer of the Tomen Limited Partnership Interest
pursuant to the provisions of this Section 10.13, the provisions
of this Section 10.13 shall lapse and be of no further force or
effect with respect to the portion of the Tomen Limited
Partnership Interest so transferred.
10.14 Right of First Offer in Respect of the SECI
Limited Partnership Interests. Prior to offering for sale the
SECI Limited Partnership Interest or any portion thereof to
Persons other than Affiliates of SECI, Tomen or GE Capital, or
soliciting offers to purchase the SECI Limited Partnership
Interest or any portion thereof from Persons other than
Affiliates of SECI, Tomen or GE Capital, SECI shall solicit an
offer to purchase the SECI Limited Partnership Interest or
portion thereof to be sold from GE Capital and TPC One and TPC
Two. Upon receipt of such a solicitation from SECI Limited, GE
Capital and TPC One and TPC Two shall have 60 days in which to
make an offer to purchase the SECI Limited Partnership Interest
or portion thereof to be sold. If neither GE Capital nor TPC One
and TPC Two makes an offer to purchase the SECI Limited
Partnership Interest or portion thereof to be sold prior to the
end of such 60 day period, then SECI may thereafter offer to
sell, solicit offers to purchase and sell the SECI Limited
Partnership Interest or portion thereof to be sold to any Person
on such terms and conditions as SECI deems appropriate, in its
sole discretion. If either GE Capital or TPC One and TPC Two
makes an offer to purchase the SECI Limited Partnership Interest
or portion thereof to be sold and SECI rejects such offer, then
SECI, during the 270 day period following the rejection of such
offer, may offer to sell, solicit offers to purchase and sell the
SECI Limited Partnership Interest or portion thereof to be sold
to any Person on terms and conditions which are more favorable to
SECI than the terms and conditions offered by GE Capital and/or
TPC One and TPC Two. If SECI shall not enter into a binding
commitment to sell the SECI Limited Partnership Interest or
portion thereof to be sold prior to the end of such 270 day
period, then the procedure set forth in the foregoing provisions
of this Section 10.14 shall be reinstated. Upon any transfer of
the SECI Limited Partnership Interest pursuant to the provisions
of this Section 10.14, the provisions of this Section 10.14 shall
lapse and be of no further force or effect with respect to the
portion of the SECI Limited Partnership Interest so transferred.
ARTICLE XI
NOTICES
11.1 Notices. Any notice, request, demand or other
communication which any Partner, the Managing General Partner or
the Partnership is to give under this Agreement shall be in
writing and shall be sufficient for all purposes hereof if
delivered in person or by registered or certified mail, by
courier service, or by telecopier or telex, in each case
addressed as provided in Section 11.2. Any such notice, request,
demand or other communication shall be deemed given and made
effective when delivered by hand or by courier, five days after
deposit in the mail, in the case of transmission by telecopier,
when confirmation of the receipt is received, or in the case of
telex notice, when sent, answerback received.
11.2 Addresses. For the purposes hereof, the
addresses are:
In the case of SECI or the Partnership:
c/o Saranac Energy Company, Inc.
Five Post Oak Park
Suite 1400
Houston, Texas 77027
Attention: President
Telecopy: (713) 622-0045
In the case of the GE Capital Limited Partner:
General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06927-1560
Attention: Vice President, Energy Project
Operations -- Transportation and
Industrial Funding Corporation
Telecopy: (203) 357-4329 or 6970
In the case of TPC One or TPC Two:
c/o Tomen Power Corporation
1455 Frazee Road
Suite 300
San Diego, California 92103
Attention: Chief Financial Officer
Telecopy: (619) 293-7046
Any party may upon written notice to the others given in
accordance with this Article XI change the address to which
notices, requests, demands or other communications are to be sent
or add such additional addresses as it may reasonably request.
ARTICLE XII
WITHDRAWAL
12.1 Withdrawal. Except as otherwise provided in this
Agreement, but in any event subject to the terms and conditions
contained in this Agreement, no Partner may withdraw from the
Partnership without the consent of a Majority in Interest of All
Partners and, prior to the First GE Capital Flip Date, the GE
Capital Limited Partner; provided, that SECI shall not withdraw
from the Partnership as a general partner except in connection
with the transfer of its General Partnership Interest under
Article X. To the fullest extent permitted by law, each Partner
hereby waives any right or remedy at law or in equity that it may
have to obtain dissolution or to dissolve the Partnership, except
as provided in this Agreement. If the General Partner shall
withdraw, be removed, or an event occurs that causes SECI General
to cease to be a general partner of the Partnership under the
Partnership Act and this Agreement, the Partnership shall be
dissolved and its affairs shall be wound up unless (i) at such
time there is at least one other general partner of the
Partnership, who is hereby authorized to and shall continue the
business of the Partnership, or (ii) if there is no remaining
general partner of the Partnership, within 90 days after the
occurrence of such event, all Partners agree in writing to
continue the business of the Partnership and to the appointment,
effective as of the date of such event, of one or more additional
general partners who is hereby authorized to and shall continue
the business of the Partnership.
ARTICLE XIII
SPECIAL EVENTS AND DISSOLUTION; LIQUIDATION; TERMINATION
13.1 Special Events. After the Second Capital
Contribution Date and prior to the First GE Capital Flip Date,
the occurrence of any of the following events shall constitute a
special event (each, a "Special Event") hereunder:
(a) Either SECI General or SECI Limited shall violate
any of the restrictions upon its rights to transfer its
Partnership Interest set forth in Article X of this
Agreement or a transfer of the Partnership Interest of SECI
General or SECI Limited in violation of the provisions of
Article X of this Agreement shall purportedly occur; or
(b) Any representation or warranty made by SECI in the
Capital Contribution Agreement or by the Partnership or any
other Partner in any other Basic Document to which it is a
party, or any representation, warranty or statement in any
certificate, financial statement or other document furnished
to the GE Capital Limited Partner by or on behalf of the
Partnership or SECI hereunder or the Partnership or any
Partner under any Basic Document, shall prove to have been
false or misleading in any material respect as of the time
made or deemed made unless the circumstances that made any
such representation or warranty false or misleading at the
time when made or deemed made shall no longer be continuing
provided, however, if such false or misleading
representation or warranty has not resulted in a Material
Adverse Effect and if the circumstances which made such
representation or warranty false or misleading are
susceptible of cure by the Managing General Partner, then a
Special Event shall not result from such false or misleading
representation or warranty for a period of 180 days after
the time when such false of misleading representation was
made or deemed made so long as during such 180 day period
the Managing General Partner shall be diligently using its
best efforts to cause the circumstances which made such
representation or warranty false or misleading to no longer
exist; or
(c) The Managing General Partner or the Partnership
shall fail to perform or observe any of its covenants
contained in this Agreement or in any other Basic Document
to which it is a party and (except in the case of Section
13.1(a) and Sections 7.2(a)(i), 7.2(b), 7.2(e) and 7.3(a) as
to which there shall be no grace or cure period) such
failure shall continue unremedied or unwaived for a period
of 30 days after written notice thereof from the GE Capital
Limited Partner to the Managing General Partner; provided,
however, if such failure to perform or observe the covenants
referred to above in this paragraph (c) (except in the case
of Section 13.1(a) and Sections 7.2(a)(i), 7.2(b), 7.2(e)
and 7.3(a) as to which there shall be no grace or cure
period) has not resulted in a Material Adverse Effect and if
such failure is susceptible of cure by the Managing General
Partner, then such failure shall not become a Special Event
unless such failure shall continue unremedied or unwaived
for a period of 180 days after written notice thereof from
the GE Capital Limited Partner to the Managing General
Partner so long as during such latter 150 day period, the
Managing General Partner shall be diligently using its best
efforts to cure such failure; or
(d) The Partnership or the Managing General Partner
shall fail to perform or observe any of its covenants or
obligations (other than the covenants and obligations
referred to in Sections 13.1(a), (b) and (c)) contained in
(1) any of the Basic Documents (other than the Installment
Sale Agreement, the Power Purchase Agreement, the Steam
Supply Agreement and the Gas Arrangements) and such failure
shall continue unremedied and unwaived until the later of
(x) the end of the applicable grace period, if any,
contained in the applicable Basic Document, and (y) 30 days
after notice thereof by the GE Capital Limited Partner to
the Managing General Partner and (2) the Installment Sale
Agreement, the Power Purchase Agreement, the Steam Supply
Agreement and any of the Gas Arrangements and such failure
shall continue unremedied or unwaived until the earlier of
(x) the end of the applicable grace period, if any,
contained in such agreement and (y) 30 days after notice
thereof by the GE Capital Limited Partner to the Managing
General Partner; provided, however, if the failure to
perform or observe the covenants referred to above in this
paragraph (d) (other than the covenants and obligations
referred to in Sections 13.1(a), (b) and (c)) with respect
to the Basic Documents referred to in clause (1) has not
resulted in the receipt of a notice of termination of such
Basic Document or otherwise resulted in a Material Adverse
Effect and if such failure is susceptible of cure by the
Managing General Partner, then such failure shall not become
a Special Event unless such failure shall continue
unremedied or unwaived for a period of 180 days after
written notice thereof from the GE Capital Limited Partner
to the Managing General Partner so long as during such
latter 150 day period, the Managing General Partner shall be
diligently using its best efforts to cure such failure; or
(e) The Partnership, SECI or North Country, with
respect to the Loan Agreement or any other Indebtedness (the
principal amount of which exceeds $250,000) other than the
SECI Term Loan Agreement, shall (x) default in any payment
of principal of or interest on any such Indebtedness for a
period in excess of the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness
was created, or (y) default in the observance or performance
of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, such
Indebtedness to become due prior to its stated maturity or
to realize upon any Collateral given as security therefor,
provided, that any Other Partner and, subject to Section
13.2(e), the GE Capital Limited Partner shall have the right
to make capital contributions to the Partnership to cure a
failure to make payments on the Term Loan or any Refinancing
Loan or any Subordinated Refinancing Loan unless a cure has
been effected in respect of (i) the failure to make such
payments for each of the three Quarterly Periods immediately
preceding such failure or (ii) the failure to make such
payments for more than six Quarterly Periods; or
(f) Any Project Participant, other than the
Partnership, North Country or the Managing General Partner,
shall fail to perform or observe any of its covenants or
obligations contained in any of the Basic Documents (other
than the covenants and obligations referred to in Sections
13.1(a), (b), (c), (d) and (e)) for a period in excess of
the grace period, if any, provided for in such Basic
Document, which failure shall continue unremedied for a
period of 30 days after notice by the GE Capital Limited
Partner to the Managing General Partner or (x) any material
provision of any Basic Document shall at any time for any
reason cease to be valid and binding or in full force and
effect or any party thereto shall so assert in writing, (y)
any material provision of any Basic Document shall be
declared to be null and void or (z) any party thereto shall
deny that it has any further liability or obligation under
any Basic Document to which it is a party provided, however,
that any such failure by a Project Participant (other than
the Partnership, North Country, NYSEG or the Operator) shall
not be a Special Event if, during the 30 days immediately
following such failure, the Partnership diligently proceeds
to enter into an agreement with a substitute Project
Participant as set forth below and within 30 days of such
failure:
(1) a substitute Project Participant shall have
entered into an agreement with the Partnership in
substantially the form of such Basic Document and
containing, in the reasonable judgment of the GE
Capital Limited Partner, terms not materially less
favorable to the Project than the terms contained in
such Basic Document;
(2) in the reasonable judgment of the GE Capital
Limited Partner, such substitute Project Participant
shall be as financially sound as the replaced Project
Participant (and the guarantor, if any, of the
obligations of such Project Participant) was on the
date of execution of this Agreement;
(3) the GE Capital Limited Partner shall have
received fully executed counterparts of such agreement;
and
(4) the GE Capital Limited Partner shall have
received a recognition agreement from the Partnership
and such substitute Project Participant and an opinion
of counsel for such substitute Project Participant,
each in form and substance reasonably satisfactory to
the GE Capital Limited Partner;
whereupon such substitute Project Participant shall be
deemed to be a Project Participant hereunder; or
(g) Any Project Participant shall (i) apply for or
consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (ii) admit
in writing its inability, or be generally unable, to pay its
debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a
voluntary case under the Bankruptcy Code (as now or
hereafter in effect), (v) file a petition seeking to take
advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding up, or composition or
readjustment of debts, (vi) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any
petition filed against such Person in an involuntary case
under the Bankruptcy Code, or (vii) take any partnership or
corporate action for the purpose of effecting any of the
foregoing provided, however, that in the case of any Project
Participant (other than SECI, the Partnership, NYSEG, North
Country or the Operator) the events specified in clauses (i)
through (vii) above shall not be a Special Event if, during
the 30 days immediately following the occurrence of any such
event, the Partnership diligently proceeds to enter into an
agreement with a substitute Project Participant as set forth
below and within 30 days of such event:
(1) a substitute Project Participant shall have
entered into an agreement with the Partnership in
substantially the form of such Basic Document and
containing, in the reasonable judgment of the GE
Capital Limited Partner, terms not materially less
favorable to the Project than the terms contained in
such Basic Document;
(2) in the reasonable judgment of the GE Capital
Limited Partner, such substitute Project Participant
shall be as financially sound as the replaced Project
Participant (and the guarantor, if any, of the
obligations of such Project Participant) was on the
date of execution of this Agreement;
(3) the GE Capital Limited Partner shall have
received fully executed counterparts of such agreement;
and
(4) the GE Capital Limited Partner shall have
received a recognition agreement from the Partnership
and such substitute Project Participant and an opinion
of counsel for such substitute Project Participant,
each in form and substance reasonably satisfactory to
the GE Capital Limited Partner;
whereupon such substitute Project Participant shall be
deemed to be a Project Participant hereunder; or
(h) A proceeding or case shall be commenced without
the application or consent of any Project Participant in any
court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution, winding-up, or the
composition or readjustment of debts, (ii) the appointment
of a trustee, receiver, custodian, liquidator or the like of
such Project Participant under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts or (iii) a warrant of
attachment, execution or similar process against all or a
substantial part of the assets of such Project Participant
and such proceeding or case shall continue undismissed, or
any order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in
effect, for a period of 60 or more days, or any order for
relief against such Person shall be entered in an
involuntary case under the Bankruptcy Code provided,
however, that the commencement of a proceeding referred to
above in clauses (i) through (iii) against a Project
Participant (other than SECI, the Partnership, NYSEG, North
Country or the Operator) shall not be a Special Event if,
during the 90 days immediately following the commencement of
a proceeding referred to above in clauses (i) through (iii),
the Partnership diligently proceeds to enter into an
agreement with a substitute Project Participant as set forth
below and within 30 days after the lapse of the 60 day
period referred to above:
(1) a substitute Project Participant shall have
entered into an agreement with the Partnership in
substantially the form of such Basic Document and
containing, in the reasonable judgment of the GE
Capital Limited Partner, terms not materially less
favorable to the Project than the terms contained in
such Basic Document;
(2) in the reasonable judgment of the GE Capital
Limited Partner, such substitute Project Participant
shall be as financially sound as the replaced Project
Participant (and the guarantor, if any, of the
obligations of such Project Participant) was on the
date of execution of this Agreement;
(3) the GE Capital Limited Partner shall have
received fully executed counterparts of such agreement;
and
(4) the GE Capital Limited Partner shall have
received a recognition agreement from the Partnership
and such substitute Project Participant and an opinion
of counsel for such substitute Project Participant,
each in form and substance reasonably satisfactory to
the GE Capital Limited Partner;
whereupon such substitute Project Participant shall be
deemed to be a Project Participant hereunder; or
(i) A judgment or judgments for the payment of money
in excess of $250,000 shall be rendered against the
Partnership or SECI General and such judgment (other than in
respect of the SECI Term Loan Agreement) or judgments shall
remain in effect, unsatisfied, unstayed and unbonded for a
period of 30 or more consecutive days; or
(j) Falcon and its Affiliates shall cease to directly
or indirectly own 100% of the voting securities of and
economic interests in SECI Holdings and Falcon Power
Operating Company;
(k) The Partnership shall abandon the Project or
otherwise cease to diligently pursue the development or
construction of the Project for a period longer than 30
consecutive days; or
(l) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan, (ii) any "accumulated
funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan,
or (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate
any Single Employer Plan, which Reportable Event or
institution of proceedings is, in the reasonable opinion of
the GE Capital Limited Partner, likely to result in the
termination of such Plan for purposes of Title IV of ERISA,
or (iv) any Single Employer Plan shall terminate under
Section 4041(c) of ERISA, or (v) the Managing General
Partner or any Commonly Controlled Entity shall, or is, in
the reasonable opinion of the GE Capital Limited Partner,
likely to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan, or (vi) any other event or condition
shall occur or exist with respect to a Plan; and in each
case in clauses (i) through (vi) above, such event or
condition, together with all other such events or
conditions, if any, could subject the Managing General
Partner, the Partnership or North Country to any tax,
penalty or other liabilities in the aggregate material in
relation to the business, operations, property or financial
or other condition of the Managing General Partner or the
Partnership or North Country; or
(m) (i) The Partnership shall fail to pay, satisfy or
otherwise obtain a release of any bond or lien for the
performance of work or the supply of materials filed against
the Site (for an amount individually, or when aggregated
with all other similar Liens, exceeds $250,000) within 20
days of the Managing General Partner's becoming aware of the
filing thereof or (ii) any right, title or interest of the
Partnership in and to the Site shall be levied upon,
attached or seized pursuant to a court order and such order
is not vacated or stayed within 20 days of entry of such
order provided, however, if the event specified in clause
(i) has not resulted in a Material Adverse Effect and if
such event is susceptible of cure by the Managing General
Partner, then such event shall not become a Special Event
unless such event shall continue unremedied or unwaived for
a period of 180 days after the Managing General Partner's
becoming aware of the filing referred to in clause (i) so
long as during such latter 160 day period, the Managing
General Partner shall be diligently using its best efforts
to satisfy or discharge such bond or lien; or
(n) The resignation or withdrawal of SECI General
Partner from the Partnership or the resignation of SECI as
Managing General Partner, in each case without the prior
written consent of the GE Capital Limited Partner; or
(o) The IDA shall cease to have good and marketable
title to the Project and the Site and the Partnership shall
cease to have good title to the property purported to be
owned by it, in each case, free and clear of all Liens other
than Partnership Permitted Liens; or
(p) The Facility shall cease to be a Qualifying
Facility (other than as a result of a transfer of the GE
Capital Limited Partnership Interest); or
(q) An Event of Loss shall have occurred; or
(r) In respect of any Quarterly Period, the GE Capital
Limited Partner shall not have received an amount equal to
99% of the scheduled Level 1 Distributions for such
Quarterly Period (net of any Deducted Payments) within five
days after the last Distribution Date in such Quarterly
Period; provided, that any Other Partner shall have the
right to make capital contributions to the Partnership to
cure such failure unless a cure has been effected in respect
of (i) (A) Level 1 Distributions payable to the GE Capital
Limited Partner for each of the three Quarterly Periods
immediately preceding such failure, (B) Level 1
Distributions payable to the GE Capital Limited Partner for
more than six Quarterly Periods, (C) the failure to make
payments on the Term Loan or a Refinancing Loan or
Subordinated Refinancing Loan for each of the three
Quarterly Periods immediately preceding such failure or (D)
the failure to make payments on the Term Loan or a
Refinancing Loan or Subordinated Refinancing Loan for more
than six Quarterly Periods or (ii) any combination of (A)
through (D) above in respect of three consecutive Quarterly
Periods or six Quarterly Periods; or
(s) At any time, the Partnership shall fail to (i)
keep in force the insurance required by Section 7.2(f) and
Schedule 8 or (ii) comply with and conform to all provisions
and requirements of the insurance policies and the insurers
thereunder which would affect the Partnership's ability to
keep in force the insurance required by Section 7.2(f) and
Schedule 8 or to collect any proceeds therefrom; or
(t) (i) Any Governmental Approval required to be
obtained by the Partnership pursuant to Section 7.2(b) shall
be revoked, terminated, withdrawn, suspended, modified or
withheld or shall cease to be in full force and effect, and
the GE Capital Limited Partner shall have determined that
such revocation, termination, withdrawal, suspension,
modification, withholding or cessation could reasonably be
expected to have a Material Adverse Effect; or (ii) any
proceeding which could reasonably be expected to have a
Material Adverse Effect shall be commenced by or before any
Governmental Authority for the purpose of so revoking,
terminating, withdrawing, suspending, modifying or
withholding any such Governmental Approval and the GE
Capital Limited Partner shall have determined that such
proceeding could reasonably be expected to have a Material
Adverse Effect and such proceeding shall not have been
dismissed or stayed within 180 days, or notice shall be
given by such Governmental Authority for such purpose and
shall have remained uncontested for 30 days.
13.2 Certain Remedies Following Special Event. (a)
If a Special Event occurs and is continuing, the GE Capital
Limited Partner shall have the right, exercisable by, and
effective upon, written notice to the Managing General Partner
(except in the case of a Special Event with respect to the
Partnership or the Managing General Partner referred to above in
Section 13.1 (g) or (h) or in the case of a Special Event which
occurs during the pendency of such a Special Event, in either
which case no written notice shall be required), to appoint or
become substitute Managing General Partner as provided in Section
13.2(b). Any substitute Managing General Partner is authorized
to and shall continue the business of the Partnership and shall
upon meeting the conditions set forth in clauses (i) through (xi)
of Section 10.1(a), without any act or deed by the Partnership,
any Partner or any other Person, be admitted to the Partnership
as a general partner of the Partnership.
(b) If a Special Event occurs and is continuing, the
GE Capital Limited Partner may, by written notice to the
Partnership (except in the case of a Special Event with respect
to the Partnership referred to above in Section 13.1(g) or (h) or
in the case of a Special Event which occurs during the pendency
of such a Special Event, in either which case no written notice
shall be required) appoint a substitute Managing General Partner
or designate itself or its nominee as the substitute Managing
General Partner, whereupon, without any further act or deed by
the Partnership, any Partner or any other Person, the existing
Managing General Partner shall cease to serve as such but shall
continue to be a General Partner. In the event the GE Capital
Limited Partner appoints a substitute Managing General Partner
said substitute Managing General Partner shall, automatically and
without any further act or deed by the Partnership, any Partner
or any other Person, acquire a 1% interest in the Partnership,
and the interest of the GE Capital Limited Partner shall be
automatically reduced by the same amount. The interest of said
substitute Managing General Partner shall be a General
Partnership Interest in the Partnership and such substitute
Managing General Partner shall, without any further act or deed
by the Partnership, any Partner or any other Person, succeed to
all the powers, privileges and obligations of a General Partner
and of the Managing General Partner under this Agreement, except
to the extent accrued or attributable to the period prior to the
allocation of such interest and except that the transfer and
related provisions of Article X pertaining to the GE Capital
Limited Partner shall be applicable to the substitute Managing
General Partner rather than those pertaining to SECI General.
The Managing General Partner hereby consents to such a partial
conversion of the GE Capital Limited Partnership Interest and
hereby consents to the admission as a General Partner of said
substitute Managing General Partner so designated by the GE
Capital Limited Partner.
(c) If a Special Event occurs and is continuing, in
addition to the other remedies available to the GE Capital
Limited Partner pursuant to this Section 13.2, the GE Capital
Limited Partner shall receive 99% and the Other Partners shall
receive 1% in accordance with their Allocation Percentages of all
Distributable Cash (after deducting from the amount distributable
to the GE Capital Limited Partner the Deducted Payments), in each
case since the last previous distribution of Distributable Cash
until the earlier of (i) the receipt by the GE Capital Limited
Partner of the Base Term Return plus the Termination Payment and
(ii) the date on which no Special Event shall be continuing.
(d) If a Special Event occurs and is continuing, in
addition to the other remedies available to the GE Capital
Limited Partner pursuant to this Section 13.2, the GE Capital
Limited Partner may elect by written notice to the General
Partner (except in the case of a Special Event with respect to
SECI referred to above in Section 13.1(g) or (h) or in the case
of a Special Event which occurs during the pendency of such a
Special Event, in either which case no written notice shall be
required) that all powers of SECI General (including the Managing
General Partner) hereunder with respect to any matter shall
thereupon, automatically, and without any further act or deed by
the Partnership, any Partner or any other Person, vest in the GE
Capital Limited Partner.
(e) Upon the occurrence of a Special Event that may be
cured, the GE Capital Limited Partner shall be entitled to, but
shall have no obligation to, cure such Special Event, unless the
Other Limited Partners have cured such Special Event prior to the
earlier of 15 days after delivery of the notice referred to in
Section 8.3(b) and the occurrence of such Special Event, and all
costs and expenses incurred by the GE Capital Limited Partner in
connection therewith shall be in the form of a demand loan to the
Partnership which shall bear interest at the lesser of (i) the
maximum rate permitted by law and (ii) LIBOR plus 500 basis
points.
(f) If a Special Event occurs and is continuing, the
GE Capital Limited Partner may by written notice to the
Partnership (except in the case of a Special Event with respect
to the General Partner or the Partnership referred to above in
Section 13.1(g) or (h) or in the case of a Special Event which
occurs during the pendency of such a Special Event, in either
which case no written notice shall be required) appoint, in the
name and on behalf of the Managing General Partner and the
Partnership, a project manager to construct, equip, maintain,
manage, control, operate and repair the Project. The reasonable
fees of any such project manager shall be an operating expense of
the Partnership.
(g) (i) If a Special Event not reasonably within the
control of the Managing General Partner to prevent or to cure
shall have occurred and be continuing and the GE Capital Limited
Partner shall have exercised the remedy set forth above in
Section 13.2(c), the Partnership (at the election of SECI General
but with the consent of TPC One and TPC Two) shall have the right
to purchase (on the date specified in the Purchase Notice, which
date shall coincide with a Distribution Date (hereinafter, the
"Redemption Date") the GE Capital Limited Partnership Interest
for a cash purchase price equal to the greater of (A) the Fair
Market Sales Value of such interest as of such purchase date
(determined without reference to the current exercise of the
remedy set forth above in Section 13.2(c)) and (B) the Stipulated
Redemption Value as of the Distribution Date specified in the
Purchase Notice.
(ii) In order to exercise the purchase right provided
in Section 13.2(g)(i) above, SECI General shall give the GE
Capital Limited Partner a Purchase Notice to such effect
(specifying the Distribution Date on which the purchase is to
occur) (A) no earlier than the later of (x) 330 days after the
commencement of the remedy under Section 13.2(c) above and (y) 30
days prior to the sixth anniversary of the Second Capital
Contribution Date and (B) no later than the later of (x) the
second anniversary of commencement of the remedy under Section
13.2(c) above and (y) the sixth anniversary of the Second Capital
Contribution Date. The Partnership shall complete the purchase
of the GE Capital Limited Partnership Interest on the Redemption
Date (A) by paying to the GE Capital Limited Partner, in
immediately available funds, (1) cash in an amount such that, if
the GE Capital Limited Partner were to receive distributions
after such date in accordance with the provisions of Sections
4.3(a) and 4.11, and without reference to Section 13.2(c), the GE
Capital Limited Partner would, taking into account the timing and
amount of the distributions of Distributable Cash under Sections
4.3(a), 4.11 and 13.2(c) and distributions of Net Proceeds from
Sales or Refinancings under Section 4.6(b) to the GE Capital
Limited Partner on and prior to such date, but making no other
adjustments to the assumptions used to determine the Level 1
Distributions, achieve the Base Term Return on the date of the
last scheduled Level 1 Distribution, (2) the purchase price of
the GE Capital Limited Partnership Interest, (3) all Breakage
Amounts and (4) all reasonable out-of-pocket expenses incurred by
the GE Capital Limited Partner in connection with such sale, (B)
by satisfying in full, in immediately available funds, (1) all
obligations of the Partnership under the Loan Documents
(including the replacement of all issued Letters of Credit or the
cash collateralization of such Letters of Credit in the manner
set forth in the Loan Documents) and (2) all obligations of SECI
under the SECI Loan Documents and (C) by paying to the GE Capital
Limited Partner the Termination Payment.
(h) In the case of (i) the appointment of a substitute
Managing General Partner pursuant to the provisions of Section
13.2(a) or (b), (ii) the vesting in the GE Capital Limited
Partner of the powers of the Managing General Partner pursuant to
the provisions of 13.2(d) or (iii) the appointment of a project
manager pursuant to Section 13.2(f), if (A) the Special Event
giving rise to such appointment or vesting of powers shall be
cured by SECI General and (B) for a period of twenty-four
consecutive months no other Special Event shall have occurred and
be continuing then SECI General shall have the right (exercisable
after the end of such twenty-four month period and prior to the
date thirty-six months after the date no Special Event shall have
occurred and be continuing) to be reinstated as the Managing
General Partner and project manager. Such reinstatement shall be
effected by the delivery to the Partnership and the other
Partners of a written notice of reinstatement executed by the GE
Capital Limited Partner, the substitute Managing General Partner
and SECI General and such other documents and instruments as the
GE Capital Limited Partner deems appropriate under the
circumstances. Upon such reinstatement, in the case of the prior
appointment of a substitute Managing General Partner pursuant to
Section 13.2(b), the General Partnership Interest of the
substitute Managing General Partner appointed by the GE Capital
Limited Partner shall be converted into or exchanged for a
Limited Partnership Interest of the same amount. Upon
reinstatement, SECI General shall succeed to all the powers,
privileges and obligations of the substitute Managing General
Partner under this Agreement, except that the transfer and
related provisions of Article X shall continue to be applicable
to the General Partnership Interest of SECI General.
(i) The rights of the GE Capital Limited Partner
hereunder are not the exclusive remedies upon the occurrence of a
Special Event but are in addition to any other remedies which may
at the time be available hereunder, at law or in equity.
(j) For purposes of this Section 13.2, no Special
Event under Section 13.1(r) shall be deemed to be continuing as
of the date when the GE Capital Limited Partner shall have
received distributions of Distributable Cash in an amount such
that, if the GE Capital Limited Partner were to receive
distributions after such date in accordance with the provisions
of Section 4.3(a) and 4.11, and without reference to Section
13.2(c), the GE Capital Limited Partner would, taking into
account the timing and amount of the distributions of
Distributable Cash under Sections 4.3(a), 4.11 and 13.2(c) and
distributions of Net Proceeds from Sales or Refinancings under
Section 4.6(b) to the GE Capital Limited Partner on and prior to
such date, but making no other adjustments to the assumptions
used to determine the Level 1 Distributions, achieve the Base
Term Return on the date of the last scheduled Level 1
Distribution.
(k) Notwithstanding any other provision of this
Agreement, in no event shall the existence of a Default or Event
of Default under the SECI Term Loan Agreement constitute a
Special Event unless the events giving rise to such Default or
Event of Default would independently give rise to a Special Event
hereunder.
13.3 Events of Dissolution. The Partnership shall be
dissolved and its affairs shall be wound up:
(a) if the Partners agree in writing to terminate the
Partnership;
(b) upon the sale, transfer or other irrevocable
disposition of all or substantially all of the property of
the Partnership, other than in connection with any security
interest granted in all or any portion of the assets of the
Partnership pursuant to the terms of the Loan Documents or
any sale-leaseback transaction in which the Partnership
becomes the lessee of the assets of the Partnership;
(c) if the Partnership is terminated in accordance
with the terms of this Agreement;
(d) upon the bankruptcy, insolvency or other event of
withdrawal (within the meaning of 17-402 of the
Partnership Act) of the General Partner, except as otherwise
provided herein; or
(e) on December 31, 2032 unless the Partners agree in
writing to extend the term of the Partnership beyond such
date.
Upon the withdrawal of the last remaining general partner of the
Partnership, the Partnership shall not be dissolved and its
affairs wound up if all remaining Partners agree in writing to
continue the Partnership and appoint one or more general partners
in the manner set forth in Section 12.1.
13.4 Procedure in Dissolution and Liquidation. (a)
Winding Up. Upon dissolution of the Partnership pursuant to
Section 13.3, the Partnership immediately shall commence to wind
up and liquidate the affairs and business of the Partnership in
an orderly manner.
(b) Management Rights During Winding Up. During the
period of the winding up of the affairs of the Partnership, the
rights and obligations of the Partners set forth herein with
respect to the management of the Partnership shall continue. For
purposes of winding up, and subject to Section 13.2, the Managing
General Partner shall act as liquidator to wind up the Partnership
and shall make all decisions relating to the conduct of any
business or operations during the winding up period and to the sale
or other disposition of the Partnership assets with the advice of
the Limited Partners, except that if the dissolution results from
the occurrence of a Special Event, the GE Capital Limited Partner
shall act as liquidating trustee and make all such decisions.
(c) Distributions in Liquidation. The assets of the
Partnership shall be applied or distributed in liquidation in the
following order:
(i) First, to the payment and discharge of all of the
Partnership's debts and liabilities (including, without
limitation, debts and liabilities to Partners other than debts
and liabilities for distributions to Partners on account of
their respective interests in the Partnership), including the
establishment of any reasonably necessary reserves; and
(ii) Second, to the Partners in accordance with the
positive balances in their respective Capital Accounts as
determined after taking into account all adjustments to
Capital Accounts for the year during which the liquidation
occurs.
All items of income, gain, loss and deduction with respect to the
taxable year of the liquidation shall be allocated as if all such
items were Gains and Losses as provided in Sections 5.4 and 5.5.
(d) Non-Cash Assets. Every reasonable effort shall be
made to dispose of the interests of the Partnership in the assets
of the Partnership, so that the distribution may be made to the
Partnership in cash. If at the time of the liquidation of the
Partnership, the Partnership owns any assets in the form of notes,
deeds of trust or other non-cash assets, such assets, if any, shall
be distributed in kind to the Partners, in lieu of cash, in
accordance with Section 13.4(c), in proportion to their right to
receive the assets of the Partnership on an equitable basis
reflecting the net fair market value of the assets so distributed.
13.5 Disposition of Documents and Records. All
documents and records of the Partnership, including, without
limitation, all financial records, vouchers, cancelled checks and
bank statements, shall be delivered to the Managing General Partner
upon termination of the Partnership. Copies thereof shall be
prepared, by microfiche process if requested, and made available to
each Partner as requested for any purpose reasonably related to the
interest of such Partner as a partner in the Partnership and at
such Partner's cost and expense. Unless otherwise approved by the
Partners, the Managing General Partner shall retain such documents
and records for a period of not less than seven years and shall
make such documents and records available for any purpose
reasonably related to the interest of a Partner as a partner in the
Partnership during normal business hours to any other Partner for
inspection and copying at such other Partner's cost and expense;
provided, however, that if there is an audit or threat of audit,
such documents and records shall be retained until the audit is
completed and any tax liability finally determined. Said documents
and records shall be available for inspection, examination and
copying by the Managing General Partner upon reasonable notice.
13.6 Termination. Upon the completion of the
liquidation of the Partnership and the distribution of all
Partnership funds, the Partnership shall terminate. The Managing
General Partner shall execute and file a Certificate of
Cancellation of the Certificate of Limited Partnership as well as
any and all other documents required to effect the dissolution and
termination of the Partnership.
13.7 No Restoration of Negative Capital Accounts.
Except as required under applicable laws of the State of Delaware,
or in respect of any negative balance resulting from a distribution
in contravention of this Agreement, at no time shall a Partner with
a negative balance in its Capital Account have any obligation to
the Partnership or to any other Partner to restore such negative
balance.
ARTICLE XIV
RIGHTS AND OBLIGATIONS OF LIMITED PARTNER
14.1 Management of the Partnership. Except as provided
in Article XIII and the Recognition Agreements with respect to the
GE Capital Limited Partner, a Limited Partner in its capacity as
such shall not (a) take part in the management or control of the
business of the Partnership or transact any business in the name of
the Partnership, (b) have the power or authority to bind the
Partnership or to sign any agreement or document in the name of the
Partnership, or (c) have any power or authority with respect to the
Partnership except insofar as the consent of such Limited Partner
shall be expressly required; provided, however, that the Limited
Partners shall have the right to consult with and advise the
Managing General Partner with respect to the business of the
Partnership. The Limited Partners hereby consent to the exercise
by the Managing General Partner of the rights and powers conferred
upon it by the Partnership Act and under other Applicable Law,
except those rights and powers that may, pursuant to the
Partnership Act or other Applicable Law, be limited and are so
limited by this Agreement. Notwithstanding the foregoing, the
Limited Partners may vote on (i) the matters listed in Section 7.3,
(ii) the removal of SECI General pursuant to Section 7.11, (iii)
the dissolution of the Partnership pursuant to Section 13.3, and
(iv) the admission of a successor General Partner pursuant to
Section 10.2, and (v) all other matters requiring the consent of
some or all of the Limited Partners under the terms of this
Agreement. These Limited Partner rights are intended solely to
assist the Limited Partners in protecting their investment in the
Partnership and not as a means of exercising control of the
Partnership or the Partnership's business.
14.2 Limitation on Liability of Limited Partners.
Except as otherwise provided by law, the liability of a Limited
Partner shall be limited to its Capital Contribution as and when it
is payable under the provisions of the Capital Contribution
Agreement. A Limited Partner, in its capacity as such, shall have
no other liability to contribute money to, or in respect of the
liabilities or obligations of, the Partnership, nor shall any
Limited Partner be personally liable for any obligations of the
Partnership. Except as provided in Section 10.10 no Limited
Partner shall be obligated to make loans to the Partnership. It is
the intent of the parties hereto that no distribution to any
Limited Partner shall be deemed a return of any money or other
property in violation of the Partnership Act. The payment of any
such money or distribution of any such property to a Limited
Partner shall be deemed to be a compromise within the meaning of
Section 17-502(b) of the Partnership Act, and the Limited Partner
receiving any such money or property shall not be required to
return any such money or property to any Person, the Partnership or
any creditor of the Partnership. However, if any court of
competent jurisdiction holds that, notwithstanding the provisions
of this Agreement, any Limited Partner is obligated to return such
money or property, such obligation shall be the obligation of such
Limited Partner and not the General Partner.
ARTICLE XV
MISCELLANEOUS
15.1 Further Assurances. Each Partner shall execute and
deliver such other certificates, agreements and documents, and take
such other actions as may be reasonably requested by the Managing
General Partner or any Limited Partner in connection with the
formation of the Partnership and the achievement of its purposes
and the placement of any debt and equity relating to the Project
authorized pursuant to this Agreement (whether by or on behalf of
the Partnership).
15.2 Amendments and Waivers. Any term of this Agreement
may be amended only with the written consent of all the Partners.
The observance of any term of this Agreement may be waived only if
such waiver is in writing signed by the Partner waiving such term.
15.3 Successors and Assigns. Subject to the provisions
of Article X, the terms and provisions hereof shall be binding on
and inure to the benefit of and be enforceable by the successors
and assigns of the parties hereto, whether so expressed or not.
15.4 Indemnification. To the fullest extent permitted
by law, the Partnership agrees to pay, indemnify and hold each
Partner and its Affiliates, directors, officers, successors and
assigns harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may
at any time be imposed on, incurred by or asserted against any such
Person in any way relating to or arising out of this Agreement, the
other Basic Documents or any documents contemplated by or referred
to herein or therein or the transactions contemplated hereby or
thereby, or as a result of such Partner's acting as a partner of
the Partnership hereunder (all of the foregoing, collectively, the
"indemnified liabilities", provided, that, with respect to SECI
General, "indemnified liabilities" shall not include the
liabilities set forth in Section 7.4 for which SECI General is
liable), provided, that the Partnership shall have no obligation
hereunder to any such Person with respect to indemnified
liabilities arising from (i) the gross negligence, fraud or willful
misconduct of any such Person, (ii) legal proceedings commenced
against any such Person by any security holder or creditor other
than in its capacity as a security holder or creditor of the
Partnership arising out of and based upon rights afforded any such
security holder or creditor solely in its capacity as such security
holder or creditor, or (iii) legal proceedings commenced against
any such Person by any assignee of such Person's interest herein.
The agreements in this Section shall survive the making by each
Partner of its initial capital contributions to the Partnership and
the termination of the Basic Documents.
15.5 Incorporation By Reference. The provisions of the
Capital Contribution Agreement are hereby incorporated by reference
herein with the same effect as if such provisions were fully set
forth herein.
15.6 Severability. If any term or provision of this
Agreement or the application thereof to any circumstance shall be
held invalid or unenforceable, to any extent, by a court of
competent jurisdiction, the remainder of this Agreement, other than
that portion determined to be invalid or unenforceable, shall not
be affected thereby, and each valid provision hereof shall be
enforced to the fullest extent permitted by law.
15.7 Headings and Table of Contents. The headings in
and the table of contents of this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning
hereof.
15.8 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument.
15.9 Submission to Jurisdiction; Waivers. (a) Each
Partner hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement or any other
Basic Document, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the States of New York and
Delaware, the courts of the United States of America for the
Southern District of New York and for the District of
Delaware, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts, and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that any such action or
proceeding was brought in any inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar
form of mail), postage prepaid, to such Partner at its address
set forth in Section 11.2 or any such other address of which
the other Partners shall have been notified pursuant thereto;
and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction.
(b) Each Partner hereby irrevocably and unconditionally
waives trial by jury in any legal action or proceeding referred to
in paragraph (a) above.
15.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE.
15.11 Entire Agreement. This Agreement sets forth the
entire agreement of the parties hereto with respect to its subject
matter, and supersedes all previous understandings, written or
oral, with respect thereto.
15.12 Partition. No Partner or any successor-in-
interest to any Partner shall have the right while this Agreement
remains in effect to have the assets of the Partnership
partitioned, or to file a complaint or institute any proceeding at
law or in equity to have the property of the Partnership
partitioned, and each Partner, on behalf of itself, its successors,
representatives, heirs and assigns, hereby waives any such right.
It is the intention of the Partners that during the term of this
Agreement, the rights of the Partners and their successors-in-
interest, as among themselves, shall be governed by the terms of
this Agreement, and that the right of any Partner or successor-in-
interest to assign, transfer, sell or otherwise dispose of its
interest in the Partnership or any of its assets shall be subject
to the limitations and restrictions of this Agreement.
15.13 Recourse Only to Partner. The sole recourse of
the Partnership or any Partner for performance of the obligations
of a particular Partner hereunder shall be against such Partner and
its assets and not against any assets or property of any present or
future shareholder, officer, employee, servant, executive,
director, agent, authorized representative or Affiliate of such
Partner.
IN WITNESS WHEREOF, this Agreement has been executed as
of the date and year first above written.
GENERAL PARTNER:
SARANAC ENERGY COMPANY, INC.
By:
Title:
LIMITED PARTNERS:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Title:
TPC SARANAC PARTNER ONE, INC.
By:
Title:
TPC SARANAC PARTNER TWO, INC.
By:
Title:
SARANAC ENERGY COMPANY, INC.
By:
Title:
EXECUTION COPY
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
FIRST AMENDMENT, dated as of September 30, 1994 (this
"Amendment"), to the Second Amended and Restated Agreement of
Limited Partnership of Saranac Power Partners, L.P., a Delaware
limited partnership (the "Partnership"), dated as of May 13, 1994
(the "Partnership Agreement"), by and among Saranac Energy
Company, Inc., a Delaware corporation ("SECI"), TPC Saranac
Partner One, Inc., a Delaware corporation ("TPC One"), TPC
Saranac Partner Two, Inc., a Delaware corporation ("TPC Two"),
and General Electric Capital Corporation, a New York corporation
("GE Capital").
W I T N E S S E T H:
WHEREAS, the parties to the Partnership Agreement
desire to make certain amendments to such Agreement and to
certain exhibits thereto, and are willing to make such amendments
subject to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein,
terms defined in Appendix A to the Partnership Agreement (without
giving effect to this Amendment) shall have their defined
meanings as set forth therein.
2. Amendment to Introductory Paragraph. The
introductory paragraph to the Partnership Agreement is hereby
amended by inserting at the beginning of the last parenthetical,
the words "together with its successors and permitted assigns
hereunder,".
3. Amendment to Section 3.1. Section 3.1 of the
Partnership Agreement is hereby amended by deleting the phrase
"Contributed Assets" each place it appears in the last sentence
thereof and inserting in lieu thereof the phrase "Power Purchase
Agreement."
4. Amendment to Section 4.3. Section 4.3(a) of the
Partnership Agreement is hereby amended by deleting the first
clause immediately before the proviso therein and substituting,
in lieu thereof, the following clause:
"First, 99% to the GE Capital Limited Partner, and 1% to the
Other Partners in accordance with their Allocation
Percentages, until the Partners have received pursuant to
this Section 4.3(a) or Section 4.9(b) of the Amended and
Restated Security Deposit Agreement an aggregate amount of
cash equal to the sum of (1) the amount set forth in
Schedule 5 in respect of such calendar month (the "Level 1
Distribution") and (2) the aggregate amount of Level 1
Distributions in respect of all prior calendar months;"
5. Amendment to Section 4.4. Section 4.4 of the
Partnership Agreement is hereby amended by inserting "and 4.22"
immediately after the reference to "13.4(c)" therein.
6. Amendment to Section 4.8(a). Section 4.8(a) of the
Partnership Agreement is hereby amended by inserting immediately
after the words "Level 1 Distributions" and immediately before
the words ", demonstrates the achievement of the Base Term
Return" at the end of the second sentence thereof, the
parenthetical "(including, without limitation, the calculation of
such distributions on a quarterly basis)".
7. Amendments to Section 4.11. (a) Section 4.11(a)
of the Partnership Agreement is hereby amended and restated in
its entirety as follows:
"(a) (i) On each Distribution Date occurring after the
Second Capital Contribution Date, until the sum of (1) the
aggregate amount on deposit in the Base Reserve Debt Account
(so long as the Loan Agreement is in effect) and the Base
Reserve Equity Account and (2) the amount available to be
drawn under the Base Reserve Letter of Credit, if any, shall
be equal to the Base Reserve Amount, there shall be
deposited in the Base Reserve Debt Account or, after the
Loan Agreement is no longer in effect, the Base Reserve
Equity Account an amount equal to 23.7% of the Distributable
Cash otherwise distributable to each Other Partner on such
Distribution Date pursuant to Section 4.3(b).
(ii) In the event of (1) any withdrawal from the Base
Reserve Debt Account (other than withdrawals of income or
gain in excess of the Base Reserve Amount or transfers from
the Base Reserve Debt Account to the Base Reserve Equity
Account) or the Base Reserve Equity Account (other than
withdrawals of income or gain in excess of the Base Reserve
Amount) or (2) any drawing under the Base Reserve Letter of
Credit, on each Distribution Date, until (A) the Base
Reserve Debt Account or, after the Loan Agreement is no
longer in effect, the Base Reserve Equity Account shall have
been replenished by the amount of such withdrawal or (B) the
stated amount of the Base Reserve Letter of Credit shall
have been reinstated by the amount of such drawing, as the
case may be, there shall be deposited in the Base Reserve
Debt Account or, after the Loan Agreement is no longer in
effect, the Base Reserve Equity Account an amount equal to
100% of the Distributable Cash otherwise distributable to
each Partner on such Distribution Date pursuant to Sections
4.3(a), 4.3(b), 4.13 and 4.14."
(b) Section 4.11(b) of the Partnership Agreement is
hereby amended by (i) changing the word "Quarterly" to
"Measurement" the first time that it appears therein and (ii)
deleting the phrase "a portion of the Distributable Cash
otherwise distributable to each Other Partner pursuant to Section
4.3(b) in respect of each of the third Distribution Date in such
Quarterly Period and the first and second Distribution Dates in
the immediately succeeding Quarterly Period" and inserting, in
lieu thereof, the phrase "a portion of the Distributable Cash
otherwise distributable to each Other Partner pursuant to Section
4.3(b) in respect of each of the three Distribution Dates
immediately after the end of such Measurement Period".
(c) Section 4.11(c) of the Partnership Agreement is
hereby amended by inserting the word "Project" immediately before
the words "Letters of Credit" each time that such words appear
therein.
(d) Section 4.11(d) of the Partnership Agreement is
hereby amended by inserting after the reference to "Section
4.3(b)" therein, the words "and Section 4.13".
(e) Section 4.11 of the Partnership Agreement is
hereby amended by inserting the following new paragraphs (e), (f)
and (g) at the end thereof:
"(e) During the period from and including the date of
occurrence of a Steam Host Event to but excluding the date
of receipt by the Security Agent of the written notice from
the Agent described in Section 4.15(a) of the Amended and
Restated Security Deposit Agreement, 100% of all
Distributable Cash otherwise distributable to each Partner
pursuant to Sections 4.3(a), 4.3(b), 4.13 and 4.14 and 100%
of all Net Cash from Sales or Refinancings otherwise
distributable to each Partner pursuant to Section 4.6(b) in
respect of each Distribution Date occurring during the
continuance of such Steam Host Event shall not be
distributed to such Partner on each such Distribution Date
but instead shall be transferred to and retained in the
Steam Reserve Account and applied as provided in Section
4.15 of the Amended and Restated Security Deposit Agreement.
(f) In the event that the Debt Service Coverage Ratio
for any Measurement Period shall be less than 1.20 to 1.00,
100% of the Distributable Cash otherwise distributable to
the Partners pursuant to Sections 4.3(a), 4.3(b), 4.13 and
4.14 in respect of each of the three Distribution Dates
immediately after the end of such Measurement Period and
100% of the Net Cash from Sales or Refinancings otherwise
distributable to the Partners pursuant to Section 4.6(b) in
respect of the period commencing with the end of such
Measurement Period and ending on the third Distribution Date
occurring immediately after the end of such Measurement
Period shall not be distributed to the Partners on each such
Distribution Date but shall instead be transferred to and
retained in the Senior Debt Service Coverage Account and
applied as provided in Section 4.11(a) of the Amended and
Restated Security Deposit Agreement."
(g) Distributable Cash that would otherwise be
distributed to the Tomen Limited Partners pursuant to
Sections 4.3, 4.4 and 4.5 on a Distribution Date which does
not occur on the last Business Day of a Quarterly Period
shall not be currently distributed to such Partners but
shall instead be transferred to and retained in the Tomen
Distribution Account. On each Distribution Date which
occurs on the last Business Day of a Quarterly Period, all
amounts on deposit in the Tomen Distribution Account shall
be distributed to the Tomen Limited Partners. Amounts held
in the Tomen Distribution Account shall be invested in
Permitted Investments maturing not later than the date such
cash is to be distributed to the Tomen Limited Partners.
Any income or gain realized as a result of any such
investment shall not be retained in the Tomen Distribution
Account but instead shall be included in Project Revenues.
Until the Amended and Restated Security Deposit Agreement
shall have been terminated in accordance with its terms, the
account referred to in this paragraph shall be the Tomen
Distribution Account established thereunder and such account
shall be subject to the provisions of the Amended and
Restated Security Deposit Agreement."
8. Amendment to Section 4.15. Section 4.15 of the
Partnership Agreement is hereby amended (i) by inserting after
the first reference to "the GE Capital Limited Partner" in the
last sentence thereof, the words "from any Account" and (ii) by
inserting after "4.11" in the last sentence thereof, the words
"or Section 13.2(c)".
9. Amendment to Section 4.18. Section 4.18 is hereby
amended and restated in its entirety as follows:
"Section 4.18 Treatment of Amounts Transferred to SECI
Reserve Account, SECI Debt Service Account and Tomen
Distribution Account. For all purposes of this Agreement,
(i) amounts which are transferred into the SECI Reserve
Account or the SECI Debt Service Account shall be deemed
distributed to the General Partner, and (ii) amounts
transferred to the Tomen Distribution Account shall be
deemed distributed to the Tomen Limited Partners."
10. Amendment to Section 4.19. Section 4.19 of the
Partnership Agreement is hereby amended and restated in its
entirety as follows:
"4.19. Treatment of Amounts Transferred to Other
Accounts. Except as provided in Section 4.18, for purposes
of Article V of this Agreement, Distributable Cash deposited
into, transferred to or retained in an Account pursuant to
Section 4.11 and not distributed under the Amended and
Restated Security Deposit Agreement to a Partner in its
capacity as a Partner in the same tax year shall not be
deemed distributed to any Partner in such year."
11. Other Amendments to Article IV. Article IV of the
Partnership Agreement is hereby amended by adding to the end
thereof the following new Sections 4.20, 4.21 and 4.22:
"4.20. Treatment of Amounts Distributed from Other
Accounts. Except as provided in Section 4.18, for all
purposes of this Agreement (other than for purposes of
Article V), cash distributed directly to a Partner in its
capacity as a Partner from an Account pursuant to the
Amended and Restated Security Deposit Agreement shall be
deemed to have been distributed to such Partner.
4.21. Success Fee. To the extent any Success Fee paid
to SECI at the Second Capital Contribution Date exceeds the
amount of cash operating profits prior to the Second Capital
Contribution Date, such excess shall be treated as a
guaranteed payment under Code Section 707(c) and shall be
considered a capitalized cost of construction. The
remainder of such Success Fee shall be treated as a
distribution of cash to SECI.
4.22. If all the Level 1 Distributions are made at the
times and in the amounts set forth on Schedule 5 hereto and
the Base Term Return is achieved as assumed on March 31,
2009, then for the period beginning from the first GE
Capital Flip Date until June 30, 2009, the distribution
percentages set forth in Section 4.4 shall be 7.5% to the GE
Capital Limited Partner and 92.5% to the Other Partners in
accordance with the Allocation Percentages. All other terms
of Section 4.4 shall apply to this period."
12. Amendments to Section 5.1. (a) Section 5.1(a) of
the Partnership Agreement is hereby amended by deleting the first
sentence thereof in its entirety and substituting, in lieu
thereof, the following sentence:
"First, to the GE Capital Limited Partner and the Other
Partners so as to match on a cumulative basis the amounts
treated as a distribution pursuant to Section 4.21 and the
greater of (i) 99% to the GE Capital Limited Partners and 1%
to the Other Partners of the aggregate amounts set forth in
Schedule 5 reduced by Deducted Payments in respect of the
present calendar year and all prior periods and
(ii) Distributable Cash received by such Partners over the
term of the Partnership pursuant to Sections 4.3(a), 4.7 and
13.2(c) (treating (x) any amounts treated as guaranteed
payments to the GE Capital Limited Partner under the last
sentence of Section 4.15 and (y) any amounts transferred to
the GE Capital Limited Partner pursuant to Section 4.2(a) or
(b) of the Amended and Restated Security Deposit Agreement
as other than distributions of Distributable Cash, which are
not to be matched with allocations of Operating Profits)."
(b) Section 5.1(c) of the Partnership Agreement is
hereby amended and restated in its entirety as follows:
"(c) Third, 99% to the Other Partners and 1% to the GE
Capital Limited Partner until the Partners have been
allocated on a cumulative basis an amount of Operating
Profits equal to the aggregate amount of Distributable Cash
received over the term of the Partnership pursuant to
Section 4.3(b) and to Sections 4.11, 4.13 and 4.14 (to the
extent they relate to distributions that would otherwise be
made pursuant to Section 4.3(b)) for this purpose treating
any Distributable Cash deposited in an Account pursuant to
the Amended and Restated Security Deposit as having been
distributed to the Partners in the proportions such amounts
would have been distributed to the Partners if actually
distributed."
(c) Section 5.1(d) of the Partnership Agreement is
hereby amended by inserting the following parenthetical at the
end thereof:
"(provided, however, that with respect to Distributable Cash
received pursuant to Section 4.22, the allocation
percentages of this Section 5.1(d) shall be 92.5% to the
Other Partners and 7.5% to the GE Capital Limited Partner)".
(d) Section 5.1(f) of the Partnership Agreement is
hereby amended by inserting the following phrase immediately
before "73%" the first time that it appears therein: "to the
extent income exceeds the amount treated as a cash distribution
under Section 4.21,".
(e) Section 5.1(g) of the Partnership Agreement is
hereby amended by (i) inserting after the reference to "(f)"
therein, the words "and (g)(i)" and (ii) inserting the following
language immediately after the word "Seventh," appearing therein:
"(i) notwithstanding paragraphs (a) through (f) of this
Section 5.1, the amount of Operating Profits otherwise
allocated to the GE Capital Limited Partner over the term of
the Partnership shall be reduced by an amount equal to 73%
of the sum of (x) the aggregate principal payments received
by the Partnership on its loan to North Country and (y) the
aggregate amounts received by the Partnership as a return of
capital with respect to its shares of North Country, and
such amount shall instead be allocated to the Other
Partners, and (ii)".
13. Amendment to Section 5.3. Section 5.3 of the
Partnership Agreement is hereby amended by (i) deleting
paragraphs (a) through (c) thereof in their entirety, (ii)
redesignating paragraph (d) thereof as paragraph (c) and deleting
therefrom the phrase "with respect to the Noncontributed Assets",
(iii) deleting paragraph (e) thereof and (iv) inserting the
following new paragraphs (a) and (b) therein:
"(a) Depreciation shall be allocated 49.22% to the GE
Capital Limited Partner, 18.20% to the Tomen Limited
Partners and 32.58% to SECI.
(b) Partner Nonrecourse Deductions for any taxable
period shall be allocated to the Partner who bears the
economic risk of loss with respect to the liability to which
such Partner Nonrecourse Deductions are attributable in
accordance with Treas. Reg. Sec. 1.704-2(j)."
14. Amendment to Section 5.5(a). Section 5.5(a) of
the Partnership Agreement is hereby amended and restated in its
entirety as follows:
"(a) Depreciation shall be initially allocated to the
Tomen Limited Partners and to SECI in the ratio of their
initial Capital Account balances as shown on Schedule 1
hereto; provided, however, that if such allocations would
result in Capital Account balances that differ from those
provided for pursuant to paragraph (b) below, after taking
into account the allocations made pursuant to paragraph (b)
below, then Depreciation shall instead be allocated to the
Tomen Limited Partners and to SECI so that the Capital
Accounts of the Other Partners satisfy the requirements of
paragraph (b) below."
15. Amendment to Section 5.11. Section 5.11 of the
Partnership Agreement is hereby amended by adding the following
sentences to the end thereof:
"In particular, tax depreciation for any period shall be
allocated 73% to the GE Capital Limited Partner and the
remaining tax depreciation first, to the Tomen Limited
Partners to match the amount of Depreciation allocated to
such Partners during such period and second, any remaining
tax depreciation shall be allocated to SECI."
16. Amendment to Section 6.6(b). Section 6.6(b) of
the Partnership Agreement is hereby amended by inserting before
the semicolon at the end of subparagraph (viii) thereof, the
following parenthetical:
"(including, without limitation, a copy of all engineer's
reports furnished by the Partnership to NYSEG pursuant to
Part 2 of Exhibit B of the Power Purchase Agreement)".
17. Amendments to Section 7. (a) Section 7.2(o) of
the Partnership Agreement is hereby amended and restated in its
entirety as follows:
"(o) Alternative Steam Plan. If during the Base Term
the GE Capital Limited Partner shall determine, in its
reasonable judgment, that the Steam Host will cease for any
reason to purchase steam from the Facility in sufficient
quantities so as to maintain the Facility's status as a
Qualifying Facility and SECI shall not have undertaken an
alternative to the sale of the thermal output of the
Facility to the Steam Host, which the GE Capital Limited
Partner shall have determined, in its reasonable judgment,
to be a viable and not economically disadvantageous means to
preserve the Facility's status as a Qualifying Facility,
upon the request of the GE Capital Limited Partner, so long
as SECI shall be the Managing General Partner, the Managing
General Partner shall provide to the GE Capital Limited
Partner, as soon as possible but in any event within 60 days
after receipt by the Managing General Partner of written
notice from the GE Capital Limited Partner to such effect,
an Alternative Steam Plan; and the Managing General Partner
shall cause the substitute facility and the permits relating
thereto described in such Alternative Steam Plan to be
developed, constructed, implemented and obtained within
fifteen (15) days of the milestones specified as 'critical
path milestones' in the timetable described in clause (x) of
the definition of Alternative Steam Plan in Appendix A, and
shall cause such substitute facility to be constructed and
completed and become operational in compliance with
Applicable Law and the Alternative Steam Plan by no later
than the date one year after the date of such request or, if
the FERC shall have granted an exemption from the
requirement that the Facility be a Qualifying Facility, such
longer period not later than the date of the expiration of
such exemption, so long as during such period NYSEG shall
have taken no action to terminate the Power Purchase
Agreement."
(b) Section 7.3(a)(i) of the Partnership Agreement is
hereby amended by adding after "$250,000" appearing therein, the
phrase ", unless such Additional Contract is contemplated by the
Partnership Operating Budget or North Country Operating Budget
most recently approved by the GE Capital Limited Partner pursuant
to Section 6.6(c) or (d), as the case may be".
(c) Section 7.3(a)(viii) of the Partnership Agreement
is hereby amended and restated in its entirety as follows:
"(viii) No Amendments or Assignments. (1) Amend in
any material respect, modify in any material respect, waive
compliance with any material provision of, or agree to any
such amendment, modification, termination, consent or waiver
of compliance with any material provision of, any Project
Contract or Governmental Approval; or (2) amend in any
respect, modify in any respect, waive compliance with any
provision of, or agree to any such amendment, modification,
termination, consent or waiver of compliance with any
provision of, any other Basic Document; or (3) terminate,
assign any rights the Partnership may have under, consent to
or permit the assignment by any other Person of any right
such Person may have under, give consents or exercise rights
under or agree to any such assignment or exercise of any
rights under, any Basic Document or Governmental Approval;".
(d) Section 7.3(a)(xi) of the Partnership Agreement is
hereby amended by inserting at the end thereof, the phrase "and
intercompany advances made by the Partnership to North Country
contemplated by clause (f) of the definition of 'Partnership
Permitted Indebtedness' in Appendix A".
(e) Section 7.3(b)(iii) of the Partnership Agreement
is hereby amended by inserting the following phrase immediately
before the semicolon at the end thereof:
", except for the loan to North Country described in clause
(f) of the definition of Partnership Permitted Indebtedness
in Appendix A."
(f) Section 7.3(c) of the Partnership Agreement is
hereby amended (i) by inserting at the end of the parenthetical
in clause (A) of subparagraph (iv) thereof, the words "and the
Cash Collateral Agreement".
(g) Section 7.3(d) of the Partnership Agreement is
hereby amended (i) by inserting at the end of the parenthetical
in clause (i) thereof, the words "and the Cash Collateral
Agreement".
18. Amendments to Article VIII. Article VIII of the
Partnership Agreement is hereby amended by inserting a new
Section 8.6 therein as follows:
"8.6. Additional SECI Capital Contribution. SECI
shall be deemed to have made an additional capital contribution
to the Partnership in an amount equal to amount specified in
Section 2.3(b)(i) or (ii) of the SECI Term Loan Agreement on the
date SECI has made or is deemed to have made, as the case may be,
a drawing of the SECI Term Loan pursuant to Section 2.3(b) of the
SECI Term Loan Agreement or, in lieu of making such a drawing,
SECI (on behalf of the Partnership) pays such amount to the
Surety Bond Arranger."
19. Amendments to Article X. (a) Sections 10.3 and
10.8 of the Partnership Agreement are hereby amended by deleting
the clause "Except as security for the Obligations and the
obligations of SECI under the SECI Term Loan Agreement," from the
first sentence of each such Section and inserting, in lieu
thereof, the phrase "Except as security for the obligations of
SECI under the SECI Term Loan Agreement,".
(b) Section 10.10(a)(ii) of the Partnership Agreement
is hereby amended by deleting the first two parentheticals in the
last sentence thereof in their entirety and substituting, in lieu
thereof, the parenthetical "(second so long as the SECI Term Loan
Agreement is in effect and such second lien is permitted by the
SECI Term Loan Agreement)" and the parenthetical "(second so long
as the Loan Agreement or any refinancing thereof is in effect and
such second lien is permitted by Section 8.2 of the Loan
Agreement and the loan documents in respect of such
refinancing)", respectively.
20. Amendments to Article XIII. Article XIII of the
Partnership Agreement is hereby amended as follows:
(a) Section 13.1(b) is hereby amended by inserting
immediately after the words "other Partner" and before the words
"in any other Basic Document" the phrase "(other than GE
Capital)".
(b) Section 13.1(e) is hereby amended by inserting
immediately before the word "unless" in the proviso clause
appearing therein, the phrase "so long as, at the time that any
such cure is made, any such Other Partner also makes capital
contributions to the Partnership to reimburse the Senior Debt
Service Reserve Letter of Credit Issuer in an aggregate amount
equal to the aggregate principal amount of all unreimbursed
drawings under the Senior Debt Service Reserve Letters of
Credit,".
(c) Section 13.1(f) is hereby amended by deleting the
word "and" at the end of subparagraph (3) thereof, by inserting
the word "and" after the semicolon at the end of subparagraph (4)
thereof and by inserting the following new subparagraph (5)
immediately after subparagraph (4) thereof:
"(5) all Governmental Approvals and other consents and
approvals required in connection with the execution,
delivery and performance of such substitute agreement shall
have been duly obtained or made, and shall be in full force
and effect (other than any such Governmental Approvals or
other consents and approvals which are obtainable in the
ordinary course of business and which are not required for
the Partnership or such substitute Project Participant to
execute or deliver such substitute agreement or to perform
its obligations under such substitute agreement which are
then required to be performed by it (including the
obligation of the Partnership to operate the Facility as
then required pursuant to such substitute agreement and the
other Project Contracts));"
(d) Sections 13.1(g) and 13.1(h) are hereby amended by
inserting the word "and" after the semicolon at the end of
subparagraph (4) thereof and by inserting the following new
subparagraph (5) immediately after subparagraph (4) thereof:
"(5) all Governmental Approvals and other consents and
approvals required in connection with the execution,
delivery and performance of such substitute agreement shall
have been duly obtained or made, and shall be in full force
and effect (other than any such Governmental Approvals or
other consents and approvals which are obtainable in the
ordinary course of business and which are not required for
the Partnership or such substitute Project Participant to
execute or deliver such substitute agreement or to perform
its obligations under such substitute agreement which are
then required to be performed by it (including the
obligation of the Partnership to operate the Facility as
then required pursuant to such substitute agreement and the
other Project Contracts));"
(e) Section 13.1(r) is hereby amended and restated in
its entirety as follows:
"(r) In respect of any Quarterly Period, the GE
Capital Limited Partner shall not have received an amount
equal to 99% of the scheduled Level 1 Distributions for such
Quarterly Period (net of any Deducted Payments) within five
days after the last Distribution Date in such Quarterly
Period; provided, that (I) any Other Partner shall have the
right to make capital contributions to the Partnership to
cure such failure so long as, at the time any such cure is
made, such Partner also makes capital contributions to the
Partnership to reimburse the Senior Debt Service Reserve
Letter of Credit Issuer in an aggregate amount equal to the
aggregate principal amount of all unreimbursed drawings
under the Senior Debt Service Reserve Letters of Credit,
unless a cure has been effected in respect of (i) (A) Level
1 Distributions payable to the GE Capital Limited Partner
for each of the three Quarterly Periods immediately
preceding such failure, (B) Level 1 Distributions payable to
the GE Capital Limited Partner for more than six Quarterly
Periods, (C) the failure to make payments on the Term Loan
or a Refinancing Loan or Subordinated Refinancing Loan for
each of the three Quarterly Periods immediately preceding
such failure or (D) the failure to make payments on the Term
Loan or a Refinancing Loan or Subordinated Refinancing Loan
for more than six Quarterly Periods or (ii) any combination
of (A) through (D) above in respect of three consecutive
Quarterly Periods or six Quarterly Periods, (II) the failure
of the GE Capital Limited Partner to receive in respect of
any Quarterly Period an amount equal to 99% of the scheduled
Level 1 Distributions for such Quarterly Period (net of any
Deducted Payments) shall not constitute a Special Event
under this paragraph (r) if such failure was caused solely
by such Level 1 Distributions being deposited during such
Quarterly Period into the Steam Reserve Account in
accordance with the provisions of Section 7.22(e) of the
Loan Agreement and Section 4.2(d) of the Amended and
Restated Security Deposit Agreement and the conditions to
the release of such Level 1 Distributions to the GE Capital
Limited Partner set forth in Section 4.15(a) of the Amended
and Restated Security Deposit Agreement not having been
satisfied, (III) if the failure of the GE Capital Limited
Partner to receive such Level 1 Distributions was caused
solely by such Level 1 Distributions being deposited during
such Quarterly Period into the Senior Debt Service Coverage
Account in accordance with the provisions of Section 7.22(c)
of the Loan Agreement and Section 4.2(d) of the Amended and
Restated Security Deposit Agreement, the Managing General
Partner, at its option, may elect to cure such failure (any
such cure being subject to the numerical limitations set
forth in subclauses (i) and (ii) of clause (I) of this
paragraph (r)) without making any capital contribution to
the Partnership (other than capital contributions to
reimburse the Senior Debt Service Reserve Letter of Credit
Issuer in an aggregate amount equal to the aggregate
principal amount of all unreimbursed drawings under the
Senior Debt Service Reserve Letters of Credit) by sending a
written notice to the GE Capital Limited Partner specifying
that the Managing General Partner is making such election
and (IV) the failure of the GE Capital Limited Partner to
receive an amount equal to 99% of the scheduled Level 1
Distribution for any Distribution Date (net of any Deducted
Payments) prior to the end of the Quarterly Period in which
such Distribution Date occurs shall not be deemed to be a
Special Event under this Section 13.1(r); or"
(f) Article XIII of the Partnership Agreement is
hereby amended by deleting the period at the end of Section
13.1(t) and inserting, in lieu thereof, "; or" and inserting the
following new paragraph (u) at the end thereof:
"(u) Any drawing shall occur under the Senior Debt
Service Reserve "A" Letter of Credit or the Senior Debt
Service Reserve "B" Letter of Credit (other than a drawing
as a result of a loss of or reduction in the rating of the
Senior Debt Service Reserve Letter of Credit Issuer) or any
withdrawal from the Senior Debt Service Reserve Account
shall occur, in each case that is not reimbursed on the
first Monthly Transfer Date that is on or after the date of
such drawing or withdrawal."
21. Amendments to Schedules and Exhibits. (a)
Schedule 1 to the Partnership Agreement is hereby deleted in its
entirety and Schedule 1 hereto is hereby added to the Partnership
Agreement as the new Schedule 1 thereto.
(b) Schedules 2, 3, 4 and 5 hereto are added to the
Partnership Agreement as Schedules 2, 5, 6 and 7, respectively.
(c) Schedule 8 to the Partnership Agreement is hereby
deleted in its entirety and Schedule 6 hereto is added to the
Partnership Agreement as the new Schedule 8 thereto.
(d) Exhibit A hereto is hereby added to the
Partnership Agreement as a new Exhibit thereto.
(e) Exhibit A to the Partnership Agreement is hereby
amended by (i) deleting in Section 1(a) the words "term is" and
inserting in lieu thereof the words "terms are" and (ii) by
inserting in Section 1(a) the following new definition:
"'Second Capital Contribution Date' shall mean
September 30, 1994."
22. Consent. The parties hereto hereby (i) agree that
the Amended and Restated Appendix A (Definitions) attached hereto
shall be substituted for the Appendix A (Definitions) which
applies to each of the Loan Documents, SECI Loan Documents and
the Partnership Agreement and (ii) consent to the execution and
delivery by the respective parties thereto of (1) the Amended and
Restated Loan Agreement, the Note Pledge Agreement (including the
note pledged pursuant thereto), the Surety Bank Arrangements Cash
Collateral Agreement and the Amended and Restated Security
Deposit Agreement (as each such document is defined in the
Amended and Restated Appendix A referred to in clause (i) above),
(2) the Letter Agreement, dated as of September 30, 1994, among
the Partnership, GE Capital and Credit Suisse, as agent, relating
to the payment of certain fees and expenses under the Amended and
Restated Loan Agreement, (3) the Successor Agency Agreement,
dated as of September 30, 1994, among Credit Suisse, GE Capital
and the Partnership, (4) the Notices of Assignment, each dated as
of October 7, 1994, delivered by the Partnership to each of the
parties to the Assigned Contracts, (5) the Amendment, dated as of
October 7, 1994, to the Consent and Agreement, dated as of
December 29, 1992, among North Country, the Partnership and GE
Capital, (6) the Term Notes, (7) the Amended and Restated
Amendment No. 1 to the Operation and Maintenance Agreement, dated
as of September 30, 1994, (8) the Amendment, dated as of
October 7, 1994, to the Partnership Stock Pledge Agreement, made
by the Partnership in favor of GE Capital, (9) the Second Swap
Agreement, (10) the Amendment No. 2, dated February 24, 1994, to
the Power Purchase Agreement, and (11) the Letter Agreement,
dated October 7, 1994, among GE Capital, the Partnership and
North Country (relating to the termination of certain Collateral
Security Documents).
23. Full Force and Effect. Except as expressly
amended and modified by this Amendment, the Partnership Agreement
shall continue to be, and shall remain, in full force and effect
in accordance with its terms.
24. No Other Amendments. This Amendment shall be
effective solely to the extent set forth herein, and is not and
shall not be construed (i) to be an amendment of any other term
or condition of the Partnership Agreement or (ii) to prejudice
any other right or rights which any party thereto may now have or
may have in the future under or in connection with the
Partnership Agreement.
25. Counterparts. This Amendment may be executed by
the parties hereto in any number of separate counterparts, all of
which counterparts, taken together, shall be deemed to constitute
one and the same instrument.
26. Condition Precedent. This Amendment shall become
effective as of the date first above written upon receipt by GE
Capital of counterparts hereof duly executed by each of the
parties hereto.
27. Governing Law. This Amendment and the rights and
obligations of the parties hereunder shall be governed by, and
construed and interpreted in accordance with, the laws of the
State of Delaware.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
SARANAC ENERGY COMPANY, INC.
By:
Title:
TPC SARANAC PARTNER ONE, INC.
By:
Title:
TPC SARANAC PARTNER TWO, INC.
By:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
Title:
Exhibit 11
CALENERGY COMPANY, INC.
CALCULATION OF EARNINGS PER SHARE IN ACCORDANCE
WITH INTERPRETIVE RELEASE NO. 34-9083
(dollars in thousands, except per share amounts)
___________________
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Actual weighted average shares
outstanding for the period 52,765,706 49,987,315 51,994,097 46,254,489
Dilutive stock options and warrants
using average market prices 3,530,474 3,092,465 3,367,558 2,606,762
Primary shares outstanding 56,296,180 53,079,780 55,361,655 48,861,251
Additional dilutive stock options
using ending market price and
assuming conversion of convertible
debt, convertible subordinated
debenture and convertible preferred
securities of subsidiary 11,444,305 8,438,214 11,035,506 7,968,064
Fully dilutive shares
outstanding 67,740,485 61,517,994 66,397,161 56,829,315
Net income $ 37,554 $ 27,362 $ 71,287 $ 50,866
Less: Series C preferred stock
dividends - - - 1,080
Net income available for common
shareholders $ 37,554 $ 27,362 $ 71,287 $ 49,786
Primary earnings per share $ .67 $ .52 $ 1.29 $ 1.02
Fully diluted earnings per share
based on SEC interpretive release
No. 34-9083* $ .59 $ .48 $ 1.18 $ .96
</TABLE>
*The net income available for common shareholders for the three and nine
months ended September 30, 1996 was increased by the interest expense, net
of tax effect, associated with the convertible debt and convertible
subordinated debenture of $1,571 and $4,968, respectively. Net income
available for common shareholders for the three and nine months ended
September 30, 1996 was increased by dividends on convertible preferred
securities of subsidiary, net of tax effect of $982 and $1,857,
respectively.
*The net income available for common shareholders for the three and nine
months ended September 30, 1995 was increased by the interest expense, net
of tax, associated with the convertible debt and convertible subordinated
debenture of $1,921 and $4,866, respectively.
Exhibit 15
CalEnergy Company, Inc.
Omaha, Nebraska
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of the
unaudited interim financial information of CalEnergy Company,
Inc. for the three and nine month periods ended September 30,
1996 and 1995 as indicated in our report dated October 22, 1996;
because we did not perform an audit, we expressed no opinion on
that information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, is incorporated by reference in Registration
Statements No. 33-41152 and No. 33-52147 on Form S-8 and
Registration Statement No. 35-51363 on Form S-3.
We also are aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act, is not considered a part of
a Registration Statement prepared or certified by an accountant
or a report prepared or certified by an accountant within the
meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
November 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 465,819
<SECURITIES> 2,864
<RECEIVABLES> 109,453
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,461,673
<DEPRECIATION> 237,903
<TOTAL-ASSETS> 3,548,442
<CURRENT-LIABILITIES> 0
<BONDS> 2,247,255
103,930
0
<COMMON> 3,853
<OTHER-SE> 723,813
<TOTAL-LIABILITY-AND-EQUITY> 3,548,442
<SALES> 346,166
<TOTAL-REVENUES> 385,198
<CGS> 0
<TOTAL-COSTS> 73,546
<OTHER-EXPENSES> 34,108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,062
<INCOME-PRETAX> 105,149
<INCOME-TAX> 33,862
<INCOME-CONTINUING> 71,287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,287
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.18
</TABLE>
