<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File number 33-87902
33-87902-01
33-87902-02
IEC Funding Corp.
North Jersey Energy Associates, A Limited Partnership
Northeast Energy Associates, A Limited Partnership
--------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3255377
New Jersey 04-2955646
Massachusetts 04-2955642
------------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
350 Lincoln Place, Hingham, Massachusetts 02043
----------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(617) 749-9800
--------------
(Registrant's Telephone Number, Including Area Code)
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________
--------
<PAGE>
IEC FUNDING CORP.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
NORTHEAST ENERGY ASSOCIATES AND
NORTH JERSEY ENERGY ASSOCIATES
Combined Balance Sheet at December 31, 1995 and
September 30, 1996 (Unaudited)......................................... 3
Combined Statement of Operations for the Three
Months and Nine Months Ended
September 30, 1995 and 1996 (Unaudited)................................ 4
Combined Statement of Cash Flows for the Nine Months
Ended September 30, 1995 and 1996 (Unaudited).......................... 5
Notes to Combined Financial Statements................................. 7
IEC FUNDING CORP.
Balance Sheet at December 31, 1995 and
September 30, 1996 (Unaudited)......................................... 8
Statement of Operations for the Three Months and Nine
Months Ended September 30, 1995 and 1996 (Unaudited).................. 9
Statement of Cash Flows for the Nine Months
Ended September 30, 1995 and 1996 (Unaudited).......................... 10
Notes to Financial Statements.......................................... 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 12
PART II OTHER INFORMATION...................................................... 13
SIGNATURES............................................................................ 14
</TABLE>
<PAGE>
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 58,277 $ 87,308
Accounts receivable 51,465 52,594
Fuel inventories 4,516 6,632
Prepaid expenses and other current assets 2,913 2,133
------------ -------------
Total current assets 117,171 148,667
------------ -------------
Cogeneration facilities and carbon dioxide facility (net of
accumulated depreciation of $104,157,000 and $122,808,000
at December 31, 1995 and September 30, 1996, respectively) 397,589 379,745
Unamortized financing costs 20,210 18,410
Other fixed assets (net of accumulated depreciation of $371,000
and $452,000 at December 31, 1995 and September 30, 1996, respectively) 485 458
Other assets 3,011 3,607
Restricted cash 78,568 69,156
------------ -------------
Total non-current assets 499,863 471,376
------------ -------------
Total assets $ 617,034 $ 620,043
------------ -------------
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities
Current portion of loans payable - IEC Funding Corp. $ 25,204 $ 24,640
Accounts payable 14,234 13,523
Accrued interest - IEC Funding Corp. 12,218
Other accrued expenses 2,104 2,845
Future obligations under interest rate swap agreements 3,654 2,369
------------ -------------
Total current liabilities 45,196 55,595
------------ -------------
Loans payable - IEC Funding Corp. 514,362 502,324
Amounts due utilities for energy bank balances 188,053 211,016
------------ -------------
Total non-current liabilities 702,415 713,340
------------ -------------
Total liabilities 747,611 768,935
------------ -------------
Partners' deficit
General partner (4,047) (4,230)
Limited partners (126,530) (144,662)
------------ -------------
Total partners' deficit (130,577) (148,892)
------------ -------------
Commitments and contingencies ------------ -------------
Total liabilities and partners' deficit $ 617,034 $ 620,043
------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue
Power sales to utilities $ 71,942 $ 73,170 $ 211,641 $ 204,710
Steam sales 1,147 1,128 3,501 3,393
----------- ---------- ------------ ------------
Total revenue 73,089 74,298 215,142 208,103
----------- ---------- ------------ ------------
Costs and expenses
Cost of power and steam sales 32,817 32,735 99,426 103,506
Operation and maintenance 6,726 6,238 18,675 17,019
Depreciation 6,211 6,249 18,637 18,732
General and administrative
expenses 3,141 3,481 8,831 10,357
----------- ----------- ------------ ------------
Total costs and expenses 48,895 48,703 145,569 149,614
----------- ----------- ------------ ------------
Operating income 24,194 25,595 69,573 58,489
----------- ----------- ------------ ------------
Other expense (income)
Amortization of financing costs 643 587 1,565 1,800
Interest expense 12,751 12,334 38,059 37,486
Interest expense on energy bank liabilities 4,273 4,783 12,143 14,375
Interest income (2,445) (2,232) (7,932) (7,673)
----------- ----------- ------------ ------------
Total other expense 15,222 15,472 43,835 45,988
----------- ----------- ------------ ------------
Net income $ 8,972 $ 10,123 $ 25,738 $ 12,501
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENT OF CASH FLOWS
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1995 1996
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Cash received from utilities and other customers $ 215,141 $ 216,648
Cash paid to suppliers (122,716) (128,969)
Interest paid (27,876) (26,525)
Bank commitment fees paid (27) (27)
Interest received 7,660 9,282
Cash payments to general partner for operating activities (1,805) (3,746)
Cash payments to owners/management (2,671) (2,765)
------------ ------------
Net cash provided by operating
activities 67,706 63,898
------------ ------------
Cash flows from investing activities:
Net expenditures for facilities (1,863) (807)
Purchase of other fixed assets (40) (54)
Decrease in restricted cash 3,432 9,412
------------- -------------
Net cash provided by
investing activities 1,529 8,551
------------- -------------
Cash flows from financing activities:
Principal payments on debt (10,217) (12,602)
Payment of refinancing costs (5,739) -
Distributions to partners (43,700) (30,816)
------------ ------------
Net cash used for financing activities (59,656) (43,418)
------------ ------------
Net increase in cash and cash equivalents 9,579 29,031
Cash and cash equivalents at beginning of period 76,255 58,277
------------ ------------
Cash and cash equivalents at end of period $ 85,834 $ 87,308
============ ============
</TABLE>
The accompanying notes are an integral
part of these financial statements
<PAGE>
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENT OF CASH FLOWS (CONTINUED)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1995 1996
(IN THOUSANDS)
<S> <C> <C>
Net income $ 25,738 $ 12,501
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 18,637 18,732
Amortization of financing costs 1,565 1,800
Changes in assets and liabilities
Accounts receivable (11,436) (1,129)
Fuel inventories (935) (2,116)
Prepaid expenses and other current assets (891) 780
Accounts payable 4,119 (711)
Accrued interest - 12,218
Other accrued expenses 11,835 741
Future obligations under interest rate
swap agreements (2,356) (1,285)
Amounts due utilities for energy bank balances 21,915 22,963
Other assets (485) (596)
-------- -------
Net cash provided by operating activities $ 67,706 $ 63,898
======== =========
</TABLE>
The accompanying notes are an integral
part of these financial statements
<PAGE>
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. Basis of Presentation
The accompanying unaudited combined financial statements should be read in
conjunction with the audited combined financial statements included in the
Annual Report on Form 10-K for the year ended December 31, 1995 for
Northeast Energy Associates, A Limited Partnership, and North Jersey Energy
Associates, A Limited Partnership (together, the "Partnerships") and IEC
Funding Corp.
The results of operations for the periods ended September 30, 1996 are
unaudited and are not necessarily indicative of the results to be expected
for the full year. The unaudited financial information at September 30,
1996 and for the periods ended September 30, 1996 contains all adjustments,
consisting only of normal recurring adjustments, considered by management
necessary for a fair presentation of the operating results for such period.
2. Reclassification
Certain reclassifications were made to the prior year balances in order to
conform to current year presentation. These reclassifications had no
effect on prior year operating results.
3. Distributions
Distributions to the partners may be made only after all required funds and
sub-funds have been fully funded as described in the Trust Indenture. After
funding all amounts required under the indenture, the excess cash generated
during periods ended June 30 and March 31, 1996 were in excess of
approximately $30.5 million and $0.3 million, respectively. All conditions
under the trust indenture for distributions of such excess cash were
satisfied after March 31, 1996 resulting in a distribution of approximately
$8.8 million in April and $22.0 million in June to the partners in
proportion to their designated interests in the Partnerships. No
distributions were made during the third quarter of 1996. As of November 2,
1996 excess cash of $19.1 million was available for distribution. These
funds have been released for payment to the partners.
<PAGE>
IEC FUNDING CORP.
BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash $ 1 $ 1
Current portion of notes receivable from
Northeast Energy Associates and North Jersey
Energy Associates (together, the "Partnerships") 25,204 24,640
Interest receivable from the Partnerships - 12,218
---------- ----------
Total current assets 25,205 36,859
Notes receivable from the Partnerships 514,362 502,324
---------- ----------
Total assets $ 539,567 $ 539,183
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of securities payable $ 25,204 $ 24,640
Accrued interest - 12,218
---------- ----------
Total current liabilities 25,204 36,858
Securities payable 514,362 502,324
---------- ----------
Total liabilities 539,566 539,182
Stockholders' equity
Common stock, no par value, 10,000 shares
authorized, issued and outstanding 1 1
---------- ----------
Total liabilities and stockholders' equity $539,567 $ 539,183
========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements
<PAGE>
IEC FUNDING CORP.
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995 1996
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income $ 12,699 $ 12,218 $ 38,386 $ 37,186
Interest expense (12,699) (12,218) (38,386) (37,186)
-------- -------- -------- --------
$ - $ - $ - $ -
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements
<PAGE>
IEC FUNDING CORP.
STATEMENT OF CASH FLOWS (UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1995 1996
(IN THOUSANDS)
<S> <C> <C>
Cash Flows from operating activities:
Interest received from Partnerships $ 25,829 $ 24,968
Interest paid (25,829) (24,968)
-------- -------
Net cash provided by operating activities - -
-------- -------
Cash flows from investing activities:
Principal payment received from partnerships 10,217 12,602
Principal payment on debt (10,217) (12,602)
-------- --------
Net cash provided by investing activities - -
-------- --------
Cash flows from financing activities - -
-------- --------
Net increase in cash - -
-------- --------
Cash at beginning of period 1 1
-------- --------
Cash at end of period $ 1 $ 1
-------- --------
</TABLE>
The accompanying notes are an integral
part of these financial statements
<PAGE>
IEC FUNDING CORP.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited financial statements should be read in
conjunction with the audited financial statements included in the Annual
Report on Form 10-K for the year ended December 31, 1995 for IEC Funding
Corp. (the "Company") and the Partnerships.
The unaudited financial information at September 30, 1996 and for the
periods ended September 30, 1996 contains all adjustments, consisting only
of normal recurring adjustments, considered by management necessary for a
fair presentation of the operating results for such period.
<PAGE>
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Total revenue of $74.3 million for the third quarter of 1996 increased $1.2
million (1.7%) as compared to the third quarter of 1995. This increase is a
result of the timing of curtailment rights exercised by certain power
purchasers. Fewer curtailment hours were requested during the third quarter of
1996 as compared to the third quarter of 1995. It is expected that the remaining
curtailment hours available to these utilities under the respective power
purchase agreements will be requested during the fourth quarter of 1996. Power
purchase rates for the third quarter of 1996 increased slightly on Bellingham
contracts and remained flat, on average, for Sayreville. On a year to date
basis, total revenue of $208.1 million in 1996 decreased $7.0 million (3.2%) as
compared to 1995. This decrease is primarily due to scheduled maintenance
outages that occurred during the second quarter of 1996 and included a major
inspection and maintenance program (scheduled at five year intervals) at the
Bellingham facility. Lower rates, on average, under the Sayreville power
purchase contract during the first nine months of 1996 also contributed to the
revenue decrease. Rates for the Bellingham project increased slightly over the
prior year.
Cost of power and steam sales as a percentage of gross revenues (gross of
increase to energy bank) was 41.8% for the third quarter of 1996 versus 42.7%
for the third quarter of 1995. Year to date costs as a percentage of gross
revenues was 47.8% in 1996 as compared to 44.2% in 1995. The decreased cost on a
quarterly basis is primarily a result of gains on natural gas swap agreements.
On a year to date basis, extended gas service charges by one of the Sayreville
facility's suppliers (due to lower temperatures), fixed demand charges under
certain fuel contracts (which remain constant regardless of availability) and
higher market prices of spot gas (which affect both spot purchases and certain
firm contracts) resulted in increased costs.
Operation and maintenance costs decreased $.5 million as compared to the
third quarter of 1995, and decreased $1.6 million on a year to date basis.
These decreases are a result of a one-time 1995 water franchise fee, and a lower
performance bonus payable to the O&M contractor in 1996 as a result of scheduled
maintenance outages. Offsetting these cost decreases were normal and expected
escalations on O&M contracts and increases in property taxes.
General and administrative expenses were $3.5 million for the third quarter
of 1996 as compared to $3.1 million for the same period in the prior year. On a
year to date basis 1996 costs were $10.3 million as compared to $8.8 million in
1995. Quarterly and year to date increases include increased insurance and other
overhead costs.
Interest expense decreased $.4 million as compared to the third quarter of
1995 and decreased $.6 million on a year to date basis. Interest on debt is
decreasing in 1996 as a result of principal payments made through June 30, 1996.
Principal payments are made semi-annually on June 30 and December 30. Interest
on energy bank liabilities has increased, reflecting increases in the underlying
amounts accrued for energy bank balances. Interest income has decreased as a
result of reduced cash collateral being held in support of letters of credit.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated during the nine months ended September 30, 1996 was more
than sufficient to fund all operating expenses for the period as well as fund
debt service requirements for both June and December of 1996. Debt service
reserve requirements specified in the trust indenture remain fulfilled. Through
the six months ended June 30, 1996 excess cash of $30.8 million was distributed
to the partners. While no distributions were made during the third quarter of
1996, as of November 2, 1996 excess cash of $19.1 million was available for
distribution and these funds have been released for payment to the partners.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are filed herewith:
3.7 Agreement of Limited Partnership dated as of October
15, 1996, of Northeast Energy Associates, A Limited
Partnership.
3.8 Agreement of Limited Partnership dated as of October
15, 1996, of North Jersey Energy Associates, A Limited
Partnership.
10.10.5 Operation and Maintenance Agreement dated as of May 1,
1995, between NECO-Bellingham, Inc. and Westinghouse
Operating Services Company, Inc. (Supersedes Exhibit
10.10.5 previously filed)
10.14 Declaration of Easements, Covenants and Restrictions
dated as of June 28, 1989, among Northeast Energy
Associates, A Limited Partnership, Commonwealth
Electric Company, Boston Edison Company and Montaup
Electric Company.
(b) There were no reports on Form 8-K filed during the three months
ended September 30, 1996.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, IEC
Funding Corp. has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IEC FUNDING CORP.
DATE SIGNATURE AND TITLE
November 14, 1996 /s/ Maureen P. Herbert
--------------------------- ----------------------------------------
Maureen P. Herbert
Vice President of Finance
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, North
Jersey Energy Associates, A Limited Partnership has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
NORTH JERSEY ENERGY ASSOCIATES,
A LIMITED PARTNERSHIP
By: INTERCONTINENTAL ENERGY CORPORATION
As General Partner
DATE SIGNATURE AND TITLE
November 14, 1996 /s/ Maureen P. Herbert
------------------------ ----------------------------------------
Maureen P. Herbert
Vice President of Finance
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
Northeast Energy Associates, A Limited Partnership has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
NORTHEAST ENERGY ASSOCIATES,
A LIMITED PARTNERSHIP
By: INTERCONTINENTAL ENERGY CORPORATION
As General Partner
DATE SIGNATURE AND TITLE
November 14, 1996 /s/ Maureen P. Herbert
------------------------ ---------------------------------------
Maureen P. Herbert
Vice President of Finance
<PAGE>
EXHIBIT 3.7
================================================================================
AGREEMENT OF LIMITED PARTNERSHIP
OF
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
Dated as of October 15, 1996
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Certain Definitions; General Provisions
---------------------------------------
SECTION 1.01. Certain Definitions....................... 1
SECTION 1.02. Name...................................... 8
SECTION 1.03. Principal Place of Business............... 9
SECTION 1.04. Purposes.................................. 9
SECTION 1.05. Duration.................................. 9
SECTION 1.06. General Partner........................... 9
SECTION 1.07. Limited Partners.......................... 9
SECTION 1.08. Assignees................................. 9
ARTICLE II
Capital and Interests in the Partnership;
-----------------------------------------
Admission of Additional Partners; Financing; Allocations
--------------------------------------------------------
SECTION 2.01. Initial Capital Contributions............. 10
SECTION 2.02. Admission of Additional Partners.......... 10
SECTION 2.03. Financing of the Partnership;
Partner Loans............................. 11
SECTION 2.04. Interest on Capital Contribution.......... 13
SECTION 2.05. General Allocations of Net Profits
and Net Losses............................ 13
SECTION 2.06. Allocations of Nonrecourse
Deductions and Minimum Gain............... 14
SECTION 2.07. Overriding Allocations Of Net
Profits and Net Losses.................... 14
SECTION 2.08. Allocations Upon Transfer or
Admission................................. 15
SECTION 2.09. Withdrawal of Capital; Limitation
on Distributions, Priorities.............. 16
ARTICLE III
Management
----------
SECTION 3.01. Management................................ 16
SECTION 3.02. Authority of the General Partner.......... 16
SECTION 3.03. Restrictions on the Authority of
the....................................... 18
General Partner.....................
</TABLE>
<PAGE>
Contents, p. 2
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.04. Compensation, Reimbursement and
Fees...................................... 19
SECTION 3.05. Limitation of Liability and
Indemnification........................... 20
SECTION 3.06 Other Business Ventures................... 21
ARTICLE IV
Books; Elections; Budgets; Fiscal Year
--------------------------------------
SECTION 4.01. Administrative Services, Books,
Records and Reports....................... 22
SECTION 4.02. Tax Matters............................... 22
SECTION 4.03. Fiscal Year............................... 23
ARTICLE V
Distributions of Distributable Funds
------------------------------------
SECTION 5.01. Distributions of Distributable Funds...... 23
ARTICLE VI
Transfers of Partnership Interests
----------------------------------
SECTION 6.01. Transfer Restrictions..................... 24
SECTION 6.02. Consequences of Transfer.................. 25
SECTION 6.03. Mandatory Transfer........................ 26
ARTICLE VII
Dissolution and Liquidation
---------------------------
SECTION 7.01. Dissolution............................... 27
SECTION 7.02. Winding up Affairs and Distributions
of Assets................................. 28
SECTION 7.03. Continuation of Business of
Partnership............................... 28
</TABLE>
<PAGE>
Contents, p. 3
<TABLE>
<CAPTION>
Page
----
ARTICLE VIII
Miscellaneous
-------------
<S> <C> <C>
SECTION 8.01. Notices.................................. 29
SECTION 8.02. Partnership Act Certificate
Requirements............................. 30
SECTION 8.03. Entire Agreement......................... 30
SECTION 8.04. Modification............................. 30
SECTION 8.05. Waivers.................................. 31
SECTION 8.06. Severability............................. 31
SECTION 8.07. Further Assurances....................... 31
SECTION 8.08. Investment Representations............... 31
SECTION 8.09. Governing Law............................ 31
SECTION 8.10. Counterparts; Effectiveness.............. 31
SECTION 8.11. Limitation on Rights of Others........... 32
SECTION 8.12. Successors and Assigns................... 32
SECTION 8.13. Power of Attorney........................ 32
SECTION 8.14. References to Agreement.................. 33
SECTION 8.15. Paragraph Titles......................... 33
SECTION 8.16. Survival of Representations,
Warranties and Agreements................ 33
</TABLE>
<PAGE>
THIS AGREEMENT OF LIMITED PARTNERSHIP dated as of October
15, 1996, among INTERCONTINENTAL ENERGY CORPORATION, a
Massachusetts corporation having its principal office at 350
Lincoln Place, Hingham, Massachusetts (herein called "IEC"),
---
those persons from time to time designated or required to be
designated on Schedule A as limited partners (collectively with
IEC called the "Partners" and individually called a "Partner").
-------- -------
W I T N E S S E T H:
The Partners previously formed the limited partnership known as
Northeast Energy Associates, A Limited Partnership (the "Partnership"), pursuant
-----------
to the Uniform Limited Partnership Act of the Commonwealth of Massachusetts, by
the filing of a certificate of limited partnership with the Secretary of State
of the Commonwealth of Massachusetts on March 31, 1986 (as subsequently
amended). The Partners hereby agree to continue the Partnership on the terms
and conditions set forth herein and to constitute this Agreement as the entire
partnership agreement of the Partners. The Partners hereby further agree as
follows:
ARTICLE I
Certain Definitions; General Provisions
---------------------------------------
SECTION 1.01. Certain Definitions. As used herein:
--------------------
"Adjusted Capital Account" means, for each Partner and Assignee, such
------------------------
Partner's or Assignee's Capital Account increased by such Partner's or
Assignee's Share of Minimum Gain.
"Affiliate" means, with respect to a Partner, a Person that, directly
---------
or indirectly, controls or is controlled by or is under common control with such
Partner or as to an individual is a spouse of such Partner or related by
consanguinity to the second degree.
<PAGE>
2
"Agreement" means this Agreement of Limited Partnership, as at any
---------
time amended, modified or restated by a writing signed by all the Partners or
signed as permitted by Section 8.04.
"Assignee" means the assignee of all or a portion of the economic
--------
interest in the Partnership held by a Limited Partner.
"Capital Account" means a separate account maintained for each Partner
---------------
and Assignee and adjusted in accordance with Regulations under Section 704 of
the Code.
To the extent consistent with such Regulations, the adjustments to
such accounts shall include the following:
(i) There shall be credited to each Partner's or Assignee's Capital
Account the amount of any cash (which shall not include imputed or actual
interest on any deferred contributions) actually contributed by such
Partner or Assignee to the capital of the Partnership, the fair market
value (without regard to Code Section 7701(g)) of any property contributed
by such Partner or Assignee to the capital of the Partnership, the amount
of Partnership liabilities assumed by the Partner or Assignee or to which
property distributed to the Partner or Assignee was subject and such
Partner's or Assignee's share of the Net Profits and Gross Income of the
Partnership and of any items in the nature of income or gain separately
allocated to the Partners and Assignees; and there shall be charged against
each Partner's or Assignee's Capital Account the amount of all cash
distributions to such Partner or Assignee, the fair market value (without
regard to Code Section 7701(g)) of any property distributed to such Partner
or Assignee by the Partnership, the amount of liabilities of the Partner or
Assignee assumed by the Partnership or to which property contributed by the
Partner or Assignee to the Partnership was subject and such Partner's or
Assignee's share of the Net Losses of the Partnership and of any items in
the nature of losses or deductions separately allocated to the Partners and
Assignees.
(ii) If the Partnership at any time distributes any of its assets
in-kind to any Partner or Assignee, the Capital Account of each Partner and
Assignee shall be adjusted to account for that Partner's or Assignee's
allocable share of the Net Profits, Net Losses or Gross
<PAGE>
3
Income that would have been realized by the Partnership had it sold the
assets that were distributed at their respective fair market values (taking
Code Section 7701(g) into account) immediately prior to their distribution.
(iii) In the event any interest in the Partnership is transferred in
accordance with the terms of this Agreement, the Transferee shall succeed
to the Capital Account of the Transferor to the extent it relates to the
transferred interest.
(iv) If elected by the Partnership, at any time specified in
Treasury Regulation Section 1.704-1(b)(2)(iv)(f), the Capital Account
balance of each Partner or Assignee shall be adjusted to the extent
allowable under such Treasury Regulation to reflect the Partner's and
Assignee's allocable share (as determined under Sections 2.05, 2.06 and
2.07) of the Net Profits, Net Losses or Gross Income that would be realized
by the Partnership if it sold all of its property at its fair market value
(taking Code Section 7701(g) into account) on the day of the adjustment.
"Capital Contributions" means the amount contributed by or on behalf
---------------------
of a Partner or Assignee to the capital of the Partnership prior to the date
hereof or from and after the date hereof pursuant to this Agreement.
"Carrying Value" means, with respect to any asset, the asset's
--------------
adjusted basis for federal income tax purposes; provided, however, that (i) upon
-------- -------
a contribution of an asset in-kind, such asset's Carrying Value and (ii) in the
circumstances described in paragraph (iv) of the definition of "Capital
Account," the Carrying Value of all of the Partnership's assets shall be
adjusted to their respective fair market values and shall thereafter be adjusted
in accordance with the provisions of Treasury Regulation Section 1.704-
1(b)(2)(iv)(g).
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, or any successor statute. References to sections of the Code include
references to all amendatory or successor provisions thereto.
"Distributable Funds" has the meaning specified in Section 5.01(a).
-------------------
<PAGE>
4
"Economic Risk of Loss" means the risk as determined under Treasury
---------------------
Regulation Section 1.752-2 (taking all applicable "grandfathering" rules into
account) that a Partner or Assignee, or person related to a Partner or Assignee,
will suffer an economic loss as a result of the failure of the Partnership to
repay a liability.
"Excess Negative Balance" for a Partner or Assignee means the excess,
-----------------------
if any, of (i) the negative balance in a Partner's or Assignee's Capital Account
after reducing such balance by the net adjustments, allocations and
distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4),
(5) and (6) which, as of the end of the Partnership's taxable year, are
reasonably expected to be made to such Partner or Assignee, over (ii) the sum of
(A) the amount, if any, which the Partner or Assignee is required to restore to
the Partnership upon liquidation of such Partner's or Assignee's interest in the
Partnership (or which is so treated pursuant to Treasury Regulations Section
1.704-1(b)(2)(ii)(c)), (B) the Partner's or Assignee's Share of Minimum Gain and
(C) that portion of any indebtedness of the Partnership (other than Partner
Nonrecourse Debt) with respect to which the Partner or Assignee bears the
Economic Risk of Loss that such indebtedness would not be repaid out of the
Partnership's assets if all of the Partnership's assets were sold at their
respective Carrying Values as of the end of the fiscal year or other period and
the proceeds from the sales together with any amounts described in clause (A),
above, were used to pay the Partnership's liabilities.
"Fiscal Year" has the meaning specified in Section 4.03.
-----------
"General Partner" means IEC.
---------------
"Gross Income" means, for each Fiscal Year or other period, an amount
------------
equal to the Partnership's gross income as determined for federal income tax
purposes for such Fiscal Year or period but computed with the adjustments
specified in paragraphs (i), (ii) and (iii) of the definition of "Net Profits"
and "Net Losses."
"IEC" has the meaning specified in the heading of this Agreement.
---
"IEC Funding" means IEC Funding Corp., a Delaware corporation.
-----------
<PAGE>
5
"Interest" means, with respect to any Partner, such Partner's interest
--------
in the Partnership and shall include a portion of an Interest not previously
divided. The Interest of each Partner as of the date hereof is set forth
opposite such Partner's name on Schedule A hereto.
"Limited Partner" means each of those parties designated in Schedule A
---------------
as a limited partner in the Partnership and any Person that may be admitted from
time to time to the Partnership as a limited partner pursuant to this Agreement
(including a Substitute Limited Partner), all as reflected in the Schedule A
hereto as in effect at the relevant time.
"Majority Limited Partners" means Limited Partners having Interests
-------------------------
aggregating at least a majority of the Interests of all the Limited Partners at
the time.
"Minimum Gain" means the amount determined by computing with respect
------------
to each Nonrecourse Debt of the Partnership, the amount of Gross Income, if any,
that would be realized by the Partnership if it disposed of the property
securing such debt in full satisfaction thereof, and by then aggregating the
amounts so computed. For purposes of determining the amount of such Gross
Income with respect to a liability, the Carrying Value of the asset securing the
liability shall be allocated among all the liabilities that the asset secures in
the manner set forth in Treasury Regulation Section 1.704-2(d)(2).
"Net Profits" and "Net Losses" mean the taxable income or loss, as the
----------- ----------
case may be, for a period as determined in accordance with Code Section 703(a)
computed with the following adjustments:
(i) Items of gain, loss, and deduction shall be computed based upon
the Carrying Values of the Partnership's assets rather than upon the
assets' adjusted bases for federal income tax purposes, and, in particular,
except as provided in Treasury Regulation Section 1.704-3(d), the amount of
any deductions for depreciation or amortization with respect to an asset
for a period shall equal such asset's Carrying Value multiplied by a
fraction the numerator of which shall be the amount of depreciation or
amortization with respect to such asset allowable for federal income tax
purposes for such period and the denominator of which shall be such asset's
adjusted basis;
<PAGE>
6
(ii) Any tax-exempt income received by the Partnership shall be
included as an item of gross income;
(iii) The amount of any adjustments to the Carrying Values of any
assets of the Partnership pursuant to Code Section 743 shall not be taken
into account;
(iv) Any expenditure of the Partnership described in Code Section
705(a)(2)(B) (including any expenditures treated as being described in
Section 705(a)(2)(B) pursuant to Treasury Regulations under Code Section
704(b)) shall be treated as a deductible expense; and
(v) The amount of Gross Income and Nonrecourse Deductions
specifically allocated to any Partners or Assignees pursuant to Section
2.06 or 2.07(a) shall not be included in the computation.
"NJEA" means North Jersey Energy Associates, A Limited Partnership, a
----
New Jersey limited partnership.
"Nonrecourse Debt" means any Partnership liability to the extent that
----------------
the liability is nonrecourse for purposes of Treasury Regulation Section 1.1001-
2.
"Nonrecourse Deductions" for a taxable year means deductions funded by
----------------------
Nonrecourse Debt (as determined under Treasury Regulation Sections 1.704-2(c)
and 1.704-2(i)(2)) for such year and are generally equal to the excess, if any,
of (i) the net increase in Minimum Gain during such year over (ii) the sum of
(A) the aggregate distributions of proceeds from Nonrecourse Debts attributable
to increases in Minimum Gain during such year and (B) increases in Minimum Gain
during such year attributable to conversions of liabilities into Nonrecourse
Debts.
"Notices" has the meaning specified in Section 8.01(a).
-------
"Partner" and "Partners" have the meanings specified in the heading of
------- --------
this Agreement.
"Partner Lender" has the meaning specified in Section 2.03(b).
--------------
<PAGE>
7
"Partner Loan" has the meaning specified in Section 2.03(b).
------------
"Partner Nonrecourse Debt" means any Nonrecourse Debt to the extent
------------------------
that a Partner or Assignee bears the Economic Risk of Loss associated with the
debt.
"Partnership" has the meaning specified in the introductory paragraph
-----------
of this Agreement.
"Percentage Interest" means the economic interest of each Partner and
-------------------
Assignee in the Partnership (expressed as a percentage). The Percentage
Interest of each Partner and Assignee as of the date hereof is set forth
opposite such Partner's or Assignee's name on Schedule A hereto.
"Person" means an individual, corporation, limited liability company,
------
association, partnership, trust or unincorporated organization.
"Project" means, collectively, the Partnership's cogeneration facility
-------
and its carbon dioxide plant and all of their components located in Bellingham,
Massachusetts, all rights, permissions, equipment and property related thereto
and all contract rights used or useful for the operation of such facility and
plant.
"Project Financing Agreements" means the agreements entered into by
----------------------------
the Partnership from time to time in connection with the financing of the
Project or any part thereof, including any instruments evidencing indebtedness
issued or guaranteed by the Partnership thereunder and any agreements granting
liens or security interests on any assets of the Partnership to secure
obligations thereunder. The Project Financing Agreements include (i) the Trust
Indenture dated as of November 15, 1994, among IEC Funding, the Partnership,
NJEA and State Street Bank and Trust Company, as Trustee, (ii) each of the
"Credit Documents" and the "Bellingham Security Documents" (as defined in such
Trust Indenture) to which the Partnership is a party and (iii) any agreements
entered into by the Partnership in connection with the replacement, refinancing
or restructuring of any of the foregoing.
"Roy Limited Partner" means any of John R. Roy, Mary L. Roy, Jock R.
-------------------
Roy, Stephen B. Roy, Peter A. Roy, Ellen S. Roy or Jane L. Roy and each Limited
Partner who is an Affiliate of any thereof.
<PAGE>
8
"Share of Minimum Gain" means, for each Partner and Assignee, the sum
---------------------
of such Partner's or Assignee's share of Minimum Gain attributable to
Nonrecourse Debt other than Partner Nonrecourse Debt (computed in accordance
with Treasury Regulation Section 1.704-2(g)) and such Partner's or Assignee's
share of Minimum Gain attributable to Partner Nonrecourse Debt (computed in
accordance with Treasury Regulation Section 1.704-2(i)(5)).
"Substitute Limited Partner" means a Transferee of a Limited Partner's
--------------------------
or Assignee's interest in the Partnership who is admitted to the Partnership as
a Limited Partner as provided in Section 6.02(d).
"Transfer" means (i) any sale, conveyance, gift, bequest, assignment
--------
by way of sale or other disposition, (ii) any hypothecation, mortgage, pledge,
assignment by way of security or (iii) any creation of any encumbrance of any
nature (and whether or not to secure an obligation) of, in each case, an
Interest and shall include a similar act in respect of rights to profits, losses
and cash distributions (or Percentage Interest) deriving from an Interest.
"Transferor" and "Transferee" shall have corresponding meanings.
- ----------- ----------
"Uniform Act" means the Uniform Limited Partnership Act of the
------------
Commonwealth of Massachusetts.
References in the singular shall include the plural and vice versa and
references to the neuter gender shall include the masculine and feminine
genders. The terms "including", "include" and "includes" as used herein shall
be deemed to be followed by the words "without limitation". References to this
Agreement or to any other agreement or document, including any Project Financing
Agreement, shall include the same as amended, supplemented, modified or
otherwise changed from time to time. References to Schedule A shall be
construed to be references to said Schedule A as from time to time changed or
required to be changed as provided for herein.
SECTION 1.02. Name. The name of the Partnership shall continue to be
-----
"Northeast Energy Associates, A Limited Partnership". The General Partner may
at any time change the name of the Partnership and shall give notice of any such
change to the Limited Partners.
<PAGE>
9
SECTION 1.03. Principal Place of Business. The Partnership's
----------------------------
principal place of business and the office where the books of the Partnership
will be maintained shall be at 350 Lincoln Place, Hingham, MA 02043, or at such
other place within the continental United States as the General Partner shall
designate. The General Partner shall give notice of any change of such
principal place of business to the Limited Partners.
SECTION 1.04. Purposes. The purposes of the Partnership shall be to
---------
develop, finance, construct, own, manage, maintain, operate, encumber, exchange,
dispose of and otherwise deal with the Project or any part thereof, to contract
with third parties to construct, maintain or operate the Project and to sell the
electricity and steam produced by the Project. The Partnership shall have the
power to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment of
such purposes, and for the protection and benefit of the Project.
SECTION 1.05. Duration. The Partnership shall continue until
---------
dissolved pursuant to Section 7.01.
SECTION 1.06. General Partner. IEC shall be the General Partner of
----------------
the Partnership. The management of the business and affairs of the Partnership
shall be conducted as provided in Article III.
SECTION 1.07. Limited Partners. The Partners identified or required
-----------------
to be identified from time to time in Schedule A as Limited Partners shall be
the Limited Partners of the Partnership. No Limited Partner, in its capacity as
a Limited Partner, shall participate in the management of the Partnership, or
have any authority or right to transact any business or act for or bind the
Partnership in any respect, and no Limited Partner shall ever be (i) personally
liable for any part of the debts or other obligations of the Partnership except
for any liability expressly assumed in writing by it or (ii) obligated to make
contributions to the Partnership in excess of those, if any, required to be made
by it pursuant to this Agreement.
SECTION 1.08. Assignees. (a) The Assignees identified or required
----------
to be identified from time to time in Schedule A as Assignees are assignees of
Interests of Limited Partners with respect solely to economic interests in the
Partnership. No Assignee, in its capacity as an
<PAGE>
10
Assignee, shall participate in the management of the Partnership, have any
authority or right to transact any business or act for or on behalf of the
Partnership in any respect and shall have none of the rights and privileges
otherwise available to Limited Partners other than to share in the income, gain,
loss, deductions, tax credits and distributions of the Partnership. In
addition, no Assignee shall ever be (i) personally liable for any part of the
debts or obligations of the Partnership except for any liability expressly
assumed in writing by it or (ii) obligated to make contributions to the
Partnership in excess of those, if any, required to be made by it pursuant to
this Agreement.
(b) Each Partner hereby acknowledges and agrees that (i) the Persons
identified in Schedule A as of the date hereof as Assignees are the only
Assignees existing at the date hereof and (ii) the percentage set forth in
Schedule A as of the date hereof opposite the name of such Partner in the
"Percentage Interest" column is the correct Percentage Interest for such Partner
as of the date hereof (giving effect to the dilution of the economic interests
in the Partnership represented by such Partner's Interest to give effect to the
Percentage Interests of the Assignees).
ARTICLE II
Capital and Interests in the Partnership;
-----------------------------------------
Admission of Additional Partners; Financing; Allocations
--------------------------------------------------------
SECTION 2.01. Initial Capital Contributions. On or before the date
------------------------------
hereof Partners (i) have made cash contributions to the capital of the
Partnership in the aggregate amount of $10,000 or (ii) in the case of some of
them, previously have contributed various services to the Partnership. A pro
rata share of any cash contributions by the Limited Partners shall be treated as
having been transferred to the Assignees in accordance with their respective
Percentage Interests.
SECTION 2.02. Admission of Additional Partners. (a) The General
---------------------------------
Partner shall have the right to admit additional Limited Partners to the
Partnership from time to time. The Interest and Percentage Interest of each
such additional Limited Partner (other than a Substitute Limited Partner) shall
be as determined by the General Partner. It is understood that the General
Partner may agree to a
<PAGE>
11
priority return of any Capital Contributions made by a Partner after the date
hereof, and/or a priority return thereon, without the approval of any Limited
Partner or Assignee. If any such additional Limited Partner is admitted to the
Partnership, the Interest of each other Limited Partner (as in effect prior to
such admission) and the Percentage Interest of each other Limited Partner and
Assignee shall be reduced ratably to reflect the Interest and Percentage
Interest of such additional Limited Partner. The General Partner also shall
have the right to admit Substitute Limited Partners pursuant to Section 6.02.
(b) The General Partner shall have the right to admit an additional
General Partner to the Partnership with the prior written consent of the
Majority Limited Partners. If any Person admitted as an additional General
Partner is at the time a Limited Partner, such Person shall be allocated as a
General Partner all or a portion of the Interest and Percentage Interest
previously held by such Partner as a Limited Partner, as agreed between such
Person and the General Partner. If any Person admitted as an additional General
Partner is not at the time a Limited Partner, the Interest and Percentage
Interest of such Person as General Partner shall be determined in the same
manner as provided in paragraph (a) above with respect to additional Limited
Partners, and the Interest of each Limited Partner and the Percentage Interest
of each Limited Partner and Assignee shall be reduced ratably to reflect the
Interest and Percentage Interest so determined.
(c) Each additional Partner admitted to the Partnership, including
any Substitute Limited Partner, shall agree to be bound by the provisions of
this Agreement pursuant to an instrument satisfactory to the General Partner.
Upon the admission of any such Partner, (i) Schedule A shall be deemed amended
to reflect such admission, (ii) the General Partner shall amend the certificate
of limited partnership of the Partnership in accordance with the Uniform Act to
reflect such admission, and (iii) the General Partner shall notify the Limited
Partners of such admission.
SECTION 2.03. Financing of the Partnership; Partner Loans. (a) In
--------------------------------------------
addition to the Capital Contributions provided for in Section 2.01, the money to
finance the Project and otherwise to finance the business of the Partnership and
any special distributions of cash to the Partners and Assignees shall be derived
from loans to or
<PAGE>
12
revenues of the Partnership. If additional capital is needed by the Partnership
for any reason, as determined by the General Partner from time to time, then,
after the amount of such needed additional capital shall have been determined by
the General Partner, the Partnership will attempt to borrow such amount of
additional capital from a third party or parties on such terms as shall be
acceptable to the General Partner.
(b) Any Partner may, but shall not be required to, loan funds to the
Partnership (or cause an Affiliate of such Partner to loan funds to the
Partnership) on such terms as shall be approved by the General Partner and the
Partner (or Affiliate thereof) advancing such loan (any such loan being referred
to herein as a "Partner Loan" and the lender of any such Partner Loan being
------------
referred to herein as "Partner Lender"). If the General Partner, any Roy
--------------
Limited Partner or any Affiliate thereof proposes to make a Partner Loan, then
the Partners agree that the terms of such Partner Loan shall be considered fair
and reasonable and shall not require any consent or approval of the Limited
Partners if:
(i) each Limited Partner is notified of the terms of such Partner
Loan and is afforded an opportunity to participate in such Partner Loan as
a Partner Lender ratably in accordance with its Interest (which opportunity
may be limited to a period, not less than 15 days, following notice of such
opportunity, during which Limited Partners must elect whether to
participate); or
(ii) the interest rate applicable to such Partner Loan does not
exceed the greatest of (x) the greatest interest rate then applicable to
any indebtedness of the Partnership plus 2% per annum, (y) the prime rate
of The Chase Manhattan Bank, from time to time in effect, plus 2% per
annum, and (z) the greatest interest offered to the Partnership by any bank
or other financial institution to provide unsecured subordinated loans to
the Partnership, as quoted to the General Partner within one year prior to
the date such Partner Loan is to be advanced, and in either case the terms
of such Partner Loan provide that repayment by the Partnership shall be
made only from the net proceeds of any refinancing thereof or from funds
that otherwise would be Distributable Funds, as and when available, prior
to any distributions to Partners or Assignees, or upon dissolution of the
Partnership; or
<PAGE>
13
(iii) the aggregate amount of such Partner Loan is less than
$50,000,000 and the interest rate applicable thereto does not exceed the
greater of (x) the greatest interest rate then applicable to any
indebtedness of the Partnership plus 2% per annum, and (y) the prime rate
of The Chase Manhattan Bank, from time to time in effect, plus 2% per
annum.
(c) This Section 2.03 shall not be construed to prohibit additional
Capital Contributions to the Partnership that are made on terms approved by the
General Partner and the contributing Partner, but such Capital Contributions
shall not be required (except as expressly provided in Section 7.02(c) with
respect to the General Partner).
SECTION 2.04. Interest on Capital Contribution. No interest shall be
---------------------------------
paid by the Partnership on any Capital Contribution.
SECTION 2.05. General Allocations of Net Profits and Net Losses. (a)
-------------------------------------------------
Except as provided in Sections 2.06 and 2.07 below (which shall be applied
first), any Net Profits of the Partnership shall be allocated among the Partners
and Assignees as follows:
(i) First, in such manner and in such amount as is necessary so
that the respective Adjusted Capital Account balances of the Partners and
Assignees are in the ratio of their respective Percentage Interests; and
(ii) The balance, if any, to the Partners and Assignees in
proportion to their respective Percentage Interests.
(b) Except as provided in Sections 2.06 and 2.07 below (which shall
be applied first), any Net Losses of the Partnership shall be allocated among
the Partners and Assignees as follows:
(i) First, in such manner and in such amount as is necessary so
that the respective Adjusted Capital Account balances of the Partners and
Assignees are in the ratio of their respective Percentage Interests; and
(ii) The balance, if any, to the Partners and Assignees in
proportion to their respective Percentage Interests.
<PAGE>
14
(c) Allocations of Net Profits and Net Losses provided for in this
Section 2.05 shall be made as of the end of the Fiscal Year or shorter relevant
period of the Partnership.
SECTION 2.06. Allocations of Nonrecourse Deductions and Minimum Gain.
------------------------------------------------------
Notwithstanding the provisions of Section 2.05 above, the following allocations
of Gross Income and Nonrecourse Deductions shall be made in the following order
of priority:
(a) If in any year there is a net decrease in the amount of Minimum
Gain attributable to either (i) Nonrecourse Debt that is not Partner Nonrecourse
Debt or (ii) Partner Nonrecourse Debt, then each Partner and Assignee shall
first be allocated items of Gross Income for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's or Assignee's share of
the net decrease in such Minimum Gain (determined in accordance with Treasury
Regulation Sections 1.704-2(g)(2) and 1.704-2(i)(5)) to the minimum extent
required by, and in the manner specified in, Treasury Regulation Sections 1.704-
2(f) and 1.704-2(i)(4).
(b) All Nonrecourse Deductions of the Partnership for any year other
than Nonrecourse Deductions attributable to Partner Nonrecourse Debt shall be
allocated to the Partners and Assignees in proportion to their respective
Percentage Interests.
(c) All Nonrecourse Deductions of the Partnership for any year
attributable to Partner Nonrecourse Debt shall be allocated to the Partners
and/or Assignees who bear the Economic Risk of Loss with respect to the debt.
SECTION 2.07. Overriding Allocations of Net Profits and Net Losses.
-----------------------------------------------------
Notwithstanding the provisions of Section 2.05 above, but subject to the
provisions of Section 2.06 above, the following allocations of Gross Income, Net
Profits and Net Losses and items thereof shall be made:
(a) If, during any year a Partner or Assignee receives any
adjustment, allocation or distribution described in Treasury Regulation Section
1.704-1(b) (2)(ii)(d)(4), or (5) or (6) or any other distribution, and, as a
result of such adjustment, allocation or distribution, such Partner's or
Assignee's Capital Account has an Excess
<PAGE>
15
Negative Balance, then items of Gross Income for such year (and, if necessary,
subsequent years) shall first be allocated to such Partner or Assignee in an
amount equal to such Partner's or Assignee's Excess Negative Balance.
(b) In no event shall Net Losses of the Partnership be allocated to a
Partner or Assignee if such allocation would cause or increase an Excess
Negative Balance in such Partner's Capital Account.
(c) Except to the extent necessary to comply with Sections 2.06(a),
2.07(a) and 2.07(b) hereof, the interest of the General Partner in each item of
Partnership income, gain, loss, deduction or credit will be equal to at least
one percent (1%) of each of those items at all times during the existence of the
Partnership.
(d) Except as otherwise provided herein or as required by Code
Section 704, for tax purposes, all items of income, gain, loss, deduction or
credit shall be allocated to the Partners and Assignees in the same manner as
are Net Profits and Net Losses; provided, however, that if the Carrying Value of
-------- -------
any property of the Partnership differs from its adjusted basis for tax
purposes, then items of income, gain, loss, deduction or credit related to such
property for tax purposes shall be allocated among the Partners and Assignees so
as to take account of the variation between the adjusted basis of the property
for tax purposes and its Carrying Value in the manner provided for under Code
Section 704(c).
SECTION 2.08. Allocations Upon Transfer or Admission. In the event
---------------------------------------
that a Partner or Assignee acquires an interest in the Partnership either by
transfer from another Partner or Assignee or by acquisition from the
Partnership, the Partnership shall close its books as of the date of the
acquisition and Net Profits, Net Losses, Gross Income, Nonrecourse Deductions
and items thereof computed for the portion of the year ending on the date of the
acquisition shall be allocated among the Partners and Assignees without regard
to such acquisition, and Net Profits, Net Losses, Gross Income, Nonrecourse
Deductions and items thereof computed for the portion of the year commencing on
the day following the date of the acquisition shall be allocated among the
Partners and Assignees taking into account such acquisition. For purposes of
determining the date on which the acquisition is deemed to occur, the
Partnership may make use of any convention allowable under
<PAGE>
16
Section 706(d) of the Code as may be elected by the General Partner in its
absolute discretion.
SECTION 2.09. Withdrawal of Capital; Limitation on Distributions,
--------------------------------- -----------------
Priorities. No Partner or Assignee shall be entitled to withdraw any part of
- -----------
its Capital Contributions to, or to receive any distributions from, the
Partnership except as provided in Section 5.01 and Section 7.02. No Partner or
Assignee shall be entitled to demand or receive any property other than cash
from the Partnership. Except as expressly provided in this Agreement, no
Partner or Assignee will have a priority over any other Partner or Assignee as
to any distributions from the Partnership.
ARTICLE III
Management
----------
SECTION 3.01. Management. Subject to the terms, conditions and
-----------
limitations of this Agreement, the General Partner shall have the exclusive
authority and full discretion to manage the business of the Partnership.
SECTION 3.02. Authority of the General Partner. Subject to the terms
---------------------------------
and conditions set forth herein, the General Partner shall have all rights and
powers required by, or appropriate or incidental to, the management and control
of the business and affairs of the Partnership in furtherance of the purposes of
the Partnership, and shall possess and may exercise all the rights and powers of
a general partner as provided in the Uniform Act, including the right and power
to take any of the following actions:
(a) execute any and all agreements, contracts, documents, deeds,
certificates, bills of sale and other instruments deemed by the General
Partner to be necessary and appropriate in connection with the business and
affairs of the Partnership;
(b) acquire or lease as lessee real and personal property and
interests therein and dispose of or lease as lessor real or personal
property or interests therein;
(c) protect and preserve the Partnership's title and interest in the
assets of the Partnership, collect
<PAGE>
17
all amounts due the Partnership, and otherwise claim all rights of the
Partnership, and in that connection retain counsel and institute and defend
suits and proceedings in the name and on behalf of the Partnership;
(d) engage in financing transactions on behalf of the Partnership,
including (i) issuance of debt obligations and incurrence of indebtedness
on behalf of the Partnership, including refinancings and successive
refinancings of indebtedness under the Project Financing Agreements and, in
connection therewith or to secure performance by the Partnership of any of
its obligations, to mortgage, pledge, hypothecate or otherwise grant
security interests in assets of the Partnership and (ii) lease financings,
including sale-leaseback transactions, with respect to assets of the
Partnership (which may include all or substantially all the assets of the
Partnership);
(e) pay all debts and obligations of the Partnership, including
expenses of the Partnership, to the extent that funds of the Partnership
are available therefor and make all distributions to the Partners in
accordance with the provisions of this Agreement;
(f) engage in joint transactions for the mutual benefit of the
Partnership and NJEA, including joint fuel procurement and transportation
arrangements, fuel hedges, power marketing and financing arrangements, it
being understood and agreed that indebtedness and other obligations may be
incurred jointly with NJEA or through IEC Funding and the Partnership may
guarantee indebtedness and other obligations of NJEA or IEC Funding and may
grant liens and security interests on assets of the Partnership to secure
indebtedness and other obligations of NJEA or IEC Funding pursuant to the
Project Financing Agreements or otherwise;
(g) invest surplus cash;
(h) represent the Partnership before Federal, state and municipal
authorities and in arbitration proceedings and pay, collect, compromise and
otherwise settle claims of, or against, the Partnership;
(i) select depreciation and accounting methods for book and income
tax purposes (which decisions may be
<PAGE>
18
different for each such purpose) to the extent not otherwise provided
herein;
(j) engage or hire on behalf of or for the benefit of the Partnership
independent accountants, architects, lawyers, engineers, management,
administrative and clerical help, fuel management, and steam sales person
nel, and to procure such other assistance and services, as may seem proper
in accordance with the purposes con templated hereby, and pay therefor such
remuneration as the General Partner may determine to be reasonable and
appropriate in the circumstances; and
(k) do and perform any acts and exercise all rights, powers and
privileges not referred to in this Section 3.02 that the General Partner
shall deem necessary to, in connection with, or incidental to the
accomplishment of the Partnership purposes, as may be lawfully carried on
or performed by a limited partnership under the laws of the Commonwealth of
Massachusetts.
SECTION 3.03. Restrictions on the Authority of the General Partner.
-------------------------------- --------------------
Without limiting the generality of any other provision of this Agreement,
without the written consent of the Majority Limited Partners, the General
Partner shall not:
(a) do any act in contravention of this Agreement;
(b) do any act which would make it impossible to carry on the
ordinary business of the Partnership (other than as provided in Article VII
hereof);
(c) admit any Person as a Partner, except as provided in Section
2.02;
(d) elect to dissolve the Partnership (except in accordance with, and
under the circumstances described in, Article VII);
(e) lease, sell or otherwise transfer or dispose of all or
substantially all the assets of the Partnership except for mortgages,
security interests and sale-leaseback transactions permitted by Section
3.02; or
<PAGE>
19
(f) engage in any transaction with the General Partner or with one or
more Roy Limited Partners or an Affiliate of any of them except (i) Partner
Loans that do not require approval of the Limited Partners as provided in
Section 2.03(b), (ii) payments contemplated by Section 3.04, (iii)
admission as a Limited Partner with preferential rights as to distributions
of any additional Capital Contributions contributed after the date hereof
plus a return thereon not exceeding the greatest interest rate that would
be permitted with respect to a Partner Loan pursuant to Section 2.03(b),
and (iv) other transactions (which may include Partner Loans and payment of
fees or other compensation for services) on terms which are at least as
favorable to the Partnership as terms which are available from a Person not
the General Partner, a Roy Limited Partner or any such Affiliate.
SECTION 3.04. Compensation, Reimbursement and Fees. (a) The
-------------------------------------
Partners hereby ratify and approve all compensation paid to the General Partner
prior to the date hereof.
(b) For each calendar year, the General Partner shall be compensated
by the Partnership for its services by payment to the General Partner of a
reasonable annual management fee. Without limiting the generality of the
foregoing (and without prejudice to the right of the General Partner to increase
such management fee), it is understood and agreed that the annual management fee
provided for in the Project Financing Agreements in effect on the date hereof,
in the amount of $3,500,000 per annum (such amount to be adjusted to reflect
changes from January 1, 1994, in the Gross National Product Implicit Price
Deflator as published from time to time in the United States Department of
Commerce Bureau of Economic Analysis publication entitled "Survey of Current
Business" or, if not so published, such other index as shall be used for similar
purposes under the Project Financing Agreements), shall be deemed reasonable.
Such management fee shall be payable monthly and, if not paid for any reason
(including as a result of insufficient funds or any restrictions under the
Project Financing Agreements), shall accrue interest until paid at an interest
rate equal to the prime rate of The Chase Manhattan Bank from time to time in
effect. Such management fee shall be in addition to other amounts payable to
the General Partner hereunder.
<PAGE>
20
(c) The General Partner shall be reimbursed by the Partnership for
any third party costs, to the extent reasonably allocable to the Project, the
Partnership or IEC Funding, including rent and any independent legal, consulting
and accounting fees and expenses.
(d) The General Partner shall be reimbursed by the Partnership for
the General Partner's general and administrative expenses, to the extent
reasonably allocable to the Project, the Partnership or IEC Funding.
(e) Subject to any restrictions in the Project Financing Agreements,
the General Partner shall be reimbursed by the Partnership for compensation
(including salary and related benefits) of individuals, to the extent reasonably
allocable to the Project, the Partnership or IEC Funding.
(f) It is understood that the annual management fee referred to in
paragraph (b) above is solely to compensate the General Partner for services in
the ordinary course. The General Partner also shall be entitled to reasonable
compensation for services outside the ordinary course, including services in
connection with any financing, refinancing, sale-leaseback or other transaction
on behalf of the Partnership.
SECTION 3.05. Limitation of Liability and Indemnification. (a) The
--------------------------------------------
General Partner shall not be liable, responsible or accountable in damages or
otherwise to any of the Partners or Assignees or the Partnership for or on
account of any act performed by the General Partner and believed by it in good
faith to be within the scope of the authority conferred by this Agreement, or
any failure or refusal to perform any acts except those expressly required by
this Agreement, regardless of whether any claim in respect of any such act or
failure to act is based on contract, tort (including negligence) or otherwise,
except for bad faith, wilful misconduct or gross negligence. For purposes of
this provision, any action taken or omitted on written advice of counsel for the
Partnership or the General Partner (which counsel may be an employee of the
General Partner) shall be deemed to have been taken or omitted in good faith and
without wilful misconduct or gross
<PAGE>
21
negligence. Unless specifically provided in this Agreement and except as
provided by law, the General Partner shall have no liability as a General
Partner for the unauthorized acts or omissions of any other Partner, any
Assignee or any Affiliate of a Partner or Assignee.
(b) The Partnership, its receiver or its trustee, shall indemnify the
General Partner against, and save the General Partner harmless from, any loss,
liability, damage or expense (including all liabilities under Federal and state
securities laws) incurred in respect of any claim, litigation or other
proceeding brought or asserted against the General Partner arising out of or
related to any act or omission of the General Partner in connection with the
business or activities of the Partnership; provided that such act or omission
--------
was believed by the General Partner in good faith to be within the scope of its
authority under this Agreement or was undertaken, not undertaken or made upon
written advice of counsel for the Partnership or the General Partner (which
counsel may be an employee of the General Partner). This indemnification
includes the payment, upon request by the General Partner, of all attorney's
fees and other expenses incurred by the General Partner in connection with the
defense of any such claim made against it, including, without limitation, any
claim asserted by any Limited Partner or Assignee individually, as a class
action or as a Partnership derivative action, and costs of settlement of any
claim made against it. The indemnification described in this Section 3.05 shall
not be available to the General Partner if a court, in a final nonappealable
decision, determines that the claim arose because of the General Partner's
wilful misconduct or gross negligence.
(c) The General Partner may purchase directors' and officers'
insurance and obtain reimbursement for the premiums therefor from the
Partnership.
(d) The benefits of this Section 3.05 shall apply to the
shareholders, directors, officers, employees, agents and Affiliates of the
General Partner to the same extent as to the General Partner.
SECTION 3.06. Other Business Ventures. The General Partner and its
------------------------
Affiliates may engage, directly or indirectly, in other business ventures of
every nature and description, including ownership, development, operation and
management of other cogeneration projects in addition to the
<PAGE>
22
Project (even if such projects compete with the Project), and neither the
Partnership nor any Partner or Assignee shall have any claim or rights hereunder
in or to any such other ventures or the income or profits derived therefrom.
ARTICLE IV
Books; Elections; Budgets; Fiscal Year
--------------------------------------
SECTION 4.01. Administrative Services, Books, Records and Reports.
------------------------------ --------------------
(a) The General Partner, or a Person or Persons designated by the General
Partner, shall cause to be performed all general and administrative services on
behalf of the Partnership in order to assure that complete and accurate books
and records of the Partnership are maintained at the Partnership's principal
place of business showing the name, address and Interest of each Partner, all
receipts and expenditures, assets and liabilities, profits and losses of the
Partnership, and all other records neces sary for recording the Partnership's
business and affairs.
(b) Promptly following any modification of this Agreement made
pursuant to Section 8.04 the General Partner will furnish to each other Partner
and Assignee notice thereof.
SECTION 4.02. Tax Matters. The General Partner shall be the Tax
------------
Matters Partner (as defined in Section 6231(a)(7) of the Code) of the
Partnership. The General Partner shall, in its discretion, make all tax
elections on behalf of the Partnership, except that if any Partner or Assignee
requests, the Partnership shall make an election under Section 754 of the Code
at such Partner's or Assignee's expense (which shall be prepaid as a condition
to such election, in the discretion of the General Partner). The General
Partner shall cause to be prepared, shall sign and shall timely submit all tax
returns required to be submitted by the Partnership, at the Partnership's
expense. The General Partner shall cooperate with and monitor any Federal or
state government taxing authority in any audit that such taxing authority may
conduct of the Partnership's books, records or other information or documents
and shall take all other action to be taken by it as contemplated by Sections
6221-6232 of the Code.
<PAGE>
23
SECTION 4.03. Fiscal Year. The fiscal year of the Partnership
------------
(herein called the "Fiscal Year") shall be the calendar year.
-----------
ARTICLE V
Distributions of Distributable Funds
------------------------------------
SECTION 5.01. Distributions of Distributable Funds. (a) The General
-------------------------------------
Partner shall from time to time determine the amount of the Partnership's cash
available for distribution to the Partners and Assignees (herein called
"Distributable Funds"). Distributable Funds shall be determined in the
- --------------------
reasonable discretion of the General Partner based upon the amount of cash
received by the Partnership (including proceeds of borrowings, if any) after (i)
payment of or provision for all operating costs and expenses (excluding
depreciation and other non-cash expenses), any capital expenditures, principal
of and interest on any debts and other obligations of the Partnership (including
any optional prepayment thereof at the General Partner's discretion, as well as
mandatory payments), amounts payable to the General Partner pursuant to this
Agreement and any other liabilities of the Partnership and (ii) provision for
any reserves, deposits or collateral security required to be maintained pursuant
to any Project Financing Agreement or any other contract binding upon the
Partnership and any other reserves determined by the General Partner to be
reasonable or prudent, including reserves for working capital purposes or for
payment of any liabilities (contingent or otherwise) of the Partnership. The
determination of Distributable Funds also shall be subject to any restrictions
and limitations imposed by any Project Financing Agreement or any other contract
binding upon the Partnership.
(b) Except as provided in Section 7.02 hereof and except as provided
in any amendment or modification to this Agreement providing for distributions
on a priority basis, Distributable Funds determined as provided above shall be
distributed to the Partners and Assignees ratably in accordance with their
respective Percentage Interests as of the date of distribution. The date of any
such distribution shall be determined by the General Partner subject to any
restrictions and limitations imposed by any Project Financing Agreement or any
other contract binding upon the Partnership.
<PAGE>
24
(c) This Section 5.01 shall not apply to distributions upon
dissolution of the Partnership, which shall be made as provided in Article VII.
ARTICLE VI
Transfers of Partnership Interests
----------------------------------
SECTION 6.01. Transfer Restrictions. A Transfer shall not be
----------------------
permitted without the prior written consent of the General Partner, which
consent may be withheld in the discretion of the General Partner. If the
General Partner consents to a Transfer, the General Partner may impose
conditions upon such Transfer, including conditions that:
(a) the Transferee executes and delivers to the General Partner:
(i) an instrument reasonably satisfactory to the General Partner
pursuant to which such Transferee assumes all the obligations of the
relevant Transferor with respect to the Interest and/or Percentage Interest
transferred and agrees to be bound by the terms of this Agreement (or, in
the case of Transfers described in clauses (ii) and (iii) of the definition
of that term, a similar instrument that requires that such obligations be
assumed and such agreement be made following enforcement of the relevant
hypothecation, mortgage, pledge, assignment, security interest or other
encumbrance); and
(ii) such additional instruments and documents as shall be reasonably
required by the General Partner;
(b) the Transferor delivers to the General Partner an opinion of
counsel (reasonably satisfactory to the General Partner) that such Transfer will
not:
(i) result, directly or indirectly, in the termination of the
Partnership for Federal income tax purposes;
(ii) result in the violation of the Securities Act of 1933 or any
other applicable Federal or state securities laws;
<PAGE>
25
(iii) be a violation of or an event of default under, or result in an
acceleration of any indebtedness under, any Project Financing Agreement or
other note, mortgage, indenture, loan agreement or similar instrument or
document to which the Partnership is a party; or
(iv) result in or create a prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended from time to time, or
result in the holder of an Interest or the assets of the Partnership being
subject to the provisions of such statute; and
(c) the General Partner is furnished with evidence satisfactory to
it that all transaction expenses for which the Transferor is or may be liable
and any expenses incurred by the Partnership in connection with such Transfer
(including preparation of any part-year tax returns and related matters) have
been paid or reimbursed in full.
The General Partner may waive all or any of the conditions described
above. In addition, the conditions described above shall not apply to any
Transfer of the Interest of the General Partner pursuant to any pledge or
security interest granted to secure obligations under any Project Financing
Agreement.
SECTION 6.02. Consequences of Transfer. (a) Any Transfer in
-------------------------
contravention of this Agreement shall be void and ineffective and shall not bind
or be recognized by the Partnership.
(b) Any Limited Partner who Transfers all his Interest (other than
pursuant to a Transfer described in clause (ii) or (iii) of the definition of
that term, which Transfer has not yet become effective to divest the Transferor
of his Interest) shall cease to be a Limited Partner and shall no longer have
the rights and privileges of a Limited Partner except that, unless and until the
Transferee is admitted as a Substitute Limited Partner as provided below, the
Transferor shall retain the statutory obligations of an assignor limited partner
under the Uniform Act.
(c) A Transferee of a Limited Partner's Interest who does not become
a Substitute Limited Partner as provided below shall be an Assignee. An
Assignee who desires to make a further Transfer of his Percentage Interest shall
be
<PAGE>
26
subject to all the provisions of this Article VI to the same extent as though
such Assignee were a Limited Partner. Unless and until such Assignee becomes a
Substitute Limited Partner, such Assignee's only right or interest under this
Agreement shall be as expressly provided herein for an Assignee.
(d) A Transferee of a Limited Partner's Interest shall become a
Substitute Limited Partner only with the prior written consent of the General
Partner, which consent may be withheld in the discretion of the General Partner;
provided that any such Transferee that was a Limited Partner prior to the
- --------
Transfer shall become a Substitute Limited Partner with respect to the
Transferred Interest without the necessity of such consent. If the General
Partner grants such consent, such Transferee shall become a Substitute Limited
Partner effective upon reflection by the General Partner of such Transferee as a
Limited Partner on the books and records of the Partnership.
SECTION 6.03. Mandatory Transfer. (a) If the General Partner and
-------------------
the Majority Limited Partners approve a sale or other disposition of all, but
not less than all, of the Interests in the Partnership, then all the Limited
Partners shall be required to Transfer their respective Interests in connection
with such sale or other disposition. Each Limited Partner agrees to cooperate
with the General Partner in connection with any such sale or disposition and to
execute and deliver such instruments and documents as shall be reasonably
required by the General Partner in connection therewith, including a bill of
sale or other appropriate instrument in order to effect such sale or other
disposition. Each Limited Partner also agrees to provide such representations,
warranties, agreements and indemnities in connection with any such sale or
disposition as shall be approved by the Majority Limited Partners to be provided
by the Limited Partners generally, which may include representations and
warranties with respect to the ownership of the Interest being sold or disposed
of and the Transfer thereof free and clear of liens and other encumbrances. The
proceeds of any sale or other disposition of all the Interests in the
Partnership pursuant to this Section shall be paid to the General Partner and,
after deducting any fees, expenses or reasonable reserves, the net proceeds
shall be distributed to the Partners and Assignees in the respective amounts
that the Partners and Assignees would have received had the Partnership sold all
of its assets for an amount equal to the sum of (i) the aggregate amount of
<PAGE>
27
net proceeds received from the sale or other disposition of all of the Interests
in the Partnership and (ii) the aggregate amount of the Partnership's
liabilities and the Partnership had then liquidated in accordance with Section
7.02(a) hereof.
(b) Any sale or disposition of all the Interests in the Partnership
pursuant to this Section shall be effective to Transfer all such Interests free
and clear of the claims and interests of all Assignees and vest 100% of the
Percentage Interests in the purchaser or purchasers of the Interests. Upon any
such sale or disposition, the only rights of the Assignees shall be the right to
receive their respective shares of the net proceeds therefrom in accordance with
paragraph (a) of this Section. Notwithstanding the foregoing, the General
Partner may request that the Assignees cooperate and execute instruments and
documents in connection with any such sale or disposition to the same extent as
Limited Partners are required to do so pursuant to paragraph (a) of this
Section, and if any Assignee fails or refuses to do so then such Assignee's
share of the net proceeds may be withheld pending compliance by such Assignee
with the requirements of this Section.
ARTICLE VII
Dissolution and Liquidation
---------------------------
SECTION 7.01. Dissolution. The Partnership shall be dissolved upon
------------
the occurrence of any of the following:
(a) December 31, 2036;
(b) the sale, transfer or other disposition of all or substantially
all the assets of the Partnership, or the agreement of the General Partner on
behalf of the Partnership so to do, except for mortgages or security interests
as may be granted to secure obligations of the Partnership and except for lease
or sale-leaseback transactions;
(c) the acquisition by a Partner of all of the Interests of the other
Partners; or
(d) subject to Section 7.03, upon an event of withdrawal of the
General Partner (or, if there is more than
<PAGE>
28
one General Partner, the last remaining General Partner) within the meaning of
the Uniform Act.
SECTION 7.02. Winding Up Affairs and Distributions of Assets. (a)
-----------------------------------------------
Upon dissolution of the Partnership (except dissolution pursuant to Section
7.01(c)), the General Partner (and in the case of dissolution pursuant to
Section 7.01(d) the Limited Partners), shall proceed to wind up the affairs of
the Partnership, liquidate the remaining property and assets of the Partnership
and terminate the Partnership. Subject to the requirements of the Uniform Act,
the proceeds of such liquidation shall be applied in the following order of
priority: (i) first, to the expenses of such liquidation; (ii) second, to the
debts and liabilities of the Partnership to third parties, if any, in the order
of priority provided by law; (iii) third, to the establishment and maintenance
of a reasonable reserve to provide for any contingent or unforeseen liabilities
or obligations of the Partnership to third parties to be held and disbursed, at
the discretion of the General Partner (and in the case of dissolution pursuant
to Section 7.01(d), the Limited Partners) by an escrow agent selected by them,
and at the expiration of such period as the General Partner (and in the case of
dissolution pursuant to Section 7.01(d), the Limited Partners) may deem
advisable, the balance shall be distributed as provided herein; and (iv) fourth,
to any and all debts of the Partnership to the Partners and Assignees. The
remaining assets of the Partnership, if any, shall be distributed to the
Partners and Assignees (or their successors and permit ted assigns) in
accordance with the balances of the Capital Accounts of each such Partner or
Assignee in the ratio of the positive Capital Account balances of all Partners
and Assignees (after such Capital Accounts have been adjusted to reflect all
allocations required pursuant to Sections 2.05, 2.06 and 2.07).
(b) If any assets of the Partnership are to be distributed in kind,
such assets shall be distributed on the basis of the fair market value thereof,
and any Partner or Assignee receiving any interest in such assets shall receive
such interest therein as a tenant-in-common with all other Partners and
Assignees receiving such an interest. Unless otherwise agreed by all the
Partners, the fair market value of such assets shall be determined by an
appraiser to be selected by the General Partner and whose fees shall be paid by
the Partnership.
<PAGE>
29
(c) If the General Partner's Capital Account has a deficit balance
(after giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), the
General Partner shall contribute to the capital of the Partnership the amount
necessary to restore such deficit balance to zero in compliance with Treasury
Regulations Section 1.704-1(b)(2)(ii)(b)(3), with the funds so contributed to be
distributed pursuant to the rules of this Section 7.02.
SECTION 7.03. Continuation of Business of Partnership. If the
----------------------------------------
Partnership is dissolved by reason of Section 7.01(d), it may be reconstituted
and its business continued if within ninety (90) days of such dissolution and by
written vote of all the Partners (i) the Limited Partners elect to continue the
business; and (ii) the Limited Partners appoint a Person to serve in the
capacity of successor general partner of the Partnership.
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Notices. (a) All notices, consents, approvals,
--------
reports, designations, requests and other communications (herein collectively
called the "Notices") authorized or required to be given pursuant to this
Agreement shall be given in writing and either personally served on the Partner
or Assignee (or a general partner or an officer of the Partner or Assignee) to
whom it is given or mailed by registered, certified or first class mail, postage
prepaid, or sent by facsimile or overnight delivery service or courier,
addressed as follows:
If to the General Partner:
Intercontinental Energy Corporation
350 Lincoln Place
Hingham, Massachusetts 02043
Attention: President
Facsimile Number: (617) 740-1281
If to a Limited Partner or Assignee, at such Limited Partner's or
Assignee's address set forth on Schedule A.
<PAGE>
30
(b) All Notices shall be deemed given when delivered or, if mailed as
provided in Section 8.01(a), on the second day after the day of mailing, or if
sent by facsimile, at the time of acknowledgment. Any Partner or Assignee may
change its address for the receipt of Notices at any time by giving notice
thereof to the General Partner (or, in the case of a change of address of the
General Partner, to each of the other Partners and Assignees).
SECTION 8.02. Partnership Act Certificate Requirements. From time to
-----------------------------------------
time the Limited Partners shall sign and swear to all such writings as may be
required, if any, to amend the certificate of limited partnership to reflect
changes in the Partnership made pursuant to this Agreement or for the carrying
out of the terms of this Agreement or, upon dissolution of the Partnership, to
cancel such certificate of limited partnership. Each Partner hereby appoints,
and each Person who may subsequently become a Partner shall be deemed to have
appointed, the General Partner as its true and lawful attorney-in-fact in such
Partner's name and behalf to sign, certify under oath and acknowledge each and
every such amendment or certificate of cancellation or other instrument that may
be required to carry out the terms of this Agreement or to effect the
substitution of a Partner. The foregoing power of attorney shall be
irrevocable, shall be a power coupled with an interest, and shall survive the
Transfer by a Partner or Assignee of its Interest or Percentage Interest or the
dissolution of a Partner.
SECTION 8.03. Entire Agreement. This Agreement supersedes all prior
-----------------
agreements and understandings among the Partners and Assignees with respect to
the subject matter hereof.
SECTION 8.04. Modification. No change or modification of this
-------------
Agreement shall be effective unless such change or modification is in writing
and has been signed by the General Partner and the Majority Limited Partners,
except that (i) no change or modification that increases or imposes additional
obligations or liabilities upon any Limited Partner under this Agreement shall
be effective unless signed by such Limited Partner, (ii) no change or
modification that adjusts a Limited Partner's Interest or Percentage Interest
(except to give effect to Transfers or redemptions or to the admission of
additional Partners as provided in this Agreement) shall be effective unless
signed by such Limited Partner and (iii) the written
<PAGE>
31
consent of all Limited Partners shall be required for any change or modification
to this Section 8.04. Notwithstanding the foregoing, any change or
modification of this Agreement that may, pursuant to any provision hereof, be
made by the General Partner shall be effective upon execution by the General
Partner of a written instrument effecting such change or modification. Any
change or modification of this Agreement made in accordance with this Section
shall be effective and binding on all the Partners and Assignees.
SECTION 8.05. Waivers. No waiver of any breach of any of the terms
--------
of this Agreement shall be effective unless such waiver is in writing and signed
by the Partner against whom such waiver is claimed. No waiver of any breach
shall be deemed to be a waiver of any other or subsequent breach.
SECTION 8.06. Severability. If any provision of this Agreement shall
-------------
be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 8.07. Further Assurances. Each Partner shall execute such
-------------------
deeds, assignments, endorsements, evidences of Transfer and other instruments
and documents and shall give such further assurances as shall be necessary to
perform its obligations hereunder.
SECTION 8.08. Investment Representations. Each Partner represents
---------------------------
and warrants that its Interest has been acquired under this Agreement for its
own account, for investment, and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling such Interest, and that it will not effect a Transfer, or attempt to
effect a Transfer, of its Interest in violation of the Securities Act of 1933,
as amended, or any other applicable Federal or state law.
SECTION 8.09. Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the Commonwealth of Massachusetts.
SECTION 8.10. Counterparts; Effectiveness. This Agreement may be
----------------------------
executed in any number of counterparts, all of which shall constitute one and
the same instrument. It
<PAGE>
32
is not necessary that all signatures be on the same counterpart, and this
Agreement may be executed by different parties on separate counterparts. This
Agreement shall become effective as of the date hereof when counterparts of this
Agreement executed by each Partner have been delivered to the General Partner.
SECTION 8.11. Limitation on Rights of Others. No Person other than a
-------------------------------
Partner or Assignee shall have any legal or equitable right, remedy or claim
under or in respect of this Agreement. Except to the extent required by the
Uniform Act, none of the provisions of this Agreement shall be for the benefit
of or be enforceable by any creditor of the Partnership.
SECTION 8.12. Successors and Assigns. This Agreement shall be
-----------------------
binding upon and inure to the benefit of the Partners and Assignees and their
respective successors and permitted assigns.
SECTION 8.13. Power of Attorney. Each Limited Partner hereby
------------------
constitutes and appoints the General Partner, with unrestricted power of
substitution and resubstitution, the true and lawful attorney for such Limited
Partner, with power and authority to act in its name and on its behalf to make,
execute, sign, acknowledge, deliver, swear to, file and record:
(a) any certificate of limited partnership or similar document, as
well as any amendments thereto, which the General Partner may deem to be
necessary, desirable or appropriate to evidence or effect the formation of
the Partnership or to qualify and continue it as a limited partnership or
assure the limited liability of the Limited Partners;
(b) any instrument or document which the General Partner may deem to
be necessary, desirable or appropriate to effect the continuation of the
Partnership or the dissolution and termination of the Partnership;
(c) any fictitious name or similar certificate required by law to be
filed on behalf of the Partnership;
(d) any amendments or modifications to this Agreement that are
authorized or approved as provided
<PAGE>
33
herein, and any other instruments or documents which are authorized
pursuant to Section 6.03; or
(e) all such other instruments, documents and certificates as may from
time to time be required by the laws of any jurisdiction, domestic or
foreign, to effect, implement, continue and defend the valid and subsisting
existence of the Partnership and its power to carry out its purposes as set
forth in this Agreement;
provided, however, that the General Partner shall not take any action as
- -------- -------
attorney-in-fact for any Limited Partner without its consent which would (i)
increase the amount of the Capital Contributions payable by such Limited
Partner; or (ii) cause such Limited Partner to lose its limited liability
status.
It is expressly acknowledged by each Limited Partner that the
foregoing power of attorney is coupled with an interest, is irrevocable and
shall survive the death, withdrawal, retirement, removal, bankruptcy,
insolvency, reorganization, merger, insanity, incompetency or legal incapacity
of such Limited Partner and any assignment, transfer or other disposition,
whether voluntary, by operation of law or otherwise, by such Limited Partner of
all or any portion of its Interest or Percentage Interest and shall extend to
its successors, assigns and legal representatives.
SECTION 8.14. References to Agreement. Words such as "herein",
------------------------
"hereinafter", "hereof" and "hereunder" refer to this Agreement as a whole and
not merely to a subdivision in which such words appear, unless the context
otherwise requires.
SECTION 8.15. Paragraph Titles. Captions contained in this Agreement
-----------------
are inserted only as a matter of convenience and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision hereof.
SECTION 8.16. Survival of Representations, Warranties and Agreements.
--------------------------- --------------------------
All representations, warranties, and agreements herein shall survive until the
dissolution and final liquidation of the Partnership, except to the extent that
a representation, warranty or agreement
<PAGE>
34
expressly provides otherwise or was applicable to a specific period of time that
has passed.
IN WITNESS WHEREOF, the Partners have duly executed this Agreement as
of the day and year first above written.
GENERAL PARTNER:
INTERCONTINENTAL ENERGY CORPORATION,
by /S/ Stephen Roy
--------------------------------
Title: President
LIMITED PARTNERS:
/s/ Stephen Roy
--------------------------------
Stephen B. Roy
/s/ Peter Roy
--------------------------------
Peter A. Roy
________________________________
Peter Roy, II
________________________________
Christopher Bonney Roy
/s/Mary L. Roy
--------------------------------
Mary L. Roy
/s/ John R. Roy
--------------------------------
John R. Roy
s/s Jane L. Roy
--------------------------------
Jane L. Roy
<PAGE>
35
/s/ Ellen Roy
--------------------------------
Ellen S. Roy
/s/ Jock R. Roy
--------------------------------
Jock R. Roy
<PAGE>
EXHIBIT 3.8
================================================================================
AGREEMENT OF LIMITED PARTNERSHIP
OF
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
Dated as of October 15, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Certain Definitions; General Provisions
---------------------------------------
<S> <C>
SECTION 1.01. Certain Definitions..................................... 1
SECTION 1.02. Name.................................................... 8
SECTION 1.03. Principal Place of Business............................. 9
SECTION 1.04. Purposes................................................ 9
SECTION 1.05. Duration................................................ 9
SECTION 1.06. General Partner......................................... 9
SECTION 1.07. Limited Partners........................................ 9
SECTION 1.08. Assignees............................................... 9
ARTICLE II
Capital and Interests in the Partnership;
-----------------------------------------
Admission of Additional Partners; Financing; Allocations
--------------------------------------------------------
SECTION 2.01. Initial Capital Contributions........................... 10
SECTION 2.02. Admission of Additional Partners........................ 10
SECTION 2.03. Financing of the Partnership;
Partner Loans........................................... 11
SECTION 2.04. Interest on Capital Contribution........................ 13
SECTION 2.05. General Allocations of Net Profits
and Net Losses.......................................... 13
SECTION 2.06. Allocations of Nonrecourse
Deductions and Minimum Gain............................. 14
SECTION 2.07. Overriding Allocations Of Net
Profits and Net Losses.................................. 14
SECTION 2.08. Allocations Upon Transfer or
Admission............................................... 15
SECTION 2.09. Withdrawal of Capital; Limitation
on Distributions, Priorities............................ 16
ARTICLE III
Management
----------
SECTION 3.01. Management.............................................. 16
SECTION 3.02. Authority of the General Partner........................ 16
SECTION 3.03. Restrictions on the Authority of
the General Partner..................................... 18
</TABLE>
<PAGE>
Contents, p. 2
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 3.04. Compensation, Reimbursement and
Fees.................................................... 19
SECTION 3.05. Limitation of Liability and
Indemnification......................................... 20
SECTION 3.06 Other Business Ventures................................. 21
ARTICLE IV
Books; Elections; Budgets; Fiscal Year
--------------------------------------
SECTION 4.01. Administrative Services, Books,
Records and Reports..................................... 22
SECTION 4.02. Tax Matters............................................. 22
SECTION 4.03. Fiscal Year............................................. 23
ARTICLE V
Distributions of Distributable Funds
------------------------------------
SECTION 5.01. Distributions of Distributable Funds.................... 23
ARTICLE VI
Transfers of Partnership Interests
----------------------------------
SECTION 6.01. Transfer Restrictions................................... 24
SECTION 6.02. Consequences of Transfer................................ 25
SECTION 6.03. Mandatory Transfer...................................... 26
ARTICLE VII
Dissolution and Liquidation
---------------------------
SECTION 7.01. Dissolution............................................. 27
SECTION 7.02. Winding up Affairs and Distributions
of Assets.............................................. 28
SECTION 7.03. Continuation of Business of
Partnership............................................ 29
</TABLE>
<PAGE>
Contents, p. 3
<TABLE>
<CAPTION>
Page
----
ARTICLE VIII
Miscellaneous
-------------
<S> <C> <C>
SECTION 8.01. Notices................................................... 29
SECTION 8.02. Partnership Act Certificate
Requirements............................................ 30
SECTION 8.03. Entire Agreement.......................................... 30
SECTION 8.04. Modification.............................................. 30
SECTION 8.05. Waivers................................................... 31
SECTION 8.06. Severability.............................................. 31
SECTION 8.07. Further Assurances........................................ 31
SECTION 8.08. Investment Representations................................ 31
SECTION 8.09. Governing Law............................................. 31
SECTION 8.10. Counterparts; Effectiveness............................... 32
SECTION 8.11. Limitation on Rights of Others............................ 32
SECTION 8.12. Successors and Assigns.................................... 32
SECTION 8.13. Power of Attorney......................................... 32
SECTION 8.14. References to Agreement................................... 33
SECTION 8.15. Paragraph Titles.......................................... 33
SECTION 8.16. Survival of Representations,
Warranties and Agreements............................... 33
</TABLE>
<PAGE>
THIS AGREEMENT OF LIMITED PARTNERSHIP dated as of October
15, 1996, among INTERCONTINENTAL ENERGY CORPORATION, a
Massachusetts corporation having its principal office at 350
Lincoln Place, Hingham, Massachusetts (herein called "IEC"), and
---
those persons from time to time designated or required to be
designated on Schedule A as limited partners (collectively with
IEC called the "Partners" and individually called a "Partner").
-------- -------
W I T N E S S E T H:
The Partners previously formed the limited partnership known as North
Jersey Energy Associates, A Limited Partnership (the "Partnership"), pursuant to
-----------
the New Je rsey Uniform Limited Partnership Law, by the filing of a certificate
of limited partnership with the Secretary of State of the State of New Jersey on
November 3, 1986 (as subsequently amended). The Partners hereby agree to
continue the Partnership on the terms and conditions set forth herein and to
constitute this Agreement as the entire partnership agreement of the Partners.
The Partners hereby further agree as follows:
ARTICLE I
Certain Definitions; General Provisions
---------------------------------------
SECTION 1.01. Certain Definitions. As used herein:
--------------------
"Adjusted Capital Account" means, for each Partner and Assignee, such
------------------------
Partner's or Assignee's Capital Account increased by such Partner's or
Assignee's Share of Minimum Gain.
"Affiliate" means, with respect to a Partner, a Person that, directly
---------
or indirectly, controls or is controlled by or is under common control with such
Partner or as to an individual is a spouse of such Partner or related by
consanguinity to the second degree.
"Agreement" means this Agreement of Limited Partnership, as at any
---------
time amended, modified or restated by
<PAGE>
2
a writing signed by all the Partners or signed as permitted by Section 8.04.
"Assignee" means the assignee of all or a portion of the economic
--------
interest in the Partnership held by a Limited Partner.
"Capital Account" means a separate account maintained for each Partner
---------------
and Assignee and adjusted in accordance with Regulations under Section 704 of
the Code. To the extent consistent with such Regulations, the adjustments to
such accounts shall include the following:
(i) There shall be credited to each Partner's or Assignee's Capital
Account the amount of any cash (which shall not include imputed or actual
interest on any deferred contributions) actually contributed by such
Partner or Assignee to the capital of the Partnership, the fair market
value (without regard to Code Section 7701(g)) of any property contributed
by such Partner or Assignee to the capital of the Partnership, the amount
of Partnership liabilities assumed by the Partner or Assignee or to which
property distributed to the Partner or Assignee was subject and such
Partner's or Assignee's share of the Net Profits and Gross Income of the
Partnership and of any items in the nature of income or gain separately
allocated to the Partners and Assignees; and there shall be charged against
each Partner's or Assignee's Capital Account the amount of all cash
distributions to such Partner or Assignee, the fair market value (without
regard to Code Section 7701(g)) of any property distributed to such Partner
or Assignee by the Partnership, the amount of liabilities of the Partner or
Assignee assumed by the Partnership or to which property contributed by the
Partner or Assignee to the Partnership was subject and such Partner's or
Assignee's share of the Net Losses of the Partnership and of any items in
the nature of losses or deductions separately allocated to the Partners and
Assignees.
(ii) If the Partnership at any time distributes any of its assets
in-kind to any Partner or Assignee, the Capital Account of each Partner and
Assignee shall be adjusted to account for that Partner's or Assignee's
allocable share of the Net Profits, Net Losses or Gross Income that would
have been realized by the Partnership had it sold the assets that were
distributed at their
<PAGE>
3
respective fair market values (taking Code Section 7701(g) into account)
immediately prior to their distribution.
(iii) In the event any interest in the Partnership is transferred in
accordance with the terms of this Agreement, the Transferee shall succeed
to the Capital Account of the Transferor to the extent it relates to the
transferred interest.
(iv) If elected by the Partnership, at any time specified in
Treasury Regulation Section 1.704-1(b)(2)(iv)(f), the Capital Account
balance of each Partner or Assignee shall be adjusted to the extent
allowable under such Treasury Regulation to reflect the Partner's and
Assignee's allocable share (as determined under Sections 2.05, 2.06 and
2.07) of the Net Profits, Net Losses or Gross Income that would be realized
by the Partnership if it sold all of its property at its fair market value
(taking Code Section 7701(g) into account) on the day of the adjustment.
"Capital Contributions" means the amount contributed by or on behalf
---------------------
of a Partner or Assignee to the capital of the Partnership prior to the date
hereof or from and after the date hereof pursuant to this Agreement.
"Carrying Value" means, with respect to any asset, the asset's
--------------
adjusted basis for federal income tax purposes; provided, however, that (i) upon
-------- -------
a contribution of an asset in-kind, such asset's Carrying Value and (ii) in the
circumstances described in paragraph (iv) of the definition of "Capital
Account," the Carrying Value of all of the Partnership's assets shall be
adjusted to their respective fair market values and shall thereafter be adjusted
in accordance with the provisions of Treasury Regulation Section 1.704-
1(b)(2)(iv)(g).
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, or any successor statute. References to sections of the Code include
references to all amendatory or successor provisions thereto.
"Distributable Funds" has the meaning specified in Section 5.01(a).
-------------------
"Economic Risk of Loss" means the risk as determined under Treasury
---------------------
Regulation Section 1.752-2 (taking
<PAGE>
4
all applicable "grandfathering" rules into account) that a Partner or Assignee,
or person related to a Partner or Assignee, will suffer an economic loss as a
result of the failure of the Partnership to repay a liability.
"Excess Negative Balance" for a Partner or Assignee means the excess,
-----------------------
if any, of (i) the negative balance in a Partner's or Assignee's Capital Account
after reducing such balance by the net adjustments, allocations and
distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4),
(5) and (6) which, as of the end of the Partnership's taxable year, are
reasonably expected to be made to such Partner or Assignee, over (ii) the sum of
(A) the amount, if any, which the Partner or Assignee is required to restore to
the Partnership upon liquidation of such Partner's or Assignee's interest in the
Partnership (or which is so treated pursuant to Treasury Regulations Section
1.704-1(b)(2)(ii)(c)), (B) the Partner's or Assignee's Share of Minimum Gain and
(C) that portion of any indebtedness of the Partnership (other than Partner
Nonrecourse Debt) with respect to which the Partner or Assignee bears the
Economic Risk of Loss that such indebtedness would not be repaid out of the
Partnership's assets if all of the Partnership's assets were sold at their
respective Carrying Values as of the end of the fiscal year or other period and
the proceeds from the sales together with any amounts described in clause (A),
above, were used to pay the Partnership's liabilities.
"Fiscal Year" has the meaning specified in Section 4.03.
-----------
"General Partner" means IEC.
---------------
"Gross Income" means, for each Fiscal Year or other period, an amount
------------
equal to the Partnership's gross income as determined for federal income tax
purposes for such Fiscal Year or period but computed with the adjustments
specified in paragraphs (i), (ii) and (iii) of the definition of "Net Profits"
and "Net Losses."
"IEC" has the meaning specified in the heading of this Agreement.
---
"IEC Funding" means IEC Funding Corp., a Delaware corporation.
-----------
<PAGE>
5
"Interest" means, with respect to any Partner, such Partner's interest
--------
in the Partnership and shall include a portion of an Interest not previously
divided. The Interest of each Partner as of the date hereof is set forth
opposite such Partner's name on Schedule A hereto.
"Limited Partner" means each of those parties designated in Schedule A
---------------
as a limited partner in the Partnership and any Person that may be admitted from
time to time to the Partnership as a limited partner pursuant to this Agreement
(including a Substitute Limited Partner), all as reflected in the Schedule A
hereto as in effect at the relevant time.
"Majority Limited Partners" means Limited Partners having Interests
-------------------------
aggregating at least a majority of the Interests of all the Limited Partners at
the time.
"Minimum Gain" means the amount determined by computing with respect
------------
to each Nonrecourse Debt of the Partnership, the amount of Gross Income, if any,
that would be realized by the Partnership if it disposed of the property
securing such debt in full satisfaction thereof, and by then aggregating the
amounts so computed. For purposes of determining the amount of such Gross
Income with respect to a liability, the Carrying Value of the asset securing the
liability shall be allocated among all the liabilities that the asset secures in
the manner set forth in Treasury Regulation Section 1.704-2(d)(2).
"NEA" means Northeast Energy Associates, A Limited Partnership, a
---
Massachusetts limited partnership.
"Net Profits" and "Net Losses" mean the taxable income or loss, as the
----------- ----------
case may be, for a period as determined in accordance with Code Section 703(a)
computed with the following adjustments:
(i) Items of gain, loss, and deduction shall be computed based upon
the Carrying Values of the Partnership's assets rather than upon the
assets' adjusted bases for federal income tax purposes, and, in particular,
except as provided in Treasury Regulation Section 1.704-3(d), the amount of
any deductions for depreciation or amortization with respect to an asset
for a period shall equal such asset's Carrying Value multiplied by a
fraction the numerator of which shall be the amount of depreciation or
amortization with
<PAGE>
6
respect to such asset allowable for federal income tax purposes for such
period and the denominator of which shall be such asset's adjusted basis;
(ii) Any tax-exempt income received by the Partnership shall be
included as an item of gross income;
(iii) The amount of any adjustments to the Carrying Values of any
assets of the Partnership pursuant to Code Section 743 shall not be taken
into account;
(iv) Any expenditure of the Partnership described in Code Section
705(a)(2)(B) (including any expenditures treated as being described in
Section 705(a)(2)(B) pursuant to Treasury Regulations under Code Section
704(b)) shall be treated as a deductible expense; and
(v) The amount of Gross Income and Nonrecourse Deductions
specifically allocated to any Partners or Assignees pursuant to Section
2.06 or 2.07(a) shall not be included in the computation.
"Nonrecourse Debt" means any Partnership liability to the extent that
----------------
the liability is nonrecourse for purposes of Treasury Regulation Section 1.1001-
2.
"Nonrecourse Deductions" for a taxable year means deductions funded by
----------------------
Nonrecourse Debt (as determined under Treasury Regulation Sections 1.704-2(c)
and 1.704-2(i)(2)) for such year and are generally equal to the excess, if any,
of (i) the net increase in Minimum Gain during such year over (ii) the sum of
(A) the aggregate distributions of proceeds from Nonrecourse Debts attributable
to increases in Minimum Gain during such year and (B) increases in Minimum Gain
during such year attributable to conversions of liabilities into Nonrecourse
Debts.
"Notices" has the meaning specified in Section 8.01(a).
-------
"Partner" and "Partners" have the meanings specified in the heading of
------- --------
this Agreement.
"Partner Lender" has the meaning specified in Section 2.03(b).
--------------
<PAGE>
7
"Partner Loan" has the meaning specified in Section 2.03(b).
------------
"Partner Nonrecourse Debt" means any Nonrecourse Debt to the extent
------------------------
that a Partner or Assignee bears the Economic Risk of Loss associated with the
debt.
"Partnership" has the meaning specified in the introductory paragraph
-----------
of this Agreement.
"Percentage Interest" means the economic interest of each Partner and
-------------------
Assignee in the Partnership (expressed as a percentage). The Percentage
Interest of each Partner and Assignee as of the date hereof is set forth
opposite such Partner's or Assignee's name on Schedule A hereto.
"Person" means an individual, corporation, limited liability company,
------
association, partnership, trust or unincorporated organization.
"Project" means, collectively, the Partnership's cogeneration facility
-------
and all components of such facility located in Sayreville, New Jersey, all
rights, permissions, equipment and property related thereto and all contract
rights used or useful for the operation of such facility.
"Project Financing Agreements" means the agreements entered into by
----------------------------
the Partnership from time to time in connection with the financing of the
Project or any part thereof, including any instruments evidencing indebtedness
issued or guaranteed by the Partnership thereunder and any agreements granting
liens or security interests on any assets of the Partnership to secure
obligations thereunder. The Project Financing Agreements include (i) the Trust
Indenture dated as of November 15, 1994, among IEC Funding, the Partnership, NEA
and State Street Bank and Trust Company, as Trustee, (ii) each of the "Credit
Documents" and the "Sayreville Security Documents" (as defined in such Trust
Indenture) to which the Partnership is a party and (iii) any agreements entered
into by the Partnership in connection with the replacement, refinancing or
restructuring of any of the foregoing.
"Roy Limited Partner" means any of John R. Roy, Mary L. Roy, Jock R.
-------------------
Roy, Stephen B. Roy, Peter A. Roy, Ellen S. Roy or Jane L. Roy and each Limited
Partner who is an Affiliate of any thereof.
<PAGE>
8
"Share of Minimum Gain" means, for each Partner and Assignee, the sum
---------------------
of such Partner's or Assignee's share of Minimum Gain attributable to
Nonrecourse Debt other than Partner Nonrecourse Debt (computed in accordance
with Treasury Regulation Section 1.704-2(g)) and such Partner's or Assignee's
share of Minimum Gain attributable to Partner Nonrecourse Debt (computed in
accordance with Treasury Regulation Section 1.704-2(i)(5)).
"Substitute Limited Partner" means a Transferee of a Limited Partner's
--------------------------
or Assignee's interest in the Partnership who is admitted to the Partnership as
a Limited Partner as provided in Section 6.02(d).
"Transfer" means (i) any sale, conveyance, gift, bequest, assignment
--------
by way of sale or other disposition, (ii) any hypothecation, mortgage, pledge,
assignment by way of security or (iii) any creation of any encumbrance of any
nature (and whether or not to secure an obligation) of, in each case, an
Interest and shall include a similar act in respect of rights to profits, losses
and cash distributions (or Percentage Interest) deriving from an Interest.
"Transferor" and "Transferee" shall have corresponding meanings.
- ----------- ----------
"Uniform Act" means the New Jersey Uniform Limited Partnership Law
------------
(1976), as amended.
References in the singular shall include the plural and vice versa and
references to the neuter gender shall include the masculine and feminine
genders. The terms "including", "include" and "includes" as used herein shall
be deemed to be followed by the words "without limitation". References to this
Agreement or to any other agreement or document, including any Project Financing
Agreement, shall include the same as amended, supplemented, modified or
otherwise changed from time to time. References to Schedule A shall be
construed to be references to said Schedule A as from time to time changed or
required to be changed as provided for herein.
SECTION 1.02. Name. The name of the Partnership shall continue to be
-----
"North Jersey Energy Associates, A Limited Partnership". The General Partner
may at any time change the name of the Partnership and shall give notice of any
such change to the Limited Partners.
<PAGE>
9
SECTION 1.03. Principal Place of Business. The Partnership's
----------------------------
principal place of business and the office where the books of the Partnership
will be maintained shall be at 350 Lincoln Place, Hingham, MA 02043, or at such
other place within the continental United States as the General Partner shall
designate. The General Partner shall give notice of any change of such
principal place of business to the Limited Partners.
SECTION 1.04. Purposes. The purposes of the Partnership shall be to
---------
develop, finance, construct, own, manage, maintain, operate, encumber, exchange,
dispose of and otherwise deal with the Project or any part thereof, to contract
with third parties to construct, maintain or operate the Project and to sell the
electricity and steam produced by the Project. The Partnership shall have the
power to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment of
such purposes, and for the protection and benefit of the Project.
SECTION 1.05. Duration. The Partnership shall continue until
---------
dissolved pursuant to Section 7.01.
SECTION 1.06. General Partner. IEC shall be the General Partner of
----------------
the Partnership. The management of the business and affairs of the Partnership
shall be conducted as provided in Article III.
SECTION 1.07. Limited Partners. The Partners identified or required
-----------------
to be identified from time to time in Schedule A as Limited Partners shall be
the Limited Partners of the Partnership. No Limited Partner, in its capacity as
a Limited Partner, shall participate in the management of the Partnership, or
have any authority or right to transact any business or act for or bind the
Partnership in any respect, and no Limited Partner shall ever be (i) personally
liable for any part of the debts or other obligations of the Partnership except
for any liability expressly assumed in writing by it or (ii) obligated to make
contributions to the Partnership in excess of those, if any, required to be made
by it pursuant to this Agreement.
SECTION 1.08. Assignees. (a) The Assignees identified or required
----------
to be identified from time to time in Schedule A as Assignees are assignees of
Interests of Limited Partners with respect solely to economic interests in the
Partnership. No Assignee, in its capacity as an
<PAGE>
10
Assignee, shall participate in the management of the Partnership, have any
authority or right to transact any business or act for or on behalf of the
Partnership in any respect and shall have none of the rights and privileges
otherwise available to Limited Partners other than to share in the income, gain,
loss, deductions, tax credits and distributions of the Partnership. In
addition, no Assignee shall ever be (i) personally liable for any part of the
debts or obligations of the Partnership except for any liability expressly
assumed in writing by it or (ii) obligated to make contributions to the
Partnership in excess of those, if any, required to be made by it pursuant to
this Agreement.
(b) Each Partner hereby acknowledges and agrees that (i) the Persons
identified in Schedule A as of the date hereof as Assignees are the only
Assignees existing at the date hereof and (ii) the percentage set forth in
Schedule A as of the date hereof opposite the name of such Partner in the
"Percentage Interest" column is the correct Percentage Interest for such Partner
as of the date hereof (giving effect to the dilution of the economic interests
in the Partnership represented by such Partner's Interest to give effect to the
Percentage Interests of the Assignees).
ARTICLE II
Capital and Interests in the Partnership;
-----------------------------------------
Admission of Additional Partners; Financing; Allocations
--------------------------------------------------------
SECTION 2.01. Initial Capital Contributions. On or before the date
------------------------------
hereof Partners (i) have made cash contributions to the capital of the
Partnership in the aggregate amount of $10,000 or (ii) in the case of some of
them, previously have contributed various services to the Partnership. A pro
rata share of any cash contributions by the Limited Partners shall be treated as
having been transferred to the Assignees in accordance with their respective
Percentage Interests.
SECTION 2.02. Admission of Additional Partners. (a) The General
---------------------------------
Partner shall have the right to admit additional Limited Partners to the
Partnership from time to time. The Interest and Percentage Interest of each
such additional Limited Partner (other than a Substitute Limited Partner) shall
be as determined by the General Partner. It is understood that the General
Partner may agree to a
<PAGE>
11
priority return of any Capital Contributions made by a Partner after the date
hereof, and/or a priority return thereon, without the approval of any Limited
Partner or Assignee. If any such additional Limited Partner is admitted to the
Partnership, the Interest of each other Limited Partner (as in effect prior to
such admission) and the Percentage Interest of each other Limited Partner and
Assignee shall be reduced ratably to reflect the Interest and Percentage
Interest of such additional Limited Partner. The General Partner also shall
have the right to admit Substitute Limited Partners pursuant to Section 6.02.
(b) The General Partner shall have the right to admit an additional
General Partner to the Partnership with the prior written consent of the
Majority Limited Partners. If any Person admitted as an additional General
Partner is at the time a Limited Partner, such Person shall be allocated as a
General Partner all or a portion of the Interest and Percentage Interest
previously held by such Partner as a Limited Partner, as agreed between such
Person and the General Partner. If any Person admitted as an additional General
Partner is not at the time a Limited Partner, the Interest and Percentage
Interest of such Person as General Partner shall be determined in the same
manner as provided in paragraph (a) above with respect to additional Limited
Partners, and the Interest of each Limited Partner and the Percentage Interest
of each Limited Partner and Assignee shall be reduced ratably to reflect the
Interest and Percentage Interest so determined.
(c) Each additional Partner admitted to the Partnership, including
any Substitute Limited Partner, shall agree to be bound by the provisions of
this Agreement pursuant to an instrument satisfactory to the General Partner.
Upon the admission of any such Partner, (i) Schedule A shall be deemed amended
to reflect such admission, (ii) the General Partner shall amend the certificate
of limited partnership of the Partnership in accordance with the Uniform Act to
reflect such admission, and (iii) the General Partner shall notify the Limited
Partners of such admission.
SECTION 2.03. Financing of the Partnership; Partner Loans. (a) In
--------------------------------------------
addition to the Capital Contributions provided for in Section 2.01, the money to
finance the Project and otherwise to finance the business of the Partnership and
any special distributions of cash to the Partners and Assignees shall be derived
from loans to or
<PAGE>
12
revenues of the Partnership. If additional capital is needed by the Partnership
for any reason, as determined by the General Partner from time to time, then,
after the amount of such needed additional capital shall have been determined by
the General Partner, the Partnership will attempt to borrow such amount of
additional capital from a third party or parties on such terms as shall be
acceptable to the General Partner.
(b) Any Partner may, but shall not be required to, loan funds to the
Partnership (or cause an Affiliate of such Partner to loan funds to the
Partnership) on such terms as shall be approved by the General Partner and the
Partner (or Affiliate thereof) advancing such loan (any such loan being referred
to herein as a "Partner Loan" and the lender of any such Partner Loan being
------------
referred to herein as "Partner Lender"). If the General Partner, any Roy
--------------
Limited Partner or any Affiliate thereof proposes to make a Partner Loan, then
the Partners agree that the terms of such Partner Loan shall be considered fair
and reasonable and shall not require any consent or approval of the Limited
Partners if:
(i) each Limited Partner is notified of the terms of such Partner
Loan and is afforded an opportunity to participate in such Partner Loan as
a Partner Lender ratably in accordance with its Interest (which opportunity
may be limited to a period, not less than 15 days, following notice of such
opportunity, during which Limited Partners must elect whether to
participate); or
(ii) the interest rate applicable to such Partner Loan does not
exceed the greatest of (x) the greatest interest rate then applicable to
any indebtedness of the Partnership plus 2% per annum, (y) the prime rate
of The Chase Manhattan Bank, from time to time in effect, plus 2% per
annum, and (z) the greatest interest offered to the Partnership by any bank
or other financial institution to provide unsecured subordinated loans to
the Partnership, as quoted to the General Partner within one year prior to
the date such Partner Loan is to be advanced, and in either case the terms
of such Partner Loan provide that repayment by the Partnership shall be
made only from the net proceeds of any refinancing thereof or from funds
that otherwise would be Distributable Funds, as and when available, prior
to any distributions to Partners or Assignees, or upon dissolution of the
Partnership; or
<PAGE>
13
(iii) the aggregate amount of such Partner Loan is less than
$50,000,000 and the interest rate applicable thereto does not exceed the
greater of (x) the greatest interest rate then applicable to any
indebtedness of the Partnership plus 2% per annum, and (y) the prime rate
of The Chase Manhattan Bank, from time to time in effect, plus 2% per
annum.
(c) This Section 2.03 shall not be construed to prohibit additional
Capital Contributions to the Partnership that are made on terms approved by the
General Partner and the contributing Partner, but such Capital Contributions
shall not be required (except as expressly provided in Section 7.02(c) with
respect to the General Partner).
SECTION 2.04. Interest on Capital Contribution. No interest shall be
---------------------------------
paid by the Partnership on any Capital Contribution.
SECTION 2.05. General Allocations of Net Profits and Net Losses. (a)
-------------------------------------------------
Except as provided in Sections 2.06 and 2.07 below (which shall be applied
first), any Net Profits of the Partnership shall be allocated among the Partners
and Assignees as follows:
(i) First, in such manner and in such amount as is necessary so
that the respective Adjusted Capital Account balances of the Partners and
Assignees are in the ratio of their respective Percentage Interests; and
(ii) The balance, if any, to the Partners and Assignees in
proportion to their respective Percentage Interests.
(b) Except as provided in Sections 2.06 and 2.07 below (which shall
be applied first), any Net Losses of the Partnership shall be allocated among
the Partners and Assignees as follows:
(i) First, in such manner and in such amount as is necessary so
that the respective Adjusted Capital Account balances of the Partners and
Assignees are in the ratio of their respective Percentage Interests; and
(ii) The balance, if any, to the Partners and Assignees in
proportion to their respective Percentage Interests.
<PAGE>
14
(c) Allocations of Net Profits and Net Losses provided for in this
Section 2.05 shall be made as of the end of the Fiscal Year or shorter relevant
period of the Partnership.
SECTION 2.06. Allocations of Nonrecourse Deductions and Minimum Gain.
------------------------------------------------------
Notwithstanding the provisions of Section 2.05 above, the following allocations
of Gross Income and Nonrecourse Deductions shall be made in the following order
of priority:
(a) If in any year there is a net decrease in the amount of Minimum
Gain attributable to either (i) Nonrecourse Debt that is not Partner Nonrecourse
Debt or (ii) Partner Nonrecourse Debt, then each Partner and Assignee shall
first be allocated items of Gross Income for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's or Assignee's share of
the net decrease in such Minimum Gain (determined in accordance with Treasury
Regulation Sections 1.704-2(g)(2) and 1.704-2(i)(5)) to the minimum extent
required by, and in the manner specified in, Treasury Regulation Sections 1.704-
2(f) and 1.704-2(i)(4).
(b) All Nonrecourse Deductions of the Partnership for any year other
than Nonrecourse Deductions attributable to Partner Nonrecourse Debt shall be
allocated to the Partners and Assignees in proportion to their respective
Percentage Interests.
(c) All Nonrecourse Deductions of the Partnership for any year
attributable to Partner Nonrecourse Debt shall be allocated to the Partners
and/or Assignees who bear the Economic Risk of Loss with respect to the debt.
SECTION 2.07. Overriding Allocations of Net Profits and Net Losses.
-----------------------------------------------------
Notwithstanding the provisions of Section 2.05 above, but subject to the
provisions of Section 2.06 above, the following allocations of Gross Income, Net
Profits and Net Losses and items thereof shall be made:
(a) If, during any year a Partner or Assignee receives any
adjustment, allocation or distribution described in Treasury Regulation Section
1.704-1(b) (2)(ii)(d)(4), or (5) or (6) or any other distribution, and, as a
result of such adjustment, allocation or distribution, such Partner's or
Assignee's Capital Account has an Excess
<PAGE>
15
Negative Balance, then items of Gross Income for such year (and, if necessary,
subsequent years) shall first be allocated to such Partner or Assignee in an
amount equal to such Partner's or Assignee's Excess Negative Balance.
(b) In no event shall Net Losses of the Partnership be allocated to a
Partner or Assignee if such allocation would cause or increase an Excess
Negative Balance in such Partner's Capital Account.
(c) Except to the extent necessary to comply with Sections 2.06(a),
2.07(a) and 2.07(b) hereof, the interest of the General Partner in each item of
Partnership income, gain, loss, deduction or credit will be equal to at least
one percent (1%) of each of those items at all times during the existence of the
Partnership.
(d) Except as otherwise provided herein or as required by Code
Section 704, for tax purposes, all items of income, gain, loss, deduction or
credit shall be allocated to the Partners and Assignees in the same manner as
are Net Profits and Net Losses; provided, however, that if the Carrying Value of
-------- -------
any property of the Partnership differs from its adjusted basis for tax
purposes, then items of income, gain, loss, deduction or credit related to such
property for tax purposes shall be allocated among the Partners and Assignees so
as to take account of the variation between the adjusted basis of the property
for tax purposes and its Carrying Value in the manner provided for under Code
Section 704(c).
SECTION 2.08. Allocations Upon Transfer or Admission. In the event
---------------------------------------
that a Partner or Assignee acquires an interest in the Partnership either by
transfer from another Partner or Assignee or by acquisition from the
Partnership, the Partnership shall close its books as of the date of the
acquisition and Net Profits, Net Losses, Gross Income, Nonrecourse Deductions
and items thereof computed for the portion of the year ending on the date of the
acquisition shall be allocated among the Partners and Assignees without regard
to such acquisition, and Net Profits, Net Losses, Gross Income, Nonrecourse
Deductions and items thereof computed for the portion of the year commencing on
the day following the date of the acquisition shall be allocated among the
Partners and Assignees taking into account such acquisition. For purposes of
determining the date on which the acquisition is deemed to occur, the
Partnership may make use of any convention allowable under
<PAGE>
16
Section 706(d) of the Code as may be elected by the General Partner in its
absolute discretion.
SECTION 2.09. Withdrawal of Capital; Limitation on Distributions,
--------------------------------- -----------------
Priorities. No Partner or Assignee shall be entitled to withdraw any part of
- -----------
its Capital Contributions to, or to receive any distributions from, the
Partnership except as provided in Section 5.01 and Section 7.02. No Partner or
Assignee shall be entitled to demand or receive any property other than cash
from the Partnership. Except as expressly provided in this Agreement, no
Partner or Assignee will have a priority over any other Partner or Assignee as
to any distributions from the Partnership.
ARTICLE III
Management
----------
SECTION 3.01. Management. Subject to the terms, conditions and
-----------
limitations of this Agreement, the General Partner shall have the exclusive
authority and full discretion to manage the business of the Partnership.
SECTION 3.02. Authority of the General Partner. Subject to the terms
---------------------------------
and conditions set forth herein, the General Partner shall have all rights and
powers required by, or appropriate or incidental to, the management and control
of the business and affairs of the Partnership in furtherance of the purposes of
the Partnership, and shall possess and may exercise all the rights and powers of
a general partner as provided in the Uniform Act, including the right and power
to take any of the following actions:
(a) execute any and all agreements, contracts, documents, deeds,
certificates, bills of sale and other instruments deemed by the General
Partner to be necessary and appropriate in connection with the business and
affairs of the Partnership;
(b) acquire or lease as lessee real and personal property and
interests therein and dispose of or lease as lessor real or personal
property or interests therein;
(c) protect and preserve the Partnership's title and interest in the
assets of the Partnership, collect
<PAGE>
17
all amounts due the Partnership, and otherwise claim all rights of the
Partnership, and in that connection retain counsel and institute and defend
suits and proceedings in the name and on behalf of the Partnership;
(d) engage in financing transactions on behalf of the Partnership,
including (i) issuance of debt obligations and incurrence of indebtedness
on behalf of the Partnership, including refinancings and successive
refinancings of indebtedness under the Project Financing Agreements and, in
connection therewith or to secure performance by the Partnership of any of
its obligations, to mortgage, pledge, hypothecate or otherwise grant
security interests in assets of the Partnership and (ii) lease financings,
including sale-leaseback transactions, with respect to assets of the
Partnership (which may include all or substantially all the assets of the
Partnership);
(e) pay all debts and obligations of the Partnership, including
expenses of the Partnership, to the extent that funds of the Partnership
are available therefor and make all distributions to the Partners in
accordance with the provisions of this Agreement;
(f) engage in joint transactions for the mutual benefit of the
Partnership and NEA, including joint fuel procurement and transportation
arrangements, fuel hedges, power marketing and financing arrangements, it
being understood and agreed that indebtedness and other obligations may be
incurred jointly with NEA or through IEC Funding and the Partnership may
guarantee indebtedness and other obligations of NEA or IEC Funding and may
grant liens and security interests on assets of the Partnership to secure
indebtedness and other obligations of NEA or IEC Funding pursuant to the
Project Financing Agreements or otherwise;
(g) invest surplus cash;
(h) represent the Partnership before Federal, state and municipal
authorities and in arbitration proceedings and pay, collect, compromise and
otherwise settle claims of, or against, the Partnership;
(i) select depreciation and accounting methods for book and income tax
purposes (which decisions may be
<PAGE>
18
different for each such purpose) to the extent not otherwise provided
herein;
(j) engage or hire on behalf of or for the benefit of the Partnership
independent accountants, architects, lawyers, engineers, management,
administrative and clerical help, fuel management, and steam sales person
nel, and to procure such other assistance and services, as may seem proper
in accordance with the purposes con templated hereby, and pay therefor such
remuneration as the General Partner may determine to be reasonable and
appropriate in the circumstances; and
(k) do and perform any acts and exercise all rights, powers and
privileges not referred to in this Section 3.02 that the General Partner
shall deem necessary to, in connection with, or incidental to the
accomplishment of the Partnership purposes, as may be lawfully carried on
or performed by a limited partnership under the laws of the State of New
Jersey.
SECTION 3.03. Restrictions on the Authority of the General Partner.
-------------------------------- --------------------
Without limiting the generality of any other provision of this Agreement,
without the written consent of the Majority Limited Partners, the General
Partner shall not:
(a) do any act in contravention of this Agreement;
(b) do any act which would make it impossible to carry on the ordinary
business of the Partnership (other than as provided in Article VII hereof);
(c) admit any Person as a Partner, except as provided in Section 2.02;
(d) elect to dissolve the Partnership (except in accordance with, and
under the circumstances described in, Article VII);
(e) lease, sell or otherwise transfer or dispose of all or
substantially all the assets of the Partnership except for mortgages,
security interests and sale-leaseback transactions permitted by Section
3.02; or
(f) engage in any transaction with the General Partner or with one or
more Roy Limited Partners or an Affiliate of any of them except (i) Partner
Loans that
<PAGE>
19
do not require approval of the Limited Partners as provided in Section
2.03(b), (ii) payments contemplated by Section 3.04, (iii) admission as a
Limited Partner with preferential rights as to distributions of any
additional Capital Contributions contributed after the date hereof plus a
return thereon not exceeding the greatest interest rate that would be
permitted with respect to a Partner Loan pursuant to Section 2.03(b), and
(iv) other transactions (which may include Partner Loans and payment of
fees or other compensation for services) on terms which are at least as
favorable to the Partnership as terms which are available from a Person not
the General Partner, a Roy Limited Partner or any such Affiliate.
SECTION 3.04. Compensation, Reimbursement and Fees. (a) The
-------------------------------------
Partners hereby ratify and approve all compensation paid to the General Partner
prior to the date hereof.
(b) For each calendar year, the General Partner shall be compensated
by the Partnership for its services by payment to the General Partner of a
reasonable annual management fee. Without limiting the generality of the
foregoing (and without prejudice to the right of the General Partner to increase
such management fee), it is understood and agreed that the annual management fee
provided for in the Project Financing Agreements in effect on the date hereof,
in the amount of $3,500,000 per annum (such amount to be adjusted to reflect
changes from January 1, 1994, in the Gross National Product Implicit Price
Deflator as published from time to time in the United States Department of
Commerce Bureau of Economic Analysis publication entitled "Survey of Current
Business" or, if not so published, such other index as shall be used for similar
purposes under the Project Financing Agreements), shall be deemed reasonable.
Such management fee shall be payable monthly and, if not paid for any reason
(including as a result of insufficient funds or any restrictions under the
Project Financing Agreements), shall accrue interest until paid at an interest
rate equal to the prime rate of The Chase Manhattan Bank from time to time in
effect. Such management fee shall be in addition to other amounts payable to
the General Partner hereunder.
(c) The General Partner shall be reimbursed by the Partnership for
any third party costs, to the extent reasonably allocable to the Project, the
Partnership or IEC Funding, including rent and any independent legal, consulting
and accounting fees and expenses.
<PAGE>
20
(d) The General Partner shall be reimbursed by the Partnership for
the General Partner's general and administrative expenses, to the extent
reasonably allocable to the Project, the Partnership or IEC Funding.
(e) Subject to any restrictions in the Project Financing Agreements,
the General Partner shall be reimbursed by the Partnership for compensation
(including salary and related benefits) of individuals, to the extent reasonably
allocable to the Project, the Partnership or IEC Funding.
(f) It is understood that the annual management fee referred to in
paragraph (b) above is solely to compensate the General Partner for services in
the ordinary course. The General Partner also shall be entitled to reasonable
compensation for services outside the ordinary course, including services in
connection with any financing, refinancing, sale-leaseback or other transaction
on behalf of the Partnership.
SECTION 3.05. Limitation of Liability and Indemnification. (a) The
--------------------------------------------
General Partner shall not be liable, responsible or accountable in damages or
otherwise to any of the Partners or Assignees or the Partnership for or on
account of any act performed by the General Partner and believed by it in good
faith to be within the scope of the authority conferred by this Agreement, or
any failure or refusal to perform any acts except those expressly required by
this Agreement, regardless of whether any claim in respect of any such act or
failure to act is based on contract, tort (including negligence) or otherwise,
except for bad faith, wilful misconduct or gross negligence. For purposes of
this provision, any action taken or omitted on written advice of counsel for the
Partnership or the General Partner (which counsel may be an employee of the
General Partner) shall be deemed to have been taken or omitted in good faith and
without wilful misconduct or gross
<PAGE>
21
negligence. Unless specifically provided in this Agreement and except as
provided by law, the General Partner shall have no liability as a General
Partner for the unauthorized acts or omissions of any other Partner, any
Assignee or any Affiliate of a Partner or Assignee.
(b) The Partnership, its receiver or its trustee, shall indemnify the
General Partner against, and save the General Partner harmless from, any loss,
liability, damage or expense (including all liabilities under Federal and state
securities laws) incurred in respect of any claim, litigation or other
proceeding brought or asserted against the General Partner arising out of or
related to any act or omission of the General Partner in connection with the
business or activities of the Partnership; provided that such act or omission
--------
was believed by the General Partner in good faith to be within the scope of its
authority under this Agreement or was undertaken, not undertaken or made upon
written advice of counsel for the Partnership or the General Partner (which
counsel may be an employee of the General Partner). This indemnification
includes the payment, upon request by the General Partner, of all attorney's
fees and other expenses incurred by the General Partner in connection with the
defense of any such claim made against it, including, without limitation, any
claim asserted by any Limited Partner or Assignee individually, as a class
action or as a Partnership derivative action, and costs of settlement of any
claim made against it. The indemnification described in this Section 3.05 shall
not be available to the General Partner if a court, in a final nonappealable
decision, determines that the claim arose because of the General Partner's
wilful misconduct or gross negligence.
(c) The General Partner may purchase directors' and officers'
insurance and obtain reimbursement for the premiums therefor from the
Partnership.
(d) The benefits of this Section 3.05 shall apply to the
shareholders, directors, officers, employees, agents and Affiliates of the
General Partner to the same extent as to the General Partner.
SECTION 3.06. Other Business Ventures. The General Partner and its
------------------------
Affiliates may engage, directly or indirectly, in other business ventures of
every nature and description, including ownership, development, operation and
management of other cogeneration projects in addition to the
<PAGE>
22
Project (even if such projects compete with the Project), and neither the
Partnership nor any Partner or Assignee shall have any claim or rights hereunder
in or to any such other ventures or the income or profits derived therefrom.
ARTICLE IV
Books; Elections; Budgets; Fiscal Year
--------------------------------------
SECTION 4.01. Administrative Services, Books, Records and Reports.
--------------------------------------------------
(a) The General Partner, or a Person or Persons designated by the General
Partner, shall cause to be performed all general and administrative services on
behalf of the Partnership in order to assure that complete and accurate books
and records of the Partnership are maintained at the Partnership's principal
place of business showing the name, address and Interest of each Partner, all
receipts and expenditures, assets and liabilities, profits and losses of the
Partnership, and all other records neces sary for recording the Partnership's
business and affairs.
(b) Promptly following any modification of this Agreement made
pursuant to Section 8.04 the General Partner will furnish to each other Partner
and Assignee notice thereof.
SECTION 4.02. Tax Matters. The General Partner shall be the Tax
------------
Matters Partner (as defined in Section 6231(a)(7) of the Code) of the
Partnership. The General Partner shall, in its discretion, make all tax
elections on behalf of the Partnership, except that if any Partner or Assignee
requests, the Partnership shall make an election under Section 754 of the Code
at such Partner's or Assignee's expense (which shall be prepaid as a condition
to such election, in the discretion of the General Partner). The General
Partner shall cause to be prepared, shall sign and shall timely submit all tax
returns required to be submitted by the Partnership, at the Partnership's
expense. The General Partner shall cooperate with and monitor any Federal or
state government taxing authority in any audit that such taxing authority may
conduct of the Partnership's books, records or other information or documents
and shall take all other action to be taken by it as contemplated by Sections
6221-6232 of the Code.
<PAGE>
23
SECTION 4.03. Fiscal Year. The fiscal year of the Partnership
------------
(herein called the "Fiscal Year") shall be the calendar year.
-----------
ARTICLE V
Distributions of Distributable Funds
------------------------------------
SECTION 5.01. Distributions of Distributable Funds. (a) The General
-------------------------------------
Partner shall from time to time determine the amount of the Partnership's cash
available for distribution to the Partners and Assignees (herein called
"Distributable Funds"). Distributable Funds shall be determined in the
- --------------------
reasonable discretion of the General Partner based upon the amount of cash
received by the Partnership (including proceeds of borrowings, if any) after (i)
payment of or provision for all operating costs and expenses (excluding
depreciation and other non-cash expenses), any capital expenditures, principal
of and interest on any debts and other obligations of the Partnership (including
any optional prepayment thereof at the General Partner's discretion, as well as
mandatory payments), amounts payable to the General Partner pursuant to this
Agreement and any other liabilities of the Partnership and (ii) provision for
any reserves, deposits or collateral security required to be maintained pursuant
to any Project Financing Agreement or any other contract binding upon the
Partnership and any other reserves determined by the General Partner to be
reasonable or prudent, including reserves for working capital purposes or for
payment of any liabilities (contingent or otherwise) of the Partnership. The
determination of Distributable Funds also shall be subject to any restrictions
and limitations imposed by any Project Financing Agreement or any other contract
binding upon the Partnership.
(b) Except as provided in Section 7.02 hereof and except as provided
in any amendment or modification to this Agreement providing for distributions
on a priority basis, Distributable Funds determined as provided above shall be
distributed to the Partners and Assignees ratably in accordance with their
respective Percentage Interests as of the date of distribution. The date of any
such distribution shall be determined by the General Partner subject to any
restrictions and limitations imposed by any Project Financing Agreement or any
other contract binding upon the Partnership.
<PAGE>
24
(c) This Section 5.01 shall not apply to distributions upon
dissolution of the Partnership, which shall be made as provided in Article VII.
ARTICLE VI
Transfers of Partnership Interests
----------------------------------
SECTION 6.01. Transfer Restrictions. A Transfer shall not be
----------------------
permitted without the prior written consent of the General Partner, which
consent may be withheld in the discretion of the General Partner. If the
General Partner consents to a Transfer, the General Partner may impose
conditions upon such Transfer, including conditions that:
(a) the Transferee executes and delivers to the General Partner:
(i) an instrument reasonably satisfactory to the General Partner
pursuant to which such Transferee assumes all the obligations of the
relevant Transferor with respect to the Interest and/or Percentage Interest
transferred and agrees to be bound by the terms of this Agreement (or, in
the case of Transfers described in clauses (ii) and (iii) of the definition
of that term, a similar instrument that requires that such obligations be
assumed and such agreement be made following enforcement of the relevant
hypothecation, mortgage, pledge, assignment, security interest or other
encumbrance); and
(ii) such additional instruments and documents as shall be reasonably
required by the General Partner;
(b) the Transferor delivers to the General Partner an opinion of
counsel (reasonably satisfactory to the General Partner) that such Transfer will
not:
(i) result, directly or indirectly, in the termination of the
Partnership for Federal income tax purposes;
(ii) result in the violation of the Securities Act of 1933 or any
other applicable Federal or state securities laws;
<PAGE>
25
(iii) be a violation of or an event of default under, or result in an
acceleration of any indebtedness under, any Project Financing Agreement or
other note, mortgage, indenture, loan agreement or similar instrument or
document to which the Partnership is a party; or
(iv) result in or create a prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended from time to time, or
result in the holder of an Interest or the assets of the Partnership being
subject to the provisions of such statute; and
(c) the General Partner is furnished with evidence satisfactory to it
that all transaction expenses for which the Transferor is or may be liable and
any expenses incurred by the Partnership in connection with such Transfer
(including preparation of any part-year tax returns and related matters) have
been paid or reimbursed in full.
The General Partner may waive all or any of the conditions described
above. In addition, the conditions described above shall not apply to any
Transfer of the Interest of the General Partner pursuant to any pledge or
security interest granted to secure obligations under any Project Financing
Agreement.
SECTION 6.02. Consequences of Transfer. (a) Any Transfer in
-------------------------
contravention of this Agreement shall be void and ineffective and shall not bind
or be recognized by the Partnership.
(b) Any Limited Partner who Transfers all his Interest (other than
pursuant to a Transfer described in clause (ii) or (iii) of the definition of
that term, which Transfer has not yet become effective to divest the Transferor
of his Interest) shall cease to be a Limited Partner and shall no longer have
the rights and privileges of a Limited Partner except that, unless and until the
Transferee is admitted as a Substitute Limited Partner as provided below, the
Transferor shall retain the statutory obligations of an assignor limited partner
under the Uniform Act.
(c) A Transferee of a Limited Partner's Interest who does not become
a Substitute Limited Partner as provided below shall be an Assignee. An
Assignee who desires to make a further Transfer of his Percentage Interest shall
be
<PAGE>
26
subject to all the provisions of this Article VI to the same extent as though
such Assignee were a Limited Partner. Unless and until such Assignee becomes a
Substitute Limited Partner, such Assignee's only right or interest under this
Agreement shall be as expressly provided herein for an Assignee.
(d) A Transferee of a Limited Partner's Interest shall become a
Substitute Limited Partner only with the prior written consent of the General
Partner, which consent may be withheld in the discretion of the General Partner;
provided that any such Transferee that was a Limited Partner prior to the
- --------
Transfer shall become a Substitute Limited Partner with respect to the
Transferred Interest without the necessity of such consent. If the General
Partner grants such consent, such Transferee shall become a Substitute Limited
Partner effective upon reflection by the General Partner of such Transferee as a
Limited Partner on the books and records of the Partnership.
SECTION 6.03. Mandatory Transfer. (a) If the General Partner and
-------------------
the Majority Limited Partners approve a sale or other disposition of all, but
not less than all, of the Interests in the Partnership, then all the Limited
Partners shall be required to Transfer their respective Interests in connection
with such sale or other disposition. Each Limited Partner agrees to cooperate
with the General Partner in connection with any such sale or disposition and to
execute and deliver such instruments and documents as shall be reasonably
required by the General Partner in connection therewith, including a bill of
sale or other appropriate instrument in order to effect such sale or other
disposition. Each Limited Partner also agrees to provide such representations,
warranties, agreements and indemnities in connection with any such sale or
disposition as shall be approved by the Majority Limited Partners to be provided
by the Limited Partners generally, which may include representations and
warranties with respect to the ownership of the Interest being sold or disposed
of and the Transfer thereof free and clear of liens and other encumbrances. The
proceeds of any sale or other disposition of all the Interests in the
Partnership pursuant to this Section shall be paid to the General Partner and,
after deducting any fees, expenses or reasonable reserves, the net proceeds
shall be distributed to the Partners and Assignees in the respective amounts
that the Partners and Assignees would have received had the Partnership sold all
of its assets for an amount equal to the sum of (i) the aggregate amount of
<PAGE>
27
net proceeds received from the sale or other disposition of all of the Interests
in the Partnership and (ii) the aggregate amount of the Partnership's
liabilities and the Partnership had then liquidated in accordance with Section
7.02(a) hereof.
(b) Any sale or disposition of all the Interests in the Partnership
pursuant to this Section shall be effective to Transfer all such Interests free
and clear of the claims and interests of all Assignees and vest 100% of the
Percentage Interests in the purchaser or purchasers of the Interests. Upon any
such sale or disposition, the only rights of the Assignees shall be the right to
receive their respective shares of the net proceeds therefrom in accordance with
paragraph (a) of this Section. Notwithstanding the foregoing, the General
Partner may request that the Assignees cooperate and execute instruments and
documents in connection with any such sale or disposition to the same extent as
Limited Partners are required to do so pursuant to paragraph (a) of this
Section, and if any Assignee fails or refuses to do so then such Assignee's
share of the net proceeds may be withheld pending compliance by such Assignee
with the requirements of this Section.
ARTICLE VII
Dissolution and Liquidation
---------------------------
SECTION 7.01. Dissolution. The Partnership shall be dissolved upon
------------
the occurrence of any of the following:
(a) December 31, 2036;
(b) the sale, transfer or other disposition of all or substantially
all the assets of the Partnership, or the agreement of the General Partner on
behalf of the Partnership so to do, except for mortgages or security interests
as may be granted to secure obligations of the Partnership and except for lease
or sale-leaseback transactions;
(c) the acquisition by a Partner of all of the Interests of the other
Partners; or
(d) subject to Section 7.03, upon an event of withdrawal of the
General Partner (or, if there is more than
<PAGE>
28
one General Partner, the last remaining General Partner) within the meaning of
the Uniform Act.
SECTION 7.02. Winding Up Affairs and Distributions of Assets. (a)
-----------------------------------------------
Upon dissolution of the Partnership (except dissolution pursuant to Section
7.01(c)), the General Partner (and in the case of dissolution pursuant to
Section 7.01(d) the Limited Partners), shall proceed to wind up the affairs of
the Partnership, liquidate the remaining property and assets of the Partnership
and terminate the Partnership. Subject to the requirements of the Uniform Act,
the proceeds of such liquidation shall be applied in the following order of
priority: (i) first, to the expenses of such liquidation; (ii) second, to the
debts and liabilities of the Partnership to third parties, if any, in the order
of priority provided by law; (iii) third, to the establishment and maintenance
of a reasonable reserve to provide for any contingent or unforeseen liabilities
or obligations of the Partnership to third parties to be held and disbursed, at
the discretion of the General Partner (and in the case of dissolution pursuant
to Section 7.01(d), the Limited Partners) by an escrow agent selected by them,
and at the expiration of such period as the General Partner (and in the case of
dissolution pursuant to Section 7.01(d), the Limited Partners) may deem
advisable, the balance shall be distributed as provided herein; and (iv) fourth,
to any and all debts of the Partnership to the Partners and Assignees. The
remaining assets of the Partnership, if any, shall be distributed to the
Partners and Assignees (or their successors and permit ted assigns) in
accordance with the balances of the Capital Accounts of each such Partner or
Assignee in the ratio of the positive Capital Account balances of all Partners
and Assignees (after such Capital Accounts have been adjusted to reflect all
allocations required pursuant to Sections 2.05, 2.06 and 2.07).
(b) If any assets of the Partnership are to be distributed in kind,
such assets shall be distributed on the basis of the fair market value thereof,
and any Partner or Assignee receiving any interest in such assets shall receive
such interest therein as a tenant-in-common with all other Partners and
Assignees receiving such an interest. Unless otherwise agreed by all the
Partners, the fair market value of such assets shall be determined by an
appraiser to be selected by the General Partner and whose fees shall be paid by
the Partnership.
<PAGE>
29
(c) If the General Partner's Capital Account has a deficit balance
(after giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), the
General Partner shall contribute to the capital of the Partnership the amount
necessary to restore such deficit balance to zero in compliance with Treasury
Regulations Section 1.704-1(b)(2)(ii)(b)(3), with the funds so contributed to be
distributed pursuant to the rules of this Section 7.02.
SECTION 7.03. Continuation of Business of Partnership. If the
----------------------------------------
Partnership is dissolved by reason of Section 7.01(d), it may be reconstituted
and its business continued if within ninety (90) days of such dissolution and by
written vote of Limited Partners having Interests aggregating at least 66-2/3%
of the Interests of all the Limited Partners at the time (i) the Limited
Partners elect to continue the business; and (ii) the Limited Partners appoint a
Person to serve in the capacity of successor general partner of the Partnership.
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Notices. (a) All notices, consents, approvals,
--------
reports, designations, requests and other communications (herein collectively
called the "Notices") authorized or required to be given pursuant to this
Agreement shall be given in writing and either personally served on the Partner
or Assignee (or a general partner or an officer of the Partner or Assignee) to
whom it is given or mailed by registered, certified or first class mail, postage
prepaid, or sent by facsimile or overnight delivery service or courier,
addressed as follows:
If to the General Partner:
Intercontinental Energy Corporation
350 Lincoln Place
Hingham, Massachusetts 02043
Attention: President
Facsimile Number: (617) 740-1281
<PAGE>
30
If to a Limited Partner or Assignee, at such Limited Partner's or
Assignee's address set forth on Schedule A.
(b) All Notices shall be deemed given when delivered or, if mailed as
provided in Section 8.01(a), on the second day after the day of mailing, or if
sent by facsimile, at the time of acknowledgment. Any Partner or Assignee may
change its address for the receipt of Notices at any time by giving notice
thereof to the General Partner (or, in the case of a change of address of the
General Partner, to each of the other Partners and Assignees).
SECTION 8.02. Partnership Act Certificate Requirements. From time to
-----------------------------------------
time the Limited Partners shall sign and swear to all such writings as may be
required, if any, to amend the certificate of limited partnership to reflect
changes in the Partnership made pursuant to this Agreement or for the carrying
out of the terms of this Agreement or, upon dissolution of the Partnership, to
cancel such certificate of limited partnership. Each Partner hereby appoints,
and each Person who may subsequently become a Partner shall be deemed to have
appointed, the General Partner as its true and lawful attorney-in-fact in such
Partner's name and behalf to sign, certify under oath and acknowledge each and
every such amendment or certificate of cancellation or other instrument that may
be required to carry out the terms of this Agreement or to effect the
substitution of a Partner. The foregoing power of attorney shall be
irrevocable, shall be a power coupled with an interest, and shall survive the
Transfer by a Partner or Assignee of its Interest or Percentage Interest or the
dissolution of a Partner.
SECTION 8.03. Entire Agreement. This Agreement supersedes all prior
-----------------
agreements and understandings among the Partners and Assignees with respect to
the subject matter hereof.
SECTION 8.04. Modification. No change or modification of this
-------------
Agreement shall be effective unless such change or modification is in writing
and has been signed by the General Partner and the Majority Limited Partners,
except that (i) no change or modification that increases or imposes additional
obligations or liabilities upon any Limited Partner under this Agreement shall
be effective unless signed by such Limited Partner, (ii) no change or
modification that adjusts a Limited Partner's
<PAGE>
31
Interest or Percentage Interest (except to give effect to Transfers or
redemptions or to the admission of additional Partners as provided in this
Agreement) shall be effective unless signed by such Limited Partner and (iii)
the written consent of all Limited Partners shall be required for any change or
modification to this Section 8.04. Notwithstanding the foregoing, any change or
modification of this Agreement that may, pursuant to any provision hereof, be
made by the General Partner shall be effective upon execution by the General
Partner of a written instrument effecting such change or modification. Any
change or modification of this Agreement made in accordance with this Section
shall be effective and binding on all the Partners and Assignees.
SECTION 8.05. Waivers. No waiver of any breach of any of the terms
--------
of this Agreement shall be effective unless such waiver is in writing and signed
by the Partner against whom such waiver is claimed. No waiver of any breach
shall be deemed to be a waiver of any other or subsequent breach.
SECTION 8.06. Severability. If any provision of this Agreement shall
-------------
be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 8.07. Further Assurances. Each Partner shall execute such
-------------------
deeds, assignments, endorsements, evidences of Transfer and other instruments
and documents and shall give such further assurances as shall be necessary to
perform its obligations hereunder.
SECTION 8.08. Investment Representations. Each Partner represents
---------------------------
and warrants that its Interest has been acquired under this Agreement for its
own account, for investment, and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling such Interest, and that it will not effect a Transfer, or attempt to
effect a Transfer, of its Interest in violation of the Securities Act of 1933,
as amended, or any other applicable Federal or state law.
SECTION 8.09. Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of New Jersey.
<PAGE>
32
SECTION 8.10. Counterparts; Effectiveness. This Agreement may be
----------------------------
executed in any number of counterparts, all of which shall constitute one and
the same instrument. It is not necessary that all signatures be on the same
counterpart, and this Agreement may be executed by different parties on separate
counterparts. This Agreement shall become effective as of the date hereof when
counterparts of this Agreement executed by each Partner have been delivered to
the General Partner.
SECTION 8.11. Limitation on Rights of Others. No Person other than a
-------------------------------
Partner or Assignee shall have any legal or equitable right, remedy or claim
under or in respect of this Agreement. Except to the extent required by the
Uniform Act, none of the provisions of this Agreement shall be for the benefit
of or be enforceable by any creditor of the Partnership.
SECTION 8.12. Successors and Assigns. This Agreement shall be
-----------------------
binding upon and inure to the benefit of the Partners and Assignees and their
respective successors and permitted assigns.
SECTION 8.13. Power of Attorney. Each Limited Partner hereby
------------------
constitutes and appoints the General Partner, with unrestricted power of
substitution and resubstitution, the true and lawful attorney for such Limited
Partner with power and authority to act in its name and on its behalf to make,
execute, sign, acknowledge, deliver, swear to, file and record:
(a) any certificate of limited partnership or similar document, as
well as any amendments thereto, which the General Partner may deem to be
necessary, desirable or appropriate to evidence or effect the formation of
the Partnership or to qualify and continue it as a limited partnership or
assure the limited liability of the Limited Partners;
(b) any instrument or document which the General Partner may deem to
be necessary, desirable or appropriate to effect the continuation of the
Partnership or the dissolution and termination of the Partnership;
(c) any fictitious name or similar certificate required by law to be
filed on behalf of the Partnership;
<PAGE>
33
(d) any amendments or modifications to this Agreement that are authorized
or approved as provided herein, and any other instruments or documents
which are authorized pursuant to Section 6.03; or
(e) all such other instruments, documents and certificates as may from
time to time be required by the laws of any jurisdiction, domestic or
foreign, to effect, implement, continue and defend the valid and subsisting
existence of the Partnership and its power to carry out its purposes as set
forth in this Agreement;
provided, however, that the General Partner shall not take any action as
- -------- -------
attorney-in-fact for any Limited Partner without its consent which would (i)
increase the amount of the Capital Contributions payable by such Limited
Partner; or (ii) cause such Limited Partner to lose its limited liability
status.
It is expressly acknowledged by each Limited Partner that the
foregoing power of attorney is coupled with an interest, is irrevocable and
shall survive the death, withdrawal, retirement, removal, bankruptcy,
insolvency, reorganization, merger, insanity, incompetency or legal incapacity
of such Limited Partner and any assignment, transfer or other disposition,
whether voluntary, by operation of law or otherwise, by such Limited Partner of
all or any portion of its Interest or Percentage Interest and shall extend to
its successors, assigns and legal representatives.
SECTION 8.14. References to Agreement. Words such as "herein",
------------------------
"hereinafter", "hereof" and "hereunder" refer to this Agreement as a whole and
not merely to a subdivision in which such words appear, unless the context
otherwise requires.
SECTION 8.15. Paragraph Titles. Captions contained in this Agreement
-----------------
are inserted only as a matter of convenience and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision hereof.
SECTION 8.16. Survival of Representations, Warranties and Agreements.
------------------------------------------------------
All representations, warranties, and agreements herein shall survive until the
dissolution and final liquidation of the Partnership, except to the
<PAGE>
34
extent that a representation, warranty or agreement expressly provides otherwise
or was applicable to a specific period of time that has passed.
IN WITNESS WHEREOF, the Partners have duly executed this Agreement as
of the day and year first above written.
GENERAL PARTNER:
INTERCONTINENTAL ENERGY CORPORATION,
by /s/ Stephen Roy
------------------------------------------
Title: President
LIMITED PARTNERS:
/s/ Stephen B. Roy
--------------------------------------------
Stephen B. Roy
/s/ Peter A. Roy
--------------------------------------------
Peter A. Roy
____________________________________________
Peter A. Roy, as custodian f/b/o Peter Roy,
II
____________________________________________
Peter A. Roy, as custodian f/b/o Christopher
Bonney Roy
/s/ Mary L. Roy
--------------------------------------------
Mary L. Roy
/s/ John R. Roy
--------------------------------------------
John R. Roy
<PAGE>
35
/s/ Jane L. Roy
--------------------------------------------
Jane L. Roy
/s/ Ellen S. Roy
--------------------------------------------
Ellen S. Roy
/s/ Jock R. Roy
--------------------------------------------
Jock R. Roy
<PAGE>
SCHEDULE A
NJEA
<TABLE>
<CAPTION>
=========================================================================================================================
NAME ADDRESS INTEREST PERCENTAGE
INTEREST
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GENERAL PARTNER:
- --------------------------------------------------------------------------------------------------------------------------
Intercontinental Energy Corporation 350 Lincoln Place 1.0000% 1.0000%
Hingham, MA 02043
- --------------------------------------------------------------------------------------------------------------------------
LIMITED PARTNERS:
- --------------------------------------------------------------------------------------------------------------------------
Stephen B. Roy c/o 350 Lincoln Place 37.5765% 13.8650%
Hingham, MA 02043
- --------------------------------------------------------------------------------------------------------------------------
Peter A. Roy 49 Margin Street 23.0768% 10.3554%
Cohasset, MA 02025
- --------------------------------------------------------------------------------------------------------------------------
Peter A. Roy as custodian 49 Margin Street 1.0211% 0.4600%
f/b/o Peter Roy, II Cohasset, MA 02025
- --------------------------------------------------------------------------------------------------------------------------
Peter A. Roy as custodian 49 Margin Street 1.0211% 0.4600%
f/b/o Christopher Bonney Roy Cohasset, MA 02025
- --------------------------------------------------------------------------------------------------------------------------
Mary L. Roy 438 Jerusalem Road 12.8659% 5.7734%
Cohasset, MA 02025
- --------------------------------------------------------------------------------------------------------------------------
John R. Roy 438 Jerusalem Road 12.2532% 5.5020%
Cohasset, MA 02025
- --------------------------------------------------------------------------------------------------------------------------
Jane L. Roy 422 Jerusalem Road 7.1477% 3.2084%
Cohasset, MA 02025
- --------------------------------------------------------------------------------------------------------------------------
Ellen S. Roy 133 Beach Street 2.5527% 1.1468%
Cohasset, MA 02025
- --------------------------------------------------------------------------------------------------------------------------
Jock R. Roy 13 Oakwood Drive 1.4850% 1.3331%
Duxbury, MA 02332
- --------------------------------------------------------------------------------------------------------------------------
ASSIGNEES:
- --------------------------------------------------------------------------------------------------------------------------
S/J NJEA Associates Limited Partnership 350 Lincoln Place 3.0000%
Hingham, MA 02043
- --------------------------------------------------------------------------------------------------------------------------
Harrison Wellford 5054 Millwood Lane, N.W. 1.0000%
Washington, D.C. 20016
- --------------------------------------------------------------------------------------------------------------------------
John Sachs 3009 44th Place, N.W. 0.2500%
Washington, D.C. 20016
- --------------------------------------------------------------------------------------------------------------------------
Graham Allison 69 Pinehurst Road 1.2500%
Belmont, MA 02178
- --------------------------------------------------------------------------------------------------------------------------
William Hogan 345 Marsh Street 0.2500%
Belmont, NA 02178
- --------------------------------------------------------------------------------------------------------------------------
Beale Lynch Capital Partners, LP. c/o M.R. Weiser & Co. 1.4375%
Attn: Lisa Osofsky
700 Wood Avenue South
Iselin, NJ 08830-2714
- --------------------------------------------------------------------------------------------------------------------------
CS First Boston NJEA, Inc. c/o Daniel Cahillane 0.8750%
c/o The Clipper Group L.P.
12 East 49th Street
30th Floor
New York, NY 10017
- --------------------------------------------------------------------------------------------------------------------------
Sayreville Energy Associates Limited Partnership c/o NEA/NJEA Inc. 48.8334%
350 Lincoln Place
Hingham, MA 02043
==========================================================================================================================
TOTAL 100.0000% 100.0000%
===================================================================================================================
</TABLE>
<PAGE>
EXHIBIT 10.10.5
OPERATION AND MAINTENANCE AGREEMENT
BY AND BETWEEN
NECO-BELLINGHAM, INC.
AS LESSEE
AND
WESTINGHOUSE OPERATING SERVICES COMPANY, INC.
AS OPERATOR
FOR THE
BELLINGHAM PROJECT
CARBON DIOXIDE RECOVERY FACILITY
DATED AS OF
MAY 1, 1995
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1.0 DEFINITIONS..................................................... 1
2.0 STATUS OF OPERATOR.............................................. 6
3.0 OPERATOR'S RESPONSIBILITIES..................................... 7
4.0 LESSEE'S RESPONSIBILITIES....................................... 12
5.0 PAYMENTS BY LESSEE.............................................. 13
6.0 TERM OF AGREEMENT............................................... 15
7.0 TERMINATION..................................................... 16
8.0 OPERATOR'S INDEMNITY............................................ 18
9.0 LESSEE'S INDEMNITY.............................................. 18
10.0 REPRESENTATIONS AND WARRANTIES................................. 19
11.0 FORCE MAJEURE.................................................. 20
13.0 DISPUTE RESOLUTION............................................. 22
14.0 LIMITATIONS OF LIABILITY....................................... 23
16.0 HAZARDOUS MATERIALS............................................ 25
17.0 PROPRIETARY INFORMATION........................................ 26
18.0 MISCELLANEOUS.................................................. 27
</TABLE>
i
<PAGE>
EXHIBITS
Exhibit A Description of the Facility
Exhibit B Facility Work Force
Exhibit C Existing Inventory
Exhibit D Termination Payments
Exhibit E O&M Recordkeeping Requirements
Exhibit F Monthly Sum Breakdown
Exhibit G Daily Reports Provided to Lessee
Exhibit H Site Layout and Description
Exhibit I Sample of Monthly Report
Exhibit J Inspection Scheduling Guidelines
Exhibit K Escalation Formula
Exhibit L Carbon Dioxide Quality Specifications
Exhibit M Price List 1720
Exhibit N Westinghouse Electric Corporation Guaranty
ii
<PAGE>
OPERATION AND MAINTENANCE AGREEMENT
THIS OPERATION AND MAINTENANCE AGREEMENT, dated as of May 1, 1995 (the
"Effective Date"), is by and between NECO-BELLINGHAM, INC. ("Lessee"), having a
place of business at 11104 West Airport Boulevard, Suite 160, Stafford, Texas
77477, and WESTINGHOUSE OPERATING SERVICES COMPANY, INC., a Delaware corporation
("Operator"), having a place of business at 4400 Alafaya Trail, Orlando, Florida
32826-2399.
W I T N E S S E T H
WHEREAS, the Facility (as hereinafter defined), located in Bellingham,
Massachusetts, is owned by Northeast Energy Associates, A Limited Partnership, a
Massachusetts limited partnership ("Owner");
WHEREAS, Lessee leases the Facility from Owner and operates the
Facility;
WHEREAS, Operator, by itself and through suppliers and subcontractors,
desires to provide certain operation and maintenance services for the Facility
to Lessee;
WHEREAS, Operator has experience in performing services required for
the operation and maintenance of the Facility; and
WHEREAS, Lessee and Operator now desire to set forth the terms
pursuant to which Operator shall provide services for the operation and
maintenance of the Facility.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements herein expressed, Lessee and Operator, intending to be
legally bound, hereby agree to the following:
1
<PAGE>
1.0 DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used herein and unless otherwise
---------------------
expressly indicated, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and the plural forms of
the terms defined):
AFFILIATE shall mean any corporation or other entity that, directly or
---------
indirectly, controls or is controlled by or under common control with a Party.
AGREEMENT shall mean this Operation and Maintenance Agreement
---------
(including all Exhibits attached hereto), as it may be amended from time to time
in accordance with its terms.
BUDGET shall have the meaning specified in Article 3.9.
------
CARBON DIOXIDE PURCHASE AGREEMENTS shall mean those certain agreements
----------------------------------
for the sale of carbon dioxide produced by the Facility (a) between Lessee and
Airco Carbon Dioxide Division of The BOC Group, Inc., dated as of December 21,
1990, and (b) between Lessee and Liquid Carbonic Carbon Dioxide Corporation,
dated as of December 21, 1990, each as the same may be amended or substituted
for from time to time.
CONTRACT PURCHASERS shall mean Airco Carbon Dioxide Division of The
-------------------
BOC Group, Inc., Liquid Carbonic Carbon Dioxide Corporation and such other
parties as may from time to time purchase carbon dioxide produced by the
Facility.
CHANGE ORDER shall have the meaning specified in Article 16.
------------
CONTRACT YEAR shall mean each of:
-------------
1. the period from the Operation Date until December 31 of the same
calendar year; and
2. each consecutive full or partial calendar year thereafter ending
on or prior to the last Day of the Term.
Any calculation in this Agreement determined by reference to a
Contract Year shall be prorated with respect to a Contract Year of less than
three hundred sixty five (365) Days.
CONSUMABLES shall mean all items consumed or needing regular periodic
-----------
replacement during the operation and maintenance of the Facility, including all
gaskets, seals, small tools, lubricants, rags, oils, filter media, greases,
chemicals, fluids, additives, anti-corrosion devices and other expendable
materials.
DAY shall mean a calendar day, unless otherwise specified. In the
---
event that a payment or regular reporting obligation or an optional notice
deadline falls or occurs due on a Saturday, Sunday or legal holiday in the
locality where the Work is being performed, the obligation or deadline shall be
deemed due or to occur on the next business Day thereafter.
1
<PAGE>
EFFICIENCY GUARANTEE shall mean consumption and makeup of MEA and
--------------------
copper, and costs for reclaimer sump waste disposal, in each case based on
quantities for which charges are incurred from third parties, in the operation
of the Facility at a rate per ton of aggregate Product output as hereinafter
adjusted not in excess of 3.75 pounds (undiluted equivalent)per ton, 17.5 pounds
(undiluted equivalent) per 1,000 tons, and 1.03 gallons per ton, respectively.
Aggregate Product output shall be adjusted for purposes of determining
compliance with the Efficiency Guarantee in respect of each Contract Year by
increasing the aggregate Product Output (computed as provided for in the Minimum
Product Output Guarantee) for such Contract Year by the number of tons of
Product extracted from flue gas but not placed in storage due to (i)
unavailability of contemporaneous storage for Product, (ii) events of Force
Majeure or (iii) Scheduled or Unscheduled Services on the liquefaction portion
(back end) of the Facility, or (iv) Lessee's direction.
FACILITY shall mean the Carbon Dioxide Recovery Facility located on
--------
the Site adjacent to the Power Plant, including raw material, product and
byproduct loading, unloading and storage facilities, and all auxiliary systems
and Facility Equipment necessary for the operation and maintenance of the same.
FACILITY CONTRACTS shall mean collectively the Carbon Dioxide Purchase
------------------
Agreements, the Lease Agreement and the Steam Sales Agreement.
FACILITY EQUIPMENT shall mean collectively all equipment, machinery,
------------------
apparatus, structures and other similar items required for the operation and
maintenance of the Facility.
FACILITY OPERATING PROCEDURES shall mean the procedures for the
-----------------------------
operation of the Facility production process included as part of the Site
Procedures, including any such procedures specified in the operation and
maintenance manuals and standard operating procedures for the Facility provided
by the contractor and any equipment supplier therefor and the most recent
revision of the MEA solution operating guidelines.
FACILITY TOOLS shall mean collectively all tools required for the
--------------
operation and maintenance of the Facility.
FACILITY WORK FORCE shall mean the individuals required for the
-------------------
operation and maintenance of the Facility and performance of all services and
other obligations of Operator under this Agreement, whether provided directly or
through Subcontractors. Operator's proposed organizational structure of the
Facility Work Force that will operate the Facility and provide Routine Services
(all of whom shall be employees of Operator) are set forth in Exhibit B,
---------
provided, however, that Exhibit B shall not have the effect of limiting in any
---------
respect the scope of Operator's obligation to provide services to carry out the
Work, including operation and Routine Services.
FINANCING ENTITY shall mean any bank, financial institution or other
----------------
person or entity providing development, construction or permanent financing or
refinancing for the development, construction or operation of the Facility or
the Power Plant or matters related thereto. The term Financing Entity shall
include entities providing financing to Owner and entities providing financing
in connection with a lease of the Facility.
FINANCING AGREEMENTS shall mean the promissory notes, loan agreements,
--------------------
guarantees, assignments, security agreements, mortgages, and other agreements
among Lessee and/or Owner and any Financing Entity.
2
<PAGE>
FORCE MAJEURE shall have the meaning specified in Article 11.1.
-------------
GOVERNMENTAL REQUIREMENTS shall mean all applicable federal, state,
-------------------------
county, municipal and administrative laws and regulations and any rulings,
interpretations, orders, codes and standards promulgated thereunder.
HAZARDOUS MATERIALS shall mean (a) asbestos, (b) any "hazardous
-------------------
substance" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), or the
Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et
seq.), (c) "hazardous wastes" as defined in the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Sections 9601, et seq.), and (d) "toxic
substances" as defined in the Toxic Substance Control Act as amended (15 U.S.C.
Section 2601 et seq.), in the regulations adopted and publications promulgated
pursuant thereto or in any other federal, state or local environmental
Governmental Requirements.
INTEREST RATE shall mean the lesser of:
-------------
(a) the reference rate of The Chase Manhattan Bank, N.A. in effect on
the date payment is due plus one percent (1%); or
(b) the maximum non-usurious interest rate under applicable law.
LEASE AGREEMENT shall mean that certain agreement for the lease of the
---------------
Facility between Owner and Lessee, dated as of June 28, 1989, as the same may be
amended or substituted for from time to time.
LESSEE shall mean NECO-Bellingham, Inc. and its successors and
------
assigns.
MAJOR MAINTENANCE BUDGET shall mean that portion of the Budget
------------------------
contemplated by Article 3.9(b).
MEA shall mean Monoethanolamine
MINIMUM PRODUCT OUTPUT GUARANTEE for any Contract Year shall mean
--------------------------------
production in such Contract Year of a number of tons of Product equal to (a) one
hundred twelve thousand five hundred (112,500) reduced by (b) tons of Product
not produced during such Contract Year (as hereafter determined) because of any
complete or partial interruption in the Facility's production due exclusively to
(i) unavailability of electricity, steam and flue gas from at least one
combustion turbine operating on natural gas in the Power Plant, (ii)
unavailability of contemporaneous storage for Product, (iii) events of Force
Majeure or, (iv)Lessee's direction.
Production in any Contract Year shall be deemed to equal the sum of
the Product output for each Day of the Contract Year, calculated for each such
Day as follows:
Product output = (CI - OI) + S
Where:
3
<PAGE>
CI = Total Product inventory in all storage tanks as of 24:00 hrs
(end of Day).
OI = Total Product inventory in all storage tanks as of 00:00 hrs
(beginning of Day).
S = Total of Product shipped for the Day.
Tons of Product not produced in any Contract Year shall be deemed to
equal the sum of the tons of Product not produced for each Day in such Contract
Year on which any such interruption occurs, calculated for each such Day as
follows:
Product not produced = (AP / D) - DP
Where:
AP = Aggregate Product output for all Days in such Contract Year on
which no interruption occurs.
D = The number of Days in such Contract Year on which no interruption
occurs.
DP = Daily Product output for such Day.
MONTHLY SUM shall have the meaning specified in Article 5.2.
-----------
OPERATION DATE shall mean July 1, 1995.
--------------
OPERATOR shall mean Westinghouse Operating Services Company, Inc. and
--------
its permitted successors hereunder.
OWNER shall mean Northeast Energy Associates, A Limited Partnership,
-----
and its successors and assigns.
PARTY and PARTIES shall mean Operator and/or Lessee, as applicable.
----- -------
PAYMENT REQUEST shall mean the periodic written requests for payment
---------------
to be submitted by Operator to Lessee in accordance with Article 5.
PERMIT shall mean any approval, certificate, permit, license or the
------
like required for the relevant matter under applicable Governmental
Requirements.
PLAN OF OPERATIONS shall mean Lessee's written instructions to
------------------
Operator issued pursuant to Article 4.1.
PLANT MANAGER shall mean the individual from time to time designated
-------------
by Operator, and approved by Lessee, pursuant to Article 3.11.
4
<PAGE>
POWER PLANT shall mean the Bellingham Cogeneration Facility owned by
-----------
Owner and located adjacent to the Facility.
PRODUCT shall mean liquid carbon dioxide meeting the minimum purity
-------
requirements set forth on Exhibit L.
---------
PROJECT ADMINISTRATOR shall mean the person or persons designated by
---------------------
Lessee pursuant to Article 4.2.
PRUDENT PRACTICES shall mean those, operating, maintenance,
-----------------
engineering and other practices and methods, as such may be changed from time to
time, that will result in the operation and maintenance of the Facility as
efficiently, safely, economically and reliably as is prudent under prevailing
industry practices and in compliance with the Agreement.
QUALIFYING FACILITY OBJECTIVE shall mean the use by the Facility in
-----------------------------
the production of Product of not less than five percent (5%) of the "total
energy output" of the Power Plant as defined by [18 C.F.R. Section 292.202(i)]
for the entire Contract Year. The total energy output for a Contract Year shall
be determined by means of actual measured flows, temperatures and pressures by
the steam and condensate return custody meters and instrumentation at the Power
Plant.
ROUTINE SERVICES shall mean services that can reasonably be expected
----------------
to be performed in the course of performance of Operator's operation and
maintenance duties identified in Article 3, including services of a regular or
minor nature that should be performed routinely to keep the Facility in good
working order, such as lubrication, repacking of valves, minor leak repair,
adjustments, calibrations and preventive and corrective services and regular
maintenance not requiring a complete or partial interruption in the Facility's
production for the performance thereof, and managerial oversight for Unscheduled
Services and the implementation of the Major Maintenance Budget, all to the
extent required by and in accordance with the standards provided in Article
3.32(a) through (f).
SAFETY AND SECURITY PROGRAM shall mean Operator's safety and security
---------------------------
program contemplated by Article 3.13.
SCHEDULED OUTAGE shall mean a planned complete or partial interruption
----------------
in the Facility's production that:
(a) has been coordinated in advance with Lessee and the Power Plant
with a mutually agreed upon start time and date and expected duration; and
(b) is required for Scheduled Services.
SCHEDULED SERVICES shall mean the planned periodic inspection,
------------------
testing, preventive and corrective servicing and maintenance, overhaul and
repair of the Facility requiring a complete or partial interruption in the
Facility's production for the performance thereof, all to the extent required by
and in accordance with the standards provided in Article 3.3(a) through (f).
Replacement of pumps, parts, compressors, motors, vessels and other major
Facility components, in each case having a component capital or repair cost in
excess of $25,000, shall not constitute Scheduled Services.
5
<PAGE>
SCOPE CHANGE shall mean all work, including those matters contemplated
------------
by Article 3.7, falling outside the scope of Work described in this Agreement,
as authorized by a Change Order.
SITE shall mean the site where the Facility is located as described in
----
Exhibit H.
- ---------
SITE PROCEDURES shall mean the procedures established pursuant to
---------------
Article 3.23 that prescribe the manner in which Work will be performed at the
Site.
SPARE PARTS shall mean all necessary or appropriate spare parts for
-----------
the Facility.
STEAM SALES AGREEMENT shall mean that certain agreement for the sale
---------------------
of steam produced by the Power Plant between Owner and Lessee, dated as of June
28, 1989, as the same may be amended or substituted for from time to time.
SUBCONTRACTOR shall mean any party with whom Operator enters into a
-------------
subcontract or otherwise arranges for the performance of any portion of the
Work.
TERM shall have the meaning provided in Article 6.1.
----
TRAINING PROGRAM shall mean Operator's training program for its
----------------
personnel responsible for operation and maintenance of the Facility as
contemplated by Article 3.24.
UNSCHEDULED OUTAGE shall mean a complete or partial interruption in
------------------
the Facility's production that is required for Unscheduled Services.
UNSCHEDULED SERVICES shall mean those services not defined as Routine
--------------------
Services or Scheduled Services or included under Article 3.9(b). Replacement of
pumps, parts, compressors, motors, vessels and other major Facility components,
in each case having a component capital or repair cost less than $25,000, shall
not constitute Unscheduled Services.
WORK shall mean all of Operator's obligations and responsibilities
----
under this Agreement.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
-----------------
herein shall be construed in accordance with generally accepted accounting
principles consistently applied, except as otherwise stated herein. References
to quantities of Product shall be deemed to be expressed in tons (2,000 pounds)
unless otherwise specified.
1.3 GENERAL REFERENCES. The words "hereof," "herein," "hereto" and
-------------------
"hereunder" and words of similar import when used in this Agreement shall,
unless otherwise specified, refer to this Agreement as a whole and not to any
particular provision of this Agreement.
2.0 STATUS OF OPERATOR
2.1 INDEPENDENT CONTRACTOR. Operator shall perform and execute its
-----------------------
obligations under this Agreement as an independent contractor to Lessee, and
shall, as between Operator and Lessee, be responsible for all employment
relations, including payroll and other taxes and other costs associated with,
all individuals performing any portion of the Work (including any such
individuals employed by or
6
<PAGE>
otherwise engaged by any Subcontractor). No such individual shall be deemed to
be an employee or agent of Lessee.
3.0 OPERATOR'S RESPONSIBILITIES
3.1 GENERAL SCOPE. Operator shall commence operation and maintenance
--------------
of the Facility on the Operation Date, and on such date shall assume full
responsibility for the scope of the Work as provided herein. The intent of the
foregoing is to require the provision by Operator, in exchange for the fixed and
variable payments provided for in Article 5, of a full complement of equipment,
materials, supplies and services, such that no other equipment, materials,
supplies or services will be required for the proper functioning of the
Facility, and to include within the Work both those matters that are
specifically addressed herein and also those that would reasonably be expected
to be performed or provided in order to achieve the foregoing. By way of
illustration, the obligation to "operate" the Facility shall be deemed also to
include the obligation to provide any equipment, materials, supplies or services
necessary for the startup and shutdown of the Facility.
3.2 OPERATION. Without limiting the generality of the foregoing,
----------
Operator shall operate the Facility so as to achieve the Minimum Product Output
Guarantee while meeting the limits of the Efficiency Guarantee and complying
with Governmental Requirements, the Site Procedures, Prudent Practices,
applicable operating requirements of the Facility Contracts, the Plan of
Operations and Lessee's reasonable directions that are consistent with the
foregoing. Operator shall also maintain metering equipment and records with
respect to all process chemicals and Consumables usage, all process emissions
and discharges and all Product deliveries. The Facility shall be staffed for
continuous operation twenty four (24) hours per Day, three hundred sixty five
(365) Days per Contract Year.
3.3 MAINTENANCE AND REPAIR SERVICES. Operator shall perform all Routine
--------------------------------
Services, Scheduled Services and Unscheduled Services, and implement all items
contemplated by the Major Maintenance Budget, each in accordance with the
standards provided in Article 3.3 (a) through (f), and shall provide all
equipment, materials, supplies and services necessary to accomplish the same,
either directly or through Subcontractors. Without limiting the generality of
the foregoing,
(a) Operator shall utilize and maintain a formal predictive,
preventive and corrective maintenance management system capable of documenting
all maintenance that is required, planned and completed. The system shall
utilize work orders and provide and maintain a list of Spare Parts availability,
Facility Equipment history and other details customarily collected with respect
to facilities similar to the Facility;
(b) Operator shall implement and periodically update a plan of
Scheduled Services for the Facility, including outage planning, execution and
coordination, technical supervision, labor, tooling and equipment, and
inspection reports and recommendations, subject to Lessee's approval, which
approval shall not be unreasonably withheld. The plan of Scheduled Services
shall include an inspection, not less than annually, of the interiors of all
major Facility vessels. The Parties shall mutually develop the plan of Scheduled
Services consistent with the scheduling requirements of the Power Plant and the
Contract Purchasers;
(c) Operator shall maintain a set of marked-up As-built drawings at
the Site showing any modifications made to the Facility (which modifications in
all cases shall be subject to Lessee's and Owner's approval as provided in
Article 15). Operator will update drawings at the Site as requested by Owner in
accordance with a Change Order;
7
<PAGE>
(d) Corrosion probe measurements shall be obtained daily.
Abnormalities shall be reported promptly to Lessee and resolved expeditiously. A
quarterly report containing a graphical representation of the corrosion probe
data and the calculated corrosion rate in mils/yr. for each test point will be
provided to Lessee by Operator;
(e) Operator shall provide reasonable home office project support,
including personnel management and administration, engineering, technical,
environmental, regulatory and training and other support, required for the
performance of the Work; and
(f) Operator shall provide accounting services as necessary to
formulate, monitor and report on the Budget.
Unscheduled Services requiring replacement of pumps, parts,
compressors, motors, vessels and other major Facility components, in each case
having a component capital or repair cost in excess of $25,000, shall (unless
and to the extent attributable to negligence of Operator) be performed pursuant
to a Change Order. The Facility shall be returned to Lessee at the end of the
Term in good working condition.
3.4 PROCUREMENT. Operator shall procure all equipment, materials,
supplies and services required for the operation and maintenance, including
Routine Services, Scheduled Services and Unscheduled Services, of the Facility
or otherwise for the performance of the Work. Operator shall make appropriate
provisions for inspection, acceptance and/or return of goods and services
delivered or provided, and shall be responsible for settling any quality
disputes with vendors.
Operator shall purchase MEA from a vendor designated by Lessee,
provided it is available at arms length fair market pricing and markups and
commissions not in excess of historical practices at the Facility.
3.5 SUBCONTRACTORS. Operator shall be responsible for the acts and
---------------
omissions of all Subcontractors, if any, used by Operator in the performance of
the Work and, as between Operator and Lessee, any act or omission of any
Subcontractor shall be deemed to be an act or omission of Operator. Operator
shall be responsible for the implementation and coordination of the work of each
Subcontractor consistent with the standards provided in Article 3.3(a) through
(f). Operator will use reasonable efforts to include in subcontracts entered
into by Operator provisions permitting simultaneous termination without accrual
of subsequent charges in the event that this Agreement is terminated or expires
pursuant to its terms.
3.6 INVENTORY. Operator shall maintain on Site an inventory of Facility
----------
Equipment, Spare Parts, Facility Tools and Consumables adequate to support
continuous and successful operation of the Facility. A current inventory of
Facility Equipment, Spare Parts, Facility Tools and Consumables shall be
supplied by Lessee to Operator thirty (30) Days prior to the Operation Date. A
periodic inventory report shall be provided by Operator to Lessee in accordance
with the Site Procedures. At the end of the Term Operator shall return to Lessee
an inventory of Facility Equipment, Spare Parts, Facility Tools and Consumables
substantially equivalent to that contained in the inventory made available to
Operator on the Operation Date.
3.7 CHANGES. Operator shall periodically identify and make
--------
recommendations to Lessee and Owner with regard to changes, capital
improvements, modifications and upgrades to enhance the operation
8
<PAGE>
of the Facility. Any such change, improvement, modification or upgrade shall be
implemented pursuant to the Change Order procedures provided in Article 15.
3.8 COORDINATION. Operator shall be responsible for routine coordination
-------------
and interface with the parties to the Facility Contracts and local agencies,
such as fire and police departments, as required for the operation and
maintenance of the Facility, subject to any direction with respect to the same
by Lessee. Operator shall arrange for loading of Product by contract purchaser's
driver into the Contract Purchasers' trucks. Operator shall maintain a
Production, Shipping and Inventory log and transmit a copy to Lessee and each
Contract Purchaser by 7:30 A.M. each Day. Operator will notify the Contract
Purchasers of any circumstances that would limit Product availability over the
following seventy two (72) hours within two (2) hours of the time that such
circumstances occur.
3.9 BUDGET. On or before May 15, 1995, and on or before each September 30
-------
thereafter, Operator shall submit to Lessee a detailed budget for the next
Contract Year (the "Budget") and a general budget projection for the next five
calendar years, in each case setting forth, the following:
(a) the proposed amounts to be spent annually as delineated in
Exhibit F;
- ---------
(b) the proposed amount to be spent annually for servicing, overhaul
and repair of the Facility required as a result of the exhaustion of the useful
life of pumps, compressors, motors, vessels and other major Facility components,
in each case having a component capital or repair cost in excess of $25,000, all
to the extent required by and in accordance with the standards provided in
Article 3.3(a) through (f). Such amount shall not include the cost of Routine
Services and Scheduled Services to be performed during such Contract Year,
and
(c) an allowance of $75,000 for Unscheduled Services to be performed
during such Contract Year; provided however that the foregoing allowance shall
be subject to annual prospective adjustment in the event that the operating
experience demonstrates that such allowance is insufficient or excessive.
The Budget and the five year general budget projection shall be subject to the
reasonable review and approval by Lessee. Any dispute as to the approval of the
same shall be subject to resolution pursuant to the binding arbitration
provisions of Article 13, notwithstanding the dollar limits otherwise applicable
to disputes under that Article. During the pendency of any such arbitration,
Lessee shall provide funding under Article 5 on the basis provided in the
general budget projection previously approved for the applicable Contract Year,
subject to retroactive adjustment to the Budget determined through such
arbitration.
3.10 REPORTS BY OPERATOR. Operator shall provide summary reports to
--------------------
Lessee on a daily basis in accordance with Exhibit G. Within five (5) Days
---------
after the end of each calendar month of operations, Operator shall deliver a
report summarizing the Facility production for the previous month. Within
fifteen (15) Days after the end of each calendar month of operations, Operator
shall deliver a report, substantially in the form provided in Exhibit I,
---------
summarizing in detail the Work performed during such month. Operator shall
advise Lessee of any Unscheduled Outage as soon as possible and in no event
later than two (2) hours after commencement. Any material modification or
repair to the Facility necessitated by or required to conclude an Unscheduled
Outage shall be reported to Lessee. Within fifteen (15) Days after the
conclusion of any Unscheduled Outage, Operator shall deliver a report to Lessee
describing the nature of the Unscheduled Outage and detailing any remedial
measures undertaken to correct such Unscheduled Outage. Further, within ninety
(90) Days after the conclusion of any Unscheduled Outage Operator shall deliver
a report to Lessee detailing the most probable cause or causes of any
Unscheduled Outage, any remedial
9
<PAGE>
measures recommended to minimize future Unscheduled Outages and the incremental
cost of such remedial actions, if not of a nature (such as proper training of
the Facility Work Force or modification of Site procedures) within the scope of
operation and Routine Services and Scheduled Services hereunder. Operator shall
provide such additional information and prepare such additional reports, notices
and other communications with respect to Operator's performance of Work
hereunder as Lessee may reasonably request.
3.11 PLANT MANAGER. Operator shall designate a Plant Manager to supervise
--------------
the performance of the Work, represent and act on behalf of Operator and receive
communications from Lessee. The designation and replacement of the Plant Manager
shall be subject to the reasonable approval of Lessee and Owner, and the Plant
Manager shall be removed and replaced by Operator if requested for reasonable
cause by Lessee or Owner. The Plant Manager shall act on behalf of Operator as
the principal interface with Lessee and Owner.
3.12 TAXES AND EMPLOYEE COSTS. Operator shall pay all income, payroll,
-------------------------
employment, unemployment, ERISA and other taxes, benefits, insurance, sick
leave, holidays, vacation, pensions and other costs or expenses associated with
or relating to its personnel and all sales and use taxes, if any, related to the
Work. As between Operator and Lessee, Operator shall be responsible for the
payment of all of the foregoing with respect to employees of Subcontractors.
3.13 SAFETY. Operator shall execute the Work and conduct its operations
-------
at the Site, and limit access and maintain Site and Facility security in
compliance with the safety requirements of all Governmental Requirements, the
Site Procedures and Prudent Practices. Operator shall review and modify the
existing Safety and Security Program on an ongoing basis as part of Routine
Services, so as to maintain it at all times in accordance with the standards
provided in Article 3.3(a) through (f). In the event it becomes necessary to
amend or modify the Safety and Security Program, Operator shall prepare and
deliver to Lessee any amendment or modification to the Safety and Security
Program promptly after making such amendment or modification. Operator shall be
responsible for implementing and managing the Safety and Security Program.
Operator shall designate a qualified safety and security representative to
implement all activities outlined in the Safety and Security Program and direct
its personnel to take all precautions necessary or appropriate to protect
against and prevent injury or damage to personnel and property. Operator shall
provide Lessee with notice (including a copy of any accident report) within
twenty four (24) hours after the occurrence, of any material accident or injury
on Site, including any as to which notice is required to any governmental entity
under Governmental requirements or to the insurance carrier under any insurance
coverage maintained by either party under Article 12.
3.14 EMERGENCIES. In the event of any emergency that involves the
------------
Facility and endangers human safety or property, Operator shall take such action
as may be reasonable and necessary to prevent, avoid, or mitigate injury, damage
or loss and shall as soon as practicable:
(a) report any such incidents, including Operator's response thereto,
to Lessee;
(b) contact Lessee if further action is required; and
(c) provide a written report of the incident and Operator's response
to Lessee within forty eight (48) hours after the end of the emergency.
10
<PAGE>
3.15 GOVERNMENT REQUIREMENTS. Operator shall operate and maintain the
------------------------
Facility and perform all of its other obligations hereunder in accordance with
all applicable Governmental Requirements. Operator shall promptly notify Lessee
of any deficiencies or compliance requirements relating to Governmental
Requirements necessary for the continuous operation of the Facility in
accordance herewith. Further, as changes take effect, or when Operator becomes
aware of changes or potential changes in such Governmental Requirements,
Operator shall advise Lessee thereof. Lessee shall provide Operator with copies
of all permits held as of the Operation Date, and all modifications or
replacements of the same promptly after issuance thereof.
3.16 PERMITS. Operator shall obtain and maintain all Permits, including
--------
those relating to engineering, crafts, safety and health, to enable it to
perform the Work in accordance with all Governmental Requirements, with the
exception of Permits, such as building Permits, certificates of occupancy and
environmental emission and discharge Permits, required by the fundamental nature
of the Facility rather than the operation thereof. Each Party shall provide
reasonable assistance to the other in obtaining and maintaining in effect all
Permits required to be obtained and maintained by the other hereunder.
3.17 LESSEE'S ACCESS. To the extent such access does not have a material
----------------
adverse effect on Operator's ability to execute the Work, Operator shall provide
unrestricted access to the Facility and to the Site to:
(a) Lessee and Owner and their respective designees, and, upon
Owner's request, Financing Entity and its designees; and
(b) parties providing goods and services to the Facility on behalf of
Lessee or Owner, including for purposes of Unscheduled Services and changes
contemplated by Article 3.7 to the extent not to be performed by Operator
hereunder.
Lessee, Owner and Financing Entity, or their respective designees, shall have
the right during regular business hours on reasonable advance notice to examine
and audit the books and records of or relating to Facility operations and
maintenance maintained at the Site. Lessee shall also at it's expense be
entitled to conduct an audit of all payment adjustments as contemplated under
Article 5.3, Budget Adjustments, and payments made to Operator hereunder on a
time and materials basis.
3.18 RECORDS. Operator shall maintain records relating to the operation
--------
and maintenance of the Facility consistent with the requirements of Exhibit E,
---------
all Governmental Requirements and the requirements related to records contained
in the Facility Contracts, and retain such records at the Site, or such off-Site
location as may be mutually agreed upon by the Parties, for a minimum period of
five (5) years and otherwise as required by applicable Governmental
Requirements, provided that Operator shall not dispose of or destroy any such
records even after said five (5) years without first providing Lessee ninety
(90) Days notice. Where Lessee is required by the Facility Contracts or by
applicable Governmental Requirements to retain records for a longer period of
time, or where records relate to disputes, appeals, arbitration, litigation or
the settlement of claims arising out of the performance of this Agreement, such
records shall be maintained by Operator for the time period requested in a
written notification from Lessee which states the amount of time needed over and
above the normal five (5) year retention period for the resolution of the matter
giving rise to the longer retention requirement. Lessee, Owner and their
respective designees shall be provided with reasonable access to such records.
11
<PAGE>
3.19 INSURANCE. Operator shall provide and maintain the insurance
----------
coverage and limits described in Article 12.1. In addition, Operator shall make
reasonable efforts to assist Lessee in procuring the insurance coverages and
limits described in Article 12.2 of this Agreement.
3.20 HAZARDOUS MATERIALS. Any Hazardous Materials shall be handled and
--------------------
disposed of in accordance with Article 16.
3.21 TITLE. Operator shall retain title to any equipment, materials,
------
supplies, and services purchased by Operator and not installed in the Facility;
provided, however, title to any equipment, materials, supplies and services that
are purchased for performance of Work by Operator under a Change Order shall
pass directly to Lessee upon payment by Lessee, and Operator shall indemnify
Lessee and Owner against any mechanics or other liens imposed with respect to
equipment, materials, supplies or services provided to the Facility as part of
the performance of the Work.
3.22 FACILITY OPERATING PROCEDURES. Operator shall review and modify
------------------------------
the existing Facility Operating Procedures on an ongoing basis as part of
Routine Services, so as to maintain them at all times in accordance with the
standards provided in Article 3.23(a) through (f). Operator shall be
responsible for implementing and managing the Facility Operating Procedures. In
the event it becomes necessary to amend or modify the Facility Operating
Procedures, Operator shall prepare and deliver to Lessee any amendment or
modification to the Facility Operating Procedures promptly after making such
amendment or modification.
3.23 SITE PROCEDURES. Operator shall review and modify the existing
----------------
Site Procedures on an ongoing basis as part of Routine Services, so as to
maintain them at all times in accordance with the standards provided in Article
3.23(a) through (f). Operator shall be responsible for implementing and
managing the Site Procedures. In the event it becomes necessary to amend or
modify the Site Procedures, Operator shall prepare and deliver to Lessee any
amendment or modification to the Site Procedures promptly after making such
amendment or modification.
3.24 PERSONNEL TRAINING. Operator shall review and modify the existing
-------------------
Training Plan on an ongoing basis as part of Routine Services, so as to maintain
it at all times in accordance with the standards provided in Article 3.3(a)
through (f). Operator shall be responsible for implementing and managing the
Training Plan. In the event it becomes necessary to amend or modify the Training
Plan, Operator shall prepare and deliver to Lessee any amendment or modification
to the Training Plan promptly after making such amendment or modification. The
Facility Work Force shall be trained pursuant to such Training Program.
3.25 FACILITY AND SITE UPKEEP. Operator shall perform all touch-up and
-------------------------
other incidental painting, cleaning and other cosmetic maintenance of Facility
structures and equipment, and all Site snow removal, landscaping and other
grounds maintenance.
4.0 LESSEE'S RESPONSIBILITIES
4.1 DIRECTION AND CONTROL. Lessee shall formulate a Plan of Operations
---------------------
for the Facility from time to time, specifying Lessee's requirements for the
operation schedule and other operating objectives, within the limits of the
terms of this Agreement, the Facility Contracts, Prudent Practices, Governmental
Requirements and the technical capability of the Facility.
12
<PAGE>
4.2 LESSEE'S REPRESENTATIVE. Lessee shall designate a Project
------------------------
Administrator to represent and act on behalf of Lessee and receive
communications from Operator. Notification of changes in the Project
Administrator shall be provided to Operator in a timely manner. The Project
Administrator shall be responsible for representing Lessee's interests in the
day-to-day operations and maintenance affairs of the Facility. The
Project Administrator shall also be responsible for specifying to Operator
Lessee's requirements as to the operating schedule and other operating
objectives in accordance with Article 4.1. The Project Administrator shall act
on behalf of Lessee as the principal interface with Operator.
4.3 PAYMENT. Lessee shall make timely payments of sums due and payable to
--------
Operator pursuant to Article 5 of this Agreement.
4.4 COPIES OF EXISTING PROCEDURES AND PROGRAMS. At least sixty (60) Days
-------------------------------------------
before the Operation Date, Lessee shall give Operator copies of the existing
Safety and Security Program, Site Procedures, Facility Operating Procedures and
Training Program. Lessee makes no representation as to the adequacy or
comprehensiveness of any of the foregoing.
4.5 AVAILABILITY OF INFORMATION. Lessee shall make available to Operator
----------------------------
such operation and maintenance manuals, as-built drawings, specifications,
warranties, diagrams, test results and all other documents and information as
are available to Lessee relating to the operation and maintenance of the
Facility. To the extent such information is designated as confidential, Operator
shall maintain it in accordance with the terms of Article 19.
4.6 PERMITS. Lessee (directly or through Owner) shall obtain and maintain
--------
all Permits, such as building Permits, certificates of occupancy and
environmental emission and discharge Permits, required by the fundamental nature
of the Facility rather than the operation thereof.
4.7 TAXES. Lessee shall pay any duty or tax, other than taxes for which
------
Operator is responsible under Article 3.12, as may arise out of or relate to the
operation of the Facility.
4.8 INSURANCE. Lessee shall provide and maintain the insurance coverages
----------
and limits described in Article 12.2 of this Agreement.
4.9 COPIES OF FACILITY CONTRACTS. Lessee shall provide true, correct
-----------------------------
and complete copies of the Facility Contracts to Operator on or before the
Effective Date and any amendments to such agreements promptly after execution.
4.10 MISCELLANEOUS FACILITIES. Lessee shall provide and make available to
-------------------------
Operator the existing Facility, including offices, storage facilities, unloading
docks, maintenance facilities, restrooms, space for food vending machines,
kitchen facilities, computers and other office equipment and other
accommodations for Operator's use in performing the Work.
4.11 UTILITIES. Lessee shall, without charge, provide Operator with
----------
electricity within the limits provided in the Lease Agreement, steam within the
limits provided in the Steam Sales Agreement, demineralized water and flue gas
from the Power Plant. Operator shall use its best efforts to minimize the use
of these items in accordance with the standards provided in Article 3.3(a)
through (f).
5.0 PAYMENTS BY LESSEE
13
<PAGE>
5.1 GENERAL. In full satisfaction of its obligations to Operator in
--------
consideration of Operator's performance of the Work, Lessee shall make the
payments to Operator provided in this Article 5, with such periodic adjustments
to be made between the Parties as is provided herein.
5.2 MONTHLY SUM. Lessee shall pay the Operator a fixed monthly fee,
------------
accruing commencing on the Operation Date, of $250,000, prorated in respect of
any partial month and escalated during the Term in accordance with the
escalation formula contained in Exhibit K (each such monthly payment shall be
---------
referred to as the "Monthly Sum"). Each Monthly Sum shall be paid by Lessee
within thirty (30) Days after receipt of a Payment Request therefor submitted by
Operator to Lessee following the month in respect of which payment is sought.
The Monthly Sum is in consideration of all goods and services to be provided
hereunder except as expressly set forth herein.
5.3 BUDGET ADJUSTMENTS. The Monthly Sum includes an estimated allocable
-------------------
portion of the cost of process chemicals and waste disposal for the applicable
Contract Year based on the Budget for such Contract Year. To the extent that the
Facility meets the Minimum Product Output Guarantee in any Contract Year, and
the actual aggregate cost of chemicals and waste disposal for such Contract
Year:
(a) exceeds one hundred ten percent (110%) of the aggregate Budget
amount for the same, Lessee shall reimburse Operator for the amount in excess of
one hundred ten percent (110%), which reimbursement request shall be included as
part of the Payment Request in respect of the first month of the following
Contract Year; or
(b) is less than ninety percent (90%) of the aggregate Budget amount
for the same, Operator shall refund to Lessee fifty percent (50%) of the amount
under ninety percent (90%), which refund shall be offset against Payment
Requests next coming due, or paid by Operator to Lessee concurrently with any
termination of this Agreement.
For purposes of the foregoing, the actual aggregate cost of chemicals and waste
disposal for any Contract Year shall exclude the cost associated with usage
rates per ton of Product of produced in excess of the Efficiency Guarantee for
the items covered thereby, but shall give effect to any cost increases during
such Contract Year in the unit rate for such items over that assumed in the
Budget.
5.4 MAJOR MAINTENANCE EXPENDITURES. Lessee shall reimburse the Operator
-------------------------------
for expenditures made in the prior month in accordance with the Major
Maintenance Budget, which reimbursement request shall be included as part of the
Payment Request in respect of such month. Payment Requests under this Article
5.4 shall include such expenditure documentation and backup as may be reasonably
requested by Lessee. Omissions, additions and other deviations from the Major
Maintenance Budget shall require a Change Order pursuant to Article 15.
5.5 CHANGE ORDERS. Lessee shall pay Operator with respect to Change
--------------
Orders on a lump sum or periodic basis as specified in the particular Change
Order. For Change Orders, if any, performed on a time and materials basis, the
Payment Request shall be accompanied by an itemization of the expenditures
covered by the Payment Request and the dollar amount of each item. Payment
Requests under this Article 5.5 shall include such expenditure documentation and
backup as may be reasonably requested by Lessee. All Change Orders shall be
handled in accordance with Article 15.1.
5.6 BONUS. Operator shall be entitled to a bonus payment (the "Bonus") in
------
respect of each Contract Year determined on the following basis:
14
<PAGE>
(a) The maximum Bonus in respect of each Contract Year shall be
$300,000, escalated during the Term in accordance with the escalation formula
contained in Exhibit K and prorated for any Contract Year of less than three
---------
hundred and sixty five (365) Days.
(b) No portion of the Bonus shall be earned in respect of any
Contract Year unless the Qualifying Facility Objective is achieved for such
Contract Year.
(c) Fifty percent (50%) of the maximum Bonus in respect of any
Contract Year shall be earned in the event that the Qualifying Facility
Objective is achieved for such Contract Year.
(d) The remaining fifty percent (50%) of the maximum Bonus in respect
of any Contract Year shall be earned in the event that the Minimum Product
Output Guarantee is achieved for such Contract Year.
(e) Notwithstanding the foregoing, the aggregate amount of Bonus
earned pursuant to Article 5.6(c) and (d) in respect of any Contract Year shall
be reduced, by not more than fifty percent (50%) of such aggregate amount, on a
dollar for dollar basis, by the amount, if any, payable by Lessee to Operator in
excess of amounts provided in Article 3.9(b) and 3.9(c) for such Contract Year.
The Bonus shall be payable within thirty (30) Days after the end of the
applicable Contract Year.
5.7 INTEREST ON LATE PAYMENTS. Any amounts not disputed in good faith and
--------------------------
not timely paid to Operator in accordance with this Article 5 shall accrue
interest from the fifth (5th) Day following the Day on which such amounts become
due and owing to the Day on which such amounts and the interest thereon are paid
to Operator at the Interest Rate.
5.8 INSURANCE. Operator shall be responsible for the payment of premiums
----------
on insurance obtained pursuant to Article 12.1. Lessee shall be responsible for
the payment of premiums on insurance obtained pursuant to Article 12.2.
6.0 TERM OF AGREEMENT
6.1 TERM. This Agreement shall become effective as of the Effective Date.
-----
The term of this Agreement shall begin on the Effective Date and continue until
the last Day of the fifth (5th) full calendar year after the Operation Date,
subject to earlier termination as provided herein (the "Term").
Notwithstanding the foregoing, Lessee shall be entitled, with the consent of
Owner, to terminate this Agreement, effective May 31, 1995, in the event
that, on or before such date, Operator has failed to satisfy the following
conditions:
(a) notifying Lessee and Owner of any Permits to be obtained by
Operator under the terms of this Agreement, making application for the same
(with copies to Lessee and Owner) and providing reasonable assurance to Lessee
and Owner that such Permits will be obtained on or before the Operation Date.
(b) developing a detailed written plan for transition of operation
and maintenance of the Facility from the current operator, including provision
for transfer of operation, maintenance, inventory, purchasing, personnel,
accounting, and other Facility historical data.
15
<PAGE>
(c) contacting the regular vendors supplying goods and services to
the Facility and arranging for the transfer of supply arrangements effective
upon the Operation Date.
(d) offering employment, commencing on the Operation Date, to persons
currently employed in the operation and maintenance of the Facility by the
current operator on terms comparable to the terms of employment provided for
persons employed in the operation and maintenance of the Power Plant (and at a
total compensation package comparable to the predecessor employer) and obtaining
acceptance of such offers by a majority of the persons currently employed but in
no event fewer than 66% of the operating staff.
(e) coming to agreement with Lessee on the initial Budget and general
budget projections contemplated by Article 3.9.
(f) providing a guaranty by Westinghouse Electric Corporation in the
form set forth in Exhibit N.
---------
In the event Lessee terminates this Agreement in accordance with this Article
6.1, this Agreement shall be terminated and the Parties shall have no further
obligations to each other except those Articles which survive termination
in accordance with Article 18.12.
7.0 TERMINATION
7.1 INSOLVENCY. If (a) either Party sells or transfers all or
-----------
substantially all of its assets, makes a general assignment for the benefit of
its creditors or institutes a proceeding in bankruptcy, or (b) an involuntary
bankruptcy proceeding is commenced against, or a receiver is appointed on
account of, such Party's insolvency, and in the case of (b) such proceeding or
receivership is not stayed or dismissed within sixty (60) Days, this Agreement
shall automatically terminate.
7.2 TERMINATION FOR MATERIAL BREACH. Either Party may terminate this
--------------------------------
Agreement effective upon notice of termination given to the other Party, if, at
any time, the other Party materially breaches this Agreement and such breach is
not cured within forty-five (45) Days after notice specifying such breach is
given to the other Party.
7.3 TERMINATION FOR CONVENIENCE. Lessee may, with the consent of Owner,
----------------------------
terminate this Agreement at any time effective upon ninety (90) Days notice
given to Operator. In the event of such termination, Lessee shall pay to
Operator the termination charges set forth in Exhibit D hereto.
---------
7.4 LESSEE'S RIGHTS. In the event that Lessee elects to terminate this
----------------
Agreement pursuant to this Article 7, or pursuant to Article 11.3, Operator
shall provide Lessee with the right without charge to continue to use any of
Operator's patented, copyrighted and/or proprietary information that has been
developed specifically for the Work , subject to the provisions of any Operator
software licensing agreements (excluding payment of license fees thereunder). In
such event, Lessee shall also have the right to take possession of all Facility
Equipment, Spare Parts, Facility Tools and Consumables and may employ any other
person to perform the Work by whatever method Lessee may deem expedient. Lessee
shall be free to make offers of employment to Operator's employees upon
expiration or termination of this Agreement or if such expiration or termination
is imminent, provided, however, that the start date for such employees shall not
be earlier than the date of termination of the Work, or the expiration of the
Term pursuant to Article 6, as applicable. In connection with any such
termination, Operator shall also deliver to Lessee all Facility records in the
possession of Operator, including any of the same that are contained in
16
<PAGE>
computer media, which records shall be downloaded in useable form by Operator.
Lessee shall attempt to mitigate the cost for the continued performance of the
Work, but may undertake such reasonable expenditures as in Lessee's sole
judgment will best support effective performance of the Facility (including,
where necessary, the entry into contracts without prior solicitation of
proposals). Operator shall not be entitled to receive any further payments under
this Agreement, except for payments for the Work performed prior to such
termination, reduced by any damages due from Operator to the extent that the
termination is pursuant to Article 7.2 due to a breach by Operator.
7.5 GENERAL OBLIGATIONS OF OPERATOR. If this Agreement terminates
--------------------------------
pursuant to Article 7.1 by reason of Lessee's insolvency, pursuant to Article
7.2 by reason of a breach by Lessee or if Lessee elects to terminate this
Agreement pursuant to Article 7.3 or Article 11.3, Operator shall, at Lessee's
request and expense, which expense Operator shall use its reasonable efforts to
minimize, assist in an orderly turnover of the Facility, and, without limiting
the generality of the foregoing, shall perform the following relative to the
Work so affected:
(a) assist Lessee in preparing an inventory of all Facility
Equipment, Spare Parts, Facility Tools and Consumables in use or in storage at
the Site;
(b) assign to Lessee all subcontracts and other contractual
agreements as may be designated by Lessee to the extent Operator is not
contractually prohibited from making such assignment;
(c) assist Lessee in training Operator's successor, if any; and
(d) to the extent specified and requested by Lessee, remove from the
Site all such Facility Equipment, Spare Parts, Facility Tools and Consumables,
and all Hazardous Materials introduced to or produced at the Site by Operator
and all rubbish.
If this Agreement terminates pursuant to Article 7.1 by reason of Operator's
insolvency or pursuant to Article 7.2 by reason of a breach by Operator,
Operator shall perform the same turnover services without charge to Lessee.
7.6 OPERATOR RIGHTS. Operator shall receive compensation for Work
----------------
performed prior to any termination in accordance with Article 7.1, 7.2, 7.3 or
11.3, reduced by any damages due from Operator to the extent that the
termination is pursuant to Article 7.1 by reason of Operator's insolvency or
Article 7.2 due to a breach by Operator. In addition, Operator shall, except in
the case of a termination pursuant to Article 7.1 by reason of Operator's
insolvency or Article 7.2 due to a breach by Operator, receive termination
charges that are specifically limited to compensation, including reasonable
profit, for Work performed after the notice of termination that is reasonably
required by Operator to bring the Work to an orderly conclusion and termination
charges as set forth in Exhibit D hereto. Payments of such termination
---------
charges shall be made by Lessee within thirty (30) Days after the date of
Operator's invoice.
7.7 OWNER RIGHTS, ETC. Notwithstanding anything herein to the contrary,
------------------
Operator shall not terminate this Agreement pursuant to Article 7.2 by reason of
a breach by Lessee without first giving Owner and Financing Entity a concurrent
notice of termination, and forty-five (45) Days opportunity to cure the breach.
In connection with any such cure, the curing third party shall have the further
right to assume this Agreement, with the effect that it shall be reinstated and
shall remain in effect with such third party in accordance with its terms.
17
<PAGE>
8.0 OPERATOR'S INDEMNITY
8.1 GENERAL. In addition to its indemnification obligations provided
--------
in Articles 3.21 (Title) and 16.4 (Hazardous Materials) herein, Operator shall
defend, indemnify and hold harmless Lessee, Owner, Financing Entity and their
respective officers, partners, directors, and employees from and against:
(a) claims, damages, losses, and expenses arising out of or resulting
from personal injury to or death of any person (including under indemnities of
Operator's employees) and for damage to or destruction of third party property
to the extent caused by any negligent act or omission or intentional misconduct
during the performance of the Work at the Site by Operator or any Subcontractor.
[Note: For purposes of this indemnity, the term "third party" shall not include
Lessee, Owner, Financing Entity and their successors and assigns, or any party
or person with an equity interest in Lessee, Owner or Financing Entity which
party or person also claims or seeks to claim any of the rights, powers or
privileges of Lessee, Owner of Financing Entity under this Agreement, or claims
that it is a third party beneficiary under this Agreement]; and
(b) fines and penalties which arise during the performance of the
Work for alleged violation of any applicable Governmental Requirements by
Operator or any Subcontractor; and
(c) claims by a governmental or taxing authority claiming taxes based
on gross receipts or on income of Operator or any Subcontractor with respect to
any payment for the Work made to or earned by Operator or any Subcontractor
under this Agreement.
8.2 WORKERS COMPENSATION, ETC. In any and all claims against Lessee, by
--------------------------
or on behalf of any employee of Operator or any Subcontractor, or any other
party for whose acts Operator or any Subcontractor may be liable, the
indemnification obligation stated above shall not be limited in any way by any
compensation or benefits payable by or for Operator under any applicable
workers' compensation act, disability act or other act providing employee
benefits or limiting the direct liability of Operator with respect to the same.
8.3 EXPENSES. The Operator's indemnification obligations under Article
---------
3.21 and Article 16.4 and this Article 8 shall include and extend to reasonable
legal fees and expenses incurred by the indemnified party in defense of any
claim for which indemnification is due hereunder and all cost incurred in
enforcement of the aforesaid indemnification obligation.
8.4 SURVIVAL. The Operator's indemnification obligations under Article
---------
3.21 and Article 16.4 and this Article 8 shall survive the expiration or any
earlier termination of this Agreement and shall extend as to any claim for which
indemnification is sought through the applicable statute of limitations period
for such claim.
8.5 NOTICE. Operator's indemnity obligations under this Agreement are
-------
conditioned upon Lessee furnishing to Operator prompt written notice of any
claim for which indemnification is sought.
9.0 LESSEE'S INDEMNITY
9.1 GENERAL. In addition to its indemnification obligations provided in
--------
Article 16.1 (Hazardous Materials) herein, Lessee shall defend, indemnify and
hold harmless Operator and its officers, directors and employees from and
against:
18
<PAGE>
(a) claims, damages, losses, and expenses arising out of or resulting
from personal injury to or death of any person (including under indemnities of
Lessee's employees) and for damage to or destruction of third party property to
the extent caused by any negligent act or omission or intentional misconduct at
the Site by Lessee or any party for whose acts Lessee may be liable. [Note: For
purposes of this indemnity, the term "third party" shall not include Contractor
and its successors and assigns or any party or person with an equity interest in
Contractor which party or person also claims or seeks to claim any of the
rights, powers or privileges of Contractor under this Agreement, or claims that
it is a third party beneficiary under this Agreement]; and
(b) fines and penalties which arise during the performance of the
Work for alleged violation of any applicable Governmental Requirements by Lessee
or any party for whose acts Lessee may be liable (other than Operator and its
Subcontractors); and
(c) claims by a governmental or taxing authority claiming taxes for
which Lessee is responsible under Article 4.7.
9.2 WORKERS COMPENSATION, ETC. In any and all claims against Operator, by
--------------------------
or on behalf of any employee of Lessee or any party for whose acts Lessee may be
liable, the indemnification obligation stated above shall not be limited in any
way by any compensation or benefits payable by or for Lessee under any
applicable workers' compensation act, disability act or other act providing
employee benefits or limiting the direct liability of Lessee with respect to the
same.
9.3 EXPENSES. The Lessee's indemnification obligations under Article 16.1
---------
and this Article 9 shall include and extend to reasonable legal fees and
expenses incurred by the indemnified party in defense of any claim for which
indemnification is due hereunder and all cost incurred in enforcement of the
aforesaid indemnification obligation.
9.4 SURVIVAL. The Lessee's indemnification obligations under Article 16.1
---------
and this Article 9 shall survive the expiration or any earlier termination of
this Agreement and shall extend as to any claim for which indemnification is
sought through the applicable statute of limitations period for such claim.
9.5 NOTICE. Lessee's indemnity obligations under this Agreement are
-------
conditioned upon Operator furnishing to Lessee prompt written notice of any
claim for which indemnification is sought.
10.0 REPRESENTATIONS AND WARRANTIES
10.1 BY OPERATOR. Operator represents and warrants to Lessee as follows as
------------
of the Effective Date:
(a) CORPORATE STANDING. Operator is, and during the Term will
-------------------
remain, a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is and will remain in good standing
as a foreign corporation qualified to do business in the Commonwealth of
Massachusetts, with all necessary corporate power and authority to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
have been duly authorized by all requisite corporate action and do not and will
not violate any provision of Operator's charter or by-laws or any indenture,
agreement or instrument to which Operator is a party, or by which Operator or
its property may be bound or affected, non-compliance of which could reasonably
be expected
19
<PAGE>
to have a materially adverse affect on Operator or its ability to perform its
obligations under this Agreement.
(b) PERMITS. Operator will obtain on or before the Operation Date and will
--------
thereafter maintain through the Term the Permits required under Article 3.16.
10.2 BY LESSEE. Lessee represents and warrants to Operator as follows as
----------
of the Effective Date:
(a) CORPORATE STANDING. Lessee is, and during the Term will remain,
a corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts, with all necessary corporate power
and authority to perform its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all requisite
corporate action and do not and will not violate any provision of Lessee's
charter or by-laws or any indenture, agreement or instrument to which Lessee is
a party, or by which Lessee or its property may be bound or affected, non-
compliance of which could reasonably be expected to have a materially adverse
affect on Lessee or its ability to perform its obligations under this Agreement.
(b) PERMITS. Lessee or Owner has and will maintain through the Term
--------
the Permits required under Article 4.6.
11.0 FORCE MAJEURE
11.1 FORCE MAJEURE. The term "Force Majeure" as used herein shall
--------------
include the following and any other causes beyond the reasonable control of and
occurring without the fault or negligence of the Party claiming Force Majeure:
acts of God, earthquakes, fires, floods, riots, unusually severe weather
conditions at the Site, insurrections, acts of war (whether declared or
otherwise), tornadoes, hurricanes, cyclones, strikes, work stoppages or other
labor difficulties ( excluding difficulties with the Facility Work Force at the
Site), unavailability of fuel or energy shortages, acts or failures to act by
federal, state or local, governmental, regulatory or judicial bodies, and acts
or failures to act by Lessee within the scope of Lessee's obligations hereunder,
Owner or Financing Entity (within the scope of their obligations hereunder) with
respect to the Facility or this Agreement. Notwithstanding the foregoing, no
failure of performance by Operator (or any Affiliate of Operator) as operator of
the Power Plant shall constitute an event of Force Majeure or otherwise excuse
performance by Operator hereunder.
11.2 EFFECT AND LIMITATIONS. If either Party because of Force
-----------------------
Majeure is rendered wholly or partly unable to perform its obligations under
this Agreement, except for the obligation to make payments, that Party shall be
excused from whatever performance is affected by the Force Majeure to the extent
so affected, provided that:
(a) The non-performing Party shall, as soon as practicable but in any
event within twenty four (24) hours after it becomes aware that it will be
unable to perform, give the other Party oral notice of such inability. Not later
than five Days after such oral notice, the non-performing Party shall furnish
written notice to the other Party describing the particulars of the occurrence
and the expected duration of the Force Majeure and thereafter provide periodic
supplemental updates;
(b) The suspension of performance is of no greater scope and of no
longer duration than is required by the Force Majeure; and
20
<PAGE>
(c) No obligations of either Party which arose before the
occurrence causing the suspension of performance are excused as a result of the
occurrence.
When the non-performing Party is able to resume performance of its obligations
under this Agreement, that Party shall give the other Party prompt notice to
that effect.
11.3 TERM. In no event will any condition of Force Majeure extend
-----
the Term. In the event that Operator's performance is suspended under this
Article 11 for a period in excess of three (3) months, Lessee shall be entitled
to terminate this Agreement upon thirty (30) Days advance notice, in connection
with which the Parties rights and obligations shall be as provided in Article 7.
11.4 REMOVAL OF FORCE MAJEURE. The affected Party shall use reasonable
-------------------------
best efforts to remedy any inability to perform due to Force Majeure provided
that Operator shall not be required to perform additional work or take special
measures that cannot be performed with the Facility Work Force unless Lessee
directs that it be done pursuant to a Change Order.
11.5 LESSEE OBLIGATION TO PAY. Lessee's obligation to make payments
-------------------------
to Operator and provide funds applicable to the Budget hereunder shall not be
excused due to Force Majeure, provided that Operator shall use reasonable
efforts to mitigate costs hereunder during any suspension of performance due to
an event of Force Majeure. Payments to Operator, including payments for special
measures undertaken by Operator pursuant to a Change Order under Article 11.4
shall be reduced to the extent of any such cost reductions.
12.0 INSURANCE
12.1 OPERATOR'S INSURANCE. Operator, and all Subcontractors performing
---------------------
any on-Site services in connection with the operation and maintenance of the
Facility, shall procure and maintain in effect during the period for which they
perform services pursuant to this Agreement the following insurance coverage:
(a) Worker's Compensation subject to statutory limits;
(b) Employer's liability with limits of liability of $1,000,000 per
accident; and
(c) Vehicle liability insurance covering all owned, non-owned and
hired automobiles, trucks, trailers, and other vehicles. Such insurance shall
provide coverage not less than that of the standard comprehensive automobile
policy in limits no less than $1,000,000 combined single limit each occurrence
for bodily injury and property damage.
12.2 LESSEE'S INSURANCE. Lessee, directly or through Owner (whose
-------------------
coverage may be obtained directly or through Operator or an affiliate in
connection with the operation and maintenance agreement for the Power Plant)
shall procure and maintain in effect during the Term at its expense the
following minimum insurance coverage:
(a) Liability insurance in a form providing coverage not less than
that of the ISO Commercial General Liability 1988 Occurrence Form, covering
operations of the Facility, including coverage for independent contractors,
products and completed operations broad form property damage
21
<PAGE>
coverage (for any written or oral contracts related to the Facility) and
personal injury liability coverage for claims arising out of the operations of
the Facility with policy limits not less than $1,000,000 aggregate;
(b) Excess, or umbrella liability, insurance to provide limits of
insurance in excess of the general liability coverage of not less than
$4,000,000 combined single limit for personal injury and property damage; and
(c) Property Insurance and Business Interruption in such levels
as may be required by Financing Entity.
(d) Deductibles applicable to any loss for which coverage applies
under any of the foregoing policies shall be borne by Owner, except for losses
for which coverage applies under the property insurance policy to the extent
such loss is caused by the negligence of Operator. In such case the deductible,
or portion thereof, shall be borne by Operator, up to a maximum of the lesser of
the deductible amount or $100,000 plus 50% of the deductible amount greater than
$100,000 but in no event shall Operator pay more than $200,000 per
occurrence, and $400,000 during any Contract Year.
12.3 POLICY TERMS. Each policy of insurance required to be carried
-------------
hereunder shall name Lessee, Operator (and Westinghouse Electric Corporation),
Owner and Financing Entities as additional insureds as their respective
interests may appear, and shall be placed with such insurers as may be accepted,
and shall include such deductibles and exclusions as may be permitted, by
Financing Entity.
12.4 CERTIFICATES. Within sixty (60) Days after the Effective Date
------------
each Party shall provide to the other Party, pursuant to the notice provisions
of Article 18.4, properly executed certificates of insurance evidencing the
required coverage. These certificates shall provide the following information:
(a) Name of insurance company, policy number and expiration date;
(b) The coverage required and the limits on each, including the
amount of deductibles and self-insured retentions;
(c) A statement indication that thirty (30) Days notice of
cancellation or modification of any of the policies shall be given to the
insured and additional insureds; and
(d) Named insured.
12.5 POLICIES. Copies of the insurance policies for each Party will be
---------
forwarded to the other Party upon request.
12.6 WAIVER OF SUBROGATION. Each additional insured waives its rights
----------------------
of recovery against the other additional insureds (in their capacity hereunder)
and will use its reasonable efforts to secure its insurer's waiver of rights of
subrogation on its respective insurance policies. shall provide a waiver of
subrogation against the other additional insured on its respective insurance
policies
13.0 DISPUTE RESOLUTION
13.1 GENERALLY. It is the non-binding intent of the Parties that
----------
they shall not invoke the binding arbitration provisions of this Article 13
prior to attempting, for a period of at least thirty (30) Days after notice of
any dispute hereunder is given by one Party to the other, to settle any dispute
hereunder through good faith attempts at the management level, and, failing
that, through the designation by each Party of a
22
<PAGE>
senior executive to make further good faith attempts to settle such dispute.
Notwithstanding the foregoing, in the event that, for any reason (including
inadequacy of settlement efforts), a settlement of such dispute, mutually
acceptable in the non-reviewable judgment of either Party, is not reached within
thirty (30) Days after notice of any dispute is given by either Party to the
other, either Party shall be entitled to invoke the binding arbitration
provisions of this Agreement, or, where permitted, to pursue other remedies
hereunder, in connection with which the adequacy or inadequacy of the aforesaid
settlement attempt by either Party shall neither be a basis for postponing
binding arbitration or pursuit of such other remedies, or otherwise an issue or
subject of such binding arbitration or any proceeding relating to the pursuit of
such other remedies.
13.2 ARBITRATION LIMITS. Both Parties agree to binding arbitration
-------------------
pursuant to Article 13.3 if such dispute involves claims which individually or
in the aggregate total not more than $1,000,000. No final arbitration award
rendered hereunder may exceed such amount. Each Party may pursue any available
legal or equitable remedy for all other disputes. The questions of whether
claims exceed the $1,000,000 and whether the binding arbitration provisions of
this Agreement are otherwise not applicable to the dispute shall each also be
determined through binding arbitration in the manner provided in Article 13.3.
13.3 ARBITRATION PROCEDURE. Disputes subject to binding arbitration
----------------------
hereunder shall be submitted to and settled by arbitration in conformance with
rules of the American Association of Arbitration then in effect (or at any other
place or under any other form of arbitration mutually acceptable to the
Parties). Any award rendered shall be final and conclusive upon the Parties, and
a judgment thereon may be entered in any court of any forum, state or federal,
having jurisdiction. In any arbitration, there shall be appointed one arbitrator
if both Parties agree in writing to do so. Otherwise, there shall be appointed
three arbitrators, one each by Lessee and Operator, and the third by the
arbitrators selected by the Parties. The jurisdiction of the arbitrator(s) shall
be limited to rendering an award not in excess of $1,000,000. The arbitration
shall take place in New York City, New York. The expenses of the arbitration
shall be borne equally by the Parties to the arbitration, provided that each
Party shall pay for and bear the cost of its own experts, evidence and counsel,
and provided, however, that the arbitrator shall have the discretionary power to
make a different allocation of costs of arbitration and/or Party expenses in the
interest of fairness.
13.4 CONSOLIDATION. To the extent permitted by applicable
--------------
Governmental Requirements, both Parties agree to consolidate into a single
arbitration or legal proceeding as the case may be, any disputes involving
Operator and Lessee.
14.0 LIMITATIONS OF LIABILITY
14.1 CONSEQUENTIAL DAMAGES, ETC. Each Party shall be liable for direct
---------------------------
contract damages for any breach of this Agreement, but shall not be liable to
the other Party, whether based in contract, in tort (including negligence and
strict liability), under warranty, or otherwise, for any special, indirect,
incidental, or consequential loss or damage whatsoever, including damage to or
loss of property or equipment (except for Operator's responsibility to pay
deductibles under the property insurance on the Facility as set forth in Article
12.2(d)), loss of use of equipment or power system, loss of profits or revenues,
increased costs of any kind, including capital cost, raw material cost and cost
of Facility production, or claims of any customers of Lessee, in each case to
the extent constituting special, indirect, incidental, or consequential damages.
For purposes of this Article 14.1, any costs of performing the Work incurred by
Operator in excess of amounts payable by Lessee pursuant to Article 5 shall not
be deemed to be special, indirect, incidental, or consequential damages.
23
<PAGE>
14.2 TOTAL LIABILITY LIMIT. The total aggregate liability of either
----------------------
Party to the other Party, in excess of insurance payments received in respect of
the same, with respect to any and all claims arising out of the performance or
non-performance of its obligations under this Agreement, whether based on
contract, warranty, tort (including negligence and strict liability), or
otherwise shall not exceed, with respect to claims arising or accruing in any
Contract Year, 62.5% of the total of all Monthly Sums paid or to be paid
in such Contract Year.
14.3 SCOPE; SUPREMACY. The protections afforded Operator under this
----------------
Article 14 extend to any Subcontractors. The provisions of this Article 14
shall prevail over any conflicting or inconsistent provisions set forth
elsewhere in this Agreement.
15.0 CHANGES
15.1 CHANGE ORDER. Scope Changes shall not be effective unless and
-------------
until they are set forth in a document which describes all work outside the
scope of Work, authorizes a Scope Change, sets forth the price of such Scope
Change, and is duly executed by Lessee and Operator ("Change Order"). Change
Orders shall be required for all Unscheduled Services (with a credit up to
the amount provided therefor in Article 3.9 (b) in each Contract Year) and
for all matters contemplated by Articles 3.7, 5.4 and 16.1. Except for
insurance payments which may be received in respect of the same, Operator shall
not be entitled to a Change Order in respect of Unscheduled Services or in
connection with an addition to the Major Maintenance Budget to the extent
attributable to negligence in the performance of its other obligations
hereunder. Nothing hereunder shall restrict Lessee from engaging other parties
to provide goods and services to the Facility.
15.2 INITIATION. Lessee may, at any time, and from time, to time,
-----------
request a Scope Change. In addition, Operator may provide Lessee with a notice
of any condition or event which Operator believes entitles it to claim that a
Change Order should be issued. Such notice shall describe in detail the nature
of any such condition or event and shall include projected additional costs
including man-hours, labor rates and mark-ups, quantities, unit rates, equipment
prices, expenses and overhead. Such claims shall also be accompanied by such
available information to assist Lessee in determining the reasonableness of the
proposed Scope Change. Supplemental information shall be provided as it becomes
available.
15.3 PREPARATION OF CHANGE ORDER. In the event that the Parties agree to
----------------------------
enter into a Change Order, the initiating Party shall prepare, sign and issue to
the other Party a Change Order. Upon review of such Change Order and, subject to
its approval, the other Party shall sign and return the document to the
initiating Party. Operator shall not be obligated to proceed with any Scope
Change until a Change Order has been duly executed by both Parties.
15.4 PRICING. With respect to the pricing of Change Orders, Operator
--------
may provide lump sum pricing which shall include reasonable overhead and profit.
Where the parties cannot agree on a lump sum Change Order, pricing shall be
established based on Exhibit M.
---------
15.5 CHANGE IN GOVERNMENTAL REQUIREMENTS. Lessee and Operator intend
------------------------------------
that services under this Agreement will at all times comply with applicable
Governmental Requirements then in effect. If Governmental Requirements are
revised, repealed or judicially reinterpreted after the Effective Date so as to
increase Operator's cost of performance of the Work, Operator shall be entitled
to a Change Order.
24
<PAGE>
15.6 CHANGE IN FACILITY CONTRACTS. If there are changes in the
-----------------------------
Facility Contracts after the Effective Date that increase Operator's cost of
performance of the Work, Operator shall be entitled to a Change Order.
16.0 HAZARDOUS MATERIALS
16.1 PRE-EXISTING MATERIALS. Operator makes no representation or
----------------------
warranty concerning the existence or nonexistence of Hazardous Materials at the
Site when the Work commences and disclaims all responsibility and liability for
the excavation, transportation, storage, handling, removal, treatment or
disposal of pre-existing Hazardous Materials discovered or encountered at the
Site. Lessee shall indemnify, defend and hold Operator and Subcontractors
harmless from and against any claim, suit, loss, cost, liability, fine, or
damage (including reasonable attorneys fees), including liability or cost
incurred or assessed against Operator pursuant to 42 USC 9601 et seq.,
"Comprehensive Environmental Response, Compensation and Liability Act of 1980"
and amendments thereto, 15 USC 2602, et seq., "The Toxic Substances Control Act"
and amendments thereto, 42 USC 6901 et seq., The Resource Conservation and
Recovery Act of 1976" and amendments thereto, or other applicable Governmental
Requirements made or asserted by any person, including governmental entities,
based on or related to complaints or allegations, whether or not supported by
fact, that soils, leachate, effluent, or other residue located on, emanating
from, or arising from the soils, subsurface or physical conditions at the Site
contain pre-existing toxic substances or pre-existing Hazardous Materials which
it finds during performance of the Work. Lessee shall be responsible for the
prompt determination of the nature of such Hazardous Materials and shall proceed
with due diligence. If treatment of such Hazardous Materials adversely affects
Operator's cost of performance or ability to perform, Operator shall be entitled
to a reasonable adjustment as set forth in a Change Order issued pursuant to
Article 16.
16.2 HANDLING OF MATERIALS. Operator shall arrange for the proper
----------------------
collection, removal and disposal of any Hazardous Materials furnished, used,
applied, generated or stored at the Site by Operator or Subcontractor(s) or
emanating from the Site as a result of Work at the Site, including MEA and other
process chemicals used in the Facility's carbon dioxide recovery process and
used oils, greases, and solvents from flushing and cleaning processes performed
under this Agreement. All activities in connection with the foregoing shall be
performed in accordance with all Governmental Requirements. All costs
associated with the transporting and disposing of Hazardous Materials introduced
on the Site by Operator during performance of the Work shall be paid by Operator
pursuant to the provisions of Article 3.4, subject to the reimbursement of costs
with respect to the same provided in Article 5.
16.3 DATA SHEETS. As required under all applicable Governmental
------------
Requirements, Operator shall provide Material Safety Data Sheets covering all
Hazardous Materials furnished under or otherwise associated with the Work.
Operator shall provide Lessee with copies of the applicable Material Safety Data
Sheets or copies of a document certifying that no Material Safety Data Sheets
are required under any applicable Governmental Requirements and shall determine
whether any substance or material furnished, used, applied, or stored in
connection with the Work is within the provisions of any Governmental
Requirements concerning Hazardous Materials.
16.4 OPERATOR RESPONSIBILITY. Operator covenants and agrees that
------------------------
Operator will not introduce Hazardous Materials on the Site or in the Work in
violation of Governmental Requirements or handle Hazardous Materials negligently
or in violation of Governmental Requirements. Operator shall indemnify, defend
and hold Lessee and its partners, officers, directors, employees, assigns,
successors in interest, and agents, from and against any claim, suit, loss,
liability, fine, or damage (including reasonable legal fees and expenses)
pursuant to 42 USC 9601 et seq., "Comprehensive Environmental Response,
Compensation and
25
<PAGE>
Liability Act of 1980" and amendments thereto, 15 USC 2601, et seq., "The Toxic
Substances Control Act" and amendments thereto, 42 USC 6901 et seq., "The
Resource Conservation and Recovery Act of 1976" and amendments thereto, or other
Governmental Requirements, arising out of Operator's breach of the preceding
covenant and agreement. Lessee shall provide prompt notice to Operator of any
such indemnification sought from Operator.
17.0 PROPRIETARY INFORMATION
17.1 PROPRIETARY INFORMATION. Operator and Lessee have a
------------------------
proprietary interest in information that will be furnished to or obtained by
Operator pursuant to this Agreement, including the proprietary process
licensed by Owner and Lessee from Fluor Daniel, Inc. for the recovery of carbon
dioxide in the Facility (which information Lessee and Lessee Owner are
authorized to disclose to Operator) and all operating and cost information
relating to the Facility prior to or during the Term. The Party in receipt of
proprietary information ("Receiving Party") from the disclosing Party
("Disclosing Party") shall keep in confidence and will not disclose any such
information which is specifically designated as being proprietary to the
Disclosing Party or use any such information for other than the purpose for
which it is supplied without the prior written permission of the Disclosing
Party. Without limiting the generality of the foregoing, Operator shall not
disclose Facility operating data to any purchaser of power from the Power Plant
or customer of the Facility, any governmental authority or any other party,
except as specifically directed (and only to the extent so directed) in writing
by Owner and Lessee or by a governmental authority of competent jurisdiction.
The provisions of this Article 17 shall not apply to information that the
Receiving Party can substantiate was in its possession at the time it was
initially furnished by the Disclosing Party; is or becomes generally available
to the public without breach of this provision; is received from a third party
who is, as far as reasonably be determined, under no limitation or restriction
regarding disclosure; or is developed independently by the Receiving Party
without benefit of the information furnished by the Disclosing Party. Operator
confirms that the facility cost and operating data is subject to a
confidentiality restriction in favor of Lessee and Owner, but may be freely
disclosed by Lessee and Owner at their discretion.
17.2 TERMS OF AGREEMENT. Operator and Lessee have a proprietary
-------------------
interest in this Agreement. Accordingly, its terms shall not be disclosed in
whole or in part to third parties without the prior written permission of the
other Party, provided, however, that nothing herein shall prohibit either Party
from making any disclosure required by any Governmental Requirement (pursuant to
Article 17.3), or Lessee from disclosing the same to Owner (on a confidential
basis as provided in this Article 17), or Owner from making any disclosure
required by any Governmental Requirement (pursuant to Article 17.3) or the
Financing Agreements (on a confidential basis as provided in this Article 17, or
as otherwise agreed between the Parties.).
17.3 MANDATORY DISCLOSURE. When required by Governmental
---------------------
Requirements, Operator may disclose such proprietary information to the
requesting governmental entity, provided, however, that prior to making any such
disclosure, Operator shall: provide Lessee and Owner with timely notice of the
proprietary information requested and Operator's intent to so disclose,
minimize the amount of proprietary information to be provided commensurate with
the interests of Lessee and Owner and the requirements of the governmental
entity, and make every reasonable effort (which shall include participation by
Lessee and Owner in discussions with the governmental entity) to secure
confidential treatment and minimization of the proprietary information to be
provided. In the event that efforts to secure confidential treatment are
unsuccessful, Lessee and Owner shall have the prior right to revise such
information to minimize the disclosure of such information in a manner
commensurate with their interests and the requirements of the governmental
entity.
26
<PAGE>
18.0 MISCELLANEOUS
18.1 ENTIRE AGREEMENT. This Agreement contains the entire understanding
-----------------
of the Parties with respect to the subject matter hereof, and supersedes all
prior agreements and commitments between the Operator and either the Lessee or
Owner with respect to the Facility. There are no oral understandings, terms, or
conditions, and neither Party has relied upon any representation, express or
implied, not contained in this Agreement.
18.2 AMENDMENTS. No change, amendment, or modification of this
-----------
Agreement shall be valid or binding upon either Party unless such change,
amendment or modification shall be in writing and duly executed by both Parties.
Except as expressly provided in Article 7 or 11, this Agreement may only be
terminated by a writing duly executed by both Parties.
18.3 CAPTIONS. The captions and subheadings contained in this
---------
Agreement are for convenience and reference only and in no way define, describe,
extend, or limit the scope or intent of this Agreement or the intent of any
provision contained herein.
18.4 NOTICES. Any notice, demand, offer, or other written instrument
--------
required or permitted to be given pursuant to this Agreement shall be in writing
signed by the Party giving such notice and shall be hand delivered or sent by
registered letter, overnight courier or telephone facsimile copy (with a
concurrent telephone confirmation of receipt and a mailing of the original by
first class mail) to the other Party at the addresses set forth below:
TO LESSEE:
NECO-Bellingham, Inc.
11104 West Airport Boulevard
Suite 160
Stafford, TX 77477
ATTN: John W. Simm, Vice President
Phone: (713)-983-0500
Fax: (713)-980-4506
With a copy in the same manner to Owner:
Northeast Energy Associates,
A Limited Partnership
c/o Intercontinental Energy Corporation
350 Lincoln Place
Hingham, MA 02043
ATTN: Stephen R. Pritchard,
Operations Manager
Phone: (617)-749-9800
Fax: (617)-740-2159
TO OWNER:
Northeast Energy Associates,
A Limited Partnership
c/o Intercontinental Energy Corporation
350 Lincoln Place
Hingham, MA 02043
27
<PAGE>
ATTN: Stephen R. Pritchard,
Operations Manager
Phone: (617)-749-9800
Fax: (617)-740-2159
For notice to Financing Entity under Article 7.7 hereunder:
TO FINANCING ENTITY:
State Street Bank and Trust Company
Corporate Trust Department
2 International Place
Boston, MA 02110
ATTN: Jill Olson
Vice President
Phone: (617)-664-5672
Fax: (617)-664-5371
TO OPERATOR:
Westinghouse Operating Services
Company, Inc.
4400 Alafaya Trail
The Quadrangle
Orlando, FL 32826-2399
ATTN: Operation & Maintenance Manager
Phone: (407) 281-2000
Fax: (407)-281-5530
Each Party shall have the right to change the place to which notice shall be
sent or delivered by similar notice sent in like manner to the other Party. The
effective date of any notice issued pursuant to this Agreement shall be the date
when delivered if hand delivered, when sent if by overnight courier or telephone
facsimile copy (as aforesaid) or three (3) Days after being deposited in U.S.
mail if sent by registered mail.
18.5 SEVERABILITY. The invalidity of one or more of the provisions
-------------
contained in this Agreement shall not affect the validity of the remaining
portions of the Agreement so long as the material purposes of this Agreement can
be determined and effectuated.
18.6 ASSIGNMENT. This Agreement shall only be binding upon, inure to the
-----------
benefit of, and be performable by the successors and assigns of the Parties
hereto, and shall only operate to release the assignor, pledgor, or transferor
from any of its obligations under this Agreement, if consent to the assignment,
pledge or transfer, or release, as the case may be, is given in writing by the
other Party and Owner. Without the prior consent of Operator, Lessee may
collaterally assign all or part of its right, title, and interest in this
Agreement to Owner, and either Lessee or Owner may similarly make such a
collateral assignment to Financing Entity, and this Agreement may be assigned in
connection with any sale or other transfer of the Facility by Owner. In
addition, Lessee may assign all or part of its right, title, and interest in
this Agreement to any other person or entity with the prior written approval of
Operator, which approval shall not be unreasonably withheld, but shall not be
given without the consent of Owner. Operator agrees to execute any consents to
such assignment reasonably required by such Financing Entity or in connection
28
<PAGE>
with any sale or transfer of the Facility so long as any such consents do not
expand the liability of Operator beyond that established in this Agreement had
no such assignment, sale or transfer taken place.
18.7 NO WAIVER. Any failure of either Party to enforce any of the
----------
provisions of this Agreement or to require compliance with any of its provisions
at any time during the pendency of this Agreement shall in no way affect the
validity of this Agreement, or any part hereof, and shall not be deemed a waiver
of the right of either Party thereafter to enforce any and each such provisions.
18.8 APPLICABLE LAW. This Agreement shall be governed by the laws of
---------------
the State of New York excluding conflicts of law principles.
18.9 EXHIBITS. All Exhibits referenced in this Agreement shall be
---------
deemed to be incorporated into this Agreement by such reference and to be an
integral part of this Agreement. In the event of a conflict or inconsistency
between the provisions of any Exhibit and the provisions of this Agreement, the
provisions of this Agreement shall prevail.
18.10 NO AGENCY, PARTNERSHIP, ETC. This Agreement shall not constitute
----------------------------
Operator an agent of, or partner or joint venturer with, Lessee or Owner, and
Operator shall have no authority to bind Lessee or Owner to any third party.
Likewise, this Agreement shall not constitute Lessee as an agent of, or partner
or joint venturer with Operator and Lessee shall have no authority to bind
Operator to any third party
18.11 THIRD PARTY BENEFICIARIES. Owner and Financing Entity shall be
--------------------------
deemed to be intended third party beneficiaries of this Agreement to the extent
of their rights expressly enumerated herein.
18.12 SURVIVAL. Article 8, 14 and 17, and all other Articles providing
---------
for limitation of or protection against liability of either Party, shall
continue in effect notwithstanding any other provision of the Agreement and
shall survive termination, cancellation or expiration of the Agreement.
18.13 COUNTERPARTS. This Agreement may be executed in counterparts, each
-------------
of which shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the
Effective Date.
NECO-BELLINGHAM, INC.
By:---------------------------
/s/ JOHN W. SIM
Name:-------------------------
/s/ VICE PRESIDENT
Title:------------------------
WESTINGHOUSE OPERATING SERVICES
COMPANY, INC.
By:___________________________
Name:_________________________
Title:________________________
29
<PAGE>
EXHIBIT A
DESCRIPTION OF THE FACILITY
The Bellingham Carbon Dioxide Recovery Facility is designed to produce liquid
food grade Carbon Dioxide.
The feedstock to the plant is a 10 MM SCFH slip stream of combustion flue gas
from the adjacent 300 MW natural gas fired power plant. This gas stream
contains approximately 3.0 to 3.5 percent by volume of Carbon Dioxide.
The slip stream of flue gas is diverted to the Carbon Dioxide facility through
use of a 96 inch diameter duct. The flue gas exits this duct into a Direct
Contact Cooler. The cooler reduces the temperature and removes water from the
flue gas. The water removed is the sole source of process water available to
the Carbon Dioxide Recovery Facility.
The flue gas exits the Direct Contact Cooler into the suction of a 2500 HP
Blower which then pushes the gas stream upward through the Absorber Tower. As
the flue gas flows upward it is contacted inside the tower by a liquid stream of
"Lean" MEA flowing downward. Contact between the MEA and flue gas results in
transfer of Carbon Dioxide from the flue gas to the liquid MEA stream. At the
top of the Absorber Tower the flue gas exits to the atmosphere minus most of the
Carbon Dioxide it contained when it entered the bottom of the Absorber. The
liquid MEA at the bottom of the Absorber tower is "Rich" or high in Carbon
Dioxide content due to its countercurrent contact with the flue gas.
The "Rich" MEA liquid proceeds to the top of a stripping column. It is stripped
of its Carbon Dioxide as it flows downward through the column into each of two
reboilers at the bottom of the stripper. At this point the MEA is now "Lean" or
low in Carbon Dioxide concentration. From the reboilers the "Lean" MEA liquid
is returned to the top of the Absorber.
In the reboilers, Carbon Dioxide gas is liberated from the MEA solution by
heating the MEA. This Carbon Dioxide gas flows upward through the stripper
joining with the Carbon Dioxide gas being released from the downward flowing
MEA. The combined or total Carbon Dioxide gas stream flows up and out of the top
of the Stripper through the reflux condenser and accumulator to the CO2 wash
column where to the "Back End" or the Liquefaction portion (back end) of the
Facility begins. The heat, or energy, that liberates the Carbon Dioxide gas from
the liquid MEA in the reboilers comes from steam off the low pressure steam
header of the Power Plant. Steam use averages 60 to 68 thousand pounds per hour.
Steam condensate is returned to the Power Plant in a closed loop.
The Carbon Dioxide gas stream exiting the top of the Stripper is laden with
moisture and contains small amounts of various impurities. The moisture and
impurities are removed as the Carbon Dioxide passes through a wide variety of
heat exchangers, knockout drums, filter media, drying media and a stripping
tower. At the same time the Carbon Dioxide gas stream is pressurized in two
stages to 300 psig and liquefied at -15 to -20 degrees Fahrenheit.
A two stage Ammonia system provides the refrigeration for cooling and liquefying
the Carbon Dioxide gas stream. All other process cooling is accomplished with
air finned fan coolers.
A-1
<PAGE>
The high purity food grade liquid Carbon Dioxide is stored at 217 psig and -17
degrees Fahrenheit in eight individual 200 ton storage tanks. It is loaded into
trucks in amounts ranging from 18 to 22 tons at a time for distribution to its
end users.
A-2
<PAGE>
EXHIBIT B
BELLINGHAM CO2 PRODUCTION FACILITY
ORGANIZATIONAL CHART
FACILITY WORK FORCE
----------------------
FACILITY PLANT MANAGER
DOUG WILLIAMSON
----------------------
------------------ -------------------- -------------------------
OPERATIONS MANAGER MAINTENANCE MANAGER ADMINISTRATIVE SUPERVISOR
WILLIAM VOGEL
------------------ -------------------- -------------------------
Plant Engineer Maintenance Engineer
1. Operator 1. Aux Oper. 1. Mechanic
2. Operator 2. Aux Oper. 2. I&CTech.
3. Operator 3. Aux Oper.
4. Operator 4. Aux Oper.
5. Aux Oper.
6. Aux Oper.
7. Aux Oper.
8. Aux Oper.
B-1
<PAGE>
EXHIBIT C
EXISTING INVENTORY
Current listing of all Facility Equipment, Spare Parts, Facility Tools and
Consumables to be supplied by Lessee to Operator thirty (30) Days prior to the
Operation Date.
C-1
<PAGE>
EXHIBIT D
TERMINATION PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Fixed Termination Fee
<S> <C>
Termination date falls in first year $600,000*
after Operation Date
Termination date falls in second year $450,000*
after Operation Date
Termination date falls in third year $300,000*
after Operation Date
Termination date falls in fourth year $150,000*
after Operation Date
Termination after fourth year following 0
Operation Date
</TABLE>
* Fixed Fee values will be multiplied by the current escalation adjustment
factor in effect as of the date of termination as calculated in accordance
with Exhibit K.
D-1
<PAGE>
EXHIBIT E
O&M RECORDKEEPING REQUIREMENTS]
The following includes a list of records that shall be retained in accordance
with Article 3.18. This list is subject to mutually agreed upon changes from
time to time.
Document of Communication and Events Within the Plant
- - Control room operators' log book
- - Supervisors log book
- - Instruction log book
- - Maintenance work order status log book
DCS Printouts
- - Daily production/consumption summary
- - DEP daily report
- - Daily report
- - Shift report
Production and Product Quality
- - Daily inventory/production/shipment summary
- - Daily Production Report
- - Carbon dioxide batch test record
- - Carbon dioxide/purity test - product to storage
- - Lot control form
- - Pickup tickets
- - Truck weigh scale calibration records
- - Liquid CO2 sample collection log
- - Outside laboratory CO2 analysis and chain of custody forms
- - Continuous Product Monitoring System, (CPMS), log book
- - CPMS repairs and calibration log
- - CPMS data printouts
- - CPMS cal. gas specification analysis
Visitor Registration and Safety
- - Control room visitor log
- - Plant visitor/safety equipment checklist
- - Work permits
- - Lock out and tag log
Training and Safety
All documentation of specialized training, i.e., hazard material handling,
emergency response, CPR, first aid, specialized skills, etc. Monthly and
quarterly inspection checklists and summaries for:
E-1
<PAGE>
- - Fire extinguishers, halon systems, safety showers and eyewash stations,
fire hoses and cabinets and sprinklers.
- - Electrical powered hand tools
- - Scott airpacks, workplace air quality analyzers and in-line fresh air
breathing gear
- - Motor vehicle safety inspections
- - Respirator cleaning and inspections
- - Rigging
- - Safety belts
Process Data Logs and Trend Plots
- - Daily chemical analysis log - MEA solution
- - MEA and inhibitor addition and tankage log
- - Waste disposal log
- - Reclaimer campaign - lean solution and soda ash addition
- - All outside laboratory analysis
- - Corrosion probe readings and plots, (XE - 115, 125, 140, 141 and 150)
- - Trend graphs of - heat stable salts, solution iron, inhibitor
concentrations, rich and lean CO2 loadings and MEA color
Materials, Services and Equipment Maintenance
- - Purchase orders
- - Receiving slips
- - Maintenance work orders
- - Instrument calibration records
- - Equipment history
- - Spare parts inventory status
Major Plant Equipment Data
- - Blower readings
- - Compressor readings
- - CO2 waste water carbon filter log
- - D.E. filter log
Waste Storage and Disposal
- - Daily environmental inspection - check list
- - Weekly satellite station and waste accumulation area inspection log
- - Waste storage area log
- - Waste movement forms
- - Waste shipment manifests
Monthly Reports
Outage Reports
Event Reports
E-2
<PAGE>
EXHIBIT F
MONTHLY SUM BREAKDOWN
The Monthly Sum will include the following items:
Personnel and Services
- ----------------------
- - All full time plant staff salaries, overtime, benefits, payroll taxes and
insurance. All personnel management and administration, engineering, technical,
environmental, regulatory and training and other support.
Process Consulting Services
- ---------------------------
Utilities
- ---------
- - House Power
- - Telephone
Chemicals and Filters
- ---------------------
- - MEA Deliveries*
- - MEA Carbon Filter*
- - Inhibitor Deliveries*
- - Soda Ash Deliveries
- - Diatomaceous Earth
- - CO2 Carbon Filter
- - CO2 H20 Filter Cartridges
- - Drier Media*
- - Coalescer Cartridges
- - Mole Sieve Media*
- - Miscellaneous Filters
Waste Removal/Disposal
- ----------------------
- - Reclaimer Sump*
- - Industrial Wastewater Sump
- - Cotton Filter
- - Oily Rags
- - Speedy Dry
- - MEA Carbon*
- - Dryer Media*
- - Mole Sieve Media*
- - CO2 Carbon
- - Carbon Filter Cartridges
- - Compressor Oil and Ammonia
- - Parts Wash Solvent
- - Carbon H20
F-1
<PAGE>
- - Methanol
- - Containers
- - Analysis
- - Plant Trash
- - Shutdown Services*
Maintenance, Parts and Services
- -------------------------------
- - Repair Parts & Services
- - Preventive Parts & Services
- - Insulation Materials & Services
- - Paint Materials & Services
- - Inspection and testing Materials & Services
- - Other Outside Contractors
- - Minor Improvements
- - Fire Protection Systems
- - Bench Stock
- - Scaffold Rental
- - Hose
- - Expendables - Gasket, Thread Compound
- - Scale Repair/Calibration
- - Fan Belts
- - Tools
- - Groundskeeping
Rental Equipment and Services
- -----------------------------
- - Pickup Truck Lease and Repairs
- - Fork Lift Truck Repair Agreement
- - Office Equipment
- - Storage Trailers
- - Janitorial Services
- - Spring Water
- - Crane
MEA Analysis
- ------------
- - Lab Material and Equipment
- - Equipment Repair
- - Outside Analysis
- - Sample Transport
CO2 Analysis
- ------------
- - Site Materials and Equipment
- - Outside Analysis
- - CO2 Sample Transport
- - Continuous Analyzer System Maintenance & Service
F-2
<PAGE>
Other
- -----
- - Safety Equipment and Materials
- - First Aid Supplies
- - Office Supplies
- - Federal Express
- - Computer Supplies
- - Plant Travel
- - Training Materials
- - Employee Relations
- - Computer Equipment & Software
* These items will be delineated separately as budgeted categories in accordance
with Article 3.9(a).
F-3
<PAGE>
EXHIBIT G
LIST OF DAILY REPORTS TO BE PROVIDED TO LESSEE
Daily inventory/production/shipment summary of status report.
All other reports, records, logs, etc. listed in Exhibit E under Article
---------
3.18 of the Agreement will be available to the Lessee at all times at the
Site.
G-1
<PAGE>
EXHIBIT H
SITE LAYOUT AND DESCRIPTION
See attached Plot Plan - Drawing 624700-4-500 Rev. 2
Release date January 24, 1990
H-1
<PAGE>
EXHIBIT I
SAMPLE OF MONTHLY REPORT
SEE ATTACHED SAMPLE OF MONTHLY REPORT
A sample monthly report has been included in the three ring binder provided
to Operator. It is the December, 1994 monthly report produced by the
current contract operator less the figures for financial performance.
I-1
<PAGE>
EXHIBIT J
INSPECTION SCHEDULING GUIDELINES
Maintenance Inspections to be performed by the Operator in accordance with
manufacturers' recommendations.
J-1
<PAGE>
EXHIBIT K
ESCALATION FORMULA
Beginning with January 1996, the Monthly Sum (excluding the estimated allocable
portion of the cost of all process chemicals and waste disposal for the
applicable Contract Year based on the Budget for such Contract Year) shall be
increased or decreased, as the case may be, January of each year as follows:
Adjusted Fee = [.7(EGSWx)/(EGSWo) + .3 (ECI-WCx)/(ECI-WCo)]
multiplied by the initial Monthly Sum.
Where:
EGSWx is the U.S. Bureau of Labor Statistics average hourly earnings of
Electric, Gas and Sanitary workers for the month in respect of
which the adjustment is made;
EGSWo is the U.S. Bureau of Labor Statistics average hourly earnings of
Electric, Gas and Sanitary Workers for July 1995;
ECI-WCx is the Employment Cost Index for Private Industry White Collar
Wages & Salaries, as published by the United States Department of
Labor, Bureau of Labor Statistics in the publication entitled
"Monthly Labor Revie w", for the month in respect of which the
adjustment is made; and
ECI-WCo is the Employment Cost Index for Private Industry White Collar
Wages & Salaries, as published by the United States Department of
Labor, Bureau of Labor Statistics in the publication entitled
"Monthly Labor Review," for July 1995.
K-1
<PAGE>
EXHIBIT L
CARBON DIOXIDE QUALITY SPECIFICATIONS
The composition of the liquid carbon dioxide produced by the Carbon Dioxide
Plant Facility will meet the following criteria:
ANALYSIS LIMIT
- -------- -----
Percent Carbon Dioxide, Purity 99.95% by Volume (Min.)
Water Content, Dew Point 8 ppm by Volume, -80 F. (Max.)
Volatile Hydrocarbons as Methane 20 ppm by Volume (Max.)
Non-Volatile Residues 5 ppm by Weight (Max.)
Oxygen (O /2/) 10 ppm by Volume (Max.)
Carbon Monoxide (CO) 10 ppm by Volume (Max.)
Hydrogen (H/2/) 60 ppm by Volume (Max.)
Hydrogen Sulfide (H/2/SO/4/ 0.5 ppm by Volume (Max.)
Nitrogen (N/2/) & Argon 90 ppm by Volume (Max.)
Nitrogen Oxides (No/x/) 2.5 ppm by Volume (Max.)
Sulfur Dioxides (SO/2/) 0.5 ppm by Volume (Max.)
Carbonyl Sulfide (COS) 0.5 ppm by Volume (Max.)
Mercaptans 0.5 ppm by Volume (Max.)
Benzene 50 ppb by Volume (Max.)
All Carbon Dioxide shall conform to the requirements of the Product Quality
Control Procedure, as mutually agreed upon by Operator and Lessee.
L-1
<PAGE>
EXHIBIT M
PRICE LIST 1720
See attached Price List 1720.
M-1
<PAGE>
[LETTERHEAD OF WESTINGHOUSE ELECTRIC CORPORATION]
September 2, 1994 SEE REVERSE SIDE FOR SECTION 2 FIELD ENGINEERING
Supersedes PL 1720 Section 1 SERVICES FOR
dated January 2, 1993 FOSSIL PLANT SITES
Prices subject to change without notice
Mailed to:E. C/1700A
- --------------------------------------------------------------------------------
I. SELLING POLICY
All prices contained herein are subject to the terms and conditions of
Westinghouse Selling Policy 1701 in effect on the date on an order is received.
II. PRICE POLICY
All rates and prices are subject to change without notice. Unless contracted
otherwise, rates and prices for ongoing contracts will be those in effect at the
time the work is performed.
III. ENGINEER HOURLY RATES
Westinghouse offers three types of field engineering services for power
generating equipment, at rates as defined below.
A. TECHNICAL FIELD ASSISTANT (TFA)
An Engineer providing TFA renders advice and makes recommendations based on
Westinghouse procedures and drawings during standard maintenance of Westinghouse
units. By definition, standard maintenance includes disassembly, inspection,
replacement of renewal parts, routine repair and reassembly.
(*) Hourly rates for TFA:
Straight Weekday OT/ Sunday &
Time Saturday Holiday
- -------------------------------------------------------
$112.00 $168.00 $224.00
- -------------------------------------------------------
B. SUPERVISORY SERVICES
An Engineer providing supervisory services directs Westinghouse personnel
performing to Westinghouse procedures and process specifications, requiring
unique skills and custom equipment or tooling.
A job specific readiness fee will apply to all orders, that are not firm priced,
for supervisory services. This fee will cover pre-job efforts and will be
quoted separately.
(*) Hourly rates for Supervisory Services:
Straight Weekday OT/ Sunday &
Time Saturday Holiday
- -------------------------------------------------------
$112.00 $168.00 $224.00
- -------------------------------------------------------
C. SPECIAL SERVICES
An Engineer providing Special Services performs diagnostic and operational
trouble-shooting of turbine-generator equipment. This work may be conducted
onsite or by telecommunication. Special Services includes diagnostic electrical
testing, evaluation and set-up activities on control systems, voltage regulator
systems and any on-line diagnostics. Level III NDE and balancing is also
included in this type of field engineering services.
(*) Hourly rates for Special Services:
Straight Weekday OT/ Sunday &
Time Saturday Holiday
- -------------------------------------------------------
$112.00 $280.00 $280.00
- -------------------------------------------------------
IV. EXPLANATORY NOTES
A) In the event Westinghouse use outside or subsidiary personnel to perform
services that would normally be performed by Westinghouse personnel.
Westinghouse will invoice Purchaser for such personnel at the hourly rates
published herein.
B) Minimum billing is 8 hours
C) The straight-time rate applies to all time worked or traveled during an 8
hour work day or fraction thereof; that is, any consecutive 8 hour period in
a weekday (Monday through Friday, holidays excepted) with an allowance for
lunch time.
D) The week day overtime and Saturday rates apply to all time worked or
traveled in excess of 8 hours during a weekday and all time worked or
traveled on Saturday (holidays excepted). All time worked or traveled on a
Sunday or a holiday, locally observed by Westinghouse, will be billed at the
Sunday and holiday rate.
E) Technical services of factory engineers, headquarters service specialists,
and computer charges will be those set forth in Westinghouse Price List
1275. Project Managers will be quoted upon request.
F) Changes for equipment, tools and instruments supplied with field engineering
personnel will be quoted by your local Westinghouse representative.
G) Technical Direction of Installation (TD of I) will be charged at the rate in
Section III A. Terms and Condition for TD or I are SP1701 with Technical
Services Warranty and Exclusive Remedy (5B) being applicable.
V. EXPENSES
A fixed daily expense charge will be assessed as outlined below.
A) * When daily commuting personnel supplied, a $35 local daily expense charge,
covering local transportation and miscellaneous expenses, will be assessed
for each day assigned to the work.
B) For job sites where personnel require overnight lodging, the applicable
daily expense charge for the job site will be assessed for each calendar day
an individual is assigned to a project including non-working weekend days
for jobs extending over the weekend(s). Westinghouse will supply engineers
and technicians based on qualifications with priority given to qualified
daily commuting personnel when available.
Round trip air and/or ground transportation from the individual's home location
to the job site will be extra and billed at cost.
The following geographical area daily expense charge covers lodging, meals,
local transportation and miscellaneous expenses (telephone, postage, laudry,
etc.).
Daily Expense Daily Expense
Charge Class Charge (*)
- ----------------------------------------------------------
A1 $280.00
A 215.00
B 190.00
C 175.00
D 165.00
E 150.00
F 140.00
G 130.00
- ----------------------------------------------------------
The daily expense charge class for a particular power plant or job location can
be obtained from the local Westinghouse representative.
(*) Changed since previous issue.
<PAGE>
EXHIBIT N
WESTINGHOUSE ELECTRIC CORPORATION GUARANTY
NECO-Bellingham, Inc.
11104 West Airport Boulevard
Suite 160
Stafford, Texas 77477
Gentlemen:
Reference is made to the Contract between NECO-Bellingham, Inc. ("Lessee") and
Westinghouse Operating Services Company, Inc. ("WOSC") for the Bellingham
Project Carbon Dioxide Recovery Facility ("Contract"). WOSC is a wholly owned
subsidiary of Westinghouse Electric Corporation ("WELCO"). In connection with
said Contract, WELCO agrees as follows:
1. Unless otherwise noted, capitalized terms used in this letter shall
the meanings assigned to such terms in the Contract.
2. In consideration of one dollar and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
WELCO, on behalf of itself, its successors, and permitted assigns,
irrevocably and unconditionally guarantees to Lessee, its successors, and
permitted assigns, the prompt, full and faithful observance, fulfillment
and performance by WOSC of each of the obligations, responsibilities, and
undertakings to be carried out, performed or observed by WOSC to the extent
and under the terms and conditions set forth in the Contract.
3. If at any time WOSC, its successors, or permitted assigns, fails,
neglects or refuses to timely or fully perform any of its obligations,
responsibilities, or undertakings as expressly provided in the terms and
conditions of the Contract, and if within fifteen (15) days after written
notice of such failure, WOSC has not commenced corrective action to the
extent required by the Contract, then upon receipt of written notice from
Lessee specifying the failure, WELCO shall perform, or cause to be
performed, any such obligation, responsibility, or undertaking as required
pursuant to the terms and conditions of the Contract, including without
limitation all payment obligations under the Contract.
4. With respect to any claim, action or proceeding against WELCO in
connection with this guaranty, WELCO shall be entitled to assert only those
defenses which WOSC would be able to assert if such claim, action or
proceeding were to be asserted or instituted against WOSC based upon the
Contract.
5. WELCO covenants and agrees with Lessee, its successors, and
permitted assigns, that (i) any amendments, modifications or supplements to
the Contract, or (ii) the giving of any consent by Lessee or WOSC to any
permitted assignment of the Contract, or (iii) the waiver of the
performance or observance by WOSC of any agreement, covenant, term or
condition to be performed or observed by WOSC, or (iv) the lease, sale,
transfer or conveyance of the Equipment or any interest to any party, may
all or any of them be made and done without notice to, or the
N-1
<PAGE>
consent of, WELCO and without in any way affecting, changing or releasing
WELCO from its obligations hereunder.
6. With respect to this Guaranty, WELCO represents the following:
(i) that it is a corporation duly organized, validly existing and in
good standing under Pennsylvania laws and that the execution,
delivery and performance of this Guaranty has been duly authorized
by all requisite corporate action and will not violate any
provision of any governmental rule, regulation or ordinance, its
charter or by-laws or any indenture, agreement or instrument to
which it is a party; and
(ii) that it is not in violation of any applicable law, statute, order,
rule or regulation promulgated or judgment entered by any federal,
state, local or governmental authority which violations,
individually or in the aggregate, would affect WELCO's guaranty of
WOSC's performance of its obligations under the Contract; and
(iii) that it is not a party to any legal, administrative, arbitral,
investigatory or other proceeding or controversy pending, or, to
the best of WELCO's knowledge, threatened, which would adversely
affect WELCO's ability to guaranty of WOSC's performance of its
obligations under the Contract. 7. This Guaranty shall be governed
by and interpreted under the substantive laws of the State of New
York, United States of America, excluding rules governing conflicts
of laws. Any dispute arising under or relating to this guaranty
shall be resolved according to the provisions set forth in Article
13, Dispute Resolution, of the Contract.
Very truly yours,
N-2
<PAGE>
EXHIBIT 10.14
DECLARATION OF EASEMENTS, COVENANTS, AND RESTRICTIONS
Declaration of Easements, Covenants, and Restrictions made as of this 28th
day of June, 1989, by Northeast Energy Associates, A Limited Partnership, a
Massachusetts limited partnership having its principal place of business at 350
Lincoln Street, Hingham, Massachusetts ("Grantor").
ARTICLE ONE. Recitals.
--------
1.1 Grantor is to be the owner of an electric cogeneration facility (the
"Unit"), which is to be constructed on certain premises owned by Grantor in the
Town of Bellingham, Massachusetts, which premises are more particularly
described in Appendix A attached hereto (the "Site"). The Unit currently is
expected to produce approximately three hundred megawatts (300 MW) of
electricity from two (2) gas turbines, two (2) heat recovery steam generators,
and one (1) steam turbine.
1.2 Grantor has entered into certain agreements regarding the purchase and sale
of the electricity to be produced by the Unit with Commonwealth Electric
Company, a Massachusetts corporation ("Commonwealth"); with Boston Edison
Company, a Massachusetts corporation ("Edison"); and with Montaup Electric
Company, a Massachusetts corporation ("Montaup"). Commonwealth, Edison, and
Montaup collectively are referred to herein as "Grantees" and each of them is
referred to herein as a "Grantee."
1.21 Grantor has entered into two power sale agreements with Commonwealth,
one dated as of November 26, 1986 and modified by amendments dated an of
August 15, 1988 and January 1, 1989, the other dated as of August 15, 1988
and modified by an amendment dated as of January 1, 1989 (together, as
amended, the "Commonwealth Agreements", copies of which are attached hereto
as Appendix B). Pursuant to the Commonwealth Agreements, Commonwealth has
agreed to purchase and Grantor has agreed to sell an entitlement
("Commonwealth's Share") to a portion of the electric capacity and related
energy to be generated by the Unit through the later of the twenty-fifth
(25th) anniversary of the In-Service Date (as such term is defined in the
Commonwealth Agreements) of the Unit or December 31, 2014. Commonwealth's
Share is equal to forty-six megawatts (46 MW) divided by the Net Electrical
Capability (as such term is defined in the Commonwealth Agreements) of the
Unit.
1.22 Grantor has entered into two power sale agreements with Edison, one
dated as of April 1, 1986 and modified by amendments dated as of June 8,
1987 and June 21, 1989, the other dated as of January 28, 1988 and modified
by an
1
<PAGE>
amendment dated as of June 21, 1989 (together, as amended, the "Edison
Agreements", copies of which are attached hereto as Appendix C). Pursuant
to the Edison Agreements, Edison has agreed to purchase and Grantor has
agreed to sell an entitlement to a portion of the electric capacity and
related energy to be generated by the Unit ("Edison's Share") through, in
the case of the first Edison Agreement the twenty-fifth (25th) (or, if
extended, the thirtieth [30th]), and in the case of the second Edison
Agreement the twentieth (20th), anniversary of the Date of Commercial
Operation (as such term is defined in the Edison Agreements). Edison's
Share is equal to (a) two hundred nineteen megawatts (219 MW) divided by
the Net Electrical Capability (as such term is defined in the Edison
Agreements) of the Unit, multiplied by (b) one hundred percent (100%) of
the Capacity and Associated Energy (as defined in the Edison Agreements).
1.23 Grantor has entered into a power sale agreement with Montaup, dated
as of October 17, 1986 and modified by an amendment dated as of June 28,
1989 (as amended, the "Montaup Agreement", a copy of which is attached
hereto as Appendix D). Pursuant to the Montaup Agreement, Montaup has
agreed to purchase and Grantor has agreed to sell an entitlement
("Montaup's Share") to a portion of the electric capacity and related
energy to be generated by the Unit through the thirtieth (30th) anniversary
of the Date of Commercial Operation (as such term is defined in the Montaup
Agreement). Montaup's Share is equal to twenty-five megawatts (25 MW)
divided by the Net Electrical Capability (as such term is defined in the
Montaup Agreement) of the Unit.
1.3 In order to facilitate the financing and thereby the development and
construction of the Unit, each of the Commonwealth Agreements, the Edison
Agreements, and the Montaup Agreement (collectively, the "Power Sale
Agreements") provides that the purchaser thereunder pay Grantor a front-loaded
floor price for electric capacity and related energy produced by the Unit, such
that each such purchaser and its ratepayers will receive proper consideration
therefor only to the extent that each such purchaser in able to purchase its
entitlement to the electric capacity and related energy from the Unit under
terms and conditions identical or substantially identical to those contained in
such purchaser's Power Sale Agreements for the full anticipated terms thereof.
1.4 Each of the Power Sale Agreements provides that the purchaser thereunder
may at its own cost construct, install, own, operate, and maintain electrical
metering equipment at the Site, in order to fulfill the purposes of this
Declaration and of the Power Sale Agreements.
2
<PAGE>
1.5 Each of the Commonwealth Agreements and the Edison Agreements, as it exists
as of the date hereof, has been submitted to and approved by the Massachusetts
Department of Public Utilities, in accordance with the regulations of such
Department. The Montaup Agreement, as it exists as of the date hereof, has been
submitted to and approved by the Federal Energy Regulatory Commission, in
accordance with the regulations of such Commission.
1.6 Grantor expects to derive substantial profit from the consideration
received through the operation of the Unit, including, without limitation,
consideration received through the sale of capacity and related energy to
Grantees under the Power Sale Agreements.
1.7 Grantor and Grantees desire to ensure the ability of each of the Grantees
to purchase such Grantee's Share, as described in Article 1.2 hereof, of the
electric capacity and related energy produced by the Unit under terms and
conditions, and at rates, identical or substantially identical to those
contained in the Power Sale Agreements for a period equal to the full
anticipated terms thereof, subject to the terms hereof, so as to ensure proper
consideration to each Grantee for amounts paid by it under such Grantee's
Agreements and to protect and preserve such Grantee's investment in any metering
equipment that such Grantee might install as hereinabove described.
1.8 Accordingly, as was provided in the Power Sale Agreements as an inducement
to Grantees to enter into such Power Sale Agreements, and in consideration of
the foregoing as well as for other good and valuable consideration, Grantor, for
itself, its successors, and assigns with respect to the Site, hereby grants to
each Grantee an easement with respect to the Site as described in Article Two
hereof (the "Easement") and declares that the Site and the Unit shall be held,
transferred, sold, conveyed, and occupied subject to the Easement and to the
covenants and restrictions hereinafter set forth.
ARTICLE TWO. Grant of Easement.
-----------------
2.1 Subject to the terms, conditions, covenants, and restrictions of this
Declaration Grantor does hereby grant to each Grantee a right-of-way and non-
exclusive easement with respect to the Site to construct, install, maintain,
repair, replace, remove, and operate in, on, over, under, across, and through
the Site electrical metering equipment, as well as to enter upon the Site for
purposes of inspecting the Unit at all reasonable times, all as contemplated by
the terms of the Power Sale Agreements.
3
<PAGE>
2.2 Grantor hereby also grants to each Grantee in connection with the Site the
right of entry and passage of men and women, vehicles, and machines on, over,
across, and through the walkways, roadways, and parking areas on the Site, to
the extent reasonably required for the purposes of having access to the Site for
performing such work as in hereinabove permitted.
2.3 Grantor hereby also grants to each Grantee the right to cut, trim, or
remove, at such Grantee's expense, any roots, trees, shrubs, brush, or other
surface or subsurface obstructions on the Site, that may in the reasonable
opinion of such Grantee interfere with or be likely to interfere with the
operation and functioning of the electrical metering equipment present at the
Site, or with the delivery of such Grantee's Share, as described in Article 1.2
hereof, of the electric capacity or related energy from the Unit.
2.4 Grantor expressly reserves the right to grant to other persons or entities
easements with respect to the Site, provided that such other grants of easements
do not materially interfere with the operation, maintenance, or safety of the
electrical metering equipment of any Grantee, or materially affect any
facilities installed by any Grantee by virtue of the rights granted hereunder.
Grantor shall notify each Grantee promptly of the nature and extent of any
easement granted to other parties. No Grantee shall have rights of approval
hereunder so long as Grantor is in compliance with this Declaration.
2.5 Each Grantee, by accepting the rights granted to it hereunder, agrees that,
in connection with the exercise of such rights, such Grantee shall be
responsible for any damage occurring to the Site or the Unit that is proximately
caused by such Grantee's activities, and shall promptly effect, at its own cost,
such repair as is necessary to restore the Site or the Unit to substantially the
condition in which it existed immediately prior to the commencement of whatever
activities of such Grantee that resulted in such damage. Each Grantee shall
save harmless and indemnify Grantor, its successors, and assigns, and each of
the other Grantees from and against any and all claims, actions, damages,
expenses, losses, settlements, or liabilities incurred by such Grantee, its
property, its employees, its agents, its contractors, or the public that may at
any time occur or arise out of the actions of such Grantee, its agents, its
contractors, or its employees. Each Grantee shall protect from damage all then-
existing improvements to the Site. Each Grantee shall use its beat reasonable
efforts to avoid interference with the work of, and the use and occupancy of the
Site by, Grantor and its agents, its employees, and its contractors.
2.6 Nothing contained herein shall be construed so as to prohibit Grantor from
having the right fully to use and enjoy the Site, including without limitation
means of ingress and egress, which right of use and enjoyment shall not be
interrupted by any
4
<PAGE>
Grantee except to the extent that such interruption might be necessary to allow
such Grantee to exercise the rights granted to it herein. Grantor may close off
certain easement rights granted to any Grantee for repair so long as Grantor
provides such Grantee with alternate access or easement rights acceptable to
such Grantee.
2.7 Subject to the termination provisions set forth in Article Four hereof, the
Easement granted hereunder to and for the benefit of each Grantee, its
successors, and its assigns, shall at all times be deemed to be a benefit with
respect to and burden upon the Site, intended to run with the Site and the title
thereto, and shall be binding upon Grantor, its Successors, its assigns, and all
parties claiming by, through, or under any of them, and shall inure to the
benefit of each Grantee, its successors, its assigns, and all parties claiming
by, through, or under any of them.
ARTICLE THREE. Declaration of Covenants and Restrictions
-----------------------------------------
3.1 Grantor hereby declares that the Site and the Unit shall be subject to the
following restrictions for the benefit of each Grantee, its successors, and its
assigns:
3.11 No electricity produced at the Site shall be sold unless and until
each Grantee is tendered such Grantee's Share of such electricity, as
described in Article 1.2 hereof, excepting only the tendering and sale to
the several Grantees as herein provided.
3.12 No production of steam at the Site shall materially adversely affect
the production of electricity by the Unit, except as contemplated in
Grantor's Lease Agreement with NECO-Bellingham, Inc., dated as of June 28,
1989, without the prior written consent of each Grantee.
3.13 The Unit shall not be operated in any manner that is inconsistent
with the manner of operation, maintenance, and insurance of the Unit
contemplated by the Power Sale Agreements.
3.14 Each Grantee has certain rights regarding any electricity produced at
the Site, and no such electricity shall be offered for sale except in
accordance with the terms of the Power Sale Agreements. If any of such
Power Sale Agreements previously has been terminated such electricity shall
be offered for sale to the original purchaser thereof only under terms and
at rates substantially identical to those contained in such terminated
Power Sale Agreements, with only such modifications, other than price, as
may be required by
5
<PAGE>
changed circumstances resulting from third-party actions (including, for
example, changes in laws, regulations, or NEPOOL requirements or
procedures).
3.2 Grantor hereby covenants for the benefit of each Grantee, its successors,
and its assigns that if at any time during the term of this Declaration, as
specified in Article Four hereof, any of the Power Sale Agreements terminates
for any reason other than the expiration of its full anticipated term or the
default of the Grantee that is the purchaser under such Power Sale Agreement, or
if any of the Power Sale Agreements is no longer in effect, Grantor, its
successors, and its assigns (subject in the case of the signatories to the
Accommodation Agreement, attached hereto as Appendix E, to the provisions
thereof) shall, within thirty (30) days of the date of such termination or of
such cessation of being in effect, offer to enter into an agreement with such
Grantee for the sale of electricity from the Unit under terms and at rates
substantially the same as those contained in such terminated or no-longer-in-
effect Power Sale Agreement, with only such modifications, other than price, as
may be required by changed circumstances resulting from third-party actions
(including, for example, changes in laws, regulations, or NEPOOL requirements or
procedures), and shall enter into such an agreement if such Grantee accepts such
offer.
3.3 Each Grantee, by accepting the benefits of the covenants and restrictions
declared hereunder, agrees that at the written request of any successor to or
assignee of the interests of Grantor in and to the Unit and the Site, pursuant
to Article 3.2, such Grantee shall within thirty (30) days enter into an
agreement with such successor or assignee under terms and at rates substantially
the same as those contained in such Grantee's Agreements, with only such
modifications, other than price, as may be required by changed circumstances
resulting from third-party actions (including, for example, changes in laws,
regulations, or NEPOOL requirements or procedures).
3.4 In the event of any subdivision of the Site into parcels, the foregoing
restrictions and covenants shall not apply to any such parcel that neither
contains the Unit (or any appurtenance thereto) nor is necessary for the
efficient operation of the Unit for its intended purposes; provided that the
elimination of such parcel from the Site subject to this Declaration must not
substantially diminish the value of this Declaration as a means of ensuring the
right of each Grantee to purchase such Grantee's Share of capacity and related
energy under terms and at rates identical or substantially identical to those
contained in such Grantee's Agreements, as described in Article 1.2 hereof, for
the full anticipated term thereof.
6
<PAGE>
3.5 Subject to the termination provisions set forth in Article Four hereof, the
covenants and restrictions declared hereunder for the benefit of each Grantee,
its successors, and its assigns shall at all times be deemed to be continuing
covenants and restrictions that shall be deemed to be a benefit with respect to
and burden upon the Site, intended to run with the Site and the title thereto,
and shall be binding upon the Grantor, its successors, its assigns, and all
parties claiming by, through, or under any of them, and shall inure to the
benefit of each Grantee, its successors, its assigns, and all parties claiming
by, through, or under any of them.
ARTICLE FOUR. Termination.
-----------
4.1 With respect to any individual Grantee, this Declaration shall become void
on the first to occur of the following: (a) the date of expiration of the full
anticipated term of such Grantee's Agreements; (b) the failure of such Grantee
to remedy a material default of such Grantee after thirty (30) days written
notice by Grantor (or such longer period as in reasonably necessary to effect
such remedy), provided that an arbitrator or court of competent jurisdiction has
found that such Grantee is in material default, and that by reason of such
default Grantor is warranted in initiating such process of termination; (c) the
date that this Declaration is terminated with the written consent of Grantor and
such Grantee; or (d) failure by such Grantee after thirty (30) days prior
written notice to perform its obligation under Article 3.3 hereof.
Notwithstanding the foregoing, in the event that Grantor has terminated any
Grantee's Agreements, as described in Article 1.2 hereof, by reason of the
breach thereof by such Grantee, and Grantor tenders the subject energy and
capacity to such Grantee under this Declaration upon the same terms as would
apply under such terminated Grantee's Agreements, and despite such tender such
Grantee fails to take and pay for such energy and capacity as contemplated under
such terms, then Grantor shall be free, notwithstanding this Declaration, to
sell the subject energy and capacity to a third party during the pendency of
such period of non-performance by such Grantee. Upon this Declaration becoming
void with respect to such Grantee, Grantor and such Grantee hereby agree to
execute and deliver appropriate instruments of release from and discharge of the
terms hereof, to be filed with the Norfolk County Registry of Deeds (the
"Registry").
4.2 This Declaration shall terminate on the date that it becomes void with
respect to each and every one of the individual Grantees pursuant to Article 4.1
hereof.
7
<PAGE>
ARTICLE FIVE. Miscellaneous Provisions.
------------------------
5.1 Each and every contract, deed, deed of trust, mortgage, or other instrument
covering or conveying the Unit, the Site, or any portion thereof, that is
executed after this Declaration is filed with the Registry and before this
Declaration terminates, shall conclusively be held to have been executed,
delivered, and accepted subject to the covenants and restrictions set forth
herein, regardless of whether such covenants and restrictions are set forth in
such contract, deed, or other instrument. Grantor agrees to advise any
prospective transferee of the Site, the Unit, or any interest therein, in any
sale or other disposition (including a foreclosure sale or other disposition in
the exercise of remedies under any mortgage or other security interest), that
this Declaration is of record and that any such transfer will be subject to this
Declaration.
5.2 Grantor and each Grantee hereby declare their understanding and intent that
the burdens of the covenants and restrictions set forth herein touch and concern
the Unit and the Site-in that Grantor's interest in the Unit and the Site in
rendered less valuable thereby. Grantor and each Grantee hereby further declare
their understanding and intent that the benefits of such covenants and
restrictions touch and concern the Unit and the Site by enhancing and increasing
the likelihood each Grantee and its ratepayers, the intended beneficiaries of
such covenants and restrictions, will be able to purchase such Grantee's Share
of the electric capacity and related energy from the Unit under terms and at
rates identical or substantially identical to those contained in the Power Sale
Agreements for the full anticipated term thereof.
5.3 If Grantor defaults in the performance or observation of any covenant or
restriction set forth in this Declaration, and if such default remains uncured
for a period of forty-five (45) days after written notice thereof is given by
any Grantee to Grantor, then such Grantee may declare a default to have occurred
hereunder, and, at its option, may take any one or more of the following steps,
after providing ten (10) days written notice to the other Grantees of its
intentions:
5.31 By mandamus or other suit, action, or proceeding at law, including
suit for injunctive relief, require Grantor to perform its covenants
hereunder or enjoin any acts or omissions that may be unlawful or in
violation of the restrictions set forth herein or of the rights of such
Grantee hereunder.
5.32 Have access to and inspect, examine, and make copies of all the books
and records of Grantor pertaining to the Site or the Unit.
8
<PAGE>
5.33 Take such other actions at law or in equity as may appear necessary
or desirable to enforce the restrictions upon and covenants of Grantor
hereunder.
5.4 Grantor shall cause this Declaration and any amendments or supplements
hereto to be duly filed with the Registry. Grantor shall pay all fees and
charges incurred in connection with any such filing.
5.5 This Declaration shall be governed by the laws of the Commonwealth of
Massachusetts.
5.6 This Declaration shall be amended only by a written instrument executed by
all the parties hereto or their successors in title, which amendment shall be
duly filed with the Registry in accordance with Article 5.4 hereof.
5.7 Any notice required to be given hereunder shall be given by certified or
registered mail, postage prepaid, return receipt requested, or by hand or
personal delivery, at the addresses specified below, or at such other addresses
as may be specified in writing by the party in question:
To Grantor: Northeast Energy Associates, A Limited
Partnership
Intercontinental Energy Corporation
350 Lincoln Street, Suite 111
Hingham, Massachusetts 02043
Attention: President
To Grantees: Commonwealth Electric Company
2421 Cranberry Highway
Wareham, Massachusetts 02571
Attention: President
(with a copy to Michael F. Donlan, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, Massachusetts 02108)
Boston Edison Company.
800 Boylston Street
Boston, Massachusetts 02199
Attention: Division Head -- Municipal
and Customer Generation
Montaup Electric Company
75 West Center Street
Post Office Box 543
West Bridgewater, Massachusetts 02379
9
<PAGE>
(with a copy to Post Office Box 2333
Liberty Square
Boston, Massachusetts 02107)
Notices given hereunder shall be deemed to have been given upon receipt or any
refusal to accept.
5.8 All of the rights, benefits, duties, liabilities, and obligations of
Grantor and each of the Grantees hereunder shall inure to the benefit of and be
binding upon their respective successors and assigns.
5.9 This Declaration shall be interpreted in light of the express intent of
Grantor hereunder to grant the easement and impose upon the Site and the Unit
the burden of the covenants and restrictions set forth herein for the benefit of
each of the Grantees. In the event that any of the provisions, portions, or
applications of this Declaration are held to be unenforceable or invalid by any
court of competent jurisdiction, the validity and enforceability of the
remaining provisions, portions, or applications thereof shall not be affected
thereby.
10
<PAGE>
In witness whereof, Grantor and each of the Grantees has caused this Declaration
to be executed as a sealed instrument as of the date first above written.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP, Grantor,
By INTERCONTINENTAL ENERGY CORPORATION, Its General Partner,
By________________________,
Its_______________________.
COMMONWEALTH ELECTRIC COMPANY, Grantee,
By________________________,
Its_______________________.
BOSTON EDISON COMPANY, Grantee,
By________________________,
Its_______________________.
MONTAUP ELECTRIC COMPANY, Grantee,
By________________________,
Its_______________________.
11
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS )
) ss.:
THE COUNTY OF ___________________ )
Personally appeared before me ________________________,
________________________ of Boston Edison Company, to me known as being
thereunto duly authorized, and acknowledged the same to be the free act and deed
of said Boston Edison Company.
________________________________________
Notary Public
Dated:________, 1989 My Commission Expires___________________
THE COMMONWEALTH OF MASSACHUSETTS )
) ss. :
THE COUNTY OF ___________________ )
Personally appeared before me _____________________________, of Montaup
Electric Company, to me known as being thereunto duly authorized, and
acknowledged the same to be the fret act and deed of said Montaup
Electric Company.
________________________________________
Notary Public
Dated:________, 1989 My Commission Expires___________________
12
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS )
) ss.:
THE COUNTY OF ___________________ )
Personally appeared before me______________________________, ______________
__________________ of Intercontinental Energy Corporation, general partner of
Northeast Energy Associates, A Limited Partnership, a Signer and Sealer of the
foregoing Instrument, to me known as being thereunto duly authorized, and
acknowledged the same to be the free act and deed of Intercontinental Energy
Corporation, acting as general partner of Northeast Energy Associates, A Limited
Partnership, and the free act and deed of said Northeast Energy Associates, A
Limited Partnership.
_______________________________________
Notary Public
Dated:________, 1989 My Commission Expires__________________
THE COMMONWEALTH OF MASSACHUSETTS )
) ss.:
THE COUNTY OF ___________________ )
Personally appeared before me _____________________________, _____________
____________ of Commonwealth Electric Company, to me known as being thereunto
duly authorized, and acknowledged the same to be the free act and deed of said
Commonwealth Electric Company.
_______________________________________
Notary Public
Dated:________, 1989 My Commission Expires__________________
13
<PAGE>
APPENDIX A
DESCRIPTION FOR DECLARATION
The land in Bellingham, Norfolk County, Massachusetts, situated on the
southwesterly side of Depot Street and bounded and described as follows:
NORTHEASTERLY by Depot Street, by four lines, 62.66 feet, 229.57 feet,
109.12 feet and 299.96 feet;
SOUTHERLY by lands now or formerly of Patton, Pearson, Alward,
Doriott, Chappell and Lorusso, 620.55 feet;
SOUTHEASTERLY
and SOUTHERLY by land of Winiker Realty Trust, by two lines, 325.43 feet
and 11.70 feet;
SOUTHEASTERLY by land of Winiker Realty Trust, by the northeasterly end of
a "way" shown on a plan entitled "Plan of Land in
Bellingham, Massachusetts Surveyed for Intercontinental
Energy Associates," dated January 6, 1988, revised March 7,
1989, to be recorded as Plan No. 596 of 1989, Book 382 (the
"Winiker Plan"), and by land of Margaret A. and Helen C.
Maher and by Leonard and Roberta Kritz, 835.58 feet;
EASTERLY by land of Joseph and Rita Bogan, by land of William R. and
Janet L. Reardon, by land of Paul R. Mantoni and Victoria A.
McBride and by land of Theodore and Frances Seethaler,
513.47 feet;
SOUTHERLY by land of William F. and Maureen McLaughlin, 214.42 feet;
SOUTHWESTERLY
and WESTERLY by land of William P. Coniaris, by land of Eleni S.
Coniaris, by land of Winiker Realty Trust and by land of The
Prestwich Corporation by several lines measuring together,
1533.10 feet;
14
<PAGE>
NORTHWESTERLY,
WESTERLY,
SOUTHERLY and
WESTERLY by land of The Prestwich Corporation and by Box Pond by four
lines measuring respectively, 186.32 feet, 74.86 feet,
247.00 feet, more or less, and 600.00 feet, more or less;
WESTERLY By Box Pond, 390 feet, more or less (of which 220 feet more
or less, is frontage on Box Pond of land now or formerly of
Ronald Mailly);
NORTHERLY and
NORTHWESTERLY by land of The Prestwich Corporation by four lines measuring
respectively, 156.00 feet, more or less, 56.25 feet, 158.75
feet and 60.00 feet, more or less;
NORTHEASTERLY
and NORTHERLY by the Charles River, 235.00 feet, more or less, and 315.00
feet, more or less;
NORTHEASTERLY,
NORTHWESTERLY
and
NORTHEASTERLY by Depot Street by four lines measuring respectively, 134.00
feet, more or less, 40.00 feet, 25.00 feet, and 122.22 feet;
SOUTHEASTERLY by a "road" with a 50 feet right of way as shown on a plan
entitled "Northeast Energy Associates Combined Cycle
Cogeneration Facility, Bellingham, Massachusetts, Definitive
Plan, Bellingham Cogeneration Subdivision," last revised
June 8, 1989, recorded with Norfolk Registry of Deeds as
Plan No. 623 of 1989, Book 382 (the "Subdivision Plan"),
107.98 feet;
WESTERLY and
SOUTHWESTERLY by two lines, 62.92 feet and 241.42 feet,
SOUTHEASTERLY 240.00 feet,
15
<PAGE>
EASTERLY
NORTHEASTERLY
NORTHERLY
NORTHEASTERLY
EASTERLY and
NORTHEASTERLY by six lines, 56.57 feet, 87.00 feet, 55.15 feet, 55.00
feet, 48.08 feet, and 45.00 feet, all by Lot 2 as shown on
the Subdivision Plan; and
SOUTHEASTERLY 50 feet,
NORTHEASTERLY 50 feet, and
NORTHWESTERLY 389.33 feet, all by the "road" as shown on the Subdivision
Plan.
Said Lot I containing 50.73 acres, more or less, and consisting of Lot I as
shown on the Subdivision Plan, land of Ronald Mailly as shown on the Winiker
Plan and land shown as Lot 40A on a plan entitled "Plan of Land in Bellingham,
Massachusetts Surveyed for Intercontinental Energy Corporation," dated July 10,
1988, and recorded as Plan No. 620 of 1989, Book 382.
Lot II
- ------
The land in Bellingham, Norfolk County, Massachusetts, situated on the
northeasterly side of Depot Street and shown as Lot 2 on the Winiker Plan,
bounded and described according to the Winiker Plan as follows:
SOUTHWESTERLY by Depot Street, by three lines measuring respectively,
46.47 feet, 197.87 feet and 155.00 feet, more or less;
NORTHWESTERLY by the Charles River, 360.00 feet, more or less; and
SOUTHEASTERLY
and EASTERLY by land of Consolidated Rail Corporation, 75.00 feet, more
or less, and 393.50 feet.
Containing, according to the Winiker Plan, 1.37 acres, more or less.
For Grantor's title see the following deeds to Grantor: 1) deed of Samuel
Winiker and Muriel Shpilner as Trustees of Winiker Realty Trust u/d/t dated
February 1, 1982, recorded with Norfolk Registry of Deeds in Book 5976, Page
216, said deed recorded an June 30, 1989 as Instrument No. 53033; 2) deed of
Vincent R. Thayer, individually and as Executor under the Will of Ruel S. Thayer
(Norfolk Probate Case No. 174266); Jeanne E. Kampton and
16
<PAGE>
Howard E. Thayer, individually and as Executors under the Will of Hilda M.
Thayer (Norfolk Probate Case No. 85P249E1); Donald R. Thayer and Lorraine F.
Duncan, said deed recorded on June 30, 1989 as Instrument No. 53034; and 3),
deed of Ronald R. Mailly and Carolina A. Mailly, recorded on June 26, 1989 as
Instrument No. 50886.
17
<PAGE>
APPENDIX B
COMMONWEALTH AGREEMENTS
-----------------------
1. Power Sale Agreement between Northeast Energy Associates, ("NEA") and
Commonwealth Electric Company ("Commonwealth"), dated as of November 26,
1986 and modified by amendments dated as of August 15, 1988 and January 1,
1989.
2. Power Sale Agreement between NEA and Commonwealth dated as August 15, 1988
and modified by an amendment dated as of January 1, 1989.
18
<PAGE>
APPENDIX C
EDISON AGREEMENTS
-----------------
1. Power Purchase Agreement between Northeast Energy Associates, A Limited
Partnership ("NEA") and Boston Edison Company ("Edison"), dated as of April
1, 19986 and modified by amendments dated as of June 8, 1987 and June 20,
1989.
2. Power Purchase Agreement between NEA and Edison, dated January 28, 1988 and
modified by an amendment dated as of June 20, 1989.
APPENDIX D
MONTAUP AGREEMENT
-----------------
1. Power Purchase Agreement between NEA and Montaup Electric Company, dated
October 17, 1986 and modified by an amendment dated as of June 28, 1989.
APPENDIX E
ACCOMMODATION AGREEMENT
-----------------------
1. Accommodation Agreement, dated as of June 28, 1989 among NEA, Commonwealth
Electric Company, Edison, Montaup, and The Chase Manhattan Bank (National
Association) as Agent for the lenders that are parties to the Credit
Agreement.
19
<PAGE>
co. Declaration of Easements, Covenants and Restrictions made as of June 28,
1989 by NEA in favor of Commonwealth, BECO and Montaup.
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000934665
<NAME> IEC FUNDING CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 539,182
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,859
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 539,183
<CURRENT-LIABILITIES> 36,858
<BONDS> 502,324
0
0
<COMMON> 1
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 539,183
<SALES> 0
<TOTAL-REVENUES> 37,186
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,186
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000934666
<NAME> NORTH JERSEY ENERGY ASSOCIATES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 87,308
<SECURITIES> 0
<RECEIVABLES> 52,594
<ALLOWANCES> 0
<INVENTORY> 6,632
<CURRENT-ASSETS> 148,667
<PP&E> 503,463
<DEPRECIATION> (380,203)
<TOTAL-ASSETS> 620,043
<CURRENT-LIABILITIES> 55,595
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (148,892)
<TOTAL-LIABILITY-AND-EQUITY> 620,043
<SALES> 208,103
<TOTAL-REVENUES> 215,776
<CGS> 0
<TOTAL-COSTS> 139,257
<OTHER-EXPENSES> 12,157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,861
<INCOME-PRETAX> 12,501
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,501
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,501
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000934667
<NAME> NORTHEAST ENERGY ASSOCIATES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 87,308
<SECURITIES> 0
<RECEIVABLES> 52,594
<ALLOWANCES> 0
<INVENTORY> 6,632
<CURRENT-ASSETS> 148,667
<PP&E> 503,463
<DEPRECIATION> (380,203)
<TOTAL-ASSETS> 620,043
<CURRENT-LIABILITIES> 55,595
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (148,892)
<TOTAL-LIABILITY-AND-EQUITY> 620,043
<SALES> 208,103
<TOTAL-REVENUES> 215,776
<CGS> 0
<TOTAL-COSTS> 139,257
<OTHER-EXPENSES> 12,157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,861
<INCOME-PRETAX> 12,501
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,501
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,501
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
