Exhibit T3B-68
HEBER LOAN PARTNERS
PARTNERSHIP AGREEMENT
THIS AGREEMENT is made and entered into this ___th day of
March, 1989, by and between ERC ENERGY, INC., a Delaware corporation ("ERC
ENERGY"), a wholly owned subsidiary of ERC INTERNATIONAL, INC., a Delaware
corporation ("ERC INTERNATIONAL"), and CENTENNIAL GEOTHERMAL CO., a Delaware
corporation ("CENTENNIAL THERMA, a wholly owned subsidiary of CENTENNIAL ENERGY,
INC., a Delaware Corporation ("CENTENNIAL"). ERC ENERGY and CENTENNIAL
GEOTHERMAL are each collectively as the "Partners." ERC INTERNATIONAL and
CENTENNIAL are each hereinafter sometimes referred to individually as "Parent"
and collectively as "Parents."
WITNESSETH:
WHEREAS, CENTENNIAL GEOTHERMAL and DRAVO ENERGY', INC. ("DRAVO
ENERGY") formed Heber Geothermal Company, a California general partnership, for
the purpose of designing, constructing and operating a certain electrical
generating station located in Heber, California; and
WHEREAS, ERC ENERGY will purchase and acquire all of the
issued and outstanding shares of DRAVO ENERGY and then merge into DRAVO ENERGY
with DRAVO ENERGY as the surviving
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corporation, and through such merger DRAVO ENERGY (which simultaneously with the
merger will change its name to ERC ENERGY) will, succeed, by operation of law,
to all of the assets and of ERC ENERGY and will continue to be, a partner in
Heber Geothermal Company; and
WHEREAS, ERC ENERGY desires to borrow $4.2 million in order
to, inter alia, purchase the shares of DRAVO ENERGY and effect the
aforementioned merger and CENTENNIAL GEOTHERMAL desires to borrow $4.2 million
in order to, inter alia, repay certain indebtedness owed to DRAVO ENERGY; and
WHEREAS, ERC ENERGY and CENTENNIAL GEOTHERMAL desire to form a
general partnership under the laws of the State of California to facilitate the
above described borrowings as well as for the other purposes and en the terms
and conditions stated in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements of the parties herein contained, ERC ENERGY and
CENTENNIAL GEOTHERMAL hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For purposes-of this Agreement
certain terms and provisions used herein are defined as follows:
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Capital Account. "Capital Account" shall mean the account
established pursuant to Section 3.03 hereof.
Facility. "Facility" means that certain electrical power
generating station constructed by the Operating Partnership in Heber, California
together with all' related properties and equipment owned, leased, or otherwise
controlled by-the Operating Partnership from time to time and used in connection
with the Operating' Partnership's business.
Management Committee. "Management Committee" shall mean the
committee established in accordance with Article IV.
Open Account. "Open Account" shall mean the account
established pursuant to Section 3.04 hereof.
Operating Partnership. "Operating Partnership" means Heber
Geothermal Company, a California Partnership formed under and pursuant to the
Operating Partnership Agreement for the purpose
Operating Partnership Agreement. The term "Operating
Partnership Agreement" means the amended partnership agreement entered into by
and between DRAVO ENERGY and CENTENNIAL GEOTHERMAL, including all amendments
thereto.
Ownership Interests. The term "Ownership Interests" means all
of the Partners' rights and interest in the Partnership.
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Partnership. The "Partnership" shall mean the partnership
created by this Partnership Agreement.
Partnership Agreement. The term "Partnership Agreement" or
"Agreement" shall mean this agreement, as it may be amended from time to time,
in writing by the Partners, together with all Exhibits hereto.
ARTICLE II
FORMATION OF A PARTNERSHIP
Section 2.01. Formation of Partnership. ERC ENERGY and
CENTENNIAL GEOTHERMAL hereby enter into and form a general partnership (the
"Partnership") under the California Uniform Partnership Act (the "Act") for, the
purposes set forth herein. Except as expressly provided herein to the contrary,
the rights and obligations of the Partners shall be governed by the Act. All
real and personal property owned by the Partnership shall, be held in the
Partnership name and not in the names of the Individual Partners, and no Partner
shall have- any individual ownership in such property except for its property
rights as a Partner.
Section 2.02. Purposes. The Partnership is intended to be a
profit making enterprise and is formed for the following limited purposes:
(1) To serve as the nominal borrower of the proceeds of one or
more loans for the benefit of the Partners and to lend
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the proceeds of such borrowings to the Partners for any purpose related to the
Facility;
(2) To acquire by purchase or in satisfaction of indebtedness
owed to the Partnership by a Partner, or otherwise, all or a portion of a
Partner's partnership interest in, and to become a partner in, the Operating
Partnership;
(3) To obtain all financing necessary to carry out the
business of the Partnership including the power to provide a security interest
in all or some of the Partnership's assets; and
(4) To carry on any other activities necessary or incidental
to the conduct of the Partnership business.
The Partnership shall not engage' in any other business or'
activity without the written agreement of both Partners. The Partnership is
empowered to do any and all things necessary, appropriate or convenient for the
furtherance and accomplishment of its purposes and for the protection and
benefit of the Partnership and its properties.
Section 2.03. Name and Principal Place of Business. The
business of the Partnership will be conducted under the name of Heber Loan
Partners ("HLP") and its principal place of business shall be at San Francisco,
California. The principal place of business may be changed from time to time,
and other places of business may be established by actions taken in
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accordance with the provisions of this Agreement that govern management of the
Partnership's business and affairs. Each Partner shall execute all assumed or
fictitious name certificates required by law in connection with the use of the
Partnership name.
Section 2.04. Term. The Partnership shall commence as of the
date of this Agreement and shall continue until the happening of one of the
following events, whichever is the latest to occur:
(1) Except for the events referred to in Section 8.01(1), (2),
(3), (4) and (5), upon notice by either Partner hereto if the other Partner
shall willfully fail to perform its obligations hereunder and such failure shall
continue for a period of at least three (3) months after written `notice thereof
from the Partner claiming such default; provided, however, that in case of a
dispute as to whether or not such default exists, the time within which the
Partner in default may cure such default shall not commence to run until it
shall have been finally adjudicated by a court of last resort having
jurisdiction that such Partner is in default;
(2) Three (3) months, after the winding up of the partnership
affairs of the Operating Partnership following its dissolution.
(3) By mutual agreement of the Partners.
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ARTICLE III
CAPITAL
Section 3.01. Capital and Working Capital. ERC ENERGY and
CENTENNIAL GEOTHERMAL shall contribute capital or working capital to the
Partnership in such amounts and at such times as directed by the Management
Committee.
Section 3.02. Annual Division of Profit or Loss. All annual
net profits or losses of the Partnership will be divided equally between ERC
ENERGY and CENTENNIAL GEOTHERMAL. For purposes of crediting or charging Capital
Accounts, the profit or loss of the Partnership' shall be computed from the
income and deductions properly reportable by the Partnership for federal income
tax purposes (plus any income specifically exempted from federal income tax).
Section 3.03. Capital Accounts. A Capital Account shall be
established for each Partner on the books of the Partnership. There shall be
credited to the Capital Account of each Partner (i) the amount of cash
contributed by the Partner from time to time, (ii) the tax basis (net of
liabilities assumed) of any property contributed by such Partner, and (iii) its
Share of profits of the Partnership, as determined under Section 302 hereof.
There shall be charged against each Partner's Capital Account (i) the amount of
all distributions
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made by the re to such Partner and (ii) its share the Partnership as determined
under Section 3.02 hereof.
Section 3.04. Open Account. An individual Open Account shall
be established and maintained for each Partner. Advances made by each Partner
which' are not capital contributions will be credited to the individual
Partner's Open Account. Temporary advances of cash by the Partnership to a
Partner, other than distributions from the Capital Account, shall only be made
for the furtherance of the business of the Partnership and shall be charged to
the Partner's Open Account. Interest on, and repayment terms and conditions for,
advances through the Open Account shall be determined by the Management
Committee and no advances through' the Open Account shall be made prior to such
determination as to each such advance by the Management Committee.
A credit balance in a Partner's Open Account shall constitute
a liability of the Partnership to that Partner and shall not constitute a part
of that Partner' $ Capital Account. A debit balance in a Partner's Open Account
shall constitute an obligation of that Partner to the Partnership and shall not
constitute a part of that Partner's Capital Account.
Section 3.05. Distributions.
(a) Partnership cash shall be allocated and distributed
regularly to the Partners fifty percent (50%) to ERC
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ENERGY and fifty percent (50%) to CENTENNIAL GEOTHERMAL, after due allocation
for the cash necessary for the operation of the requirements of any Partnership
indebtedness. Cash necessary for operation of the Partnership business is
defined as the amount of cash necessary for thirty (30) days of normal operation
to pay accounts payable, payroll, and other operating expenses (other than
income taxes).
(b) During any year, the Partnership may make advances on
account of distributions on an interim basis, per month or per quarter. The
annual cash flow budget will be revised as appropriate but no less frequently
than on a quarterly basis and previous distributions during the year together
with subsequent distributions will be adjusted to the proportions set forth in
the revised annual cash flow budget. A final unaudited statement of cash flow
for the year will be prepared and all interim cash withdrawals for that year
will, be adjusted to the proportions indicated on the final statement of cash
flow as soon as practicable.
ARTICLE IV
MANAGEMENT
Section 4.01. Overall Management of the Partnership. Each of
the Partner's rights in the management of the business of the Partnership shall
be exercised through the
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Management Committee in accordance with the provisions of this ARTICLE IV.
The Partners shall act through a Management Committee composed
of two (2) members, consisting of one (1) representative appointed by ERC ENERGY
and one (1) representative appointed by delivered one Partner to the other, Each
member of the Management Committee shall have one (1) vote in all Management
Committee decisions. Except as otherwise provided herein, the Management
Committee will conduct its proceedings in accordance with such rules as it may
from time to time establish and will keep minutes of its meetings and the
actions taken by it.
Members of the Management Committee may attend meetings and
vote either in person or through duly authorized proxies. Partnership action
shall be governed by unanimous vote of the Management Committee. The powers and
responsibilities of the Management Committee shall include, but not be limited
to, action on and resolution of the following matters.
(1) Amendment of this Agreement so as to affect the substantive
rights or obligations of either or both Partners hereto.
(2) Sales or other disposition of any asset of the Partnership the
disposition of which asset would materially impair or change
the conduct of the ordinary business of the Partnership as
contemplated by this Agreement.
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(3) Termination of the Partnership otherwise than as provided for
in Section 2.04 or 8.02 of this Agreement.
(4) Approval of distributions of Partnership cash, subject,
however, to the provisions of Section 3.05 of this Agreement.
(5) A voluntary prepayment or extension of debt incurred by. the
Partnership in connection with the Partnership's lending of
such borrowed funds to the Partners.
(6) Approval of long range plans and annual capital, revenue and
expense budgets and plans, including financial plans and
accounting policies.
(7) Authorization of any individual expenditure over $5,000 not
previously approved as part of a capital budget.
(8) Approval of any borrowing of money.
(9) Approval to commit the credit of the Partnership, other than
to trade creditors in the normal course of business.
(10) Voting of the Partnership's interest in, or exercising any
right of the Partnership as a partner in, the Operating
Partnership.
(11) Advances by the Partnership to the Partners under Section
3.04.
(12) Select, remove and replace the General Manager.
(13) Any other matters that the Executive Committee determines to
be a power or responsibility of the Management Committee.
Meetings of the Management Committee shall be held regularly
but not less than quarterly, or may be called at any time by any representative
or by the General Manager upon reasonable notice of the time and place of such
meeting to each
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representative. Such notice may be waived by the written consent of the
representatives of each of the Partners. Each Partner shall pay its own expenses
and those of its representatives on the Management Committee.
Section 4.02. Management of the Partnership. The General
Manager, selected by the Executive Committee, shall have the general charge,
supervision and conduct of the day-to-day operations of the Partnership.
Section 4.03. General Manger. A General Manager, who shall
have the responsibilities and authorities of the chief operating officer for the
Partnership, shall be appointed by the Management Committee, shall serve at the
will of the Management Committee and shall be responsible to and report to the
Partners.
Section 4.04. Reimbursement for Employees of a Partner or
Affiliate. Any employee of a Partner or its affiliate who, at the request of the
Partnership, is loaned to the Operating Partnership to perform necessary
services shall be paid by the Partner or affiliate by whom they are employed.
The Partnership shall' pay such Partner or affiliate any amounts received by the
Partnership from the Operating Partnership on account of such services. In the
case of personnel of a Partner performing services on a part-time basis on
behalf of the Partnership, the Partnership shall reimburse such Partner for
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the actual costs (inclusive of direct and indirect costs and allocable overhead)
which shall be determined on the basis of records reflecting the time spent in
rendering services for the Partnership.
ARTICLE V
TAX MATTERS
Section 5.01. Considered a Partnership. Heber Loan Partners is
intended to be and shall constitute a "partnership" for federal income tax
purposes, within the meaning of Section 761(a) of the Internal Revenue Code of
1954, as amended (the "Code"), and the rules and regulations promulgated
thereunder. It is agreed that the income of the Partners attributable to the
partnership taxable for federal income tax purposes shall be determined under
the provisions of Subchapter K of the Code relating taxation of partners and
partnerships, or by superseding legislation rules or regulations enacted in lieu
thereof. Each Partner further agrees not to take any action or make any election
not to be so treated for purposes of the Code. The Partners, acting through the
Management Committee, will make common `elections at the partnership level
required by or permitted under the Code.
Section 5.02. Allocation of Income. All items of income, gain,
loss or' deduction reportable for tax purposes (as well as any tax credits
arising from partnership activity and
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the cost or basis of property with respect to which tax credits may be
available) in any year shall be allocated for tax purposes between the Partners
in the same percentages as the profits or losses of the partnership are
allocated during such year.
ARTICLE VI
BOOKS AND RECORDS: ACCOUNTING
Section 6.01. Books. The Partnership shall, maintain at the
Partnership offices at the Facility accurate and complete books and records, on
the accrual basis, in accordance with generally accepted accounting principles
(which, having been adopted by the Management Committee, shall not be changed
without mutual consent), showing all costs, expenditures, sales, receipts,
assets and liabilities, and profits and losses, and all other records necessary,
convenient or incidental to recording the Partnership's business and affairs.
The Partnership's fiscal year shall end December 31. The books and records of
the Partnership shall be open to inspection by each' Partner or its designated
representative at any reasonable time during business hours.
Section 6.02. Records. Within ninety (90) days after the end
of each fiscal year of the Partnership, the Partnership shall furnish to each of
the Partners an annual, report which shall. include the Partnership' a federal
and state income tax
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returns which it is proposed that the Partnership shall file for that fiscal
year, and unaudited statements of income, changes in financial position, and
balance sheet for the fiscal year then ended and any additional information that
the Partners or either of them may require.
Promptly after the end of each quarter, including the last
quarter of the fiscal year, there shall be prepared an unaudited balance sheet
showing the Partnership's assets and liabilities at the close of the quarter and
an unaudited statement of income and a cash flow statement showing the results
of its operations for the quarter. Each of the Partners or their representatives
upon notice in writing to the Partnership shall have the right to audit the
Partnership's books and accounts for any accounting period within the 24 month
period following the end of such accounting period; provided, however, the
Partnership shall not be required to make any adjustments, as to any Partner,
unless and to the extent that such Partner took written exception to the books
and accounts and made a claim upon the Partnership for any discrepancies
disclosed by said audit within such 24 month period except for claims arising
from a determination of any governmental agency that any portion of such books
or accounts is erroneous. The expense of all such audits conducted at the
request of a Partner
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shall be borne by the Partner requesting' the audit and shall not be an expense
of the Partnership.
ARTICLE VII
TRANSFER OF PARTNERSHIP INTEREST
Section 7.01. Restrictions on Transfer, Changes in Ownership
of Partner. No Partner may at any time assign, convey, mortgage, pledge or
otherwise dispose of ("transfer") all, or any part of its Ownership Interest in
the Partnership or interest in this Agreement, nor' shall control (i e.,
ownership of more than 50% of the outstanding beneficial ownership interests) of
any Partner (or of any upstream entity in control of any Partner) be
transferred, whether by merger, sale of assets, sale of stock, consolidation,
combination or other corporate reorganization except in accordance with the
right of first refusal provisions of this Article VII. In this Article VII only,
the Partner (or an entity controlling the Partner, as the case may be)
proposing, the transfer is the "Seller," the continuing Partner is the "Buyer,"
and "Shares" shall mean the Ownership Interest or corporate stock to be
transferred, as the case may be.
Section 7.02. First Refusal Rights and Obligations. In the
event of a proposed transfer of Shares as described in Section 7.01, the
following provisions shall apply.
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(1) Notice. Seller shall notify Buyer in writing of Seller's
intent to transfer Shares, which notice ("Initial Notice")
will contain (1) the name and/or names of any and all parties
to whom the Shares may be transferred, (ii) the price at which
said Shares are intended to be sold and (iii) the terms of
payment and such other terms and conditions relating to the
proposed transfer as are relevant and material for purposes
hereof.
(2) Right to Purchase. Buyer, and/or such other party or parties
as designated by Buyer, shall have the right to purchase the
Shares by an additional notice sent or given to Seller not
later than 30 days after Buyer's receipt of the Initial
Notice. The price to Buyer, or its designate(s), of said
Shares shall be equal to the proposed price and the payments
and other terms shall be consistent with those stated in the
-Initial Notice. Seller shall not be required to sell to Buyer
and/or its designates(s) less than all of the Shares covered
in the Initial Notice, but may agree to do so. Notwithstanding
any of the foregoing, Buyer, or any of its designate(s), shall
not be obligated' to make any payment for said Shares to
Seller unless or until it has received documents conveying
said Shares. All incidents of ownership (including voting
rights) shall be deemed to have been transferred as of the
date that notice of purchase is sent or given to Seller.
(3) Sale to Other(s). In the event and to the extent that the
Shares covered by the Initial Notice are not so provided
above, not being required to sell less than all of said Shares
so covered to Buyer and/or its designate(s)), or if Buyer
rejects, in writing, its rights to purchase said Shares, then
Seller may transfer all of said Shares (but not less than all
of said Shares)' to any and/or all of the parties identified
in the Initial Notice (but not others) and upon the purchase,
price and, payment and other terms set forth therein and/or as
provided herein. In no event, without Buyer's written consent,
shall Seller effect any such transfer upon any terms more
favorable to any such other party than those set forth in the
Initial Notice, and said transfer must be effected within 90
days after the earlier of' (i) the expiration of the 30-day
period within which Buyer may purchase the Shares as provided
above, or (ii) the
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date when Buyer rejects, by a written, notice given to Seller,
its purchase rights thereto.
Section 7.03. Exceptions. The foregoing Sections 7.01 and 7.02
shall not preclude either-Partner from pledging or assigning distributions to be
received by it from the Partnership. In addition, it shall not preclude a
transfer of `Ownership Interest in the Partnership by a Partner to such
Partner's parent or to an entity 100% of whose equity is owned either directly
or indirectly by that Partner's parent.
Section 7.04. Transferees. All transferees shall execute a
written instrument of express assumption pursuant to which it shall take such
Shares subject to and burdened with (i) all the terms, provisions and conditions
of this Agreement which should then become effective as between the transferee
and the remaining Partner, and (ii) all other obligations the transferring
Partner has to the Partnership, contractual or otherwise.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Default of a Partner. If any of the following
events occur:
(1) the entry of a decree or order by a court having jurisdiction
in the premises adjudging a Partner or its Parent a bankrupt
or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition
of or in respect of the Partner or its Parent under the
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federal. Bankruptcy Act or any other applicable federal or
state law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the
Partner or its Parent or `of any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order
unstayed and in effect for a period of ninety (90) consecutive
days; or
(2) the institution by a Partner or its Parent of proceedings to
be adjudicated a bankrupt or insolvent, or the consent by it
to the institution of bankruptcy or insolvency proceedings
against it, or the filing of a petition or answer or consent
seeking reorganization or relief under the federal Bankruptcy
Act or any other applicable federal or state law, or the
consent by it to the filing of such petition or to the
appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or similar official) of the Partner or its
Parent or of any substantial part of its property, or the
making by it of an assignment for the benefit or creditors or
the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate
action by the Partner or its Parent in furtherance of any such
action; or'
(3) any part of the Ownership Interest of a partner in the
Partnership is seized by a creditor of such Partner, and the
same is not released from seizure or bonded out within thirty
(30) days from the date of notice of seizure; or
(4) a Partner fails to perform any material obligation imposed
upon such Partner under any agreement relating to money
borrowed from the Partnership, or attempts to transfer any of
its Ownership Interest in the Interest in the Partnership
except as otherwise provided in Section 7.01; or
(5) a Partner fails to repay advances debited to its Open Account
upon demand by the partnership; then
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such Partner shall be deemed to be in default hereunder and shall be referred to
as the "Defaulting Partner," and the other Partner shall be referred to as the
"Non-Defaulting Partner."
The Non-Defaulting Partner shall have the right to give the
Defaulting Partner a Notice of Default, which shall be in writing, shall, set
forth the nature of the event of default, and shall' set forth the date by which
such default must be cured which date shall be ninety (90) days after receipt of
the Notice of Default. If within such ninety (90) day period the Defaulting
Partner cures such default, the Notice of Default `shall be inoperative, and the
Defaulting Partner shall lose no rights hereunder. If, within such specified
period the Defaulting Partner does not cure such default, the Non-Defaulting
Partner at; the expiration.of such period shall have the rights hereinafter
specified.
Section 8.02. Buy-Sell Procedure at Option of Non-Defaulting
Partner. If a Partner becomes a Defaulting Partner, pursuant to the provisions
of Section 8.01 and the default is not cured within the specified period, then,
in such event, the Non-Defaulting Partner shall `have the right, at its option,
to proceed under the provisions of this Section 8.02 to either:
(i) expel the Defaulting Partner from the Partnership by giving
written notice specifying the expulsion date and Partner's
Ownership Interest in the Partnership at
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a price which for such purposes shall be equal in amount to
the Defaulting Partner' s Ownership Interest in the net book
value of the Partnership as determined by generally accepted
accounting principles as consistently applied by the
Partnership (excluding goodwill and any capital resulting from
write-up of assets) as shown by the Partnership books as of
the end of the calendar month preceding the date of purchase,
after deducting any amounts payable to the Partnership by the
Defaulting Partner, any costs or remedying the default and any
damages or costs to the Partnership or Non-Defaulting Partner,
including any adverse federal tax consequences suffered by the
Non-Defaulting Partner, resulting from the default. Payment to
the Defaulting Partner may take the form of a ten (10) year
promissory note of the Non-Defaulting Partner, the principal
amount of which shall be paid in ten (10) equal annual
payments, with interest payable annually and in arrears and at
the floating prime rate of' Bank of America, San Francisco,
California in effect, from time to time, but in no event in
excess of the maximum rate of interest `permitted by
applicable law; provided, however, that the `Non-Defaulting
Partner shall have the option to
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prepay the note in whole or in part at any time without
penalty or premium. In the event the liability in respect of a
period prior to the expulsion of the Defaulting Partner which
liability had not been accrued on the books of the Partnership
on the date the purchase price of the Defaulting Partner' a
Ownership Interest `in the net book value of the Partnership
was determined, the note provided for in the preceding
sentence shall be reduced by an amount equal to the Defaulting
Partner's proportionate share of such liability prior to its
expulsion, or the Non -- Defaulting Partner may offset such an
amount against any Other sums owed by the Partnership to the
Defaulting Partner; or
(ii) cure the default and the cost of such curing shall be charged
against the Defaulting Partner's Capital Account and credited
to the Non-Defaulting Partner's Capital Account. In such
event, notwithstanding any provision of this Agreement to the
contrary, the Ownership Interests of the Partners shall then
be adjusted to reflect the relationship of the Partners
Capital Accounts to each other. The distribution of
Partnership profit and loss and cash flow shall also be
-adjusted so that the Non-Defaulting Partner
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percentage interest therein shall be increased and the
Defaulting Partner's percentage interest therein decreased by
the same number of percentage points or fraction of a
percentage point as was their respective each time a default
occurs and is cured by the Non-Defaulting Partner. Adjustments
to the Partners' Ownership Interests shall be carried out to
the nearest one-tenth of 1%. The Defaulting Partner's
liability for any obligations to or of the Partnership, other
than those involved in the curing of the default, in respect
of a period prior to the effective date of the curing of the
default, shall not be affected.
In addition to the foregoing, the Non-Defaulting Partner may,
at its option, at any time within one (1) year following the date of receipt of
notice by the Partner of the uncured default, cause the Partnership to terminate
any contracts existing between the Partnership and the Defaulting Partner or its
Parent or any of its affiliated entities on not less than ninety (90) days
written notice.
The right of the Nan-Defaulting Partner to proceed under this
Section 8.02 shall be in addition to all other rights and remedies that the
Non-Defaulting Partner may have either at law, equity, or otherwise.
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ARTICLE IX
RESOLUTION OF DISPUTES ARBITRATION
Section 9.1. Any dispute between the Partners arising out of
the interpretation or implementation of this Agreement shall initially be
reviewed and considered by the Chief Executive officer (or his designate) of
each of the Partners hereto, and in the event the: Partners are unable, within a
reasonable period of time to resolve their differences by such means, then the
dispute shall be determined by arbitration pursuant to the then current
commercial arbitration rules of the American Arbitration Association. The
request for arbitration shall be in writing, setting forth in detail the claim
or claims to be arbitrated, the amount involved, if any, and the remedy sought.
It shall be delivered to the other party within ninety (90) days from the date
that discussions between the Chief Executive Officers terminated. Any failure to
request arbitration within such ninety-day period shall be deemed a waiver of
the right to arbitrate the dispute unless excused in writing. A board of three
arbitrators shall be selected by the American Arbitration Association. The
decision of not less than a majority of the arbitrators shall be final.
Section 9.2. The existence of a dispute which has oz may
become the subject of arbitration shall in no way excuse either ERC ENERGY or
CENTENNIAL GEOTHERMAL from performing its
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obligations under this Agreement and each of the parties hereto shall continue
to perform in accordance with the terms of this Agreement irrespective of the
existence of any such dispute.
Section. 9.3. The Partner responsible for payment of the cost
of arbitration shall, be determined by the American Arbitration Association.
ARTICLE X
CONTRIBUTI TO PARTNERSHIP LIABILITIES, INDEMNIFICATION
If either Partner pays any Partnership liability or
obligation, the Partnership shall reimburse such Partner. Any payment under this
Section by a Partner that is not reimbursed shall be considered a contribution
to the capital of the Partnership. If the Partnership is unable to make such
reimbursement, each Partner agrees to, and does hereby indemnify and save and
hold harmless the other Partner, and to the extent set forth below each
Affiliate and the Parent of the other Partner, from and against all claims,
causes of action, liabilities, payments, obligations, expenses (including
without limitation reasonable Lees of and disbursements, of counsel) or losses
("claims, liabilities and losses") arising out of a Partnership liability or
obligation to the extent necessary to accomplish the result that neither Partner
(together with its Affiliates and its Parent) shall bear any portion of a
liability or obligation of the Partnership in any manner other than
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equally. Without limiting the generality of the foregoing, a claim, loss or
liability shall be deemed to arise out of a Partnership liability or obligation
if it arises out of, or is based upon, the conduct of the business of the
Partnership or the Partnership's ownership of an interest in the Operating
Partnership or any other property of the `Partnership (such property being
hereinafter, referred to as the "Partnership Property"). The foregoing
indemnification shall be available to an Affiliate and the Parent of a Partner
with respect to a claim, liability or loss arising out of a Partnership
liability or obligation, which is paid by or incurred by such Affiliate or
Parent as a result of such Affiliate or Parent directly or indirectly owning or
controlling a Partner, or as a result of the fact that an individual employed or
engaged by the Partnership or a contractor is also a director, officer, or
employee of such Affiliate or Parent. The foregoing shall not inure to the
benefit of any Partner (or
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Affiliate or Parent of any Partner) in respect of any claim, liability or loss
which (1) arises out of, or is based upon, the gross negligence or willful
misconduct of such Partner or the Parent or Affiliate of such Partner, (2) is a
tax, levy or similar law or governmental charge not imposed upon the Partnership
or upon Partnership Property, or (3) results from the breach, failure to perform
or negligent performance of, any obligation of any Partner (or Affiliate or
Parent of any Partner) under any contract entered into with the Partnership or
on behalf of the Partnership, the Partnership reserving full right of legal
recourse against each Partner and its Affiliates and Parents for breach or
improper performance of such obligations. It is understood and agreed that, for
the purposes of the foregoing sentence, no claim, liability or loss shall be
deemed to arise out of, or be based upon, the gross negligence or willful
misconduct of the Affiliate or Parent of any Partner solely by reasons of the
fact that it arises out of, or is based upon, the gross negligence or willful
misconduct of a director, officer, or employee of such Affiliate or Parent, if
at the time of such negligence or misconduct such director, officer or employee
was the Partnership.
The foregoing indemnity shall apply only to~ a claim,
liability or loss to the extent that it is uninsured by the Partnership.
ARTICLE XI
DISTRIBUTION ON TERMINATION
Section 11.01. Winding Up of Partnership. Upon the dissolution
of the Partnership or its termination for any reason, the assets of the
Partnership, after payment of liabilities, shall be converted into cash and the
Capital
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Accounts adjusted for such sales and the proceeds distributed in the following
manner:
(a) All Partnership liabilities shall be paid and discharged, or
adequate funds set aside for the payment and discharge
thereof, all out of the Partnership's cash after sale of all
assets, with either Partner having the right of first refusal,
for a period of not more than 90 days from the receipt of a
third party offer to purchase, to purchase such assets at the
same price and on the same terms and conditions as such third
party offer. In the event that the liabilities of the
Partnership cannot be fully satisfied and discharged after the
sale or sales of all assets, the Partners shall assume and pay
the excess equally; provided, however, that if the Capital
adjusted for such sale or sales of all assets, shall be
negative, such Partner shall first contribute to the
Partnership an amount equal to the negative balance of its
Capital Account. Any such payment will be credited to such
Partner's Capital Account.
(b) Thereafter, (i) a final examination, under United States,
generally accepted auditing standards, of the Partnership's
financial statements prepared in accordance with United States
generally accepted
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accounting principles shall be made by the Partnership's
independent public accountants, and (ii) statements setting
forth the Partners' Capital Accounts shall be prepared by such
independent public accountants in accordance with Section 3.03
of this Agreement. Copies of such financial statements and
statements respecting Capital Accounts shall be furnished to
each Partner. The Capital Accounts subsequent to these
adjustments shall be termed the "Final Capital Accounts"
(c) In the event that the Final Capital Account of a Partner is
negative, such Partner shall pay to the Partnership an amount
equal to' the negative balance in its account. The Partnership
shall retain sufficient assets as a reserve to meet its
obligations and contingent liabilities. It shall distribute
any assets in excess of such reserve and, from time to time,
such assets as are no longer needed for such reserve, to the
Partners in proportion to their Final Capital Accounts.
(d) The Partnership shall terminate when all property owned by the
proceeds, after payment or satisfaction of liabilities to
Partnership creditors shall have been distributed to the
Partners.
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(e) Notwithstanding anything herein to the contrary, the
provisions of this Article XI are meant to define the
respective rights and duties of the Partners, and shall not
give any third parties any rights against the Partners.
ARTICLE XII
GENERAL PROVISIONS
Section 12.01. Integration. This Partnership Agreement is the
entire agreement between the parties with respect to the subject matter hereof.
Any prior' agreements, promises, negotiations or representations inconsistent
with this Agreement (and not expressly set forth herein are of no force and
effect. No alteration, modification, or interpretation hereof shall be binding
unless in writing and signed by the Partners.
Section 12.02. Interpretation. This Partnership Agreement
shall be interpreted and construed in accordance with the laws of the State of
California. The titles of the Articles and Sections in this Agreement have been
inserted as a matter of convenience, are for reference only, and shall not
control or affect the meaning or construction of any of the terms and provisions
hereof.
Section 12.03. Inspection. Each Partner or its authorized
representatives, at its own expense, may examine and
30
reproduce any of the Partnership's books or records, or may inspect the property
of the Partnership at any reasonable time, and on reasonable notice. In
addition, the Partnership shall, upon request, make available for examination by
the Partners or their representatives, copies of all records and any and all
other data relating to' the operations by the Partnership which it may have
available. Each Partner, at its own expense, shall be entitled to copy any such
data or records.
Section 12.04. Force Majeure. The respective obligations of
each Partner hereto, other than the obligation to pay money shall be suspended
while it is prevented from complying therewith, in whole or in part, by weather
conditions, labor accidents or incidents, rules and regulations of any federal,
state, or other governmental agency, delays in transportation, inability to
obtain necessary materials in the open market, or any other cause of the same or
other character beyond the reasonable control of such Partner.
Section 12.05. Notices. All notices, consents, requests,
reports and other documents authorized or required, to be given pursuant to this
Agreement shall be effective when personally served upon the Partner to be given
such notice at the' address designated by it hereinbelow, or seventy-two (72)
hours after the -same shall have been deposited in the United States Mails,
properly addressed, certified or registered with
31
return receipt requested, and with postage thereon fully prepaid. Until
otherwise specified by notice in writing, the addresses for such notice shall
be:
If to ERC ENERGY:
ERC ENERGY, INC.
c/o ERC INTERNATIONAL, INC.
0000 Xxxxxxxxxx' Xxxx
X.X. Xxx 00000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
If to CENTENNIAL GEOTHERMAL:
CENTENNIAL GEOTHERMAL, INC.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: President
Any Partner may at any time by written notice to the other.
Partner change the address to which payment, notices, or communications shall be
sent.
Section 12.06. Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns, subject to the restrictions on assignability
set forth in ARTICLE VII hereof.
Section 12.07. Severability. If any provisions of this
Agreement or the application thereof to any party or circumstances shall be
invalid or unenforceable to any extent, the remainder of this Agreement and the
application of such
32
provision to other parties or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
WITNESS: ERC ENERGY, INC.
By -------------------------------------
Title/s/ Vice President
/s/ Xxxx X. Xxxxxxxx
--------------------------
WITNESS: CENTENNIAL GEOTHERMAL, INC.
-------------------------- By -------------------------------------
Title/s/ Vice President
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