Exhibit 3.10
SECOND AMENDED AND RESTATED
AGREEMENT
OF
LIMITED PARTNERSHIP
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
DATED AS OF JUNE 29, 2001
TABLE OF CONTENTS
PAGE
1. Definitions..............................................................2
2. Formation of Partnership................................................11
3. Name....................................................................11
4. Business................................................................11
5. Certificate of Limited Partnership......................................11
6. Fictitious Business Name Statement......................................12
7. Executive Offices.......................................................12
8. Term of Partnership.....................................................12
9. Contributions and Status................................................12
9.1 Percentage Interests of General Partner..........................12
9.2 Percentage Interest of the Limited Partners......................12
9.3 Limited Liability of the Limited Partners........................13
9.4 Role of Limited Partner..........................................13
9.5 Withdrawal and Return of Capital.................................13
9.6 Salaries, Drawings and Interest on Capital Accounts..............13
9.7 Contributions in Connection with Certain Credit Support..........13
10. Distributions...........................................................14
10.1 Distributable Cash...............................................14
10.2 Amounts Withheld.................................................14
11. Allocation of Profits and Losses........................................14
11.1 Capital Account..................................................14
11.2 Allocation of Losses.............................................16
11.3 Allocation of Profits............................................16
11.4 Deficit Restoration..............................................16
11.5 Regulatory Allocations and Related Provisions....................16
11.6 Curative Allocations.............................................17
11.7 Tax Allocations..................................................18
11.8 Special Allocations of Profit and Loss and Distributable
Cash While Tracking Account Loan is Outstanding ...............18
11.9 Certain Special Allocations of Deduction and Income
Related to Project Tracking Account Deduction .................19
11.10 Cost Recovery Recapture; Allocation of Cost Recovery.............20
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TABLE OF CONTENTS
(Cont'd)
PAGE
11.11 Distributions and Allocations in Respect of Transferred
Interests......................................................20
11.12 Special Allocation of Income, Loss and Distributable
Cash For Proceeds of Certain Litigation and the
Casualty Insurance Claim Receivable ...........................20
11.13 Disbursements in Repayment of Credit Support Loans...............21
12. Rights, Powers and Duties of the General Partner; Charges,
Expenses and Fees of the General Partner..............................22
12.1 Management and Control of the Partnership........................22
12.2 Authority of the General Partner.................................22
12.3 Expenses of the General Partner..................................24
12.4 Restrictions on Authority of the General Partner.................24
12.5 Duties and Obligations of the General Partner....................28
12.6 Power of Attorney................................................28
12.7 Independent Activities...........................................29
12.8 Exempt Wholesale Generator Status................................29
12.9 Amended and Restated Operations and Maintenance Agreement;
Restrictions on Change of Control of Operator;
Administrative Services Agreement .............................29
12.10 Certain Actions Upon the Occurrence of an Event of Loss;
Technical Disputes.............................................30
13. Investment and Operating Restrictions...................................31
13.1 Transfers of Property............................................31
13.2 Receipt of Funds.................................................31
14. Additional General Partner; Removal of a General Partner................32
14.1 Additional General Partner.......................................32
14.2 Removal of a General Partner.....................................32
15. Assignability of Interests..............................................33
15.1 Transfer of Limited Partners' Interest...........................33
15.2 Right of First Negotiation.......................................33
15.3 Limitations on Transfer..........................................34
15.4 Mandatory Sales or Restructuring.................................34
15.5 Certain Sales by the Sithe Partners..............................36
15.6 Expenses.........................................................36
16. Reserved................................................................37
17. Substituted Limited Partner.............................................37
17.1 Conditions.......................................................37
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TABLE OF CONTENTS
(Cont'd)
PAGE
17.2 Effect of Assignment without Substitution........................37
17.3 Discretion of General Partner....................................37
17.4 Consent Not Required.............................................37
17.5 Amendment of Certificate.........................................37
17.6 Miscellaneous....................................................38
18. Withdrawal..............................................................38
19. Dissolution and Liquidation of the Partnership..........................38
19.1 Events Causing Dissolution.......................................38
19.2 Liquidation......................................................39
20. Books and Records; Reports; Other Information...........................40
20.1 Books and Records................................................40
20.2 Annual Reports...................................................40
20.3 Reports to Project Lenders.......................................41
20.4 Annual Budget....................................................41
20.5 Tax Information..................................................41
21. Amendments..............................................................41
21.1 Additional Partners..............................................41
21.2 Amendments with Consent of Limited Partners......................41
21.3 Execution of Amendments..........................................42
21.4 Recording of Amendments..........................................42
22. Liability of the General Partner........................................42
22.1 In General.......................................................42
22.2 Agents of the General Partner....................................42
23. Indemnification of General Partner......................................43
23.1 In General.......................................................43
23.2 Against Claims by Limited Partner................................43
23.3 Exceptions.......................................................43
24. Miscellaneous...........................................................43
24.1 Agreements in Counterparts.......................................43
24.2 Survival of Rights...............................................43
24.3 Section Headings.................................................43
24.4 Additional Documents.............................................43
24.5 Waiver of Partition..............................................44
24.6 Validity.........................................................44
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TABLE OF CONTENTS
(Cont'd)
PAGE
24.7 Interpretation...................................................44
24.8 Governing Law....................................................44
24.9 Limitation on Damages............................................44
24.10 Notices..........................................................44
Exhibit A Percentage Interests and Estimated and Projected Capital Account
Balances as of June 30, 2001
Exhibit B Term Sheet for Second Amended and Restated Operations and
Maintenance Agreement
Exhibit C Term Sheet for Administrative Services Agreement
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SECOND AMENDED AND RESTATED
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
This SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this
"Agreement") is executed as of June 29, 2001, and shall be effective as of 12:01
a.m. (New York time) on June 30, 2001 among Sithe/Independence, Inc., a Delaware
corporation, as general partner ("General Partner") and Sithe Energies, Inc., a
Delaware corporation, as a limited partner, Sithe Energies U.S.A., Inc., a
Delaware corporation, as a limited partner, Mitex, Inc., a Massachusetts
corporation, as a limited partner, and Oswego Cogen Company, LLC, a Delaware
limited liability company, as a limited partner (together, the "Limited
Partners"), pursuant to the provisions of the Delaware Revised Uniform Limited
Partnership Act, as amended.
WHEREAS, on January 1, 1991, the General Partner, Sithe Energies
U.S.A., Inc., Mitex, Inc. and Sithe Energies, Inc. entered into an Agreement of
Limited Partnership of Sithe/Independence Power Partners, L.P. (the "Original
Agreement");
WHEREAS, Sithe Energies, Inc. transferred and assigned a portion of its
Interest (as defined herein) in the Partnership to Energy Factors, Incorporated
with the consent of the General Partner;
WHEREAS, Energy Factors, Incorporated transferred and assigned all of
its Interest in the Partnership to Cogeneration National Corporation with the
consent of the General Partner;
WHEREAS, pursuant to an Amended and Restated Agreement of Limited
Partnership dated June 29, 2001 (the "First Amended and Restated Partnership
Agreement") between Sithe/Independence, Inc., Sithe Energies, Inc., Sithe
Energies U.S.A., Inc., Mitex, Inc. and Cogeneration National Corporation,
Cogeneration National Corporation was admitted as a limited partner to the
Partnership;
WHEREAS, pursuant to a Purchase and Sale Agreement dated the date
hereof between Cogeneration National Corporation and Oswego Cogen Company, LLC,
Cogeneration National Corporation shall transfer and assign all of its Interest
in the Partnership to Oswego Cogen Company, LLC with the consent of the General
Partner; and
WHEREAS, the General Partner and the Limited Partners desire to amend
and restate the First Amended and Restated Partnership Agreement in its entirety
as set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the General Partner and the
Limited Partners, intending to be legally bound, hereby covenant and agree as
follows:
1. DEFINITIONS.
In addition to the terms defined elsewhere in this Agreement, when used
with initial capitalization, whether singular or plural, the following terms
shall have the meanings set forth below. All references in this Agreement to any
governmental or non-governmental entity, including, without limitation, the
Federal Energy Regulatory Commission, shall include any and all successors to
such entities. Unless the context otherwise requires, any reference herein to
any contract, agreement and any schedule, attachment or exhibit thereto shall
mean such contract, agreement, schedule, attachment or exhibit as amended,
supplemented and modified and in effect from time to time
1.1 "Act" means the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time.
1.2 "Adjusted Basis" means the basis for determining gain or loss for
federal income tax purposes from the sale or other disposition of property, as
defined in Section 1011 of the Code.
1.3 "Adjusted Capital Account Balance" means the balance in any
Partner's Capital Account as of the end of the relevant taxable year, after
giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts that such Partner is
obligated to restore pursuant to any provision of this Agreement, is otherwise
treated as being obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the
Treasury Regulations, or is deemed to be obligated to restore pursuant to the
penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Treasury Regulations (determined after taking into account any changes during
such year in Partnership Minimum Gain and Partner Nonrecourse Debt Minimum
Gain); and
(b) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations.
1.4 "Adjusted Capital Account Deficit" means a deficit Adjusted Capital
Account Balance with respect to any Limited Partner.
1.5 "Administrative Services Agreement" shall have the meaning set
forth in Section 12.9 hereof.
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1.6 "Administrative Services Provider" means the Administrative
Services Provider pursuant to the Administrative Services Agreement.
1.7 "Affiliate" with respect to any Person means any other Person
directly or indirectly controlling, controlled by, or under common control with
such first Person whether through ownership, by contract, or otherwise; provided
that any Person with direct or indirect ownership of five percent (5%) or more
of the voting power for the election of directors or other governing body of a
corporation or five percent (5%) or more of the economic interest of any other
Person will be deemed to control such corporation or other Person.
1.8 "Agreement" means this Second Amended and Restated Agreement of
Limited Partnership, as originally executed and as amended from time to time, as
the context requires. Words such as "herein," "hereinafter," "hereof," "hereto"
and "hereunder," when used with reference to this Agreement, refer to this
Agreement as a whole, unless the context otherwise specifically requires.
1.9 "Allocation Share" shall have the meaning set forth in Section
11.8(a) hereof.
1.10 "Annual Period" shall have the meaning set forth in the Operations
and Maintenance Agreement.
1.11 "Applicable Laws" means laws, rules, regulations, statutes, acts
(including the Act), codes (including the Code), ordinances, decrees, rulings,
directives, judgments, declarations and requirements of all federal, state and
local governmental authorities applicable to the Partnership, the Business, the
Project, the Partners and the performance of the obligations of a Partner
hereunder.
1.12 "Available Cash" means the sum derived by deducting the total
annual "Costs" of the Partnership from the total annual gross cash receipts of
the Partnership from all sources (other than from Capital Contributions or from
loans from any Partner). Such Costs, for the purposes hereof, mean all cash
expenditures in connection with the Business of the Partnership, including,
without limitation, lease payments, advertising and promotion, salaries,
accounting, computer time-sharing, statistical or bookkeeping service and
computing or accounting equipment use, accounting, tax preparation, legal,
travel, transportation and telephone expenses, operating and maintenance
expenses and Debt Service. There shall be included in Costs the direct
out-of-pocket expenses incurred by the General Partner or any of its Affiliates
(including payments to salaried employees and payments for services and
supplies) and a reasonable proportion of the overhead or indirect expenses of
the General Partner or any of its Affiliates incurred in performing bookkeeping,
accounting, tax preparation, legal, general management, computer and public
relations services for the Partnership necessary for the operation of the
Partnership, which services, but for their performance by the General Partner or
any such Affiliates, would be required to be performed for the Partnership by
another Person; PROVIDED that the expenses so included in Costs shall not exceed
the amount that the Partnership would be required to pay to Persons not
Affiliates of the General Partner for comparable services that would have been
obtainable in a bona fide arm's-length transaction. "Costs" do not include: (i)
any overhead expenses of the General Partner or an Affiliate thereof not
reasonably incurred in connection with
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the Business as provided in the third sentence of this Section 1.12, (ii) cost
recovery, depreciation or amortization deductions; or (iii) expenditures of
funds from Reserves or from Capital Contributions. Notwithstanding the
foregoing, the "Available Cash" shall not exceed the amounts which may be
distributed to the Partners under the terms of any Mortgage.
1.13 "Base Gas Sales Agreement" means the Amended and Restated Base Gas
Sales Agreement dated October 26, 0000 xxxxxxx Xxxxx Xxxxx Xxxxxxx Corp. (as
successor in interest to Enron Power Services, Inc.) and the Partnership, as
amended.
1.14 "Budget" shall have the meaning set forth in the Operations and
Maintenance Agreement.
1.15 "Business" shall have the meaning set forth in Section 4 hereof.
1.16 "Capital Account" shall have the meaning set forth in Section 11.1
hereof.
1.17 "Capital Contribution" or "Contribution" means any cash, property,
services rendered or a promissory note or other obligation to contribute cash or
property or to perform services, which a Partner contributes from time to time
to the Partnership in its capacity as a Partner.
1.18 "Casualty Insurance Claim Receivable" means that certain
receivable in the amount of approximately $6,330,291 currently reflected on the
books of the Partnership (as may be adjusted in the future to reflect the actual
insurance settlement), in respect of the Partnership's aggregate insurance
reimbursement claims (relating to both property and business interruption
coverage) arising from the occurrence of a casualty event at the Project on or
about May 31, 2000.
1.19 "Code" means the Internal Revenue Code of 1986, as amended.
1.20 "Commission" means the United States Securities and Exchange
Commission.
1.21 "Costs" means those items designated as such in the definition of
Available Cash.
1.22 "Credit Support Agreement" means that certain Financial Swap
Credit Support Contribution Agreement, dated as of June 30, 2001, among Enron
Corp., Exelon and the Partnership.
1.23 "Credit Support Curing Party" means a Credit Support Party that
elects to cure, in whole or in part, a default by the other Credit Support Party
under the Credit Support Agreement.
1.24 "Credit Support Defaulting Party" means a Credit Support Party
that fails to satisfy its contribution obligations under the Credit Support
Agreement.
1.25 "Credit Support Loan" shall have the meaning set forth in the
Credit Support Agreement.
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1.26 "Credit Support Party" means, with respect to the Sithe Partners,
Exelon, and with respect to Oswego Cogen, Enron Corp.
1.27 "Debt Service" means all payments required to be made in
connection with a loan to the Partnership or any other loan or debt obligation
secured by a lien on any Partnership assets (including any Tracking Account
Payments) and all payments required to be made pursuant to any lease to which
the Partnership is a party as the lessee and which is treated as a capital lease
under generally accepted accounting principles.
1.28 "Depreciation" means for each taxable year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such taxable year, except that if the Gross Asset Value
of an asset differs from its Adjusted Basis for federal income tax purposes at
the beginning of such taxable year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such taxable
year bears to such beginning adjusted tax basis; provided, however, that if the
Adjusted Basis for federal income tax purposes of an asset at the beginning of
such taxable year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
General Partner.
1.29 "Distributable Cash" means, with respect to any taxable year or
other period, Available Cash, reduced by any amounts set aside from Available
Cash for the restoration or creation of Reserves and increased by any amounts
available as a result of the reduction or elimination of Reserves.
1.30 "Enron Corp." means Enron Corp., an Oregon corporation.
1.31 "Event of Loss" shall have the meaning set forth in the Indenture.
1.32 "Exelon" means Exelon Generation Company, L.L.C., a Pennsylvania
limited liability company.
1.33 "Exempt Wholesale Generator" means an exempt wholesale
generator as defined under PUHCA, Section 32 (15 U.S.C. Section 79z-5a) and
Part 365 of the rules and regulations of the Federal Energy Regulatory
Commission (18 C.F.R. Part 365).
1.34 "Federal Power Act" means the Federal Power Act of 1920, as
amended from time to time.
1.35 "Financial Swap Agreement" means, collectively, that certain
Master Agreement, dated July 1, 2001, between Dynegy Power Marketing, Inc. and
the Partnership, the Schedule to the Master Agreement attached thereto dated
July 1, 2001 and Confirmation #1A thereof dated July 1, 2001.
1.36 "First Amended and Restated Partnership Agreement" shall have the
meaning set forth in the recitals hereto.
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1.37 "General Partner" means Sithe/Independence, Inc., or any
successors in interest, and any additional General Partner, in its capacity as
general partner of the Partnership.
1.38 "Gross Asset Value" means with respect to any asset, the asset's
Adjusted Basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the gross fair market value of such asset, as
determined by the contributing Partner and the General Partner;
(b) The Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined by the General
Partner, as of the following times: (i) the acquisition of an additional
interest in the Partnership by any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (ii) the distribution by the Partnership
to a General Partner or Limited Partner of more than a de minimis amount of
Property as consideration for an interest in the Partnership; and (iii) the
liquidation of the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g). This provision is intended to comply with Regulations
Section 1.704-1(b)(2)(iv)(f) and shall be interpreted and applied accordingly.
(c) The Gross Asset Value of any Partnership asset distributed to the
General Partner or Limited Partner shall be adjusted to equal the gross fair
market value of such asset on the date of distribution as determined by the
distributee and the General Partner; and
(d) The Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the Adjusted Basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and Section 1.62 and Section
11.5(g) hereof; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this Section 1.38(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.38(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.38(d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant
to subsections (a), (b), or (d) hereof, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
1.39 "Indenture" means that certain Trust Indenture, dated as of
January 1, 1993, among Sithe/Independence Funding Corporation,
Sithe/Independence Power Partners, L.P. and IBJ Xxxxxxxx Bank & Trust Company,
as Trustee, as amended and supplemented from time to time.
1.40 "Intercreditor Agreement" means the Collateral Agency and
Intercreditor Agreement dated January 1, 1993 among the Partnership, Enron North
America Corp. (as successor in interest in Enron Power Services, Inc.), The
Sumitomo Bank Limited (as successor in interest to Union Bank), Bank of New York
(as successor in interest to IBJ Xxxxxxxx Bank &
6
Trust Company), Sithe/Independence Funding Corporation, the County of Oswego
Industrial Development Agency and Manufacturers and Traders Trust Company.
1.41 "Interest" means the entire ownership interest of any Person which
is a Partner in the Partnership at any particular time, including the right of
such Partner to any and all benefits to which such Partner may be entitled as
provided in this Agreement, together with the obligations of such Partner to
comply with all of the terms and provisions of this Agreement.
1.42 "Limited Partners" means Sithe Energies, Inc., Sithe Energies
U.S.A., Inc., Oswego Cogen, Mitex, Inc., and such other Persons who are admitted
to the Partnership as Substituted Limited Partners, and who are then owners of
an Interest. References to a "Limited Partner" shall mean any one of the Limited
Partners.
1.43 "Liquidating Trustee" shall have the meaning set forth in Section
19.2(a) hereof.
1.44 "Mortgage" means any mortgage, deed of trust, or other encumbrance
on any asset of the Partnership or any promissory note, lease, loan agreement,
or any other similar document, agreement or instrument binding on the
Partnership.
1.45 "Niagara Mohawk Proceeding" means any legal proceeding, suit or
action involving the Partnership and Niagara Mohawk Power Corporation before the
Federal Energy Regulatory Commission pending or outstanding as of the date
hereof, including, without limitation, those proceedings under Docket Nos.
XX00-00, XX 00-00, XX00-0000, OA97-470 and ER97-4234 of the Federal Energy
Regulatory Commission.
1.46 "Nonrecourse Deductions" shall have the meaning set forth in
Section 1.704-2(b)(1) of the Regulations.
1.47 "Nonrecourse Liability" shall have the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
1.48 "Offeree" shall have the meaning set forth in Section 15.2 hereof.
1.49 "Operations and Maintenance Agreement" means the Amended and
Restated Operations and Maintenance Agreement, dated as of August 25, 1992,
between the Partnership and Sithe Energies Power Services, Inc., as amended,
supplemented or replaced from time to time.
1.50 "Operator" shall mean the Operator pursuant to the Operations and
Maintenance Agreement, or any other Person as may direct the day to day
operations of the Project.
1.51 "Original Agreement" shall have the meaning set forth in the
recitals hereto.
1.52 "Oswego Cogen" means Oswego Cogen Company, LLC, a Delaware limited
liability company.
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1.53 "Partner" means the General Partner and each of the Limited
Partners, where no distinction is required by the context in which the term is
used herein. Reference to a "Partner" means any one of the Partners.
1.54 "Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
1.55 "Partner Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
1.56 "Partner Nonrecourse Deductions" shall have the meaning set forth
in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
1.57 "Partnership" means Sithe/Independence Power Partners, L.P., a
Delaware limited partnership.
1.58 "Partnership Minimum Gain" shall have the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
1.59 "Percentage Interest" means, with respect to each Partner, such
Partner's Interest in the Partnership expressed as a percentage of the aggregate
of all of the Interests in the Partnership, as reflected on Exhibit A hereto.
1.60 "Permitted Investment" shall have the meaning set forth in the
Indenture.
1.61 "Person" means any individual, partnership, limited liability
company, corporation, trust or other entity.
1.62 "Profits and Losses" means for each taxable year, an amount equal
to the Partnership's taxable income or loss for such taxable year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses pursuant
to this Section 1.62 shall be added to such taxable income or loss;
(b) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this Section 1.62 shall be subtracted
from such taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to Section 1.38(b) or Section 1.38(c) hereof, the amount of
such adjustment shall be
8
taken into account as gain or loss from the disposition of such asset for
purposes of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such taxable year, computed in
accordance with Section 1.28 hereof;
(f) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or (4) to be
taken into account in determining Capital Accounts as a result of a distribution
other than in complete liquidation of a Partner's Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of such asset and shall be taken into account for purposes
of computing Profits or Losses; and
(g) Notwithstanding any other provision of this Section 1.62, any items
which are specially allocated pursuant to Section 11 hereof shall not be taken
into account in computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss or deduction
available to be specially allocated pursuant to Section 11 hereof shall be
determined by applying rules analogous to those set forth in subsections (a)
through (f) of this Section 1.62.
1.63 "Project" means an approximately 1,032 megawatt net capacity gas
fired cogeneration facility located in the Town of Scriba, County of Oswego, New
York, including all related equipment, real and personal property, associated
contract rights and other intangible property.
1.64 "Project Document" shall have the meaning set forth in the
Indenture.
1.65 "PUHCA" means the Public Utility Holding Company Act of 1935, as
amended from time to time.
1.66 "Qualifying Facility" means a qualifying cogeneration facility
or a qualifying small power production facility as defined in the Federal
Power Act, as amended, Section 3 (16 U.S.C. Section 796) and Part 292 of the
rules and regulations of the Federal Energy Regulatory Commission (18 C.F.R.
Part 292).
1.67 "Ratings Confirmation Letters" shall have the meaning set forth in
Section 15.4(b) hereof.
9
1.68 "Regulations" means the income tax regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
1.69 "Regulatory Allocations" shall have the meaning set forth in
Section 11.6 hereof.
1.70 "Reserves" means, with respect to any 12-month period, payments
made or amounts allocated during such period to reserves, which the General
Partner shall in its reasonable, good faith judgment estimate to be required to
meet, operating costs (exclusive of depreciation and other cost recovery
deductions), capital expenditures, Debt Service and any other obligations of the
Partnership known or anticipated to be payable within such 12-month period, as
well as a reasonable reserve for contingencies, including anticipated capital
expenditures in excess of revenues and payments to be received subsequent to
such 12-month period.
1.71 "Second Amended and Restated Operations and Maintenance Agreement"
shall have the meaning set forth in Section 12.9 hereof.
1.72 "Security Agreement and Assignment of Contracts" means that
certain Security Agreement and Assignment of Contracts, dated as of January 1,
1993, made by the Partnership in favor of Manufacturers and Traders Trust
Company.
1.73 "Selling Partner" shall have the meaning set forth in Section 15.2
hereof.
1.74 "Sithe Energies, Inc." means Sithe Energies, Inc., a Delaware
corporation.
1.75 "Sithe Limited Partners" means Mitex, Inc., Sithe Energies, Inc.
and Sithe Energies U.S.A., Inc.
1.76 "Sithe Partners" means Sithe/Independence, Inc., Sithe Energies,
Inc., Sithe Energies U.S.A., Inc. and Mitex, Inc.
1.77 "Special Distribution Account" means the notional account
established and maintained by the Partnership pursuant to Section 11.8(b) of
this Agreement that reflects the outstanding balance on and after June 30, 2001,
from time to time, of the aggregate amount of the accrued and unpaid special
cash distributions owed by the Partnership to Oswego Cogen in respect of the
payment by the Partnership of principal on the Tracking Account Loan from time
to time, as provided in Sections 11.8(b)(i) and 11.8(b)(ii), which account may
never be less than zero.
1.78 "Special Distribution Account Determination Date" means any date
on or after the effective date hereof on which the General Partner makes a
distribution of Distributable Cash pursuant to Section 10.1.
1.79 "Substituted Limited Partner" means any Person admitted to the
Partnership as a Limited Partner pursuant to the provisions of Section 17
hereof.
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1.80 "Technical Dispute" shall have the meaning set forth in Section
12.10 hereof.
1.81 "Technical Expert" means an individual selected in accordance with
the procedure set forth in Section 12.10(c) and who (i) has at least eight years
experience in the electric generation industry, (ii) has no interest, financial
or otherwise, or duty which conflicts or may conflict with his or her functions
as a Technical Expert (such individual being required to fully disclose any such
interest or duty prior to his or her appointment) and (iii) is not and has not
been during the five (5) years prior to the date of appointment an employee of
any of the Partners or any of their Affiliates.
1.82 "Tracking Account Allocation Percentage" shall have the meaning
set forth in Section 11.8(a) hereof.
1.83 "Tracking Account Loan" means the Tracking Account Loan described
in the Base Gas Sales Agreement.
1.84 "Tracking Account Payment" shall mean any payments due and owing
under the Tracking Account Loan in accordance with the Base Gas Sales Agreement.
1.85 "Trustee" shall mean the trustee under the Indenture.
2. FORMATION OF PARTNERSHIP.
The Partnership was formed upon the filing of a Certificate of Limited
Partnership with the Delaware Secretary of State on November 16, 1990. The names
of all Partners are as set forth on the signature page hereof. Without the need
for any additional action on the part of any Person, (i) Oswego Cogen Company,
LLC is hereby admitted to the Partnership as a limited partner of the
Partnership, (ii) Sithe/Independence, Inc. shall continue to be a general
partner of the Partnership, and (iii) Sithe Energies U.S.A., Inc. Sithe
Energies, Inc. and Mitex, Inc. shall continue to be limited partners of the
Partnership.
3. NAME.
The name of the Partnership is "SITHE/INDEPENDENCE POWER PARTNERS,
L.P."
4. BUSINESS.
The business and purposes of the Partnership shall be to develop,
finance and commercially exploit the Project, whether the foregoing is
accomplished by owning, operating, managing, leasing or disposing of the Project
(or any part thereof or any interest therein), including any and all things
necessary or appropriate in connection therewith (the "Business").
5. CERTIFICATE OF LIMITED PARTNERSHIP.
The General Partner has caused the Certificate of Limited Partnership
to be recorded as required by the Act on November 16, 1990. All of the Partners
do hereby appoint the General Partner to act as their attorney-in-fact for the
purpose of executing and recording any other
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certificate or document or amendment thereto evidencing the existence and terms
of the Partnership, whether in the State of Delaware or any other state; and the
General Partner is hereby expressly granted the right to subscribe the name of
any and all of the Partners hereto on any such certificate or document or
amendment thereto.
6. FICTITIOUS BUSINESS NAME STATEMENT.
Upon the execution of this Agreement or subsequent change in the
Partners of the Partnership, the General Partner shall, if the Partnership is
required, sign and cause to be filed and published in the county in which the
principal place of business is situated, a fictitious business name statement or
similar document in accordance with the provisions of Applicable Laws. The
Partnership may do business under any other fictitious business names deemed
desirable by the General Partner in its reasonable judgment. In such case, and
if required, the General Partner may sign and cause to be filed and published a
fictitious business name statement or similar document as attorney-in-fact for
all of the Partners.
7. EXECUTIVE OFFICES.
The executive offices of the Partnership shall be 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000. The General Partner may from time to time
change the location of the executive offices of the Partnership and in such
event shall notify the Partners in writing at least ten days prior to the
effective date hereof of such change. The General Partner may establish
additional offices or places of business of the Partnership.
8. TERM OF PARTNERSHIP.
The Partnership commenced on the date of filing of the Partnership's
Certificate of Limited Partnership with the Delaware Secretary of State. The
term of the Partnership shall continue until December 31, 2040, unless
terminated pursuant to the Act or dissolved pursuant to the terms of Section
19.1 hereof.
9. CONTRIBUTIONS AND STATUS.
9.1 PERCENTAGE INTERESTS OF GENERAL PARTNER. The Percentage Interest of
the General Partner is one percent (1%). The estimated and projected Capital
Account balance of the General Partner as of June 30, 2001, as determined in
accordance with the Regulations, is as set forth on Exhibit A hereto.
9.2 PERCENTAGE INTEREST OF THE LIMITED PARTNERS. The Percentage
Interest of Sithe Energies U.S.A., Inc. is forty-four percent (44%). The
Percentage Interest of Sithe Energies, Inc. is five percent (5%). The Percentage
Interest of Oswego Cogen is forty percent (40%). The Percentage Interest of
Mitex, Inc. is ten percent (10%). The estimated and projected Capital Account
balances of the Limited Partners as of June 30, 2001, as determined in
accordance with the Regulations, are as set forth on Exhibit A hereto.
9.3 LIMITED LIABILITY OF THE LIMITED PARTNERS. No Limited Partner shall
be liable for the debts, liabilities, contracts or any other obligations of the
Partnership. Except as otherwise
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provided by Applicable Laws, no Limited Partner shall be liable to make
additional Capital Contributions and shall not be required to lend any funds to
the Partnership.
9.4 ROLE OF LIMITED PARTNER. Except as otherwise provided in this
Agreement, or as approved by the General Partner and as will not under
Applicable Laws result in a Limited Partner being subject to general liability
for Partnership obligations, the Limited Partners shall not take part in, or
interfere in any manner with, the conduct or control of the business of the
Partnership and shall have no rights or authority to act for or bind the
Partnership.
9.5 WITHDRAWAL AND RETURN OF CAPITAL. No Limited Partner shall withdraw
any of its capital without the consent of the General Partner and the other
Limited Partners, except upon dissolution or liquidation of the Partnership.
Under circumstances requiring a return of any Capital Contribution, no Limited
Partner shall have the right to receive property other than cash except as may
be specifically provided herein.
9.6 SALARIES, DRAWINGS AND INTEREST ON CAPITAL ACCOUNTS. No Limited
Partner shall receive any interest, salary or drawing with respect to its
Capital Contribution or for services rendered on behalf of the Partnership or
otherwise in its capacity as Limited Partner, except as provided herein.
9.7 CONTRIBUTIONS IN CONNECTION WITH CERTAIN CREDIT SUPPORT.
(a) In connection with the implementation of the Financial Swap
Agreement, each Credit Support Party has agreed, pursuant to the Credit Support
Agreement, to furnish for the benefit of the Partnership certain financial
support in respect of the Partnership's obligations to the counterparty under
the foregoing agreement. In the event and to the extent that any amounts are
paid (i) out of any cash collateral posted by a Credit Support Party, (ii)
pursuant to any draw under any letter of credit provided by a Credit Support
Party or (iii) by a Credit Support Party under any guarantee provided by such
Credit Support Party, in each case in satisfaction of the Partnership's
obligations to the counterparty under the Financial Swap Agreement, such amounts
shall be treated for purposes of this Agreement (including for purposes of
maintaining the Capital Account balances of the Partners) as cash capital
contributions by Oswego Cogen (in the case of any amounts made or deemed to have
been made by Enron Corp.) and the Sithe Partners (in the case of any amounts
paid or deemed to have been paid by Exelon, in this case allocated among the
Sithe Partners in proportion to their respective Percentage Interests);
PROVIDED, HOWEVER, that no adjustment to the Capital Accounts of the Partnership
pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations shall be made in
respect of any such cash capital contributions. Each Credit Support Party shall
provide prompt written notification to the Partnership upon the payment by it of
any of the foregoing amounts, PROVIDED that the failure to provide such notice
shall not affect in any manner the treatment of such payments as contemplated by
this Section 9.7.
(b) If, pursuant to the Credit Support Agreement, a Credit Support
Curing Party provides, or causes to be provided, funds under the Credit Support
Agreement to or on behalf of a Credit Support Defaulting Party, such funds shall
be treated as having been lent by the Credit Support Curing Party to the Credit
Support Defaulting Party as a Credit Support Loan, followed by a loan by the
Credit Support Defaulting Party of such funds to the Partner or Partners
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Affiliated with such party (pro rata in accordance with their respective
Percentage Interests), and followed in turn by a capital contribution by such
Partners of all of such funds to the Partnership.
10. DISTRIBUTIONS.
10.1 DISTRIBUTABLE CASH. The Partnership intends from time to time to
make distributions of Distributable Cash, as available and as determined by the
General Partner, subject to the following: (i) the General Partner shall use
commercially reasonable efforts to distribute Distributable Cash to the Partners
on at least a quarterly basis, subject to any applicable limitations in the
Project Documents, (ii) distributions may be restricted or suspended when the
General Partner determines in its reasonable judgment that it is in the best
interest of the Partnership to do so, (iii) all distributions are subject to the
payment of Costs and to the maintenance of reasonable Reserves and (iv) no
distribution shall be made if such distribution is prohibited by any of the
Project Documents. A Partner receiving a distribution in violation of the
foregoing Section 10.1(iv) shall be liable to the Partnership for return of the
amount of the distribution without regard to the date of the distribution or the
date of the discovery of the violation, whether or not such Partner remains a
Partner and without regard to any other facts or circumstances. Subject to the
foregoing, except as provided in Section 19.2(d) hereof (relating to
distributions upon the dissolution of the Partnership), Section 11.8(b)
(relating to special allocations of Distributable Cash while the Tracking
Account Loan is outstanding), Section 11.12(b) (relating to special allocations
of Distributable Cash received in connection with any Niagara Mohawk Proceeding)
and Section 11.12(d) (relating to special allocations of Distributable Cash
received in connection with the recovery of all or a portion of the Casualty
Insurance Claim Receivable), Distributable Cash, if any, shall be distributed to
the Partners in proportion to their then existing Percentage Interests;
PROVIDED, HOWEVER, that any Distributable Cash otherwise allocable to one or
more of the Partners pursuant to this Section 10.1 but which is disbursed by the
Partnership to a Curing Credit Support Party as a result of, and to the extent
of, the outstanding balance of any amounts due to the Curing Credit Support
Party on account of a Credit Support Loan under the Credit Support Agreement, as
required by Section 11.13 hereof, shall be treated for all purposes of this
Agreement, including for purposes of adjusting the respective Capital Accounts
of the Partners pursuant to Section 11.1(b), as having been distributed by the
Partnership to the Partner or Partners, as the case may be, that are Affiliated
with the Credit Support Defaulting Party.
10.2 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or any
state or local tax laws with respect to any payment to the Partnership or to any
Partner shall be treated as amounts distributed pursuant to Sections 10.1 or
19.2(d) hereof for all purposes of this Agreement. Amounts treated as
distributed to any Person pursuant to such Sections shall reduce the amount
otherwise distributed or distributable to such Person pursuant to such Sections.
11. ALLOCATION OF PROFITS AND LOSSES.
11.1 CAPITAL ACCOUNT. With respect to any Partner, a "Capital Account"
shall be maintained for such Partner in accordance with the following
provisions:
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(a) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of Profits
and any items in the nature of income or gain which are specially allocated
pursuant to Sections 11.5, 11.6, 11.8(a), 11.9(b) and 11.12 hereof, and the
amount of any Partnership liabilities assumed by such Partner or which are
secured by any property distributed to such Partner as provided in Section
1.704-1(b)(2)(iv)(c) of the Regulations.
(b) To each Partner's Capital Account there shall be debited the amount
of cash and the Gross Asset Value of any property distributed to such Partner
pursuant to any provision of this Agreement, such Partner's distributive share
of Losses and any items in the nature of expenses or losses which are specially
allocated pursuant to Sections 11.5, 11.6, 11.9(a) and 11.12 hereof, and the
amount of any liabilities of such Partner assumed by the Partnership or which
are secured by any property contributed by such Partner to the Partnership as
provided in Section 1.704-1(b)(2)(iv)(c) of the Regulations.
(c) In the event all or a portion of an 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.
(d) In determining the amount of any Partnership liabilities for
purposes of this Section 11.1, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations. In the event the General Partner shall determine that it
is necessary to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributions or distributed property or which
are assumed by the Partnership, General Partner, or Limited Partners), are
computed in order to comply with such Regulations, the General Partner may make
such modification; PROVIDED, that (i) it is not likely to have a material effect
on the amounts distributed to any Person pursuant to Section 19 hereof upon the
dissolution of the Partnership and (ii) prior to making any such modification
(A) the General Partner obtains the written consent of all Partners that may be
reasonably likely to be adversely affected by such modification or (B) if such
consent or consents cannot be obtained, the General Partner obtains a tax
opinion from a nationally recognized tax counsel with expertise in partnership
tax matters, which counsel is reasonably acceptable to the Partners holding a
majority in interest of the Percentage Interests, to the effect that the
proposed modifications of the General Partner are necessary to comply with the
Regulations. The General Partner also shall be entitled to make, subject to the
foregoing proviso, (i) any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the General Partner and
Limited Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) any appropriate modifications
in the event unanticipated events (for example, the acquisition by the
Partnership of oil or gas properties) might otherwise cause this Agreement not
to comply with Regulations Section 1.704-1(b).
15
11.2 ALLOCATION OF LOSSES. Except as provided in Sections 11.5, 11.6,
11.8, 11.9 and 11.12 hereof, Losses of the Partnership for any taxable year
shall be allocated to the Partners in proportion to their then existing
Percentage Interests. To the extent that the allocation of a Loss to a Limited
Partner would create or increase an Adjusted Capital Account Deficit with
respect to such Limited Partner, however, such Loss shall instead be allocated
to the General Partner.
11.3 ALLOCATION OF PROFITS. Except as provided in Sections 11.5, 11.6,
11.8, 11.9 and 11.12 hereof, Profits of the Partnership for any taxable year
shall be allocated to the Partners in proportion to their then existing
Percentage Interests.
11.4 DEFICIT RESTORATION. Except as otherwise required by Applicable
Laws or Sections 14.2(c) or 19.2(e) of this Agreement, no Partner shall be
required to contribute to any deficit of the Partnership or to restore any debit
Capital Account balance.
11.5 REGULATORY ALLOCATIONS AND RELATED PROVISIONS. The following
special allocations shall be made in the following order:
(a) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Section 11, if there is a net decrease in Partnership Minimum Gain during any
taxable year, each Partner shall be specially allocated items of Partnership
income and gain for such taxable year (and, if necessary, subsequent taxable
years) in an amount equal to such Person's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section
11.5(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Section 11.5, if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
taxable year, each Person who has a share of the Partner Nonrecourse Debt
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially
allocated items of Partnership income and gain for such Taxable year (and, if
necessary, subsequent taxable years) in an amount equal to such Person's share
of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section
11.5(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
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(c) QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly
receives any adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Partnership income and gain
shall be specially allocated to each such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Partner as quickly as possible, provided that an
allocation pursuant to this Section shall be made only if and to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 11 have been tentatively made as if
this Section 11.5(c) were not in the Agreement.
(d) GROSS INCOME ALLOCATION. In the event any Partner has a deficit
Capital Account at the end of any Partnership taxable year which is in excess of
the sum of (i) the amount such Partner is obligated to restore pursuant to any
provision of this Agreement, and (ii) the amount such Partner is deemed to be
obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be specially
allocated items of Partnership income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this Section
11.5(d) shall be made only if and to the extent that such Partner would have a
deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 11 have been made as if Section 11.5(c) hereof and
this Section 11.5(d) were not in the Agreement.
(e) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any taxable year
shall be allocated to the Partners in the same manner as Losses are allocated
pursuant to Section 11.2 above.
(f) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse Deductions
for any taxable year shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
(g) SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of his interest in the
Partnership, the amount of such adjustment to Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or loss
(if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Partners in accordance with their interests in the
Partnership in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Partner to whom such distribution was made in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
11.6 CURATIVE ALLOCATIONS. The allocations set forth in Sections
11.5(a), 11.5(b), 11.5(c), 11.5(d), 11.5(e), 11.5(f), and 11.5(g) hereof (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Regulations. It is the intent of the Partners that, to the extent possible,
all Regulatory Allocations shall be offset either with other Regulatory
17
Allocations or with special allocations of other items of Partnership income,
gain, loss or deduction pursuant to this Section 11.6. Therefore,
notwithstanding any other provision of this Article 11 (other than the
Regulatory Allocations), the General Partner shall make such offsetting special
allocations of Partnership income, gain, loss or deduction in whatever manner it
determines to be appropriate so that, after such offsetting allocations are
made, each Partner's Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of the Agreement and all Partnership items were
allocated pursuant to Sections 11.2, 11.3, 11.8, 11.9 and 11.12. In exercising
its discretion under this Section 11.6, the General Partner shall take into
account future Regulatory Allocations under Sections 11.5(a) and 11.5(b) that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 11.5(e) and 11.5(f).
11.7 TAX ALLOCATIONS. In accordance with Code Section 704(c) and the
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall, solely for tax
purposes, be allocated among the Partners so as to take account of any variation
between the Adjusted Basis of such property to the Partnership for federal
income tax purposes and its initial Gross Asset Value. In the event the Gross
Asset Value of any Partnership asset is subject to adjustment, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the Adjusted Basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations thereunder. Any elections or other
decisions relating to such allocations shall be made by the General Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 11.7 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Person's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
11.8 SPECIAL ALLOCATIONS OF PROFIT AND LOSS AND DISTRIBUTABLE CASH
WHILE TRACKING ACCOUNT LOAN IS OUTSTANDING.
(a) For each taxable year commencing with the first taxable year in
which principal payments on the Tracking Account Loan are paid by the
Partnership, there will be a special allocation of gross income otherwise
allocable to the Sithe Limited Partners away from such Sithe Limited Partners
and to Sithe/Independence, Inc. Such special allocation from each of the Sithe
Limited Partners to the General Partner will equal the lesser of:
(i) the gross income otherwise allocable to such Sithe Limited
Partner for such taxable year without regard to such special allocation;
and
(ii) the excess of (y) the sum of the Allocation Share of such Sithe
Limited Partner for the current taxable year and each prior taxable year
to which this Section 11.8(a) applies over (z) the cumulative amount of
gross income specially allocated from such Sithe Limited Partner to the
General Partner pursuant to this Section 11.8(a) for all prior taxable
years.
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The "Allocation Share" of a Sithe Limited Partner for each taxable year to which
this Section 11.8(a) applies shall be the product of its "Tracking Account
Allocation Percentage" for such taxable year multiplied by the amount of
principal payments made in such taxable year with respect to the Tracking
Account Loan. The "Tracking Account Allocation Percentage" of a Sithe Partner
for any taxable year shall be equal to the ratio of the Percentage Interest of
such Sithe Partner to the sum of the Percentage Interests of the General Partner
and the Sithe Limited Partners for such taxable year.
(b) (i) (i) Throughout the period the Tracking Account Loan is
outstanding, any Distributable Cash that would be distributed, but for
this Section 11.8(b), to a Sithe Partner pursuant to Section 10.1 of this
Agreement shall be distributed instead to Oswego Cogen pursuant to this
Section 11.8(b)(i) if and to the extent that there shall exist a positive
balance in the Special Distribution Account on such date. Such
distributions shall be made to Oswego Cogen prior to, and with a priority
over, the distribution of Distributable Cash to any of the Sithe Partners
pursuant to Section 10.1, provided that any remaining Distributable Cash
allocable to the Sithe Partners (after reflecting the special distribution
described in the first sentence of this Section 11.8(b)(i)) shall be
distributed among the Sithe Partners as provided in Section 10.1 of this
Agreement.
(ii) The Special Distribution Account on the effective date hereof
shall have a balance of zero. On each Special Distribution Account
Determination Date, prior to the distribution of any Distributable Cash to
the Sithe Partners, the Special Distribution Account shall be increased by
an amount equal to the product of (A) the Percentage Interest of Oswego
Cogen on such date and (B) the total amount of principal paid by the
Partnership on or with respect to the Tracking Account Loan since the
immediately preceding Special Distribution Account Determination Date,
including any such principal paid on the Special Distribution Account
Determination Date. The Special Distribution Account shall be reduced
(without duplication) by any amounts distributed to Oswego Cogen from time
to time pursuant to Section 11.8(b)(i) of this Agreement. The Partnership
shall furnish Oswego Cogen and each of the Sithe Partners a statement
reflecting the outstanding balance of the Special Distribution Account,
including all debits and credits thereto, from time to time but in all
events as of each Special Distribution Account Determination Date.
(iii) The amount of Distributable Cash distributed to Oswego Cogen
pursuant to Section 10.1 of this Agreement shall not be reduced to any
extent as a result of the payment or distribution of any amount pursuant
to this Section 11.8(b) and the determination of the amount that is
distributable to Oswego Cogen pursuant to Section 10.1 shall made without
regard to the additional amount of Distributable Cash, if any, that is
distributed to Oswego Cogen pursuant to this Section 11.8(b).
11.9 CERTAIN SPECIAL ALLOCATIONS OF DEDUCTION AND INCOME RELATED TO
PROJECT TRACKING ACCOUNT DEDUCTION.
(a) One hundred percent (100%) of the deduction resulting from fixing
the amount of the Tracking Account Loan shall be allocated specially to the
General Partner for the
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year in which the liability for such amount is fixed. If, pursuant to a
determination by the Internal Revenue Service or a court, the Tracking Account
Loan liability is reallocated from the General Partner in whole or in part to
any or all of the Sithe Limited Partners, then a portion or portions of the
aforementioned deduction corresponding to (and equal to) the reallocated portion
or portions of the Tracking Account Loan liability shall likewise be reallocated
to the Sithe Limited Partners, as the case may be. In the event that part or all
of said deduction is reallocated in the manner set forth in the preceding
sentence, the General Partner shall make corresponding adjustments to the manner
in which income is specially allocated under the provisions of Section 11.8(a).
(b) Any income realized by the Partnership pursuant to Section
61(a)(12) of the Code in connection with the satisfaction, reduction of
principal amount or other compromise of the Tracking Account Loan shall be
allocated one hundred percent (100%) to the General Partner; PROVIDED, HOWEVER,
that in the event the second sentence of Section 11.9(a) is applicable, any such
income shall be allocable to and among the Sithe Partners in proportion to the
manner in which the deduction described in Section 11.9(a) was allocable among
the Sithe Partners.
11.10 COST RECOVERY RECAPTURE; ALLOCATION OF COST RECOVERY.
Notwithstanding the provisions of Sections 11.2 and 11.3, if taxable gain to be
allocated pursuant to Section 11.3 includes gain treated as ordinary income for
income tax purposes because it is attributable to cost recovery recapture, such
gain so treated as ordinary income for federal income tax purposes shall be
allocated to and reported by the Partners in proportion to the aggregate of all
of their respective shares of cost recovery allocations, and the Partnership
shall keep records of such allocations. Such allocations of recapture shall be
merely a characterization of the net gains allocated pursuant to Section 11.3
hereof, and shall not affect the amount of net gain allocated to a Partner.
11.11 DISTRIBUTIONS AND ALLOCATIONS IN RESPECT OF TRANSFERRED
INTERESTS. If all or any portion of any Interest is transferred during any
accounting period, Profits, Losses, each item thereof and all other items
attributable to such Interest for such period shall be divided and allocated
between the transferor and the transferee by accounting for their varying
interests during such period in accordance with the interim closing of the books
method as provided in Code Section 706(d). For this purpose, any deduction
relating to the establishment of the Tracking Account Loan has been allocated to
the portion of the taxable year of the Partnership ending immediately prior to
the effective time of the acquisition by Cogeneration National Corporation of
its former Interest in the Partnership. All distributions on or before the date
of transfer of such Interest in compliance with the provisions of this Agreement
shall be made to the transferor, and all distributions thereafter shall be made
to the transferee.
11.12 SPECIAL ALLOCATION OF INCOME, LOSS AND DISTRIBUTABLE CASH FOR
PROCEEDS OF CERTAIN LITIGATION AND THE CASUALTY INSURANCE CLAIM RECEIVABLE.
(a) During any taxable year in which the Partnership realizes any gross
income (or net gain) attributable to any Niagara Mohawk Proceeding, such gross
income (or net gain) shall be specially allocated to and among the Sithe
Partners in proportion to their respective Tracking
20
Account Allocation Percentages. No portion of such gross income (or net gain)
shall be allocated to Oswego Cogen.
(b) Any amount received by the Partnership that is attributable to any
Niagara Mohawk Proceeding shall be distributed to the Sithe Partners in
proportion to their respective Tracking Account Allocation Percentages (subject
to refund if and to the extent the Partnership is required, pursuant to the
terms and conditions of any settlement or judgment of any Niagara Mohawk
Proceeding, to refund any such amounts so distributed to such Partners). In the
event that the Partnership is required, pursuant to the terms and conditions of
any settlement or judgment of any Niagara Mohawk Proceeding, to refund any
amounts, then any expense, loss or reduction in gross income attributable to
such refund shall be specially allocated to and among the Sithe Partners in
proportion to their respective Tracking Account Allocation Percentages.
(c) During any taxable year in which the Partnership realizes gross
income, loss or deduction, if any, attributable to the Casualty Insurance Claim
Receivable, including the settlement or compromise thereof, such gross income,
loss or deduction shall be specially allocated to and among the Sithe Partners
in proportion to their respective Tracking Account Allocation Percentages. No
portion of such gross income, loss or deduction shall be allocated to Oswego
Cogen.
(d) Any amount received by the Partnership that is attributable to the
proceeds of the recovery of all or a portion of the Casualty Insurance Claim
Receivable shall be distributed to the Sithe Partners in proportion to their
respective Tracking Account Allocation Percentages. The General Partner has
informed Oswego Cogen that the Partnership's accrual or receipt of the proceeds
of the Casualty Insurance Claim Receivable shall not result in a reduction in
the depreciable basis of the Partnership's properties to any material extent.
11.13 DISBURSEMENTS IN REPAYMENT OF CREDIT SUPPORT LOANS.
Notwithstanding any other provision of this Agreement, if on any date the
General Partner proposes to make a distribution of Distributable Cash pursuant
to Section 10.1 there shall exist any amount due and owing to a Curing Credit
Support Party with respect to a Credit Support Loan, the General Partner shall
(a) determine the aggregate amount of Distributable Cash tentatively allocable
to all of the Partner or Partners Affiliated with the applicable Credit Support
Defaulting Party, after reflecting any adjustment in such amount resulting from
the application of Sections 11.8(b)(i) and (ii) if applicable, but before
applying this Section 11.13, and (b) disburse to the Credit Support Curing
Party, rather than to the Partner or Partners Affiliated with the applicable
Credit Support Defaulting Party, an amount equal to the lesser of (i) one
hundred percent (100%) of the amount determined in (a) above or (ii) the amount
necessary to reduce the outstanding balance owed by the Credit Support
Defaulting Party under such Credit Support Loan to zero. The General Partner
shall cause the Partnership's books and records, including the Partners' Capital
Account balances, to account for any such cash payments to the Credit Support
Curing Party as having been disbursed to the Partner or Partners Affiliated with
the applicable Credit Support Defaulting Party in proportion to their respective
Percentage Interests, as reflected in the last proviso contained in Section
10.1, followed by the distribution or payment of funds by such Partners to the
Credit Support Defaulting Party, followed, in turn, by the payment by such
Credit Support Defaulting Party to the Credit Support Curing Party of an amount
equal to the cash
21
disbursements received by such Credit Support Curing Party pursuant to this
Section 11.13 in repayment of such Credit Support Loan.
12. RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER; CHARGES, EXPENSES
AND FEES OF THE GENERAL PARTNER.
12.1 MANAGEMENT AND CONTROL OF THE PARTNERSHIP.
(a) Except as otherwise provided for herein, the General Partner,
within the authority granted to it under this Agreement, shall have the
exclusive right to manage the Business of the Partnership, and hereby is
authorized to take any action of any kind and to do anything and everything it
deems necessary in accordance with the provisions of this Agreement. The General
Partner shall have the exclusive right to manage the day-to-day activities of
the Partnership.
(b) No Person who owns an Interest (except one who also is a General
Partner, and then only in its capacity as a General Partner within the scope of
its authority hereunder) shall participate in or have any control over the
Partnership Business or shall have any authority or rights to act for or bind
the Partnership. The Limited Partners hereby consent to the exercise by the
General Partner of the powers conferred on it by this Agreement.
(c) Any contract or agreement between the Partnership and any Partner
or any Affiliate of any Partner shall be on terms no more favorable to such
Partner or Affiliate than would have been obtainable in a bona fide arm's-length
transaction and shall be in writing, describing the services to be rendered and
the compensation to be paid. If reasonably requested by a Partner, the General
Partner shall furnish such requesting Partner with information reasonably
necessary to determine the arm's-length nature of the terms of any such contract
or agreement. Notwithstanding anything herein to the contrary, the Base Gas
Sales Agreement and the Operation and Maintenance Agreement, as in effect on the
date hereof, are each hereby ratified and approved by the Partners.
12.2 AUTHORITY OF THE GENERAL PARTNER.
(a) Except as otherwise provided for herein, the General Partner for,
in the name and on behalf of, the Partnership, is hereby authorized to take any
action of any kind and to do any and all things necessary or convenient to the
conduct of the Business of the Partnership, including, without limitation:
(i) to acquire by purchase, lease or otherwise, any property which
may be necessary, convenient or incidental to the accomplishment of the
purposes of the Partnership;
(ii) to operate, maintain, finance, improve, own, grant options with
respect to, sell, convey, assign, mortgage, lease or cause to have
constructed any property necessary, convenient or incidental to the
accomplishment of the purposes of the Partnership;
22
(iii) to execute any and all agreements, contracts, documents,
certifications, and instruments necessary, convenient or incidental in
connection with the acquisition, disposition, management, maintenance and
operation of the Partnership or any Partnership property and to employ
such Persons as are necessary to perform the duties required hereby;
(iv) to borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Partnership, and to secure the same by mortgage, pledge or other lien on
any property of the Partnership;
(v) to execute, in furtherance of any or all of the purposes of the
Partnership, any deed, lease, mortgage, deed of trust, mortgage note,
promissory note, xxxx of sale, contract or other instrument binding on the
Partnership or purporting to convey or encumber property of the
Partnership;
(vi) to prepay in whole or in part, refinance, recast, increase,
modify or extend any mortgages affecting the Partnership property and in
connection therewith to execute any extensions or renewals of mortgages on
any such property;
(vii) to care for and distribute at such time or times as it may
determine all funds by way of cash, income, return of capital or
otherwise, to establish Reserves in accordance with this Agreement and to
perform all matters in furtherance of the objectives of the Partnership;
(viii) to engage in any kind of activity and to enter into, perform
or carry out contracts of any kind (including contracts of insurance
covering risks to Partnership property and General Partner liability) and
to do all things necessary or incidental to, or in connection with, the
accomplishment of the purposes of the Partnership, as may lawfully be
carried on or performed by a partnership under the Applicable Laws of each
state in which the Partnership then is formed or qualified; and
(ix) to make any and all elections for federal, state and local tax
purposes as the General Partner deems, in reasonable judgment, to be
desirable or appropriate, including, without limitation, any election, if
permitted by Applicable Laws: (a) to adjust the basis of Partnership
assets pursuant to Code Sections 754, 734(b) and 743(b), or comparable
provisions of state or local law, in connection with transfers of
Interests and Partnership distributions of Partnership property other than
cash; (b) to extend the statute of limitations for assessment of tax
deficiencies against Partners with respect to adjustments to the
Partnership's federal, state or local tax returns; and (c) to represent
the Partnership and the Partners from time to time before tax authorities
or courts of competent jurisdiction in tax matters affecting the
Partnership and such Persons in their capacity as Partners, and to execute
any agreements or other documents relating to or affecting such tax
matters, including agreements or other documents that bind such Persons
with respect to such tax matters or otherwise affect the rights of the
Partnership or such Persons. The General Partner is specifically
authorized to act as the "Tax Matters
23
Partner" for the Partnership and such Persons under the Code or in any
similar capacity under state or local law.
(b) Any Person dealing with the Partnership or the General Partner may
rely upon a certificate signed by the General Partner, thereunto duly
authorized, as to:
(i) the identity of the General Partner or the Partners;
(ii) the existence or nonexistence of any fact or facts which
constitute a condition or conditions precedent to acts by the General
Partner or which are in any other manner germane to the affairs of the
Partnership;
(iii) the Persons authorized to execute and deliver any instrument
or document of the Partnership; or
(iv) any act or failure to act by the Partnership or as to any other
matter whatsoever involving the Partnership or any Partner.
12.3 EXPENSES OF THE GENERAL PARTNER. The General Partner may charge
the Partnership for any reasonable direct expenses actually incurred by it, its
employees or agents, and for a reasonable proportion of the overhead or indirect
expenses of the General Partner or of any of its Affiliates incurred in
performing services for the Partnership in connection with the Partnership's
Business, which services, but for their performance by the General Partner or
any such Affiliates, would be required to be performed for the Partnership by
another Person; provided that the expenses so chargeable shall not exceed the
amount that the Partnership would be required to pay to Persons not Affiliates
of the General Partner for comparable services made available to the
Partnership, in a bona fide arm's-length transaction. All Partnership expenses
will be billed directly to the Partnership.
12.4 RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNER.
(a) Notwithstanding anything contained in this Agreement to the
contrary, but subject to Section 12.4(d) hereof, without the written consent of
each of the Limited Partners, the General Partner shall not have the authority
to:
(i) do any act in contravention of this Agreement;
(ii) do any act which would make it impossible to achieve the
purposes of the Partnership;
(iii) possess Partnership assets, or assign rights in specific
Partnership assets, for other than a Partnership purpose;
(iv) admit a Person as a General Partner;
(v) sell, whether through one or a series of transactions, all or
substantially all of the assets or property of the Partnership; or
24
(vi) issue new Interests in the Partnership.
(b) Notwithstanding anything contained in this Agreement to the
contrary, but subject to Section 12.4(d) hereof, without the consent of the
Partners holding at least sixty-six and two-thirds percent (66 2/3%) of the
Interests, the General Partner shall not have the authority to:
(i) in any 12 month period, and except as may be specifically
authorized by Sections 12.4(b)(ii) through (xi) in respect of intangible
assets of the Partnership, sell or cause to be sold any asset or real
property of the Partnership, whether through one or a series of
transactions, having a fair market value in excess of $10,000,000 in the
aggregate;
(ii) permit or cause the Partnership to make any loans, advances or
contributions to any Person or guarantee the obligations of any Person;
(iii) change or reorganize the Partnership into any other legal
form, enter into any joint venture or partnership, or consolidate, convert
or merge with or acquire any other entity;
(iv) engage in any business other than the Business, except as
described in subsection (vi) hereof;
(v) incur any indebtedness, including any:
(1) indebtedness (other than trade liabilities incurred in the
ordinary course of Business) for money borrowed or for the deferred
purchase price of money or services in excess of an aggregate of
$10,000,000 outstanding at any one time;
(2) reimbursement obligation under any letter of credit or
banker's acceptance;
(3) obligation under any capital lease;
(4) obligation with respect to interest rate or currency swap
or similar hedging agreement, in excess of an aggregate of
$10,000,000 outstanding at any one time; or
(5) indebtedness pursuant to any refinancing of all or a
portion of the Senior Obligations;
(vi) make any equity or debt investment in any other entity other
than Permitted Investments or create or permit to exist any subsidiary
other than Sithe/Independence Funding Corporation;
25
(vii) make any material expansion of or modification to the Project
involving (A) an increase in capital cost in an amount greater than
$10,000,000 in the aggregate, or (B) any unreimbursed material increase in
annual operation and maintenance expenses; PROVIDED that the planned
modifications to convert the Project to cycling operations following the
date hereof, and the associated capital expenditures (estimated by the
Partners as of the date hereof to be approximately $6,000,000) to be made
by the Partnership in connection therewith, are hereby approved by the
Partners and such expenditures shall not be applied in any manner against
the $10,000,000 aggregate threshold in this subsection (vii);
(viii) enter into, or suspend, cancel or terminate, or amend,
supplement or modify any contract, or engage in any series of
transactions, on behalf of the Partnership if (A) such action could
reasonably be expected to cause a material adverse change in the condition
(financial or otherwise), results of operations, Business or properties or
prospects of the Partnership or (B) such contract or series of
transactions involves annual expenditures by, or annual revenues to, the
Partnership in excess of $10,000,000 in the aggregate outstanding at any
one time;
(ix) subject to Section 12.8, take any action that could reasonably
be expected to result in a loss by the Partnership of the Project's status
as a Qualifying Facility, or, in the absence of Qualifying Facility
status, the Partnership's status as an Exempt Wholesale Generator;
(x) commence, terminate, withdraw or settle, or consent to, any
claim or lawsuit, or confess any judgment against the Partnership, which
could reasonably be expected to cause a material adverse change in the
condition (financial or otherwise), results of operations, Business,
properties or prospects of the Partnership;
(xi) make any material press release or communication with the
general public relating to the Project, unless the failure to promptly
make such release would be a violation of Applicable Law or could
reasonably be expected to cause a material adverse change in the condition
(financial or otherwise), results of operations, Business, properties or
prospects of the Partnership;
(xii) except as contemplated by Section 12.9 hereof, change the
Operator, amend the Operations and Maintenance Agreement in any material
respect, or enter into a new operations and maintenance agreement for the
Project; or
(xiii) except as contemplated by Section 12.9 hereof, change the
Administrative Services Provider, amend the Administrative Services
Agreement in any material respect, or enter into a new administrative
services agreement for the Project.
(c) For the purpose of obtaining consent to approve or disapprove of a
proposed action under Section 12.4 of this Agreement, the General Partner may,
in its notice to the other Partners, require written responses from such
Partners within a specified time period (not less than fifteen (15) nor more
than thirty (30) days from the date that the receipt of such notice of a
26
proposed action is acknowledged by such Partner pursuant to Section 24.10
hereof) and provide that the failure to respond within such time period shall
constitute consent for the proposed action.
(d) Notwithstanding anything contained in Section 12.1 or this Section
12.4 to the contrary:
(i) all contracts and agreements entered into by the Partnership on
or prior to the date of this Agreement, including, without limitation, the
Project Documents, shall be deemed to be approved and are hereby ratified
by the Partners;
(ii) the Partners hereby expressly pre-approve and ratify any action
taken or to be taken by the General Partner, without the consent of any
other Partner, for the purpose of:
(1) seeking to amend the Indenture in order to permit Sithe
Energies, Inc. to own, directly or indirectly, less than fifty-one
percent (51%) of the Partnership and less than one hundred percent
(100%) of the outstanding voting securities of Sithe/Independence,
Inc.;
(2) converting Sithe/Independence, Inc. from a Delaware
corporation to a Delaware limited liability company in accordance
with Applicable Laws;
(3) creating or permitting to exist any subsidiary established
by the Partnership and authorized by the Federal Energy Regulatory
Commission to engage in resales of electrical energy and/or capacity
at market-based rates; PROVIDED, HOWEVER, that if a subsidiary is so
established, any acts, activities, transactions, the entering into
of contracts or agreements and events of similar import that are to
be taken, or proposed to be taken, by such subsidiary (or any of its
subsidiaries) shall be subject to the provisions of Section 12.4(b)
as if such subsidiary (or, if applicable, its subsidiary) were the
Partnership; and
(iii) nothing herein shall prohibit the General Partner from taking
any action on behalf of the Partnership in order for the Partnership to
perform any obligation under any contracts and agreements to which the
Partnership is a party and which have been entered into by the Partnership
prior to the date hereof or in compliance with the provisions of Section
12.4, or if such action is required for the Partnership to comply with
Applicable Laws.
12.5 DUTIES AND OBLIGATIONS OF THE GENERAL PARTNER.
(a) The General Partner shall take all actions which may be necessary
or appropriate (i) for the continuation of the Partnership's valid existence as
a limited partnership under the laws of the State of Delaware (and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Limited Partners or to enable the Partnership to
27
conduct its Business) and (ii) for the achievement of the Partnership's purposes
in accordance with the provisions of this Agreement and Applicable Laws.
(b) The General Partner shall be responsible for the safekeeping and
use of all of the funds and assets of the Partnership, whether or not in its
immediate possession, or control, and shall not employ or permit another to
employ such funds or assets in any manner except for the benefit of the
Partnership.
(c) The General Partner shall devote to the Partnership such time as
may be necessary for the proper performance of its duties hereunder.
(d) The General Partner shall conduct the affairs of the Partnership in
the best interests of the Partnership and of the Partners, including the
safekeeping and use of all Partnership funds and assets for the benefit of the
Partnership.
12.6 POWER OF ATTORNEY.
(a) Each Limited Partner by its execution of this Agreement irrevocably
constitutes and appoints the General Partner as such Limited Partner's true and
lawful attorney and agent, with full power and authority in such Limited
Partner's name, place and stead, to execute, acknowledge, deliver, file and
record in the appropriate public offices: (i) all certificates or other
instruments (including, without limitation, counterparts of this Agreement) and
amendments thereto which the General Partner deems appropriate to qualify or
continue the Partnership as a limited partnership (or a partnership in which
special partners have limited liability) in the jurisdictions in which the
Partnership conducts its Business; (ii) all instruments and amendments thereto
which the General Partner deems appropriate to reflect any change or
modification of the Partnership or the admission of additional or substituted
Partners; (iii) all documents of conveyance and other instruments which the
General Partner deems appropriate to evidence and reflect any sales or transfer
by or the dissolution and termination of the Partnership; (iv) all consents to
transfers of Interests, to the admission of additional or Substituted Limited
Partners or to the withdrawal or reduction of any Person's invested capital; in
each case to the extent that such actions are authorized by the terms of this
Agreement; and (v) the execution of any or all of the documents reasonably
necessary to the conduct of the Business of the Partnership.
(b) The foregoing grant of authority (i) is a special power of attorney
coupled with an interest in favor of the General Partner and as such shall be
irrevocable and shall survive the death or insanity (or, in the case of a
Limited Partner that is a corporation, association, partnership, joint venture
or trust, shall survive the merger, dissolution or other termination of its
existence) of a Limited Partner; (ii) may be exercised for a Limited Partner by
a facsimile signature of the General Partner or by listing the Limited Partner,
executing any instrument with a single signature of the General Partner acting
as attorney-in-fact for all of them, and (iii) shall survive the assignment by a
Limited Partner of the whole or any portion of its Interest, except that where
the assignee of the whole thereof has furnished a power of attorney and has been
approved by the General Partner for admission to the Partnership as a
Substituted Limited Partner, this special power of attorney shall survive such
assignment for the sole purpose of
28
enabling the General Partner to execute, acknowledge and file any instrument
necessary to effect such substitution and shall thereafter terminate.
12.7 INDEPENDENT ACTIVITIES. The Limited Partners and their respective
Affiliates (other than the General Partner), and any Affiliate of the General
Partner, may, notwithstanding the existence of this Agreement, engage in
whatever activities they choose, whether the same shall be competitive with the
Partnership or otherwise, without having or incurring any obligation to offer or
disclose any interest in such activities to the Partnership or any Partner.
Neither this Agreement nor any activity undertaken pursuant hereto shall prevent
such Persons from engaging in any activity, or require the General Partner to
permit the Partnership or any Partner to participate therein, and, as a material
part of the consideration for the General Partner's execution hereof and
admission of the Limited Partners, each of the Partners hereby waives,
relinquishes and renounces any such right or claim of participation in any other
venture or activity engaged or participated in by such Person(s), except
pursuant to a written agreement signed by the General Partner. It is
specifically understood and agreed that Affiliates of the General Partner may
organize and participate as general partner in partnerships which may engage in
activities substantially identical to the activity engaged in by this
Partnership.
12.8 EXEMPT WHOLESALE GENERATOR STATUS. Each of the Partners shall
exercise their good faith efforts to cooperate and take such actions as may be
reasonably necessary to cause the Partnership to obtain the status of an Exempt
Wholesale Generator pursuant to the rules and regulations of the Federal Energy
Regulatory Commission; provided that no Partner shall be obligated to take any
action to cause the Partnership to obtain Exempt Wholesale Generator status
pursuant to this Section 12.8 if, in the reasonable judgment of such Partner,
such action could reasonably be expected to cause a material adverse change in
the condition (financial or otherwise), results of operations, Business,
properties or prospects of the Partnership.
12.9 AMENDED AND RESTATED OPERATIONS AND MAINTENANCE AGREEMENT;
RESTRICTIONS ON CHANGE OF CONTROL OF OPERATOR; ADMINISTRATIVE SERVICES
AGREEMENT.
(a) The General Partner and the Limited Partners acknowledge and agree
that the General Partner currently is in negotiations, on behalf of the
Partnership, with the Operator to amend and restate the Operations and
Maintenance Agreement (such new agreement, the "Second Amended and Restated
Operations and Maintenance Agreement"). The General Partner shall use
commercially reasonable efforts to promptly conclude the negotiations of such
agreement containing terms substantially in accordance with the proposed terms
set forth in Exhibit B hereto. If, following the execution and delivery of the
Second Amended and Restated Operations and Maintenance Agreement, a "Change of
Control" shall have occurred (as such term is described in the proposed terms
set forth in Exhibit B, which provisions shall be reflected in the Second
Amended and Restated Operations and Maintenance Agreement), the General Partner
shall furnish to the Operator a notice that the Partnership desires the Second
Amended and Restated Operations and Maintenance Agreement to continue in effect
despite the occurrence of such Change of Control if, and only if, directed to do
so in writing by Oswego Cogen. The General Partner shall promptly notify Oswego
Cogen of the occurrence of any such Change of Control. The Partners acknowledge
that the exercise of the Partnership's and the Operator's respective rights and
obligations under the Second Amended and Restated Operations and
29
Maintenance Agreement shall be subject to the Indenture, Security Agreement and
the consent previously executed by the Operator with the Collateral Agent.
(b) The General Partner and the Limited Partners acknowledge and agree
that the General Partner currently is in negotiations, on behalf of the
Partnership, with Sithe Energies Power Services, Inc. to conclude an agreement
(the "Administrative Services Agreement") for the provision by Sithe Energies
Power Services, Inc., as the Administrative Services Provider, of certain
administrative services to the Partnership. The General Partner shall use
commercially reasonable efforts to promptly conclude the negotiations of such
agreement containing terms substantially in accordance with the proposed terms
set forth in Exhibit C hereto.
12.10 CERTAIN ACTIONS UPON THE OCCURRENCE OF AN EVENT OF LOSS;
TECHNICAL DISPUTES.
(a) EVENTS OF LOSS. Notwithstanding Section 12.4, the Partners hereby
expressly pre-approve any action taken or to be taken by the General Partner for
the purpose of making any determination and certification pursuant to Section
6.10(c) of the Indenture following an Event of Loss; PROVIDED, that the
execution and delivery of any material contracts or agreements proposed by the
General Partner on behalf of the Partnership in connection with the
reconstruction or repair of the Project following an Event of Loss shall require
the General Partner to demonstrate, subject to confirmation by the Technical
Expert if requested by Oswego Cogen as provided in Section 12.10(b) below, that
the reconstruction or repair of the Project in accordance with such contracts or
agreements is commercially reasonable, taking into account the impact, if any,
on the Project's revenues and expenses and general market conditions at such
time.
(b) TECHNICAL DISPUTES. In the event Oswego Cogen disputes any
determination of the General Partner pursuant to Section 12.10(a), such dispute
shall be deemed a "Technical Dispute" hereunder and Oswego Cogen shall be
entitled to notify the General Partner that it desires to refer such Technical
Dispute to a Technical Expert for resolution in accordance with the provisions
of Section 12.10(c) and (d). Notwithstanding the foregoing or Section 12.4(b) to
the contrary, in the event the Partnership receives Casualty Proceeds (as
defined in the Indenture) from any Event of Loss that do not exceed, in the
aggregate, $10,000,000, the Partners hereby expressly pre-approve any action
taken or to be taken by the General Partner for the purpose of reconstructing,
repairing or otherwise restoring any portion of the electric or steam generation
facilities at the Project following the occurrence of such Event of Loss and the
Technical Dispute provisions of Section 12.10(c) and (d) below shall not be
available to Oswego Cogen.
(c) DESIGNATION OF TECHNICAL EXPERT. Within ten (10) days following
receipt of a notice referring a Technical Dispute to a Technical Expert, the
representatives of the General Partner and Oswego Cogen shall confer in an
effort to agree upon a Technical Expert to hear the dispute. If such parties are
unable to agree upon the appointment of a Technical Expert then, at the end of
such ten (10) day period, each party shall, within five (5) days, notify the
other party in writing of its designation of three proposed Technical Experts.
Each party shall promptly strike two of the proposed Technical Experts
designated by the other party. The remaining two proposed Technical Experts
shall, within two (2) days, select one of them to hear the dispute; PROVIDED,
that if one of the parties still objects to the dispute being heard by such
selected
30
Technical Expert, then, within two (2) days, such two proposed Technical Experts
shall select a third Technical Expert and such third Technical Expert shall hear
the dispute.
(d) TECHNICAL DISPUTE PROCEDURES. The Technical Expert shall render a
decision resolving the matter within sixty (60) days of the date of his or her
selection as the Technical Expert. The decision of the Technical Expert shall be
in writing and shall be final and binding upon the parties and not subject to
appeal or review. The Partnership shall bear all costs and expenses of the
Technical Expert procedure and the Technical Expert shall not have the authority
to award costs or attorneys' fees to either party. The Technical Expert shall
resolve the Technical Dispute in accordance with the procedures set forth in the
Commercial Arbitration Rules of the American Arbitration Association, and such
decision may be confirmed and enforced in, and judgment upon the award entered
by, any federal or state court having jurisdiction over the parties.
13. INVESTMENT AND OPERATING RESTRICTIONS.
13.1 TRANSFERS OF PROPERTY. The signature of the General Partner shall
be sufficient to pass title to any property owned by the Partnership or to
execute any promissory notes, trust deeds, mortgages or other instruments of
hypothecation, and each of the Limited Partners agrees that a copy of this
Agreement, subject to appropriate confidentiality protections, may be shown to
the appropriate parties in order to confirm the same, and further agrees that
the signature of the General Partner shall be sufficient to execute any
documents necessary to effectuate this or any other provision of this Agreement.
13.2 RECEIPT OF FUNDS. If, at any time during the continuance of this
Agreement, cash, bills or other securities or evidence of indebtedness arising
out of or in any manner connected to this Partnership shall be received by a
Limited Partner (except for distributions by the Partnership to a Limited
Partner as permitted by this Agreement), the same shall be brought to the
attention of the General Partner and shall be deposited promptly in a banking
institution or wherever the funds and profits of this Partnership are held or
shall be turned over to the General Partner.
14. ADDITIONAL GENERAL PARTNER; REMOVAL OF A GENERAL PARTNER.
14.1 ADDITIONAL GENERAL PARTNER. Persons may be admitted to the
Partnership as additional General Partners with the consent of the General
Partner and all of the Limited Partners. The addition of one or more General
Partners shall not increase the total distributions or allocations to the
General Partners as a group.
14.2 REMOVAL OF A GENERAL PARTNER.
(a) Any General Partner may be removed as general partner, but not as a
Partner, upon a vote of the Limited Partners holding seventy-five percent (75%)
of the Interests in the Partnership that are not owned by Affiliates of the
General Partner, in the event that, pursuant to a final, non-appealable
judgment, it shall have been determined that the General Partner has committed
fraud or engaged in willful misconduct in connection with the Business of the
Partnership; PROVIDED, HOWEVER, that no removal shall be effective until a
replacement general
31
partner is appointed pursuant to Section 14.2(b). Upon such removal, the
Interest of the General Partner as removed shall be converted into an Interest
as a Limited Partner.
(b) Unless the General Partner and the Limited Partners otherwise
agree, if the last General Partner is removed as general partner pursuant to
Section 14.2(a), a replacement general partner shall be appointed with the
written approval of all of the Limited Partners which are not Affiliates of the
removed General Partner, such replacement general partner shall be deemed
admitted to the Partnership immediately prior to the removal of the predecessor
General Partner and such replacement general partner hereby is authorized to and
shall continue the Business of the Partnership. Any replacement general partner
appointed pursuant to this Section 14.2(b) shall either purchase a one percent
(1%) Percentage Interest in the Partnership for the fair market value thereof or
be assigned all or part of the Percentage Interest of one or more of the
consenting Limited Partners. No General Partner shall be admitted as such
pursuant to this Section 14.2(b) if the admission of such General Partner would
violate any of the limitations on transfer set forth in Sections 15.3(b) through
(e).
(c) Any General Partner which is removed as a general partner of the
Partnership shall continue to remain liable as a general partner for all debts
and obligations of the Partnership incurred prior to or as a result of such
removal, but shall not have any liability for any debts and liabilities of the
Partnership incurred after such removal. Notwithstanding the foregoing,
following the removal of any General Partner, such General Partner shall remain
obligated, pursuant to Section 19.2(e) hereof, to restore any negative balance
existing in such General Partner's Capital Account upon the liquidation of the
Partnership or of such General Partner's interest in the Partnership; PROVIDED,
HOWEVER, that such obligation shall not exceed the deficit balance existing on
the date of the conversion of such General Partner's Interest as General Partner
into an Interest as a Limited Partner.
15. ASSIGNABILITY OF INTERESTS.
15.1 TRANSFER OF LIMITED PARTNERS' INTEREST. Except as provided in this
Section 15, the only restrictions on the assignment or hypothecation of the
Interests of the Limited Partners shall be that the assignor shall first have
obtained the written consent of all of the Partners; PROVIDED, HOWEVER, that
such consent shall not be unreasonably withheld, conditioned or delayed. Any
Limited Partner, however, shall be entitled, without receiving the consent of
the other Partners but subject to the provisions of Sections 15.3 and 15.6, to
transfer or hypothecate its Interest, without relieving itself of liability
hereunder, (i) as security for any financing, (ii) to any of its Affiliates or
(iii) in the case of the Sithe Partners, to Exelon Corporation, a Pennsylvania
corporation, or any Affiliates of Exelon Corporation; PROVIDED, HOWEVER, that
any such transfer does not have the consequence described in clause (i) of the
immediately following sentence. Without limiting the rights of the Partners
whose consent is required for a proposed transfer by another Partner of its
Interest, it shall not be unreasonable for a Partner to withhold its consent if
(i) such transfer would result in a termination of the Partnership for federal
income tax purposes pursuant to Code Section 708 or (ii) such transfer is
proposed to be made to a Person (or an Affiliate thereof) that is an adverse
litigant of the Partnership, of any Partner or of any Affiliate of any Partner
in any material litigation.
32
15.2 RIGHT OF FIRST NEGOTIATION. In the event that a Limited Partner
(hereafter, the "Selling Partner") desires to make an assignment of all or a
portion of its Interest to a Person other than an Affiliate of the Selling
Partner, the Selling Partner agrees to first negotiate exclusively for a
period of not less than thirty days with the Offeree for the purchase by the
Offeree or its designee of such Interest. For purposes hereof, "Offeree"
means either (1) Oswego Cogen, in the event the Selling Partner is one of the
Sithe Partners, or (2) Sithe Energies, Inc., in the event the Selling Partner
is Oswego Cogen. In the event that after such time period an agreement cannot
be reached between the Selling Partner and the Offeree, the Selling Partner
may proceed to assign its Interest to any other Person, subject to the
consent requirements of Section 15.1; PROVIDED, HOWEVER, that in the event
the Selling Partner fails to so assign its Interest within six months of the
date on which the Selling Partner and the Offeree fail to reach agreement,
the Selling Partner may not assign its Interest without once again complying
with the provisions of this Section 15.2. No Limited Partner shall transfer
its Interest to an Affiliate and then transfer ownership in such Affiliate to
another Person to avoid compliance with this Section 15.2. Notwithstanding
the foregoing, the right of first negotiation set forth in this Section 15.2
shall not apply (i) to the transfer or assignment of all or a portion of the
Interests of Sithe/Independence, Inc., Sithe Energies, Inc., Sithe Energies
U.S.A., Inc., Mitex, Inc. or Oswego Cogen to the extent necessary (and only
to the extent necessary) to prevent the Partnership from becoming a Person
primarily engaged in the generation or sale of electric power (other than
electric power solely from cogeneration facilities or small power production
facilities), as defined in 18 C.F.R. Section 292.206, including a sale or
transfer described in Section 15.4 or (ii) to any proposed transfer by the
Sithe Partners of all or a portion of their respective Interests to Exelon
Corporation, a Pennsylvania corporation, or any Affiliates of Exelon
Corporation.
15.3 LIMITATIONS ON TRANSFER. Notwithstanding any provision of this
Section 15 to the contrary, any otherwise permitted transfer shall be deemed
void AB INITIO and shall have no force or effect, to the fullest extent
permitted by law, if:
(a) such transfer would, in the written opinion of a qualified tax
advisor or counsel to the Partnership, cause the Partnership to cease to be
classified as a partnership for federal or state income tax purposes;
(b) such transfer would require the registration of such transferred
Interest pursuant to any applicable federal or state securities laws or would
subject the Partnership to regulation under the Investment Company Act of 1940
or the Employee Retirement Income Security Act of 1974, each as amended;
(c) such transfer would result in a material adverse effect on the
Partnership with respect to any Applicable Law, or is proposed to be made to any
Person who lacks the legal right, power, or capacity to own such Interest;
(d) in the case of a transfer by Oswego Cogen, such transfer is
proposed to be made to any Person who is, or whose Affiliate is, an "electric
utility company", "electric utility holding company", "public utility company"
or "public utility holding company" under PUHCA (other than any such Person that
is exempt pursuant to Sections 3(a)(3) or 3(a)(5) of PUHCA); PROVIDED, HOWEVER,
that the foregoing transfer limitation shall cease to apply if and to the extent
33
that the Project has ceased to qualify as a Qualifying Facility and the
Partnership is not pursuing actions reasonably intended to reestablish
Qualifying Facility status for the Project;
(e) in the case of a transfer by one of the Sithe Partners, such
transfer is proposed to be made to any Person who is, or whose Affiliate is, an
"electric utility company", "electric utility holding company", "public utility
company" or "public utility holding company" under PUHCA (other than any such
Person that is exempt pursuant to Sections 3(a)(3) or 3(a)(5) of PUHCA), if,
taking into account the status of the existing Partners in the Partnership (and
their Affiliates) such transfer would result in a loss by the Project of its
status as a Qualifying Facility; provided, however, that the foregoing transfer
limitation shall cease to apply if and to the extent that the Project has ceased
to qualify as a Qualifying Facility and the Partnership is not pursuing actions
reasonably intended to reestablish Qualifying Facility status for the Project;
or
(f) such transfer would result in a breach of any material obligation
under any material contract or agreement to which the Partnership is a party.
15.4 MANDATORY SALES OR RESTRUCTURING.
(a) In the event that the Commission determines, pursuant to an order
that has not been stayed, enjoined or set aside, that Enron Corp. is not an
exempt holding company under Section 3(a)(3) or Section 3(a)(5) of PUHCA, Oswego
Cogen shall take such actions as may be reasonably necessary to avoid the loss
by the Partnership of the Project's status as a Qualifying Facility, including,
if necessary, the sale or other restructuring of its Interest. Any such sale,
transfer or restructuring of the Interest of Oswego Cogen shall be subject to
all restrictions on the transfer of its Interest contained in Section 15.3. A
sale or transfer by Oswego Cogen of its Interest pursuant to this Section 15.4
shall not require the consent of any Partner unless its proposed transferee is
described in subclause (ii) of the last sentence of Section 15.1, in which case
prior consent of the other Partners shall be required. Notwithstanding the
foregoing, if the sale or transfer of the Interest by Oswego Cogen would result
in a termination of the Partnership for purposes of Code Section 708, Oswego
Cogen shall hold harmless and pay to each of the other Partners an amount equal
to (i) the net present value of any adverse net federal and state income tax
consequences it will suffer as a direct result of the termination of the
Partnership for tax purposes, including, without limitation, any readjustment to
the depreciation periods or methods applicable to the Partnership's depreciable
properties, plus (ii) an additional payment necessary to reimburse the Partners
for the net federal and state income taxes owed on any payment under the
foregoing subclause (i) and this subclause (ii) (such net federal and state
income taxes to be conclusively presumed to be imposed at a combined effective
tax rate of forty percent (40%) regardless of the actual effective tax rate or
tax situation of the Partners or of any Partner); PROVIDED, HOWEVER, that Oswego
Cogen shall not be required to pay any amount pursuant to the foregoing
subclause (ii) in the event that Oswego Cogen obtains an opinion from a
nationally recognized accounting or law firm, selected by Oswego Cogen and
consented to by the Partners holding a majority in interest of the Interests of
the Partnership (excluding the Interest held by Oswego Cogen), such consent not
to be unreasonably withheld, to the effect that the payment by Oswego Cogen of
amounts pursuant to subclause (i) should not be treated as taxable income to the
Partners. For purposes of this Section 15.4, any net present value
34
calculation shall be determined using a discount rate of ten percent (10%) and
an assumed effective combined income tax rate of forty percent (40%).
(b) In the event that Oswego Cogen determines, in its reasonable
business judgment, that a sale or other restructuring of its Interest pursuant
to Section 15.4(a) would be reasonably likely to have a material adverse effect
on it, Oswego Cogen may provide written notice thereof to the General Partner,
and, if requested by Oswego Cogen, the General Partner shall consider in good
faith any reasonable proposals of Oswego Cogen that may eliminate the (i)
regulatory or contractual requirements for the Project to continue to qualify as
a Qualifying Facility and (ii) the requirement hereunder for Oswego Cogen to
sell or otherwise restructure its Interest; PROVIDED, HOWEVER, that the General
Partner shall not be required to take any action that would not be in compliance
with the Indenture; and PROVIDED, FURTHER, that if any such proposed action
would not be in compliance with the Indenture, the General Partner agrees, upon
the reasonable written request of Oswego Cogen, to cooperate in good faith with
Oswego Cogen in seeking on behalf of the Partnership and Sithe Funding a waiver
or modification to the Indenture if the General Partner reasonably determines
that such proposed action would not have an adverse effect on the business,
financial condition, properties or prospects of the Partnership. In making such
determination, the General Partner shall consider, among other things, (x) any
financial support or contributions to be provided or made by Oswego Cogen to or
for the benefit of the Partnership and/or any of the other Partners in
connection with or resulting from any change in the status of the Project and
the Partnership proposed by Oswego Cogen pursuant to this Section 15.4(b) and
(y) letters from each of Standard & Poor's Ratings Corporation, a Division of
the XxXxxx-Xxxx Companies, Xxxxx'x Investors Service, Inc. and Fitch, Inc., or
the rating agencies then rating the Bonds, obtained by Oswego Cogen (or, if
reasonably requested by Oswego Cogen, by the Partnership or Sithe Funding, at
the expense of Oswego Cogen), stating that the rating of the Bonds (as defined
in the Indenture) will not be reduced as a result of any change in the status of
the Project and the Partnership proposed by Oswego Cogen pursuant to this
Section 15.4(b) (collectively, the "Ratings Confirmation Letters"). For the
avoidance of doubt, the General Partner shall have no obligation to consider any
proposed action of, or cooperate with, Oswego Cogen pursuant to this Section
15.4(b) in the event that Oswego Cogen fails to obtain, or cause to be obtained,
the Ratings Confirmation Letters and provide copies thereof to the General
Partner. The costs and expenses of seeking any waiver or modification to the
Indenture for the purposes of this Section 15.4(b) shall be borne solely by
Oswego Cogen, and Oswego Cogen hereby agrees to indemnify and hold harmless the
Partnership and each of the other Partners for any costs or expenses incurred by
the Partnership or such Partner, as the case may be, in furtherance of the
foregoing.
15.5 CERTAIN SALES BY THE SITHE PARTNERS. In the event that a sale or
transfer of a portion of any of the Interests held by the Sithe Partners is
necessary to avoid the loss by the Partnership of the Project's status as a
Qualifying Facility as a result of the exercise by Exelon, or any successor or
assignee thereof, of any right to acquire an additional ownership interest in
Sithe Energies, any such sale or transfer shall be subject to all of the
restrictions on the transfer of Interests contained in Section 15.3. A sale or
transfer by any of the Sithe Partners pursuant to this Section 15.5 shall not
require the consent of any Partner (but only to the extent of the portion of
such sale that is necessary to avoid the loss by the Partnership of the
Project's status as a Qualifying Facility), unless its proposed transferee is
described in subclause (ii) of the last
35
sentence of Section 15.1, in which case prior consent of the other Partners
shall be required. Notwithstanding the foregoing, if the sale or transfer of the
Interest by the selling Sithe Partner(s) would result in a termination of the
Partnership for purposes of Code Section 708, the selling Sithe Partner(s) shall
hold harmless and pay to each of the other Partners an amount equal to (i) the
net present value of any adverse net federal and state income tax consequences
it will suffer as a direct result of the termination of the Partnership for tax
purposes, including, without limitation, any readjustment to the depreciation
periods or methods applicable to the Partnership's depreciable properties, plus
(ii) an additional payment necessary to reimburse the Partners for the net
federal and state income taxes owed on any payment under the foregoing subclause
(i) and this subclause (ii) (such net federal and state income taxes to be
conclusively presumed to be imposed at a combined effective tax rate of forty
percent (40%) regardless of the actual effective tax rate or tax situation of
the Partners or of any Partner); PROVIDED, HOWEVER, that the selling Sithe
Partner(s) shall not be required to pay any amount pursuant to the foregoing
subclause (ii) in the event that such selling Sithe Partner(s) obtains an
opinion from a nationally recognized accounting or law firm, selected by such
selling Sithe Partner(s) and consented to by Oswego Cogen, such consent not to
be unreasonably withheld, to the effect that the payment by such selling Sithe
Partner(s) of amounts pursuant to subclause (i) should not be treated as taxable
income to the Partners. For purposes of this Section 15.5, any net present value
calculation shall be determined using a discount rate of ten percent (10%) and
an assumed effective combined income tax rate of forty percent (40%).
15.6 EXPENSES. No transfer described in Sections 15 shall be effective
unless the transferor or transferee pays to the Partnership all direct
out-of-pocket costs reasonably incurred by the Partnership as a result of such
transfer and indemnifies the Partnership (in a manner which is reasonably
satisfactory to the General Partner) for any such costs that may be reasonably
incurred by the Partnership thereafter as a result of such transfer.
16. RESERVED.
17. SUBSTITUTED LIMITED PARTNER.
17.1 CONDITIONS. No assignee of the whole or any portion of the
Interest of any Person who is not a General Partner shall have the right to
become a Substituted Limited Partner in place of his assignor, unless all of the
following conditions are satisfied:
(a) a written instrument of assignment, fully executed and acknowledged
by the assignor, has been filed with the Partnership setting forth the intention
of the assignor that the assignee become a Substituted Limited Partner in its
place;
(b) the assignor and assignee have executed and acknowledged such other
instruments as the General Partner may deem necessary or desirable to effect
such admission, including the written acceptance and adoption by the assignee of
the provisions of this Agreement; and
(c) the General Partner has consented in writing to the substitution,
which consent will not be unreasonably withheld. The General Partner
acknowledges that it has consented to
36
the substitution of Oswego Cogen for Cogeneration National Corporation as a
Substituted Limited Partner.
17.2 EFFECT OF ASSIGNMENT WITHOUT SUBSTITUTION. In the case of
assignments where the assignee does not become a Substituted Limited Partner,
the Partnership shall recognize the assignment not later than the last day of
the calendar month following receipt of notice of assignment and required
documentation for the limited purposes of allocating Profits and Losses and
making distributions pursuant to the terms of this Agreement.
17.3 DISCRETION OF GENERAL PARTNER. The General Partner may elect to
treat an assignee which has not become a Substituted Limited Partner as a
Substituted Limited Partner in the place of its assignor should it deem, in its
reasonable judgment, that such treatment is in the best interest of the
Partnership for any of its purposes or for any of the purposes of this
Agreement.
17.4 CONSENT NOT REQUIRED. No consent of the Limited Partners is
required to effect the substitution of a Limited Partner, except that a Limited
Partner assigning its Interest must evidence its intention that its assignee be
admitted as a Substituted Limited Partner in its place and execute any
instruments required in connection therewith.
17.5 AMENDMENT OF CERTIFICATE. The General Partner will amend the
Certificate of Limited Partnership if, as and when required to reflect the
substitution of the Limited Partner.
17.6 MISCELLANEOUS. Upon the bankruptcy or insolvency of a Limited
Partner or upon the dissolution or other cessation of a non-individual Limited
Partner's existence as a legal entity, the authorized representative of such
entity shall have all the rights of the Limited Partner for the purpose of
effecting the orderly winding up and dissolution of the business of such entity,
and shall have such power as such entity possessed to constitute a successor as
an assignee of its Interest in the Partnership and to join, if necessary, with
such assignee in making application to substitute such assignee as the Limited
Partner.
18. WITHDRAWAL.
The General Partner shall not withdraw from the Partnership without the
express written consent of all of the Partners. The withdrawal of any Limited
Partner shall not cause a dissolution of the Partnership, and the Business shall
continue without interruption. In the event of the withdrawal, for any reason,
of the General Partner, the Partnership shall dissolve, unless the Business is
continued by any remaining General Partner. In the event of the withdrawal of
the last remaining General Partner, the Partnership shall dissolve, unless
within 90 days after the occurrence of such withdrawal, each of the Partners not
Affiliated with such General Partner agree in writing to continue the Business
of the Partnership and to the appointment, effective as of the date of
withdrawal of the last General Partner, of one or more additional General
Partners, who are hereby authorized to and shall continue the Business of the
Partnership.
19. DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP.
19.1 EVENTS CAUSING DISSOLUTION. The Partnership shall terminate upon
the happening of any of the following events:
37
(a) the removal or withdrawal of the General Partner, except as
provided in Sections 14 and 18 hereof;
(b) the sale or other disposition of all or substantially all of the
assets of the Partnership;
(c) the election by the General Partner and the approval of each of the
Limited Partners to dissolve the Partnership; or
(d) the entry of a decree of judicial dissolution of the Partnership.
Dissolution of the Partnership shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Partnership shall not terminate
until the Partnership's Certificate of Limited Partnership shall have been
cancelled, and the assets of the Partnership shall have been distributed as
provided in Section 19.2(d) hereof. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership, as aforesaid, the
Business of the Partnership shall continue to be governed by this Agreement.
19.2 LIQUIDATION.
(a) Upon dissolution of the Partnership, the General Partner, or, if
none, a Person approved in accordance with Applicable Laws by the Limited
Partners (a "Liquidating Trustee"), shall liquidate the assets of the
Partnership, apply and distribute the proceeds thereof as contemplated by this
Agreement and cause the cancellation of the Partnership's Certificate of Limited
Partnership.
(b) Notwithstanding the foregoing, in the event that the General
Partner or the Liquidating Trustee, as the case may be, shall determine that an
immediate sale of part or all of the Partnership assets would cause undue loss
to the Partners, the General Partner or the Liquidating Trustee, as the case may
be, in order to avoid such loss, may, after having given notice to all the
Partners, to the extent not then prohibited by Applicable Laws, either defer
liquidation of and withhold from distribution for a reasonable time any assets
of the Partnership except those necessary to satisfy the Partnership's then
current debts and obligations, or distribute the assets in kind.
(c) 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 Person entitled to any interest in such assets shall receive such
interest therein as a tenant-in-common with all other Persons so entitled. The
fair market value of such assets shall be determined by an independent appraiser
to be selected by the General Partner or the Liquidating Trustee, as the case
may be.
(d) The proceeds from the liquidation of the assets of the Partnership
shall be distributed, after all allocations of Profit or Loss have been made in
accordance with Section 11 hereof, in the following order:
(i) First, to pay the expenses of liquidation of, and the claims and
obligations of the Partnership, including any obligations under the
Project Documents,
38
other than the debts or obligations owing to the Partners whether matured
or contingent, or to establish reasonable reserves therefor, all in
accordance with Applicable Laws;
(ii) Second, to such debts or obligations as are owing to the
Partners;
(iii) Third, to Oswego Cogen, in an amount equal to the lesser of
(i) the balance of its Special Distributions Account and (ii) its positive
Capital Account balance;
(iv) Fourth, to the Partners in proportion to, and up to the amounts
of, their respective positive Capital Account balances (determined after
reducing the balance of Oswego Cogen to take into account any distribution
made pursuant to the provisions of Section 19.2(d)(iii) hereof); and
(v) Fifth, to the Partners in proportion to their Percentage
Interests.
(e) In the event that any current or former General Partner's Capital
Account is negative upon liquidation of the Partnership (or of the General
Partner's interest in the Partnership), and after giving effect to all
contributions (including any amount considered contributed by such General
Partner to the Partnership under Section 1.704-1(b)(2)(iv)(c) of the
Regulations), distributions and allocations for all taxable years, including the
taxable year during which the final liquidating distribution occurs, such
General Partner shall contribute to the capital of the Partnership the amount
necessary to restore its Capital Account to zero (or, if applicable, the amount
determined pursuant to Section 14.2(c) hereof), and the amount so contributed
shall be treated as additional proceeds from the liquidation of the assets of
the Partnership and shall be distributed in accordance with and pursuant to
Section 19.2(d) hereof. The General Partner shall make such contribution by no
later than the end of the taxable year during which such liquidation occurs (or,
if later, within 90 days after the date of such liquidation). This Section
19.2(e) is intended to impose an unconditional obligation on the General Partner
to restore any deficit balance in its Capital Account in accordance with the
requirements of Section 1.704-1(b)(2)(ii)(b)(3) of the Regulations, and it shall
be interpreted and applied accordingly.
(f) The General Partner may, upon the liquidation of the Partnership or
of the General Partner's Interest, expressly assume any liability of the
Partnership. Any such assumption of liability by the General Partner is intended
to be treated as an assumption of such liability for purposes of Section
1.704-1(b)(2)(iv)(c) of the Regulations, and this Section 19.2(f) shall be
interpreted and applied accordingly.
20. BOOKS AND RECORDS; REPORTS; OTHER INFORMATION.
20.1 BOOKS AND RECORDS. The Partnership shall keep adequate books and
records at its principal place of business or at such other location selected by
the General Partner, setting forth a true and accurate account of all business
transactions arising out of and in connection with the conduct of the Business
of the Partnership. Subject to Applicable Laws, any Partner or its designated
representative shall have the right, at any reasonable time, to have access to
and inspect the contents of such books and records. The books shall be kept
pursuant to the method of accounting selected by the General Partner. The
General Partner may, upon recommendation
39
of the Partnership's independent certified public accountants, change the
accounting method pursuant to which the books are kept.
20.2 ANNUAL REPORTS. Within one hundred and twenty (120) days after the
end of each tax year, each Partner shall be furnished with an annual report
containing (i) a balance sheet of the Partnership as of the end of the tax year
and statements of income, Partners' equity, and changes in financial position of
the Partnership and a cash flow statement of the Partnership, for the year then
ended, all of which, except the cash flow statement, shall be prepared in
accordance with generally accepted accounting principles and accompanied by an
auditor's report containing an opinion of an independent certified public
accountant; (ii) a report of the activities of the Partnership during the period
covered by the report; (iii) if applicable, a statement of fees paid by the
Partnership to the General Partner and Affiliates thereof; and (iv) where
projections have previously been provided to the Partners, a table comparing the
projections previously provided with the actual results during the period
covered by the report. Such report shall set forth distributions to Persons
owning Interests for the period covered thereby and shall separately identify
distributions from (i) Available Cash during the period, (ii) Available Cash
during a prior period which has been held as Reserves, (iii) proceeds from
disposition of properties, and (iv) Reserves from the gross proceeds originally
obtained from the Partners.
20.3 REPORTS TO PROJECT LENDERS. The General Partner shall deliver or
cause to be delivered to Oswego Cogen a copy of each report, notice or piece of
correspondence required by Section 6.1 of the Indenture, at the same time as
such reports are (or if no bonds remain outstanding under the Indenture, at the
time such reports would have been) required to be delivered to the Trustee under
the Indenture or any agent acting on such Person's behalf.
20.4 ANNUAL BUDGET. The General Partner shall (i) provide each Limited
Partner with a copy of the annual Budget not later than five (5) days following
the General Partner's receipt of same from the Operator, (ii) at least thirty
(30) days prior to the first day of the second half of each Annual Period,
provide each Limited Partner with a semi-annual Budget for the next following
six month period, and (iii) reasonably consider such comments as such Limited
Partner may provide to the General Partner in the process of the General
Partner's approval or rejection of any Budget as contemplated in the Operations
and Maintenance Agreement. Each annual and semi-annual Budget shall, among other
information, set out the amount and expected timing of all material expenses,
including, without limitation, the amount to be expended for and the expected
timing of capital expenditures, scheduled maintenance and other material
non-operating expense categories. If and to the extent that the amount or
expected timing of all material expenses, including, without limitation, the
amount to be expended for and the expected timing of capital expenditures,
scheduled maintenance and other material non-operating expense categories is
materially revised, the General Partner shall promptly provide each Limited
Partner with the revised schedule of such items.
20.5 TAX INFORMATION. Necessary tax information (including Schedule
K-1) shall be delivered by the General Partner to the Partners as soon as
practicable after the end of each tax year of the Partnership, taking into
account the due dates of the tax returns of the Partners, and the Partners
shall, upon request of the General Partner, provide such information as may
reasonably be requested to permit the Partnership to comply with all Applicable
Laws.
40
21. AMENDMENTS.
21.1 ADDITIONAL PARTNERS. Each Substituted Limited Partner, additional
General Partner and successor General Partner shall become a party hereto by
signing such number of counterpart signature pages to this Agreement and such
other instrument or instruments, as the General Partner shall determine, or in
such other manner permissible by law. Each Substituted Limited Partner,
additional General Partner or successor General Partner, as the case may be,
shall be deemed to have adopted, and to have agreed to be bound by, all the
provisions of this Agreement, as amended from time to time in accordance with
the provisions of this Agreement.
21.2 AMENDMENTS WITH CONSENT OF LIMITED PARTNERS. This Agreement may be
amended from time to time by the General Partner with the consent of the
Partners holding at least sixty-six and two-thirds percent (66 2/3%) of the
Interests; PROVIDED, HOWEVER, that no amendment to Sections 10.1, 10.2, 19.2(e),
19.2(f) or 20.4 shall be effective without the consent of all of the Partners;
and PROVIDED, FURTHER, that without the consent of the Limited Partners to be
adversely affected by any such amendment, this Agreement may not be amended to
(i) convert a Limited Partner's Interest into a General Partner's Interest; (ii)
modify the limited liability of a Limited Partner; (iii) alter the interest of a
Limited Partner in Profits or Losses or in distributions; or (iv) alter the fees
or other compensation payable to a Limited Partner. For the purpose of obtaining
a written vote to approve or disapprove of a proposed amendment under this
Section 21.2 of this Agreement, the General Partner may require written
responses within a specified time period (not less than fifteen (15) nor more
than sixty (60) days from the date of any notice of a proposed amendment) and
provide that the failure to respond within such time period shall, at the
General Partner's designation, constitute a favorable or unfavorable vote for
the proposed amendment.
21.3 EXECUTION OF AMENDMENTS. If this Agreement shall be amended as a
result of substituting a Limited Partner, such amendment to this Agreement shall
be signed, at a minimum, by the General Partner and by the Person to be
substituted. If this Agreement shall be amended to reflect the designation of an
additional General Partner, or the cessation of the General Partner as the
General Partner and the continuation of the Business of the Partnership, such
amendment shall be signed by such additional General Partner and by the
remaining or successor General Partner or General Partners.
21.4 RECORDING OF AMENDMENTS. In making any amendments to this
Agreement, the General Partner shall prepare and file for recording such
documents and certificates as are required to be prepared and filed pursuant to
the Act and under the laws of any other jurisdiction in which the Partnership
owns property or is required to file any such documents or certificates, not
less frequently than once each calendar quarter.
22. LIABILITY OF THE GENERAL PARTNER.
22.1 IN GENERAL. Except as expressly provided in this Agreement,
neither the General Partner nor its Affiliates and their respective officers,
directors, employees and agents shall be liable to the Partnership or any
Persons who have acquired any interests in the Partnership, whether as Limited
Partners or otherwise, or any other Persons, for losses sustained or liabilities
41
incurred as a result of any act or omission of the General Partner or such
Person, if the General Partner or such Person acted in good faith and in a
manner it reasonably believed to be in, or not opposed to, the best interests of
the Partnership. The duties and liabilities of the General Partner to the
Partnership or to any other Partner shall be only as specifically provided in
this Agreement, and no Partner shall have any liability to the Partnership or
any other Partner for any act or omission taken or done in good faith reliance
on the provisions of this Agreement.
22.2 AGENTS OF THE GENERAL PARTNER. The General Partner may exercise
any of the powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or through its agents, and the General
Partner shall not be responsible for any act or omission on the part of any such
agent appointed by the General Partner in good faith and in a manner it
reasonably believed to be in, or not opposed to, the best interests of the
Partnership.
23. INDEMNIFICATION OF GENERAL PARTNER.
23.1 IN GENERAL. To the fullest extent permitted by law, the
Partnership, its receiver or its trustee, shall indemnify, hold harmless and pay
in full all judgments and claims against or liabilities of the General Partner
incurred by reason of any act performed or omitted to be performed or alleged to
have been performed or omitted to be performed by or in connection with the
Business of the Partnership, including attorneys' fees incurred by the General
Partner in connection with the defense of any action or threatened action based
on any act or omission, which attorneys' fees shall be paid as incurred,
including, except as specifically provided in Section 23.3 hereof, all such
liabilities under federal and state securities laws (including the United States
Securities Act of 1933, as amended) as permitted by law.
23.2 AGAINST CLAIMS BY LIMITED PARTNER. In the event of any action by a
Limited Partner or Partners against any General Partner, including a Partnership
derivative suit, the Partnership shall indemnify, hold harmless and pay in full
all expenses of such General Partner, including attorneys' fees, incurred in the
defense of such action, if (i) such General Partner is successful in the defense
of such action, or (ii) in the opinion of the Partnership's counsel, the matter
has been settled by controlling precedent, or (iii) if the matter has not been
settled by controlling precedent, the issue will be submitted to a court of
competent jurisdiction as to whether such indemnification by the Partnership is
against public policy, and all parties will be governed by the final
adjudication of such court of such issue.
23.3 EXCEPTIONS. Notwithstanding the provisions of Sections 23.1 and
23.2 hereof, a General Partner shall not be indemnified from any liability for
fraud, bad faith, willful misconduct or gross negligence.
24. MISCELLANEOUS.
24.1 AGREEMENTS IN COUNTERPARTS. This Agreement may be executed in
several counterparts or with multiple signature pages, and as executed shall
constitute one Agreement, binding on all of the parties hereto, notwithstanding
that all the parties are not signatory to the original or to the same
counterpart.
42
24.2 SURVIVAL OF RIGHTS. Except as herein otherwise provided, this
Agreement shall be binding upon and inure to the benefit of each of the parties
signatory hereto, its personal representatives, heirs, successors and assigns.
24.3 SECTION HEADINGS. The section headings are intended for
convenience only, and in no way define, limit, extend or interpret the scope of
this Agreement or of any particular section or paragraph hereof.
24.4 ADDITIONAL DOCUMENTS. Each party hereto agrees to execute by
acknowledgment or affidavit, if required, any and all documents and writings
which may be necessary or expedient in the creation or continuation of this
Partnership and the achievement of its purposes, including the Certificate of
Limited Partnership and all amendments thereto, as well as any cancellation
thereof. Without limiting the generality of the foregoing, the Partners agree to
use reasonable efforts to cooperate with any application of the Partnership for
Exempt Wholesale Generator status unless such status could be reasonably
expected to have a material adverse effect on the Partnership.
24.5 WAIVER OF PARTITION. Each of the parties hereto irrevocably
waives, during the term of the Partnership, any right that it may have to
maintain any action for partition with respect to the properties of the
Partnership.
24.6 VALIDITY. In the event that any provision of this Agreement shall
be held to be invalid, the same shall not affect in any respect whatsoever the
validity of the remainder of this Agreement.
24.7 INTERPRETATION. When the context in which words are used in this
Agreement indicates that such is the intent, words in the singular number shall
include the plural and vice versa. Any reference to any gender shall be deemed
to include all other genders unless the context otherwise requires.
24.8 GOVERNING LAW. It is the intention of the parties that the laws of
the State of Delaware govern the validity of this Agreement, the construction of
its terms and the interpretation of the rights and duties of the parties.
24.9 LIMITATION ON DAMAGES. No Partner shall be entitled to any treble,
special, incidental, punitive, exemplary or consequential damages of any nature,
each Partner hereby waiving its right, if any, to recover such damages.
24.10 NOTICES. All notices or other communications hereunder shall be
in writing and may be sent by (a) facsimile, or (b) registered, certified or
regular United States mail, first-class, postage prepaid, in either case as
follows:
(i) if to the General Partner:
43
Sithe/Independence, Inc.
c/o Sithe Energies, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
(ii) if to Sithe Energies U.S.A., Inc.:
Sithe Energies U.S.A., Inc.
c/o Sithe Energies, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
(iii) if to Sithe Energies, Inc:
Sithe Energies, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
(iv) if to Mitex, Inc.:
Mitex, Inc.
c/o Sithe Energies, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
(v) if to Oswego Cogen:
Oswego Cogen Company, LLC
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile: (000) 000-0000
44
with a copy to:
Enron Corp.
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000
The date of transmission as recorded on a valid confirmation in the
case of notice described in subsection (a) above, and the date of registry
thereof or the date of the certified receipt therefor in the case of registered
or certified mail described in subsection (b) above, shall be deemed the date of
receipt of notice; PROVIDED that any notice delivered pursuant to Section
12.4(c) shall not be deemed to have been received until the intended recipient
thereof shall acknowledge receipt in writing to the party providing such notice.
From time to time any Partner may designate a new address for itself for purpose
of notice hereunder by written notice to each of the other Partners duly given
as provided herein.
45
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer as of the
day and year first above written.
GENERAL PARTNER: SITHE/INDEPENDENCE, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and Treasurer
LIMITED PARTNER: SITHE ENERGIES U.S.A., INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and Treasurer
LIMITED PARTNER: SITHE ENERGIES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and Treasurer
LIMITED PARTNER: MITEX, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Treasurer
LIMITED PARTNER: OSWEGO COGEN COMPANY, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Operating
Officer
46
EXHIBIT A
PERCENTAGE INTERESTS AND ESTIMATED AND PROJECTED CAPITAL ACCOUNT BALANCES
Percentage Estimated and Projected Capital Account
Partner Interest Balance (As of June 30, 2001)**
------- --------- -----------------------------
Sithe/Independence, Inc. 1% -420,800,000
Sithe Energies U.S.A., Inc. 44% -33,600,000
Sithe Energies, Inc. 5% -1,600,000
Mitex, Inc. 10% -7,600,000
Oswego Cogen Company, LLC* 40% -12,700,000
*As indirect successor in interest of a 40% Interest formerly held by Sithe
Energies, Inc.
**Estimated and projected balances; final balances will vary.
A-1
Exhibit B
SUMMARY OF PROPOSED TERMS AND CONDITIONS
OF THE
SECOND AMENDED AND RESTATED OPERATIONS AND MAINTENANCE AGREEMENT
BETWEEN
SITHE/INDEPENDENCE POWER PARTNERS, L.P. AND SITHE ENERGIES POWER SERVICES, INC.
Owner: Sithe/Independence Power Partners, L.P.
Operator: Sithe Energies Power Services, Inc.
Facility: Approximately 1,032 megawatt gas-fired
electrical and steam generating plant and
associated materials, structures and systems
located in the Town of Scriba, County of
Oswego, New York (the "Project").
Term: Until December 31, 2014.
Services: Operator shall provide all services
necessary to properly operate and maintain
the Project (including without limitation
all appurtenant facilities, hot water
distribution piping, access roads and
utility connections) in good operating
condition and in compliance with, inter
alia, (i) the Project Documents and all
insurance policies relating to the Project,
(ii) the procedures established in the
operation and maintenance manuals, (iii)
Prudent Engineering and Operating Practices
(as defined in the Indenture), or, to the
extent more stringent, standards set forth
in the Project Documents, including the
performance of all routine and scheduled
maintenance of the Project, (iv) vendor and
manufacturer requirements or conditions, as
applicable, (v) the O&M Procedures
established by Operator and approved by
Owner and (vi) any and all environmental
permits, operating permits, franchise
agreements, and other governmental
approvals, licenses or permits necessary for
the operation of the Project.
Operator shall also (1) carry out any and
all activities necessary to respond
appropriately to and mitigate situations of
emergency that involve the safety of persons
or the security of property or that
interfere with the normal operation of the
Project; (2) operate and maintain the
Project in a manner designed to maintain the
status of the Project as a qualifying
cogeneration facility or a qualifying small
power production facility as defined in the
Federal Power Act, as amended, Section 3 (16
U.S.C. Section 796) and Part 292 of the
B-1
rules and regulations of the Federal
Energy Regulatory Commission (18 C.F.R.
Part 292) (a "Qualifying Facility");
PROVIDED, that if the Project is no
longer required by the Project Documents
to be a Qualifying Facility, if
instructed to do so by Owner, Operator
shall operate and maintain the Project in
a manner designed to maintain the status
of the Project as an "Exempt Wholesale
Generator" as defined under PUHCA,
Section 32 of the Public Utility Holding
Company Act of 1935, as amended, (15
U.S.C. Section 79z-5a) and Part 365 of
the rules and regulations of the Federal
Energy Regulatory Commission (18 C.F.R.
Part 365); (3) provide any and all
technical and engineering support
reasonably required for operation and
maintenance of the Project; and (4)
recommend to Owner any necessary or
advisable improvements, modifications or
alterations to the Project.
Personnel: Operator shall employ qualified personnel to
provide the services for the operation of
the Project, including a site manager.
Operator may engage any independent
contractors reasonably necessary for making
scheduled or unscheduled repairs to or
performing maintenance on the Project in the
event that Operator is not available or is
otherwise unable to make or perform such
repairs or maintenance.
Restrictions on Authority: Operator shall not, without Owner's prior
written consent: (1) sell, lease, pledge,
mortgage, convey, license, exchange, or
dispose of any property or assets of Owner,
including, but not limited to, any property
or assets acquired by Owner, except that
Operator may dispose of minor items that are
incidental to the operation and maintenance
of the Project such as worn-out parts, used
consumables, or other sundry items which are
no longer of value (including, without
limitation, scrap value) to the operation or
maintenance of the Project; PROVIDED,
HOWEVER, that any such disposition is not
prohibited under any Project Document; and
PROVIDED, FURTHER, that the proceeds of any
such disposition shall be for the account of
Owner; (2) make, enter into, execute, amend,
modify, or supplement any Project Document
or other contract or agreement on behalf, or
in the name of, Owner; (3) engage in any
other transaction on behalf of Owner in
contravention of this Agreement or any
Project Document; (4) amend, terminate,
waive any obligation of, or extend the term
of, or agree to amend, terminate, waive any
obligation of, or extend the term of, any
Project Document on behalf of Owner or take
or agree to take any other action in
material variance with any Project Document;
or (5) settle, compromise, assign, pledge,
transfer, release, or consent to do the
same, any claim, suit, debt, demand, or
judgment
B-2
involving or in any way affecting Owner or
the Project, the cost of which would be an
expense to Owner under any Project Document,
would affect the revenues of the Project,
would be covered by any Project insurance
policy or would otherwise become a liability
of Owner.
Restrictions on
Expenditures: Operator shall be authorized to make such
expenditures and incur such expenses on
behalf of Owner as are approved by Owner in
the annual Budget for the Project. In
addition, Operator may incur expenses on
behalf of Owner for purposes of maintenance
and repairs up to [$1,000,000] per incident
(if covered by Owner's insurance) or
[$250,000] per incident (if not covered by
Owner's insurance). Notwithstanding the
foregoing, in the event of an imminent risk
of personal injury, significant property or
environmental damage, or significant
interruption to the business of Owner (an
"Emergency"), Operator is authorized to
incur any necessary costs and expenses
without Owner's prior approval in responding
to or mitigating any damage, loss or injury
threatened by such Emergency, subject to
reasonable limitations customary in the
electricity generation industry (to be
included in the agreement). Operator shall
notify Owner as soon as practicable under
the circumstances of the occurrence of any
Emergency and any resulting costs and
expenses incurred or proposed to be incurred
in connection with such Emergency.
Advances for Operator
Expenses: Operator shall notify Owner by the 20th
calendar day of each month of the
anticipated cash requirements for the next
following month necessary for Operator to
perform its services under this Agreement.
Operator shall promptly notify Owner of the
need, if any, to make advances of the
estimated operating expenses. Operator shall
submit to Owner by the 20th day of each
calendar month a statement and reasonably
detailed breakdown of actual costs for the
preceding month.
Reimbursement of
Operator Costs: Owner shall reimburse Operator for
reasonable direct and indirect costs
associated with the services rendered by
Operator pursuant to this Agreement,
including costs of meals, lodging and
travel, and telecommunications; indirect
costs such as a reasonable allocation of
Operator's general, administrative and
overhead costs; reasonable fees and costs of
attorneys, accountants or other third-party
advisors incurred by Operator in carrying
out its duties and
B-3
obligations under this Agreement; and
reasonable costs of all subcontractors hired
by Operator in performance of services.
Operator Fee: $500,000 per year, payable monthly in twelve
installments (escalated annually by factor
of 1.05 from November 1994) (the "Operator
Fee").
Limitation of Liability: The total aggregate liability of Operator to
Owner under this Agreement during any
calendar year during the term (or portion
thereof if the Agreement is not in effect
for a full calendar year) for any
liabilities of Operator to Owner arising
hereunder during such year shall not exceed
an amount equal to the Operator Fee paid or
payable to Operator in such year; PROVIDED,
HOWEVER, that such limitations on liability
shall not apply with respect to any loss,
damage or liability resulting from or
arising out of the fraud, gross negligence
or willful misconduct of Operator, its
respective agents, employees, directors,
officers, delegates or subcontractors. In no
event shall either party be liable to the
other by way of indemnity or by reason of
any breach of contract or of statutory duty
or by reason of tort (including negligence
or strict liability) or otherwise for any
loss of profits, loss of revenue, loss of
use, loss of production, loss of contracts
or for any incidental, indirect, special or
consequential damages of any other kind or
nature whatsoever that may be suffered by
the other.
Termination by
Owner: Owner shall be entitled to terminate this
Agreement (1) upon the dissolution,
bankruptcy, or insolvency of Operator or (2)
if Operator fails to perform any of its
material obligations under this Agreement
and such failure continues for thirty (30)
days after Operator's receipt of written
notice from Owner or Collateral Agent
regarding such failure; PROVIDED, that if
such failure is not capable of being cured
within such thirty (30) day period, and
Operator has demonstrated to Owner's
reasonable satisfaction that such failure is
capable of being cured and that Operator has
undertaken diligent efforts to effect a
cure, such period shall be extended for so
long as Operator is diligently pursuing such
efforts, but not to exceed an additional
thirty (30) days.
Termination by
Operator: Operator shall be entitled to terminate this
Agreement (1) upon the dissolution,
bankruptcy, or insolvency of Owner or (2) if
Owner fails to perform any of its material
obligations under this Agreement and such
failure continues for thirty (30) days after
Owner's receipt of written notice from
Operator or Collateral
B-4
Agent regarding such failure; PROVIDED, that
if such failure is not capable of being
cured within such thirty (30) day period,
and Owner has demonstrated to Operator's
reasonable satisfaction that such failure is
capable of being cured and that Owner has
undertaken diligent efforts to effect a
cure, such period shall be extended for so
long as Owner is diligently pursuing such
efforts, but not to exceed an additional
thirty (30) days.
Special Termination Right
of Owner and Operator
upon a Change of Control: BY OWNER: In the event that, at any time,
Sithe Energies, Inc. shall cease to own,
directly or indirectly, at least 50% of the
voting securities of Operator or at least a
40% percent interest in the Partnership
(each, a "Change of Control"), then this
Agreement shall automatically terminate on
the date that is ninety (90) days after the
occurrence of such Change of Control, unless
Owner shall have furnished to Operator a
written notice specifying that Owner desires
the Agreement to continue in full force and
effect notwithstanding such Change of
Control.
BY OPERATOR: In the event that Owner
furnishes notice to Operator that it elects
to continue the Agreement in full force and
effect notwithstanding a Change of Control,
then notwithstanding such continuation
notice, Operator shall have the right, upon
furnishing to Owner written notice, to
terminate the Agreement, effective upon the
earlier of (i) the expiration of sixty (60)
days following the receipt by Owner of a
notice of termination from Operator or (ii)
such earlier date as may be agreed to by
Operator and Owner.
Any termination of this Agreement resulting
from a Change of Control shall be without
liability on the part of either Owner or
Operator to the other as a result thereof.
Each of Owner and Operator agrees to (a)
promptly notify the other of the occurrence
of a Change of Control affecting such
person, respectively, and (b) use
commercially reasonable efforts to effect an
orderly transition to a new operator in the
event of any termination of the Agreement.
The Agreement shall contain an
acknowledgement by the Parties that the
exercise of their respective rights and
obligations under the Agreement shall be
subject to the Indenture, Security Agreement
and consent previously executed by Operator
with the Collateral Agent.
Dispute Resolution: New York law; submission to non-exclusive
jurisdiction of New York courts.
B-5
Indemnification: Standard; mutual.
Force Majeure: Standard.
B-6
Exhibit C
SUMMARY OF PROPOSED TERMS AND CONDITIONS
OF THE
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
SITHE/INDEPENDENCE POWER PARTNERS, L.P. AND SITHE ENERGIES POWER SERVICES, INC.
Owner: Sithe/Independence Power Partners, L.P.
Administrative Service
Provider: Sithe Energies Power Services, Inc.
Term: Until December 31, 2014.
Services: Administrative Service Provider shall
provide services relating to (1) contract
(i.e. Project Documents) management and
administration, accounting, financial and
tax services, which shall include
bookkeeping, preparation, review and
analysis of the financial results of Owner,
(2) preparation and revision of Project
budgets (including an annual budget of the
Administrative Service Provider for approval
by Owner), (3) maintenance of control
procedures for the Project budgets, (4)
preparation and review of all income and
non-income tax filings of Owner and
coordination of all tax planning for Owner,
(5) cash management and treasury services,
(6) maintenance of an inventory
identification system, (7) all bookkeeping
and record keeping matters, including
payroll and personnel records, journal and
ledger entries and preparation of monthly,
quarterly and annual financial statements,
(8) procurement services which shall include
advice on sourcing of products and
assistance in obtaining favorable terms of
purchase/credit, and (9) consulting services
which shall include advice on engagement by
Owner of specialized consultants; PROVIDED,
that, to the extent that such consultants
are engaged to perform work for, or on
behalf of, Owner, such consultants' fees
shall be borne by the Trust directly.
Personnel: All personnel shall be suitably qualified,
trained, experienced and competent.
Restrictions on Authority: Administrative Service Provider shall not,
without Owner's prior written consent: (a)
settle, compromise, assign, pledge,
transfer, release, or consent to do the
same, any claim, suit, debt, demand, or
judgment involving or in any way affecting
Owner or the Project,
C-1
the cost of which would be an expense to
Owner under any Project Document, would
affect the revenues of the Project, would be
covered by any Project insurance policy or
would otherwise become a liability of Owner;
(b) amend, modify or terminate any Project
Document; (c) enter into any contract on
behalf of Administrative Service Provider or
Owner; (d) enter into agreements with any
bank, finance or lending institution in
relation to the Project; (e) make any sale,
transfer, disposition or grant or purport to
grant any lien or encumbrance on any
property owned by Owner in relation to the
Project; (f) resolve or decide any other
matters deemed to be outside the ordinary
course of business of Administrative Service
Provider as would be determined pursuant to
standards of a reasonable prudent service
provider; (g) issue a consent, opinion or
approval that is subject to lender consent
under the Project Documents; or (h) accept
service of process on behalf of Owner or the
Trustee in connection with any legal
proceeding, whether arising under the
Project Documents or otherwise.
Reimbursement of
Administrative Service
Provider Direct Costs: Unless otherwise paid for by Sithe Energies
Power Services, Inc., Owner shall reimburse
Administrative Service Provider for the
following: (i) all costs reasonably incurred
by Administrative Service Provider in
connection with the performance of services
by Administrative Service Provider
personnel, including all recruitment costs,
salaries, wages, payroll taxes (including
social security and labor housing charges
and all taxes related to personnel seconded
to Administrative Service Provider),
overtime pay, shift differentials, fringe
benefits, pensions, holiday pay, vacation
pay, bonuses, termination payments,
relocation expenses, travel, training and
other similar costs of Administrative
Service Provider personnel; PROVIDED, that
such labor costs are related to
Administrative Service Provider's
performance under this Agreement, (ii)
reasonable costs of attorneys, accountants,
and other third-party advisors directly
required for the performance by
Administrative Service Provider of its
obligations hereunder, (iii) reasonable
costs incurred by Administrative Service
Provider in connection with insurance
maintained by Administrative Service
Provider in connection with its obligations
hereunder, (iv) overhead costs allocated to
any direct labor costs incurred in
connection with the performance of the
Services, (v) reasonable costs incurred in
connection with financial controls, data
processing, management, administration and
other similar services required for the
performance by Administrative Service
Provider of its obligations hereunder, and
(vi) other reasonable and similar
C-2
out-of-pocket expenses directly associated
with Administrative Service Provider's
obligations hereunder (collectively,
"Administrative Service Provider Direct
Costs"); PROVIDED, HOWEVER, that Owner shall
not reimburse Administrative Service
Provider for any income taxes directly
related to the income, including the
Administrative Fee, of Administrative
Service Provider. For purposes of "(iv)"
above, overhead costs shall be conclusively
presumed to equal 30% of the direct labor
costs incurred in connection with the
performance of the Services.
Limitation of Liability: The total aggregate liability of
Administrative Service Provider to Owner
under this Agreement during any calendar
year during the term (or portion thereof if
the Agreement is not in effect for a full
calendar year) for any liabilities of
Administrative Service Provider arising
hereunder during any given year shall not
exceed one hundred thousand dollars
($100,000.00); PROVIDED, HOWEVER, that such
limitations on liability shall not apply
with respect to any loss, damage or
liability resulting from or arising out of
the fraud, gross negligence or willful
misconduct of Administrative Service
Provider, its respective agents, employees,
directors, officers, delegates or
subcontractors. In no event shall either
party be liable to the other by way of
indemnity or by reason of any breach of
contract or of statutory duty or by reason
of tort (including negligence or strict
liability) or otherwise for any loss of
profits, loss of revenue, loss of use, loss
of production, loss of contracts or for any
incidental, indirect, special or
consequential damages of any other kind or
nature whatsoever that may be suffered by
the other.
Termination by Owner: Owner shall be entitled to terminate this
Agreement (1) upon the dissolution,
bankruptcy, or insolvency of Administrative
Service Provider or (2) if Administrative
Service Provider fails to perform any of its
material obligations under this Agreement
and such failure continues for a period
greater than thirty (30) days after
Administrative Service Provider's receipt of
written notice from Owner or Collateral
Agent regarding such failure, PROVIDED, that
if such failure is not capable of being
cured within such thirty (30) day period,
and Administrative Service Provider has
demonstrated to Owner's reasonable
satisfaction that such failure is capable of
being cured and that Administrative Service
Provider has undertaken diligent effort to
effect a cure, such period shall be extended
for so long as Administrative Service
Provider is diligently pursuing such
efforts, but not to exceed an additional
thirty (30) days.
C-3
Termination by
Administrative Service
Provider: Administrative Service Provider shall be
entitled to terminate this Agreement (1)
upon the dissolution, bankruptcy, or
insolvency of Owner or (2) if Owner fails to
perform any of its material obligations
under this Agreement and such failure
continues for a period greater than thirty
(30) days after Owner's receipt of written
notice from Administrative Service Provider
or Collateral Agent regarding such failure,
PROVIDED, that if such failure is not
capable of being cured within such thirty
(30) day period, and Owner has demonstrated
to Administrative Service Provider's
reasonable satisfaction that such failure is
capable of being cured and that Owner has
undertaken diligent effort to effect a cure,
such period shall be extended for so long as
Owner is diligently pursuing such efforts,
but not to exceed an additional thirty (30)
days.
Cross-Termination: The Administrative Services Agreement shall
automatically terminate upon termination of
the Second Amended and Restated Operations
and Maintenance Agreement.
The Agreement shall contain an
acknowledgement by the Parties that the
exercise of their respective rights and
obligations under the Agreement shall be
subject to the Indenture and the Security
Agreement and the parties shall enter into a
consent with the Collateral Agent under the
Security Agreement similar in form and
substance to the consent previously executed
by Operator in connection with the Amended
and Restated Operations and Maintenance
Agreement dated as of August 25, 1992.
Dispute Resolution: New York law; submission to non-exclusive
jurisdiction of New York courts.
Indemnification: Standard; mutual.
Force Majeure: Standard.
C-4
