DEVELOPMENT AGREEMENT
Between
CALENERGY COMPANY, INC.,
EL PASO POWER HOLDING COMPANY
and
CE GENERATION, LLC
Dated as of
March 3, 1999
DEVELOPMENT AGREEMENT
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This DEVELOPMENT AGREEMENT ("Agreement") dated as of March 3, 1999, is by
and among CalEnergy Company, Inc., a Delaware corporation ("CalEnergy"), El
Paso Power Holding Company, a Delaware corporation ("El Paso"), and CE
Generation, LLC, a Delaware limited liability company ("Company") (individually,
"Party" and collectively, "Parties").
RECITALS
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WHEREAS, CalEnergy formed the Company and contributed to the Company all of
its ownership interests in the owners of certain power plants as further
described herein ("Project Owners").
WHEREAS, CalEnergy and El Paso have executed an Equity Purchase Agreement
dated as of February 21, 1999 with respect to certain equity interests in the
Company (the "Purchase Agreement").
WHEREAS, CalEnergy has retained all rights to develop minerals within the
Salton Sea Known Geothermal Resource Area ("SSKGRA").
WHEREAS, Company, CalEnergy and El Paso desire to pursue certain
development activity upon the occurrence of specified events.
NOW, THEREFORE, in consideration of the promises, mutual covenants, and
conditions set forth herein, the receipt and sufficiency of which are hereby
acknowledged, and subject to the terms and conditions set forth herein and
intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
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The capitalized items used in this Agreement are defined in the Recitals
above, Appendix A or in the Section in which such term is used.
ARTICLE II
FUTURE DEVELOPMENT
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Section 2.1 Development Activities. CalEnergy and the Company shall
endeavor to develop new project opportunities (each an "Opportunity") within
the "SSKGRA" on Leases owned or held by the Company and its affiliates pursuant
to terms hereof and subject to their respective rights for power plant and
mineral development. Upon receipt by the Company of a proposal for a joint
Opportunity from CalEnergy, El Paso shall either (i) determine whether the
Company will pursue such proposal or (ii) elect to have the Company forego the
proposed Opportunity. If El Paso elects to have the Company pursue such proposal
the Company shall establish budgets (with all internal costs to be billed at
cost) to jointly pursue the Opportunity. In the event El Paso elects to have
the Company not pursue the Opportunity or El Paso fails to
consent to the Company meeting its budgetary requirements or a stalemate ensues
(as determined pursuant to Section 5.10) (a "Trigger Event"), then CalEnergy
shall be free to pursue the Opportunity independently.
Section 2.2 Option. If within 60 days after Cal Energy proposes an
Opportunity for a Power Plant or Combined Facility to the Company, El Paso has
not irrevocably elected in writing to pursue the Opportunity or within 30 days
of a Trigger Event, CalEnergy may independently develop, construct and own the
resulting Power Plant, Mineral Facility or Combined Facility, provided, prior to
commencement of construction thereof, that CalEnergy delivers an independent
geothermal consultants report concluding that the SSKGRA resource supplying
existing Power Plants owned by the Company will continue to be sufficient to
sustain for 33 years the then existing production by Power Plants then operating
or under construction. If within 30 days after delivery of such independent
geothermal consultants report to the Company, El Paso delivers a subsequent
independent geothermal consultants report concluding that the resource will be
insufficient to sustain for 33 years the then existing production by Power
Plants then operating or under construction, then the matter shall be submitted
to alternative dispute resolution pursuant to Section 5.10.
Section 2.3 Resource Priority. In the event a Power Plant or Combined
Facility is owned by CalEnergy and neither Company nor El Paso has an interest
therein, geothermal brine used by such Power Plant or Combined Facility shall be
subject to the prior right to such brine by the existing facilities to the
extent required to maintain the same access to geothermal brine required to
maintain the level of operations contemplated by the Geothermal Report;
provided, however, prior to preempting any use of such brine by a Power Plant or
Combined Facility, the Company first uses commercially reasonable efforts
consistent with past practices to otherwise develop or produce any required
brine.
Section 2.4 Other Minerals. Except for the limitation with respect to
resource sustainability to Section 2.2 above, nothing in this Agreement
restricts or encumbers the right of CalEnergy with respect to the development of
Minerals Facilities in connection with the Existing Facilities or future Power
Plants or the Zinc Recovery Project. El Paso and the Company expressly
acknowledge that except as expressly provided in connection with the option
provided with respect to a Combined Facility set forth in Section 2.2 above,
neither El Paso nor the Company have any right or interest to participate in any
Mineral Facilities or receive any payment with respect thereto. It is further
expressly acknowledged that neither the Company nor El Paso has any right or
interest to participate or receive any payment with respect to the Excluded
Assets (as defined in the Purchase Agreement) and any expansions or
modifications thereof.
ARTICLE III
ROYALTIES
Section 3.1 Power Plant Royalty. For any new geothermal electric generating
facilities (other than the Existing Facilities or any expansion thereof)
developed by the Company
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within the SSKGRA, the Company shall pay to CalEnergy a royalty equal to 1% of
the gross revenue from the sale of electricity and ancillary services therefrom,
payable monthly.
Section 3.2 Mineral Facility. For any Combined Facility developed by the
Company within the SSKGRA, the Company shall pay to CalEnergy a royalty equal
to 4% of the gross revenue from the sale of any minerals or byproducts produced
therefrom, payable monthly.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.1 Access/Cooperation. The Company shall provide such access and
surface rights as may be reasonably requested by CalEnergy to develop,
construct, operate, or maintain a Power Plant, Mineral Facility or Combined
Facility owned by CalEnergy (rather than by the Company). Any incremental costs
of the Company as a result of these activities shall be borne by CalEnergy.
Section 4.2 Financing. The Company and El Paso shall cooperate with
CalEnergy and execute such documents as may be necessary to permit financing of
a Power Plant, Mineral Facility or Combined Facilities owned by CalEnergy
(rather than the Company) on a project finance basis through Salton Sea Funding
Corporation or otherwise. All costs related to such new financing shall be borne
by CalEnergy.
Section 4.3 Consents. The Company shall cooperate to obtain each of the
Consents which must have been obtained for closing of financing with respect
to Project Assets and to maintain them in full force and effect.
ARTICLE V
MISCELLANEOUS
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Section 5.1 Transferability. This Agreement may not be transferred or
assigned in whole or in part by any party hereto; provided that any party may
merge with or into another entity and such successor entity shall succeed to the
rights and obligations of such party.
Section 5.2 Payment of Costs and Expenses. Except as otherwise set forth
herein, each party shall be solely responsible for their own costs and expenses
(including, without limitation, legal and accounting fees and disbursements).
Section 5.3 Third-Party Beneficiaries. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any creditors of any
Party. Unless otherwise expressly provided herein, no one, including, without
limitation, the Parties or any creditor of a Party, shall have any rights under
this Agreement against any Affiliate of any Party.
Section 5.4 Further Assurances. Each Party agrees to use its best efforts
to take, or cause to be taken, and to do, or cause to be done, all things that
may be necessary or appropriate to consummate and make effective the
transactions contemplated by this Agreement.
Section 5.5 Amendment. This Agreement may not be modified or amended except
by a written instrument executed by or on behalf of each of the Parties.
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Section 5.6 Waivers. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively
or prospectively) by the Party entitled to enforce such term. Such waiver shall
be effective only if in a writing signed by the Party or Parties against which
such waiver is to be asserted. Unless otherwise expressly provided herein, no
delay or omission on the part of any Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any Party of any right, power or privilege hereunder operate as a
waiver of any other right, power or privilege hereunder, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
Section 5.7 Entire Agreement. This Agreement, including the schedules and
exhibits hereto, and the documents expressly referred to herein, constitutes
the entire agreement between the Parties with respect to the matters covered
hereby, and any other prior or contemporaneous oral or written understandings
or agreements with respect to the matters covered hereby expressly are
superseded by this Agreement. There are no unwritten or oral agreements between
the Parties.
Section 5.8 Severability. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be declared
judicially to be invalid, unenforceable or void, such decision will not have
the effect of invalidating or voiding the remainder of this Agreement or
affect the application of such provision to other Persons or circumstances,
and the Parties agree that the part or parts of this Agreement so held to be
invalid, unenforceable or void will be deemed to have been stricken here from
and the remainder of this Agreement will have the same force and effect as if
such part or parts had never been included herein. Any such finding of
invalidity or unenforceability will not prevent the enforcement of such
provision in any other jurisdiction to the maximum extent permitted by
applicable law.
Section 5.9 Notices. Unless otherwise expressly provided herein, all
notices, requests, demands, consents, waivers, instructions, approvals and
other communications hereunder shall be in writing and will be deemed to have
been duly given if personally delivered to or mailed, certified mail, return
receipt requested, first-class postage paid, addressed as follows:
If to CalEnergy, to it at:
000 Xxxxx 00xx Xxxxxx, Xxxxx 000-00
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to Company, to it at:
000 Xxxxx 00xx Xxxxxx, Xxxxx 000-00
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telephone: 000-000-0000
Facsimile: 000-000-0000
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And a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to El Paso, to it at:
El Paso Power Holding Company
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: President
Telephone: 000-000-0000
Facsimile: 000-000-0000
And a copy to:
El Paso Energy
0000 Xxxxxxxxx
Xxxxx 0000 X
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
And a copy to:
King & Spalding
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 212-556-2222
or to such other address or to such other individuals as any party shall have
last designated by notice to the other Party. All notices and other
communications given to any Party in accordance with the provisions of this
Agreement shall be deemed to have been given when personally delivered or five
days after mailing to the intended recipient thereof in accordance with the
provisions of this Section 5.9.
Section 5.10 Alternative Dispute Resolution. If the parties hereto are
unable to resolve disputes, the parties shall refer the disputes to the
President of El Paso and CalEnergy. If such Presidents are unable to resolve
such disputes within 30 days, then the dispute shall be referred to a mediator
or arbitrator for a period of 30 days. If the dispute is not resolved after
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such process, the dispute shall be deemed a stalemate and the parties may pursue
such other remedies as may be available.
Section 5.11 Governing Law. This Agreement shall be construed in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of California without regard to the principles of conflict of laws.
Section 5.12 Successors and Assigns. Unless otherwise expressly provided
herein, this Agreement shall be binding upon and inure to the benefit of the
Parties hereto, and their respective legal representatives, successors and
permitted assigns.
Section 5.13 Headings and Table of Contents. The Article and Section
headings and the Table of Contents in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
Section 5.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date first written above.
CALENERGY COMPANY, INC.
By: /s/ Xxxxxx X. XxXxxxxx
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Name: Xxxxxx X. XxXxxxxx
Title: Executive V.P.
EL PASO POWER HOLDING COMPANY
By: /s/ Xxxxx XxXxxxxx
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Name: Xxxxx XxXxxxxx
Title: President
CE GENERATION, LLC
By: /s/ Xxxxxx X. XxXxxxxx
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Name: Xxxxxx X. XxXxxxxx
Title: Executive V.P.
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APPENDIX A
DEFINITIONS
"Affiliate" shall mean as to any Person any other Person that directly or
indirectly controls, is controlled by, or is under common control with such
first Person.
"Agreement" shall mean this Development Agreement, as amended from time to
time.
"Best Efforts" shall mean the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
"CalEnergy" shall mean CalEnergy Company, Inc., and its successors in
interest.
"Combined Facility" shall mean a facility consisting of one integrated
facility involving both a Power Plant and Mineral Facility which is to be
constructed contemporaneously.
"Company" shall have the meaning specified in the preamble to this
Agreement.
"Existing Facilities" shall mean the geothermal power generation facilities
included in the definition of Projects in the Purchase Agreement.
"Minerals Facility" shall mean any facility for the extraction or
processing of minerals including without limitation ion exchange units, solvent
extraction units and electro-winning facilities for the extraction or production
of zinc, silica, manganese, silver, gold, lithium or other minerals.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency of political subdivision
thereof or any other legal entity.
"Power Plant" means any electric generating facilities including the
turbine/generator all auxiliary equipment required for generation of
electricity, geothermal xxxxx, gathering facilities, processing facilities, and
injection or disposal facilities with respect to a geothermal facility, and all
contract and real and personal property rights related thereto.
"Project Assets" means all of the real and personal property used or
useful in connection with the ownership and operation of a Power Plant, Mineral
Facility or Combined Facility and which are now owned or held by a Project Owner
or hereafter acquired, including the Project Documents, other contracts,
contract rights, licenses and other intangible property, but excluding cash and
accounts receivable.
"Project Document" means for any project means each of the agreements or
documents providing for operation, maintenance, administration, sales of power,
leasing of real or personal property, easements, licenses, technology transfer,
services performed by and for minerals extraction activities, whether now
existing or hereafter entered into, in each case, with any amendments,
notifications, supplements, and replacement thereof, and any other agreements
entered into by a Project Company in the ordinary course of the operation of a
Project.
"Salton Sea Funding Indebtedness" means the Indebtedness of Salton Sea
Funding Corporation as of the date of this Agreement.
