Exhibit T3B-84
AGREEMENT OF
HONOLULU RESOURCE RECOVERY VENTURE
THIS AGREEMENT, effective as of the 1st day of November, 1983, by and
between COMBUSTION ENGINEERING HAWAII, INC. (hereinafter "CEHI"), a Hawaii
corporation having its principal office at 000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx
00000, and OAHU WASTE ENERGY RECOVERY, INC. (hereinafter "OWER"), a California
corporation with its principal office at 000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx
00000.
W I T N E S S E T H:
WHEREAS, the City and County of Honolulu (hereinafter the "City"),
desires to have established a facility to receive municipal solid waste and
process it by converting it to electrical energy and residue (hereinafter
referred to as the "Facility"); and
WHEREAS, the City issued a "Request for Proposal for the Financing,
Design, Construction, Shakedown and Operation/Maintenance of a Solid Waste
Processing and Resource Recovery Facility for the City and County of Honolulu,"
dated August 30, 1982, as amended and restated from time to time (hereinafter
referred to as the "RFP"); and
WHEREAS, CEHI (and/or its Affiliates) is a corporation engaged in the
business of design, construction and operation of solid waste processing and
resource recovery facilities; and
WHEREAS, OWER (and/or its Affiliates) is in the business of operating
and maintaining facilities similar to the Facility; and
WHEREAS, CEHI and OWER (and/or their Affiliates) in response to the RFP
jointly submitted to the City a proposal to design, construct, shakedown, test,
operate and maintain the Facility ("Proposal") and desire to establish a general
partnership under this agreement (hereinafter "Agreement") to execute and
perform a contract or series of related contracts for the
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design, construction, shakedown, testing, operation and maintenance of the
Facility in accordance with the Proposal; and
WHEREAS, CEHI and OWER (hereinafter referred to as the "Partners")
desire to define their respective areas of responsibility with respect to the
Facility and their rights and obligations with respect to each other;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I.
NAME AND PLACE OF BUSINESS
1.1 Name. The partnership shall operate under the name of the
Honolulu Resource Recovery Venture (hereinafter referred to as the
"Partnership").
1.2 Location. The principal place of business shall be at 000 Xxxxxx
Xxxxxx, Xxxxxxxx, Xxxxxx 00000, with such other places of business as may be
agreed upon by the Partners.
1.3 Other Activities. Nothing contained herein shall be deemed to
restrict in any way the freedom of either party or its Affiliates to conduct any
business or activity whatsoever for its own account excepting only such business
or activity which may conflict with or materially impair the ability of a
Partner to perform its obligations assumed under this Agreement, the
Construction Contract and/or the Disposal Services Contract.
ARTICLE II.
PURPOSE OF BUSINESS
2.1 Purpose. The purpose of the Partnership shall be to design,
construct, shakedown, test, operate and maintain the Facility. Unless otherwise
directed by the Executive Committee (as
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hereinafter defined), CEHI will design, construct, shakedown and test the
Facility during the Construction Phase and OWER will operate and maintain the
Facility during the Operating Phase.
2.2 Registration. The Partners have signed and caused to be filed with
the Department of Commerce and Consumer Affairs, State of Hawaii, a general
partnership registration statement.
ARTICLE III.
DEFINITIONS
3.1 "Affiliate" shall mean any corporation, partnership or other
business entity (other than the Partnership formed hereunder) which controls, is
controlled by or is under common control with CEHI or OWER, as the case may be.
3.2 "Construction Contract" shall mean the contract between the City
and the Partnership for the design, construction and testing of the Facility,
dated as of July 3, 1985 and amended on July 19, 1985, and as may be further
amended from time to time.
3.3 "Construction Guaranty Agreement" shall mean the performance
guaranty agreement executed by the ultimate parent corporation of each Partner,
individually, for construction of the Facility.
3.4 "Disposal Services Contract" shall mean the contract between the
City and the Partnership for the provision of waste processing and disposal
services, including operation and maintenance of the Facility, dated as of July
3, 1985 and amended on July 19, 1985, and as may be further amended from time to
time.
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3.5 "Energy Product Revenues" and "Recovered Material Revenues" shall
mean those Energy Product Revenues and Recovered Material Revenues as defined
respectively in the Disposal Services Contract.
3.6 "Facility" shall mean a facility to receive municipal solid waste
and process it by converting it to electrical energy, ash and residue, and built
in accordance with the Construction Contract and Related Documents.
3.7 "Guaranteed Expenses" and "Reimbursable Expenses" shall mean those
Guaranteed Waste Processing and Disposal Expenses and Reimbursable Expenses as
defined respectively in the Disposal Services Contract.
3.8 "Operating Guaranty Agreement" shall mean the performance guaranty
agreement executed by the ultimate parent corporation of each Partner,
individually, for operation of the Facility.
3.9 "Power Purchase Contract" shall mean the contract for the sale of
electrical energy produced by the Facility to the Hawaiian Electric Company,
Inc. (hereinafter "HECO").
3.10 "Proposal" shall mean the final Pricing Proposal submitted by CEHI
and OWER on July 3, 1985, as amended, in response to the RFP.
3.11 "Related Documents" shall mean any and all documents other than
the Construction Contract, the Disposal Services Contract and the Power Purchase
Contract which are contemplated by the Proposal and are customary and necessary
to put into effect and carry on the business deal and financing structure
described in the Proposal.
3.12 The terms herein defined shall have the meanings specified in this
Article III for the purposes of this Agreement. Any term used in this Agreement
which is not defined herein shall have the meaning defined in the applicable
Construction Contract or Disposal Services
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Contract. Any term used herein which is not defined in either this Agreement or
in the Construction Contract or Disposal Services Contract shall have the
meaning normally ascribed to it in the context of agreements such as this
Agreement.
ARTICLE IV.
TERM
4.1 Term. The Partnership shall commence on November 1, 1983, and shall
continue until terminated or dissolved by the occurrence of one of the events
listed in Section 9.1 below. The Partners shall extend the term of this
Partnership Agreement on a month-to-month basis, as necessary, for purposes of
winding up the Partnership affairs.
ARTICLE V.
CAPITAL
5.1 Capital Contributions. The initial capital shall be the total
sum of $20,000, to be contributed by the Partners in equal shares.
5.2 Additional Capital Contributions. In the event additional capital
contributions of any kind are required, from time to time, the Partners will, at
the time the need for additional capital occurs, proportionately contribute such
capital in the same manner set forth in Section 7.9 below. In the event any
Partner shall fail to contribute additional capital within the time limits as
the Executive Committee (as defined hereinbelow) shall specify, then the other
Partner may contribute the required capital for such Partner and if it so elects
to contribute, the Partner so contributing shall be first repaid from any funds
otherwise payable to the non-contributing Partner together with interest thereon
at the rate of two percent (2%) above the prime lending
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rate quoted to substantial and commercial borrowers on ninety-day loans at the
City Bank of New York, each day such interest accrues.
5.3 Working Capital. The Partners acknowledge the need for working
capital for ongoing business operations of the Partnership. Said need and actual
amounts required shall be determined by the Executive Committee in accordance
with this Article V.
ARTICLE VI.
CAPITAL ACCOUNTS
6.1 Capital Accounts. An individual capital account shall be
maintained for each Partner for purposes of this Agreement and in accordance
with generally accepted accounting principles.
6.2 Interest. No interest shall be paid to any Partner on its
original capital, its additional capital, or on a credit balance in its account.
ARTICLE VII.
ADMINISTRATIVE PROVISIONS
7.1 Management of Partnership. The overall management and control of
the business and affairs of the Partnership shall be vested in a two person
Executive Committee consisting of one representative from CEHI and one
representative from OWER, to be designated from time to time in writing by each
of the Partners (hereafter called "Representative"). Each Partner may have more
than one person present at the Executive Committee meeting as a non-voting
participant. Either Partner may replace its Representative, or designate an
alternate for any particular meeting, at any time upon written notice to the
other Partner. Each Representative shall have 50% of the voting power.
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(a) The Executive Committee shall designate one of its members
to be chairman of the Committee, with said chairmanship to be
alternated annually between Representatives of the Partners. The
business and affairs of the Partnership shall be managed by the
Executive Committee in accordance with the powers and limitations set
forth in this Agreement.
(b) Meetings of the Executive Committee may be called by
either Representative. Unless otherwise agreed upon by the
Representatives, all meetings shall be either held in Honolulu, Hawaii
at OWER's office located at 000 Xxxxxx Xxxxxx, or held via
teleconferencing calls between Representatives.
(c) Notice of time, date and place of meetings and business to
be transacted shall be given to the other Representative at least seven
(7) days prior thereto by written notice delivered personally or by
certified or registered mail, with return receipt requested, to the
Representative at his business address, or by telegram. If mailed as
provided herein, such notice shall be deemed to be delivered on the
date of delivery as indicated by the U.S. Postal Service on the return
receipt requested. If notice is to be given by telegram, such notice
shall be deemed to be delivered when confirmation of the telegram is
delivered to the sender thereof. Whenever any notice is required to be
given to a Representative, a waiver thereof in writing, signed at any
time (whether before or after the time of meeting) by the
Representative entitled to such notice, shall be deemed equivalent to
the giving of such notice. The attendance of a Representative at a
meeting shall constitute a waiver of notice of such meeting, except
where the Representative attends a meeting and objects to the
transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted nor the purpose of
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any meeting of the Executive Committee shall be limited to that
specified in the notice or waiver of notice of such meeting.
(d) Representation of a Representative from each Partner shall
constitute a quorum for the transaction of all business at any meeting
of the Executive Committee which has been duly noticed. The act of 100%
of the voting power present shall be the act of the Executive
Committee.
(e) Any action required or permitted by this Agreement to be
taken by the Executive Committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken,
shall be signed by both Representatives.
(f) The Chairman, or a person designated by him, shall keep
the minutes of all meetings of the Executive Committee in one or more
books provided for that purpose. The Chairman shall submit a written
copy of the minutes of each meeting to the other Representative within
fifteen (15) days from the date of each meeting. Said minutes shall
become final thirty (30) days following distribution thereof to the
Representatives, unless within said 30 day period a Representative
shall notify the other Representative in writing of any errors or
omissions in respect thereto.
(g) The Executive Committee shall from time to time adopt all
reasonable and necessary rules and regulations for the operation of the
Partnership, providing such are not in conflict with this Agreement.
7.2 Accounting Method and Decisions. The Partnership shall keep
its accounting records and shall report its income for income tax purposes on
the accrual method of accounting. As to all matters of accounting not provided
for in this Agreement, generally accepted accounting principles shall govern.
The books shall be kept on a calendar year basis and shall be
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closed and balanced at the end of each year. The Partners agree to treat income
and expenses for federal and state income tax reporting purposes in the manner
most beneficial to the Partnership under applicable law.
7.3 Maintenance of Books and Records. The Executive Committee shall
maintain, or cause to be maintained, the books and records of the Partnership
and may employ or retain, on behalf and at the expense of the Partnership, such
employees and accountants as in its reasonable discretion it deems necessary or
proper in connection therewith. In addition, the Executive Committee shall
maintain all other records necessary, convenient or incidental to recording the
Partnership's business and affairs and sufficient to record the allocation of
profits or losses as provided for herein, and shall prepare and file all tax
returns and payroll reports that are required to be filed by the Partnership,
and shall furnish, execute and permanently maintain all other data, forms and
records as required by any governmental unit or agency. Such books and records
shall at all times be open to the reasonable inspection, duplication and
examination by the Partners or their duly authorized agents or Representatives.
7.4 Reports. Promptly after the end of each accounting period (which
period shall be a calendar month unless otherwise designated by the Executive
Committee), the Executive Committee shall direct that statements showing the
results of operation during such accounting period and the financial position of
the Partnership as of the end of such accounting period be prepared and
delivered to each Partner. Similar statements shall be prepared and delivered to
each Partner within forty-five (45) days after the end of each calendar year,
showing the results of operations for the year and the financial position of the
Partnership as of the end of such year. The Partnership shall have an audit of
its books made after the close of each year by a certified public accountant
mutually agreed to by the Partners, unless the Executive Committee agrees
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unanimously to forego or otherwise delay said audit. Said audit shall be made as
soon as reasonably practicable after the close of each year, but in no event
later than the end of the first calendar quarter. Each Partner shall be
furnished with copies of the Partnership's financial statements and audit report
covering the results of such audit.
7.5 Budget Estimates, Review and Approval.
(a) Annual Meeting: Review and Approval of Proposed Program
and Budget. The Representatives shall hold an annual Meeting in Honolulu each
calendar year on the first Thursday of November. The Executive Committee shall
meet in accordance with this subparagraph (a) to consider and, if appropriate,
approve, with or without amendment, a proposed annual budget for partnership
operations and a capital program, if any, and as appropriate, an annual budget
for operation and maintenance of the Facility under the Disposal Services
Contract for the immediately following calendar year. Each such proposed program
and budget shall be prepared by the appropriate Partner and furnished to each
Representative by the Chairman at least 30 days prior to each such meeting. Each
such proposed budget shall include separate budgets for capital expenditures and
for non-capital expenditures and shall contain an estimate of working capital
requirements during the applicable calendar year.
Any program and budget may from time to time be revised and
amended by the Executive Committee at a meeting held in accordance with this
Article VII. The Executive Committee shall limit expenditures to those specified
in the programs and budgets as approved and revised in accordance with this
Section 7.5.
(b) Approved Budget. The Chairman shall, as soon as
practicable, but no later than thirty (30) days following the annual meeting,
prepare and furnish to each Representative a copy of the budget as shall have
been approved by the Representatives at the
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annual meeting showing for the coming year and each calendar month thereof (a)
budgeted expenditures for items to be capitalized or deferred and for items of
expense, (b) projected receipts, (c) amounts needed for additions to working
capital and for capital assets, (d) items for operation and maintenance of the
Facility, if applicable, and (e) amounts expected to be available for
distribution pursuant to Article VIII. The budget approved at the initial
meeting of the Executive Committee for the first calendar year or other
designated accounting period following execution of this Agreement shall be
furnished to the Representatives within thirty (30) days after such initial
meeting, unless otherwise agreed to by the Representatives.
(c) Monthly Estimates and Borrowing. Based on the approved
budget (which may be amended and/or revised by the Representatives from time to
time as the circumstances may require) the Chairman, on or before the fifth day
of each month, will submit to each Representative a current cash estimate
showing (i) the estimated cash disbursement which the Partnership will be
required to make during such calendar month for items to be capitalized or
deferred or expensed (specifying separately the estimated disbursements for
partnership operations, applicable construction or operation/maintenance of
Facility activities, and other items to be capitalized or deferred) and all
other expense items; (ii) estimated receipts; (iii) amounts needed for additions
to working capital; and (iv) the amount, if any, by which estimated expenditures
and required additions to working capital exceed estimated receipts.
(d) Construction Phase Budget. The final Construction Phase
budget shall be the budget used by the Partners in preparation of the Proposal
and shall not be altered or amended except by prior approval of the Executive
Committee.
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7.6 Bank Accounts. All receipts of the Partnership shall be deposited
in such bank(s) as selected by the Executive Committee. Withdrawals from said
accounts shall be made by signatures only of such person or persons as shall be
authorized by the Executive Committee.
7.7 Restrictions on Partners. Except as provided herein for the powers
and authority of each Partner, no Partner shall, without the written consent of
the Executive Committee:
(a) Borrow or lend money on behalf of the Partnership;
(b) Execute any mortgage, bond, lease or contract on behalf of the
Partnership;
(c) Encumber any Partnership assets;
(d) Assign, transfer or pledge any debts due the Partnership or
release any debts due except on payment in full; and/or
(e) Compromise any claim due to the Partnership or submit to
arbitration any dispute or controversy wherein the Partnership
is principal in or to the dispute or controversy.
7.8 Compensation for Partner Services. Except as otherwise expressly
provided herein or in the approved project budgets, neither Partner shall be
entitled to be reimbursed by the other or the Partnership for its own cost
related to its separate activities under this Agreement, including, but not
limited to, costs incurred by it in preparing its portion of the Proposal and
salaries and expenses of its officers and employees. Further, it is the
intention of the Partners that their interests in the net profits of the
Partnership shall adequately compensate them for any services rendered to the
Partnership in connection with the day to day management and conduct of the
Partnership business and, accordingly, except as otherwise expressly provided
herein, neither Partner shall be entitled to receive any compensation for said
services. In performing services (other than those specifically provided for in
this Section 7.8) required by
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the Partnership, either Partner, with the consent of the other, may engage
outside professional services as may be reasonably necessary, and the fees for
such services shall be deemed expenses of the Partnership.
7.9 Disbursements for Goods and Services.
7.9.1 Disbursements for goods and services shall be shared
by the Partners as follows:
(a) disbursements incurred for the joint and mutual
benefit of the Partnership in performing this Agreement, to
the extent those goods or services are not related to and
properly a part of performance of the applicable Construction
and/or Disposal Services Contracts with the City shall be
shared equally by the Partners; and
(b) disbursements incurred that are attributable to
either the Construction Contract and/or the Disposal Services
Contract shall be determined as follows:
(i) disbursements incurred during the
Construction Phase and/or attributable to the
Construction Contract shall be borne 100% by CEHI,
but only after any and all Construction Phase related
revenues (which includes profit margins but excludes
reimbursements for goods and services provided to the
Partnership by either Partner or their Affiliates)
have been expended for such disbursements;
(ii) disbursements incurred that are
attributable to the make-up of any shortfalls of
Energy Product and Recovered Material Revenues to the
City, as a result of the Facility being accepted by
the City at a level
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less than that necessary for the Facility to meet
100% of the guarantees set forth in the Construction
Guaranty Agreement, shall be borne 100% by CEHI, but
only after any and all Construction Phase related
revenues (which includes profit margins but excludes
reimbursements for goods and services provided to the
Partnership by either Partner or their Affiliates)
have been expended for such disbursements; and
(iii) disbursements incurred during the
Operating Phase that are attributable to the Disposal
Services Contract shall be paid from amounts received
pursuant to the Disposal Service Contract to
reimburse these expenses under said Contract.
Differences between disbursements incurred and
amounts received pursuant to the Disposal Services
Contract as reimbursements shall be shared in
accordance with subsections 8.3.2 and 8.3.3 below.
(c) disbursements required for facility improvement
projects not provided for in the Construction Contract and/or
the Disposal Services Contract shall be determined by good
faith negotiation between the Partners based upon the expected
or anticipated benefit of said disbursement.
7.9.2 In the event either Partner, with the prior approval of
the Executive Committee, procures goods or services on behalf of the Partnership
and pays to the supplier the entire cost thereof, the Partner shall be
reimbursed by the Partnership in accordance with subsection 7.9.1 from funds
available for such purposes in Partnership Accounts.
7.9.3 The Partners shall, in the performance of their duties
under the Construction and Disposal Services Contracts, exercise sound business
judgment. In the event of
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Facility maintenance, repair and procurement of parts, the Partners shall
endeavor to procure same from either CEHI or OWER, or their Affiliates, provided
such procurement is commercially reasonable and in the best interests of the
Partnership. In the event the Partnership procures a repair service or parts
from a Partner (or its Affiliate) for an unscheduled and unexpected event with
the Facility, the providing Partner (or its Affiliate) shall be reimbursed only
its costs and no profit on said repair service or procurement of parts.
7.10 Employment of Affiliates. The Partnership shall not enter
into any agreement or arrangement for the furnishing to or the procurement by
the Partnership of a material amount of goods or services of any kind or
description from any Partner or any of its Affiliates, unless any such agreement
or arrangement has been approved by the Executive Committee after the full
disclosure of the relationship and other relevant facts relating to such
agreement or arrangement.
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ARTICLE VIII.
ALLOCATION OF PROFITS AND LOSSES AND DISTRIBUTIONS TO PARTNERS
8.1 Allocation to Profits During Construction Phase. During the period
in which the Construction Contract is in effect and prior to successful
completion of the testing and acceptance of the Facility (the "Construction
Phase"), and subject to Section 8.7 below, the profits ultimately to be
allocated at completion of construction shall be net of any costs not included
on a line item basis in the final Construction Phase budget (as defined in
Section 7.5(d) above) but required under the Construction Contract, and shall be
allocated to the Partners in the following manner and order:
(a) The first $2 million of profit from any source shall be
shared equally;
(b) Of the next $15.154 million increment of profit from any
source, OWER shall be entitled to receive 10% and CEHI 90%;
(c) Of the next $3.549 million increment of profit from any
source, OWER shall be entitled to receive 20% and CEHI 80%;
(d) Of the next $3.390 million increment of profit from any
source, OWER shall be entitled to receive 50% and CEHI 50%;
(e) Of the next $3.783 million increment of profit from any
source, OWER shall be entitled to receive 70% and CEHI 30%; and
(f) Any amount of profit that is greater than $27.876 million
shall be shared as follows:
(i) if the source of profit is from construction
(including interest), then OWER shall receive 10% and CEHI
90%;
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(ii) if the source of profit is from testing and
startup processing, then
OWER shall receive 50% and CEHI 50%.
For the purpose of determining the source of profit under subparagraph
(f) hereinabove, the final construction phase budget referred to in Section
7.5(d) above will be used as a basis of comparison to the actual results in
order to determine any variances and the source(s) of the profits in excess of
$27.876 million, if any. For illustration purposes, the following two examples
shall apply:
($ millions)
(i) BUDGET ACTUAL VARIANCE
------ ------ --------
Construction 20.703 21.703 1.000
Testing 7.173 9.173 2.000
-----
Excess 3.000
Conclusion: CEHI would receive 90% of the $1.0 million excess from construction
and 50% of the $2.0 million excess from testing. OWER would receive
10% of the $1.0 million excess and 50% of the $2.0 million excess.
(ii) BUDGET ACTUAL VARIANCE
------ ------ --------
Construction 20.703 18.703 <2.000>
Testing 7.173 10.173 3.000
-----
Excess $1.000
Conclusion: CEHI and OWER would each receive 50% of the $1.0 million excess.
8.2 Allocation of Liability during Construction Phase.
8.2.1 During the Construction Phase only, CEHI shall assume
and be responsible for 100% of all liability of the Partnership to the City and
the adverse economic
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consequences, if any, to the Partnership caused by and to the extent of CEHI's
failure to satisfy the Partnership's obligations to the City under the
Construction Contract and/or the Construction Guaranty Agreement. However, to
cover the costs and expenses incurred with meeting these responsibilities, CEHI
shall have available to it any and all funds received by the Partnership at any
time pursuant to the Construction Contract including, but not limited to, funds
from the City, insurance proceeds (remaining after payments are made to anyone
for costs legitimately incurred as a direct result of the event or events or
circumstances giving rise to the insurance proceeds), interest income,
subcontractor penalties and start-up operational revenues. Said assumption of
risk of adverse economic consequences to the Partnership by CEHI shall not be
construed as a guarantee of any profit or level of profit and/or any revenue or
level of revenue of any kind at any time during the Construction and/or the
Operating Phase to the Partnership or to any Partner. Liability and adverse
economic consequences include, but are not limited to, events arising from or in
connection with Project costs and expenses guaranteed by the Partnership, timely
completion of construction of the Facility, and the ability or inability of the
Facility to meet 100% of the guarantees set forth in the Construction Guaranty
Agreement to the City.
8.2.2 For purposes of this Agreement, CEHI shall provide the
warranty set forth in Exhibit A, attached hereto and made a part hereof. It is
agreed and acknowledged by the Partners that, as between them for the purpose of
allocation of losses as set forth herein, the warranty set forth in Exhibit A
shall be deemed to be the sole and exclusive warranty by CEHI with respect to
the Facility equipment and shall be no more than the warranty given by the
Partnership to the City.
8.3 Allocation of Profits and Losses During Operating Phase. To
determine each Partner's share of profits or losses during the period in which
the Disposal Services Contract is in
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effect (the "Operating Phase"), and subject to the obligations assumed by CEHI
under Section 8.2.1 above, all revenues, reimbursable expenses, guaranteed
expenses and cost of operations shall be allocated to the Partners in the
following order and manner:
8.3.1 General Revenues Allocation. That portion of Energy
Product Revenues and Recovered Materials Revenues credited to the Partnership,
plus income from interest and other undefined sources, (hereinafter collectively
referred to as "General Revenues") shall be allocated as follows:
(a) Thirty percent (30%) to CEHI, and
(b) Seventy percent (70%) to OWER.
Forty percent (40%) of the General Revenues allocation for each year shall be
deemed the "Buffer" for that year and shall be chargeable to OWER's seventy
percent (70%) allocation aforementioned.
8.3.2 Allocation of Shortfall in the City's Guaranteed
Revenues. If in the event the actual Energy Product Revenues and Recovered
Material Revenues to the City are less than the revenues to the City that would
have resulted from the guaranteed performance under the Operating Guaranty
Agreement (hereinafter referred to as "Guaranteed Revenues"), for any reason or
cause, thereby resulting in a shortfall to be paid by the Partnership to the
City, the shortfall shall be settled in accordance with the Disposal Services
Contract, and offset in the following priority until fully recovered:
(a) First, against the Buffer for the current year;
(b) Second, equally against the Partners' 30% allocations of
the current year's General Revenues;
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(c) Third, against the Buffer for the third year preceding the
current year in which the shortfall was incurred, to the extent the Buffer for
that year has not already been used to reduce any prior shortfalls;
(d) Fourth, against the Buffer for the second year preceding
the current year in which the shortfall was incurred, to the extent the Buffer
for that year has not already been used to reduce any prior shortfalls;
(e) Fifth, against the Buffer for the year preceding the
current year in which the shortfall was incurred, to the extent the Buffer for
that year has not already been used to reduce any prior shortfalls; and
(f) Finally, any remaining shortfall shall be borne equally by
the Partners.
8.3.3 Allocation of Operating Phase Expenses.
(a) When the sum of the cash receipts to the Partnership to
pay for the Guaranteed Expenses and Reimbursable Expenses, plus any other
expense recoveries (e.g., insurance proceeds, recoveries from third parties,
etc.), exceeds the total expenses and costs incurred or expended by the
Partnership in discharging its obligations pursuant to the Disposal Services
Contract, then such excess amount shall be allocated to the Partners in
accordance with Section 8.3.1 above (but shall not be deemed a part of General
Revenues).
(b) When the total expenses and costs incurred or expended by
the Partnership in discharging its obligations pursuant to the Disposal Services
Contract are not fully recovered from payments to the Partnership to cover the
sum of the Guaranteed Expenses and Reimbursable Expenses, or from any other
expense recoveries, then such shortfall shall be allocated to the Partners in
accordance with Section 8.3.2 above.
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8.4 Priority for Distribution of Cash Receipts. All cash receipts
to the Partnership shall be used by the Partnership only for the following
purposes and in the following order of priority:
(a) To pay costs and expenses reasonably incurred in
connection with maintaining and operating the Partnership, including
the servicing of any loan made to or other debt incurred by the
Partnership;
(b) To maintain an adequate level of working capital for
ongoing partnership operations; and
(c) To create and retain reserves for future expenditures
determined by the Executive Committee to be needed by the Partnership;
(d) To distribute the allocation of profits to the Partners as
set forth in Sections 8.1 and 8.3 hereinabove.
8.5 Determination of Distributions. The Partners may make distributions
of cash and other Partnership assets from time to time as the Executive
Committee shall determine after making such provisions for the payment of
expenses and other obligations of the Partnership and establishing such reserves
for the future operation of the Partnership business, all as set forth in
Paragraph 8.4 above. If, at the time of distribution, the capital account of any
Partner reflects a debit balance, said Partner's share of the distribution shall
first be applied to satisfy said deficit. All cash distributions shall be made
to the Partners in the same manner as the allocation of profits set forth in
Sections 8.1 and 8.3 above.
8.6 Time of Distributions. Distributions, if any, to the Partners shall
be authorized and approved by the Executive Committee and made at the following
times:
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(a) During the Construction Phase, as soon as practicable;
however, any distributions, and recaptures of same, made during the
Construction Phase shall be finally settled within thirty (30) days
after the end of the applicable construction warranty period relating
to the Facility.
(b) During the Operating Phase, within thirty (30) days after
each calendar month closing of the Partnership's books.
8.7 Recapture of Construction Distributions. Distributions, if any,
made to the Partners as a result of the Construction Phase shall be subject to
recapture by the Partnership to the extent said distributions are greater than
the amounts actually due the Partners. At an appropriate time selected by the
Executive Committee, the Construction Phase distributions actually due each
Partner shall be recalculated in accordance with Sections 8.1 and 8.2 above to
reflect the appropriate Partner distributions. In addition, if the Purchase
Option set forth in Section 10.2(a) is exercised by an Option Partner, the
distributions previously made to the Selling Partner shall be refunded to the
Partnership at the time of closing of said sale of the Selling Partner's
interest.
ARTICLE IX.
TERMINATION
9.1 Termination. This Agreement shall terminate and the Partners
shall have no further obligations hereunder on the earlier of the date on which:
(a) the Construction Contract is terminated prior to
completion, and all rights and liabilities with respect to the City,
the Partnership, the Partners and third parties xxxx been finally
settled, adjusted, adjudicated or otherwise discharged;
-22-
(b) the Disposal Services Contract has been fully performed or
terminated in accordance with its terms and conditions, full and
complete payment has been made thereon and all rights and liabilities
with respect to the City, the Partnership, the Partners and third
parties have been finally settled, adjusted, adjudicated or otherwise
discharged;
(c) either Partner becomes the subject of dissolution,
bankruptcy or insolvency proceedings, and said proceedings are not
discharged within ninety (90) days; or
(d) the Partners mutually agree to terminate.
9.2 Sale of Assets Upon Termination. All of the assets of the
Partnership (other than cash) shall be sold or collected and turned into cash
and deposited into an appropriate bank account of the Partnership within a
period of one year from the date of any termination. Each Partner shall have the
right to bid on and purchase any or all of the assets being sold.
9.3 Distribution on Termination. Upon sale or conversion into cash of
the assets as hereinabove provided, a final audit shall be made and thereafter
all cash and remaining assets of the Partnership shall be distributed in
accordance with Section 11.1 below.
ARTICLE X.
TRANSFER OF INTEREST
10.1 Transfer of Interest in Partnership. Each Partner has the right to
transfer or sell its interest in the Partnership without the prior consent of
the other Partner. The right of transfer of interest herein shall not be
exercised in such a manner which will materially jeopardize the Partners'
interests under the Construction and Disposal Service Contracts with the City.
Each Partner shall have the right of first refusal with respect to any proposed
transfer or sale of the other Partner's interest to any person or entity, except
that this right of first refusal shall not
-23-
apply with respect to a transfer or sale of a Partner's interest to an Affiliate
of the Partner making such transfer or sale.
10.2 Purchase Option. In the event a Partner ("Selling Partner")
desires to transfer or sell its Partnership interest, it shall give written
notice and full financial and informational disclosure to the other Partner
("Option Partner") of the proposed transfer or sale. The Option Partner shall
have the right, to be exercised within thirty (30) days of said written notice,
to purchase the Selling Partner's interest at a purchase price established as
follows:
(a) If during the Construction Phase, at a fixed,
nonrefundable purchase price of $1.5 million;
(b) If during the Operating Phase:
(1) within the first five years of operations, at a
purchase price equal to $1.5 million or the total construction
phase net distributions received by the Selling Partner
pursuant to Article VIII, whichever is greater;
(2) after the first five years of operations, at a
purchase price equal to 20% of the net present value of the
normalized annual revenue (hereinafter "NAR") for a period of
years equal to the remaining term of the Disposal Services
Contract, discounted at the Treasury note rate relating to
said remaining term.
The NAR shall be determined as follows:
(i) Take the five years (60 months) preceding the
date of the purchase and determine for the total Facility the
annual, actual gross Energy Products Revenues and Recovered
Materials Revenues, for purposes of this Section 10.2
hereinafter referred to as Combined Revenues ("CR"), for each
of the five preceding years.
-24-
(ii) Eliminate the highest and lowest annual CR so
determined, and calculate the average annual CR using the
three remaining annual CR's.
(iii) Determine the Partnership's share ("PS") of the
average annual CR by multiplying the average annual CR by the
percentage allocated to the Partnership under the Disposal
Services Contract for each of the remaining years in the term
of the Disposal Services Contract.
(iv) The NAR shall be equal to the percentage of the
PS allocated to the Selling Partner for each of the remaining
years in the term of the Disposal Services Contract (i.e., 70%
if Ower, 30% if CEHI).
Whenever the average annual CR is to be established, the Partnership
shall, at the direction of the Executive Committee, make whatever adjustments
are equitable for the balance of the Disposal Services Contract's term to
account for unusual events of a material significance. An event is unusual if it
was not reasonably foreseeable, and is material if it will cause a variance in
the Facility's annual revenues by +/-5% or more of the projected annual
revenues.
10.3 Restriction on Option Party. For a period of three (3) years from
the date of exercise of the Purchase Option, the Option Party shall be
restricted from selling any portion of its Partnership interest to any potential
purchaser disclosed by the Selling Partner pursuant to Section 10.2 above.
10.4 Assumption of Transferee. Any transferee or other person to whom
an interest in the Partnership may be transferred shall automatically take such
interest subject to all the terms and conditions of this Agreement, the
Construction Contract, the Disposal Services Contract, the Construction Guaranty
Agreement, the Operating Guaranty Agreement, the Power Purchase Contract, and
any and all Related Documents. Specifically, the transferee or other person
-25-
acquiring an interest in the Partnership shall assume all guarantees made by the
Selling Partner; provided, however, the obligations of the Selling Partner
and/or its Affiliates under such guarantees shall not thereupon be released,
except as to the Option Party if it exercises the Purchase Option.
ARTICLE XI.
DISSOLUTION
11.1 Winding Up the Partnership. Upon any voluntary dissolution, the
Partnership shall immediately commence winding up its affairs. The Partners
shall continue to share profits and losses during liquidation in the same
proportions as before dissolution. The proceeds from liquidation of Partnership
assets shall be applied in the following order:
(a) Debts of the Partnership, other than to Partners;
(b) Amounts owed to Partners for unpaid compensation and for
contributions and interest on contributions made to the other Partner's
capital account;
(c) Amounts owed to Partners for the credit balances in their
respective capital accounts;
(d) The capital contributions of the Partners as reflected in
their respective capital accounts; and
(e) Any residual proceeds shall be shared equally by the
Partners.
11.2 Balance Owed by a Partner. Should either Partner have a debit
balance in its capital account, whether by reason of losses resulting from the
liquidation of Partnership assets or otherwise, the debit balance shall
represent an obligation from it to the Partnership and shall be paid in cash
within 30 days after written demand by the Partnership.
-26-
ARTICLE XII.
ARBITRATION
12.1 Arbitration. In the event of any disagreement between the Partners
with respect to the provisions of this Agreement, or the rights or obligations
of the Partners hereunder, which is not resolved between the Partners within 45
days after one Partner gives written notice of such dispute to the other, such
disagreement shall be submitted to arbitration under Hawaii law. Any such
arbitration shall be held in Honolulu, Hawaii and shall be determined by a
single arbitrator, if the Partners are able to agree upon such an arbitrator, or
by three impartial arbitrators, pursuant to Chapter 658, Hawaii Revised Statutes
("HRS"), as the same is in effect at the date hereof. One Partner to the
disagreement may give to the other Partner written notice of a desire to have
arbitration of the matter in disagreement and (unless the Partners have agreed
upon a single arbitrator) name one of the arbitrators. Thereupon the other
shall, within ten (10) days after receipt of such notice, name a second
arbitrator and give notice of its selection to the Partner seeking arbitration
and, in case of failure to do so, the Partner who has named an arbitrator shall
have the right to apply to any judge of the Circuit Court of the First Circuit
of the State of Hawaii (hereinafter, "the Judge") to appoint an arbitrator. The
two arbitrators thus appointed (in either manner) shall within ten (10) days
after the appointment of the second arbitrator select and appoint a third
arbitrator and give notice thereof to the Partners. In the event that the two
arbitrators so appointed fail, within the said ten (10) days fail to appoint the
third arbitrator, either Partner may procure the appointment of a third
arbitrator by the Judge. The three arbitrators so appointed shall thereupon
proceed to determine the matter in dispute. The award of any two of them
(including the disposition of the costs of arbitration as hereinafter provided)
shall be final, conclusive and binding upon both Partners unless vacated,
modified or corrected
-27-
as provided in HRS Chapter 658. In the event a written award is not delivered by
the arbitrator(s) to either Partner, or their respective attorneys, as provided
in HRS Chapter 658, within one hundred twenty (120) days of the appointment of
the panel of arbitrators, either Partner may proceed to have the matter
determined by the courts in an action for accounting or declaratory judgment, or
other appropriate legal and equitable relief. Either Partner to the dispute may
apply to the Circuit Court of the First Circuit of the State of Hawaii for an
order confirming the award as provided in HRS Chapter 658. Upon the granting of
an order confirming, modifying or correcting an award, judgment may be entered
in conformity therewith by the said Court as provided in HRS Chapter 658. Unless
otherwise specified by the arbitrator(s), each Partner to the dispute shall pay
for the services of its own appointee or arbitrator otherwise appointed on its
behalf, its own arbitration expenses, witness fees and attorneys' fees, and
one-half of all other reasonable and necessary costs of such arbitration.
12.2 Notwithstanding anything to the contrary, in the event of a
dispute the Partners shall carry on and proceed with their work and/or
obligations of the Partnership pending resolution of the dispute, unless
otherwise agreed to in writing by the Partners.
ARTICLE XIII.
INDEMNIFICATION
13.1 General Indemnity. Each Partner shall indemnify, defend and hold
harmless the Partnership and the other Partner from and against any and all
charges, expenses, claims and liabilities resulting from or arising out of any
gross negligence or willful misconduct on the part of the indemnifying Partner,
to the extent that the amount of any such charge, expense or liability exceeds
or is not covered by the applicable insurance coverage required to be maintained
by the Partnership; provided, however, that if the negligence or misconduct of
the indemnifying Partner
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is covered by applicable insurance coverage of the Partnership, the Partnership
shall pay any charges, expenses or liabilities not paid by the insurance carrier
solely as a result of such insurance carrier's deductible clause or provision
contained in the applicable insurance policy (if the Partnership itself has
sufficient funds to pay same). If the Partnership does not have sufficient funds
to do so, then the indemnifying Partner shall be fully responsible therefor.
ARTICLE XIV.
WAIVER OF CONSEQUENTIAL AND OTHER DAMAGES
In no event, whether as a result of or in connection with a breach of
this Agreement, the Construction Contract, Disposal Services Contract, the
Construction Guaranty Agreement, the Operating Guaranty Agreement, or the Power
Purchase Contract, or tort (including but not limited to negligence), or any
warranty, or liability without fault, or otherwise, shall either Partner or its
Affiliates be liable to the other or its Affiliates for special, incidental,
punitive or consequential damages, including without limitation, loss of profits
or revenue, loss of use, losses by reason of Facility shutdown or service
interruption. The foregoing notwithstanding, the waiver contained herein shall
not apply to third party claims of whatever nature or kind, or to claims by a
Partner (or its Affiliates) arising from or as a result of fraud or willful
misconduct by the other Partner (or its Affiliates).
ARTICLE XV.
CONFIDENTIALITY
15.1 Confidence. The design, construction, shakedown, testing,
operation and maintenance of the Facility shall be carried out in a spirit of
mutual trust between the Partners. Any reasonable request made by one Partner to
have a part of its work, services or documents
-29-
treated in a confidential manner with respect to third parties (other than
Partners' Affiliates) shall be honored by the other Partner.
15.2 CEHI's Confidential Information. OWER acknowledges that CEHI has
and will have valuable and confidential proprietary data and information with
respect to the design and construction of a resource recovery facility, and that
disclosure of any such data and information to OWER or its representatives is
solely for the purpose of facilitating the transactions contemplated by this
Agreement and is made solely on the terms and conditions set forth below. As
used herein, the term "Confidential Information" means all data and information
now or hereafter disclosed directly, in writing, by or on behalf of CEHI to OWER
or to the Partnership and identified as Confidential Information by being
clearly labelled as such.
OWER shall:
(a) Treat in strict confidence all Confidential Information
and use such information only for the purposes contemplated by this
Agreement and shall not exploit said information in any way whatsoever;
(b) Limit access to Confidential Information to its employees,
trade contractors, vendors and related entities who require such access
for such purposes;
(c) Not disclose, and use best efforts to insure that its
employees, trade contractors, vendors and related entities not
disclose, any Confidential Information to any third party except as
hereinafter may be provided and, prior to any disclosure, require such
employees, trade contractors, vendors and related entities to execute
and deliver confidentiality agreements which shall be consistent with
provisions of this Article; and
(d) Not use Confidential Information except for performance of
its obligations under the Construction and Disposal Services Contracts.
-30-
The following shall not be deemed to be Confidential Information:
(a) Any part of the data or information which, prior to or at
the time to CEHI supplies the same to OWER, is within public domain;
(b) Any part of the data or information which may have been
published publicly subsequent to CEHI's supplying the same to OWER,
provided that any such publication was through no fault of OWER;
(c) Any part of the data or information which was known by or
in the possession of OWER or its employees prior to CEHI's supplying
the same to OWER;
(d) any part of the data or information that was contributed
to the Partnership by OWER or its Affiliates; or
(e) any part of the data or information that comprises a joint
work product of the Partners, to which OWER has made a significant and
material contribution of data or information.
15.3 Continuing Obligation. The obligations under this Article XV shall
be continuing obligations which shall be observed by each Partner hereto
notwithstanding that such Partner may have ceased to be a Partner.
ARTICLE XVI.
MISCELLANEOUS PROVISIONS
16.1 Entire Agreement. This Agreement contains the entire understanding
of the Partners and supersedes any prior understandings and agreements between
and among them respecting the within subject matter. There are no
representations, agreements or understandings, oral or written, between the
Partners hereto relating to the subject matter hereof which are not fully
expressed herein.
-31-
16.2 Condition Precedent. This Agreement shall not be effective
unless and until Amfac, Inc. and Combustion Engineering, Inc. execute an
Indemnity Agreement in substantially the form of the agreement attached hereto
as Exhibit C.
16.3 Conversion to Mass Burning Facility.
16.3.1 Conversion Responsibility. In the event the Partnership
is required, under either the Construction Contract or the Disposal
Services Contract, to convert the Facility to a mass burning facility,
CEHI shall be responsible for said conversion, including all
construction costs and expenses related thereto, and for the subsequent
operation of said mass burning Facility. OWER shall, in good faith,
cooperate with CEHI for an orderly transition of operations.
16.3.2 Transfer of Interest. At the time said conversion is
completed and operation begins as a mass burning facility accepted by
the City, OWER shall immediately transfer, free of charge, any and all
rights and interest in the Partnership and/or the Facility to CEHI,
whereupon CEHI shall assume all guarantees and obligations of the
Partnership to the City. Said assumption by CEHI of all guarantees and
obligations shall not be construed as a release of OWER by CEHI for any
indemnification or obligation or reimbursement due CEHI prior to the
time of said transfer for any third party liability or claim, or from
the applicable provisions of Articles VIII, XIII, XIV and XV
hereinabove. The foregoing notwithstanding, in no event shall OWER's
liability under this Section 16.3 and this Agreement exceed that
liability which OWER would have incurred under this Agreement if the
City did not have the right under Section 6.10 of the Disposal Services
Contract to require conversion to a mass burning facility.
-32-
16.3.3 Winding Up of Partnership. Upon said transfer of OWER's
rights and interests to CEHI, the Partnership's assets and liabilities
shall be accounted for in the same manner as contemplated in a
Partnership termination under Article IX, in order to determine what
obligations, if any, are due CEHI from OWER. After said transfer and
winding up of OWER's interests and obligations, OWER shall no longer
have any interest (except nominally as may be necessary to continue the
Partnership's existence) in the Partnership and all obligations and
liabilities of the Partnership thereafter shall be borne by CEHI. The
Partnership shall continue after said transfer only so long as
necessary to permit CEHI to satisfy or assume the Partnership's
obligations to the City under the Construction and Disposal Services
Contracts. Thereafter, the Partnership shall terminate.
16.3.4 OWER Option to Operate. In the event conversion to a
mass burning facility is required during the term of the Disposal
Services Contract, then OWER shall have the option to continue
operating the facility, provided OWER exercises said option within 72
hours after the converted facility is accepted by the City. If the
option is exercised, OWER shall operate the converted facility for the
term of the Disposal Services Contract and under the same terms and
conditions as set forth in this Agreement; except, however, Sections
7.9.1(b) (ii) and 8.3 of this Agreement shall not apply, and the
parties' respective allocations of profits and losses shall be directly
proportionate to the adverse economic consequences suffered by each
party as a result of conversion of the Facility to mass burning
pursuant to Section 16.3 herein and Section 6.10 of the Disposal
Services Contract.
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16.4 Amendment. This Agreement may be amended by the Partners only
pursuant to a written instrument duly executed by each Partner.
16.5 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to the persons or circumstances shall not be affected
thereby.
16.6 No Waiver. The failure of either Partner to seek redress for
violation of or to insist upon the strict performance of any covenant or
condition of this Agreement shall not constitute a waiver of its right to seek
redress or performance for a subsequent or other violation.
16.7 Documents.
16.7.1 Access to Documentation. Each Partner shall have access
to work carried out by the other Partner in connection with the design,
construction, shakedown, testing, operation and maintenance of the
Facility, as far as this is necessary for furtherance of the work and
this Agreement. Copies of all final documents submitted to the City and
HECO shall be made available to and approved by each Partner in
accordance with Exhibit B attached hereto. All documentation shall be
treated in a confidential manner and as provided in Article XV hereof,
and shall not be used for any application other than that covered by
this Agreement.
16.7.2 Ownership of Documents. The Partners agree that all
memoranda, notes, records, paper, reports, analyses or other documents
and all copies thereof relating to each other's operations or business,
some of which may be prepared by the other Partner, in any way obtained
by a Partner shall be the respective Partner's exclusive property. Each
Partner shall not, except for use by the Partnership in the rendering
of its respective
-34-
services for the Facility or with consent of the other Partner, copy or
duplicate any of the aforementioned documents nor use any information
concerning them except for the Partnership's benefit either during the
term of this Agreement or thereafter. In the event of any conflict or
inconsistency between this Section 16.7.2 and Article XV, Article XV
shall control.
16.8 Notices. Except as otherwise provided in Section 7.1 of this
Agreement, any notices, demands or other communications required or desired to
be given or made under the terms of this Agreement shall be in writing and
personally served or served by registered or certified mail, deposited in the
United States mail with postage thereon fully prepaid and addressed as follows:
If to CEHI:
Combustion Engineering Hawaii, Inc.
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Vice President & General Manager -
Resource Recovery System Division
If to OWER:
Oahu Waste Energy Recovery, Inc.
X.X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000
or to such other address as either Partner may designate by written notice to
the other. Any notice, demand or other communication shall be deemed given or
made on the day served, if personally served, or if mailed (in the manner set
forth in Section 7.1(c)), shall be deemed given
-35-
or made on the date of delivery as indicated by the U.S. Postal Service on the
Return Receipt Requested.
16.9 Captions; Pronouns.
(a) Any titles or captions of sections or paragraphs
contained in this Agreement are solely for
convenience and are not a part of and are not
intended to govern, limit or aid in the construction
of any term or provision of this Agreement.
(b) All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter,
singular or plural, as the context may require.
16.10 Governing Law. This Agreement and all the instruments executed
pursuant thereto shall be governed by and construed in accordance with the laws
of the State of Hawaii.
16.11 Binding Effect. The terms and conditions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
16.12 Counterparts. This Agreement may be executed in any number of
counterparts, which when so executed and delivered shall be deemed an original,
and such counterparts shall constitute one and the same Agreement.
16.13 Further Assurances. Each Partner agrees to execute such further
instruments as may be necessary or desirable to carry out this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed on the day and year written below.
COMBUSTION ENGINEERING HAWAII, INC.
Dated: 2-28-86
By /s/ Xxxx X. Xxxxxxxxxx
-----------------------------------------
Its President
By /s/
-----------------------------------------
Its Vice President
OAHU WASTE ENERGY RECOVERY, INC.
Dated: 2-28-86
By /s/ Xxxxxx X.X. Xxxx
-----------------------------------------
Its President
By /s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------------------
Its Secretary
-37-
EXHIBIT "A"
FACILITY WARRANTY
(to be furnished)
EXHIBIT "B"
PARTNERSHIP REVIEW PROCEDURE
(to be furnished)
EXHIBIT C
INDEMNITY AGREEMENT
THIS AGREEMENT, made and entered as of the 15th day of November 1983,
by and between COMBUSTION ENGINEERING, INC. (hereinafter "C-E"), a Delaware
corporation having its principal office in Stamford, Connecticut, and AMFAC,
INC. (hereinafter "Amfac"), a Hawaii corporation having its principal office in
San Francisco, California.
W I T N E S S E T H:
WHEREAS, affiliates of C-E and Amfac have entered into the Agreement of
Honolulu Resource Recovery Venture (hereinafter the "JV Agreement") for the
purpose of designing, constructing, operating and maintaining a solid waste
processing and resource recovery facility for the City and County of Honolulu
("City"), and in furtherance of that purpose have entered into a Construction
Contract and a Disposal Services Contract with the City;
WHEREAS, pursuant to said Construction Disposal Services Contracts with
the City, C-E and Amfac each, individually, executed a Construction Guaranty
Agreement and Operating Guaranty Agreement for the City;
WHEREAS, the willingness of C-E and Amfac to execute said Guaranty
Agreements was premised upon the execution of this Indemnity Agreement; and
WHEREAS, the willingness of C-E's and Amfac's affiliates to enter into
the 311 Agreement is premised upon the execution of this Indemnity Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto hereby agree as follows:
1
1. For purposes hereunder, the Construction Contract, the Construction
Guaranty Agreement, the Disposal Services Contract, and the Operating Guaranty
Agreement shall each be the respective contract or agreement as defined in the
JV Agreement.
2. C-E shall indemnify, defend and hold Amfac (and its affiliates)
harmless from and against any and all claims, liabilities, losses, charges and
expenses resulting from or arising out of:
(i) C-E's failure or refusal to perform any obligations assumed by it
under the Construction Guaranty Agreement; and
(ii) the failure or refusal of CEHI to perform any obligations assumed
by it under or in connection with the Construction Contract and/or Sections 8.2
and 16.3 of the JV Agreement; provided, however, that nothing in this
subparagraph 2 (ii) shall impose upon C-E, or be construed as an acceptance by
C-E, of any liability or responsibility not assumed by CEHI under the JV
Agreement.
3. C-E and Amfac shall each indemnify, defend and hold the other (and
its respective affiliates) harmless, from and against any and all claims,
liabilities, losses, charges and expenses resulting from or arising out of:
(i) the failure or refusal to perform their respective obligations
under the Operating Guaranty Agreement; and
(ii) the failure or refusal of CEHI (in the case of C-E) or of OWER (in
the case of Amfac) to perform any obligations assumed thereby under or in
connection with the Disposal Services Contract, and/or Section 8.3 of the JV
Agreement; provided, however, that nothing in this Paragraph 3 shall impose upon
either C-E or Amfac, or be construed as an acceptance by either C-E or Amfac, of
any liability or responsibility not
2
assumed by or imposed upon CEHI (in the case of C-E) or OWER (in the case of
Amfac) under the JV Agreement.
4. In no event, whether as a result of breach of the 311 Agreement, the
Construction Contract, Disposal Services Contract, the Construction Guaranty
Agreement, the Operating Guaranty Agreement, or the Power Purchase Contract, or
tort (including but not limited to negligence), or any warranty, or liability
without fault, or otherwise, shall either C-E or Amfac, or their respective
Affiliates, be liable to the other, or their respective Affiliates, for special,
incidental, punitive or consequential damages, including without limitation,
loss of profits or revenue, loss of use, losses by reason of Facility shutdown
or service interruption. The foregoing notwithstanding, the waiver contained
herein shall not apply to third party claims of whatever nature or kind, or to
claims by C-E or Amfac, or their respective Affiliates, arising from or as a
result of fraud or willful misconduct by the other party (or its Affiliates).
5. This Indemnity Agreement may be signed in counterparts, which when
so executed and delivered shall be deemed an original, and such counterparts
shall constitute one and the same Indemnity Agreement.
3
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed the day and year written below.
COMBUSTION ENGINEERING, INC.
Dated: _________________________ By ___________________________________________
Its
By ___________________________________________
Its
AMFAC, INC.
Dated: _________________________ By ___________________________________________
Its
By ___________________________________________
Its
4
