Exhibit T3A-69.
HEBER LOAN PARTNERS
PARTNERSHIP AGREEMENT
THIS AGREEMENT is made and entered into this _27_th day of March 1989,
by and between ERC ENERGY, INC., a Delaware corporation ("ERC ENERGY"), a wholly
owned subsidiary of ERC INTERNATIONAL, INC., a Delaware corporation ("ERC
INTERNATIONAL"), and CENTENNIAL GEOTHERMAL CO., a Delaware corporation
("CENTENNIAL GEOTHERMAL"), a wholly owned subsidiary of CENTENNIAL ENERGY, INC.,
a Delaware Corporation ("CENTENNIAL"). ERC ENERGY and CENTENNIAL GEOTHERMAL are
each hereinafter sometimes referred to individually as "Partner" and
collectively as the "Partners." ERC INTERNATIONAL and CENTENNIAL are each
hereinafter sometimes referred to individually as "Parent" and collectively as
"Parents."
WITNESSETH:
WHEREAS, CENTENNIAL GEOTHERMAL and DRAVO ENERGY, INC. ("DRAVO ENERGY")
formed Heber Geothermal Company, a California general partnership, for the
purpose of designing, constructing and operating a certain electrical generating
station located in Heber, California; and
WHEREAS, ERC ENERGY will purchase and acquire all of the issued and
outstanding shares of DRAVO ENERGY and then merge into DRAVO ENERGY with DRAVO
ENERGY as the surviving corporation, and through such merger DRAVO ENERGY (which
simultaneously with the merger will change its name to ERC ENERGY) will succeed,
by operation of law, to all of the assets and liabilities of ERC ENERGY and will
continue to be a partner in Heber Geothermal Company; and
WHEREAS, ERC ENERGY desires to borrow $4.2 million in order to, inter
alia, purchase the shares of DRAVO ENERGY and effect the aforementioned merger
and CENTENNIAL GEOTHERMAL desires to borrow $4.2 million in order to, inter
alia, repay certain indebtedness owed to DRAVO ENERGY; and
WHEREAS, ERC ENERGY and CENTENNIAL GEOTHERMAL desire to form a general
partnership under the laws of the State of California to facilitate the above
described borrowings as well as for the other purposes and on the terms and
conditions stated in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties herein contained, ERC ENERGY and
CENTENNIAL GEOTHERMAL hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For purposes of this Agreement certain terms
and provisions used herein are defined as follows:
Capital Account. "Capital Account" shall mean the account established
pursuant to Section 3.03 hereof.
Facility. "Facility" means that certain electrical power generating
station constructed by the Operating Partnership in Heber, California together
with all related properties and equipment owned, leased, or otherwise controlled
by-the Operating partnership from time to time and used in connection with the
Operating Partnership's business.
Management Committee. "Management Committee" shall mean the committee
established in accordance with Article IV.
Open Account. "Open Account" shall mean the account established
pursuant to Section 3.04 hereof.
Operating Partnership. "Operating Partnership" means Heber Geothermal
Company, a California Partnership formed under and pursuant to the Operating
Partnership Agreement for the purpose of constructing, developing, and operating
the Facility.
Operating Partnership Agreement. The term "Operating Partnership
Agreement" means the amended partnership agreement entered into by and between
DRAVO ENERGY and CENTENNIAL GEOTHERMAL, including all amendments thereto.
Ownership Interests. The term "Ownership Interests" means all of the
Partners' rights and interest in the Partnership.
Partnership. The "Partnership" shall mean the partnership created by
this Partnership Agreement.
Partnership Agreement. The term "Partnership Agreement" or "Agreement"
shall mean this agreement, as it may be amended from time to time, in writing by
the Partners, together with all Exhibits hereto.
ARTICLE II
FORMATION OF A PARTNERSHIP
Section 2.01. Formation of Partnership. ERC ENERGY and CENTENNIAL
GEOTHERMAL hereby enter into and form a general partnership (the "Partnership")
under the California Uniform Partnership Act (the "Act") for the purposes set
forth herein. Except as expressly provided herein to the contrary, the rights
and obligations of the Partners shall be governed by the Act. All real and
personal property owned by the Partnership shall be held in the Partnership name
and not in the names of the individual Partners, and no Partner shall have any
individual ownership in such property except for its property rights as a
Partner.
Section 2.02. Purposes. The Partnership is intended to be a
profit-making enterprise and is formed for the following limited purposes:
(1) To serve as the nominal borrower of the proceeds of one or more
loans for the benefit of the Partners and to lend the proceeds of such
borrowings to the Partners for any purpose related to the Facility;
(2) To acquire by purchase or in satisfaction of indebtedness owed to
the Partnership by a Partner, or otherwise, all or a portion of a Partner's
partnership interest in, and to become a partner in, the Operating Partnership;
(3) To obtain all financing necessary to carry out the business of the
Partnership including the power to provide a security interest in all or some of
the Partnership's assets; and
(4) To carry on any other activities necessary or incidental to the
conduct of the Partnership business.
The Partnership shall not engage in any other business or activity
without the written agreement of both Partners. The Partnership is empowered to
do any and all things necessary, appropriate or convenient for the furtherance
and accomplishment of its purposes and for the protection and benefit of the
Partnership and its properties.
Section 2.03. Name and Principal Place of Business. The business of the
Partnership will be conducted under the name of Heber Loan Partners ("HLP") and
its principal place of business shall be at San Francisco, California. The
principal place of business may be changed from time to time, and other places
of business may be established by actions taken in accordance with the
provisions of this Agreement that govern management of the Partnership's
business and affairs. Each Partner shall execute all assumed or fictitious name
certificates required by law in connection with the use of the Partnership name.
Section 2.04. Term. The Partnership shall commence as of the date of
this Agreement and shall continue until the happening of one of the following
events, whichever is the latest to occur:
(1) Except for the events referred to in Section 8.01(1), (2), (3), (4)
and (5), upon notice by either Partner hereto if the other Partner shall
willfully fail to perform its obligations hereunder and such failure shall
continue for a period of at least three (3) months after written notice thereof
from the Partner claiming such default; provided, however, that in case of a
dispute as to whether or not such default exists, the time within which the
Partner in default may cure such default shall not commence to run until it
shall have been finally adjudicated by a court of last resort having
jurisdiction that such Partner is in default;
(2) Three (3) months, after the winding up of the partnership affairs
of the Operating Partnership following its dissolution.
(3) By mutual agreement of the Partners.
ARTICLE III
CAPITAL
Section 3.01. Capital and Working Capital. ERC ENERGY and CENTENNIAL
GEOTHERMAL shall contribute capital or working capital to the Partnership in
such amounts and at such times as directed by the Management Committee.
Section 3.02. Annual Division of Profit or Loss. All annual net profits
or losses of the Partnership will be divided equally between ERC ENERGY and
CENTENNIAL GEOTHERMAL. For purposes of crediting or charging Capital Accounts,
the profit or loss of the Partnership shall be computed from the income and
deductions properly reportable by the Partnership for federal income tax
purposes (plus any income specifically exempted from federal income tax).
Section 3.03. Capital Accounts. A Capital Account shall be established
for each Partner on the books of the Partnership. There shall be credited to the
Capital Account of each Partner (i) the amount of cash contributed by the
Partner from time to time, (ii) the tax basis (net of liabilities assumed) of
any property contributed by such Partner, and (iii) its share of profits of the
Partnership as determined under Section 3.02 hereof. There shall be charged
against each Partner's Capital Account (i) the amount of all distributions made
by the Partnership to such Partner and (ii) its share of any losses of the
Partnership as determined under Section 3.02 hereof.
Section 3.04. Open Account. An individual Open Account shall be
established and maintained for each Partner. Advances made by each Partner which
are not capital contributions will be credited to the individual Partner's Open
Account. Temporary advances of cash by the Partnership to a Partner, other than
distributions from the Capital Account, shall only be made for the furtherance
of the business of the Partnership and shall be charged to the Partner's Open
Account. Interest on, and repayment terms and conditions for, advances, through
the Open Account shall be determined by the Management Committee and no advances
through the Open Account shall be made prior to such determination as to each
such advance by the Management Committee.
A credit balance in a Partner's Open Account shall constitute a
liability of the Partnership to that Partner and shall not constitute a part of
that Partner's Capital Account. A debit balance in a Partner's Open Account
shall constitute an obligation of that Partner to the Partnership and shall not
constitute a part of that Partner's Capital Account.
Section 3.05. Distributions.
(a) Partnership cash shall be allocated and distributed regularly to
the Partners fifty percent (50%) to ERC ENERGY and fifty percent (50%) to
CENTENNIAL GEOTHERMAL, after due allocation for the cash necessary for the
operation of the Partnership business and for requirements of any Partnership
indebtedness. Cash necessary for operation of the Partnership business is
defined as the amount of cash necessary for thirty (30) days of normal operation
to pay accounts payable, payroll, and other operating expenses (other than
income taxes).
(b) During any year, the Partnership may make advances on account of
distributions on an interim basis, per month or per quarter. The annual cash
flow budget will be revised as appropriate but no less frequently than on a
quarterly basis and previous distributions during the year together with
subsequent distributions will be adjusted to the proportions set forth in the
revised annual cash flow budget. A final unaudited statement of cash flow for
the year will be prepared and all interim cash withdrawals for that year will be
adjusted to the proportions indicated on the final statement of cash flow as
soon as practicable.
ARTICLE IV
MANAGEMENT
Section 4.01. Overall Management of the Partnership.
Each of the Partner's rights in the management of the business of the
Partnership shall be exercised through the Management Committee in accordance
with the provisions of this ARTICLE IV.
The Partners shall act through a Management Committee composed of two
(2) members, consisting of one (1) representative appointed by ERC ENERGY and
one (1) representative appointed by CENTENNIAL GEOTHERMAL; all such appointments
to be in writing and delivered one Partner to the other. Each member of the
Management Committee shall have one (1) vote in all Management Committee
decisions. Except as otherwise provided herein, the Management Committee will,
conduct its proceedings in accordance with such rules as it may from time to
time establish and will keep minutes of its meetings and the actions taken by
it.
Members of the Management Committee may attend meetings and vote either
in person or through duly authorized proxies. Partnership action shall be
governed by unanimous vote of the Management Committee. The powers and
responsibilities of the Management Committee shall include, but not be limited
to, action on and resolution of the following matters.
(1) Amendment of this Agreement so as to affect the substantive
rights or obligations of either or both Partners hereto.
(2) Sales or other disposition of any asset of the Partnership the
disposition of which asset would materially impair or change
the conduct of the ordinary business of the Partnership as
contemplated by this Agreement.
(3) Termination of the Partnership otherwise than as provided for
in Section 2.04 or 8.02 of this Agreement.
(4) Approval of distributions of Partnership cash, subject,
however, to the provisions of Section 3.05 of this Agreement.
(5) A voluntary prepayment or extension of debt incurred by the
Partnership in connection with the Partnership's lending of
such borrowed funds to the Partners.
(6) Approval of long range plans and annual capital, revenue and
expense budgets and plans, including financial plans and
accounting policies.
(7) Authorization of any individual expenditure over $5,000 not
previously approved as part of a capital budget.
(8) Approval of any borrowing of money.
(9) Approval to commit the credit of the Partnership, other than
to trade creditors in the normal course of business.
(10) Voting of the Partnership's interest in, or exercising any
right of the Partnership as a partner in, the Operating
Partnership.
(11) Advances by the Partnership to the Partners under Section
3.04.
(12) Select, remove and replace the General Manager.
(13) Any other matters that the Executive Committee determines to
be a power or responsibility of the Management Committee.
Meetings of the Management Committee shall be held regularly but not
less than quarterly, or may be called at any time by any representative or by
the General Manager upon reasonable notice of the time and place of such meeting
to each representative. Such notice may be waived by the written consent of the
representatives of each of the Partners. Each Partner shall pay its own expenses
and those of its representatives on the Management Committee.
Section 4.02. Management of the Partnership. The General Manager,
selected by the Executive Committee, shall have the general charge, supervision
and conduct of the day-to-day operations of the Partnership.
Section 4.03. General Manager. A General Manager, who shall have the
responsibilities arid authorities of the chief operating officer for the
Partnership, shall be appointed by the Management Committee, shall serve at the
will of the Management Committee and shall be responsible to and report to the
Partners.
Section 4.04. Reimbursement for Employees of a Partner or Affiliate.
Any employee of a Partner or its affiliate who, at the request of the
Partnership, is loaned to the Operating Partnership to perform necessary
services shall be paid by the Partner or affiliate by whom they are employed.
The Partnership shall pay such Partner or affiliate any amounts received by the
Partnership from the Operating Partnership on account of such services. In the
case of personnel of a Partner performing services on a part-time basis on
behalf of the Partnership, the Partnership shall reimburse such Partner for the
actual costs (inclusive of direct and indirect costs and allocable overhead)
which shall be determined on the basis of records reflecting the time spent in
rendering services for the Partnership.
ARTICLE V
TAX MATTERS
Section 5.01. Considered a Partnership. Heber Loan Partners is intended
to be and shall constitute a "partnership" for federal income tax purposes
within the meaning of Section 761(a) of the Internal Revenue Code of 1954, as
amended (the "Code"), and the rules and regulations promulgated thereunder. It
is agreed that the income of the Partners attributable to the Partnership
taxable for federal income tax purposes shall be determined under the provisions
of Subchapter K of the Code relating to taxation of partners and partnerships,
or by superseding legislation, rules or regulations enacted in lieu thereof.
Each Partner further agrees not to take any action or make any election not to
be so treated for purposes of the Code. The Partners, acting through the
Management Committee, will make common elections at the Partnership level
required by or permitted under the Code.
Section 5.02. Allocation of Income. All items of income, gain, loss or
deduction reportable for tax purposes (as well as any tax credits arising from
Partnership activity and the cost or basis of property with respect to which tax
credits may be available) in any year shall be allocated for tax purposes
between the Partners in the same percentages as the profits or losses of the
Partnership are allocated during such year.
ARTICLE VI
BOOKS AND RECORDS: ACCOUNTING
Section 6.01. Books. The Partnership shall maintain at the Partnership
offices at the Facility accurate and complete books and records, on the accrual
basis, in accordance with generally accepted accounting principles (which,
having been adopted by the Management Committee, shall not be changed without
mutual consent), showing all costs, expenditures, sales, receipts, assets and
liabilities, and profits and losses, and all other records necessary, convenient
or incidental to recording the Partnership's business and affairs. The
Partnership's fiscal year shall end December 31. The books and records of the
Partnership shall be open to inspection by each Partner or its designated
representative at any reasonable time during business hours.
Section 6.02. Records. Within ninety (90) days after the end of each
fiscal year of the Partnership, the Partnership shall furnish to each of the
Partners an annual report which shall include the Partnership's federal and
state income tax returns which it is proposed that the Partnership shall file
for that fiscal year, and unaudited statements of income, changes in financial
position, and balance sheet for the fiscal year then ended and any additional
information that the Partners or either of them may require.
Promptly after the end of each quarter, including the last quarter of
the fiscal year, there shall be prepared an unaudited balance sheet showing the
Partnership's assets and liabilities at the close of the quarter and an
unaudited statement of income and a cash flow statement showing the results of
its operations for the quarter. Each of the Partners or their representatives
upon notice in writing to the Partnership shall have the right to audit the
Partnership's books and accounts for any accounting period within the 24 month
period following the end of such accounting period; provided, however, the
Partnership shall not be required to make any adjustments, as to any Partner,
unless and to the extent that such Partner took written exception to the books
and accounts and made a claim upon the Partnership for any discrepancies
disclosed by said audit within such 24 month period except for claims arising
from a determination of any governmental agency that any portion of such books
or accounts is erroneous. The expense of all such audits conducted at the
request of a Partner shall be borne by the Partner requesting the audit and
shall not be an expense of the Partnership.
ARTICLE VII
TRANSFER OF PARTNERSHIP INTEREST
Section 7.01. Restrictions on Transfer, Changes in Ownership of
Partner. No Partner may at any time assign, convey, mortgage, pledge or
otherwise dispose of ("transfer") all or any part of its Ownership Interest in
the Partnership or interest in this Agreement, nor shall control (i.e.,
ownership of more than 50% of the outstanding beneficial ownership interests) of
any Partner (or of any upstream entity in control of any Partner) be
transferred, whether by merger, sale of assets, sale of stock, consolidation,
combination or other corporate reorganization except in accordance with the
right of first refusal provisions of this Article VII. In this Article VII only,
the Partner (or an entity controlling the Partner, as the case may be) proposing
the transfer is the "Seller," the continuing Partner is the "Buyer," and
"Shares" shall mean the Ownership Interest or corporate stock to be transferred,
as the case may be.
Section 7.02. First Refusal Rights and Obligations. In the event of a
proposed transfer of Shares as described in Section 7.01, the following
provisions shall apply.
(1) Notice. Seller shall notify Buyer in writing of Seller's
intent to transfer Shares, which notice ("Initial Notice")
will contain (1) the name and/or names of any and all parties
to whom the Shares may be transferred, (ii) the price at which
said Shares are intended to be sold and (iii) the terms of
payment and such other terms and conditions relating to the
proposed transfer as are relevant and material for purposes
hereof.
(2) Right to Purchase. Buyer, and/or such other party or parties
as designated by Buyer, shall have the right to purchase the
Shares by an additional notice sent or given to Seller not
later than 30 days after Buyer's receipt of the Initial
Notice. The price to Buyer, or its designate(s), of said
Shares shall be equal to the proposed price and the payments
and other terms shall be consistent with those stated in the
Initial Notice. Seller shall not be required to sell to Buyer
and/or its designates(s) less than all of the Shares covered
in the Initial Notice, but may agree to do so. Notwithstanding
any of the foregoing, Buyer, or any of its designate(s), shall
not be obligated to make any payment for said Shares to Seller
unless or until it t has received documents conveying said
Shares. All incidents of ownership (including voting rights)
shall be deemed to have been transferred as of the date that
notice of purchase is sent or given to Seller.
(3) Sale to Other(s). In the event and to the extent that the
Shares covered by the Initial Notice are not so sold to Buyer
and/or its designate(s) (Seller, as provided above, not being
required to sell less than all of said Shares so covered to
Buyer and/or its designate(s)), or if Buyer rejects, in
writing, its rights to purchase said Shares, then Seller, may
transfer all of said Shares (but not less than all of said
Shares) to any and/or all of the parties identified in the
Initial Notice (but not others) and upon the purchase price
and payment and other terms set forth therein and/or as
provided herein. In no event, without Buyer's written consent,
shall Seller effect any such transfer upon any terms more
favorable to any such other party than those set forth in the
Initial Notice, and said transfer must be effected within 90
days after the earlier of (i) the expiration of the 30-day
period within which Buyer may purchase the Shares as provided
above, or (ii) the date when Buyer rejects, by a written
notice given to Seller, its purchase rights thereto.
Section 7.03. Exceptions. The foregoing Sections 7.01 and 7.02 shall
not preclude either Partner from pledging or assigning distributions to be
received by it from the Partnership. In addition, it shall not preclude a
transfer of Ownership Interest in the Partnership by a Partner to such Partner's
parent or to an entity 100% of whose equity is owned either directly or
indirectly by that Partner's parent.
Section 7.04. Transferees. All transferees shall execute a written
instrument of express assumption pursuant to which it shall take such Shares
subject to and burdened with (i) all the terms, provisions and conditions of
this Agreement which should then become effective as between the transferee and
the remaining Partner, and (ii) all other obligations the transferring Partner
has to the Partnership, contractual or otherwise.
ARTICLE VIII
DEFAULTS AND REMEDIES
Section 8.01. Default of a Partner. If any of the following events
occur:
(1) the entry of a decree or order by a court having jurisdiction
in the premises adjudging a Partner or its Parent a bankrupt
or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition
of Or in respect of the Partner or its Parent under the
federal Bankruptcy Act or any other applicable federal or
state law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the
Partner or its Parent or of any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order
unstayed and in effect for a period of ninety (90) consecutive
days; or
(2) the institution by a Partner or its Parent of proceedings to
be adjudicated a bankrupt or insolvent, or the consent by it
to the institution of bankruptcy or insolvency proceedings
against it, or the filing of a petition or answer or consent
seeking reorganization or relief under the federal Bankruptcy
Act or any other applicable federal or state law, or the
consent by it to the filing of such petition or to the
appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or similar official) of the Partner or its
Parent or of any substantial part of its property, or the
making by it of an assignment for the benefit or creditors or
the admission by it in writing, of its inability to pay its
debts generally as they become due, or the taking of corporate
action by the Partner or its Parent in furtherance of any such
action; or
(3) any part of the Ownership Interest of a partner in the
Partnership is seized by a creditor of such Partner, and the
same is not released from seizure or bonded out within thirty
(30) days from the date of notice of seizure; or
(4) a Partner fails to perform any material obligation imposed
upon such Partner under any agreement relating to money
borrowed from the Partnership, or attempts to transfer any of
its Ownership Interest in the Partnership except as otherwise
provided in Section 7.01; or
(5) a Partner fails to repay advances debited to its Open Account
upon demand by the partnership; then
such Partner shall be deemed to be in default hereunder and shall be referred to
as the "Defaulting Partner," and the other Partner shall be referred to as the
"Non-Defaulting Partner."
The Non-Defaulting Partner shall have the right to give the Defaulting
Partner a Notice of Default, which shall be in writing, shall set forth the
nature of the event of default, and shall set forth the date by which such
default must be cured which date shall be ninety (90) days after receipt of the
Notice of Default. If within such ninety (90) day period the Defaulting Partner
cures such default, the Notice of Default shall be inoperative, and the
Defaulting Partner shall lose no rights hereunder. If, within such specified
period the Defaulting Partner does not cure such default, the Non-Defaulting
Partner at the expiration of such period shall have the rights hereinafter
specified.
Section 8.02. Buy-Sell Procedure at Option of Non-Defaulting Partner.
If a Partner becomes a Defaulting Partner pursuant to the provisions of Section
8.01 and the -default is not cured within the specified period, then, in such
event, the Non-Defaulting Partner shall have the right, at its option, to
proceed under the provisions of this Section 8.02 to either:
(i) expel the Defaulting Partner from the Partnership by giving
written notice specifying the expulsion date and to purchase
as of the expulsion date all the Defaulting Partner's
Ownership Interest in the Partnership at a price which for
such purposes shall be equal in amount to the Defaulting
Partner's Ownership Interest in the net book value of the
Partnership as determined by generally accepted accounting
principles as consistently applied by the Partnership
(excluding goodwill and any capital resulting from write-up of
assets) as shown by the Partnership books as of the end of the
calendar month preceding the date of purchase, after deducting
any amounts payable to the Partnership by the Defaulting
Partner, any costs or remedying the default and any damages or
costs to the Partnership or Non-Defaulting Partner, including
any adverse federal tax consequences suffered by the
Non-Defaulting Partner, resulting from the default. Payment to
the Defaulting Partner may take the form of a ten (10) year
promissory note of the Non-Defaulting Partner, the principal
amount of which shall be paid in ten (10) equal annual
payments, with interest payable annually and in arrears and at
the floating prime rate of Bank of America, San Francisco,
California in effect, from time to time, but in no event in
excess of the maximum rate of interest permitted by applicable
law; provided, however, that the Non-Defaulting Partner shall
have the option to prepay the note in whole or in part at any
time without penalty or premium. In the event the Partnership
or the Non-Defaulting Partner suffers liability in respect of
a period prior to the expulsion of the Defaulting Partner
which liability had not been accrued on the books of the
Partnership on the date the purchase price of the Defaulting
Partner's Ownership Interest in the net book value of the
Partnership was determined, the note provided for in the
preceding sentence shall be reduced by an amount equal to the
Defaulting Partner's proportionate share of such liability
prior to its expulsion, or the Non-Defaulting Partner may
offset such an amount against any other sums owed by the
Partnership to the Defaulting Partner; or
(ii) cure the default arid the cost of such curing shall be charged
against the Defaulting Partner's Capital Account and credited
to the Non-Defaulting Partner's Capital Account. In such
event, notwithstanding any provision of this Agreement to the
contrary, the Ownership Interests of the Partners shall then
be adjusted to reflect the relationship of the Partners'
Capital Accounts to each other. The distribution of
Partnership profit and loss and cash flow shall also be
adjusted so that the Non-Defaulting Partner's percentage
interest therein shall be increased and the Defaulting
Partner's percentage interest therein decreased by the same
number of percentage points or fraction of a percentage point
as was their respective Ownership Interests. Such adjustments
shall be made each time a default occurs and is cured by the.
Non-Defaulting Partner. Adjustments to the Partners' Ownership
Interests shall be carried out to the nearest one-tenth of 1%.
The Defaulting Partner's liability for any obligations to or
of the Partnership, other than those involved in the curing of
the default, in respect of a period prior to the effective
date of the curing of the default, shall not be affected.
In addition to the foregoing, the Non-Defaulting Partner may, at its
option, at any time within one (1)-year following the date of receipt of notice
by the Partner of the uncured default, cause the Partnership to terminate any
contracts existing between the Partnership and the Defaulting Partner or its
Parent or any of its affiliated entities on not less than ninety (90) days
written notice.
The right of the Non-Defaulting Partner to proceed under this Section
8.02 shall be in addition to all other rights and remedies that the
Non-Defaulting Partner may have either at law, equity, or otherwise.
ARTICLE IX
RESOLUTION OF DISPUTES: ARBITRATION
Section 9.1. Any .dispute between the Partners arising out of the
interpretation or implementation of this Agreement shall initially be reviewed
and considered by the Chief Executive Officer (or his designate) of each of the
Partners hereto, and in the event the Partners are unable, within a reasonable
period of time to resolve their differences by such means, then the dispute
shall be determined by arbitration pursuant to the then current commercial
arbitration rules of the American `Arbitration Association. The request for
arbitration shall be in writing, setting forth in detail `the claim or claims to
be arbitrated, the amount involved, if any, and the remedy sought. It shall be
delivered to the other party within ninety (90) days frost the date that
discussions between the Chief Executive Officers terminated. Any failure to
request arbitration within such ninety-day period shall be deemed a waiver of
the right to arbitrate the dispute unless excused in writing. A board of three
arbitrators shall be selected by the American Arbitration Association. The
decision of not less than a majority of the arbitrators shall be final.
Section 9.2. The existence of a dispute which has or may become the
subject of arbitration shall in no way excuse either ERC ENERGY or CENTENNIAL
GEOTHERMAL from performing its obligations under this Agreement and each of the
parties hereto shall continue to perform in accordance with the terms of this
Agreement irrespective of the existence of any such dispute.
Section 9.3. The Partner responsible for payment of the cost of
arbitration shall be determined by the' American Arbitration Association.
ARTICLE X
CONTRIBUTION TO PARTNERSHIP LIABILITIES; INDEMNIFICATION
If either Partner pays any Partnership liability or obligation, the
Partnership shall reimburse such Partner. Any payment under this Section by a
Partner that is not reimbursed shall be considered a contribution to the capital
of the Partnership. If the Partnership is unable to make such reimbursement,
each Partner agrees to, and does hereby indemnify and save and hold harmless the
other Partner, and to the extent set forth below each Affiliate and the Parent
of the other Partner, from and against all claims, causes of action,
liabilities, payments, obligations, expenses (including without limitation
reasonable fees of and disbursements of counsel) or losses ("claims, liabilities
and losses'!') arising out of a Partnership liability or obligation to the
extent necessary to accomplish the result that neither Partner (together with
its Affiliates and its Parent) shall bear any portion of a liability or
obligation of the Partnership in any manner other than equally. Without limiting
the generality of the foregoing, a claim, loss or liability shall be deemed to
arise out of a Partnership liability or obligation if it arises out of, or is
based upon, the conduct of the business of the Partnership or the Partnership's
ownership of an interest in the Operating Partnership or any other property of
the Partnership (such property being hereinafter, referred to as the
"Partnership Property"). The foregoing indemnification shall be available to an
Affiliate and the Parent of a Partner with respect to, a claim, liability or
loss arising out of a Partnership liability or obligation which is paid by or
incurred by such Affiliate or Parent as a result of such Affiliate or Parent
directly or indirectly owning or controlling a Partner, or as a result of the
fact that an individual employed or engaged by the Partnership or a contractor
is also a director, officer, or employee of such Affiliate or Parent. The
foregoing shall not inure to the benefit of any Partner (or Affiliate or Parent
of any Partner) in respect of any claim, liability or loss which (1) arises out
of, or is based upon, the gross negligence or willful misconduct of such Partner
or the Parent or Affiliate of such Partner, (2) is a tax, levy or similar law or
governmental charge not imposed upon the Partnership or upon Partnership
Property, or (3) results from the breach, failure to perform or negligent
performance of, any obligation of any Partner (or Affiliate or Parent of any
Partner) under any contract entered into with the Partnership or on behalf of
the Partnership, the Partnership reserving full right of legal recourse against
each Partner and its Affiliates and Parents for breach or improper performance
of such obligations. It is understood and agreed that, for the purposes of the
foregoing sentence, no claim, liability or loss shall be deemed to arise out of,
or be based upon, the gross negligence or willful misconduct of the Affiliate or
Parent of any Partner solely by reasons of the fact that it arises out of, or is
based upon, the gross negligence or willful, misconduct of a director, officer,
or employee of such Affiliate or Parent, if at the time of such negligence or
misconduct such director, officer or employee was employed or engaged by the
Partnership as a loaned employee of the Partnership.
The foregoing indemnity shall apply only to a claim, liability or loss
to the extent that it is uninsured by the Partnership.
ARTICLE XI
DISTRIBUTION ON TERMINATION
Section 11.01. Winding Up of Partnership. Upon the dissolution of the
Partnership or its termination for any reason, the assets of the Partnership,
after payment of liabilities, shall be converted into cash and the Capital
Accounts adjusted for such sales and the proceeds distributed in the following
manner:
(a) All Partnership liabilities shall be paid and discharged, or
adequate funds set aside for the payment and discharge thereof, all out of the
Partnership's cash after sale of all assets, with either Partner having the
right of first refusal, for a period of not more than 90 days from the receipt
of a third party offer to purchase, to purchase such assets at the same price
and on the same terms and conditions as such third party offer. In the event
that the liabilities of the Partnership cannot be fully, satisfied and
discharged after the sale or sales of all assets, the Partners shall assume and
pay the excess equally; provided, however, that if the Capital Account of one or
both of the Partners, as adjusted for such sale or sales of all assets, shall be
negative, such Partner shall first contribute to the Partnership an amount equal
to the negative balance of its Capital Account. Any such payment will be
credited to such Partner' s Capital Account.
(b) Thereafter, (i) a final examination, under United States generally
accepted auditing standards, of the Partnership's financial statements prepared
in accordance with United States generally accepted accounting principles shall
be made by the Partnership's independent public accountants, and (ii) statements
setting forth the Partners' Capital Accounts shall be prepared by such
independent public accountants in accordance with Section 3.03 of this
Agreement. Copies of such financial statements and statements respecting Capital
Accounts shall be furnished to each Partner. The Capital Accounts subsequent to
these adjustments shall be termed the "Final Capital Accounts"
(c) In the event that the Final Capital Account of a Partner is
negative, such Partner shall pay to the Partnership an amount equal to the
negative balance in its account. The Partnership shall retain sufficient assets
as a reserve to meet its obligations and contingent liabilities. It shall
distribute any assets in excess of such reserve and, from time to time, such
assets as are no longer needed for such reserve, to the Partners in proportion
to their Final Capital Accounts.
(d) The Partnership shall terminate when all property owned by the
Partnership shall have been disposed of and the net proceeds, after payment or
satisfaction of liabilities to Partnership creditors shall have been distributed
to the Partners.
(e) Notwithstanding anything herein to the contrary, the provisions of
this Article XI are meant to define the respective rights and duties of the
Partners and shall not give any third parties any rights against the Partners.
ARTICLE XII
GENERAL PROVISIONS
Section 12.01. Integration. This Partnership Agreement is the entire
agreement between the parties with respect to the subject matter hereof. Any
prior agreements, promises, negotiations or representations inconsistent with
this Agreement and not expressly set forth herein are of no force and effect. No
alteration, modification, or interpretation hereof' shall be binding unless in
writing and signed by the Partners.
Section 12.02. Interpretation. This Partnership Agreement shall be
interpreted and construed in accordance with the laws of the State of
California. The titles of the Articles and Sections in this Agreement have been
inserted as a matter of convenience, are for reference only, and shall not
control or affect the meaning or construction of any of' the terms and
provisions hereof.
Section 12.03. Inspection. Each Partner or its authorized
representatives, at its own expense, may examine and reproduce any of the
Partnership's books or records, or may inspect the property of the Partnership
at any reasonable time, and on reasonable notice. In addition, the Partnership
shall, upon request, make available for examination by the Partners or their
representatives, copies of all records and any and all other data relating to
the operations by the Partnership which it may have available. Each Partner, at
its own expense, shall be entitled to copy any such data or records.
Section 12.04. Force Majeure. The respective obligations of each
Partner hereto, other than the obligation to pay money, shall be suspended while
it is prevented from complying therewith, in whole or in part, by weather
conditions, labor accidents or incidents, rules and regulations of any federal,
state, or other governmental agency, delays in transportation, inability to
obtain necessary materials in the open market, or any other cause of the same or
other character beyond the reasonable control of such Partner.
Section 12.05. Notices. All notices, consents, requests, reports and
other documents authorized or required to be given pursuant to this Agreement
shall be effective when personally served upon the Partner to be given such
notice at the address designated by it hereinbelow, or seventy-two (72) hours
after the same shall have been deposited in the United States Mails, properly
addressed, certified or registered with return receipt requested, and with
postage thereon fully prepaid. Until otherwise specified by notice in writing,
the addresses `for such' notice shall be:
If to ERC ENERGY:
ERC ENERGY, INC.
c/o ERC INTERNATIONAL, INC.
0000 Xxxxxxxxxx Xxxx
X.X. Xxx 00000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
If to CENTENNIAL GEOTHERMAL:
CENTENNIAL GEOTHERMAL, INC.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: President
Any Partner may at any time by written notice to the other Partner
change the address to which payment, notices, or communications shall be sent.
Section 12.06. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns, subject to the restrictions on assignability set forth
in ARTICLE VII hereof.
Section 12.07. Severability. If any provisions of this Agreement or the
application thereof to any party or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other parties or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
WITNESS: ERC ENERGY, INC.
/s/ Xxxx X. Xxxxxxxx By /s/ [Illegible]
Title Vice President
WITNESS: ERC ENERGY, INC.
/s/ [Illegible] By /s/ [Illegible]
Title Vice President
