Operating Adjustment. a. October 1, 1996, at 12:01 a.m. shall be considered the "Effective Date" of this Agreement, and the operations of ▇▇▇▇▇▇▇▇▇ and the Cogeneration Assets, including income derived from the P.G.&E. S.O. #2 Contract, shall be for the account of ▇▇▇▇▇ from and after that date, conducted in the ordinary course of business as described in Section 5.5 hereof; provided, however, that the application of such an Effective Date shall not be deemed to make ▇▇▇▇▇ liable for any costs or charges related to the SOCAL Contract. For all other purposes, and without limiting the generality of the foregoing, the representations, warranties, covenants and indemnities herein, and the delivery of the Purchase Price, shall occur and be effective at the Closing. The Operating Adjustment will occur at or after the Closing with a cash payment in an amount equal to the net income or loss of the Cogeneration Assets after the Effective Date, adjusted to reflect only necessary operating revenues and expenses which would have been credited to or incurred by ▇▇▇▇▇ had both this Agreement and the acquisition of the Cogeneration Assets under the Right to Purchase Contract been concluded and closed on the Effective Date. The operating revenues shall specifically include, but not be limited to, revenue from power and steam sales. Operating expenses shall exclude any payments made pursuant to the Cogeneration Lease or the Cogeneration Premises Lease, any SOCAL charges, legal fees, interest, amortization, unreasonable travel and entertainment and management fees in excess of Fifty Dollars ($50) per day. If the Cogeneration Assets produce a net income after the Effective Date, then ▇▇▇▇▇▇▇▇▇ shall pay ▇▇▇▇▇ an Operating Adjustment equal to such net income. If the Cogeneration Assets produce a net loss after the Effective Date, then ▇▇▇▇▇ shall pay ▇▇▇▇▇▇▇▇▇ an Operating Adjustment equal to the amount of the net loss. b. In the event ▇▇▇▇▇▇▇▇▇ does not provide ▇▇▇▇▇ with its calculation of the Operating Adjustment (the "Calculation") prior to the Closing, ▇▇▇▇▇▇▇▇▇ shall provide ▇▇▇▇▇ with the Calculation within sixty (60) days after the Closing. ▇▇▇▇▇ shall have immediate access at reasonable times to such books, records and invoices as it deems necessary to verify the Calculation. If ▇▇▇▇▇ does not object to the Calculation within ten (10) days after receipt thereof by ▇▇▇▇▇, it shall be deemed to be final and binding upon the parties hereto. If ▇▇▇▇▇ objects to the Calculation within such ten (10) days by specifying the items to which it objects, then the parties will attempt to mutually resolve any differences. If the differences cannot be resolved within twenty (20) days after ▇▇▇▇▇'▇ objection to the Calculation, then all amounts agreed to shall be paid as provided below and the difference shall be resolved by arbitration under the Commercial Arbitration Rules of the American Arbitration Association. The costs of arbitration shall be shared equally by the parties. This Section 2.4 is the only Section or part of this Agreement which is subject to arbitration jurisdiction.
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Operating Adjustment. a. October 1, 1996, at 12:01 a.m. shall be considered the "Effective Date" of this Agreement, and the oil and gas operations of ▇▇▇▇▇▇▇▇▇ and included in the Cogeneration Assets, including income derived from the P.G.&E. S.O. #2 Contract, Assets shall be deemed to be for the account of ▇▇▇▇▇ from and after that date, conducted in the ordinary course of business as described in Section 5.5 hereof; provided, however, that the application of such an Effective Date shall not be deemed to make ▇▇▇▇▇ liable for any costs or charges related to the SOCAL Contract. For all other purposes, and without limiting the generality of the foregoing, the representations, warranties, covenants and indemnities herein, and the delivery of the Purchase Price, shall occur and be effective at the Closing. The Operating Adjustment will occur at or after the Closing with a cash payment in an amount equal to the net income or loss difference between (i) the value of oil and gas produced by ▇▇▇▇▇▇▇▇▇ after the Cogeneration Assets Effective Date and (ii) the normal cost of producing oil and gas after the Effective Date, as determined by ▇▇▇▇▇▇▇▇▇'▇ customary accounting method adjusted to reflect only necessary operating revenues and expenses which would have been credited to or incurred by ▇▇▇▇▇ had both this Agreement and the acquisition of the Cogeneration Assets under the Right to Purchase Contract been concluded and transaction closed on the Effective Date. The operating revenues oil tanks shall specifically include, but not be limited to, revenue from power gauged at 12:01 a.m. on the Effective Date. The value of oil and steam sales. Operating expenses gas produced by ▇▇▇▇▇▇▇▇▇ after the Effective Date shall exclude any payments made pursuant to be the Cogeneration Lease or net sales after royalties adjusted for the Cogeneration Premises Lease, any SOCAL charges, legal fees, interest, amortization, unreasonable travel change in inventory between the Effective Date and entertainment and management fees in excess of Fifty Dollars ($50) per daythe Closing. If the Cogeneration Assets produce a net income value of the oil and gas produced after the Effective DateDate is greater than said cost, then ▇▇▇▇▇▇▇▇▇ shall pay ▇▇▇▇▇ an Operating Adjustment equal to such net incomethe amount of the difference. If the Cogeneration Assets produce a net loss value of the oil and gas produced after the Effective DateDate is less than said cost, then ▇▇▇▇▇ shall pay ▇▇▇▇▇▇▇▇▇ an Operating Adjustment equal to the amount of the net lossdifference.
b. In the event ▇▇▇▇▇▇▇▇▇ does not provide ▇▇▇▇▇ with its calculation of the Operating Adjustment (the "Calculation") prior to the Closing, ▇▇▇▇▇▇▇▇▇ shall provide ▇▇▇▇▇ with the Calculation within sixty (60) days after the Closing. ▇▇▇▇▇ shall have immediate access at reasonable times to such books, records and invoices of ▇▇▇▇▇▇▇▇▇ as it deems necessary to verify the Calculation. If ▇▇▇▇▇ does not object to the Calculation within ten (10) days after receipt thereof by ▇▇▇▇▇, it shall be deemed to be final and binding upon the parties hereto. If ▇▇▇▇▇ objects to the Calculation within such ten (10) days by specifying the items to which it objects, then the parties will attempt to mutually resolve any differences. If the differences cannot be resolved within twenty (20) days after ▇▇▇▇▇'▇ objection to the Calculation, then all amounts agreed to shall be paid as provided below and the difference shall be resolved by arbitration under the Commercial Arbitration Rules rules of the American Arbitration Association. The costs of arbitration shall be shared equally by the parties. This Section 2.4 is the only Section or part of this Agreement which is subject to arbitration jurisdiction.
c. Within three (3) days of the final determination of the Calculation, the party required to make the Operating Adjustment payment shall pay, via wire if requested, the Operating Adjustment payment agreed upon to the other party.
d. For managing ▇▇▇▇▇▇▇▇▇ subsequent to September 30, 1996, ▇▇▇▇▇▇▇▇▇ shall only be entitled to be credited for management fees at the rate of Ten Dollars ($10) per day and shall not be entitled to reimbursement of overhead costs for legal expenses, accounting costs, loan fees and interest, contributions, dues and assessments, 401K retirement costs or excessive travel or entertainment costs or expenses.
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