JOINT VENTURE AGREEMENT
DB Power, Inc. ("DBP"), a Delaware corporation and an indirect,
wholly-owned subsidiary of Dominion Bridge Corporation, a Delaware corporation
("DBC"), and New World Power Corporation, a Delaware corporation ("NWP"), each
recognize the unique strengths of the other Party and hereby enter into this
joint venture agreement ("Agreement") to develop, construct, own and operate
power projects domestic/international as set forth herein.
Strengths: NWP brings power project development expertise,
power project financing expertise, power project
operational expertise, broad knowledge of the
domestic/international power markets and knowledge
of certain specific domestic/international power
project opportunities currently available.
DBP brings extensive power project construction
expertise, EPC turnkey contract capability,
bonding and performance and completion guarantee
capability, vendor relationships, infrastructure
development expertise, financial wherewithal,
steel fabrication expertise, and a broad knowledge
of the power markets domestically/internationally.
Power Projects: Subject to the conditions set forth in this
Agreement, the Parties mutually agreed to pursue
the joint development of the power projects listed
on Exhibit A hereto (the "Initial Projects") and
such other projects as shall be mutually agreed
(the Initial Projects and any additional projects
are hereinafter referred to as the "Projects").
For purposes of this Agreement, a "Project"
consists of a power purchase agreement and certain
permits, licenses, contracts and proprietary
information such as meteorological data or other
data relating to a wind, hydro or solar power
project and all other rights relating thereto.
NWP's Vermont subsidiary (the "Subsidiary") is
also identified as a "Project" on Exhibit A
hereto. The Parties agree that funding of the
Subsidiary as part of the Funding Commitment shall
be the last funding provided pursuant to this
Agreement. Prior to any such funding, DBP shall
conduct a customary due diligence review of the
assets and liabilities (including, without
limitation, environmental liabilities) and NWP
shall convert its shareholder loans to the
Subsidiary into equity. In connection with the
funding of the Subsidiary pursuant to this
Agreement NWP shall transfer 50% of the shares of
capital stock of the Subsidiary held by it to DWP.
Joint Venture Management
and Decision-Making: Prior to the transfer of a Project to a Project
Entity as described below and/or with respect to
the Initial Projects, the transfer of 50% of NWP's
equity interest therein, all decisions with
respect to Projects shall rest with a five member
Management Committee, composed of two members
selected by DBP, two members selected by NWP and
the fifth member to be selected by the mutual
agreement of DBP and NWP. Four members of the
Management Committee must be present to constitute
a quorum and decisions shall be made based on the
affirmative vote of four of the five members of
the Management Committee. Members of the
Management Committee shall be entitled to
participate in discussion and voting via
conference telephone. The Management Committee
shall have meetings not less often than quarterly.
The Executive Director shall prepare, and the
Management Committee shall approve, and review as
necessary, annual budgets for Joint Venture
activities. All decisions with respect to Projects
undertaken or to be undertaken by the Joint
Venture shall be coordinated at the day to day
level by the Executive Director and the Operating
Manager. Subject to the authority of the
Management Committee and within the constraints of
budgets adopted by the Management Committee, the
Executive Director shall have the authority to
approve single expenditures of the joint venture
to third parties which do not exceed $25,000 or
$500,000 in the aggregate over a one year period.
Expenditures to DBP and its affiliates and those
over these amounts shall be approved by the
Management Committee.
The individuals serving as Executive Director and
the Operating Manager shall be selected annually
for a term of one year by the Management Committee
and may be removed by the Management Committee for
incompetence or dereliction of duty, but shall
otherwise remain in those positions for the
duration of their term.
Development Costs: Each of the Initial Projects shall be reviewed
prior to any expenditure by the Joint Venture
Management Committee. The Parties acknowledge that
NWP has incurred development costs with respect to
the Initial Projects prior to July 31, 1996 of
$2.5 million. Subject to the approval requirements
for expenditures provided below, in consideration
of DBP's receiving a 50% equity interest in the
Initial Projects DBP shall pay with respect to the
Initial Projects specified on Exhibit A hereto up
to $2.5 million (the "Initial Funding Commitment")
to equal the amount of development costs for which
NWP has received credit pursuant to
2
the first sentence of this paragraph; provided,
however, (i) that the Initial Funding Commitment
shall be reduced by the amount of unexpended
development costs to be funded by DBP with respect
to Initial Projects which are abandoned by the
Management Committee and (ii) in no event shall
the Initial Funding Commitment be less than
$500,000 (including Development Costs of
approximately $130,000 incurred prior by DBP prior
to the date of this Agreement). Within five days
of the execution of this Agreement, DBP shall
deposit into an escrow account $400,000 to be
earmarked exclusively for the development of the
Texas Project. The Initial Funding Commitment
shall be satisfied by the payment by DBP of costs
related to Projects in accordance with the Project
budget. Except as DBP shall determine in its sole
discretion, prior to any funding of a Project
pursuant to this Agreement, NWP shall execute
bills of sale and such instruments of transfer as
DBP shall reasonably request so as to effect DBP's
purchase of a 50% interest in each such Project.
Except as set above with respect to DBP's
commitment of development costs with respect to
the Initial Projects, the Parties shall share all
project development costs equally, with NWP being
responsible for the development costs which will
be incurred prior to acceptance of a Project by
the Joint Venture, DBP being responsible for the
next portion of development costs equal to NWP's
initial contribution and the Parties being
responsible for the remaining development costs on
a 50/50 basis. Development costs shall only be
incurred at the direction of the Management
Committee and until a Party declines, in its sole
discretion, to participate in the development of
such project, or a Party or the Joint Venture or a
Project Entity abandons or transfers its interest
in a Project, or a Party is otherwise required to
discontinue its participation in a Project.
Development costs include out-of-pocket,
third-party expenses reasonably incurred by the
Parties in furtherance of development of a Project
as well as the cost associated with employees and
consultants of the Parties who perform work to
develop a power project, as provided below.
In no event shall the reimbursable costs for
employees and consultants of a Party or an
affiliate thereof be credited in excess of an
hourly rate which exceeds 1.4 times the hourly
equivalent wage in the case of an employee or 1.1
times the hourly fee of a consultant retained by
such Party, in each case for the actual time
period involved by such staff in Joint Venture
development activities. Each Party shall be
required to submit detailed time sheets setting
forth the tasks performed by the employees and/or
consultants in respect of Joint Venture
activities. It is anticipated
3
that NWP employees and consultants will perform a
majority of the development activities. DBP shall
have the ability, however, to dedicate up to one
full-time equivalent employee to Joint Venture
activities, subject to agreement by the Parties as
appropriate concerning time commitment and cost
reimbursement arrangements with respect thereto.
Each Party shall submit bills (and provide all
reasonably requested supporting documentation) for
development costs incurred after July 31, 1996 on
a monthly basis and each Party's share of such
costs shall be payable within 30 days of
submission of such bills. Semiannually, the
Parties shall review and reconcile any development
costs incurred hereunder. Verified development
costs shall be recovered at project financial
closing unless converted to equity or subordinated
debt in the projects.
Turnkey Construction: Where the ability to select the turnkey contractor
is within the Joint Venture's control, the
Management Committee shall provide to DBP or an
affiliate thereof the first opportunity to
negotiate a turnkey construction contract for each
such Project, provided that the contract meets
customary industry standards and the pricing of
such preferred contract is on terms no less
favorable to the project than as are obtainable
from an unrelated party. DBP or such affiliate
shall provide completion and performance
guarantees and appropriate security (e.g. letter
of credit, guarantee, bond) reasonably required,
if at all, by project finance lenders or other
third party Project participants to secure
performance of its contractual obligations. Prior
to entering into the turnkey contract, NWP and DBP
or such affiliate shall jointly (i) agree upon the
technical/systems/vendors to be utilized, taking
into account market conditions and project
financing requirements (it being recognized that
where possible Groupe MIL shall be utilized to
provide turbines and towers) and (ii) price and
select items of equipment whose value exceeds
$250,000.
Project Entity: After a Project has reached an appropriate stage
of development, DBP and NWP shall endeavor to
create a Project Entity (e.g., corporation,
limited liability company, partnership), which
shall be reasonably acceptable to both Parties to
undertake the further development and financing of
such Project. The Parties recognize that the Big
Springs, Texas Project has been transferred to a
Project Entity. The Project Entity organizational
documents shall reflect the equity participation
of the Parties as are negotiated with the project
finance providers and the fact that DBP shall act
as the managing general partner or in an analogous
operating or
4
managing role for such Project Entity, subject to
mutually acceptable management or shareholder
approval rights. The provisions set forth in this
Joint Venture Agreement relating to the terms and
conditions of each Project Entity may be varied by
mutual agreement of the Parties; in the event of
any conflict between this Agreement and any
agreement relating to a Project Entity, the
agreement relating to the Project Entity shall
control.
Project Financing: DBP, or an affiliate thereof reasonably acceptable
to NWP, shall advise each Project Entity with
respect to financing alternatives, including the
selection of underwriters, placement agents,
lenders and equity investors. For such services,
DBP or such affiliate, shall be entitled to an
advisory fee of 1.5% of the gross amount of such
financing. The advisory fee payable to DBP or its
affiliate shall be in lieu of other third party
financial advisory fees, but not in lieu of other
financing fees such as commissions and placement
fees.
Capital Contributions: Unless otherwise negotiated by the Parties, NWP
and DBP shall each provide equity or other
sponsor-provided funding required from the Parties
for financing a Project developed by the Joint
Venture or a Project Entity in proportion to their
equity participation in a Project. If agreed by
the Parties and acceptable to project lenders,
equity contributions may be made in the form of
cash or construction or engineering or other
services performed. Development costs, including
those incurred by NWP on the Initial Projects
through July 31, 1996, not recovered through fees
at Project financial closing shall be considered
equity contributions of the Parties to the extent
agreed by the Parties and permitted by the
applicable project financing parties, and
accountants. The Parties acknowledge that any
commitment by either Party to invest equity will
be conditioned upon obtaining acceptable rates of
return and other acceptable provisions in its sole
discretion.
Profit/Loss/
Distributions: Except as otherwise provided in the organizational
documents for Project Entities relating to Initial
Projects, all profits, losses and other
distributions (including fees and other similar
compensation) arising from Joint Venture or
Project Entity activities after repayment of
development costs (other than profits and losses
arising under separate construction and operation
and maintenance contracts) shall be allocated
50/50 to NWP and DBP or otherwise in accordance
with each Party's equity contribution in the
specific Project Entity to which such development
costs have been assigned by the Management
Committee.
5
Operations &
Maintenance: The Management Committee shall determine the
operator of all Projects developed by the Joint
Venture or a Project Entity under an agreement
acceptable to the Parties and Project lenders
which provides reasonable oversight to the Parties
over operational expenses and activities. The
operator shall provide appropriate security (e.g.
letter of credit, guarantee, bond) reasonably
required by lenders or other third parties to
secure performance of its contractual obligations
as operator.
Accounting: The Executive Director shall cause to be
maintained, on behalf of the Joint Venture,
records of development costs and such other
matters as are reasonably required in connection
with Joint Venture activities. The records of the
Executive Director and each Project Entity shall
be accurate in all material respects and shall
fairly present the position and results of the
Joint Venture and each Project Entity and shall be
prepared on an accrual basis in accordance with
U.S.A. generally accepted accounting principles
consistently applied. The Executive Director shall
retain a public accountant mutually acceptable to
NWP and DBP.
Discontinuance: Except for binding obligations under executed
contracts in connection with a specific Project
executed after the date of this Agreement,
including construction or operation and
maintenance agreements, with respect to any
Project, either Party may elect to discontinue its
participation or any Project or Project Entity by
delivering written notice to the other 15 days in
advance of its discontinuance provided that the
discontinuing party shall use all reasonable
efforts to ensure that such discontinuance shall
not be made in a manner which would unduly disrupt
any near term pending proposals and/or
negotiations such that the remaining Party is
injured and cannot continue with the
proposal/negotiations. Upon delivery of such
notice, the Parties shall for no additional
consideration, execute appropriate assignment,
assumption, indemnity and release documents which
transfer, as of the date of discontinuance, to the
remaining Party (or an affiliate thereof as
designated by such remaining Party) all
obligations and rights in the respective project
or Project Entity, whichever is applicable. Such
discontinuance by a Party shall be immediately
effective as an assignment of its interest in any
power project; however, the discontinuing Party
shall pay its share of development costs incurred
by the Joint Venture or Project Entity on or
before the date of discontinuance, although such
expenses may become due later. The discontinuing
Party shall be entitled to
6
be repaid its share of the development costs with
respect to any discontinued Project out of the
construction or project financing therefor, but
only after payments to the remaining party (and
any new equity participants) equal to 150 percent
of all development costs incurred with respect to
the Project; however, the discontinuing Party
shall not have any lien on the Project.
Right of First Offer: After the interest in a Project has been
transferred to DBP pursuant to this Agreement, and
notwithstanding any provision of this Agreement to
the contrary, either Party ("Selling Party") may
sell or transfer its interest in any Project or
Project Entity (but not the Joint Venture) to a
third party, provided it first notifies the other
Party ("Offeree Party") of its intention to sell
and sends to the Offeree Party a notice of the
terms and conditions under which it proposes to
sell; and provided further that the Selling Party
shall first offer to sell all its interest in any
project or Project Entity to the Offeree Party for
the price, and on the same terms, as stated in
such notice. The Offeree Party shall have 30 days
after receiving such offer to accept it. If the
Offeree Party does not agree to purchase the
Selling Party's interest in any project or Project
Entity within the 30-day period set forth above,
the Selling Party may sell its interest in any
project or Project Entity on the terms first
proposed in the written offer sent to the Offeree
Party; provided, however, that no Party may
transfer its interest in any project or Project
Entity to another unless (x) the transferee agrees
in writing to be bound by the same terms and
conditions of this Agreement (as it applies to
such Project or Project Entity) and becomes a
party hereto, (y) demonstration to the Offeree
Party that it is financially able to assume the
Selling Party's obligations; and (z) is otherwise
satisfactory to the Offeree Party on its sole
discretion.
Compliance with Law: In performing their respective activities
hereunder, each Party agrees to comply with all
applicable United States and other applicable
laws. In this regard, each Party agrees that
neither it nor its employees, agents or
subcontractors shall make any payment or give
anything of value to any government official to
influence a government decision, or to gain any
other governmental advantage for the Parties, the
Joint Venture, any project or a Project Entity in
connection with the activities performed
hereunder.
Assignment: Except for assignments to Affiliates and
assignments to lenders and others (which each
Party agrees to make as reasonably required for
project financing) and assignments pursuant to the
Right of First Offer set forth above, neither
Party may sell, transfer, assign or otherwise
encumber any portion of its interest in
7
the Joint Venture, any Project, or any Project
Entity without the other Party's prior written
consent. For purposes of this Agreement,
"Affiliate" of a Party shall mean a person or
entity controlling, controlled by or under common
control with the Party and an "assignment" shall
include a "change in control" of a Party of a
nature that would be required to be reported in
response to Item 6(e) of Regulation 14A under the
Securities Exchange Act of 1934.
Nature of Joint Venture: The Joint Venture shall not be considered, and
this Agreement shall not be considered to have
formed, a partnership or other legal entity.
Except for DBP's and NWP's rights to incur project
development expenses within the scope of this
agreement, unless otherwise agreed, neither Party
shall be the agent or representative of, or have
the power to legally bind, the other Party in
connection with the activities of the Joint
Venture, and each Party shall be severally liable
for any obligations to third parties incurred in
connection with Joint Venture activities.
Term: The initial term of the Joint Venture shall be
three years; but the term shall be automatically
extended for additional terms of one year provided
that no Party notifies the other Party within 60
days of the end of the term of its election to
terminate the Joint Venture and the end of such
term. The Joint Venture shall also extend
automatically for successive terms of one year at
the end of its term but only for the sole purpose
of considering identified power projects not yet
rejected or pursuing Projects for which a Project
Entity has not yet been formed. The term of each
Project Entity shall be as set forth in its
organizational documents which shall establish a
term at least as long as is required to complete
the development, construction and operation of its
respective Project. The term of the Right of First
Offer for any identified project or Project Entity
shall extend for a term equal to the applicable
Party's right to an equity participation in such
project or Project Entity. Notwithstanding the
foregoing, the term of this Joint Venture shall
terminate upon the bankruptcy or dissolution of
either Party or if no activity is undertaken by
the Joint Venture for a period of 180 days.
Furthermore, any given Project can be terminated
if no activity is undertaken with respect thereto
by the Joint Venture for a period of 120 days
after the approval by the Management Committee for
the commencement of activities.
DBC Guaranty: DBC hereby guarantees the payment of the Initial
Funding Commitment as provided herein.
8
Cooperation: Since this Joint Venture Agreement is expected to
continue for some time and both Parties recognize
that the development of Projects can present
unique challenges or require special arrangements,
both Parties will attempt in good faith to
negotiate additional terms or modifications to
this Agreement in response to any such unique
circumstances which are encountered, consistent
with the intent of the Parties in forming this
Joint Venture.
This Agreement has been duly authorized and executed by each Party
and is intended to be a legally binding and enforceable agreement under, and
governed by, the laws of the State of New York, U.S.A. (without regard to
conflicts of law principles).
Dated as of October 31, 1996
DB POWER, INC. NEW WORLD POWER CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------- ----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Name:▇▇▇▇ ▇. ▇▇▇▇▇
---------------------- ----------------------
Title:PRESIDENT Title:CHAIRMAN
---------------------- ----------------------
DOMINION BRIDGE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------- --------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------- INTERIM CEO
Title:CHAIRMAN
----------------------
9
SCHEDULE A
The New World Power Corporation
POTENTIAL JOINT VENTURE PROJECTS
PROJECT NAME PROJECT DESCRIPTION
------------ -------------------
1 Texas 40 MW wind
2 Woodstock, Minnesota 10 MW wind
3 ▇▇▇▇▇▇, Wisconsin 10 MW wind
4 Manatoulin Island 5 MW wind
5 Tierras Morenas 20 MW wind
6 La Vantosa 20 MW wind
7 ▇▇▇▇▇ 12 MW Hydro
8 ▇▇▇▇▇ 15 MW wind
9 Drumlough Hill 5 MW wind
10 Turkey 10 MW wind
▇▇ ▇▇▇▇▇▇▇-- ▇▇. ▇▇▇▇ (Phase 1) 150 KW Hybrid
12 Village-- El Cuy 70 KW Hybrid
▇▇ ▇▇▇▇▇▇▇-- ▇▇. ▇▇▇▇▇▇ 250 KW Hybrid
14 Ontario Hydro 2 10 MW wind
15 Anguilla 3.5 MW wind
16 Village-- Chiraco Summit 500 KW Hybrid
17 China Developments
18 ▇▇▇▇▇▇▇▇ Falls
19 NWP Technology Vermont Operations