EXHIBIT 3.3
THIRD AMENDED AND RESTATED
GENERAL PARTNERSHIP AGREEMENT
OF
COSO FINANCE PARTNERS
This Third Amended and Restated General Partnership Agreement (the
"Agreement"), of Coso Finance Partners (the "Partnership") dated as of May 28,
1999, is between (a) ESCA, LLC, a Delaware limited liability company (successor
by merger with ESCA Limited Partnership, a California limited partnership)
("ESCA") and (b) New CLOC Company, LLC, a Delaware limited liability company
("New CLOC").
R E C I T A L S
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On December 6, 1979, CalEnergy Company, Inc., a Delaware corporation
(formerly known as California Energy Company, Inc.) ("CECI") entered into a
contract (the "Navy Contract") with the United States Navy (the "Navy") to
develop geothermal energy at the Naval Weapons Center, China Lake, California,
and to sell the resultant electricity to the Navy.
CECI and Caithness Geothermal 1980 Ltd., a Delaware limited partnership
(successor by merger with Caithness Geothermal 1980 Ltd., a New Jersey limited
partnership) ("CG-80") entered into a Joint Venture Agreement to form the China
Lake Joint Venture ("CLJV") on December 17, 1980 (as amended and restated from
time to time, the "CLJV Agreement"). The CLJV Agreement set forth the
relationship between CECI and CG-80 regarding the development and operation of a
geothermal power generating system at the Naval Weapons Center; established a
Management Committee; designated CECI the "Operator"; set forth the Operator's
rights and duties; and provided guidelines for conduct of the geothermal power
project.
CECI assigned its rights and obligations under the Navy Contract to CLJV on
December 17, 1980. The assignment was approved by the Navy on December 24,
1980.
On July 7, 1987, CLOC and ESCA entered into the General Partnership
Agreement of Coso Finance Partners (the "1987 Agreement"), creating the
Partnership. The Partnership entered into certain agreements in connection with
the acquisition of Turbine 1 (as hereinafter defined) and the Turbine 1 Project
Area Rights (as hereinafter defined).
At the time of entering into the 1987 Agreement, the partners and their
affiliates contemplated that Turbine 1 would be financed, owned and operated by
the Partnership, and that Turbines 2 and 3 (as hereinafter defined) would be
owned and operated by CFP II (as hereinafter defined). Subsequent to that time,
the Partners determined that it was the best interests of the Partnership to
have all of the Turbines owned and operated by a single entity to provide for
operation of the Turbine 1 Project and the Turbines 2 and 3 Project as a
combined project and to provide for allocation of profits and losses and
distributions in a manner as if separate ownership of Turbine 1 and Turbines 2
and 3 had been maintained.
ESCA, CLOC and partners of CFP II transferred and assigned to the
Partnership the Division II Assigned Rights (as hereinafter defined).
Pursuant to that certain Agreement and Plan of Merger dated as of February
25, 1999, CLOC was merged with and into New CLOC, and New CLOC became the
successor-in-interest to CLOC.
Concurrently with this Agreement, the Partnership is acquiring, subject to
the approval of the United States Department of the Interior, Bureau of Land
Management ("BLM"), an undivided interest as a tenant-in-common in and to the
BLM Leases (as hereinafter defined) and has entered into the Co-Tenancy
Agreement (as hereinafter defined) in order to utilize the resources from said
land for the Combined Project (as hereinafter defined).
Concurrently with this Agreement, (1) China Lake Geothermal Management
Company, Inc. ("CLGMC"), a general partner of Coso Finance Partners II, a
California general partnership ("CFP II"), has dissolved and distributed its
general partnership interest in CFP II to its sole shareholder, Caithness
Acquisition Company, LLC, a Delaware limited liability company ("CAC"), which
contributed the interest to New CLOC; (2) ESCA Limited Partnership, a California
limited partnership, has converted into ESCA; (3) ESCA II Limited Partnership II
("ESCA II") has merged with and into ESCA; and (4) CFP II has merged with and
into CFP.
The parties hereto desire to provide for the continued existence and
governance of the Partnership and to set forth in detail their respective rights
and duties relating to the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements herein contained, the parties agree that the Original Agreement shall
be amended and restated so that the operative provisions shall read in their
entirety as follows:
ARTICLE I
DEFINITIONS
The capitalized words and phrases used in this Agreement shall, unless the
context otherwise requires, have the meanings specified in this Article I.
1.1 "Act" means the California Uniform Partnership Act, as amended from
time to time.
1.2 "Agreement" or "Partnership Agreement" means this Third Amended and
Restated General Partnership Agreement, as amended from time to time. Words
such as "herein", "hereof", "hereto" and "hereunder" refer to this Agreement as
a whole, unless the context otherwise requires.
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1.3 "AMJV" means ▇▇▇▇▇▇▇▇-Mitsubishi Joint Venture, a joint venture
between ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Company, a Nevada corporation, and Mitsubishi Heavy
Industries America, Inc., a Delaware corporation.
1.4 "AMJV Project Agreement" means the Coso Geothermal Project Agreement
between CLJV and AMJV, dated February 12, 1986, as amended.
1.5 "AMJV Royalties" means the Plant Royalty and the Well Residual more
fully described in the AMJV Project Agreement and that certain Project Royalty
and Warranty Agreement, dated as of July 14, 1987, by and among AMJV, CFP and
CLJV, as amended, which assigned to CFP pursuant to the Assignment of Royalty
and Residual Interests and Mutual Release of Claims by and among AMJV, CFP and
CLJV dated July 14, 1998, and as may be further amended.
1.6 "BLM Leases" means that certain (i) Geothermal Resources Lease, Serial
No. CA-11384, by and between the United States of America, acting through the
BLM, and the LADWP, effective as of February 1, 1982, as amended; (ii)
Geothermal Resources Lease, Serial No. CA-11385, by and between the United
States of America, acting through the BLM, and the LADWP, effective as of
February 1, 1982, as amended; and, (iii) Geothermal Resources Lease, Serial No.
CA-11383, by and between the United States of America, acting through the BLM,
and the LADWP, effective as of February 1, 1982, as amended.
1.7 "Book" when used to modify an item of income, gain, loss or deduction,
or any word in reference thereto, means the amount thereof taken into account
for capital accounting purposes under the principles of Section 1.10 and
Regulation Section 1.704-1(b)(2)(iv).
1.8 "Budget" means each of the budgets to be prepared by the Managing
Partner and approved by the Management Committee pursuant to Section 7.4.
1.9 "Business Day" means any day that is not a Saturday, Sunday or a day
on which banking institutions in the City of San Francisco, State of California,
are authorized or required to close by law, executive order or Regulation.
1.10 "Capital Account" with respect to each Partner means the capital
account of that Partner determined and maintained throughout the full term of
the Partnership in accordance with the capital accounting rules set forth in
Regulation Section 1.704-1(b)(2)(iv). The initial balance of each Partner's
Capital Account is set forth at Section 4.1. As a result of the reorganizations
described in the Recitals, the capital contributions by ESCA, New CLOC, ESCA II
and CLGMC are in the amounts reflected on the Partnership's books. In the event
the Managing Partner determines that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property, or assumed by the Partnership with regard
to such asset with the approval of the Partnership), are computed in order to
comply with such
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Regulations, the Managing Partner may make such modification, provided that it
is not likely to have a material effect on the amounts distributable to any
Partner. The Managing Partner also shall make any modification, provided that it
is not likely to have a material effect on the amounts distributable to any
Partner, in the event unanticipated events cause this Agreement not to comply
with Regulation Section 1.704.1(b). Subject to the four previous sentences:
(a) Each Partner's Capital Account shall be increased by (i) the
amount of money contributed by such Partner to the Partnership; (ii) the Fair
Market Value of property contributed by such Partner to the Partnership (net of
liabilities secured by such contributed property that the Partnership is
considered to assume or take subject to under Code Section 752); and (iii)
Partnership income and gain (or items thereof) allocated to such Partner. Each
Partner's Capital Account shall be decreased by (iv) the amount of money
distributed to such Partner by the Partnership; (v) the Fair Market Value of
property distributed to such Partner by the Partnership (net of liabilities
secured by such distributed property that such Partner is considered to assume
or take subject to under Code Section 752); (vi) Partnership loss (or item
thereof) allocated to such Partner; (vii) the Partner's share of expenditures of
the Partnership described in Code Section 705(a)(2)(B), including for this
purpose losses which are nondeductible under Code Section 267(a)(1) or Code
Section 707(b); and (viii) the Partner's share of amounts paid or incurred by
the Partnership to organize the Partnership or to promote the sale of (or to
sell) an interest in the Partnership (except to the extent properly amortizable
for tax purposes).
(b) For this purpose, "income" refers to all items of income
(including all items of gain and including income exempt from tax) as properly
determined for Book purposes, and "loss" refers to all items of loss (including
all items of deduction) as properly determined for Book purposes.
(c) An assumption of a Partner's unsecured liability by the
Partnership shall be treated as a distribution of money to the Partner. An
assumption of the Partnership's unsecured liability by a Partner shall be
treated as a cash contribution to the Partnership.
(d) Capital Accounts shall be adjusted appropriately on account of
investment tax credit and investment tax credit recapture in accordance with the
principles of Code Section 48 (q).
(e) In the event that assets of the Partnership other than cash are
distributed to a Partner in kind, Capital Accounts shall be adjusted for the
hypothetical Book gain or Book loss that would have been realized by the
Partnership if the distributed assets had been sold for their Fair Market Value
in a cash sale (in order to reflect unrealized Book gain or Book loss).
(f) At the option of the Management Committee, in the event of a
contribution of money or other property (other than a de minimus amount) to the
Partnership by a new or existing Partner as consideration for an interest in the
Partnership, or in connection with a distribution of money or other property
(other than a de minimus amount) by the Partnership to a
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retiring or continuing Partner as consideration for an interest in the
Partnership, Capital Accounts shall be adjusted for the hypothetical Book gain
or Book loss that would have been realized by the Partnership if all Partnership
assets had been sold for their Fair Market Value in a cash sale (in order to
reflect unrealized Book gain or Book loss).
1.11 "Capital Contribution" means the amount of money plus the Fair Market
Value of property contributed by a Partner to the Partnership.
1.12 "Capital Events" shall mean a Division I Capital Event and/or a
Division II Capital Event.
1.13 "Cash Flow from Capital Events" shall mean the net proceeds from each
Capital Event which the Management Committee makes available for distribution
after the Management Committee has set aside the amounts deemed prudent by the
Management Committee to: (a) replace tangible property disposed of or destroyed
and (b) provide working capital for the Partnership.
1.14 "CED" means Coso Energy Developers, a California general partnership.
1.15 "CFP" or the "Partnership" means Coso Finance Partners, a California
general partnership of which the Managing Partner is New CLOC, and the other
general partner is ESCA, being the partnership organized under the Act by the
Original Agreement and as such partnership may be constituted from time to time.
1.16 "CFP II" means Coso Finance Partners II, a California general
partnership of which the Managing Partner immediately prior to the merger of CFP
II into CFP was China Lake Geothermal Management Company, a Delaware
corporation, and the other partner was ESCA Limited Partnership II, a California
limited partnership.
1.17 "CFP II Royalty" means the royalty rights originally retained by CFP
II pursuant to that certain Assignment and Royalty Agreement between CFP and CFP
II dated July 14, 1988 which shall be held by the Partnership after the date
hereof.
1.18 "COC" means Coso Operating Company LLC, a Delaware limited liability
company.
1.19 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any succeeding law.
1.20 "Combined Project" means the Turbine 1 Project together with the
Turbine 2 and 3 Project.
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1.21 "Co-Tenancy Agreement" means that certain Co-Tenancy Agreement, dated
as of even date herewith, by and between, the Coso Power Developers, a
California general partnership, Coso Energy Developers, a California general
partnership, and the Partnership
1.22 "CPD" means Coso Power Developers, a California general partnership.
1.23 "Distribution Condition" shall have the meaning set forth on Exhibit
D hereto.
1.24 "Distribution Date" means the 45th day following the end of each
calendar quarter, commencing with the third quarter of 1987, or the next
succeeding Business Day if such day is not a Business Day.
1.25 "Division I Assigned Rights" means the following rights assigned by
CLJV to CFP in partial consideration of the issuance of Interests to CLOC and
ESCA, which assignment was made in connection with the 1987 Agreement:
(a) the Turbine 1 Project Area Rights;
(b) the Power Sales Contract;
(c) an assignment of all assignable Turbine 1 Project Authorizations;
and
(d) CLJV's rights to acquire Turbine 1 and all other assets and
rights pursuant to "Buy-out", as described in the AMJV Project Agreement.
The Division I Assigned Rights are subject to all related monetary
obligations and liabilities assumed by the Partnership.
1.26 "Division I Capital Event" means any of the following: (a) a sale,
exchange, transfer, assignment or other disposition of all or a portion of any
Turbine 1 Project asset (but not including occasional sales in the ordinary
course of business of inventory, furniture, fixtures and equipment); (b) any
financing or refinancing of, or with respect to, a Turbine 1 Project asset; (c)
any condemnation or deeding in lieu of condemnation of a Turbine 1 Project
asset; (d) any collection with respect to property, hazard or casualty insurance
(but not business interruption insurance) or any damage award; or (e) any other
Turbine 1 Project transaction the proceeds of which, in accordance with
generally accepted accounting principles, are considered to be capital in
nature.
1.27 "Division I Cash Flow from Capital Events" means Cash Flow from
Capital Events pertaining to ownership and operation of the Turbine 1 Project.
1.28 "Division I Cash Flow from Operations" means, with respect to any
fiscal period and determined on the basis of a closing or interim closing of the
books as of the end of such
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period: (a) all cash receipts received during such fiscal period by the
Partnership attributable to the Turbine 1 Project (other than Division I Cash
Flow from Capital Events and Division I Capital Contributions); plus (b) any
amounts that were originally reserved from amounts that would otherwise have
been Division I Cash Flow from Operations that are no longer deemed by the
Management Committee to be required as reserves; less (c) all cash outlays
during such fiscal period to pay expenses of the Partnership attributable to the
Turbine 1 Project; less (d) amounts paid by the Partnership with respect to AMJV
Royalties, Tudesco Royalties and Navy Sinking Fund Payments; less (e) any
amounts set aside as reserves attributable to the Turbine 1 Project, including
reserves for capital improvements, expenses or contingent liabilities; less (f)
payments (and reserves for payments) of debt service (and premiums or penalties
thereon, if any) on indebtedness of the Partnership attributable to the Turbine
1 Project.
1.29 "Division I Payout" shall mean the point at which all Partners have
received distributions from Division I Cash Flow from Capital Events or Division
I Cash Flow from Operations in an aggregate amount equal to: (i) $14,509,815 for
CLOC, or (ii) $20,375,658 for ESCA, respectively, plus (iii) any cash
contributions to the Turbine 1 Project and the cash value, as determined by the
Management Committee, of any property contributed to the Turbine 1 Project after
December 31, 1988, plus (iv) a simple return of ten percent (10%) per annum on
the sum of (i), (ii), and (iii), as applicable, accrued from and after December
31, 1988, provided, however, that the 10% distribution of Division I Cash Flow
from Operations to the Managing Partner under Section 5.1(a) shall not be
considered a distribution in computing whether Division I Payout has been
achieved."
1.30 "Division II Assigned Rights" means the following rights assigned to
the Partnership by CFP II (subject to Section 4.1), which at the time was in
partial consideration of the CFP II Royalty:
(a) the Turbines 2 and 3 Project Area Rights;
(b) the Turnkey Contract together with all work in progress,
guarantees, security interests and subject to all liens thereunder; and
(c) an assignment of all assignable Turbines 2 and 3 Project
Authorizations.
The Division II Assigned Rights are subject to all related monetary
obligations and liabilities assumed by the Partnership.
1.31 "Division II Capital Event" means any of the following: (a) a sale,
exchange, transfer, assignment or other disposition of all or a portion of any
Turbines 2 and 3 Project asset (but not including occasional sales in the
ordinary course of business of inventory, furniture, fixtures and equipment);
(b) any financing or refinancing of, or with respect to, a Turbines 2 and 3
Project asset; (c) any condemnation or deeding in lieu of condemnation of a
Turbines 2 and 3 Project asset; (d) any collection with respect to property,
hazard or casualty insurance (but not
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business interruption insurance) or any damage award; or (e) any other Turbines
2 and 3 Project transaction the proceeds of which, in accordance with generally
accepted accounting principles, are considered to be capital in nature.
1.32 "Division II Cash Flow from Capital Events" means the Cash Flow from
Capital Events pertaining to the ownership and operation of the Turbines 2 and 3
Project.
1.33 "Division II Cash Flow from Operations" means, with respect to any
fiscal period and determined on the basis of a closing or interim closing of the
books as of the end of such period: (a) all cash receipts received during such
fiscal period by the Partnership attributable to the Turbines 2 and 3 Project
(other than Division II Cash Flow from Capital Events and Division II Capital
Contributions); plus (b) any amounts that were originally reserved from amounts
that would otherwise have been Division II Cash Flow from Operations that are no
longer deemed by the Management Committee to be required as reserves; plus (c)
the AMJV Royalties less (d) all cash outlays during such fiscal period to pay
expenses of the Partnership attributable to the Turbines 2 and 3 Project; less
(e) any amounts set aside as reserves attributable to the Turbines 2 and 3
Project, including reserves for capital improvements, expenses or contingent
liabilities; less (f) payments (and reserves for payments) of debt service (and
premiums or penalties thereon, if any) on indebtedness of the Partnership
attributable to the Turbines 2 and 3 Project.
1.34 "Division II Payout" means the point at which all Partners have
received distributions from Division II Cash Flow from Capital Events or
Division II Cash Flow from Operations in an aggregate amount equal to: (i)
$5,254,773 for CLOC, or (ii) $6,099,775 for ESCA, plus (iii) any cash
contributions and the cash value, as determined by the Management Committee, of
any property contributed to the Turbines 2 and 3 Project after December 31,
1988, plus (iv) a simple return of ten percent (10%) per annum on the sum of
(i), (ii) and (iii) accrued from and after December 31, 1988, provided, however,
that the 10% distribution of Division II Cash Flow from Operations to the
Managing Partner under Section 5.3(a) shall not be considered a distribution in
computing whether Division II Payout has been achieved.
1.35 "ESCA Operating Agreement" means that certain Limited Liability
Company Agreement of ESCA, LLC, a Delaware limited liability company dated as of
the date hereof.
1.36 "Escrow Account" means an interest-bearing deposit account acceptable
to the partners of each Joint Venture and established in the name of Managing
Partner with a bank acceptable to the Partners pursuant to an escrow or other
similar agreement which is acceptable to each such Partner and contains
distribution provisions in form attached as Exhibit E to this Agreement.
1.37 "Excess Revenues" means, with respect to a period and a Project, one
half of the difference between (a) the revenue for the Project for the period,
minus (b) the revenue which would have been produced if the Project had operated
continuously during the period at 85% of
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nominal capacity (calculated at an assumed capacity of 80 MW for the CPD Project
and the CFP Project and 70 MW for the CED Project).
1.38 "Fair Market Value" shall mean the fair market value of an asset, as
reasonably agreed to among the Partners in arm's-length negotiations, net of
liabilities secured by such asset or assumed by the Partnership with regard to
such asset.
1.39 "FPLE" means FPL Energy Operating Services, Inc. a Florida
corporation.
1.40 "Indenture" means that certain Trust Indenture dated as of the date
hereof, by and between Caithness Coso Funding Corp., the Joint Ventures and U.S.
Bank Trust National Association.
1.41 "Interest" means a partnership interest in the Partnership with the
rights, terms and preferences described in this Agreement.
1.42 "Joint Venture" means any or all of CED, CPD and the Partnership.
1.43 "Management Committee" means the Management Committee established
pursuant to Article VIII.
1.44 "Managing Partner" means New CLOC.
1.45 "Maximum Payment" means an amount equal to the Preferred Return.
1.46 "Meeting" means a meeting of Partners or of the Management Committee
duly called in accordance with Article VIII hereof.
1.47 "MPE" means Mission Power Engineering Company, a California
corporation.
1.48 "Navy Contract" means the Original Service Contract N62474-79-C-5382
dated December 6, 1979 between the United States Navy and CECI, as amended and
restated, and assigned.
1.49 "Navy Power Payment" means the payment for NAVWPNCEN Power, as
defined in Section 3(d) of Modification P00008 to the Navy Contract, delivered
with respect to Turbine 1.
1.50 "Navy Sinking Fund Payments" means the periodic payments set aside by
CFP to fund its obligations to the Navy upon termination of the Navy Contract as
described in Section 8 of Modification P00008 to the Navy Contract.
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1.51 "Net Profit" and "Net Loss" of the Partnership means the net "income"
and net "loss", respectively, of the Partnership, as those terms are used in
1.10(b).
1.52 "Operator" means such operator as is designated by the Managing
Partner pursuant to Article VII.
1.53 "Original Agreement" means the 1987 Agreement, as amended prior to
the date hereof.
1.54 "Partners" means the Managing Partner, ESCA and all substituted or
additional Partners. Where no distinction is required by the context in which
the term is used herein, "Partner" means any one of the Partners.
1.55 "Plant Operations" means the operation and maintenance of all aspects
of Turbine 1 operation and Turbines 2 and 3 operations which do not constitute
Resource Operations, including operation of the Transmission Line, power
transmission facilities and substation interconnection facilities.
1.56 "Power Sales Contract" means the Agreement between CLJV and the
Southern California Edison Company, a California corporation, dated June 4,
1984, as amended, assigned to CFP on July 14, 1987.
1.57 "Preferred Return" means, (a) $7,500,000, plus (b) the amount of
Preferred Return Interest accrued during any previous Preferred Return Year that
was not paid from distributions from the Escrow Account for that Preferred
Return year, less (c) the sum of all distributions from the Escrow Account
previously applied to reduce the Preferred Return. Notwithstanding the
foregoing, the Preferred Return was prepaid in full at a discount to the parties
entitled thereto on December 16, 1992; provided, however, that if for any
Preferred Return Year for which the Preferred Return would have been paid if
such prepayment had not been made the Distribution Condition is not satisfied,
then ESCA shall promptly pay to the Escrow Account an amount equal to its
proportionate share (based on the percentage share of the Preferred Return paid
to it) of $715,000, which is the amount of the Preferred Return allocable to
each Preferred Return Year after taking into account the discount in connection
with the prepayment, to be distributed pursuant to Exhibit E.
1.58 "Preferred Return Interest" means, (a) an amount equivalent to the
aggregate of the interest which would have accrued from March 19, 1991 through
the date of determination on the amount of the Preferred Return, as adjusted to
reflect distributions for each previous Preferred Return Year, at a per annum
rate of 10%, less (b) the sum of all distributions from the Escrow Account
previously applied to reduce Preferred Return Interest.
1.59 "Preferred Return Year" means each of the periods beginning on July 1
and ending on the immediately subsequent June 30. The first Preferred Return
Year shall begin on
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July 1, 1991, and the last Preferred Return Year shall end on the date on which
the Preferred Return would have been reduced to zero if there had been no
prepayment.
1.60 "Project Manager" shall mean the person appointed pursuant to Section
8.5.
1.61 "Projects" means the three geothermal power projects owned by the
Joint Ventures.
1.62 "Regulation" means the Treasury Regulations promulgated under the
Code, as such Regulations may be amended from time to time including
corresponding provisions of any succeeding Regulations.
1.63 "Resource Operations" means the well drilling and well operation and
maintenance work for the Turbine 1 Project Area and the Turbines 2 and 3 Project
Area, as well as the operation and maintenance of the geothermal resource
related to the Turbine 1 Project Area and the Turbines 2 and 3 Project Area, the
surface steam gathering system and brine disposal system, together with
construction and maintenance of buildings, roads and other surface structures on
the Turbine 1 Project Area and the Turbines 2 and 3 Project Area.
1.64 "Section," unless preceded by the words "Code" or "Regulation," means
a Section of this Agreement.
1.65 "Transmission Line" means the 28.8 mile (approximate) power line
further described in Exhibit C.
1.66 "Tudesco Royalties" means the amounts payable to Tudesco Geosource
Ltd. pursuant to the Agreement dated March 26, 1987 between CLJV and Tudesco
Geosource Ltd.
1.67 "Turbine 1" means ▇▇▇▇ ▇ of the geothermal power plant with a maximum
net output of approximately 25 megawatts and its associated facilities as
constructed by AMJV (including but not limited to the surface steam gathering
system, brine disposal system, power transmission facilities, substation
interconnection facilities and other facilities and equipment necessary to
generate, meter, sell and deliver power from Unit 1) together with any
replacements or substitutes; but excludes all geothermal resources and ▇▇▇▇▇.
1.68 "Turbine 1 Project" means the construction and operation of Turbine
1, and the development and operation of the Turbine 1 Project Area Rights and,
from and after the date of this Agreement and subject to and in accordance with
the terms and conditions of the Co-Tenancy Agreement, the rights and interests
under the BLM Leases.
1.69 "Turbine 1 Project Area" means the area described in Exhibit A.
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1.70 "Turbine 1 Project Area Rights" means the rights, titles, interests,
estates, powers and privileges CLJV has pursuant to the Navy Contract with
respect to the Turbine 1 Project Area, including rights to all ▇▇▇▇▇, the
Transmission Line, the Turbine 1 plant site, and other facilities (and all
improvements, equipment, fixtures and other items appurtenant or accessorial to
such ▇▇▇▇▇ or facilities), and including rights of access and egress to the
Turbine 1 Project Area, subject to the terms and conditions of the Navy
Contract, and, from and after the date of this Agreement and subject to and in
accordance with the terms and conditions of the Co-Tenancy Agreement, the rights
and interests under the BLM Leases.
1.71 "Turbine 1 Project Authorizations" means all permits, authorizations,
rights of way and licenses necessary or appropriate to operate and maintain
Turbine 1 and the geothermal resources subject to the Turbine 1 Project Area
Rights.
1.72 "Turbines 2 and 3" mean Units 2 and 3 of the geothermal power plant,
each having a maximum net output of approximately 25 megawatts and their
associated facilities as constructed by MPE pursuant to the Turnkey Contract
(including but not limited to the surface steam gathering system, brine disposal
system, power hookups to connect Units 2 and 3 to the Transmission Line and
other facilities and equipment necessary to generate meter, sell and deliver
power from Units 2 and 3); but excludes all geothermal resources and ▇▇▇▇▇, and
excludes the Transmission Line.
1.73 "Turbines 2 and 3 Project" means the construction and operation of
geothermal power plants on the Turbines 2 and 3 Project Area, and the
development and operation of the Turbines 2 and 3 Project Area Rights and, from
and after the date of this Agreement and subject to and in accordance with the
terms and conditions of the Co-Tenancy Agreement, the rights and interests under
the BLM Leases.
1.74 "Turbines 2 and 3 Project Area" means the area described in Exhibit
B.
1.75 "Turbines 2 and 3 Project Area Rights" means the rights, titles,
interests, estates, powers and privileges which CFP II has assigned to CFP with
respect to the Turbines 2 and 3 Project Area, including rights to all ▇▇▇▇▇, the
plant site, and other facilities (and all improvements, equipment, fixtures and
other items appurtenant or accessorial to those ▇▇▇▇▇ and facilities), including
rights of access and egress to the Turbines 2 and 3 Project Area, subject to the
terms and conditions of the Navy Contract, and, from and after the date of this
Agreement and subject to and in accordance with the terms and conditions of the
Co-Tenancy Agreement, the rights and interests under the BLM Leases.
1.76 "Turbines 2 and 3 Project Authorizations" means all permits,
authorizations, rights of way and licenses necessary or appropriate to operate
and maintain the Turbines 2 and 3 Project and the geothermal resources subject
to the Turbines 2 and 3 Project Area Rights.
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1.77 "Turnkey Contract" means the Contract for the Construction of the
Coso Geothermal Project (Units 2 and 3) dated December 14, 1987, between MPE and
CFP II, assigned to the Partnership on July 14, 1988, as amended.
ARTICLE II
PARTNERSHIP FORMATION; IDENTIFICATION; AND TERM
2.1 Formation. This Partnership was organized under the Act on July 7,
---------
1987 and shall be continued under and governed by the Act and this Agreement.
2.2 Amendment. The parties hereto agree to amend and restate the
---------
Original Agreement. The Managing Partner shall do, make or cause to be made
all such filings, recording, publishing and other acts as may be necessary or
appropriate from time to time in connection therewith, and as required to
preserve the existence of the Partnership.
2.3 Name, Principal Executive Office, Registered Office and Registered
------------------------------------------------------------------
Agent for Service of Process. The name of the Partnership shall be COSO FINANCE
----------------------------
PARTNERS, or such other name or names as may be selected by the Management
Committee from time to time. The principal executive office of the Partnership
and the office at which shall be kept the records, if any, required by the Act
shall be 1114 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
unless changed by the Managing Partner with prior written notice given to the
Interest holders of such change. The Partnership may also maintain such other
offices at such other places as the Managing Partner may deem advisable. The
name of the Partnership's agent for service of process is Corporation Service
Company, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and Corporation Service
Company, which will do business in California as CSC-Lawyers Incorporating
Services, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
2.4 Term. The Partnership shall continue so long as it has any
----
geothermal property interests in the Turbine 1 Project Area Rights or the
Turbines 2 and 3 Project Area Rights, or any obligations outstanding to any
lender having provided construction or term financing to the Partnership, or any
assignee thereof, unless the Partnership is terminated earlier in accordance
with Article XIII; provided, however, that subsequent to such time the
-------- -------
Partnership shall exist only to the extent and for the purposes necessary to
wind up the affairs of the Partnership.
ARTICLE III
PURPOSE AND NATURE OF BUSINESS; CERTAIN OBLIGATIONS
3.1 Purpose. The purpose of the Partnership and the business to be
-------
carried on by it, subject to the limitations contained elsewhere in this
Agreement, are:
13
(a) To hold Turbine 1 and the Division I Assigned Rights in connection
with the exercise of the Buy-Out rights under the AMJV Project Agreement; to
acquire the rights to, and to construct and finance Turbines 2 and 3 and to
acquire the Division II Assigned Rights; and to operate Turbine 1, Turbines 2
and 3 and the Combined Project;
(b) To raise sufficient capital through borrowings from banks or other
lenders to finance, or refinance, the acquisition or construction of Turbine 1
and Turbines 2 and 3 and to acquire the AMJV Royalties (for Division II) and the
acquisition of the Division I Assigned Rights and the Division II Assigned
Rights, and to provide for the development and the exploitation of the lands
subject to the Turbine 1 Project Area Rights and the Turbines 2 and 3 Project
Area Rights;
(c) To borrow money for any legitimate Partnership purpose and in
connection therewith to issue notes, bonds, debentures and other evidences of
indebtedness and to secure the same and hypothecate any, all or substantially
all of the assets of the Partnership by mortgage, deed of trust, pledge or other
lien in furtherance of the foregoing purposes of the Partnership;
(d) To enter into and perform contracts and agreements and to carry on
any other activities necessary to, or desirable or incidental in connection
with, the accomplishment of the foregoing purposes of the Partnership; and
(e) To engage in any kind of activity and to enter into and perform
obligations of any kind necessary to, or in connection with, or incidental to,
the accomplishment of the purposes and business of the Partnership, so long as
such activities and obligations may lawfully be engaged in or performed by a
partnership under the Act. Such purpose and business of the Partnership shall
include the entering into by the Partnership of the transactions described in
that certain preliminary Offering Circular of Caithness Coso Funding Corp. dated
May 5, 1999 (as it may have been revised, the "Offering Circular"), including
without limitation the making by the Partnership of certain loans to and the
pledging by the Partnership of certain funds and assets of the Partnership for
payment of certain obligations of affiliated partnerships, all to the extent
provided for and described in the Offering Circular and the definitive documents
entered into in accordance therewith.
ARTICLE IV
CAPITAL
4.1 Partners' Capital Contributions to the Partnership.
--------------------------------------------------
(a) CECI and CG-80 have caused CLJV to assign to the Partnership for
the benefit of CLOC and ESCA, respectively, all of the Division I Assigned
Rights and rights to
14
Turbine 1 held by CECI and CG-80, respectively, under the CLJV Agreement.
Concurrently with the execution of the 1987 Agreement, the Partnership assumed,
and took the Division I Assigned Rights and related contributed property subject
to, all liabilities secured by the contributed property at the time of
contribution or assumed by the Partnership with regard to such asset.
(b) The respective Capital Contributions of the Partners as of July
7, 1987 were as follows (the Cash Contributions to be made at a time to be
determined by the Management Committee):
CLOC ESCA
-------------- --------------
Property - at historical cost $ 9,236,891 $ 8,529,298
Deemed net value appreciation 834,012 3,580,680
-------------- --------------
Property - net deemed value $ 10,070,903 $ 12,109,978
Cash Accounts Receivable 0 2,695,000
At deemed net value 0 521,000
-------------- --------------
$ 10,070,903 $ 15,325,978
(c) The value of respective Capital Contributions at any particular
time is to be determined by reference to the books and records of the
Partnership.
4.2 Restrictions Relating to Capital; No Withdrawal. Except as otherwise
-----------------------------------------------
specifically provided in this Agreement or in the Act, no Partner shall have the
right to withdraw or reduce its Capital Contributions, to receive interest on
its Capital Contributions, to partition Partnership assets or to receive
property other than cash in return for its Capital Contributions.
4.3 Additional Capital Contributions; Additional Partners.
-----------------------------------------------------
(a) No Partner shall be required or entitled to make any additional
Capital Contributions to the Partnership except with the consent of, and in
accordance with the terms, conditions and procedures determined by, the
Management Committee. Such additional capital shall be contributed by the
Partners in proportion to their percentage distributions set forth in Sections
5.1(b) and 5.2(b), and shall be attributed by the Management Committee either to
the Turbine 1 Project or to the Turbines 2 and 3 Project, for purposes of
determining Division I Payout or Division II Payout, respectively.
(b) Except as provided in Article X, no additional Partners shall be
admitted to the Partnership except with the consent of, and in accordance with
the terms (including the relative rights, duties, and interest of such
additional Partners), conditions and procedures agreed to by all Partners;
provided, however, that any Partner may, without the consent of any other
Partner or the Management Committee, subdivide its Interest, through formation
of a partnership,
15
corporation or other arrangement that would hold that Partner's Interest, so
long as that Partner remains the owner of the controlling portion of such
Interest.
ARTICLE V
CURRENT DISTRIBUTIONS
5.1 Division I Cash Flow From Operations. Subject to Article XIII (that
------------------------------------
is, other than in liquidation of a Partner's Interest in the Partnership as
provided in Section 13.4 (a)), Division I Cash Flow from Operations shall be
applied or distributed on each Distribution Date as follows:
(a) until the Preferred Return has been reduced to zero (or funds are
on deposit in the Escrow Account sufficient to reduce the Preferred Return to
zero and the Distribution Condition will be satisfied for the Preferred Return
Year);
(i) until Division I Payout is achieved for all Partners, to
distribute 10% to New CLOC, and 90% to and among New CLOC and ESCA in the
proportion for each that the remaining sum necessary to be distributed in order
to achieve Division I Payout to each of them bears to the sum of the same for
both Partners; and
(ii) after Division I Payout is achieved by all Partners, to
distribute 46.4% to New CLOC and 53.6% to ESCA;
provided, however, that all amounts distributable to New CLOC pursuant to this
Section 5.1 (a) on the Distribution Date shall be deposited into the Escrow
Account until (a) the Joint Ventures have deposited therein an amount, in the
aggregate, equal to the Maximum Payment for the Preferred Return Year in which
the Distribution Date occurs, or (b) the Partnership has deposited therein an
amount, in the aggregate, equal to the Excess Revenues for the Partnership's
Project for the Preferred Return Year; and
(b) after the Preferred Return has been reduced to zero, in the manner
provided in Section 5.1(a)(i) and (ii), without regard to the proviso.
5.2 Division II Cash Flow from Operations. Subject to Article XIII (that
-------------------------------------
is, other than in liquidation of a Partner's Interest in the Partnership as
provided in Section 13.4 (a)) , Division II Cash Flow from Operations shall be
applied or distributed on each Distribution Date as follows:
(a) until the Preferred Return has been reduced to zero (or will be
reduced to zero through the distribution of funds on deposit in the Escrow
Account):
16
(i) until Division II Payout is achieved for all Partners, to
distribute 10% to New CLOC, and 90% to and among New CLOC and ESCA in the
proportion for each that the remaining sum necessary to be distributed in order
to achieve Division II Payout to each of them then bears to the sum of the same
for both Partners; and
(ii) after Division II Payout is achieved by all Partners, to
distribute 46.4% to New CLOC and 53.6% to ESCA;
provided, however, that all amounts distributable to New CLOC pursuant to this
Section 5.2 (a) on the Distribution Date shall be deposited into the Escrow
Account until (a) the Joint Ventures have deposited therein an amount, in the
aggregate, equal to the Maximum Payment for the Preferred Return Year in which
the Distribution Date relates, or (b) the Partnership has deposited therein an
amount, in the aggregate, equal to the Excess Revenues for the Partnership's
Project for the Preferred Return Year; and
(b) after the Preferred Return has been reduced to zero, in the manner
provided in Section 5.2(a)(i) and (ii), without regard to the proviso.
5.3 Division I Cash Flow From Capital Events. Subject to Article XIII
----------------------------------------
(that is, other than in liquidation of a Partner's Interest in the Partnership
as provided in Section 13.4(a)), Division I Cash Flow from Capital Events shall,
unless otherwise agreed by the Partners, be applied or distributed on each
Distribution Date as follows:
(a) until the Preferred Return has been reduced to zero (or will be
reduced to zero through the application of funds on deposit in the Escrow
Account):
(i) to deposit 46.4% in the Escrow Account; and
(ii) to distribute 53.6% to ESCA;
(b) after the Preferred Return has been reduced to zero, 46.4% to New
CLOC and 53.6% to ESCA.
5.4 Division II Cash Flow From Capital Events. Subject to Article XIII
-----------------------------------------
(that is, other than in liquidation of a Partner's Interest in the Partnership
as provided in Section 13.4 (a)), Division II Cash Flow from Capital Events
shall, unless otherwise agreed by the Partners, be applied or distributed on
each Distribution Date as follows:
(a) until the Preferred Return has been reduced to zero (or will be
reduced to zero through the application of funds on deposit in the Escrow
Account):
(i) to deposit 46.4% in the Escrow Account; and
17
(ii) to distribute 53.6% to ESCA;
(b) after the Preferred Return has been reduced to zero, 46.4% to New
CLOC and 53.6% to ESCA.
5.5 Characterization of Escrow Account Deposits and Payments. For tax and
--------------------------------------------------------
accounting purposes, (a) all amounts deposited in the Escrow Account pursuant to
Sections 5.1 (a), 5.2 (a), 5.3 (a) and 5.4 (a) shall be deemed to have been
distributed by the Partnership to New CLOC and to have been distributed as a
dividend by New CLOC to the Managing Partner, (b) the Managing Partner shall be
deemed to have directed the Partnership to make the deposits in the Escrow
Account on behalf of the Managing Partner, and (c) any payments from the Escrow
Account shall be deemed to have been made by the Managing Partner.
5.6 Intentionally Deleted.
18
ARTICLE VI
ALLOCATIONS
6.1 Allocation of Net Profit and Net Loss.
-------------------------------------
(a) The Net Profit or Net Loss of the Partnership which is
attributable to the Turbine 1 Project (exclusive of other items of income, gain,
loss, deduction or credit that are otherwise allocated under this Article VI)
shall be allocated to and among the Partners in the same manner that Division I
Cash Flow from Operations is (or would have been had there been Division I Cash
Flow from Operations) distributed under the provisions of Section 5.1.
(b) The Net Profit or Net Loss of the Partnership which is
attributable to the Turbines 2 and 3 Project (exclusive of other items of
income, gain, loss, deduction or credit that are otherwise allocated under this
Article VI) shall be allocated to and among the Partners in the same proportion
that Division II Cash Flow from Operations is (or would have been had there been
Division II Cash Flow from Operations) distributed to them under the provisions
of Section 5.2.
6.2 Allocation of Net Gain and Net Loss from Capital Events.
-------------------------------------------------------
(a) The net Book gain (Book gain in excess of Book loss) of the
Partnership from Division I Capital Events, and the net Book loss (Book loss in
excess of Book gain) of the Partnership from Division I Capital Events, shall be
allocated to and among the Partners in the same manner that Division I Cash Flow
from Capital Events is (or would have been had there been Division I Cash Flow
from Capital Events) distributed under the provisions of Section 5.3.
(b) The net Book gain (Book gain in excess of Book loss) of the
Partnership from Division II Capital Events, and the net Book loss (Book loss in
excess of Book gain) of the Partnership from Division II Capital Events, shall
be allocated to and among the Partners in the same manner that Division II Cash
Flow from Capital Events is (or would have been had there been Division II Cash
Flow from Capital Events) distributed under the provisions of Section 5.4.
6.3 Allocation of Depreciation.
--------------------------
(a) Book depreciation of the Partnership from the Turbine 1 Project
shall be allocated to and among the Partners in the same manner that Division I
Cash Flow from Capital Events is (or would have been had there been Division I
Cash Flow from Capital Events) distributed under the provisions of Section 5.3.
(b) Book depreciation of the Partnership from the Turbines 2 and 3
Project shall be allocated to and among the Partnership in the same manner that
Division II Cash Flow
19
from Capital Events is (or would have been had there been Division II Cash Flow
from Capital Events) distributed under the provisions of Section 5.4.
6.4 Allocation of Depletion. Book percentage depletion of the
-----------------------
Partnership and/or Book cost depletion of the Partnership shall be allocated to
and among the Partners as follows:
(a) Book percentage depletion for the Turbine 1 Project shall be
allocated to and among the Partners in the proportions in which the Partners are
allocated the related "gross income from the property" for the same applicable
accounting period. Unless otherwise required, Book percentage depletion and the
related "gross income from the property" for the Turbine 1 Project shall be
allocated to and among the Partners in the same manner that Division I Cash Flow
from Operations is (or would have been had there been Division I Cash Flow from
Operations) distributed under the provisions of Section 5.1.
(b) Book percentage depletion for the Turbines 2 and 3 Project shall
be allocated to and among the Partners in the proportions in which the Partners
are allocated the related "gross income from the property" for the same
applicable accounting period. Unless otherwise required, Book percentage
depletion and the related "gross income from the property" for the Turbines 2
and 3 Project shall be allocated to and among the Partners in the same manner
that Division II Cash Flow from Operations is (or would have been had there been
Division II Cash Flow from Operations) distributed under the provisions of
Section 5.2.
(c) Book cost depletion for the Turbine 1 Project shall be allocated
to and among the Partners in the proportions in which the Partners are allocated
the related "adjusted cost basis of the property" used to compute cost
depletion. Unless otherwise required, the Book cost depletion and the related
"adjusted cost basis of the property" for the Turbine 1 Project shall be
allocated to and among the Partners in the same manner that Division I Cash Flow
from Operations is (or would have been had there been Division I Cash Flow from
Operations) distributed under the provisions of Section 5.1.
(d) Book cost depletion for the Turbines 2 and 3 Project shall be
allocated to and among the Partners in the proportions in which the Partners are
allocated the related "adjusted cost basis of the property" used to compute cost
depletion. Unless otherwise required, the Book cost depletion and the related
"adjusted cost basis of the property" for the Turbines 2 and 3 Project shall be
allocated to and among the Partners in the same manner that Division II Cash
Flow from Operations is (or would have been had there been Division II Cash Flow
from Operations) distributed under the provisions of Section 5.2.
6.5 Allocation of Intangible Drilling and Development Costs. The Book
-------------------------------------------------------
deduction for intangible drilling and development costs of the Partnership shall
be allocated to and among the Partners as follows:
20
(a) Intangible drilling and development costs for the Turbine 1
Project paid from additional Capital Contributions shall be allocated 100% to
the Partner from whom the additional Capital Contributions for the deductible
items were received, effective from and after July 1, 1988.
(b) Intangible drilling and development costs for the Turbines 2 and
3 Project paid from additional Capital Contributions to the Turbines 2 and 3
Project shall be allocated 100% to the Partner from whom the additional Capital
Contributions for the deductible items were received.
(c) Intangible drilling and development costs for the Turbine 1
Project paid from funds borrowed by the Partnership shall be allocated among the
Partners in the same manner that Division I Cash Flow from Capital Events is
distributed under the provisions of Section 5.3.
(d) Intangible drilling and development costs for the Turbines 2 and
3 Project paid from funds borrowed by the Partnership shall be allocated among
the Partners in the same manner that Division II Cash Flow from Capital Events
is distributed under the provisions of Section 5.4.
6.6 Allocations For Tax Purposes.
----------------------------
(a) All items of Partnership income, gain, loss, and deduction for
federal and state income tax purposes shall be allocated to and among the
Partners in the same manner that the corresponding Book items of the Partnership
are allocated in Sections 6.1 through 6.5, except as otherwise provided in Code
Section 704(c) and Regulation Section 1.704-1(b)(4)(i).
(b) For purposes of Regulation Section 1.46-3(f)(2)(ii) concerning
the allocation of the adjusted tax basis of property for purposes of tax credits
allowable under Code Section 38, the adjusted tax basis of the Turbine 1 Project
shall be allocated in the same manner that Division I Cash Flow from Capital
Events is distributed under the provisions of Section 5.3, and the adjusted tax
basis of the Turbines 2 and 3 Project shall be allocated in the same manner as
Division II Cash Flow from Capital Events is distributed under the provisions of
Section 5.4.
(c) In the event that the Partnership has taxable income that is
characterized as ordinary income by reason of the recapture provisions of the
Code, each Partner's allocation of taxable gain from the sale or exchange of
Partnership assets (to the extent possible) shall include a proportionate share
of the recapture income equal to the Partner's (and his predecessors in
interest's) share of prior cumulative depreciation, cost recovery or other
deductions for the applicable Project with respect to the assets which gave rise
to the recapture income (but not to exceed the amount of gain allocated to each
Partner).
21
6.7 Intentionally Deleted.
6.8 Regulatory and Curative Allocations.
-----------------------------------
(a) Notwithstanding the foregoing provisions of this Article VI, the
Partnership shall allocate items of book income and gain in a manner that
constitutes a "minimum gain chargeback" as described in Section 1.704-2 of the
Treasury Regulations and the term "minimum gain" shall have the meaning assigned
to it therein. Determinations of each Partner's share of minimum gain shall be
made in accordance with Section 1.704-2 of the Treasury Regulations. In
addition, "partner nonrecourse deductions" shall be allocated to the Partners
bearing the risk of loss with respect to such deductions in accordance with
Section 1.704-2 of the Treasury Regulations.
(b) The Partners acknowledge and ratify the following modifications
to the provisions of this Article VI that were adopted pursuant to discussions
among the Partners and the Partnership accountants:
(i) For purposes of allocating income with respect to each
year, distributions are to be taken into account on the day in which they occur,
and the effective profit and loss percentages shall be determined as of each
date such distributions occur;
(ii) The following items are allocated in the ratios that apply
to Capital Events cash flow: depreciation, write-offs of plant and well capital
costs, fees paid to Southern California Edison related to transmission lines,
and alternative minimum tax adjustments and preferences associated with
property, plant and equipment; and
(iii) The initial capital contributions of the Partners are
determined by reference to the generally accepted accounting principle financial
statement figures for such capital contributions.
22
(c) As stated in Treasury Regulations Section 1.704-1(b)(4)(i), when
any property of the Partnership is reflected in the Capital Accounts of the
Partners and on the books of the Partnership at a book value that differs from
the adjusted tax basis of such property, then certain book items with respect to
such property will differ from certain tax items with respect to that property.
Since the Capital Accounts of the Partners are required to be adjusted solely
for allocation of the book items, the Partners' shares of the corresponding tax
items are not independently reflected by adjustments to the Capital Accounts.
These tax items must be shared among the Partners in a manner that takes account
of the variation between the adjusted tax basis of the applicable property and
its book value pursuant to or in the same manner as variations between the
adjusted tax basis and fair market value of property contributed to the
Partnership are taken into account in determining the Partners' share of tax
items under Code Section 704(c). In making allocations of tax items of the
Partnership, the Partnership shall comply with the foregoing principles.
(d) The Partners intend that the allocation of items of income, gain,
loss, deduction and credit pursuant to this Agreement result in Capital Account
balances that achieve the economic sharing provisions reflected in Article V, as
amended. Notwithstanding any other provisions contained herein, allocations of
income, gain, loss and deductions shall be applied and amended by the Managing
Partner as necessary to produce such result, including special allocations of
gross income and gross deductions and amendment of prior tax returns. This
Section 6.8(d) shall control notwithstanding any reallocation of income, loss or
items thereof by the Internal Revenue Service or other taxing authority.
ARTICLE VII
RIGHTS, DUTIES, LIABILITIES AND
COMPENSATION OF THE MANAGING PARTNER
7.1 General.
-------
(a) Except as otherwise provided in this Agreement, the Managing
Partner shall be responsible for the conduct of the business of the Partnership
and for Resource Operations. The Managing Partner shall devote to the business
affairs of the Partnership such time and effort as the Managing Partner may from
time to time deem necessary. Pursuant to that certain Operations and
Maintenance Agreement, made and entered into by the Partnership, COC and FPLE,
dated as of the date hereof, and that certain Field Operations and Maintenance
Agreement, executed by COC and the Partnership, dated as of the date hereof
(FPLE and COC are individually and collectively referred to herein as
"Operator") as either may be amended, COC shall act as Operator, provided,
however, that certain field and maintenance operations shall be performed by
FPLE.
23
(b) The Managing Partner and COC, in its capacity as the Operator,
shall be subject to all directives of the Management Committee with respect to
the performance of their respective duties hereunder, and shall be liable to the
Partnership for all damages, losses and expenses incurred by the Partnership as
a result of noncompliance with such directives.
7.2 General Rights and Powers of Managing Partner. Except as otherwise
---------------------------------------------
provided herein, including the provisions of Article VIII:
(a) The management and control of the day-to-day business and affairs
of the Partnership shall rest with the Managing Partner, which shall have such
rights and powers as are necessary, advisable or convenient to the discharge of
its duties under this Agreement and to the management of the business affairs of
the Partnership in furtherance of the purposes of the Partnership as set forth
in Article III.
(b) In furtherance of the purposes of the Partnership as set forth in
Article III of this Agreement, the Managing Partner is hereby granted the right,
power and authority to do on behalf of the Partnership all things which, in its
reasonable judgment, are necessary, proper or desirable to carry out its duties
and responsibilities hereunder, including, but not limited to, the following:
from time to time to incur all reasonable expenditures pursuant to the Budget;
to employ and dismiss from employment any and all employees, agents,
contractors, brokers, attorneys and accountants except for the partnership's
auditor; to create, by grant or otherwise, easements and servitudes; to borrow
money up to an aggregate principal amount of $100,000 at any time outstanding;
and to execute, acknowledge and deliver any and all contracts, agreements or
other instruments to effectuate any and all of the foregoing. Subject to the
direction of the Management Committee, the Managing Partner shall be responsible
for the following:
(i) maintain and protect the assets of the Partnership and the
interests of the Partners;
(ii) obtain such consultants, technicians, agents, and
contractors as it ▇▇▇▇▇ ▇▇▇ be required for Project operations;
(iii) make all reports and disburse funds in accordance with the
Budget for all payments required under this Agreement with respect to Project
operations and under all agreements, permits, authorizations, and other rights
relating thereto;
(iv) submit the Budget, cost projections and any other budgets
for Project operations to the Management Committee;
(v) keep full and accurate records and accounts of the
transactions entered into by it on behalf of the Partnership;
24
(vi) do all such acts and things and conduct all such steps as
may reasonably be necessary or advisable in its judgment for the efficient and
economical conduct of Project operations; and
(vii) secure adequate and reasonable insurance (to the extent
possible and with the Partners and Partnership as named insureds) covering those
insurable risks with respect to the Partnership and Partnership operations that
can be insured at reasonable costs, including risk of personal injuries to or
deaths of employees or others, risks of fire, and all other risks ordinarily
insured against in similar operations, and adjust losses and claims pertaining
to or arising out of such insurance. To the extent possible, and to the extent
not inconsistent with requirements of lenders to the Partnership, or as
determined by the Management Committee, the Partnership shall maintain the
following insurance:
(1) Worker's Compensation Insurance covering all employees
of the Partnership employed in, on or about the business premises, Turbine 1 and
Turbines 2 and 3 to provide statutory benefits as required by the laws of
California;
(2) Policies of insurance on standard insurance Service
Office forms with commercial insurers acceptable to the Management Committee
providing comprehensive commercial general liability coverage and comprehensive
commercial automotive liability coverage. Said policies shall cover generally
all liabilities which might arise under, or in the performance or nonperformance
of, this Agreement, including but not limited to products liability/completed
operations coverage, for the Partnership, the Partners and their respective
parents, subsidiaries or affiliated entities and each of their officers,
directors, employees, or agents (hereinafter in this subsection (2) collectively
called the "Insureds"). The policy shall also contain a blanket broad form
contractual endorsement and a severability of interest clause. The Insureds
shall be designated as a named insured, and the policies shall be endorsed to be
primary to any insurance which may be maintained by or on behalf of the Partners
and their parents, affiliates and their respective officers, directors or
employees. The policies shall have limits of liability agreeable to the
Management Committee.
In the event that the policies are on a "claims made"
basis, the retroactive date of the policies shall be July 7, 1987 for the
Turbine 1 Project and July 13, 1988 for the Turbines 2 and 3 Project.
Furthermore, if the policy is on a "claims made" basis, the Managing Partner's
responsibility to maintain such coverage shall survive the termination of this
Agreement until the expiration of the maximum statutory period of limitations in
the State of Florida and any jurisdiction where the Partnership has property for
actions based in contract or in tort; if coverage is on an "occurrence" basis,
such insurance shall be maintained by the Managing Partner during the entire
term of this Agreement. The policy shall not be canceled or materially altered
without at least 30 days' written notice to each Partner and the Partnership.
(3) A program of property insurance with limits and
coverages as agreed by the Management Committee, insuring risks of physical loss
or damage, including
25
without limitation, boiler and machinery exposures, loss or damage to any
equipment, or to Partnership property. The Managing Partner shall with the
assistance of the Management Committee undertake or make provisions to
investigate and settle any claim against third parties or insurers as a result
of property damage to Partnership property. With respect to any claim against
insurance procured pursuant to this Section the Managing Partner shall, at its
discretion with the cooperation and assistance of the Partners, pursue any right
of subrogation on behalf of the Partners or the applicable insurer.
7.3 Expenses. The Partnership shall reimburse the following expenses of
--------
the Partnership incurred by either of the Partners, limited to the amounts set
forth in the applicable Budget approved in accordance with Section 7.4:
(a) All organization fees and expenses of the Partnership;
(b) The actual costs of goods and materials used by or for the
Partnership by the Managing Partner, any subcontractors or the Partnership;
(c) All employee time and costs and related overhead of the Managing
Partner attributable to the business of the Partnership;
(d) All operational expenses of the Partnership that may be paid by
the Managing Partner pursuant to the terms hereof, including, without
limitation, the following: obligations related to Division I Assigned Rights and
Division II Assigned Rights; all costs of borrowed money paid to lenders; taxes
and assessments on Partnership assets and other taxes applicable to the
Partnership; legal, accounting, appraisal, audit and brokerage fees; fees and
expenses paid to independent consultants or insurance brokers; and
(e) All accounting, documentation, professional and reporting expenses
of the Partnership paid or to be paid to any person, including, without
limitation, the following: preparation and documentation of Partnership
accountings and audits; preparation and documentation of Partnership state and
federal tax returns; expenses of revising, amending, converting, modifying, or
terminating this Agreement or the Partnership; costs incurred in connection with
any litigation in which the Partnership is involved as well as any examination,
investigation or other proceedings conducted by any regulatory agency with
respect to the Partnership, including legal and accounting fees incurred in
connection therewith; costs of any computer equipment or services used for or by
the Partnership; the costs of preparation and dissemination of informational
material and documentation relating to a potential sale of Partnership Interests
to third parties or relating to a potential acquisition, sale, financing or
refinancing of Partnership assets; and all other expenses due to any Person in
connection with the maintenance and operation of the Partnership.
26
7.4 Budgets, Mechanism for Reimbursements.
-------------------------------------
(a) The Managing Partner shall prepare the Budget for the Partnership,
which shall include a capital expenditure budget and an annual budget for
Partnership operations. The Budget shall be presented to the Management
Committee for approval no later than ninety (90) days prior to the beginning of
the calendar year to which such Budget relates. Once the Budget has been
approved by the Management Committee, the Managing Partner may pay all
Partnership expenses, reimburse itself for expenditures permitted by Section
7.3, and otherwise apply all available Partnership funds in accordance with the
approved Budget. If all or any portion of a proposed Budget is not approved by
the Management Committee, the Managing Partner shall have the right to retain
Sandwell Corporation or, upon prior written notice to the other Partners, other
independent engineering firm not objected to in writing by the other Partners
within ten (10) days after receipt of the Managing Partner's designation of such
other firm to review the proposed budget. If such independent engineering firm
certifies that the proposed budget is reasonably designed to permit the Managing
Partner to operate and maintain a project of the type of the Combined Project
and to maximize revenues and net income to the Partnership, such proposed budget
shall be deemed to be the Budget. If the independent engineering firm fails to
provide such certification prior to the commencement of the subject budget year,
the Budget shall be the same as in the immediately preceding year, adjusted for
inflation in accordance with the national Consumer Price Index. The Managing
Partner shall be liable to the Partnership for all payments found to be in
noncompliance with an approved Budget (including, without limitation, any Budget
that is deemed to be approved pursuant to the two immediately preceding
sentences) except for any such payment as may be ratified by the Management
Committee or otherwise expressly permitted under this Agreement without
Management Committee approval.
(b) Subject to the approval of the Management Committee, the
reasonable costs incurred by the Partners in connection with matters to be
considered by the Management Committee as well as any other activities of the
Partners assigned to such Partners by the Management Committee shall be
reimbursed by the Partnership in accordance with the amounts set forth in the
applicable Budget approved in accordance with Section 7.4(a).
7.5 Third Party Reliance. Any person dealing with the Partnership as to
--------------------
any matter with respect to which the Managing Partner is granted authority
hereunder may rely solely on written advice from the Managing Partner as to any
matter relating to this Agreement, as to compliance herewith and as to the
authority of the Managing Partner to act on behalf of the Partnership, and as
between the Partnership or the Managing Partner, on the one hand, and such other
person, on the other hand, the facts stated in such written advice from the
Managing Partner will be conclusive and binding on the Partnership and the
Managing Partner.
27
ARTICLE VIII
MANAGEMENT OF PARTNERSHIP
8.1 Management Committee. Subject to requirements of the Act or other
--------------------
applicable law the business operations of the Partnership shall be overseen by a
Management Committee, consisting of two delegates appointed by New CLOC and two
delegates appointed by ESCA. New CLOC and ESCA shall each be fully empowered to
substitute for its own delegates and to appoint alternates. The decision of the
Management Committee shall be required for all actions set forth in Section 8.4.
8.2 Meetings. The Partnership shall hold Meetings to transact all
--------
Partnership business for which a meeting or a vote of the Partners is required
by the Act. Each Partner shall send two delegates to each Meeting. Each
Partner may substitute or change delegates at will, and shall notify the other
Partner of the names of such delegates prior to each Meeting.
8.3 Procedures. Management Committee Meetings and Partnership Meetings
----------
shall occur and be conducted pursuant to the following procedures:
(a) The Partnership and the Management Committee shall hold a Meeting
on the second Tuesday of January, April, July and October of each year and on
such other dates as shall be called by a Partner on written notice of not less
than fifteen (15) business days given by the calling party to all Partners. All
meetings shall, unless otherwise waived by at least three delegates, be preceded
by no less than fifteen (15) business days by an agenda and supporting
documentation provided by the calling Partner (or by the Managing Partner for
regular meetings), describing, in reasonable detail, the issues to be presented
to the Management Committee for voting. Meetings shall be held at the Managing
Partner's office and begin at 10:00 A.M. unless another time or place is agreed
to.
(b) A quorum of three (3) delegates (including alternates to delegates
not present) must be present to convene a Meeting and/or vote on Partnership or
Management Committee matters.
(c) All votes on Partnership or Management Committee action shall
require a favorable vote of at least a majority of the delegates comprising the
quorum present at the Meeting; provided, however, that said favorable vote must
be composed of at least one favorable vote by a delegate representing New CLOC
and one favorable vote by a delegate representing ESCA.
(d) Action by the Partnership and the Management Committee may be
taken at any time without a meeting upon the written consent of at least three
(3) delegates after proper advance written notice is given to all delegates
setting forth in detail the action which is proposed to be taken by the
Partnership or Management Committee.
28
(e) In any event, delegates may vote at a meeting or by a letter,
telex, telegram, or other written communication addressed to the other delegates
or by telephone confirmed subsequently in writing.
(f) The Partnership and the Management Committee may also take action
by vote of at least three (3) delegates given by the telephone and subsequently
confirmed in writing to all delegates. The notice provision in Section 8.3(a)
shall apply also to such vote by telephone, provided, however, that vote may be
taken without notice, if in the reasonable opinion of the three delegates so
voting, there exists an emergency situation precluding such advance notice, and
that all reasonable efforts have been made to notify all Partners of the
emergency and the vote.
(g) Minutes shall be prepared for all Meetings, and shall be approved
by the Partners or the Management Committee, as applicable, prior to being
entered into the permanent minute book maintained by the Managing Partner for
the Partnership.
8.4 Limitations on Authority of Managing Partner. The Managing Partner
--------------------------------------------
shall have no authority to do any act prohibited by law, nor shall the Managing
Partner, without the consent of the Management Committee, have any authority to:
(a) Permit any creditor who makes a loan to the Partnership to take,
as a condition of making such loan, any direct or indirect interest in the
profits, capital, assets or property of the Partnership other than as a secured
creditor;
(b) Sell or lease the Partnership's rights in commercial geothermal
▇▇▇▇▇, power plants and other substantial assets owned by the Partnership;
(c) make or amend contracts for the sale of electricity;
(d) Terminate, liquidate and wind up the Partnership, except upon the
occurrence of an event which, under the Act, dissolves or terminates the
Partnership;
(e) Approve and establish procedures and ongoing review of all budgets
and the budget process, including each Budget;
(f) Change the Partnership's auditor;
(g) Create, incur, or assume any indebtedness for borrowed money other
than in the ordinary course of Partnership business or create, incur, or assume
any indebtedness in aggregate principal amount at any time outstanding greater
than $100,000;
(h) Obtain refinancing or replacements of any mortgages or other
security instruments related in any way to any Partnership property, or repay in
whole or in part,
29
refinance, recast, modify, consolidate or extend any of the terms of any
indebtedness owed by the Partnership or affecting all or any portion of any
Partnership property;
(i) Modify, amend or waive any provision of any material agreement to
which the Partnership is a party;
(j) Acquire, amend or terminate any geothermal leases;
(k) Select or discharge the person employed as the Project Manager of
the Combined Project;
(l) Engage and discharge outside consultants, construction
contractors, engineers or similar entities or professionals, including contracts
with third party Project operators in connection with work to be performed by or
for the benefit of the Partnership in instances where the estimated or incurred
cost of said work exceeds $100,000; excluding, however, contracts for drilling
of ▇▇▇▇▇ and all related supplies and equipment, provided the estimated costs of
such contracts do not exceed the amounts budgeted for such items in an approved
Budget; further provided that any contract between the Partnership and the
Operator, the Managing Partner or any of their affiliates must have the approval
of the Management Committee;
(m) All other functions for which Partnership approval is required by
applicable law or for which Management Committee approval is required by this
Agreement;
(n) (i) do any act in contravention of this Agreement or not in
furtherance of the purposes of the Partnership set forth in Article III; (ii) do
any act which would make it impossible to carry on the ordinary business of the
Partnership; (iii) confess a judgment against the Partnership; (iv) possess
Partnership property or assign rights in specific Partnership property, for
other than a Partnership purpose; (v) change or reorganize the Partnership into
any other legal form; or (vi) admit a person as a Partner, except as provided in
this Agreement.
(o) Issue any Additional Notes pursuant to Section 8.06 of the
Indenture.
Notwithstanding anything to the contrary set forth herein, the
Managing Partner shall have the authority, without the approval of the
Management Committee, to administer the definitive documents entered into by the
Partnership in accordance with and as generally described in the Offering
Circular, including any amendments, waivers, extensions, indulgences, minor
adjustments, or other loan administration matters with respect to such documents
(other than amendments materially affecting the Partnership or any Partner).
8.5 Project Manager. The Project Manager shall be the on-site senior
---------------
manager responsible for the day-to-day management of the Combined Project. The
Project Manager shall report regularly to the Management Committee. He shall be
employed by the Managing Partner
30
on terms and conditions approved by the Management Committee, and subject to
periodic review and change. The Project Manager may be terminated with or
without cause by the vote of two delegates to the Management Committee.
ARTICLE IX
REPRESENTATIONS AND COVENANTS OF PARTNERS
9.1 Representation of Partners. Each Partner represents to each other
--------------------------
Partner that it is an entity duly organized and validly existing under the laws
of its jurisdiction of organization, and qualified to do business in the State
of California, that all action required by such Partner to authorize that
Partner to enter into this Agreement has been taken, and that this Agreement is
a binding agreement of that Partner, enforceable in accordance with its terms.
9.2 Covenants of Partners. Each Partner covenants that it will not
---------------------
engage in any business or in any other activities other than performing its
obligations under this Agreement to the extent such business or other activities
are otherwise not permitted by agreements between the Partnership and financing
entities.
ARTICLE X
ASSIGNMENTS OR TRANSFERS OF INTERESTS
10.1 Assignments. Subject to compliance with applicable federal and state
-----------
securities laws, and subject to Section 4.3(b), a Partner may transfer all or a
portion of his Interest in the Partnership, by an executed and acknowledged
written instrument, only with the consent of the Management Committee. Subject
to compliance with applicable federal and state securities laws, assignments
will be recognized by the Partnership as effective only on the first day of the
calendar month following the receipt by the Partnership of written notice of the
assignment. The Partnership may charge the assigning or transferring Partner
and any Partner requesting a change of name, type of ownership, etc., a fee not
to exceed the expenses, including actual legal expenses, incurred in effecting
the assignment or transfer of his interest in the Partnership or other change in
the records of the Partnership.
10.2 Substituted Partners. No assignee of the whole or any portion of a
--------------------
Partner's Interest in the Partnership shall have the right to become a
substituted Partner in the place of his assignor unless all of the following
conditions are satisfied:
31
(a) The fully executed and acknowledged written instrument of
assignment that has been filed with the Partnership sets forth the intention of
the assignor that the assignee become a substituted Partner in his place;
(b) The assignor and assignee execute and acknowledge such other
instruments as the Management Committee may deem necessary or desirable to
effect such admission, including the written acceptance and adoption by the
assignee of the provisions of this Agreement, the form and content of which
shall be provided by the Management Committee;
(c) Any transfer fee and legal expenses, if any, referred to in
paragraph (a) above required to be paid shall have been paid;
(d) The transfer shall not be in violation of any applicable federal
or state securities laws, including the Securities Act of 1933, as amended, it
being understood and agreed that the Management Committee may require as a
condition of such transfer that the Partnership be furnished with an appropriate
opinion of counsel to the foregoing effect, which counsel and opinion shall be
satisfactory to the Management Committee; and
(e) The Management Committee has consented to the assignment (which
consent may be granted or withheld at the sole discretion of the Management
Committee).
10.3 Management Committee Option. The Management Committee may elect to
---------------------------
treat an assignee who has not become a substituted Partner as a substituted
Partner in the place of his assignor should it deem, in its sole discretion,
that such treatment is in the best interest of the Partnership for any of its
purposes or for any of the purposes of this Agreement.
10.4 Amendment of Agreement. The Managing Partner will be required to
----------------------
prepare an amendment to this Agreement for signature by the Partners to reflect
the substitution of Partners. Until this Agreement is so amended, an assignee
shall not become a substituted Partner.
10.5 Insolvency. Upon the bankruptcy, insolvency, dissolution, or other
----------
cessation to exist as a legal entity of a Partner not an individual, the
authorized representative of such entity shall have all the rights of a Partner
for the purpose of effecting the orderly winding up and disposition of the
business of such entity and such power as such entity possessed to constitute a
successor as an assignee of its interest in the Partnership and to join with
such assignee in making application to substitute such assignee as a Partner.
10.6 Special Restrictions Relating to Non-U.S. Persons. Each transferee of
-------------------------------------------------
an Interest shall certify whether or not such transferee is a U.S. person. Such
certifications shall be made on the transfer application required to be
submitted pursuant to Section 10.2. Each Partner shall notify the Managing
Partner if it becomes a non-U.S. person within 30 days of such change. Prior to
a disposition of a "United States Real Property Interest," as defined in Code
Section 897,
32
or a distribution pursuant to a disposition of a "United States Real Property
Interest," each Partner shall, if requested to do so by the Managing Partner,
certify as a to its U.S. person status.
10.7 Amendments in Respect of Transfers; Admission of Partners; Etc. The
---------------------------------------------------------------
Managing Partner, at the discretion of the Management Committee, shall amend any
Partnership document listing the Partners from time to time to reflect and the
admission, substitution or withdrawal of Partners, provided that such documents
shall be amended no less often than quarterly. No such admission, substitution
or withdrawal shall be effective until all appropriate Partnership documents are
so amended.
ARTICLE XI
LOANS TO THE PARTNERSHIP
11.1 Authority to Borrow. Subject to the approval of the Management
-------------------
Committee and to the limitations elsewhere provided in this Agreement, the
Partnership may from time to time borrow such amounts from such persons
(including the Managing Partner or any other Partner and its affiliates) on such
security and payable on such terms as the Managing Partner may determine.
11.2 Loans from Partners. If a Partner shall, with the prior consent of
-------------------
the Management Committee, make any loan or loans to the Partnership or advance
money on its behalf, the amount of any such loan or advance shall not increase
the applicable Capital Account of the lending Partner or entitle such lending
Partner to any increase in his share of the distributions of the Partnership or
result in his having any greater share of Partnership allocations of Net Profit
and Net Loss. The amount of any such loan or advance shall be a debt due from
the Partnership to such lending Partner, repayable upon such terms and
conditions and bearing interest at such rates as shall be mutually agreed upon
by the lending Partner and the Management Committee, and such loan or advance
may, subject to approval of the Management Committee, be secured by a mortgage,
deed of trust, pledge, security interest or other lien in or on any, all or
substantially all of the properties and other assets of the Partnership.
ARTICLE XII
BOOKS, RECORDS AND REPORTS
12.1 Books. The Partnership, at its expense, shall maintain books and
-----
records for the Partnership at the Managing Partner's designated office, and all
Partners shall have the right to inspect and examine such books and records, and
to copy them (at their own expense), but only for a valid business purpose
related to the conduct of the Partnership's business, upon reasonable notice and
during regular business hours.
33
12.2 Reports. The Partnership shall cause to be prepared and delivered
-------
to Partners, at its expense, the following reports (all unaudited reports to be
certified by the Chief Financial Officer of the Managing Partner):
(a) Within 60 days after the end of the first three quarterly periods
of the Partnership's fiscal year, a quarterly report containing the following:
(i) A balance sheet, which may be unaudited;
(ii) A statement of income for the three-month period then
ended, and for the year to date at such quarter end, which may be unaudited;
(iii) A statement of changes in financial position for the
three-month period then ended, and for the year to date at such quarter end,
which may be unaudited;
(iv) Other pertinent information regarding the Partnership and
its activities during the three-month period covered by the report; and
(v) A statement setting forth in reasonable detail the
services rendered by the Managing Partner to the Partnership and the amounts
charged for those services, and the Managing Partner shall provide such further
detailed information as any Partner may reasonably request.
(b) Within 75 days after the end of each fiscal year of the
Partnership, all information concerning the Partnership reasonably necessary for
the preparation of the Partners' federal and state income tax returns.
(c) Within 45 days after the end of each fiscal year of the
Partnership, an annual report containing (i) a balance sheet as of the end of
its fiscal year and statements of income, Partners' equity and changes in
financial position, for the year then ended, all of which shall be prepared in
accordance with generally accepted accounting principles consistently applied
and accompanied by an auditor's report containing to the extent available an
unqualified opinion of an independent certified public accountant; (ii) a report
of the activities of the Partnership during the period covered by the report.
(d) Within 27 days after the end of each fiscal year of the
Partnership, unaudited versions of the financial statements described in
12.2(c).
(e) Copies of any documents delivered to any institution providing
financing to the Partnership pursuant to the requirements of any Partnership
loan documents.
34
12.3 Accounting Decisions. Except as otherwise provided in this
--------------------
Agreement all decisions as to accounting matters shall be made by the Managing
Partner as directed by the Management Committee.
12.4 Income Tax Elections and Proceedings.
------------------------------------
(a) The Management Committee shall direct the Managing Partner to
make such elections under the tax laws of the United States, the several States
and other relevant jurisdictions as to the treatment of the Partnership's items
of income, gain, loss, deduction and credit and as to all other relevant matters
as it reasonably believes necessary, appropriate or desirable.
(b) In the event the Partnership is subject to administrative or
judicial proceedings for the assessment and collection of deficiencies for
federal, state or local taxes or for the refund of overpayments of federal,
state or local taxes arising out of a Partner's distributive share of the tax
items of the Partnership, the Managing Partner shall act as, and shall have all
the power and duties assigned to, the "tax matters partner" under Code Sections
6221-6232 and the Regulations thereunder. The Partners agree to perform all
acts necessary under Code Section 6231 and the Regulations thereunder to
designate the Managing Partner as the "tax matters partner."
(c) No Partner shall, on such Partner's federal or state income tax
return, treat any "partnership item" (as defined in Code Section 6231(a)(3) and
the Regulations thereunder) in a manner which is inconsistent with the treatment
of such "partnership item" on the Partnership's return without first submitting
its proposed treatment to the other Partner for its advance review.
(d) Bank Accounts. The Managing Partner may designate from time to
-------------
time those persons authorized to execute checks and other items on the
Partnership bank accounts. The funds of the Partnership shall not be commingled
with the funds of any other person. The Managing Partner shall have fiduciary
responsibility for the safekeeping and use of all funds and assets of the
Partnership, whether or not in the Managing Partner's possession or control, and
it shall not employ, or take actions to permit another to employ, such funds or
assets in any manner except as provided in this Agreement.
(e) The Managing Partner shall make an election, solely for purposes
of Code Section 614(b)(3), to make a pooling agreement with respect to the
Turbine 1 Project Area and the Turbines 2 and 3 Project Area, unless otherwise
directed by the Management Committee.
35
ARTICLE XIII
DISSOLUTION AND TERMINATION OF THE PARTNERSHIP AND THE
LIQUIDATION OF A PARTNER'S INTEREST IN THE PARTNERSHIP
13.1 Dissolution. Only the happening of any one of the following events
-----------
shall dissolve the Partnership:
(a) The expiration of the Term of the Partnership;
(b) The expiration of 60 days after the Partnership's election to
dissolve the Partnership (provided that no Partner shall, without such approvals
as may be required from lenders providing financing to the Partnership in
accordance with the relevant loan or financing agreements, seek the dissolution
of the Partnership);
(c) The entry of a decree of judicial dissolution of the Partnership
pursuant to the Act; or
(d) The occurrence of any event that would cause the dissolution of
the Partnership under the Act or that would make it unlawful for the business of
the Partnership to be continued.
13.2 Distributions in Liquidation of the Partnership and in Liquidation
------------------------------------------------------------------
of a Partner's Interest in the Partnership:
------------------------------------------
(a) In the event of a distribution in connection with the
liquidation of the Partnership, the occurrence of which is described in Section
13.4(b), the Partnership shall apply and distribute the proceeds from the
liquidation of the assets of the Partnership and collection of the receivables
of the Partnership, together with assets distributed in kind, to the extent
sufficient therefor, in the following order of priority:
(i) First, to the payment and discharge of all liabilities,
obligations and debts of the Partnership and the expenses of liquidation, paid
in the order then required by California law;
(ii) Second, to the creation and setting up of any reserves
which the Management Committee may deem necessary, appropriate or desirable for
any future, contingent or unforeseen liabilities, obligations or debts of the
Partnership which are not yet payable or have not yet been paid. The Partnership
may pay, but is not obligated to pay, such reserves to an independent escrow
holder designated by the Management Committee, to be held by it for the purpose
of disbursing such reserves in payment of any of the aforementioned liabilities,
obligations and debts and, at the expiration of such period as the Management
Committee shall
36
deem necessary, advisable or desirable, to distribute the balance thereafter
remaining in the manner hereinafter provided;
(iii) Third, to the payment and discharge of all of the
liabilities, obligations and debts of the Partnership owing to Partners, but if
the amount available for payment is insufficient, then pro rata in accordance
with the amount of those liabilities, obligations and debts; and
(iv) Finally, to the Partners with positive Capital Accounts,
in accordance with their respective Capital Accounts after taking into account
all Capital Account adjustments for the Partnership taxable year during which
such liquidation occurs (other than those made pursuant to this Section 13.2, or
Section 13.3).
(b) Except as otherwise provided in Regulation Section 1.704-
1(b)(2)(ii)(b), a distribution to a Partner in liquidation of such Partner's
interest in the Partnership (as described in Section 13.4(c)), but other than in
liquidation of the Partnership (the occurrence of which is described in Section
13.4(b)), shall be in an amount equal to each Partner's Capital Account after
taking into account all Capital Account adjustments for the Partnership taxable
year during which such liquidation occurs (other than those made pursuant to
this Section 13.2 or Section 13.3).
(c) For purposes of this Section 13.2, the Partnership taxable year
shall be determined without regard to Code Section 706(c)(2)(A).
13.3 Deficit Capital Account.
-----------------------
(a) If any Partner has a deficit balance in its Capital Account
following the liquidation of such Partner's Interest in the Partnership (the
occurrence of which is described in Section 13.4(a)), as determined after taking
into account all Capital Account adjustments for the Partnership taxable year
during which such liquidation occurs (other than those made pursuant to this
Section 13.3), such Partner must pay to the Partnership the amount of such
deficit balance.
(b) This amount shall, in the event of a distribution in connection
with the liquidation of the Partnership (the occurrence of which is described in
Section 13.4(b)), be paid to creditors of the Partnership or distributed to the
other Partners with positive Capital Accounts in accordance with their Capital
Account balances as provided in Section 13.2(a). This payment must be made no
later than the end of the taxable year during such liquidation of the Partner's
Interest in the Partnership occurs (or, if later, within 90 days after the date
of such liquidation).
(c) The Partners intend that the provisions of this Section 13.3,
will constitute an unconditional obligation of a Partner to restore the amount
of the deficit in its Capital Account, as described in Regulation Section 1.704-
1(b)(2)(ii)(b)(3). The Regulations control in the case of any conflict between
the Regulations and this Section 13.3.
37
(d) For purposes of this Section 13.3, the Partnership taxable year
shall be determined without regard to Code Section 706(c)(2)(A).
13.4 Liquidation of the Partnership and Liquidation of a Partner &
-------------------------------------------------------------
Interest in the Partnership.
---------------------------
(a) For purposes of Sections 1.10, 5.1, 5.2, 5.3, 5.4 and 13.3(a),
a liquidation of a Partner's Interest in the Partnership occurs upon the earlier
of (i) the date upon which there is a liquidation of the Partnership or (ii) the
date upon which there is a liquidation of the Partner's Interest in the
Partnership.
(b) For purposes of Section 13.4(a) and Sections 13.2(a) and
13.3(b), the liquidation of the Partnership occurs upon the earlier of (i) the
date upon which the Partnership is terminated under Code Section 708(b)(1), or
(ii) the date upon which the Partnership ceases to be a going concern (even
though it may continue in existence for the purpose of winding up its affairs,
paying its debts, and distributing any remaining balance to its Partners).
(c) For purposes of Sections 13.4(a) and 13.2(b), the liquidation
of a Partner's Interest in the Partnership means the termination of a Partner's
entire Interest in the Partnership by means of a distribution, or a series of
distributions, to the Partner by the Partnership. A series of distributions will
come within the meaning of this term whether they are made in one year or in
more than one year. Where a Partner's Interest is to be liquidated by a series
of distributions, the Interest will not be considered as liquidated until the
final distribution has been made.
(d) The liquidation of a Partner's Interest in the Partnership, the
occurrence of which is described in Section 13.4(a), will not be delayed after
the Partnership's primary business activities have been terminated for a
principal purpose of deferring any distribution pursuant to Section 13.2(a)(iv),
or deferring any Partner's obligation under Section 13.3.
13.5 Time of Liquidation. Subject to Section 13.4(d) a reasonable time
-------------------
shall be allowed for the orderly liquidation of the assets of the Partnership
and the discharge of liabilities to creditors so as to enable the Partnership to
minimize to the extent it deems practicable, advisable or desirable the normal
losses attendant upon a liquidation.
13.6 Liquidation Statement. Each of the Partners shall be furnished
---------------------
with a statement prepared by the Partnership, which shall set forth the assets
and liabilities of the Partnership as of the date of complete liquidation. Upon
the Partnership complying with the foregoing distribution plan, the Partners
shall cease to be such and the Managing Partner may execute, acknowledge and
cause to be filed and recorded a certificate of cancellation of the Partnership
or other appropriate documents evidencing its dissolution and winding up.
38
ARTICLE XIV
LIMITATION OF LIABILITY OF MANAGING PARTNER AND
INDEMNIFICATION OF THE MANAGING PARTNER AND OTHERS
14.1 Limitation on Liability of Managing Partner. None of the Managing
-------------------------------------------
Partner or its officers, directors, members, shareholders, employees or agents
will be liable to the Partnership or the Partners for any expense, loss or
liability suffered by the Partnership or the Partners in connection with the
Partnership or its activities; provided that, in the event such expense, loss or
liability arose out of any action or inaction of a Managing Partner or its
affiliates or such other persons, as the case may be, the foregoing shall only
apply if (i) such course of conduct did not constitute gross negligence, acts of
bad faith or willful misconduct, and (ii) the Managing Partner, its affiliates
or such other persons, as the case may be, had previously determined in good
faith that such course of conduct was in the best interests of the Partnership.
14.2 Indemnification of the Managing Partner.
---------------------------------------
(a) The Partnership shall indemnify and hold harmless the Managing
Partner, and its officers, directors, members, shareholders, employees and
agents (individually, an "Indemnitee") from and against any and all losses,
claims, demands, costs, damages, liabilities, joint and several, expenses of any
nature (including attorneys' fees and disbursements), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative,
(including without limitation any action brought by the Project Manager for
unlawful termination of employment) in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise arising out of or incidental
to the business of the Partnership, including without limitation liabilities
under the federal and state securities laws, regardless of whether the
Indemnitee continues to be the Managing Partner, or an officer, director,
member, shareholder, employee or agent of the Managing Partner at the time any
such liability or expense is paid, if the Indemnitee's conduct did not
constitute actual fraud, willful misconduct or gross negligence and if the
Indemnitee acted in a manner it reasonably believed to be in the best interests
of the Partnership. The termination of any action, suit or proceeding by
settlement or upon a plea of nolo contendre, or its equivalent, shall not, in
and of itself, create a presumption or otherwise constitute evidence that the
Indemnitee acted in a manner contrary to that specified above.
(b) Reasonable expenses incurred by an Indemnitee in defending any
claim, demand, action, suit or proceeding subject to this Section 14.2 shall,
from time to time, be advanced by the Partnership prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by the
Partnership of an undertaking by or on behalf of the Indemnitee to repay such
amount if it shall be determined that such person is not entitled to be
indemnified as authorized in this Section 14.2.
39
(c) The indemnification provided by this Section 14.2 shall be in
addition to any other rights to which those indemnified may be entitled under
any agreement, vote of the Partners, as a matter of law or equity or otherwise,
both as to action in the Indemnitee's capacity as Managing Partner, as an
affiliate or as an officer, director, employee or agent of a Managing Partner or
an affiliate and as to any action in another capacity, and shall continue as to
an Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain insurance, at the
Partnership's expense, on behalf of the Managing Partner and such other persons
as the Management Committee shall determine, against any liability that may be
asserted against or expense that may be incurred by such person in connection
with the activities of the Partnership and/or the Managing Partner's acts or
omissions as Managing Partner of the Partnership regardless of whether the
Partnership would have the power to indemnify such person against such liability
under the provisions of this Agreement.
(e) Any indemnification hereunder shall be satisfied solely out of
the assets of the Partnership. No Partner shall be subject to personal
liability by reason of these indemnification provisions.
(f) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 14.2 by reason of the fact that the Indemnitee had an
interest in the transaction with respect to which the indemnification applies if
the transaction was otherwise permitted by the terms of this Agreement.
(g) The provisions of this Section 14.2 are for the benefit of the
Indemnitees, their heirs and personal representatives, and shall not be deemed
to create any rights for the benefit of any other Persons.
14.3 Management Committee Indemnification. The Partnership shall
------------------------------------
indemnify and save harmless the delegates to the Management Committee, including
the alternates, against all actions, claims, demands, costs and liabilities
arising out of the acts (or failure to act) of any such person in good faith
within the scope of their authority in the course of the Partnership's business,
and such persons shall not be liable for any obligations, liabilities or
commitments incurred by or on behalf of the Partnership as a result of any such
acts or failure to act, provided that the foregoing shall not entitle a member
to indemnification for gross negligence or willful misconduct.
14.4 Survival of Rights. The rights of the Managing Partner, and its
------------------
respective officers, directors, shareholders, employees or agents under this
Article XIV shall survive the termination of the Managing Partner's status as a
Partner of the Partnership.
40
ARTICLE XV
GENERAL PROVISIONS
15.1 Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach thereof, which cannot be settled by agreement of
the Partners, shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and judgment upon the
award rendered thereunder may be entered in any court having jurisdiction
thereof.
15.2 Press Releases. No Partner may issue a press release naming another
--------------
Partner in connection with the Partnership without the prior consent of the
Partner or Partners to be named; provided, however, that this provision shall
not prohibit the naming of a Partner in public documents when applicable law so
requires.
15.3 Notices.
-------
(a) Except as otherwise provided herein, any notice, distribution,
offer, report or other communication which is to be given to any Partner in
connection with the Partnership or this Agreement shall be in writing and shall
be deemed to have been duly given when delivered in person or sent by first-
class mail or by telecopy, telegram or telex, confirmed by letter sent to the
address set forth on Exhibit D to this Agreement or to such other address as a
Partner may notify the Managing Partner in writing.
(b) Delivery of a notice, demand, request or report sent by first
class mail or by telecopy, telegraph or telex shall be deemed to be effected at
the time when a duly addressed letter containing the same (or a confirmation
thereof in the case of a telecopy, telegram or telex message) is deposited,
postage prepaid, in the United States mail. The Managing Partner and the
Partnership, however, may act upon any telecopy, telegram or telex message
received by it from any Partner notwithstanding that such telecopy, telegram or
telex message is not subsequently confirmed by letter as aforesaid.
(c) Copies of any notices provided to any Partner in connection with
any documents relating to the Partnership's rights in the Combined Project, or
loan documents or other financing documents (or any documents relating thereto)
shall be forwarded to each other Partner promptly upon receipt.
15.4 Survival of Rights. This Agreement shall be binding upon, and, as to
------------------
permitted or accepted successors, transferees and assigns, inure to the benefit
of the Partners and the Partnership and their respective heirs, legatees, legal
representatives, successors, transferees and assigns, in all cases whether by
the laws of descent and distribution, merger, reverse merger, consolidation,
sale of assets, other sale, operation of law or otherwise.
41
15.5 Construction. The language in all parts of this Agreement shall be
------------
in all cases construed simply according to its fair meaning and not strictly for
or against the Partners or the Managing Partner.
15.6 Section Headings. The captions of the Articles or Sections in this
----------------
Agreement are for convenience only and in no way define, limit, extend or
describe the scope or intent of any of the provisions hereof, shall not be
deemed part of this Agreement and shall not be used in construing or
interpreting this Agreement.
15.7 Agreement in Counterparts. This Agreement and any amendments hereto
-------------------------
may be executed in multiple counterparts, each of which shall be deemed an
original agreement and all of which shall constitute one and the same agreement,
notwithstanding the fact that all parties are not signatories to the original or
the same counterpart. For purposes of recording this instrument, if required,
multiple signature pages and acknowledgment pages may be attached to each
counterpart; the signature pages and the acknowledgment pages pertaining thereto
may be detached from the counterpart, when executed, and attached to another
counterpart, which other counterpart may thereafter be recorded.
15.8 Governing Law. This Agreement shall be construed according to the
-------------
internal laws, but not the laws pertaining to choice or conflict of laws, of the
State of California.
15.9 Additional Documents. Each Partner, upon the request of the
--------------------
Management Committee, agrees to perform all further acts and execute,
acknowledge and deliver all further documents which may be reasonably necessary,
appropriate or desirable to carry out the provisions of this Agreement,
including but not limited to acknowledging before a notary public any signature
heretofore or hereafter made by a Partner.
15.10 Severability. Should any portion or provision of this Agreement be
------------
declared illegal, invalid or unenforceable in any jurisdiction, then such
portion or provision shall be deemed to be severable from this Agreement as to
such jurisdiction (but, to the extent permitted by law, not elsewhere) and in
any event such illegality, invalidity or unenforceability shall not affect the
remainder hereof.
15.11 Pronouns and Plurals. Whenever the context may require, any pronoun
--------------------
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
15.12 Third Party Beneficiaries. There are no third party beneficiaries
-------------------------
of this Agreement.
15.13 Partition. The Partners agree that any assets the Partnership may
---------
at any time have may not be suitable for partition. Each Partner hereby
irrevocably waives any and all rights that
42
he may have to maintain any action for partition of any assets the Partnership
may at any time have.
15.14 Security Interest and Right of Set-Off. As security for any
--------------------------------------
withholding tax or other liability or obligation to which the Partnership may be
subject as a result of any act or status of any Partner or to which the
Partnership becomes subject with respect to the Interests of any Partner, the
Partnership shall have (and each Partner hereby grants to the Partnership) a
security interest in all Division I or Division II Cash Flow from Operations or
Division I or Division II Cash Flow from Capital Events distributable to such
Partner to the extent of the amount of such withholding tax or other liability
or obligation. The Partnership shall have a right to setoff against any such
cash distributable in the amount of such withholding tax or other liability or
obligation.
15.15 Entire Agreement. This Agreement delivered by the Partners
----------------
constitutes the entire agreement of the Partners with respect to, and supersedes
all prior written and prior and contemporaneous oral agreements, understandings
and negotiations, including the Original Agreement, with respect to, the subject
matter hereof.
15.16 Waiver. No failure by any party to insist upon the strict
------
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
15.17 Attorneys' Fees. In the event of any litigation or arbitration
----------------
between the parties hereto with respect to the subject matter hereof, the
unsuccessful party to such litigation or arbitration shall pay to the successful
party all costs and expenses, including, without limitation, reasonable
attorneys' fees and expenses, incurred therein by the successful party, all of
which shall be included in and as a part of the judgment or decision rendered in
such litigation or arbitration.
END OF PAGE
43
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
By: New CLOC Company, LLC,
a Delaware limited liability company,
its Managing General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Executive Vice President
By: ESCA, LLC,
a Delaware limited liability company,
its General Partner
By: Caithness Geothermal 1980 Ltd., L.P.
a Delaware limited partnership,
its Member
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Executive Vice President
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its Managing Member
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Executive Vice President
By: ESI Geothermal, Inc.,
a Florida corporation,
its Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
44
EXHIBIT A
TURBINE 1 PROJECT AREA
The Turbine 1 Project Area shall consist of the two parcels designated
below each of which consists of the following partial sections of Township 22
South, Range 39 East, Mount Diablo base and Meridian, in the County of Inyo,
State of California, including the surface area thereof and the subsurface areas
thereunder, except that: (1) the assignment of rights to Parcel A does not
include the geothermal resource underlying the North 2 of Section 8; (2) the
assignment of rights to Parcel A, with respect to the North 2 of Section 8 is
subject to the Partial Release as set forth and subject to the conditions in the
Deed of Trust (Navy 1) dated July 14, 1987 executed by CLJV and CFP; (3) the
assignment of rights to Parcel B is subject to release and reconveyance upon the
satisfaction of the conditions set forth in and subject to the conditions in the
Letter Agreement between Coso Finance Partners and Credit Suisse, dated July 14,
1987 and (4) the assignment of rights to each of the following section and
partial sections are subject to an easement of access for CLJV or its assignees
to use for construction, maintenance or operation of plants to be built adjacent
to or in the immediate vicinity of Turbine 1:
Parcel A: Southeast 1/4 of Section 7;
All of Section 8;
Southwest 1/4 of Section 9;
Parcel B: ▇▇▇▇▇▇▇▇▇ ▇/▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇ of the North 2 of Section 17.
45
EXHIBIT B
TURBINES 2 and 3 PROJECT AREA
The Turbines 2 and 3 Project Area shall consist of the parcels described
below, including the surface rights and subsurface rights:
The Southwest quarter of the Southwest quarter of Section 4; the South half
of the South half of Section 5; the South half of the Southeast quarter of
Section 6; the Southeast quarter of the Southwest quarter of Section 6; the
Northeast quarter of Section 7; the North half of Section 8; and the North
half and the Southeast quarter of Section 9; all located in Township 22
South, Range 39 East, Mount Diablo Base and Meridian, in the County of
Inyo, State of California.
46
EXHIBIT C
RIGHT-OF-WAY DESCRIPTION
FOR
COSO-INYOKERN 115 KV TRANSMISSION LINE
_______________
The COSO-Inyokern 115 KV Transmission Line begins at survey station
0+00 at the Inyokern Substation in the SE 1/4, SE 1/4 of Section 20, T26S, R39E,
in ▇▇▇▇ County, California and goes Northerly approximately 28.3 miles ending at
survey station 1505+03.87 at COSO Geothermal Plant No. 1 Switch Yard in ▇▇ ▇/▇,
▇▇ ▇/▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇ in Inyo County, California. The Transmission
Line is located entirely within the boundaries of the China Lake Naval Weapons
Center.
The right-of-way for the transmission line is a strip of land 200 feet
wide of which 65 feet of this right-of-way is located to the left (Westerly) of
the transmission line centerline and 135 feet is located to the right (Easterly)
of the transmission centerline.
The Transmission centerline is described as follows:
Sections 20, 7, 8, 5 & 6 of T26S, R39E
--------------------------------------
Beginning at survey station 0+00, which is located on the North
boundary fence line of the Inyokern sub-station and is 400 feet West and 320
feet North of the ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇▇. Thence, from station
0+00, N21(degrees)11'57"W a distance of 255.00 feet to an angle point at station
2+55.00; thence N17(degrees)40'18"W a distance of 21,637 feet to the Leliter
Road crossing at station 218+92 which is a point on the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇ and is 1410 feet West of the NE ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇,
▇▇▇▇.
Sections 31, 30 & 19 of T25S, R39E
----------------------------------
Thence, from station 218+92, N17(degrees)40'18"W a distance of 13,228
to station 351+20 which is a Point on the ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇,
▇▇▇▇ and is 1960 feet North of the SW ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇▇.
Sections 24, 13, 12, 1 & 2 of T25S, R38E
----------------------------------------
Thence, from station 351+20, N17(degrees)40'18"W a distance of 20,165
feet to survey station 552+85 which is a point on the ▇▇▇▇ and Inyo County Line
and on the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇ and is 540 feet West of the
NE ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇.
47
Sections 35, 34, 27, 22, 15, 10 & 3 of T24S, R38E
-------------------------------------------------
Thence, from station 552+85, N17(degrees)40'18"W a distance of 980.65
feet to an angle point at station 562+65.65; thence N00(degrees)32'59"E a
distance of 1849.86 feet to an angle point at station 581+15.51; thence
N18(degrees)55"43"W a distance of 8200.72 feet to an angle point at station
663+16.23; thence N17(degrees)49'44"W a distance of 6843.04 feet to an angle
point at station 731+59.27; thence N09(degrees)26'36"E a distance of 13,280.99
feet to an angle point at Equation station 864+40.26 Back = 873+79.76 Ahead;
thence N07(degrees)43'29"E a distance of 1460 feet to survey station 888+39.76
which is a point on the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇ and is 1680 feet
West of the NE ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇.
Sections 34, 27, 26, 23, 24, 13, 12 & 1, T23S, R38E
---------------------------------------------------
Thence from station 888+39.76, N07(degrees)43'29"E a distance of
5111.45 to an angle point at station 939+51.21; thence N31(degrees)43'12"E a
distance of 9820.50 feet to an angle point at station 1037+71.71; thence
N31(degrees)14'47"E a distance of 10,758.97 feet to an angle point at station
1145+30.68; thence N10(degrees)29'29"W a distance of 8780.38 feet to survey
station 1233+11.06 which is a point on the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇,
▇▇▇▇ and is 1600 feet West of the NE ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇.
Section 36 of T22S, R38E
------------------------
Thence, from station 1233+11.06, N10(degrees)29'29"W a distance of
1200.00 feet to an angle point at station 1245+11.06; thence N43(degrees)08'19"E
a distance of 2718.94 feet to survey station 1272+30 which is a point on the
East boundary of Section 36, T22S, R38E and is 2180 feet South of the NE ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇▇.
▇▇▇▇▇▇▇ ▇▇, ▇▇, ▇▇, ▇▇, ▇ & ▇ ▇▇ ▇▇▇▇, ▇▇▇▇
-------------------------------------------
Thence, from station 1272+30, N43(degrees)08'19"E a distance of
1922.34 feet to an angle point at station 1291+52.34; thence N06(degrees)45'07"E
a distance of 12,581.98 feet to an angle point at station 1417+34.32; thence
N00(degrees)50'59"W a distance of 4,017.81 feet to an angle point at station
1457+52.13; thence N55(degrees)41'23"E a distance of 1,152.30 feet to an angle
point at station 1469+04.43; thence N13(degrees)42'55"E a distance of 1,065.66
feet to, an angle point at station 1479+70.09; thence N81(degrees)26'21"E a
distance of 1,169.68 feet to an angle point at station 1491+39.77; thence
N25(degrees)26'31"E a distance of 1,135.98 feet to an angle point at station
1502+75.75; thence N05(degrees)40'26"E a distance of 228.12 feet to the end of
the COSO-Inyokern 115 KV Transmission Line at survey station 1505+03.87. This
ending point is located at the COSO Geothermal Plant No. 1 Switch Yard in the ▇▇
▇/▇, ▇▇ ▇/▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇ in Inyo County, California.
48
EXHIBIT D
ADDRESSES OF PARTIES FOR NOTICES
--------------------------------
If to CFP:
Coso Finance Partners
c/o Caithness Energy, LLC
1114 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: President
If to ESCA:
Caithness Geothermal 1980, Ltd.
c/o Caithness Energy, LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: President
and
ESI Geothermal, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President - Business Management
49
EXHIBIT E
ESCROW ACCOUNT DISTRIBUTION PROVISIONS
1. Amounts deposited in the Escrow Account with respect to a Preferred
Return Year shall be distributed promptly after it is determined whether the
Distribution Condition is satisfied with respect to that Preferred Return Year,
as follows:
(a) if the Distribution Condition was satisfied for the Preferred
Return Year:
(i) first, to CCH, ESCA and Navy II Group, as directed in
writing by an authorized representative thereof, until distributions pursuant to
this Section 1(a)(i) equal the lesser of (a) the Maximum Payment for the
Preferred Return Year, and (b) the amount or deposit in the Escrow Account;
(ii) the balance to the Managing Partner; or
(b) to the Managing Partner, if the Distribution Condition was not
satisfied for the Preferred Return Year.
2. Amounts deposited in the Escrow Account pursuant to Sections
5.2(a)(ii) of the CPD and CED Partnership Agreements and Sections 5.3(a)(ii) and
5.4(a)(ii) of the CFP Partnership Agreement shall be distributed within fifteen
days after deposit to CCH, ESCA and Navy II Group, as directed in writing by an
authorized representative thereof.
3. All amounts distributed pursuant to Section 1(a)(i) and Section 2 will
be applied (i) first, to reduce Preferred Return Interest, and (ii) second, to
reduce the Preferred Return.
4. For the purpose of Section 1, "Distribution Condition" means the
generation of Excess Revenues by at least one Project during the Preferred
Return Year.
50