Exhibit 10.59
FIELD OPERATION AND MAINTENANCE AGREEMENT
(Navy II)
This Field Operation and Maintenance Agreement ("Agreement") is entered
into May 28, 1999 (the "Effective Date") by and between COSO POWER DEVELOPERS, a
California general partnership ("CPD"), and COSO OPERATING COMPANY LLC, a
Delaware limited liability company ("COC").
WHEREAS, CPD owns a three unit 90 megawatt output power facility and
related geothermal resources (collectively, the "Facility," as further defined
herein) located at the Naval Air Weapons Center near China Lake, California,
designated as the Navy II Project; and
WHEREAS, CPD and COC wish to provide for the terms and conditions of the
operations and maintenance of the Facility as more fully provided for herein.
Now THEREFORE, the parties to this Agreement agree as follows:
ARTICLE 1
DEFINITIONS
The following capitalized words and phrases used in this Agreement shall
have the meanings specified in this Article 1.
1.1 Additional Services means services other than Required Services,
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which will be provided by COC at such times and at such costs as approved by
CPD.
1.2 Annual Operating Fee means the Annual Operating Fee as provided for
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in Section 4.3 hereof.
1.3 CLJV means China Lake Joint Venture, a California single-purpose
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partnership organized as a joint venture, between Caithness Acquisition Company,
LLC and Caithness Geothermal 1980, Ltd.
1.4 Commencement Date means February 25, 1999, the date of the previous
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operations and maintenance agreement.
1.5 CPD means Coso Power Developers, a California general partnership.
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1.6 CPD Partnership Agreement means that certain Amended and Restated
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General Partnership Agreement of Coso Power Developers, dated as of the
Effective Date.
1.7 Direct Costs means Direct Costs as defined in Section 4.2 hereof.
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1.8 Drilling Services means Drilling Services as defined in Section
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2.1(c) hereof.
1.9 Emergency means an event occurring at the Resource Area which poses
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actual or imminent risk of serious personal injury, physical damage, violation
of material Governmental Requirement or loss of material contractual rights of
CPD requiring, in the good faith determination of COC, immediate preventative or
remedial action by COC and for which advance approval by CPD otherwise required
under this Agreement would be impossible or impractical and for which there was
no reasonable advance notice to COC of the need for such action.
1.10 Facility means the geothermal power facilities, located on the lands
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of the Navy, consisting of three Units known as the Navy II Project,
interconnection to the Transmission Line, certain common control and support
facilities, and any part of the surface of the real property, fixtures and
buildings which are located within the Fencelines of any of the three Units.
1.11 Fenceline means the perimeter described by the fence or fences which
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enclose any Unit.
1.12 FERC means the Federal Energy Regulatory commission.
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1.13 Field Operations means the well drilling and well workover work
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within the Resource Area, and related accounting activities, and management and
engineering of the geothermal resource, but shall exclude the surface steam
gathering system and steam, noncondensable gas and brine disposal systems
connected to the Facility and well operation and maintenance.
1.14 Field Operator means COC in its capacity as field operator under this
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Agreement.
1.15 FPLE means FPL Energy Operating Services, Inc., or such other
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operator as may be selected by CPD.
1.16 Geothermal Reserve means not less than one hundred five percent
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(105%) or such other lesser percentage as CPD may specify in writing of the
geothermal resource available at the wellhead (stabilized and tested in
accordance with generally recognized standards and procedures) sufficient to
operate the Facility continuously and economically at a capacity reflected from
time to time in the projections included in the Independent Engineer's Report,
dated May 20, 1999, attached as an Appendix to the Caithness Coso Funding Corp.
Offering Memorandum, dated May 20, 1999, in compliance with all Governmental
Requirements during the term of the Navy Contract.
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1.17 Governmental Authority means the government of any federal, state,
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municipal or other political subdivision in which the Facility is located, and
any other government or political subdivision thereof exercising jurisdiction
over the Resource Area, the Facility, or CPD, including all agencies and
instrumentalities of such governments and political subdivisions (including,
without limitation, the Navy).
1.18 Governmental Requirements means all Laws, ordinances, statutes,
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codes, rules, regulations, orders and decrees of any Governmental Authority,
including, without limitation, all authorizations, consents, approvals,
registrations, exemptions, permits and licenses with or from any Governmental
Authority, applicable to the Resource Area, the Facility, or CPD.
1.19 Law means any constitution or treaty, any law, ordinance, decree,
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regulation, order, rule, judicial or arbitral decision and any voluntary
restraint, policy or guideline not having the force of law, with which such
party must reasonably comply, or any of the provisions of such Laws binding on
or affecting the party referred to in the context in which the term is used.
1.20 Navy means the United States Government, acting through the Western
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Division (Code 022) Naval Facilities Engineering Command, San Bruno, California
and/or the Disbursing Officer, Code 0862, Naval Weapons Center, China Lake,
California, as the contents may require.
1.21 Navy Contract means that certain contract No. K-N64274-79-C-5382,
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dated December 6, 1979, by and between the United States of America acting
through the Navy and California Energy Company, Inc., as modified, amended,
assigned to CLJV and restated by Contract Modification P00004, dated as of
October 19, 1983 and as the same may have been or may be modified or amended.
1.22 Operating Budget means an annual budget approved by CPD pursuant to
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Section 3.1.
1.23 Operations means those operations delineated by Section 2 of the
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Operation and Maintenance Agreement.
1.24 Operations and Maintenance Agreement means the Operations and
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Maintenance Agreement (Navy II Project), dated the Effective Date, entered into
by CPD, COC and FPLE.
1.25 Permitted Assigns means Permitted Assigns as defined in Section 12.7.
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1.26 Permitted Liens means Liens which are:
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(a) liens for taxes, assessments and governmental charges which are
not delinquent and remain payable without penalty or are being contested in good
faith by appropriate proceedings and for which adequate reserves, bonds or other
security has been provided; and
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(b) purchase money security interests in real or personal property
when the obligation secured is incurred for the purchase of such property and
does not exceed one hundred per cent (100%) of the lesser of cost or fair market
value thereof at the time of acquisition, and the security interest does not
extend beyond the property involved; and
(c) mechanics', materialmen's and similar liens which do not
individually or in the aggregate materially interfere with the conduct of CPD's
business which are being contested in good faith and have not proceeded to
judgment and for which a bond or other security has been posted; and
(d) deposits or pledges to secure statutory obligations or appeals;
release of mechanics' and materialmen's liens and similar attachments, stay of
execution or injunction; performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases; or for purposes of like general
nature in the ordinary course of its business; and
(e) any other Liens approved by CPD.
1.27 Power Purchase Contract means that certain Agreement effective
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February 1, 1985 between SCE and CLJV (as assigned to CPD), and that certain
Interconnect Agreement dated December 15, 1988, between SCE and CED (as assigned
to CPD), in each case as the same may be modified or amended.
1.28 Project means the Facility, the Resource Area, and the associated
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rights to geothermal resources.
1.29 PURPA means Public Utilities Regulatory Policies Act of 1978, as
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amended.
1.30 Required Services means the services described in Section 2.1 hereof.
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1.31 Resource Area means all real property described in Exhibit A to this
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Agreement, exclusive of the area on which the Facility is located.
1.32 Resource Management Plan means the annual written plan for the
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management and development of the Resource Area and performance of its other
services hereunder prepared by COC in accordance with Section 2.1(a)(vi) hereof,
as the same may be modified from time to time with the approval of CPD.
1.33 SCE means Southern California Edison Company, a corporation organized
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and existing under the laws of the State of California.
1.34 Subordination Agreement means the Operating Fee Subordination
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Agreement (Navy I) between COC and U.S. Bank Trust, National Association, as
collateral agent of even date herewith.
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1.35 Transmission Line means that certain 230Kv overhead transmission
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line, including associated equipment, connecting the Facility to SCE's Inyokern
substation.
1.36 Unit means any of the three single geothermal turbine generators of
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the Facility.
1.37 Warranties means the warranties provided by the contractor for the
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Facility.
ARTICLE 2
OPERATION AND MAINTENANCE; SUPPORT SERVICE
2.1 Required Services. During the term of this Agreement, commencing on
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the date of this Agreement, COC shall, to the extent contemplated by the
Operating Budget and the Resource Management Plan, provide operation and
maintenance services for the Project as described below (all of which constitute
Required Services):
(a) The following testing, permitting, reporting and record keeping
services:
(i) Review all testing of geothermal production wells and
maintain all records regarding the geothermal reserves of the Resource Area as
may reasonably be required by CPD;
(ii) Review all normal testing and record keeping of the
Resource Area as is usual or advisable for maintenance of existing wells and for
determining the necessity of drilling replacement wells, in accordance with
general industry practice;
(iii) Select one or more individuals to act as liaison with the
Navy, SCE, CPD, and FPLE with respect to all services to be rendered by COC
under this Agreement;
(iv) Provide CPD, and FPLE and any person designated by CPD
prompt notice of all events, occurrences, conditions and issues with respect to
the Geothermal Resource of which COC shall become aware and which COC reasonably
believes are material to, or are likely to have a material effect on,
Operations;
(v) Provide to CPD analysis of reports, test data, and other
information related to the Resource Area with respect to all services to be
rendered by COC hereunder, as reasonably requested by CPD from time to time; and
(vi) Prepare not later than 90 days prior to the end of each
calendar year, in connection with the preparation of the Operating Budget, the
Resource Management Plan with respect to (A) the management and development of
the Resource Area, (B) performance of its other services hereunder in substance
and format acceptable to CPD, (C) a schedule of anticipated tests, including
justification as to technical and scientific requirements
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and estimated costs of testing, (D) a review of the actions taken hereunder
during the preceding twelve (12) month period, including specifically an
analysis of drilling and maintenance activities, resource operations and capital
expenditures paid or incurred during such period and (E) a forecast of drilling
and maintenance activities, resource operations and required capital
expenditures for the ensuing calendar year.
(b) The following support services:
(i) Maintain, as appropriate, third-party contracts for
drilling geothermal wells;
(ii) Provide adequate safety and security measures for the
Resource Area, in coordination with CPD, the Navy, SCE and FPLE; and
(iii) Assist CPD and FPLE in maintaining good community
relations.
(c) COC shall, to the extent contemplated by the Operating Budget
and the Resource Management Plan, provide the following exploration, drilling,
testing and injection services (all of which constitute Drilling Services):
(i) Explore for new well sites, drill new wells, and
complete, test, and make available new wells for tie in to the resource
gathering systems for the Project; and
(ii) Drill, test, workover, repair and make available new
wells to the disposal system; and
(iii) Perform well workovers and related activities; and
(iv) Perform all reservoir and resource management related
services and reservoir engineering and geologic activities with respect to the
field and sub-surface reservoir, including, without limitation, scheduling and
supervising well testing, well surveys, maintaining production data bases,
reservoir modeling, identifying candidates for well workovers, acid jobs,
providing reports on resource availability, declines, production projections,
targeting new wells, providing three dimensional models of the reservoir,
maintaining and distributing maps, scheduling and supervising geologic
geophysical and/or geochemical surveys.
2.2 CPD may by written notification to COC make changes in, additions to,
or deletions from COC's Required Services or Drilling Services. COC shall
thereafter perform its Required Services and Drilling Services in accordance
with such notification, and the Operating Budget pursuant to Article 3 shall be
increased or decreased by the estimated amount of the Direct Costs resulting
from the change.
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2.3 If, as a result of an Emergency, COC reasonably believes it necessary
to perform services outside the scope of the Operating Budget then in effect and
for which advance approval by CPD otherwise required under this Agreement would
be impossible or impractical, COC may perform such reasonably necessary services
(except Drilling Services, unless such Drilling Services are needed to control
blow-outs) so long as the Emergency continues. Payment of all costs including
Direct Costs will be made as if the services were part of the Operating Budget
then in effect, except to the extent such Emergency is the result of COC's
failure (by reason of gross negligence or willful misconduct) to perform the
services required hereunder. COC shall provide notice of such Emergency to CPD
and FPLE as soon as is practical, together with a statement (including
appropriate supporting documentation) for its services provided in connection
therewith.
ARTICLE 3
OPERATING BUDGET
3.1 COC shall prepare a proposed annual budget for Required Services and
Drilling Services itemizing separately for services described in Section 2.1 and
more particularly described in the related Resource Management Plan. In
preparing each proposed budget, COC shall take into account the amounts
described in Section 4.2. The budgets shall be in form and substance acceptable
to CPD. Each proposed budget for Drilling Services will be accompanied by a
written report describing drilling, steam gathering and related activities,
recommendations on any actions necessary to maintain the Geothermal Reserve, and
long-term projections on resource availability. The proposed budgets will be
submitted by COC for consideration and approval by CPD in connection with the
approval of CPD's Budget (as defined in the CPD Partnership Agreement) as more
fully described in the CPD Partnership Agreement. COC shall submit each
proposed budget and, in the case of the proposed annual budgets, related
proposed Resource Management Plan, to CPD not later than ninety (90) days prior
to the calendar year to which such budget relates.
3.2 COC shall perform all Required Services and Drilling Services in
accordance with the Operating Budget and related Resource Management Plan
(except for Emergencies under Section 2.3). Should COC determine during the
course of the year that it cannot in good faith perform the Required Services
and Drilling Services within the Operating Budget, COC shall immediately notify
CPD. COC shall prepare a revised Operating Budget, together with any necessary
supplementary materials, setting forth in reasonable detail the reasons for the
inability of COC to perform the services contemplated hereunder within the
Operating Budget and the reasons for omission from such Operating Budget of
expenses, the incurrence of which COC considers necessary and submit them to CPD
within fifteen (15) days after determining the need for the revised Operating
Budget. The proposed revised Operating Budget shall be subject to approval in
the manner described in Section 3.1.
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3.3 COC shall report to CPD any variance of the $20,000 or ten percent
(10%) or more between (a) actual expenditures for budgeted line items, and (b)
budgeted expenditures for such line items on a year-to-date basis, within
fifteen (15) days of the end of each calendar quarter and within fifteen (15)
days of the determination by COC during the course of any quarter that such
variance is likely to occur.
3.4 COC shall make available to CPD, at reasonable times, all records
relating to the charges incurred in connection with COC's performance of COC's
obligations under this Agreement.
ARTICLE 4
PAYMENT
4.1 Compensation. Subject to the constraints of the Operating Budget, CPD
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shall pay COC, as compensation for Required Services and Drilling Services
performed under this Agreement, all Direct Costs plus the Annual Operating Fee.
4.2 Direct Costs. Direct Costs are the following:
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(a) Costs for personnel reasonably assigned to work at the Resource
Area, as well as additional personnel, including home office personnel as may be
required by COC, together with related overhead costs calculated at COC's actual
overhead rate. Personnel costs reimbursable hereunder shall include, but not be
limited to, direct salaries and wages, overtime premiums, employer paid social
security and unemployment insurance costs, insurance coverages required to be
furnished by COC pursuant to Article 9, medical, hospital, dental, eye care,
disability and life insurance coverages, employer retirement savings program
contributions, and vacation, holiday and sick leave in accordance with COC's
standard policies.
(b) All other expenses reasonably incurred by COC at the Resource
Area, including but not limited to materials, supplies, rental equipment and
vehicles, subcontracted services, communication costs and spare parts, and any
other cost or expense not otherwise reimbursed hereunder, including those in
excess of the insurance coverage to be maintained by COC under Article 9 of this
Agreement subject to the Operating Budget; excepting only those costs or
expenses that are (a) due to the negligence or willful misconduct of COC or its
employees, officers or agents or (b) due to replacement of items lost or stolen
as a result of negligence in security, tracking or control by COC. COC may not,
without the approval of CPD, enter into any subcontract for the performance of
the services set forth herein or for the supply of materials therefor having an
aggregate value in excess of $50,000 in any calendar year; provided, however,
that all items in an approved operating Budget indicated as being subcontracted
shall be deemed approved for purposes of this provision up to the amounts
budgeted for such items.
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4.3 Annual Operating Fee. CPD shall pay to COC for the Required Services
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and Drilling Service performed hereunder an annual operating fee (the "Annual
Operating Fee") as follows: (i) $532,000 from the Effective Date through the
first anniversary of the Commencement Date; (ii) $400,000 from the first
anniversary of the Commencement Date through the second anniversary of the
Commencement Date; and (iii) $334,000 for each year after the second anniversary
of the Commencement Date. On or before June 30 and December 31 of each year,
CPD will pay to COC one-half of the Annual Operating Fee in arrears.
4.4 Procedure for Payment. COC shall submit all invoices for services
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performed under this Agreement to CPD. All invoices for amounts within the
Operating Budget or covered by Section 2.3 hereof shall be paid promptly by CPD.
ARTICLE 5
STANDARD OF CARE
5.1 COC shall perform its obligations under this Agreement in conformance
with applicable industry standards and in a good, workmanlike and commercially
reasonable manner. COC will exercise such care, skill and diligence as a prudent
business entity engaged in the business of managing and operating a geothermal
power project would exercise for the advancement and protection of its own
economic interests.
5.2 All operation and maintenance services shall be performed in a manner
designed to have the least possible adverse effect on the Resource Area and on
the Facility. Maintenance, overhauls and (to the extent possible) repairs or
overhauls required as a result of unexpected events shall be scheduled with CPD
and FPLE so as to minimize interference with the operations of the Facility.
5.3 COC shall at all times keep, or cause to be kept, qualified personnel
on the Project site, and shall pay all wages and benefits required by contract
and by law. COC shall administer all matters relating to labor relations,
working conditions, training, employee benefits, safety and related matters
pertaining to its employees.
5.4 CPD understands that COC's management personnel for operations under
this Agreement shall be assigned to the Facility part-time as is reasonably
necessary to satisfy COC's obligations under this Agreement, but may also be
assigned to work on other projects in which COC or its affiliates are involved
as equity participants and/or in which an affiliate of FPLE may have an
interest. CPD may make requests of COC to replace personnel deemed by CPD to be
inadequately experienced or otherwise unqualified to perform the Required
Services, which request shall not be unreasonably refused.
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5.5 COC shall comply with, and cause the Resource Area and all Resource
Area personnel to comply with, any applicable standards required by insurance
policies, all applicable Governmental Requirements (including all requirements
imposed by PURPA and FERC), the Power Purchase Contract, the Navy Contract
pertaining to the Required Services, and the operating manuals for the Units.
5.6 COC shall not, directly or indirectly, create, incur or permit to
exist any lien on the Facility, the Resource Area or any materials, equipment,
services, supplies or other items supplied or procured by COC under this
Agreement except for Permitted Liens.
ARTICLE 6
RESPONSIBILITIES OF OTHERS
AND COOPERATION WITH FPLE
6.1 CPD shall obtain and maintain all permits and licenses necessary to
allow COC to provide all services contemplated by this Agreement.
6.2 CPD grants to COC a limited licence under the Navy Contract and other
rights that CPD has to the Project and the surrounding areas that are reasonable
and necessary to allow COC to perform the services contemplated by this
Agreement.
6.3 CPD shall provide for COC's use in connection with COC's performance
of its duties and obligations under this Agreement permanent furnished office
facilities and a maintenance building.
6.4 Inasmuch as COC must interface directly with parties other than CPD
in the performance of its obligations, CPD shall, when requested by COC, exert
its best efforts to secure the performance of such third parties for COC,
including but not limited to the compliance with warranties, and the furnishing
of information, assistance, or permission. Such third persons shall include, but
are not limited to the Navy, the BLM, SCE, and FPLE. COC shall use its best
efforts to cooperate with such third parties in the performance of its
obligation under this Agreement.
ARTICLE 7
COC WARRANTIES
7.1 Limited Warranty. COC warrants that it will perform the Required
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Services and Drilling Services in a good and workmanlike manner by qualified
personnel in accordance with generally accepted sound operating and engineering
practices for the maintenance of equipment and structures like the Facility.
COC shall assign to CPD all warranties provided by manufacturers, contractors or
vendors of spare parts provided for the Facility, and shall pass on
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to CPD copies of any such warranty. THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED,
WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE HEREOF.
7.2 Warranty Period Remedies. COC's limited warranty described in Section
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7.1 shall be for a period of twelve (12) months from the date such Required
Services and Drilling Services were performed or such parts were put into
service (the "Warranty Period"). Any claim by CPD under the limited warranty
must be made in writing promptly after such party is informed of the deficient
Required Services and Drilling Services. COC's sole liability for breach of the
limited warranty shall be, in the case of Required Services and Drilling
Services, promptly to perform the defective services correctly free of charge
and/or promptly to replace unfit or unqualified personnel.
7.3 No Implied Warranties. ANY IMPLIED WARRANTIES OF MERCHANTABILITY,
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QUALITY, SUITABILITY AND FITNESS ARE EXCLUDED. THERE ARE NO WARRANTIES WHICH
EXTEND BEYOND THE DESCRIPTION ON THE FACE HEREOF. COC's limited warranty in
Section 7.1 is exclusive and in lieu of any other warranties.
7.4 No Additional Payments. If work required to be performed pursuant to
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this Agreement must be performed, or personnel must be replaced due to a breach
of the warranties contained in this Article 7 within the Warranty Period, COC
shall not be entitled to be paid under this Agreement for any and all costs
incurred in performing its limited warranty hereunder.
ARTICLE 8
SUSPENSION OF SERVICES
8.1 CPD may suspend all or a part of the services to be performed by COC
under this Agreement by written notice to COC, for any of the following reasons:
(a) Force majeure causes as set forth in Paragraph 12.1, or any
other reason that causes shutdown of the Facility or Resource Area for a period
of more than 20 consecutive calendar days or for more than 30 days in any 60 day
period.
(b) Inability of the Facility, the Resource Area to properly operate
for any reason including but not limited to unavailability of geothermal
resource in sufficient quality or quantity, malfunction of equipment,
unavailability of materials, equipment, supplies or labor, or structural
defects.
(c) SCE's inability or refusal to accept power from the Facility.
(d) Navy activities or restrictions which prohibit economical
operation of the Facility or the Resource Area.
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(e) Failure of COC to perform the Required Services, Drilling
Services or Emergency Services in accordance with the standards set forth in
Article 5 of this Agreement.
8.2 Upon receipt of notice of suspension from CPC, COC shall continue to
perform its non-suspended services under this Agreement at such personnel
staffing and performance levels as are prudently dictated by the circumstances.
COC shall have the right during any such suspension to terminate the employment
of any of its personnel. Any cost of reemployment for the performance of
services under this Agreement shall be payable as a Direct Cost under Section
4.2.
8.3 Except in connection with Section 8.1(e), in the event of suspension,
CPD shall continue to pay COC all compensation in accordance with Article 4,
unless it is determined that such suspension will extend for more than 30
calendar days. In the event such suspension will extend for more than 30
calendar days CPD shall compensate COC for costs associated with winding down
and restarting the operation and maintenance activities to the extent provided
for in the Operating Budget.
8.4 COC may, by giving 30 days written notice to CPD, suspend all or a
part of its services under this Agreement if CPD shall fail to make any payment
when due as required under Article 4, provided that no such suspension shall
occur if the required payment is made within the notice period and except for
any Operating Fees which are not paid on account of the Subordination Agreement.
ARTICLE 9
INSURANCE
9.1 COC shall procure and maintain in force the insurances listed below,
which shall contain waivers of subrogation with respect to loss or damage
resulting from COC's performance under this Agreement;
(a) Comprehensive general liability coverage, including bodily
injury, physical damage, and automobile liability, in the amount of $5,000,000
combined single limit.
(b) California Workers' Compensation coverage in statutory form and
amount.
(c) Such additional insurance as may be reasonably required by CPD
from time to time.
9.2 COC shall provide to CPD such evidence of the required insurance as
CPD may reasonably specify.
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9.3 Each of the required policies shall be endorsed to provide that the
party requiring the insurance be given thirty (30) days advance notice of
cancellation or material change.
9.4 Each of the required insurances shall be primary insurance for all
purposes and shall be so endorsed.
ARTICLE 10
TERMINATION
10.1 COC may terminate its performance under this Agreement upon six
months' written notice to CPD. CPD may terminate COC's performance under this
Agreement upon six months' written notice to COC. Should such termination occur,
COC shall be paid for its services to the date of termination in accordance with
Article 4 (including any costs payable under Section 10.3) less any out-of-
pocket costs incurred by CPD in obtaining a replacement operator to perform the
services contemplated by this Agreement.
10.2 If either party commits a material breach of its obligations under
this Agreement, the other party (hereinafter the "Non-Defaulting Party") may
give such party in default (hereinafter the "Defaulting Party") a written notice
describing such breach in reasonable detail and, if the breach is remediable,
demanding that the Defaulting Party cure it. If the breach is not remediable,
the Defaulting Party shall be in default under this Article 10. If the breach
is remediable, and the Defaulting Party does not cure the breach within sixty
(60) days after its receipt of such notice or, if the breach is such that it can
be cured but not within such period of time, does not promptly commence action
which is calculated to cure such breach within a reasonable period of time and
thereafter diligently pursue such action to completion, then the Defaulting
Party shall be deemed to be in default under this Article 10. Upon a default
under this Article 10:
(a) If the Defaulting Party is CPD, then COC shall have the right to
terminate this Agreement by written notice to CPD, without prejudice to any
remedies at law or in equity that are available to COC by reason of CPD's
default. In addition, the costs reasonably incurred by COC in effecting
termination in accordance with the terms of this provision, including severance
pay and relocation costs for any terminated employees, shall be paid to COC.
(b) If the Defaulting Party is COC, then CPD may suspend COC's
Performance under this Agreement and engage a third party to perform the
services COC is obligated to perform under this Agreement until such time as COC
is able to resume performance. If, within 30 days of such suspension, COC
demonstrates to the reasonable satisfaction of CPD that it is able to perform
fully under this Agreement, and to compensate CPD for all costs, losses or
damages incurred which arise from COC's prior incomplete performance or failure
to perform, then COC shall be reinstated under this Agreement with
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full powers and rights as it had prior to the suspension. If COC shall not be
reinstated under the Agreement as contemplated in the preceding sentence, then
CPD shall have the right to terminate this Agreement by written notice to COC,
effective immediately upon such notice, without prejudice to any remedies at law
or in equity that are available to CPD by reason of COC's default.
10.3 If a default is not cured as provided in Section 10.2, the Non-
Defaulting Party may elect to suspend performance hereof on a month-by-month
basis rather than terminate the Agreement. If the Non-Defaulting Party suspends
performance, the Defaulting Party may remedy such default during the period of
suspension and pay the Non-Defaulting Party its losses or damages, plus interest
at the rate of 10% per annum. Upon the remedy of such default and payment of
such damages to the Non-Defaulting Party, such default shall cease to exist and
the Non-Defaulting Party may not terminate this Agreement unless the Defaulting
Party commits a separate material breach of this Agreement which permits
termination pursuant to this Article. The remedy provided by this Section 10.3
is in addition to other remedies provided elsewhere in this Agreement.
10.4 Subject to the applicable provisions of other documents entered into
by the parties, either party may terminate this Agreement by written notice to
the other party if the latter party (a) commences a voluntary proceeding under
any federal or state bankruptcy, insolvency or reorganization law, or (b) has
such a proceeding filed against it and fails to have such proceeding stayed or
vacated within 30 days, or (c) upon the end of any such stay, fails to have such
involuntary proceeding vacated within 30 days thereafter, or (d) admits the
material allegations of any petition in bankruptcy filed against it, or (e) is
adjudged bankrupt, or (f) makes a general assignment for the benefit of its
creditors, or if a receiver is appointed for all or a substantial portion of
such party's assets and is not discharged within 30 days after his appointment.
Any termination of this Agreement pursuant to this Section 10.4 shall be
considered to be by reason of anticipatory breach of contract, and such
termination shall be without prejudice to any rights the terminating party may
have by reason of such anticipatory breach.
10.5 If SCE terminates the Power Purchase Contract because of an uncured
default of the Power Purchase Contract that was the result of COC's gross
negligence or willful misconduct, then this Agreement shall be terminated
effective upon termination of the Power Purchase Contract.
10.6 In case of a termination pursuant to this Article 10, CPD and COC
shall arrive at a schedule for a transition period, at the end of which COC
shall be relieved of its obligations under this Agreement. During the
transition period, COC shall cooperate with any party appointed to be
replacement field operator to ensure a smooth transition of service. In
addition, COC shall arrange for the transfer to CPD of any permits and licenses
for the Facility or any resource development activities in connection therewith
held in the name of COC. In case of a termination, COC shall be entitled to the
termination and demobilization payments contemplated
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by this Article 10, unless the termination results from a default by COC as
defined in this Article 10, in which case no termination or demobilization
payments shall be due to COC under this Agreement.
10.7 Subject to earlier termination pursuant to the terms of this Article
10, the term of this Agreement shall expire on December 31, 2009.
ARTICLE 11
INDEMNIFICATION
11.1 Each party shall defend, indemnify, and hold harmless the other from
and against all claims, demands, liability, loss, suit, judgment, cost, damage
or expense incurred or suffered by the indemnified party (including the cost of
investigating, analyzing and defending such matters, and including court costs
and reasonable attorneys' fees) relating to, resulting from or arising out of
acts or omissions of the indemnifying party and connected in any way with its
performance under this Agreement, whether or not insured against, except to the
extent caused by the gross negligence of the party otherwise indemnified. The
indemnity granted herein shall include indemnity for damage to property or to
the environment and for injury to or death of any person, including employees of
COC and CPD. "Acts or omissions" of a party shall include acts or omissions of
lower tier subcontractors, suppliers, or others operating within the scope of
authorization of such party.
11.2 Where one party is obligated under this or other Articles to
indemnify another, such obligations shall extend to the partners and affiliates
of the party indemnified, and to directors, officers, agents, and employees of
any of them.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Any delay or stoppage of work due to any of the following causes
shall constitute a Force Majeure event for such a period as such obligations
cannot be performed: acts of God, fire, flood, earthquake, explosion, riot, war,
sabotage, terrorism, or governmental acts and decrees. However, such delay or
stoppage shall not constitute a Force Majeure event if such event is caused by
the active or passive negligence or the intentional acts or omissions of the
delayed party. The delayed party shall recommence the performance of its
obligations as promptly and expeditiously as possible following any such delay
or stoppage. If any such Force Majeure event continues for 45 days, either party
may terminate this Agreement in accordance with the provisions of Article 10,
including without limitation the provisions regarding payment to COC of
termination and demobilization payments.
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12.2 Any controversy between COC and CPD or claim of either COC or CPD
arising out of or related to this Agreement, or the breach thereof, shall first
be referred to the management of COC and management committee of CPD for
resolution. If agreement cannot be reached, the parties may pursue other means
for resolving the dispute.
12.3 Any notice, demand or request provided for in this Agreement shall be
in writing and shall be deemed properly served, given or made if delivered in
person or upon five days after being dispatched by registered or certified mail,
postage prepaid, to the entities specified below:
If to CPD: Coso Power Developers
c/o Caithness Energy, L.L.C.
1114 Avenue of the Americas
New York, New York 10036
Attn.: President
If to COC: Coso Operating Company LLC
c/o Caithness Energy, L.L.C.
1114 Avenue of the Americas
New York, New York 10036
Attn.: President
If to FPLE: FPL Energy Operating Services, Inc.
700 Universe Boulevard
Juno Beach, Florida 33408
Attn: Vice President - Operations
Any party may at any time by written notice to all other parties designate
different or additional entities or different addresses for the giving of these
notices.
Further, all consents and approval required by this Agreement shall
be in writing, sent as any notice would be under this Section 12.3; provided,
however, that in case of Emergency, approvals or consents may be made by telefax
or other similar means.
12.4 During the term of this Agreement, COC acting in its capacity under
this Agreement shall act as an independent contractor of CPD, not as a partner
or joint venturer. No party shall be the agent or have a right or power to bind
any other party without its express consent.
12.5 The captions and headings appearing in this Agreement are inserted
merely to facilitate reference and shall have no bearing upon the interpretation
of this Agreement.
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12.6 This Agreement shall be governed by the laws of the State of
California respecting contracts made and to be performed in the State of
California.
12.7 This Agreement shall inure to the benefit of and be binding upon (i)
the parties hereto and (ii) any other persons or entities to which either of
them may assign or transfer their rights and/or obligations hereunder in
accordance herewith (such persons or entities collectively the "Permitted
Assigns"). The parties hereto acknowledge that this Agreement is being entered
into for the benefit of CPD. Neither party may assign its rights or delegate
its obligations under this Agreement, except by prior written approval of the
parties; provided, however, that CPD shall have the right to assign their rights
under this Agreement without consent to any lender or lenders in connection with
any financing secured by the Facility.
12.8 Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
any applicable law in any jurisdiction, such provision shall be ineffective to
the extent of such prohibition or invalidity, without prohibiting or
invalidating the remainder of such provision or the remaining provisions of this
Agreement in such jurisdiction, and without affecting the validity of such
provision or the remaining provisions of this Agreement in any other
jurisdiction.
12.9 No failure to exercise and no delay in exercising, on the part of
either party, any right, power or privilege in this Agreement shall operate as a
waiver of such right, power or privilege. The rights and remedies of this
Agreement are cumulative and not exclusive of any rights or remedies provided by
law.
12.10 This Agreement sets forth the entire Agreement and understanding
between the parties and supersedes and replaces all prior written agreements and
negotiations and oral understandings, if any, with respect to this Agreement,
including the Amended and Restated Field Operation and Maintenance Agreement
(Navy II), dated December 16, 1992, by and between Coso Technology Company and
California Energy Company, Inc., as amended. This Agreement may not be amended
without the written consent of CPD.
12.11 COC agrees that it does not and shall not discriminate against or
segregate any applicant or employee, or group of applicants or employees, on
account of race, color, religion, sex, national origin, disability, or status as
a disabled veteran or veteran of the Vietnam era. Further, unless this Agreement
is exempted by statute, rules, or regulations, the following clauses are
incorporated herein by reference and are binding on COC: (a) "Equal Employment
Opportunity Clause," paragraphs one (1) through seven (7), set forth at Section
202 of Executive Order 11246, as amended by Executive Order 11375, 41 C.F.R. 60-
1.4, (applicable to contract exceeding $10,000); (b) "Affirmative Action for
Disabled Veterans and Veterans of the Vietnam Era Clause," set forth at 41
C.F.R. 60-250.4 (applicable to contracts exceeding $10,000); and (c)
"Affirmative Action for Handicapped Worker Clause," set forth at 41 C.F.R. 60-
741.4 (applicable to contract exceeding $2,500).
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
COSO POWER DEVELOPERS,
a California general partnership
By: New CTC Company, LLC,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Christopher T. McCallion
----------------------------
Christopher T. McCallion
Executive Vice President
By: Caithness Navy II Group, LLC,
a Delaware limited liability company
its General Partner
By: /s/ Christopher T. McCallion
----------------------------
Christopher T. McCallion
Executive Vice President
COSO OPERATING COMPANY LLC,
a Delaware limited liability company
By: /s/ Christopher T. McCallion
----------------------------
Its: Executive Vice President
----------------------------
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EXHIBIT A
REAL PROPERTY DESCRIPTION
All of Section 16, all of Section 17, and the East half of Section 18, all
located in Township 22 South, Range 39 East, Mount Diablo Base and Meridian, in
the County of Inyo, State of California.
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