Exhibit 10.60
FIELD OPERATION AND MAINTENANCE AGREEMENT
(BLM)
This Field Operation and Maintenance Agreement ("Agreement") is entered
into as of May 28, 1999 (the "Effective Date"), by and between COSO ENERGY
DEVELOPERS, a California general partnership ("CED"), and COSO OPERATING COMPANY
LLC, a Delaware limited liability company ("COC").
WHEREAS, CED owns a three unit 90 megawatt output power facility and
related geothermal resources (collectively the "Facilities," as further defined
herein) located on lands of the Bureau of Land Management near China Lake,
California designated as the BLM Project; and
WHEREAS, CED and COC wish to provide for the terms and conditions of the
operations and maintenance of the Facilities as more fully provided for herein.
NOW, THEREFORE, the parties hereby 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,
which will be provided by COC at such times and at such costs as approved by
CED.
1.2 "Annual Operating Fee" means the Annual Operating Fee as provided for
in Section 4.3 hereof.
1.3 "BLM" means the Bureau of Land Management of the United States
Department of Interior acting through the Chief of Leasable Minerals Section.
1.4 "BLM Lease": The term "BLM Lease" means (i) that certain Offer to
Lease and Lease for Geothermal Resources between BLM and California Energy
Company, a Delaware corporation ("CalEnergy"), dated April 29, 1985; (ii) that
certain Assignment Affecting Record Title to Geothermal Resources Lease by
CalEnergy to CLC and approved by BLM dated June 24, 1985; (iii) that certain
Assignment of Record Title Interest in a Lease for Oil and Gas or Geothermal
Resources from CLC to CGC dated as of April 15, 1988 and approved by BLM
effective as of May 1, 1988; (iv) that certain Assignment of Record Title
Interest in a Lease for Oil and Gas or Geothermal Resources from CGC to Borrower
dated as of April 15, 1988 and approved by BLM effective as of May 1, 1988; (v)
that certain Agreement of Transfer and Assignment of Agreements and Rights
Relating to the BLM Project between CLC and CGC dated as of May 3, 1988; and
(vi) that certain Agreement of Transfer and Assignment of Agreements and Rights
Relating to the BLM Project between CGC and CED dated as of May 3, 1988, in each
case as the same may be modified or amended.
1.5 "CCH" means Caithness Coso Holdings, LLC, a Delaware limited liability
company.
1.6 "CED Partnership Agreement" means that certain Amended and Restated
Partnership Agreement of Coso Energy Development, dated as of the Effective
Date.
1.7 "CGC" means Coso Geothermal Company, a California general partnership
organized as a joint venture.
1.8 "CLC" means Coso Land Company, a California general partnership
organized as a joint venture.
1.9 "Commencement Date" means February 25, 1999, the date of the previous
operations and maintenance agreement.
1.10 "Direct Costs" means Direct Costs as defined in Section 4.2 hereof.
1.11 "Resource Management Plan" means the annual written plan for the
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 CED.
1.12 "Drilling Services" means Drilling Services as defined in Section
2.1(c) hereof.
1.13 "Emergency" means an event occurring at the Resource Area which poses
actual or imminent risk of serious personal injury, physical damage, violation
of a material Governmental Requirement or loss of material contractual rights of
CED requiring, in the good-faith determination of COC, immediate preventative or
remedial action by COC and for which advance approval by CED 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.
1.14 "Facilities" means the geothermal power facilities (each a
"Facility"), located on the lands of the BLM, consisting of three Units,
interconnection to the Transmission Line,
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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.
1.15 "Fenceline" means the perimeter described by the fence or fences which
enclose any Unit or Facility.
1.16 "FERC" means the Federal Energy Regulatory Commission.
1.17 "Field Operations" means the well drilling and well workover work
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 Facilities and well operation and maintenance.
1.18 "Field Operator" means COC.
1.19 "FPLE" means FPL Energy Operating Services, Inc., or such other
operator as may be selected by CED.
1.20 "Geothermal Reserve" means not less than One Hundred Five Percent
(105%) or such lesser percentage as CED 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
Facilities 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.
1.21 "Governmental Authority" means the government of any federal, state,
municipal or other political subdivision in which the Facilities are located,
and any other government or political subdivision thereof exercising
jurisdiction over the Resource Area, the Facilities, or CED, including all
agencies and instrumentalities of such governments and political subdivisions
(including, without limitation, the BLM).
1.22 "Governmental Requirements" means all Laws, ordinances, statutes,
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 Facilities, or CED.
1.23 "Law" means any constitution or treaty, any law, ordinance, decree,
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
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provisions of such Laws binding on or affecting the party referred to in the
context in which the term is used.
1.24 "Operating Budget" means an annual budget approved by CED pursuant to
Section 3.1.
1.25 "Operations" means those operations delineated by Section 2 of the
Operation and Maintenance Agreement.
1.26 "Operations and Maintenance Agreement" means the Operations and
Maintenance Agreement (BLM Project), dated the Effective Date, entered into by
CED, COC and FPLE.
1.27 "Permitted Assigns" means Permitted Assigns as defined in Section
12.7.
1.28 "Permitted Liens" means Liens which are:
(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
(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 CED'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 CED.
1.29 "Power Purchase Contract" means that certain Agreement dated February
1, 1985 between SCE and CGC (as assigned to CED) and that certain Interconnect
Agreement dated as of December 15, 1988, between SCE and CED, in each case as
the same may be modified or amended.
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1.30 "Project" means the Facilities, the Resource Area and the associated
rights to geothermal resources.
1.31 "PURPA" means Public Utilities Regulation Policies Act of 1978, as
amended.
1.32 "Required Services" means the services described in Section 2.1
hereof.
1.33 "Resource Area" means all real property described in Exhibit A to this
Agreement, exclusive of the area on which the Facilities are located.
1.34 "SCE" means Southern California Edison Company, a corporation
organized and existing under the laws of the State of California.
1.35 "Subordination Agreement" means the Operating Fee Subordination
Agreement (Navy I) between COC and U.S. Bank Trust, National Association, as
collateral agent of even date herewith.
1.36 "Transmission Line" means that certain 230Kv overhead transmission
line, including associated equipment, connecting the Facilities to SCE's
Inyokern substation.
1.37 "Unit" means any of the three single geothermal turbine generators of
the Facilities.
1.38 "Warranties" means the warranties by the contractor for the
Facilities.
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 Drilling Program and 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 recordkeeping
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 CED;
(ii) Review all normal testing and recordkeeping 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;
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(iii) Select one or more individuals to act as liaison with the
BLM, SCE, CED, and FPLE with respect to all services to be rendered by COC under
this Agreement;
(iv) Provide CED and FPLE and any person designated by CED 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 CED analysis of reports, test data, and other
information related to the Resource Area, as reasonably requested by CED 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
Drilling Program and Resource Management Plan with respect to (i) the management
and development of the Resource Area, (ii) performance of its other services
hereunder in substance and format acceptable to CED, (iii) a schedule of
anticipated tests, including justification as to technical and scientific
requirements and estimated costs of testing, (iv) a review of the actions taken
hereunder during the preceding twelve (12) month period and (v) 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 CED, the BLM, SCE and FPLE; and
(iii) Assist CED 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
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(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 CED 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.
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
COC is unable to obtain the prior approval of CED for such services, 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
COC shall provide notice of such Emergency to CED 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 format and substance
acceptable to CED. 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 for consideration and approval by CED in connection
with the approval of CED's Budget (as defined in the CED Partnership Agreement)
as more fully described in the CED Partnership Agreement. COC shall submit each
proposed budget and related proposed Resource Management Plan to CED not later
than ninety (90) days prior to the calendar year to which such budget relates.
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3.2 COC shall perform all Required Services and Drilling Services in
accordance with the Operating Budget and related Drilling Program and 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 CED. COC shall prepare a revised Operating Budget, together
with any necessary supplementary materials, and submit them to CED 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.
3.3 COC shall report to CED 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 CED, 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, CED
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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
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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;
(b) deductible from the insurance coverage to be maintained under Article 9 of
this Agreement; or (c) 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 CED, 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
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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.
4.3 Annual Operating Fee. CED shall pay to COC for the Required Services
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and Drilling Services 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,
CED 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 CED. All invoices for amounts within the
Operating Budget shall be paid promptly by CED.
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 Facilities. Maintenance, overhauls and (to the extent possible) repairs or
overhauls required as a result of unexpected events shall be scheduled with CED
and FPLE so as to minimize interference with the operations of the Facilities.
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
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administer all matters relating to labor relations, working conditions,
training, employee benefits, safety and related matters pertaining to its
employees.
5.4 CED understands that COC's management personnel for operations under
this Agreement shall be assigned to the Facilities 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. CED may make requests of COC to replace personnel deemed by CED to be
inadequately experienced or otherwise unqualified to perform the Required
Services, which request shall not be unreasonably refused.
5.5 COC shall comply with, and cause the Resource Area and all Resource
Area personnel to comply with, all applicable Governmental Requirements
(including all requirements imposed by PURPA and FERC), the Power Purchase
Contract, the BLM Lease pertaining to the Required Services, and the operating
manuals provided for the Units.
5.6 COC shall not, directly or indirectly, create, incur or permit to
exist any lien on the Facilities, 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 CED shall obtain and maintain all permits and licenses necessary to
allow COC to provide all services contemplated by this Agreement.
6.2 CED grants to COC a limited license of certain rights under the Power
Purchase Contract, the FERC Qualifying Facility Certification, the BLM Lease and
other rights that CED has to the Facilities and the surrounding areas reasonably
necessary to allow COC to perform the services contemplated by this Agreement.
CED grants COC access to the Facilities as is necessary to perform the services
under this Agreement.
6.3 CED 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 CED in
the performance of its obligations, CED 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 the
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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 Facilities.
COC shall assign to CED all warranties provided by manufacturers, contractors or
vendors of spare parts provided for the Facilities, and shall pass on to CED
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 CED 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, express or
implied.
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.
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ARTICLE 8
SUSPENSION OF SERVICES
8.1 CED 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 beyond the control and not the fault of COC as Field Operator that causes
shutdown of the Facilities 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 or 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 Facilities.
(d) BLM activities or restrictions which prohibit economical operation
of the Facilities or the Resource Area.
(e) Failure of COC to perform 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 CED, 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,
CED shall continue to pay COC all compensation in accordance with Article 4,
unless it is determined that (a) such suspension will extend for more than 30
calendar days or (b) that such suspension is the result of a default by COC as
described in Article 10. In the event of (a), CED 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 CED, suspend all or a
part of its services under this Agreement if CED 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
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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 CED
from time to time.
9.2 COC shall provide to CED such evidence of the required insurance as
CED may reasonably specify.
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 CED. CED 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 CED 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
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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 thirty (30) 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 CED, then COC shall have the right to
terminate this Agreement by written notice to CED, without prejudice to any
remedies at law or in equity that are available to COC by reason of CED'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 CED 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 CED that it is able to perform
fully under this Agreement, and to compensate CED 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 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 CED 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 CED 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
14
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, CED 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 CED 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 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
gross indemnity granted herein shall include indemnity for damage to property or
to the environment
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and for injury to or death of any person, including employees of COC or CED.
"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.
12.2 Any controversy between COC and CED or claim of either COC or CED
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 CED 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 CED: Caithness Energy Developers
c/o Caithness Coso Holdings, LLC
c/o Caithness Energy, L.L.C.
1114 Avenue of the Americas
New York, New York 10036
Attn: President
16
If to COC: Caithness 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 CED, 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.
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 the
parties hereto and 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").
Neither party may assign its rights or delegate its obligations under this
Agreement, except by prior written approval of the parties; provided, however,
that CED shall have the right to assign its rights under this Agreement without
consent to any lender or lenders in connection with any financing secured by the
Facilities.
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
17
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, without limitation, that certain Amended and Restated Field Operation
and Maintenance Agreement (BLM), dated December 16, 1992, by and between Coso
Hotsprings Intermountain Power, Inc., and California Energy Company, Inc., as
amended. This Agreement may not be amended without the written consent of CED.
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).
END OF PAGE
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
COSO ENERGY DEVELOPERS,
a California general partnership
By: New CHIP Company, LLC,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Christopher T. McCallion
---------------------------------
Christopher T. McCallion
Executive Vice President
By: Caithness Coso Holdings, 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
Lots 1 through 4 inclusive of Section 19; and the East half of Section 19; and
the East half of the West half of Section 19; all of Sections 20 and 29; Lots 1
through 4 inclusive of Section 30; and the East half of Section 30; and the East
half of the West half of Section 30, all in Township 22 South, range 39 East,
M.D.M., in the County of Inyo, State of California according to the official
plat thereof.
20