PROJECT DEVELOPMENT AGREEMENT
This Project Development Agreement, ("PDA"), dated August 7, 2001, is
executed by Millennium Ventures LLC, a Delaware, USA limited liability company
"(MEVCO"), and Regent Exploration, Inc., a Nevada USA corporation ("REGENT").
MEVCO and REGENT are referred to individually as a "Party" and collectively as
the "Parties."
RECITALS
WHEREAS, REGENT wishes to form a power development company to pursue
power generation development and acquisition projects near REGENT'S existing and
future exploration and production core areas in the United States and aborad;
and
WHEREAS, MEVCO wishes to assist REGENT with project development,
management, operating and financing; and
WHEREAS, the Parties desire to work together toward the potential
development of a greenfield gas-fired electric power generation project near
REGENT's exploration assets commonly referred to as the Four Corners Properties
in the Four Corners Region of New Mexico, with a projected capacity of
approximately 100 MW, commonly referred to as the Four Corners Energy Center
Project (the "Project"); and
WHEREAS, the Parties have entered into a Consulting Agreement
("Consulting Agreement"), under separate cover, by which MEVCO will seek to
bring acquisition targets in the Four Corners Region to Regent, and
WHEREAS, the Parties wish to jointly conduct a power generation site
feasibility study and submit an electrical interconnect request to the
appropriate New Mexico regulatory agency ("NMRA"), the ("Request") on terms and
conditions which are satisfactory to each of them, for the rights to build and
operate the Project; and
WHEREAS, the Parties wish to enter this PDA to set forth certain
preliminary understandings with respect to the Interconnect Request and the
Project;
AGREEMENT
NOW, THEREFORE, in consideration of the promises and mutual agreements
contained herein and other consideration, the receipt and sufficiency of which
is hereby acknowledged, and intending to be legally bound hereby, the Parties
agree as follows:
1. Purpose. This PDA sets forth certain preliminary terms and conditions under
which the ------- Parties intend to prepare and submit the NMRA Interconnect
Request, receive NMRA approval, and, if successful, to develop the Project. The
Parties shall use commercially reasonable efforts to (a) submit a Request to
develop the Project within commercially competitive parameters, (b) obtain a
Tolling-of-Power purchase contract for the Project on terms reasonably
acceptable to them, (c) obtain long-term non-recourse financing for the Project
on terms reasonably acceptable to them, (d) successfully negotiate and execute
all agreements necessary or appropriate for development of the Project,
inclusive of a site purchase agreement, and (e) if economically and technically
feasible, execute a fuel supply management agreement with Regent Exploration
Company.
In addition, each of the Parties shall be individually responsible for
the activities indicated on Exhibit A attached hereto. As used therein, the
terms "Lead" or "co-Lead" refer to the Party or Parties who are primarily (but
not exclusively) responsible for the planning, management, negotiation and
implementation of the indicated task. The terms "Review" and "Participate" shall
refer to the necessity for obtaining such Party's approval prior to any major
undertaking with respect to the indicated task, with the term "Participate"
indicating a more active role in planning and implementation than the term
"Review". The Parties contemplate that, if the Request is successful, they will
form a limited liability company, which will become the owner (the "Owner") of
the Project. The limited liability company shall be organized in a jurisdiction,
which will advance the activities of the Parties and result in the lowest
possible tax liabilities. The Parties agree to name the Owner company "Four
Corners Energy Center, LLC".
2. Exclusive Development. The Parties shall work exclusively with each other to
develop the Project during the term of this PDA. Each Party agrees that it shall
not solicit or engage in negotiations with any other corporation, partnership,
firm, entity or person regarding the development, construction, ownership or
operation of the Project. This PDA shall not extend to any activities or
relationships by or among the Parties other than with respect to the Project.
Nothing in this PDA shall preclude or restrict either Party from conducting its
business as it determines in its sole discretion other than in connection with
the Project.
3. Transfer of Interests. Each of the original Parties to this PDA may assign
its rights in the Project to one of the other Parties, or to one of its
affiliates, as long as the assigning Party provides such assurances as may be
necessary from time to time to assure lenders to the Project as well as the
other Party that the affiliate has the ability to meet the financial commitments
and other obligations of the assigning Party. If a Party (an "Assigning"
"Party") wishes to assign its interest in the Project to another Party, it must
first notify each of the other Parties (the "Other Parties") in writing of such
assignment, providing in the notice the name of the intended assignee, the
intended assignee's most recent balance sheet and the terms and conditions to
apply to the intended assignment. Each of the Other Parties shall have the
option to acquire its pro-rata share (based on its percentage equity interest
when compared to the total equity interest of the Other Parties) of the interest
to be conveyed upon giving written notice of such effect within fifteen (15)
calendar days of its receipt of the Assigning Party's notice based on the terms
and conditions specified in such notice. If any one of the Other Parties elects
not to increase its interest in the Project pursuant to this section (a
"Declining Party"), it shall so notify the Parties in writing and the remaining
Other Parties shall then have the option, to be exercised within fifteen (15)
calendar days of receipt of the Declining Party's notice, of acquiring an
additional pro-rata share of the interest declined by the Declining Party.
Notwithstanding the foregoing, the Other Parties choosing to acquire the
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Assigning Party's interest may agree to do so based on any particular
percentages agreed upon by them. Except as set forth in this Section 3, no Party
may transfer all or any portion of its rights or obligations in this PDA or
prospective rights or obligations in the Project, including its rights to
develop, construct, own or operate the Project, to any person without the
unanimous written consent of the other Parties, however the Parties may by
unanimous consent add one or more Parties to this PDA by assigning portions of
their interests to any such new party. For purposes of this PDA, "affiliate"
means in relation to any Party, a person which (x) directly or indirectly
controls that Party; (y) is directly or indirectly controlled by that Party; or
(z) is under common control with that Party.
4. Unanimous Action. Except as expressly set forth in this PDA, all material
decisions relating to the Project shall be made by the unanimous agreement of
all of the Parties. Without limiting the foregoing, it shall take the unanimous
consent of the Parties to retain any attorney, consultant or other adviser to
undertake work on behalf of the Project. The scope of all work to be performed
by any such attorney, consultant or adviser shall be set forth in writing, and
the Parties shall prepare and approve a budget and obtain proposals for such
work before approving the retention. The Parties agree to work together to
control the costs of all attorneys, consultants and other advisers.
Notwithstanding the foregoing, the Parties acknowledge that Energy Generation
Corporation and Taylor-DeJongh Inc., will provide, during the term of this PDA,
engineering and financial analysis services to the Project on the most favorable
terms and prices as are generally available to the best customers of Energy
Generation Corporations and Taylor-DeJongh Inc.
5. Terms of the Interconnect Request. The terms and conditions of the Request,
other than pricing, shall be made by the unanimous agreement of all the Parties.
The Parties shall seek in good faith to agree unanimously on the technical
requirements for the Request and the site purchase agreement as provided by
REGENT. If after submitting the Request, the Parties do not receive permission
to interconnect into the NMRA grid, then either Party may, acting by itself or
with one or more of the other Parties (inclusive of third Parties), continue to
pursue the Project using a different plant configuration. If within sixty (60)
calendar days after notification by NMRA of their denial of the Request, neither
Party elects to pursue the Project, then this PDA shall terminate and neither
Party shall be responsible to the other for any additional costs and/or
obligations subject only to the obligations included in section 18 herein.
6. Ownership. The Parties contemplate that the allocation of ownership of the
Project will be as follows:
MEVCO 25%
REGENT 75%
The ownership percentages set forth above shall be the basis for the benefits,
rights, commitments and obligations that each Party will have in and to the
Project (subject to variation in accordance with subsequent agreements), and
shall be the basis for determining the amount of equity funding each Party must
provide to the Owner from time to time. Before the formation of the Owner, all
permits, assets or contract rights related to the Project held or obtained by
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any Party shall be held in trust in the agreed ownership percentages for the
other Parties and for the Owner. Upon the formation of the Owner the Parties
shall assign and transfer, for no additional consideration, all of their
respective rights in the Project to the Owner and, thereafter, all development
efforts and activities shall be undertaken in the name of and on behalf of the
Owner. Upon the formation of the Owner the Parties shall cause the Owner to
expressly assume all obligations undertaken by the Parties on the Owner's
behalf.
It is understood that the Parties wish to allow the entry of a Strategic Partner
to the Project who may provide the financial guarantee for a Tolling-of-Power
Purchase Agreement. Entry of a Strategic Partner is defined as the date of
execution of a Memorandum of Understanding or Letter of Intent for a
Tolling-of-Power Purchase Agreement. In the event a Strategic Partner enters the
Project by no later than January 1, 2002, and also wishes to become an equity
participant in the Project, the Parties shall reallocate their respective
ownership and control of the Project in the following minimum amounts:
MEVCO: 25%
REGENT: 25%
STRATEGIC PARTNER: 50%
7. Shareholder's Agreement. Each Party shall in good faith negotiate by no later
than September 1, 2001, a Project Shareholder Agreement (the "PSA") containing
more definitive terms and conditions regarding the corporate governance and
development of the Project. The Parties agree that the ownership structure of
the Project must be designed for the maximum benefit of the Project and the
Parties, including the tax planning of the Parties.
8. Management. The Parties hereby appoint the following individuals as their
Project Directors: for MEVCO: Phillip Gennarelli; for REGENT: John Ehrman. The
Parties contemplate that the Project Directors will, among other things, meet
regularly to discuss the progress of the Project, to schedule and coordinate
future activities, to select attorneys, consultants and other advisers, to
negotiate on behalf of the Project with third Parties, to negotiate the terms of
the PSA, to prepare budgets and to approve and arrange for the payment of
third-party costs. However, a Project Director shall have the authority to bind
his or her respective Party only to the extent such authority is expressly
conferred in writing by such Party from time to time or is subsequently ratified
by such Party from time to time or is subsequently ratified by such Party, and
no such authority is conferred by this PDA.
9. Costs. For future development costs, REGENT agrees to pay MEVCO a monthly
development fee of $25,000 beginning the first of the month following
introduction to an acquisition target as identified in the "Consulting
Agreement", Exhibit A of even date hereto. The development fee will be due and
payable on the first day of each succeeding month and shall extend for a period
of six (6) months. After the PSA is executed, the development fee will be
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extended for a period of two (2) years and will be paid by the Owners. REGENT
agrees to pay for one hundred percent (100% of all external third party costs as
contained in an approved budget as set forth in Section 4. An initial budget of
$250,00, inclusive of the development fees, has been approved by the Parties to
complete the interconnect request to the NMRA and associated site feasibility
study. REGENT agrees to pre-pay $25,000 of the development fee upon execution of
this agreement. All fees shall be wired to MEVCO's account with Chase Manhattan
Bank of Texas, ABA 11001150, Acct. No. 36780096035, located in Houston, Texas.
10. Preliminary Nature of Agreement. This PDA is not intended to obligate any
Party to enter into the PDA or any other contract or agreement with any other
Party. Rather, this PDA is intended merely as a statement of certain preliminary
terms upon which the Parties intend to proceed with efforts to develop the
Project. This PDA does not obligate any Party to finance any part of the
Project, and does not bind or commit any Party to enter into any further
agreements. No Party or third party shall bring any suit or assert any claim
against any other Party based on this PDA as a result of a failure or inability
of the Parties to (a) agree on the terms of, or enter into, the PDA, or (b)
proceed with development of the Project. Each Party recognizes that the parties
may not be able to agree on the terms of future agreements, and that their
efforts to develop the Project may thereby terminate without liability on the
part of any Party. Each Party recognizes that the development of projects such
as the one contemplated by this PDA is a high-risk activity in terms of
likelihood of success and that no Party in any way warrants or predicts that the
Project will be successfully developed. No Parties, by reason of this PDA, shall
be liable in contract or in tort for any special, indirect, incidental or
consequential damages, including, but not limited to, loss of profits, loss of
revenues, loss of use, loss of earnings, loss of productivity or loss of
efficiency, arising out of or in connection with this PDA.
11. Withdrawal by Any Party. Any Party, in its sole discretion upon thirty (30)
calendar days prior written notice to the other Parties, shall have the absolute
right to withdraw from this PDA at any time. Upon withdrawal by a Party from
this PDA, the withdrawing Party shall have no liability to any other Party
except as provided pursuant to Section 18. Upon withdrawal by any Party, the
other Parties shall be entitled to proceed with the development of the Project
with out the withdrawing Party, and upon request of the non-withdrawing Parties
the withdrawing Party shall assign or transfer to the non-withdrawing Parties
all of its right, title and interest in and to the Project on a pro-rata basis
or in any other proportions agreed to by all of the non-withdrawing Parties,
including any contracts with third Parties or permits then held in the name of
the withdrawing Party. The withdrawing Party shall use commercially reasonable
efforts to ensure that its withdrawal is done in a manner that will not have a
material adverse impact on the Project. The withdrawing Party (a) shall have no
claim against the other Parties, the Owner or the Project, (b) shall have no
rights in or to the Project, and (c) shall have no right to reimbursement of any
of its expenses incurred in connection with the Project except as otherwise
provided in Section 5.
The Parties agree that any party may withdraw from this DTPA, and the request
for NMRA interconnection for the Project covered thereby, at any time after
submission of such request with not attendant liability whatsoever, with the
exception of the potential liability addressed in section 18 herein.
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Upon withdrawal by a Party under such circumstances, the other Parties shall be
entitled to proceed with the development of the Project without the withdrawing
Party. The withdrawing Party shall assign to the non-withdrawing Parties
proportionately all of its right, title and interest in and to the Project,
including any contracts with third Parties or permits then held in the name of
the withdrawing Party. Upon the transfer by the non-withdrawing Parties of the
referenced interest, such non-withdrawing Parties shall assume the obligations
of the withdrawing Party under any letters of credit required by the project and
indemnify the withdrawing Party with respect to such obligations, unless the
non-withdrawing Party notifies the withdrawing Party in writing within fifteen
(15) calendar days of such assignment of its refusal to do so. If the
non-withdrawing Parties assume the obligations of the withdrawing Party under
the letters of credit, the non-withdrawing parties shall also immediately
thereafter provide additional security to the issuer of the letters of credit
which is necessary to support the added interest acquired from the withdrawing
Party and to protect the credit issuer in the event the letter of credit is
called for payment. If, in good faith, the non-withdrawing parties determine
that they cannot assume such credit obligations, the withdrawing Party shall
remain responsible to the credit issuer for the obligations owed thereunder
attributable to its previously held interest in the Project.
12. Compliance with Laws. Each party represents and warrants that it has
conducted its affairs and activities with respect to the Project in accordance
with all applicable laws. Each Party shall comply with any law, rule or
regulation under the laws of all jurisdictions, which is or may be applicable to
it in the conduct of its business relating to the Project or the Owner's
business. No Party shall take any action that would subject any party to
liability, penalty or forfeiture under any and all laws, rules, regulations or
decrees of any governmental authority. Without limiting the foregoing, no Party
shall make or authorize any payment or give anything of value directly or
indirectly to an official of NMRA or any other governmental body for the purpose
of influencing an act or decision in his official capacity or inducing him to
use his influence with that government with respect to the Project or the Owner.
Likewise, no Party shall make or authorize any payment to any government agency,
political party or political candidate for the purpose of influencing any
official act or decision, or inducing such entity or person to use any influence
with that government with respect to the Project or the Owner. Each Party shall
keep its books and records in such a fashion that its compliance with the
foregoing may be readily audited, and shall permit any other Party to conduct
such an audit at the auditing Party's expense. Any Party that fails to comply
with this Section shall indemnify the other Parties from and against any and all
claims, losses, damages, liabilities, expenses and costs of whatever nature
arising out of or connected with such noncompliance, including reasonable
attorney fees and costs. Each Party agrees to execute certificates acknowledging
its ongoing compliance with this Section from time to time at the request of any
other Party.
13. Governing Law. This PDA shall be interpreted in accordance with and governed
by the substantive laws of Texas, without regard to the conflicts of law
principles thereof.
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14. Relationship of Parties. The Parties understand and agree that with respect
to the Project no Party is an agent, employee, contractor, vendor,
representative or partner of any other Party, that no Party shall owe a
fiduciary duty to any other Party, that no Party shall hold itself out as such
to any third party, and that no Party is capable of binding any other Party to
any obligation or liability without the prior express written consent of the
other Party. Notwithstanding anything to the contrary in this PDA, the
relationship among the Parties with respect to the Project shall not constitute
a partnership, joint venture or any other form of business organization prior to
execution of a definitive document to that effect.
15. Integration. The terms and provisions contained in this PDA constitute the
entire agreement between the Parties with respect to the subject matter hereof.
No other agreements, promises, correspondence, discussions, representations or
understandings, either express or implied, unless expressly set forth herein,
are binding between the Parties.
16. No Oral Modifications. This PDA may not be amended or modified except by
written agreement executed by each of the Parties hereto.
17. Term. This PDA shall terminate on the earliest to occur of (a) the execution
by the Parties of the PSA, (b) the agreement of all of the Parties to terminate
this PDA, (c) thirty (30) calendar days following the end of the calendar
quarter during which the Parties receive final notification that the Request is
denied, or (d) March 1, 2002. The rights and obligations of the Parties under
this PDA shall cease immediately upon termination except that termination shall
not affect any rights or obligations, which have accrued on or before the date
of termination, and the provisions of Section 18 shall have effect as stated
herein.
18. Survival. In the case of a termination of this PDA (except because of
execution of the PSA), the obligations of the Parties under Sections 2, 5, 9,
12, 13, 20 and 21, shall survive such termination.
19. Competitiveness of Affiliate Contracts. Any contract proposed to be entered
into between the Owner, on the one hand, and any Party or affiliate of any
Party, on the other hand, must be negotiated in good faith on an arm's-length
basis, must have terms that are reasonably competitive with those generally
available in the market from unaffiliated third Parties, and must be sufficient
to satisfy the requirements of construction and permanent debt financing. No
Party shall have a right of first refusal or an exclusive negotiating right with
respect to any such contract, an the Owner shall have the right to seek
competitive bids from third Parties with respect to any such contract. Any Party
that is negotiating with the Owner regarding the terms of such a contract shall
not participate in any analysis, negotiations, decisions deliberations by Owner
or the other Parties regarding such contract. Subject to the foregoing, the
Parties contemplate that the Owner will contract with (a) Energy Generation
Corporation or one of its Affiliates for the Engineering, Procurement, and
Construction of the Project, and (b) MEVCO or one of its Affiliates for the
financing of the Project and (c) Taylor-DeJongh Inc. or one of their Affiliates
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for the Financial Advisory services of the Project, and (d) Energy Services
Inc., for Owner's Engineer services of the Project, and (e) REGENT or one of its
Affiliates for fuel suppl arrangements for the Project, and (f) REGENT or one of
its affiliates for the site acquisition, inclusive of water requirements,
rights-of-way, and transmission line access.
20. Arbitration.
(a) All claims, disputes or controversies arising in connection with
or under this PDA or relating thereto shall be finally settled under the
Commercial Rules of the American Arbitration Association then in effect (the
"Rules") by a single arbitrator appointed in accordance with the Rules. The
arbitration shall be held in Houston, Texas. The decision of the arbitrator
shall be final, binding and enforceable in any court of competent jurisdiction
and the Parties agree that there shall be no appeal from the arbitrator's
decision. All statutes of limitation that would otherwise be applicable shall
apply to any arbitration proceeding.
The right to arbitrate shall survive the termination of the Agreement. The
Parties acknowledge and agree that this Agreement includes activities in
Interstate Commerce and that the Federal Arbitration Act, 9 U.S.C. ss.1 et seq
shall control and apply to all arbitrations conducted hereunder, notwithstanding
any state law provisions to the contrary. Any award entered by the arbitrator(s)
may be enforced by a judgment entered in a court of competent jurisdiction.
(b) This agreement to arbitrate shall be binding upon the successors,
assigns and any trustee or receiver of any Party.
21. Confidentiality and Non-Competition. It is understood that all or some of
the Parties may be submitting interconnect requests for other power projects in
the United States. In order to protect the business strategies of the Parties
and the confidential information shared among the Parties relating to this
Project which will be relevant to and useful in the preparation of interconnect
requests for such other projects, the Parties agree that they will not (a)
contract with any entity or person other than the Parties to provide
engineering, procurement, construction, financing, financial advisory services,
owner's engineer services, and fuel for the Project; nor (b) submit or
participate in the submission of an interconnect request to acquire an interest
in the Project, and/or disclose any information relating to the Project that it
received as part of its participation in this Project.
22. Development Fee. It is understood by the Parties that they will share in the
Project's Development Fee on a 75/25 basis, irrespective of their equity
percentage at financial closing. The Parties agree that a development fee of
four (4%) shall be paid to the Parties by the Owner at time of financial
closing.
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IN WITNESS WHEREOF, the Parties have caused this PDA to be executed by
their duly authorized officers as of the day and year first above written.
"MEVCO"
Millennium Ventures LLC
a Delaware, USA company
By: /s/ Phillip P. Gennarelli
---------------------------------------
Phillip P. Gennarelli
Managing Director
"REGENT"
Regent Exploration Company
A Nevada U.S.A. corporation
By: /s/ John Ehrman
----------------------------------------
John Ehrman
President
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