PARTNERSHIP AGREEMENT
THIS PARTNERSHIP AGREEMENT is made and entered into as of the 30th day
of August, 1985, by and between VULCAN POWER COMPANY, 631 South Witmer Street,
P. O. Box 17760, Los Angeles, California 90017, a Nevada corporation
("Vulcan"), and BN GEOTHERMAL, INC., P.0. Box 1492, El Paso, Texas 79978, a
Delaware corporation ("BNG").
In consideration of the mutual convenants hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I
FORMATION OF PARTNERSHIP
1.1 Formation.
Pursuant to the Uniform Partnership Act of the State of Nevada, the
parties hereto (the "Partners"), hereby associate themselves together
to form a partnership (the "Partnership"). The parties shall
immediately take such steps as are necessary to comply with all
requirements for the formation and continuation of a partnership under
said Act and to comply with the requirements of the assumed name or
similar statutes in effect in the State of Nevada.
1.2 Partnership Name.
The Partnership shall operate under the name of, and shall be known as,
VULCAN/BN GEOTHERMAL POWER COMPANY. The parties shall take such steps
as are necessary to terminate any prior use of this name and to secure
for the
Partnership the rights to this name free of any earlier purposes and
any liabilities possibly associated therewith.
1.3 Purposes of Partnership.
The fundamental purpose of the Partnership is the acquisition,
construction, ownership and operation of a single geothermal-electric
generating facility now under construction near Calipatria, California
(the "Vulcan Facility"), and any activities incidental to such
fundamental purpose, as well as to carry on all such other activities
related thereto as are not forbidden by the laws of the State of
Nevada.
1.4 Place of Business.
The principal place of business and office of the Partnership shall be
located at 7001 Gentry Road, Calipatria, California 92233, and may
subsequently be moved to such other location as from time to time may
be determined by the Management Committee (as defined hereinafter) of
the Partnership and reflected in a duly filed amendment to the
Partnership certificate. The Partnership may maintain such other
offices at any other location or locations as the Management Committee
may from time to time deem advisable.
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ARTICLE II
CAPITAL AND DEBT FINANCING
2.1 Capital of the Partnership.
(a) Initial Capital Contributions.
The initial capital of the Partnership shall consist of the
following described assets (the "Partnership Assets"), an undivided
one-half (1/2) interest of which is to be contributed by each
Partner:
(1) The physical plant of the Vulcan Facility described in
Exhibit A attached hereto and incorporated herein by
reference; and
(2) The eighteen (18) completed wells (including intangible
drilling costs) associated with the Vulcan Facility described
in Exhibit B attached hereto and incorporated herein by
reference, along with rights of ingress and egress to said
wells, subject to Vulcan's right to repurchase described in
Section 9.1 hereof.
(b) Payment of Initial Capital Contributions. Immediately following the
execution of this Partnership Agreement, the Partners shall each
contribute to the Partnership an undivided one-half (1/2) interest
in the Partnership Assets and be credited the amount of capital
shown on Exhibit C, attached hereto and made a part hereof.
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(c) Additional Capital Contributions and Withdrawals. Equal
additional contributions to capital, whether needed to complete the
Vulcan Facility, to cover costs of operation, or to otherwise
accomplish the purposes of the Partnership, shall be made by the
Partners when, and in the manner and amount, requested by Vulcan
and approved by unanimous consent of the Management Committee.
Failure to make such additional capital contributions shall cause
an automatic adjustment in the distribution of profits and losses
in accordance with Section 3.2 below. Withdrawals of capital shall
be made only by unanimous decision of the Management Committee.
Both additional capital contributions and withdrawals shall be made
upon the following conditions:
(1) The preparation of a revised schedule of capital contributions
(similar in form to Exhibit C) showing the then aggregate
capital contributions of both Partners, which revised schedule
shall thereafter be attached hereto; and
(2) The filing of a properly revised partnership certificate in
the office of the clerk of the county where the principal
place of business of the Partnership is then located, if such
a revised partnership certificate is then required by law.
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2.2 Partner's Capital.
The Partner's capital for each Partner shall reflect its interest in the
net book value of the assets and liabilities of the Partnership. The
initial amount of each Partner's capital shall be the initial capital
contribution made by that Partner. Each Partner's capital shall
thereafter be increased by any additional capital contributions made by
such Partner and decreased by any withdrawals of capital made by such
Partner. Capital contributions or withdrawals made other than in cash
shall be reflected at the value of the property involved as agreed upon
by the Partners.
2.3 Interest in the Partnership Defined.
A Partner's "interest in the Partnership", as that term is used
throughout this Partnership Agreement, refers to its entire interest in
and with respect to the Partnership including its interest in the
capital and profits of the Partnership (unreduced by any amounts owed by
such Partner to the Partnership, but such interest shall constitute
security for the repayment of such debts). A Partner's interest in the
Partnership shall not include any amounts owed to that Partner by the
Partnership or to the Partnership by that Partner on written promissory
notes nor shall such expression include a Partner's right to participate
as a Partner in the management of the Partnership or any of its
property. No Partner in its individual capacity shall have any ownership
of the property of the Partnership.
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2.4 Partnership Distributions.
Distributions to Partners shall be made only to the extent that the
Partners acting jointly may determine from time to time that such
distributions are in the best interest of the Partnership; provided,
however, that proceeds received by the Partnership as a result of the
sale by the Partnership of its assets (or a portion thereof), whether
pursuant to a purchase agreement granted by the Partnership to a Partner
or otherwise, shall be first applied to retire the outstanding debts of
the Partnership and any residual shall be immediately distributed to the
Partners in equal proportion, unless the Partners shall agree otherwise.
No Interest shall be paid to a Partner on its capital in the
Partnership.
2.5 The Partnership's Anticipated Financial Needs.
(a) Financing of the Vulcan Facility.
It is the specific intent of the Partners that financing for the
acquisition and construction of the Vulcan Facility be obtained
solely from capital contributions made by the Partners, such
financing being presently estimated to be approximately Seventy-
three Million Dollars ($73,000,000), U.S.
(b) Additional-Funds Required for the Partnership.
It is the specific intent of the Partners to fund all other
financial needs of the Partnership solely from operations and/or
additional capital contributions made by the Partners. If at any
time or times the
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Partnership should require additional funds for such other needs
which it is unable to generate through its own operations and
which, for any reason, the Partnership does not wish to raise
through an increase in the Partnership capital pursuant to the
provisions of Section 2.1(c) above, the Management Committee, by
unanimous decision, may authorize such additional funds to be
borrowed by the Partnership, upon such terms as the Management
Committee may agree, using one or more of the following methods:
(1) From third parties based on the Partnership's own credit;
(2) From the Partners (in equal amounts);
(3) From third parties, by means of corporate guarantees of the
Partners, with the burden with respect to the amounts, form
and terms of such loans to be borne substantially equally by
the Partners, unless they otherwise agree.
ARTICLE III
PROFITS AND LOSSES
3.1 Profit and Losses Defined.
Throughout this Partnership Agreement, the term "profits and losses of
the Partnership" shall mean the net profits or net losses of the
Partnership, including realized capital gains and losses, as determined
in the Partnership's books of account. The Partnership's books of
account shall be kept
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using the accrual method of accounting, applying generally accepted
accounting principles. Commencing with the calendar year 1986, the
Partnership's fiscal year shall be the calendar year.
3.2 Division Between Partners.
The profits and losses of the Partnership shall be credited or charged
to the Partners in equal proportions. However, if a Partner fails to
make any additional capital contribution required by Section 2.1(c)
above, it is understood and agreed by the parties hereto that the
division of profits and losses specified herein shall be automatically
adjusted so as to allocate to each Partner a fraction of the profits and
losses, the numerator of which shall be (a) one-half of the total of
both Partners' capital accounts before any additional capital
contributions plus (b) any additional capital contributions made by the
individual Partner; and, the denominator of which shall be the total of
both Partners' capital accounts after all additional capital
contributions.
3.3 Consequences of Default in Capital Contributions.
A partner which fails to make additional capital contributions required
by Section 2.l(c) above shall be hereinafter referred to as a
"defaulting Partner". While any Partner is in default:
(a) No distributions shall be made to such defaulting Partner and any
interest or other earnings on amounts withheld from such defaulting
Partner shall accrue to
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the non-defaulting Partner; provided, however, that upon the
unanimous consent of the Management Committee, any counts withheld
from such defaulting Partner pursuant to this Section, together
with any interest or other earnings on such withheld amounts, may
be credited to the capital account of such defaulting partner;
(b) the non-defaulting Partner may, at its option, consider the sums
advanced by it (and not matched by the defaulting Partner) to be a
loan to the Partnership; and
(c) except as provided in this Section 3.3, and in Section 7.1 of this
Partnership Agreement, such defaulting Partner shall continue to be
a Partner subject to all of the terms and conditions of this
Partnership Agreement.
A defaulting Partner shall be liable to the Partnership and to the
non-defaulting Partner for all losses, damages and expenses sustained or
incurred by the Partnership and such non-defaulting Partner as a result of
such default, including, without limitation, any additional tax liabilities
and interest, and any allocation of Partnership losses resulting from such
default.
3.4 Compensation of Partners.
Each Partner shall receive reasonable compensation for any services
(such as bookkeeping services or tax return preparation services)
rendered by it to the Partnership, but
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only after provision for such compensation has been made in a written
agreement between the Partners or between the Partner rendering such
services and the Partnership. Any such compensation shall be deducted
from Partnership income, as in the case of any other expense, in
determining the profit or loss allocable among the Partners under the
provisions of Section 3.2 above.
3.5 Reimbursement for Expenses.
Each Partner shall be entitled to be reimbursed by the Partnership, as
an expense of the Partnership, for its actual, reasonable and necessary
expenses authorized by the Partners and incurred in behalf of the
Partnership, upon filing an itemized account of such expenses in the
records of the Partnership.
ARTICLE IV
TAXES
4.1 Responsibilities for Income Taxes; Preparation of Partnership Returns.
AA soon as practicable following the end of each fiscal year of the
Partnership, the Partnership shall cause the Operator (as hereinafter
defined) to prepare and deliver to each Partner such federal, state and
local income tax returns and such other accounting information, tax
information and schedules as shall be necessary for the preparation by
each Partner of its income tax returns for such fiscal year. The
Operator shall submit copies of all returns to each Partner not less
than forty-five (45) days prior to the date upon
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which such returns are required to be filed (including extensions of
time obtained by the Operator) to permit review and approval of the
returns prior to filing.
The Operator shall file or cause to be filed, subject to Management
Committee review and approval, such federal income tax returns as may be
required in respect of the Partnership.
4.2 Allocation of Tax Benefits and Burdens.
For income tax purposes, depreciation deductions shall be allocated to
the Partners based upon the value of the capital contributions of the
Partners stated as a percentage of total capital contributions. The
Partners shall share the investment and energy tax credits in accordance
with the applicable provisions of the Internal Revenue Code of 1954, as
amended, and the Treasury Regulations promulgated thereunder.
4.3 Elections in U.S. Income Tax Returns.
In preparing the federal U.S. Partnership income tax returns for the
Partnership, the following elections shall be made:
(a) A calendar taxable year;
(b) The accrual method of accounting;
(c) The depreciation method for each asset most beneficial to the
Partners as determined by the Partners;
(d) The full amount of credit under Internal Revenue Code Section 46(a)
; and
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(e) in respect of any election not specified, the method providing
for the most immediate deduction shall be chosen.
4.4 Termination Within the Meaning of IRC Section 708.
No sale or exchange of any Partnership interest, or any fraction
thereof, may be made if the interest sought to be sold or exchanged,
when added to the total of all other interests sold or exchanged within
the period of 12 consecutive months prior thereto, would, in the opinion
of tax counsel for the Partnership (as selected by either Partner),
result in the Partnership being considered to have been terminated
within the meaning of Section 708 of the Internal Revenue Code of 1954,
as amended, or any similar provision enacted in lieu thereof.
4.5 IRC Section 754 Election.
The Operator or other party who is responsible for filing the
Partnership's federal tax return shall, if the Partners so desire, make
or attempt to revoke the election referred to in Section 754 of the
Internal Revenue Code of 1954, as amended, or any similar provision
enacted in lieu thereof. Each of the Partners shall, upon request,
supply the information necessary to properly give effect to any such
election.
4.6 State and Local Franchise and Income Tax Returns.
The Operator, on behalf of and for the account of the Partnership and
subject to review and approval of the Management Committee, shall file
(or cause to have filed)
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all returns and make (or cause to be made) all payments for the
Partnership of all state and local franchise or income taxes levied
directly on the Partnership. All such tax payments made or caused to be
made for or on behalf of the Partnership shall be made from Partnership
funds.
The Operator shall render for ad valorem taxation all property subject
to this Agreement which by law should be returned for such taxes, and
shall pay (or cause to be paid) all such taxes assessed thereon before
they become delinquent. The Operator shall bring any unreasonable tax
assessment to the attention of the Management Committee and, so directed
by the Management Committee, shall protest any unreasonable tax
assessment within the time and manner prescribed by law, and prosecute
the protest to a final determination, unless the Management Committee
directs the Operator to abandon the protest prior to final
determination. When any such protested valuation shall have been finally
determined, the Operator shall pay (or cause to be paid) the assessment,
together with interest and penalty accrued. All ad valorem tax payments
shall be made from Partnership funds.
4.7 Access to Partnership Tax Returns, Etc.
Any tax returns which may be filed or any information concerning or upon
which payments for taxes may be made by a Partner respecting the
Partnership pursuant to this Article IV shall be subject to audit by the
other Partner and both
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0147747.01
Partners and any accountants or firms of accountants designated by such
Partners shall at all reasonable times have access thereto.
4.8 Designation of Tax Matters Partner.
Vulcan is designated the tax matters Partner as defined in Section
6231(a)(7) of the Internal Revenue Code of 1954, as amended.
ARTICLE V
MANAGEMENT
5.1 Partners' Rights and Responsibilities.
The Partners shall have equal rights in the direction and conduct of the
business and affairs of the Partnership. The Partners covenant with one
another that no action will be taken on behalf of or in the name of the
Partnership without the consent of both Partners, except as otherwise
expressly permitted herein.
5.2 Powers of the Partners.
The Partners acting jointly through their respective representatives on
the Management Committee shall possess all of the powers and rights of
Partners under the partnership law of the State of Nevada, including,
without limiting the generality of the foregoing, the power, on behalf
of the Partnership and in their discretion, to:
(a) Sell, assign, convey, or otherwise transfer title to any portion of
the real and personal property and other assets of the Partnership,
including any interest in
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any mortgage, lease, or other interest in real or personal property
owned by the Partnership;
(b) Construct or cause the construction of such buildings and other
improvements upon land owned or leased by the Partnership, and such
additions and alterations to existing improvements, as they deem
proper;
(c) Lease to any party, including a Partner, upon such terms as they
deem proper all or any portion of the real or personal property of
the Partnership, whether or not the space or facility so leased is
to be occupied by the lessee or, in turn, subleased in whole or in
part to others;
(d) Borrow money for the Partnership, and, as security therefor,
mortgage all or any part of the Partnership's real and personal
property and in conjunction therewith execute all necessary papers
and documents, including, but not limited to, bonds, notes,
mortgages, pledges, security agreements and confessions of judgment
for and on behalf of the Partnership;
(e) Open and close bank accounts, and name and change signatories
authorized to make deposits and withdrawals in relation thereto;
(f) Obtain replacements of mortgages of the Partnership's property;
(g) Prepay, in whole or in part, refinance, recast, increase, modify,
consolidate, correlate or extend on
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such terms as they deem proper any mortgages affecting the real or
personal property of the Partnership;
(h) Place record title to the Partnership's real or personal property
in the name or names of a nominee or nominees for the purpose of
mortgage financing or any other convenience or benefit to the
Partnership;
(i) Employ from time to time persons, firms, financial advisors and
corporations (including persons, firms and corporations which may
be otherwise affiliated with a Partner), on such terms and for such
compensation as they shall deem proper, to operate and manage the
Partnership's property, including, without limitation, management
agents, accountants and attorneys;
(j) Set aside investment funds of the Partnership for payment of past,
current and future liabilities of the Partnership including, but
not limited to, liabilities of the Partnership to individual
Partners; and
(k) Execute, acknowledge and deliver any and all instruments to
effectuate any of the foregoing powers.
No person, firm or corporation dealing with the Partnership shall be required
to inquire into the authority of the Partners acting through the Management
Committee to take any action or make any decision hereunder.
5.3 Delegation of Responsibility to Management Committee.
Each Partner shall appoint two natural persons to represent that Partner
on the Management Committee of the Partnership. The persons so appointed
by each Partner shall be from time
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to time herein called the "Partner's Representatives" on the Management
Committee and any one of such representatives shall be called "Partner's
Representative". The name of each such representative shall be notified
to the other Partner by the Partner appointing same and any such
representative may be removed by the appointing Partner, such removal
being likewise notified to the other Partner. The Partners hereby
delegate responsibility for the conduct of the business and affairs of
the Partnership to the Management Committee.
5.4 Power of a Partner's Representative.
Each Partner will take such action as is internally required within that
Partner to provide each of its Partner's Representatives on the
Management Committee sufficient authorization to bind and legally act on
behalf of that Partner so long as his appointment remains in effect.
Persons or entities dealing with the Partnership may rely upon the
signatures of one representative of each Partner as binding upon the
Partnership.
5.5 Management of the Partnership Business.
The Management Committee shall conduct the property, affairs and
business of the Partnership and shall make all decisions pertaining to
the kind of business to be transacted (including decisions which expand
or otherwise change the purpose of the Partnership as stated in Section
1.3 above), the establishment of budgets for the Partnership, and the
establishment of Partnership policies, including, but not
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limited to, tax policies. In addition, the Management Committee may
exercise on behalf of the Partners any of the powers of the Partners
specified in Section 5.2 hereof. Unless otherwise specifically provided
for herein, any decision of the Management Committee shall require the
consent of all representatives on such Committee.
5.6 Rules of Procedure; Minutes; Secretary.
The Management Committee may establish rules of procedure and policies
pursuant to which it shall conduct its operations and proceedings. Such
Committee may appoint a Secretary who shall be responsible for keeping
the minutes of the proceedings and Committee decisions and for giving
notice of the meetings of the Committee to each Partner's Representative
in the manner provided herein. Such Secretary shall serve at the
pleasure of the Partners, either one of which may cause his removal,
effective upon the appointment and qualification of his successor, by
the giving of written notice to the other Partner, in which event the
Partners shall agree on such successor.
5.7 Management Committee Meetings.
The Management Committee shall hold its meetings at such times, but at
least quarterly, and places as it determines and shall have the
Secretary specify by notice. Notice of each such meeting shall be
communicated to each Partner's Representative by telephone or by mail,
telegram or telex, addressed to him at his usual place of business at
least fourteen (14) days if by mail or three (3) days if by
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telephone, telegram or telex before the day on which the meeting is to
be held; and such notice shall specify the time, place and general
purpose of the meeting. The meeting shall not take place if either
Partner is unable to be sufficiently represented and if that Partner
communicates same to the other Partner and specifies an alternative
date. In lieu of a formal meeting, any action required or permitted to
be taken by the Management Committee may be taken in the form of a
written consent thereto which shall have been signed by at least one
representative of each Partner and filed with the minutes of the
meetings of the Management Committee meetings.
5.8 Banking.
A11 funds of the Partnership which are to be deposited with any
financial institution shall be deposited in the name of the Partnership
in such account or accounts as shall be designated by the Management
Committee and withdrawals therefrom shall be made upon instruments
signed by persons authorized by the Management Committee to make
withdrawals.
5.9 Accounting and Auditors.
(a) Books of Account.
The Partnership shall cause the Operator to maintain accounting
records to show a true and complete record of the business, assets
and liabilities of the Partnership according to generally accepted
accounting principles in such form as the Management Committee
shall from time to time approve or direct and shall
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make such accounting records available for inspection to the
Management Committee or to either Partner or any accountants or
accounting firms designated by the Management Committee or by
either Partner, at all reasonable times.
(b) Periodic Statements.
The Partnership shall cause the Operator to prepare annual and
quarterly financial statements (balance sheet and income statements
and statements of changes in financial position), both in form and
substance as dictated by generally accepted accounting principles,
plus estimated monthly accounting data sufficient to allow monthly
closings of Partnership accounting records. The annual financial
statements shall be audited and certified by a national accounting
firm selected by the Management Committee, and shall be submitted
for review and approval by the Management Committee on an estimated
basis not later than the end of February, and in final form not
later than the end of March, in the year following the year to
which they relate.
ARTICLE VI
CONSTRUCTION AND OPERATION OF THE VULCAN FACILITY
6.1 Construction and Operation of the Vulcan Facility.
The Partners hereby agree that the Partnership shall
designate Vulcan as the initial Operator to construct and
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operate the Vulcan Facility pursuant to a certain Construction,
Operating and Accounting Agreement between the Partnership and Vulcan
dated as of August 30, 1985. The initial and any successor Operator may
be removed from such position by unanimous vote of the Management
Committee. Upon removal of an Operator, a successor shall be designated
by unanimous vote of the Management Committee.
ARTICLE VII
PARTNERSHIP TERM
7.1 Term.
The term of the Partnership shall commence upon the date of this
Agreement and shall expire on August 30, 2015, unless extended to a
certain later date by mutual agreement of the Partners (such term and
any such extension thereof being hereinafter called "the Partnership
Term") or unless terminated earlier by the occurrence of any one or more
of the following events:
(a) The acquisition pursuant to Article VIII hereof, by one Partner
of the entire interest in the Partnership owned by the other Partner;
(b) The mutual written agreement of the Partners to dissolve the
Partnership; or
(c) The election, by a solvent Partner, to dissolve the Partnership
upon the other Partner becoming insolvent, which, for the purposes
hereof, shall be evidenced either by:
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(1) The filing by the other Partner or any parent entity
thereof (hereinafter collectively the "Partner") of a voluntary
petition in bankruptcy or the entry of a decree or order by a
court having jurisdiction in the premises adjudging the Partner
a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Partner under the Federal
Bankruptcy Act or any other applicable federal or state law, or
appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Partner or of
any substantial part of its property, or the ordering of the
winding-up or liquidation of its affairs, said order or decree
continuing unstayed and in effect for a period of sixty
consecutive days; or
(2) The failure of the other Partner to make an initial capital
contribution pursuant to Section 2.1(a) hereof or such
additional capital contributions as may from time to time be
called for pursuant to Section 2.1(c) hereof within ten (10)
business days of receipt of a notice from the solvent Partner
that such contribution has not been made within ten (10)
business days of when due.
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In order to be effective, such election must be made within thirty (30) days
after the default specified in this Section 7.1(c).
ARTICLE VIII
TRANSFER OF PARTNERSHIP INTEREST
8.1 Restriction on Transfer.
During the Partnership Term no Partner shall, directly or indirectly in
any manner, sell, transfer, assign, encumber or otherwise dispose of its
interest in the Partnership, or any interest in the assets of the
Partnership, without the prior written consent of the other Partner,
except as provided in this Article. Further, no Partner shall, except
with the prior written consent of the other Partner or except as
provided for in Section 7.1(c) above, cause the dissolution of the
Partnership.
8.2 Permitted Transfers.
(a) Mutually Agreed Transfers.
In the event that the Partners mutually agree that one Partner
("the Purchaser") is to acquire the entire interest in the
Partnership owned by the other ("the Seller") then, unless
otherwise agreed between the Seller and the Purchaser:
(1) The Seller shall sell its interest to the Purchaser for cash
at a mutually agreed upon price and under such terms as the
Partners may agree upon; and
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(2) Following consummation of the sale of its interest in the
Partnership, the Seller shall cease to have any further
interest in the assets, rights (except that the validity of
such other leases, service agreements, or other agreements to
which Seller is also a party shall remain unimpaired thereby),
or profits and losses of the Partnership and shall be
indemnified by the Purchaser in respect of all liabilities and
obligations of the Partnership as such exist as of said date of
consummation of sale.
(b) Transfer to Related Entity.
Each Partner shall have the right to transfer all (but not less
than all) of its interest in the Partnership to a wholly-owned
subsidiary thereof, to the corporate parent thereof, or to any
other wholly-owned subsidiary of its corporate parent. In the event
of such transfer, the Partner so transferring shall remain
primarily liable for the performance by such transferee of
transferor's Partnership obligations.
(c) Transfer to Third Parties.
Each Partner shall have the right to transfer all (but not less
than all) of its interest in the Partnership to a bona fide arms'
length purchaser, if all of the following conditions are met:
(1) The other Partner shall have been provided with a copy of the
bona fide offer of purchase from a
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third party and shall have been given, by written notice, a
first right of purchase of the transferor's interest on terms
equal to those of the proposed transfer, which terms shall be
specified in such notice, and the other Partner shall either
have declined same or have failed to have entered into, within
90 days of said notice, a written agreement with the transferor
Partner for the transfer of said interest on the terms
specified in such bona fide offer of purchase;
(2) The transferee is approved by the other Partner (which approval
shall not be unreasonably withheld);
(3) The transferee is acceptable to any entities which have
lent money or extended other credit facilities to the
Partnership; and
(4) The transferee enters into a written agreement providing for
said transfer which includes assumption by transferee of all of
transferor's obligations in and to the Partnership, and which
agreement has been approved by the other Partner (which
approval shall not be unreasonably withheld).
(d) Transfers Subject to Section 4.4.
Any transfer permitted pursuant to this Section 8.2 shall be subject
to the restrictions contained in Section 4.4 hereof, which
restrictions may require that
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the transfer of all (but not less than all) of a Partner's interest
in the Partnership be completed in one or more transactions.
8.3 Effect of Transfer.
A Partner which transfers its interest in the Partnership in accordance
with any provisions of this Article shall thereupon cease to be a party
to this Agreement and shall have no further obligations hereunder and
its transferee shall, by the agreement required in Section 8.2 above,
thereupon be substituted in its place.
ARTICLE IX
TRANSFER OF ASSETS OF PARTNERSHIP
9.1 Transfer of Goethermal Wells.
The Partners, on behalf of the Partnership and upon the unanimous
consent of the Management Committee, hereby agree to transfer to Vulcan,
upon its request, any or all unneeded wells identified as such by an
independent geothermal reservoir expert selected by Vulcan and approved
by the Management Committee (the "Unneeded Wells"). The purchase price
for the Unneeded Wells shall be equal to the original book value of such
wells on Vulcan's books, inflated from the Closing Date through the date
of purchase hereunder at a rate equal to the base rate on corporate
loans at large U.S. money center commercial banks published by The Wall
Street Journal plus one-half percent (l/2%), determined monthly in
arrears (the "Interest Rate"). Said purchase price shall be
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payable in sixty (60) equal monthly installments (or, at Vulcan's
option, in a lesser number of equal monthly installments, but, in any
event, with right of prepayment at any time without penalty), including
interest calculated at the Interest Rate, commencing at the end of the
month following the month of purchase hereunder.
ARTICLE X
WINDING UP OF THE AFFAIRS OF THE PARTNERSHIP
10.1 Procedure Upon Ending of Partnership Term. Upon the expiration or
termination of the Partnership Term, except pursuant to Section 7.1(c)
above (which termination shall be governed by Section 10.2 below), the
Partners, acting jointly through their respective representatives or, if
one of the Partners is then in bankruptcy or receivership, the Partner
who is not in bankruptcy or receivership, as the case may be, shall
forthwith commence to wind up the affairs of the Partnership and the
winding up shall be completed as promptly as possible. The proceeds from
the liquidation of the assets of the Partnership (including the
obligations of the Partners to the Partnership) shall be applied as
promptly as is reasonably possible to the payment of the following in
the order or priority in which they are listed:
(a) Debts of the Partnership, other than to Partners;
(b) Amounts owed to Partners, first on account of advances, and then on
account of loans;
27
(c) The capital contributions of the Partners reduced by any current
net loss; and
(d) The share of each Partner in undivided net profits, if any.
Any profit or loss on disposition of Partnership properties or otherwise
in the process of liquidation shall be credited or charged to the
Partners in the manner provided in Section 3.2 above. Property shall be
distributed in kind in the dissolution only to the extent the Partners
(or their legal representatives, if any) agree upon such distribution
and on the then present fair market value of such property. Such a
distribution of property shall be treated for Partnership accounting
purposes as though each item of property had been sold for cash equal to
its value and the cash proceeds distributed to the Partner receiving
that item of property. The difference between the value of the property
distributed in kind and its book value shall be treated the same as a
profit or loss on the sale of such property and shall be credited or
charged to the Partners in the manner provided in Section 3.2 above. If
in the process of winding up the Partnership affairs, a Partner should
have a net debit balance in its capital account, whether by reason of
losses in liquidation or otherwise, said debit balance shall represent
an obligation from such Partner to the Partnership, which obligation
shall be paid in cash within 30 days.
28
10.2 Procedure Upon Termination of Partnership Term by Solvent
Partner.
(a) In the event the Partnership is terminated pursuant to Section
7.1(c) above, then the solvent Partner shall have an option to
purchase the Partnership interest of the insolvent Partner and
shall pay as consideration therefor a price equal to the capital
contributions(s) of the insolvent Partner plus:
(1) Amounts owed to the insolvent Partner by the Partnership; plus
(2) In the case of undivided net profits, the insolvent
partner's share thereof; less
(3) In the case of undivided net losses, the insolvent Partner's
share thereof; and less
(4) Amounts owed by the insolvent Partner to the Partnership.
In order to be effective this option must be exercised by the
solvent Partner within 30 days after the date on which an election
has been made pursuant to Section 7.1(c) above.
(b) In the event the solvent Partner shall elect not to purchase the
Partnership interest of the insolvent Partner, then the assets of
Partnership shall be liquidated in accordance with the provisions
of Section 10.1.
29
ARTICLE XI
MISCELLANEOUS
11.1 Amendment.
The parties hereto acknowledge that this Partnership Agreement contains
the entire agreement between them with respect to the Partnership, that
all prior documents, agreements and negotiations with respect to the
Partnership are merged herein and superseded hereby, and any amendment
to this Partnership Agreement shall be made in writing to and shall be
executed by all of the then Partners.
11.2 Notices.
Any notice or other instrument required or permitted to be given, made
or sent under this Partnership Agreement shall be in writing, signed by
the party giving or making the same, and shall be deemed duly given or
made when personally delivered or on the fifth day after being mailed by
prepaid registered or certified mail to the party entitled thereto at
the addresses set forth on the first page hereof, or at such other
addresses as the parties may specify by like notice.
11.3 Benefit.
This Partnership Agreement shall be binding upon and operate for the
benefit of the parties hereto and their respective successors and
assigns.
11.4 Counterparts.
This Partnership Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an
30
original, and such counterparts together shall constitute but one and
the same Partnership Agreement. Anyone may rely upon a copy certified by
a notary public commissioned under the law of the states of either
Texas, Nevada or California to be a true copy of this Partnership
Agreement (and of the attachments hereto) to the same effect as if such
copy were an original. One copy of this Partnership Agreement and each
amendment and supplement thereto shall at all times be kept on file at
the principal place of business of the Partnership.
11.5 Applicable Law.
This Partnership Agreement and the rights and obligations of the parties
hereunder shall be interpreted in accordance with the laws of the State
of Nevada. The descriptive titles of articles, sections and paragraphs
of this Partnership Agreement are for convenience only and any
construction of this Partnership Agreement shall be made without
reference to such titles. In the event that any provisions of this
Partnership Agreement violate any rule of law, only such invalid
provisions and not this entire Partnership Agreement shall be considered
void and of no effect and all of the other provisions hereof shall
remain in full force and effect.
11.6 Injunctive Relief and-Specific Performance.
A Partner's interest in this Partnership cannot readily be purchased or
sold in the open market, and for that reason, among others, the parties
may be irreparably damaged in the
31
event that this Partnership Agreement is not specifically enforced.
Should any dispute arise concerning any possible disposition of such an
interest in the Partnership, allegedly in violation of this Partnership
Agreement, an injunction may be issued restraining such disposition
pending the determination of such dispute. Likewise, any purchase and
sale of any interest in the Partnership required by this Partnership
Agreement, or any other transaction specified herein, shall be
enforceable in a court having equity jurisdiction by an appropriate
decree of specific performance.
11.7 Waiver of Terms.
No waiver of any term or condition of this Partnership Agreement shall
be effective unless made in a writing signed by the party against which
enforcement of the waiver is sought. No such waiver shall be deemed to
be a waiver of any subsequent breach of such term or condition, or of
any breach of any other term or condition of this Partnership Agreement.
32
IN WITNESS WHEREOF, the parties hereto have executed this Partnership
Agreement as of the day and year first above written.
ATTEST: VULCAN POWER COMPANY
(Seal)
/s/ Joseph W. Aidlin By: /s/ Andrew W. Hoch
- ---------------------------------- ------------------------------
Secretary Its: President
Vulcan Power Company -----------------------------
ATTEST: BN GEOTHERMAL, INC.
(Seal)
/s/ Michael D. Ferguson By: /s/ Martin R. Engler, Jr.
- ---------------------------------- ------------------------------
Assistant Secretary Its: President
BN Geothermal, Inc. -----------------------------
33
ACKNOWLEDGMENT
--------------
STATE OF CALIFORNIA )
)ss.
COUNTY OF LOS ANGELES )
On this 30th day of August, 1985, A.D., Joseph W. Audlin personally
appeared before me, a notary public in and for Los Angeles County, known or
proved to me to be the person described in and who executed the foregoing
instrument, who acknowledged to me that he or she executed the same freely and
voluntarily and for the uses and purposes therein mentioned.
/s/ April L. Taylor
------------------------------
Notary Public in and for said
County and State
Commission Expires: August 2, 1988
34
AGREEMENT
AND
AMENDMENT NO. 1 TO PARTNERSHIP AGREEMENT
This Agreement and Amendment No. 1 to Partnership Agreement is made
and entered into as of the 15th day of December, 1988, by and between Vulcan
Power Company, a Nevada corporation ("Vulcan"), and BN Geothermal Inc., a
Delaware corporation ("BNG").
WHEREAS, Vulcan and BNG entered into the Partnership Agreement
dated as of August 30, 1985 (the "Partnership Agreement"), for the primary
purpose of acquiring, constructing, owning and operating a single
geothermal-electric generating facility;
WHEREAS, Burlington Resources Inc. ("BRI"), the owner of record of
all the issued and outstanding shares of capital stock of BNG (the "BNG
Shares"), has entered into an agreement with Mission Energy Company
("Mission") dated as of June 16, 1988 (the "Stock Purchase Agreement")
providing for the sale by BNI and the purchase by Mission of the BNG Shares;
WHEREAS, Mission has conditioned its obligations under the Stock
Purchase Agreement upon the execution of this Agreement;
WHEREAS, BNG has agreed to amend, and seek Vulcan's agreement to
amend, the Partnership Agreement as herein provided to facilitate the sale of
the BNG Shares to Mission; and
WHEREAS, Vulcan has agreed to so amend the Partnership Agreement;
NOW THEREFORE, consideration of the mutual covenants hereinafter
set forth and other good and valuable consideration, receipt of which is
hereby acknowledged, Vulcan and BNG agree as follows:
1. Default in Capital Contributions. Section 2.1(c) and Section 3.2
of the Partnership Agreement each shall be amended to delete the second
sentence thereof. Section 3.3 of the Partnership Agreement shall be amended in
its entirety to read as follows:
"3.3 Default in Capital Contributions
In the event that a partner does not make a timely additional
capital contribution as required by Section 2.1(c) above ("Defaulting
Partner"), the other general partner ("Non-Defaulting Partner"), at its
option, may pay to the Partnership an amount (the "Non-Defaulting
Partner Payment"), up to or equal to the unfunded amount, which
payment shall be deemed to be a capital contribution from the Defaulting
Partner to the Partnership. Notwithstanding any other provision of this
Partnership Agreement, in the event that a Non-Defaulting Partner makes
a Non-Defaulting Partner Payment, the Partnership shall not make any
distribution to the Defaulting Partner, but shall pay all distributions
(the "Defaulting Partner Distributions") which would otherwise have been
paid to the Defaulting Partner to the Non-Defaulting Partner until (i)
the amount of all Defaulting Partner Distributions paid to the
Non-Defaulting Partner equals the amount of the Non-Defaulting Partner
Payment plus an amount equal to the maximum lawful rate of interest on
the unreimbursed balance thereof (the "Additional Amount") or (ii) the
Non-Defaulting Partner notifies the Partnership that it has received a
payment from the Defaulting Partner equal to the amount of the Non-
Defaulting Partner Payment plus the Additional Amount, less the amount
of any previous distributions to the Non- Defaulting Partner with
respect to such default. During any period in which Defaulting Partner
Distributions are being paid to the Non-Defaulting Partner, at the
Non-Defaulting Partner's option, the Defaulting Partner's members on the
Management Committee shall not have any voting rights and the vote of
the Non-Defaulting Partner shall be sufficient with regard to any matter
voted on by the Management Committee. The Defaulting Partner shall be
liable to the Partnership and to the Non-Defaulting Partner for all
losses, damages and expenses sustained or incurred by the Partnership
and such Non-Defaulting Partner as a result of the Defaulting Partner's
failure to fund its required contribution and such default, including,
without limitation, any additional tax liabilities and interest or
penalties thereon."
In addition, Section 7.1(c)(2) and Section 10.2 of the Partnership Agreement
shall be amended to substitute (i) the phrase "Non-Defaulting Partner" for the
phrase "solvent partner" or "solvent Partner" and (ii) the phrases "Defaulting
Partner['s]" for the phrases "insolvent Partner['s]".
2. Capital Accounts. Section 2.2 of the Partnership Agreement
shall be amended in its entirety to read as follows:
"2.2 Partners' Capital Accounts
(1) The Partners' capital accounts have been adjusted to reflect
the fair market value of the Partnership property in accordance with the
rules set forth in Treasury Regulation Section 1.704-1(b)(2)(iv)(r).
Partners' capital accounts shall be maintained in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv). The capital account of
each Partner shall be credited with (i) the dollar amount of any capital
contributions made by such Partner, (ii) the fair market value of
property contributed by such Partner to
2
the Partnership (net of liabilities secured by such contributed property
that the Partnership is considered to assume or take subject to under
Internal Revenue Code Section 752), (iii) the amount of any income,
gain, profit, or tax exempt income allocated to such Partner pursuant to
Section 4.2 below, and (iv) the Partner's share of any basis increases
required by Internal Revenue Code Sections 48(q) and 1016(a)(22). The
capital account for each Partner shall be decreased by (i) the amount of
any loss or other deduction allocated to such Partner pursuant to
Section 4.2 below, (ii) the amount of money and the fair market value of
all property distributed to such Partner (net of liabilities assumed by
such Partner or to which the property is subject), (iii) any Internal
Revenue Code Section 705(a)(2)(B) expenditures and Section 709
nondeductible and nonamortizable items allocated to such Partner, and
(iv) the Partner's share of any basis decreases required by Internal
Revenue Code Sections 48(q) and 1016(a)(22).
At the discretion of the Management Committee, the Partners'
capital accounts will be adjusted to reflect a revaluation of
Partnership property (including intangible assets such as goodwill) on
the Partnership's books in accordance with Treasury Regulation Section
1.704(b)(2)(iv)(f) upon (i) the contribution of money or other property
(other than a de minimis amount) to the Partnership by a new or existing
Partner as consideration for an interest in the Partnership or (ii) in
connection with the liquidation (including a constructive liquidation)
of the Partnership or a distribution of money or other property (other
than a de minimis amount) by the Partnership to a retiring or continuing
Partner as consideration for an interest in the Partnership."
3. Distributions. Section 2.4 of the Partnership Agreement shall
be amended in its entirety to read as follows:
"Distributions to Partners shall be made quarterly on the 45th day
of each calendar quarter in such amounts as the Partners acting
jointly may determine to be in the best interest of the
Partnership; provided, however, that the net cash proceeds received
by the Partnership as a result of the sale by the Partnership of
its assets (or a portion thereof), whether pursuant to a purchase
agreement granted by the Partnership to a Partner or otherwise,
shall be first applied to retire the outstanding debts of the
Partnership and any residual amount (after provision considered
appropriate by the Partners for taxes, replacements and other
expenses of the partnership related to such sale) shall be
immediately distributed to the Partners in equal proportion, unless
the Partners shall agree otherwise. Except as provided in Section
3.3, no interest shall be paid to a Partner on its capital in the
Partnership."
3
4. Tax Allocations. Section 4.2 of the Partnership Agreement
shall be amended in its entirety to read as follows:
"Each item of income, gain, loss or deduction shall be allocated to
each Partner in accordance with Internal Revenue Code Section
704(b) and the regulations promulgated thereunder, as follows:
(a) All amounts received by the Partnership constituting gross
income shall be allocated to the Partners in proportion to their
respective interests in profits and losses of the Partnership as
provided in Section 3.2;
(b) Exploration cost, intangible drilling cost ("IDC"), and
operating and maintenance costs shall be allocated to the Partners
in proportion to their respective interests in profits and losses
of the Partnership as provided in Section 3.2;
(c) With respect to depreciable assets purchased by the
Partnership, depreciation shall be allocated to the Partners in
proportion to their respective interests in profits and losses of
the Partnership as provided in Section 3.2;
(d) Amortization of intangible assets shall be allocated to
each Partner as follows:
(1) With respect to intangible assets which were contributed
by a Partner at the formation of the Partnership, any
amortization will be allocated entirely to such Partner;
and
(2) With respect to all other intangible assets, amortization
will be allocated to the Partners in proportion to their
respective interests in profits and losses of the
Partnership as provided in Section 3.2;
(e) Loss upon the sale, exchange, distribution, abandonment or
other disposition of property shall be allocated to the Partners in
proportion to their respective interests in profits and losses of
the Partnership as provided in section 3.2;
(f) Gain upon the sale, exchange, distribution, or other
disposition of property shall be allocated to the Partners in
proportion to their respective interests in profits and losses of
the Partnership as provided in Section 3.2;
4
(g) Costs or expenses of any other kind shall be allocated to
the Partners in proportion to their respective interests in profits
and losses of the Partnership as provided in Section 3.2;
(h) All deductions and credits attributable to property
eligible for the regular investment tax credit or the energy tax
credit percentage shall be allocated to the Partners in proportion
to their respective interests in profits and losses of the
Partnership as provided in Section 3.2;
(i) Any recapture of depreciation, IDC, and any other item of
deduction or credit shall, to the extent possible, be allocated
among the Partners in accordance with their sharing of the
depreciation, IDC or other item of deduction or credit which is
recaptured; and
(j) Income, gain, loss and deduction with respect to property
contributed to the Partnership by a Partner shall be shared among
the Partners, pursuant to Treasurer Regulations promulgated under
Section 704(c) of the Code, so as to take account of the variation,
if any, between the basis of the property to the Partnership and
its fair market value at the time of the contribution."
5. Transfers of Partnership Interest. Section 8.2 of the
partnership Agreement shall be amended by changing the designation of
paragraph (d) of such Section to paragraph (f) and adding the following
paragraphs (d) and (3) after paragraphs (c) of such Section:
"(d) Transfer of Partial Interest to Third Party; Of Limitations.
(i) Notwithstanding anything in this Agreement to the
contrary, if the Federal Energy Regulatory Commission proposes to
decertify the Vulcan Facility as a Qualifying Small Power
Production Facility (a "Qualifying Facility") under the Federal
Power Act and the Public Utility Regulatory Policies Act of 1978,
each as amended, and the regulations promulgated thereunder, based
on the grounds that, as a result of an amendment or modification to
the ownership criteria of 18 C.F.R. Section 292.206 (the "Ownership
Criteria") or the interpretation thereof, which become effective
subsequent to the certification of the Vulcan Facility as a
Qualifying Facility, the Ownership Criteria are not satisfied
because of a Partner's interest in the Vulcan Facility, then such
Partner (the "Noncomplying Partner") shall have the right (a) to
convert the Partnership to a Nevada limited partnership, with the
consent of the other Partner (the "Complying Partner"),
5
which consent shall not be unreasonably withheld, and (b) to
convert to limited partner interests in the Partnership ("Limited
Interests") the portion of its general partner interest in the
Partnership necessary to satisfy the Ownership Criteria (the
"Necessary Interest") and to transfer to a single third party such
Limited Interests. In the event the Noncomnlying Partner does not
elect to convert the Partnership to a Nevada limited partnership or
the Complying Partner does not consent to such election, the
Noncomplying Partner shall have the right to transfer to a single
third party the Necessary Interest, provided that all of the
Following conditions are satisfied:
(a) The Complying Partner shall have been provided with a copy
of the bona fide offer of purchase from any third party and shall
have been given, by written notice, a first right of purchase of
the Necessary Interest on terms equal to those of the proposed
transfer, which terms shall be specified in such notice, and the
Complying Partner shall have (1) declined to exercise such right of
first purchase, (2) failed to notify the Noncomplying Partner
within 5 days of such notice of its decision to exercise such right
or (3) failed to complete a purchase of the Necessary Interest
within 15 days of such notice;
(b) The transferee of the Necessary Interest enters into a
written agreement providing for said transfer which includes
assumption by such transferee of the Noncomplying Partner's
obligations, in proportion to the interest being transferred to
such transferee, in and to the Partnership; and
(c) Section 5.7 of this Agreement shall be amended to provide
for decisions of the Management Committee to be made by approval of
the representatives of partners holding 65% of the interests of the
Partnership.
(ii) Notwithstanding anything in this Agreement to the
contrary, if a Partner fails to make a timely capital contribution
as required by Section 2.1(c), then the other Partner shall have
the right, but not the obligation, in addition to its option
pursuant to Section 3.3, (a) to convert the Partnership to a Nevada
limited partnership and (b) to convert any portion of its general
partner interest in the Partnership to Limited Interests and to
transfer such Limited Interests to one or more third parties.
"(e) Restrictions on Encumbrances of Partnership Interests.
Notwithstanding the foregoing," in no event may any Partner
assign, convey, mortgage,
6
pledge, sell, transfer or otherwise dispose of all or any part
of its interest in the Partnership under this Agreement to, or
merge with, sell assets to, sell stock to, consolidate with or
combine with, any person whose ownership of an interest in the
Partnership or under this Agreement would cause the Vulcan
Facility not to be a qualifying facility within the meaning of
18 C.F.R. Section 292.203."
Line 1 of Section 8.3 of the Partnership Agreement shall be amended to insert
the words "all of" after the word "transfers".
Article VIII of the Partnership Agreement shall be further amended by adding a
new Section 8.4 and Section 8.5 at the end thereof to read in its entirety as
follows:
"8.4 Change in Control. Except as otherwise permitted pursuant to
Section 8.2, no Partner may, without the consent of the other Partner,
(a) sell transfer, pledge, encumber, assign or otherwise hypothecate its
interest in the Partnership if such act would result in a change of
control of the Partnership, or (b) permit a change in control of such
Partner (other than in the course of a reorganization, merger,
consolidation or public offering involving (i) creation of a holding
company, or (ii) corporate spin-offs or split-offs). For purposes of
this subsection only, control shall mean ownership, direct or indirect,
of more than fifty percent (50%) of the outstanding voting securities of
a Partner by an entity which itself is not owned, directly or
indirectly, more than fifty percent (50%) by any other entity.
"8.5 Obligation to Restore Deficit Capital Account
Any transfer permitted under this Agreement of a Partner's interest
in the Partnership shall be subject to the provisions of Section 10.1."
6. Right of First Refusal to Purchase Electricity. The title of
Article IX shall be amended by adding the words "AND RIGHT OF FIRST REFUSAL TO
PURCHASE" after the words "TRANSFER OF". A new Section 9.2 shall be added
which shall read in its entirety as follows:
"9.2 Right of First Refusal to Purchase Electricity. In the event that
the Vulcan Facility produces electrical energy in excess of that which
can be sold to Southern California Edison Company ("SCE") (such excess,
the "Excess Electricity"), then Magma Power Company ("Magma") shall have
the right of first refusal to purchase the Excess Electricity or any
portion thereof on substantially similar price, terms and conditions
that the Partnership may sell to any third party in an arms length
transaction, f.o.b. the Partnership's generating facility. The
Partnership shall
7
give Magma written notice of the price, terms and conditions of the
proposed sale of Excess Electricity. If Magma fails to exercise its
right of first refusal to purchase the Excess Electricity within 15 days
of the receipt of such written notice, said right of first refusal shall
expire. Any such sale of the Excess Electricity to Magma pursuant to
this Section 9.2 is expressly conditioned on the prior written consent
of SCE as required by the Partnership's power purchase contract with
SCE. Notwithstanding anything in this Section 9.2 to the contrary, Magma
shall not be given the right of first refusal to purchase the Excess
Electricity or any portion thereof and shall not be entitled to purchase
the Excess Electricity or any portion thereof if such right or such
purchase would contravene any law or agreement by which the Partnership
or its assets are bound, cause the Vulcan Facility to lose its status as
a Qualifying Small Power Production Facility under the Federal Power Act
and the Public Utility Regulatory Policies Act of 1978, each as amended,
and the regulations promulgated thereunder, cause the Partnership or the
Vulcan Facility to be regulated as a utility under state or federal law,
violate or conflict or interfere with any rights of third parties, or
impair any assets of the Partnership."
7. Procedure Upon Ending of Partnership Term.
Section 10.1 is amended to delete the last paragraph of such Section and add
the following in its place:
"Any profit or loss on disposition of Partnership Properties or
otherwise in the process of liquidation shall be credited or charged to
a Partner as follows:
(i) First, to each of the Partners to the extent of and in proportion
to the deficit balance, if any, in their capital accounts;
(ii) Second, to each of the Partners in proportion to and to the extent
of the minimum amount required to equalize the capital accounts of the
Partners in proportion to their interests in the Partnership as provided
in Section 3.2; and
(iii) Third, to the Partners in the manner provided in Section 3.2.
Property shall be distributed in kind in the dissolution only to the
extent the Partners (or their legal representatives, if any) agree upon
such distribution and on the then present fair market value of such
properties. Such distribution of property shall be treated for
Partnership accounting purposes as though each item of property has been
sold for cash equal to its value and the cash proceeds distributed to
the Partner receiving that item of property. The difference between the
value of property distributed in kind and its book value shall be
treated the same as a
8
profit or loss on the sale of such properties and shall be credited or
charged to the Partners in the manner provided above. If a Partner has a
deficit balance in its capital account at the time of the liquidation of
the Partnership or the liquidation of its interest in the Partnership
(after crediting allocations of gross income and debiting allocations of
loss and deduction to its capital account) such Partner must pay to the
Partnership the amount of the deficit balance. This amount, upon the
liquidation of the Partnership, will be paid to the creditors of the
partnership or distributed to the other Partner in accordance with its
positive capital account balances in accordance with Section
1.704-1(b)(2)(ii)(b)(3) of the Treasury Regulations. The payment must be
made in readily available funds no later than the end of the taxable
year of the liquidation of a Partner's interest in the Partnership (or,
if later, within 30 days after the date of the liquidation). The
Partners intend that the provisions set forth in this paragraph will
constitute an unconditional obligation to restore deficit capital
accounts as described in Section 1.704-1(b)(2)(ii)(b)(3) of the Treasury
Regulations. The regulations will control in the case of any conflict
between those regulations and this Section 10.1."
8. Technical Amendments. All references in the Partnership
Agreement to the "Internal Revenue Code of 1954, as amended" shall be amended
to read the "Internal Revenue Code of 1986, as amended."
9. Miscellaneous.
(a) This Agreement may be executed in any number of counterparts,
each of which shall constitute an original, and all of which, when taken
together, shall constitute one agreement.
(b) All headings appearing in this Agreement are for convenience of
reference only and shall be disregarded in construing this Agreement.
(c) If any provision hereof is determined to be illegal or
unenforceable for any reason, the remaining provisions hereof shall not
be affected thereby.
(d) Capitalized terms not otherwise defined herein shall have the
meanings assigned to them in the Partnership Agreement.
(e) This Agreement is for the benefit of the respective parties
and of Mission.
(f) This Agreement shall be effective as of the Closing under the
Stock Purchase Agreement.
9
IN WITNESS WHEREOF, Vulcan and BNG have executed this Agreement as
of the day and year first above written.
VULCAN POWER COMPANY
By /s/ John R. Peele
--------------------------------
Its Vice President
-------------------------------
ATTEST: /s/ Wallace D. Dieckman
----------------------
Assistant Secretary
BN GEOTHERMAL INC.
By /s/ L. Edward Parker
--------------------------------
Its President
-------------------------------
ATTEST: /s/ Wallace D. Dieckman
----------------------
Attorney
10